<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 33-80659
COMPARE GENERIKS, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 11-3289396
- ------------------------------- ----------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number )
incorporation or organization)
300 Oser Avenue
Hauppauge, New York
(Address of principal executive offices)
11788
(Zip Code)
(800) 342-6555
(Registrant's telephone number including area code)
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 and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ----
Class Outstanding at November 4, 1996
------------ -------------------------------
Common Stock 3,890,000
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COMPARE GENERIKS, INC.
FORM 10-QSB
SIX MONTHS ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements:
<S> <C>
Balance sheet ...................................................................... 1
Statements of operations............................................................ 2
Statements of cash flows ........................................................... 3
Notes to financial statements ...................................................... 4-5
Item 2. Management's discussion and analysis
of financial condition and results of
operations ....................................................................... 6
PART II - OTHER INFORMATION
Item 1. Legal proceedings .................................................................. 7
SIGNATURES .................................................................................... 8
</TABLE>
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COMPARE GENERIKS, INC.
BALANCE SHEET
(Unaudited)
SEPTEMBER 30, 1996
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 195,097
Investments in marketable securities at fair value 500,201
Accounts receivable, net of $10,000 allowance
for doubtful accounts 417,466
Inventories 427,603
Prepaid expenses and other current assets 258,817
----------
Total current assets 1,799,184
---------
INVESTMENTS IN MARKETABLE SECURITIES 373,125
FURNITURE AND FIXTURES, net 49,802
INVESTMENT IN SUPERIOR SUPPLEMENTS, INC. 1,150,000
INTANGIBLE ASSETS, net 1,477,592
OTHER ASSETS 199,200
------------
$5,048,903
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 166,372
Due to affiliate 249,188
-----------
415,560
-----------
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock, $.0001 par value, authorized
25,000,000 shares; 3,890,000 issued and
outstanding 389
Preferred stock, Class A, $.0001 par value;
authorized 10,000,000 shares; 5,000,000 issued
and outstanding 500
Preferred stock, Class B, $.0001 par value;
authorized 10,000,000 shares; 500,000 issued
and outstanding 50
Additional paid-in capital 5,273,344
Accumulated deficit (635,940)
-----------
4,638,343
Less stock subscription receivable (5,000)
------------
4,633,343
------------
$5,048,903
============
</TABLE>
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COMPARE GENERIKS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 975,845 $ -0- $ 467,387 $ -0-
---------- ---------- ----------- ------------
COSTS AND EXPENSES:
Cost of sales 491,731 -0- 238,892 -0-
Selling, general and
administrative 777,958 -0- 433,390 -0-
Amortization of intangible
assets 157,020 -0- 78,510 -0-
---------- ---------- ----------- ------------
1,426,709 -0- 750,792 -0-
---------- ---------- ----------- ------------
OPERATING LOSS (450,864) -0- (283,405) -0-
INTEREST INCOME, net 29,101 -0- 8,289 -0-
---------- ---------- ----------- ------------
NET LOSS $(421,763) $ -0- $ (275,116) -0-
=========== ========== =========== ============
NET LOSS PER SHARE $ (.11) $ -0- $ (.07) $ -0-
=========== ========== =========== ============
WEIGHTED AVERAGE
NUMBER OF SHARES
OF COMMON STOCK
OUTSTANDING $3,823,333 $2,500,000 $ 3,890,000 $ 2,500,000
=========== ========== =========== ============
</TABLE>
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COMPARE GENERIKS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Six Months
Ended Ended
September 30, 1996 September 30,1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(421,763) $ -0-
---------- ---------------
Adjustments to reconcile net loss to net cash
used in operating activities:
Amortization and depreciation 210,861 -0-
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (182,170) -0-
Inventories (265,200) -0-
Prepaid expenses and other current assets (118,811) -0-
Other assets (125,200) -0-
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 79,178 -0-
Due to affiliate 16,013 -0-
---------- --------------
Total adjustments (385,329) -0-
---------- --------------
Net cash used in operating activities (807,092) -0-
---------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investments (873,326) -0-
Acquisition of furniture and fixtures (48,430) -0-
Investment in Superior Supplements, Inc. (100,000) -0-
Acquisition of intangible assets (23,528) -0-
----------- --------------
Net cash used in investing activities (1,045,284) -0-
----------- --------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,852,376) -0-
----------- --------------
CASH AND CASH EQUIVALENTS, beginning of
period 2,047,473 -0-
---------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 195,097 $ -0-
=========== ==============
</TABLE>
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COMPARE GENERIKS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1. Basis of Presentation:
The interim financial statements furnished reflect all adjustments
which are, in the opinion of management, necessary to present a fair statement
of the financial position and results of operations for the six and three
months ended September 30, 1996. The financial statements should be read in
conjunction with the summary of significant accounting policies and notes to
financial statements included in the Company's Form 10-KSB for the fiscal year
ended March 31, 1996. The results of operations for the six and three months
ended September 30, 1996 are not necessarily indicative of the results to be
expected for the full year.
2. Concentration of Credit Risk:
Financial instruments which potentially expose the Company to credit
risk, as defined by Statement of Financial Accounting Standard No. 105 ("FAS
105"), consists primarily of trade accounts receivable. Wholesale distributors
of dietary supplements and over-the-counter pharmaceuticals account for a
substantial portion of trade receivables. The risk associated with this
concentration is limited due to the large number of distributors and their
geographic dispersion.
3. Investment in Marketable Securities:
The Company has adopted Financial Accounting Standards Board ("FASB")
Statement No. 115, "Accounting for Certain Investments in Debt and Equity
Securities" FASB No. 115 requires that investments in equity securities be
designated as trading, held-to-maturity, or available-for-sale. Management
considers the Company's marketable securities, consisting principally of
government and government backed securities, to be available-for-sale.
Available-for-sale securities are reported at amounts which approximate fair
value.
4. Inventories:
Inventories, consisting principally of finished goods, at September
30, 1996 have been estimated using the gross profit method.
5. Investment in Superior Supplements, Inc.:
On May 31, 1996, the Company acquired 500,000 shares of common stock
of Superior Supplements, Inc. valued at $1,150,000.
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COMPARE GENERIKS, INC.
NOTES TO FINANCIAL STATEMENTS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Continued)
6. Stockholders' Equity:
a. Net loss per share
Net loss per share is computed by dividing the net loss by the
weighted average number of common shares and equivalents outstanding during the
period.
b. Issuance of stock
On May 31, 1996, the Company acquired 500,000 shares of common stock
of Superior Supplements, Inc. for $100,000 and the issuance of 200,000 shares
of the Company's stock. The value of the shares ($1,150,000) issued in
connection with this transaction have been determined using a fair value of
$5.75 per share representing approximately two-thirds of the market value of
the Company's stock at May 31, 1996.
7. Commitments:
On May 31, 1996, the Company entered into a three year Supply
Agreement with Superior Supplements, Inc. (SSI) which provides for SSI to
supply the Company with vitamins in bulk tablet form (other than any vitamins
sold under the "Energex" trade mark or as part of the "Energex" product line)
at a price equal to SSI's cost plus 15 percent.
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<PAGE>
COMPARE GENERIKS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net sales, derived primarily from convenience stores and drug store
chains were approximately $976,000 and $467,000 for the six and three month
period ended September 30, 1996, respectively. The gross profit on these sales
was approximately $484,000 (50% of sales) and $228,000 (49% of sales).
Selling, general and administrative expenses approximated $778,000
(80% of sales) and $433,000 (93% of sales) for the six and three month period
ended September 30, 1996, respectively. The Company has increased attendance at
trade shows, placed advertisements in various trade publications, and has
implemented marketing campaigns targeting convenience store chains for the
placement of product displays. In addition, the Company has began radio
advertising in certain test markets in order to streamline its marketing
efforts based on demographics.
The Company realized losses of approximately ($422,000) and ($275,000)
for the six and three month period ended September 30, 1996, respectively. The
losses are principally attributable to the amortization of intangible assets on
a straight line basis, the implementation of marketing campaigns and radio
advertising costs.
On May 31, 1996, the Company entered into a three year supply
agreement with Superior Supplements, Inc. (SSI), which provides for SSI to
supply the Company with vitamins in bulk tablet form (other than any vitamins
sold under the "Energex" trade mark or as part of the "Energex" product line)
at a price equal to SSI's cost plus 15 percent.
Liquidity and Capital Resources
As of September 30, 1996, the Company had working capital of
approximately $1,384,000.
The Company's statement of cash flows reflects cash used in operating
activities of approximately ($807,000) primarily due to a net loss of
approximately $422,000 and increases in operating assets and payables such as
accounts receivable ($182,000), inventories ($265,000), prepaid expenses and
other current assets ($119,000), other assets ($125,000), and accounts payable
and accrued expenses ($79,000).
The statement also reflects cash used in investing activities of
approximately ($1,045,000) which is principally attributable to the purchase of
government and government backed securities ($873,000), furniture and fixtures
($48,000), intangible assets ($24,000), as well as an investment in Superior
Supplements, Inc. common stock ($100,000).
The Company expects to meet its cash requirements from operations and
current cash reserves.
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<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There is no material litigation pending or threatened against the
Company nor are there any such proceedings to which the Company is a party.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMPARE GENERIKS, INC.
Dated: November 7, 1996 By: /s/Thomas A. Keith
--------------------------
Thomas A. Keith
President and Chief
Executive Officer
Chief Financial Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
financial statements and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-START> APR-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 195,097
<SECURITIES> 500,201
<RECEIVABLES> 427,466
<ALLOWANCES> 10,000
<INVENTORY> 427,603
<CURRENT-ASSETS> 1,799,184
<PP&E> 52,453
<DEPRECIATION> 2,651
<TOTAL-ASSETS> 5,048,903
<CURRENT-LIABILITIES> 415,560
<BONDS> 0
<COMMON> 389
0
550
<OTHER-SE> 4,632,404
<TOTAL-LIABILITY-AND-EQUITY> 5,048,903
<SALES> 975,845
<TOTAL-REVENUES> 975,845
<CGS> 491,731
<TOTAL-COSTS> 491,731
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (421,763)
<INCOME-TAX> 0
<INCOME-CONTINUING> (421,763)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421,763)
<EPS-PRIMARY> (.11)
<EPS-DILUTED> (.11)
</TABLE>
