SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES ACT OF
1934
For the quarterly period ended December 31, 2005.
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 000-51386
EAST WEST DISTRIBUTORS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 20-2012723
- --------------- -------------------
(STATE OR OTHER (I.R.S.EMPLOYER
JURISDICTION OF IDENTIFICATION NO.)
ORGANIZATION)
PMB 382
10105 East Via Linda, #103
Scottsdale, AZ 85258
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(480) 614-2874
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $ .001 PAR VALUE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
----- -----
ON DECEMBER 31, 2005, THERE WERE 2,456,855 SHARES OF THE ISSUER'S COMMON STOCK
OUTSTANDING.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES NO X
----- -----
DOCUMENTS INCORPORATED BY REFERENCE
NONE.
INDEX
Part I. Financial Information
Item 1. Financial Statements
Balance Sheet at December 31, 2005 (Unaudited) 1
Statement of Operation for the three months and six months
ended December 31, 2005 and From December 13, 2004 (Inception)
to December 31, 2004 to December 31, 2005 (Unaudited) 2
Statement of Changes in Shareholders' Equity (Unaudited) 3
Consolidated Statements of Cash Flows for the six months
ended December 31, 2005 And from December 13, 2004 (Inception)
to December 31, 2005 (Unaudited) 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis or Plan of Operation 10
Item 3. Control and Procedures 10
Part II. Other Information
Item 1. Legal Proceedings 10
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 11
Item 6. Exhibits 11
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
Balance Sheet
December 31, 2005
(Unaudited)
Assets
Current assets:
Cash $ 6,912
--------
Total Current Assets 6,912
--------
Total Assets $ 6,912
========
Liabilities and Shareholders' Deficit
Current Liabilities
Accrued expenses and payables to directors and officers $ 13,736
Due to related party 42,760
--------
Total Current Liabilities 56,496
--------
Total Liabilities 56,496
--------
Shareholders' Deficit
Preferrred stock, $0.001 par value; 25,000,000 shares
no shares issued and outstanding -
Common stock $0.001 par value; 400,000,000 shares
authorized, 2,456,855 shares issued and outstanding 2,457
Deficit accumulated during development stage (52,041)
--------
Total Shareholders' Deficit (49,584)
--------
Total Liabilities and Shareholders' Deficit $ 6,912
========
The accompanying notes are an integral part of these unaudited financial
statements.
1
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
From Inception From Inception
(December 13, 2004) (December 13, 2004)
Three Months Ended Six Months Ended To To
December 31, 2005 December 31, 2005 December 31, 2004 December 31, 2005
----------------- ----------------- ------------------ -----------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
Professional services $ 4,851 $ 57,818 $ - $ 57,818
Administrative expenses 2,249 2,249 - 2,249
Distribution of shares in spin-off - - 2,157 -
---------------- ---------------- ------------------ -----------------
Total operating expenses 7,100 60,067 2,157 60,067
---------------- ---------------- ------------------ -----------------
Other income:
Sale of BioDtech 10,183 10,183 - 10,183
---------------- ---------------- ------------------ -----------------
Total Other Income 10,183 10,183 - 10,183
Net Income(Loss) $ 3,083 $ (49,884) $ (2,157) $ (49,884)
================ ================= ================== =================
Basic and diluted Loss per Share $ 0.00 $ (0.02) $ (0.00) $ (0.02)
================ ================= ================== =================
Weighted average shares outstanding 2,156,855 2,156,855 2,156,855 2,156,855
================ ================= ================== =================
The accompanying notes are an integral part of these unaudited financial
statements.
2
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Deficit Accumulated
Number of Common Common Stock at during development Total Shareholders'
Shares $.001 Par Value stage Deficit
---------------- --------------- ------------------- -------------------
Inception, December 13, 2004 - $ - $ - $ -
Distribution of shares in spin-off 2,156,855 2,157 (2,157) -
Shares issued for compensation 300,000 300 - 300
Net loss - - - -
---------------- --------------- ------------------- -------------------
Balance at June 30, 2005 2,456,855 2,457 (2,157) 300
Net loss - - (49,884) (49,884)
Balance at December 31, 2005 2,456,855 2,457 (52,041) (49,584)
================ =============== =================== ===================
The accompanying notes are an integral part of these unaudited financial
statements.
3
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
From Inception From Inception
Six months ended (December 13, 2004) (December 13, 2004)
December 31, 2005 To December 31, 2004 To December 31, 2005
----------------- -------------------- --------------------
(Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (49,884) $ (2,157) $ (52,041)
Adjustments to reconcile net loss to
net cash provided by operations
Shares issued for compensation 300 - 300
Distribution of shares in spin-off 2,157 2,157
Change In Operating Liabilities
Due to related party 42,760 - 42,760
Accrued expenses and other liabilities 13,736 - 3,736
----------------- -------------------- --------------------
Net Cash provided by Operations 6,912 - 6,912
NET CHANGE IN CASH 6,912 - 6,912
----------------- -------------------- --------------------
CASH
Beginning of period - - -
----------------- -------------------- --------------------
End of period $ 6,912 $ - $ 6,912
================= ==================== ====================
Supplemental schedule of non-cash investing and financing activities:
None
The accompanying notes are an integral part of these unaudited financial
statements.
4
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business activity (Company and Subsidiaries)
EAST WEST Distributors, Inc. ("EAST WEST") is a drug development company, which
is focused in the areas of research, development, and marketing in the
biomedical industry, with an emphasis on anti-infective drugs. EAST WEST was
incorporated in Nevada on December 13, 2004. Since then, it has been engaged in
attempting to fund operations with the objective of bringing its future products
to market.
Development Stage Enterprise
The Company was formed in December 2004 as a wholly owned subsidiary of Meditech
Pharmaceuticals, Inc, which spun off 2,156,855 shares to its shareholders as of
August 29, 2005.
The Company is a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7, "Accounting and Reporting by Development
Stage Enterprises." The Company is devoting substantially all of its present
efforts to establish a new business, and its planned principal operations have
not yet commenced.
The Company has not generated significant revenues from operations and has no
assurance of any future revenues. All losses accumulated since inception have
been considered as part of the Company's development stage activities. The
Company will require substantial additional funding for commercialization of its
products. There is no assurance that the Company will be able to obtain
sufficient additional funds when needed, or that such funds will be obtainable
on terms satisfactory to the Company. The Company's products, to the extent that
they may be deemed medical devices or biologics, are governed by the Federal
Food, Drug and Cosmetics Act and by the regulations of state agencies and
various foreign government agencies. There can be no assurance that the Company
will maintain or obtain the regulatory approvals required to market its
products.
Basis of Presentation
The accompanying financial statements have been prepared by EAST WEST pursuant
to the rules and regulations of the Securities and Exchange Commission. The
information furnished herein reflects all adjustments (consisting of normal
recurring accruals and adjustments) which are, in the opinion of management,
necessary to fairly represent the operating results for the respective periods.
Certain information and footnote disclosures normally present in the annual
consolidated financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been omitted
pursuant to such rules and regulations. The results of the six months ended
December 31, 2005 are not necessarily indicative of the results to be expected
for the six months ending June 30, 2006.
Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements, as well as the reported amounts of revenues and
expenses during the reported period. Actual results could differ from those
estimates.
Cash and Cash Equivalents
The company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
5
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
December 31, 2005
(Unaudited)
Revenue
Revenue represents license fees that are recognized when earned over the period
of the applicable license agreement.
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of the assets to future net cash flows
expected to be generated by the assets. If the assets are considered to be
impaired, the impairment to be recognized is measured by the amount by which the
carrying amount exceeds the fair value of the assets. Based on its analysis, the
Company believes that no impairment of the carrying value on its long-lived
assets exists at December 31, 2005. There can be no assurance, however, that
market conditions will not change which could result in impairment of long-lived
assets in the future.
Stock-Based Compensation
The Company accounts for non-employee stock-based compensation under Statement
of Financial Accounting Standards No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation." SFAS 123 defines a fair value based method of
accounting for stock-based compensation. However, SFAS 123 allows an entity to
continue to measure compensation cost related to stock and stock options issued
to employees using the intrinsic method of accounting prescribed by Accounting
Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to
Employees." Under APB 25, compensation cost, if any, is recognized over the
respective vesting period based on the difference, on the date of grant, between
the fair value of the Company's common stock and the grant price. Entities
electing to remain with the accounting method of APB 25 must make pro forma
disclosures of net income (loss) and earnings per share, as if the fair value
method of accounting defined in SFAS 123 had been applied. The Company has
elected to account for its stock-based compensation to employees under APB 25.
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the option vesting period. Adjustments are made for
options forfeited prior to vesting.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
6
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
(Unaudited)
the periods in which the differences are expected to affect taxable income. A
valuation allowance is provided for significant deferred tax assets when it is
more likely than not those assets will not be recovered.
Loss Per Share
Basic loss per share is computed by dividing loss available to common
stockholders by the weighted-average number of common shares outstanding.
Diluted loss per share is computed similar to basic loss per share except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potential common shares had been issued
and if the additional common shares were dilutive. For the six months ended
December 31, 2005, the Company incurred net losses; therefore, potential common
shares are ignored as their effect would be anti-dilutive.
Comprehensive Income
Comprehensive income is not presented in the Company's consolidated financial
statements since the Company did not have any items of comprehensive income in
any period presented.
Segments of an Enterprise and Related Information
As the Company operates in one segment, the Company has not made segment
disclosures in the accompanying consolidated financial statements.
7
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
(Unaudited)
NOTE B - COMMITMENTS AND CONTINGENCIES
Leases
Currently, the Company uses its operating facilities provided by its Chief
Executive Officer, without a lease agreement. There is no guarantee the officer
will be willing to provide these facilities in the future.
Employment Agreements
There are no employment agreements in effect as of December 31, 2005.
Litigation
The Company may become involved in various legal proceedings and claims which
arise in the ordinary course of its business. Management does not believe that
these matters will have a material adverse effect on the Company's financial
position or results of operations.
8
EAST WEST DISTRIBUTORS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
(Unaudited)
NOTE C - STOCKHOLDERS' DEFICIT
During the six months ended December 31, 2005, the company issued 300,000 shares
valued at par for services.
NOTE D - RELATED PARTY TRANSACTIONS
The Company maintains its primary place of business in facilities owned by the
Chief Executive Officer, for which it is NOT charged rent expense (see Note B).
NOTE E - SALE OF BIO-D-TECH
On October 4, 2005, the company sold its 50% interest in Bio-d-tech for $10,183.
9
Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
You should read the following discussion of our financial condition and
operations in conjunction with the condensed consolidated financial statements
and the related notes included elsewhere in this filing. This discussion
contains forward-looking statements that involve risks and uncertainties. Our
actual results may differ materially from those anticipated in these
forward-looking statements as a result of many factors.
Overview
We are a drug development company, founded in 2004, focused in the areas of
research, development, and marketing in the biomedical industry, with an
emphasis on anti-infective drugs. The Company has been granted the rights to the
drugs Viraplex (R) and MTCH-24(TM).
Our development activities since inception (December 14, 2004) have included
efforts to secure financing and create a management and business structure.
These activities have produced very little in operating revenues.
Going Concern
Our financial statements for the six months ended December 31, 2005, were
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. These
factors, among others, raise substantial doubt about our ability to continue as
a going concern.
We must raise additional capital in order to continue and complete our research
and development and testing. Our future success is dependent upon raising
additional money to provide for the necessary operations of the Company. If we
are unable to obtain such additional financing, there would be a material
adverse effect on our business, financial position, and results of operations.
Our continuation as a going concern is dependent on our ability to generate
sufficient capital to meet our obligations on a timely basis, and to resume
research and development and testing efforts. However, no assurance can be given
that additional capital, if needed, will be available when required or upon
terms acceptable to the Company.
10
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, 2005.
The major activity during the first six months ended December 31, 2005 was the
sale of the Company's 50% interest in Bio-D-tech for $10,183. Other than that,
preparations were made to begin operations.
Operating Expenses
Total operating expenses for the six months ended December 31, 2005 consisted of
legal and administrative costs in preparation for commencement of operations in
the amount of $60,067.
Net Income/Loss
The net loss for the six months ended December 31, 2005 of $49,884. was the
result of $60,067. in legal and administrative costs offset slightly by the sale
of the Company's 50% interest in Bio-D-tech.
LIQUIDITY AND CAPITAL RESOURCES
Our cash and cash equivalents were $6,912. at December 31, 2005.
Item 3. Controls and Procedures
As of the end of the period covered by this Form 10-QSB, the Company carried out
an evaluation, under the supervision and with the participation of its chief
executive officer and chief financial officer, of the effectiveness of the
design and operation of its disclosure controls and procedures (as defined in
Rule 13-a-15-e or 15-d-15-e under the Securities Exchange Act of 1934).
Based on this evaluation, the Company's chief executive officer and chief
financial officer concluded that as of the evaluation date, such disclosure
controls and procedures were reasonably designed to ensure that information
required to be disclosed by the Company in reports it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission.
Part II Other Information
Item 1. Legal Proceedings
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
10
Item 5. Other Information
Not applicable.
Item 6. Exhibits
The following exhibits are included herein:
31.1 Certification of CEO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
31.2 Certification of CFO Pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.
32.1 Certification of CEO Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
32.2 Certification of CFO Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
EAST WEST Distributors, Inc.
By: /s/ Gerald N. Kern
- ---------------------------
Gerald N. Kern, Director
Dated: 1/31/06
------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and/or the class indicated.
/s/ Gerald N. Kern Dated: 1/30/06
- ---------------------------
Gerald N. Kern, Director