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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, 2000
OR
[ ] 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: 0-22133
SUPERIOR SUPPLEMENTS, INC.
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(Exact name of Registrant as specified in its charter)
Delaware 11-3320172
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(State or other jurisdiction of (State or I.R.S. Employer
incorporation of organization) Identification Number)
270 Oser Avenue
Hauppauge, New York
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(Address of principal executive offices)
11788
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(Zip Code)
(631) 231-0783
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(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
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Class Outstanding at November 9, 2000
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Common Stock 4,000,000
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SUPERIOR SUPPLEMENTS, INC.
FORM 10-QSB
QUARTERLY REPORT
For the Three Months Ended September 30, 2000
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TABLE OF CONTENTS
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Page
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Financial Statements:
Balance sheet ................................................................1
Statements of operations......................................................2
Statements of cash flows......................................................3
Notes to financial statements...............................................4-5
Management's discussion and analysis
of financial condition and results
of operations...............................................................6-7
Legal proceedings.............................................................8
Signatures....................................................................9
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SUPERIOR SUPPLEMENTS, INC.
BALANCE SHEET
(Unaudited)
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September 30, 2000
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ASSETS
CURRENT ASSETS:
Cash and cash equivalent $ 83,253
Accounts receivable (no allowance for
doubtful accounts) 43,871
Due from affiliate 123,732
Inventories 71,384
Prepaid expenses and other current
assets 23,477
-----------
Total current assets 345,717
PROPERTY AND EQUIPMENT, net 1,070,633
OTHER ASSETS 28,911
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$ 1,445,261
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 559,883
Note payable (Note 3) 200,000
Due to affiliates 1,343,912
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Total current liabilities 2,103,795
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COMMITMENTS AND CONTINGENCIES (Note 5)
STOCKHOLDERS' DEFICIENCY (Note 4):
Common stock, $.0001 par value;
authorized 25,000,000 shares;
4,000,000 issued and outstanding 400
Preferred stock, $.0001 par value;
authorized 10,000,000 shares; 5,000,000
issued and outstanding 500
Additional paid-in capital 3,145,441
Accumulated deficit (3,804,875)
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(658,534)
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$ 1,445,261
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SUPERIOR SUPPLEMENTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
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Three Months Ended
September 30,
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2000 1999
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NET SALES $ 834,149 $ 1,147,614
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COSTS AND EXPENSES:
Cost of sales 727,423 1,390,806
Selling, general and administrative 173,079 186,739
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900,502 1,577,545
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OPERATING LOSS (66,353) (429,931)
OTHER:
Interest expense, net (4,439) (4,722)
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NET LOSS $ (70,792) $ (434,653)
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LOSS PER COMMON SHARE $ (.02) $ (.11)
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WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 4,000,000 4,000,000
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SUPERIOR SUPPLEMENTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
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<TABLE>
<CAPTION>
Three Months Ended
September 30,
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (70,792) $(434,653)
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Adjustments to reconcile net loss to net
cash provided by (used in) operations:
Depreciation and amortization 61,785 61,525
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (34,631) 888
Due from affiliate (119,273) 266,736
Inventories 85,408 314,972
Prepaid expenses and other current assets 37,933 9,680
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 115,711 (72,648)
Due to affiliates (294) (169,244)
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Total adjustments 146,639 411,909
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Net cash provided by (used in) operating activities 75,847 (22,744)
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Net increase (decrease) in cash and cash equivalents 75,847 (22,744)
Cash and cash equivalents at beginning of period 7,406 27,736
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Cash and cash equivalents at end of period $ 83,253 $ 4,992
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</TABLE>
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SUPERIOR SUPPLEMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
THREE MONTHS ENDED SEPTEMBER 30, 2000
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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 three month periods
ended September 30, 2000 and 1999. The Company's financial statements for the
year ended September 30, 2000 have been prepared on a going concern basis which
contemplates the realization of assets and the settlement of liabilities and
commitments during the normal course of business. During the three month period
ended September 30, 2000, the Company experienced a decline in revenues and
reflected a working capital deficit of approximately $1,758,000 as of
September 30, 2000. 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 June 30, 2000.
The results of operations for the three months ended September 30, 2000 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 Standards Board Statement
No. 105 ("FASB 105"), consist primarily of trade accounts receivable. Wholesale
distributors of dietary supplements and over-the-counter pharmaceuticals account
for all the Company's trade receivables.
3. Notes Payable:
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The Company borrowed $200,000 from its founder. This note bearing
interest at 8% per annum, was due on June 25, 1998. The note was unpaid as of
September 30, 2000.
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SUPERIOR SUPPLEMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED SEPTEMBER 30,2000
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(Continued)
4. Stockholders' Deficiency:
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Loss per common share is computed by dividing the net loss by the
average number of common shares outstanding during the period. Common stock
equivalents were excluded from the calculation as the effect is antidilutive.
5. Commitments:
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The Company is party to an amended supply agreement with PDK Labs Inc.
("PDK"). The agreement, which expires in May 2001, provides for PDK to purchase
certain products at specified prices. In the event that PDK fails to purchase a
minimum amount ($2,500,000) of products in any given year, the Company will be
paid up to $100,000, on a pro-rata basis, as liquidated damages.
The Company also is party to a supply agreement with Compare Generiks,
Inc. ("CGI"). The terms of this agreement are similar to the agreement with PDK,
except there are no minimum purchase requirements.
The Company is also obligated under a management agreement with PDK,
which provides for PDK to supply the Company with certain management services in
consideration for the payment by the Company of a management fee ranging between
$2,500 and $10,000 per month.
6. Major Customer:
---------------
Sales to PDK approximated 62% and 66% for the three months ended
September 30, 2000 and 1999, respectively. Sales to CGI approximated 15% for the
three months ended September 30, 2000. Sales to a third major customer
approximated 18% and 13% for the three months ended September 30, 2000 and 1999,
respectively.
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SUPERIOR SUPPLEMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-looking Statements
--------------------------
This report on Form 10-QSB contains certain forward looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995 with
respect to the financial condition, results of operations and business of the
Company. All of these forward looking statements, although believed to be
reasonable, are inherently uncertain. Therefore, undue reliance should not be
placed upon such estimates and statements.
Results of Operations
---------------------
The Company has incurred a net loss of $71,000 from operations for the
three month period ended September 30, 2000. In addition, the Company has a
working capital deficit of $1,758,000 at September 30, 2000. These factors raise
substantial doubt about the company's ability to continue as a going concern.
Net sales for the three month period ended September 30, 2000 were
approximately $834,000, as compared to $1,148,000 in the corresponding period in
the prior year. The Company has realized a decline in sales of bottled products
to its customers. Cost of sales for the three months ended September 30, 2000
reflects fixed overhead costs and decreased direct labor rates as a result of
lower production volume due to the decline in sales.
Selling, general and administrative expenses approximated $173,000 and
$187,000 for the three month periods ended September 30, 2000 and 1999,
respectively. As a percentage of sales, these amounts represent 21% and 16%
respectively.
The Company is operating under a supply agreement with PDK Labs Inc.,
("PDK"), which expires in May 2001 and provides for the Company to supply PDK
with vitamins and dietary supplements in bulk tablet form. The agreement, as
amended, provides for PDK to purchase certain products at specified prices. PDK
agreed to purchase products having a minimum aggregate sales price of $2,500,000
per year during the term of the agreement. In the event that PDK fails to
purchase the minimum amount of products in any year, the Company will be paid up
to $100,000 on a pro-rated basis as liquidated damages. Sales to PDK
approximated $515,000 and $756,000 for the three months ended September 30,
2000 and 1999, respectively.
The Company is operating under a similar supply agreement with CGI
except there are no minimum purchase requirements. Sales to CGI approximated
$124,000 for the three months ended September 30, 2000.
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SUPERIOR SUPPLEMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
(Continued)
The Company is also obligated under a management agreement with PDK,
which provides for PDK to supply the Company with certain management services in
consideration for the payment by the Company of a management fee ranging between
$2,500 and $10,000 per month.
The Company has satisfactorily implemented a plan to ensure its systems
are compliant with the requirements to process transactions in the Year 2000. To
date, the Company has not experienced any adverse effects related to the Year
2000.
Liquidity and Capital Resources
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As of September 30, 2000 the Company had a working capital deficit of
approximately $(1,758,000).
The Company's statement of cash flows reflects cash provided by
operating activities of approximately ($76,000), primarily due to decreases in
operating assets such as inventories ($85,000) and prepaid expenses and other
current assets ($38,000), an increase in accounts payable and accrued expenses
($116,000) and an adjustment for depreciation and amortization ($62,000) offset
by increases in operating assets such as accounts receivables ($35,000) and due
from affiliates ($119,000), and a net loss of ($71,000).
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PART II - OTHER INFORMATION
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Item 1. - Legal Proceedings
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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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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.
SUPERIOR SUPPLEMENTS, INC.
Dated: November 10, 2000 By: /s/ Lawrence Simon
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Lawrence Simon
President
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