<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 December 31, 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
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(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 February 11, 1997
------------ --------------------------------------
Common Stock 3,890,000
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COMPARE GENERIKS, INC.
FORM 10-QSB
NINE MONTHS ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
-----------------
PART 1 - FINANCIAL INFORMATION Page
Item 1. Financial Statements:
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
<PAGE>
COMPARE GENERIKS, INC.
BALANCE SHEET
(Unaudited)
DECEMBER 31, 1996
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 732,033
Accounts receivable, net of $10,000 allowance
for doubtful accounts 440,365
Inventories 832,832
Prepaid expenses and other current assets 159,562
----------
Total current assets 2,164,792
----------
FURNITURE AND FIXTURES, net 51,197
INVESTMENT IN SUPERIOR SUPPLEMENTS, INC. 1,150,000
INTANGIBLE ASSETS, net 1,388,879
OTHER ASSETS 172,500
----------
$4,927,368
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 764,439
Due to affiliate 22,476
Dividend 45,000
----------
831,915
----------
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 (1,173,830)
----------
4,100,453
Less stock subscription receivable (5,000)
----------
4,095,453
----------
$4,924,368
==========
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<PAGE>
COMPARE GENERIKS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Period April 25, Three Months Ended
Ended 1995 (Inception) to December 31,
December 31, December 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
NET SALES $1,414,749 $ 141,290 $ 438,904 $ 141,290
---------- ---------- ---------- ----------
COST AND EXPENSES:
Cost of sales 795,725 80,226 303,994 80,226
Selling, general and administrative 1,343,227 97,782 565,269 97,782
Amortization of intangible assets 235,632 52,340 78,612 52,340
---------- ---------- ---------- ----------
2,374,584 230,348 947,875 230,348
---------- ---------- ---------- ----------
OPERATING LOSS (959,835) (89,058) (508,971) (89,058)
INTEREST INCOME (EXPENSE), net 45,182 (10,667) 16,081 10,667
---------- ---------- ---------- ----------
NET LOSS $(914,653) $(99,725) $(492,890) $(99,725)
========== ========== ========== ==========
NET LOSS PER SHARE $ (.25) $ (.03) $ (.13) $ (.03)
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OF COMMON STOCK OUTSTANDING 3,845,636 3,000,000 3,890,000 3,000,000
========== ========== ========== ==========
</TABLE>
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<PAGE>
COMPARE GENERIKS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Period April 25, 1995
Ended (Inception) to
December 31, 1996 December 31, 1995
_________________ ____________________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $(914,653) $(99,725)
Adjustments to reconcile net loss to
net cash (used in) provided by
operating activities:
Amortization and depreciation 335,766 52,340
Changes in operating assets and
liabilities:
(Increase) in assets:
Accounts receivable (205,069) (83,945)
Inventories (670,429) (167,668)
Prepaid expenses and other
current assets (47,019) (27,562)
Other assets (98,500) (7,000)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses 677,245 369,408
Due to affiliate (210,699) --
__________________ _________________
Total adjustments (218,705) 135,573
__________________ _________________
Net cash (used in) provided by
operating activities (1,133,358) 35,848
__________________ _________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of furniture and fixtures (51,143) --
Investment in Superior Supplements,
Inc. (100,000) --
Acquisition of intangible assets (30,939) (34,614)
__________________ _________________
Net cash used in investing activities (182,082) (34,614)
__________________ _________________
CASH FLOWS FROM FINANCING ACTIVITES:
Proceeds from issuance of stock -- 55,000
Proceeds from bridge loans -- 300,000
Deferred offering costs -- (50,000)
__________________ _________________
Net cash provided by financing
activities -- 305,000
__________________ _________________
NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (1,315,440) 306,234
__________________ _________________
CASH AND CASH EQUIVALENTS, beginning
of period 2,047,473 --
__________________ _________________
CASH AND CASH EQUIVALENTS, end
of period $ 732,033 $ 306,234
================== =================
</TABLE>
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<PAGE>
COMPARE GENERIKS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NINE MONTHS ENDED DECEMBER 31, 1996
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
nine and three months ended December 31, 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 nine and three months ended December 31, 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. Inventories:
Inventories, consisting principally of finished goods at December
31, 1996 have been estimated using the gross profit method.
4. 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.
5. 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.
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<PAGE>
5. Stockholder's Equity: (Continued)
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.
c. Series B preferred stockholders are entitled to cumulative
annual dividends at $.12 per share, payable one year from the date of
issuance. Dividends earned through December 31, 1996 amounted to
$45,000.
Nine Months Period April 25, Three Months Ended
Ended 1995 (Inception) to December 31,
December 31, December 31, (Unaudited)
(Unaudited) (Unaudited)
1996 1995 1996 1995
Net (Loss) $ (914,653) $ (99,725) $ (492,890) $ (99,725)
Dividends 45,000 - 15,000 -
Loss available to
common shareholders $ (959,653) $ (99,725) $ (507,890) $ (99,725)
Weighted average
number of shares 3,845,636 3,000,000 3,890,000 3,000,000
(Loss) per share $ (.25) $ (.03) $ (.13) $ (.13)
6. 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 $1,415,000 and $439,000 for the nine and three month periods
ended December 31, 1996, respectively. The gross profit on these sales was
approximately $619,000 (44% of sales) and $135,000 (31% of sales.)
Selling, general and administrative expenses approximated $1,343,000
(95% of sales) and $565,000 (128% of sales) for the nine and three month period
ended December 31, 1996, respectively. The Company has increased attendance at
trade shows, placed radio advertisements and trade publications throughout the
nation, and has implemented marketing campaigns targeting convenience store
chains for the placement of product displays.
The Company realized losses of approximately ($915,000) and ($493,000) for
the nine and three month period ended December 31, 1996, respectively. The
losses are principally attributable to the amortization of intangible assets on
a straight line basis, the implementation of marketing campaigns geared toward
product placement, and 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 December 31, 1996, the Company had working capital of approximately
$1,333,000.
The Company's statement of cash flows reflects cash used in operating
activities of approximately ($1,133,000) primarily due to a net loss of
approximately $915,000 and increases in operating assets such as accounts
receivable ($205,000), inventories ($670,000), prepaid expenses and other
current assets ($47,000), other assets ($99,000) and a decrease in due to
affiliate ($211,000) offset by an increase in accounts payable and accrued
expenses ($677,000) and an adjustment for amortization and depreciation expenses
($336,000).
The statement also reflects cash used in investing activities of
approximately ($182,000) which is principally attributable to the purchase of
furniture and fixtures ($51,000), intangible assets ($31,000), 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.
-7-
<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: February 13, 1996 By: /s/ Thomas A. Keith
---------------------------
Thomas A. Keith
President and Chief
Executive Officer
Chief Financial Officer
-8-
<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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1996
<CASH> 732,033
<SECURITIES> 0
<RECEIVABLES> 450,365
<ALLOWANCES> 10,000
<INVENTORY> 832,832
<CURRENT-ASSETS> 2,164,792
<PP&E> 55,166
<DEPRECIATION> 3,969
<TOTAL-ASSETS> 4,927,368
<CURRENT-LIABILITIES> 831,915
<BONDS> 0
389
0
<COMMON> 550
<OTHER-SE> 4,094,514
<TOTAL-LIABILITY-AND-EQUITY> 4,927,368
<SALES> 1,414,749
<TOTAL-REVENUES> 1,414,749
<CGS> 795,725
<TOTAL-COSTS> 795,725
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (914,653)
<INCOME-TAX> 0
<INCOME-CONTINUING> (914,653)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (914,653)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
