UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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Commission file number 000-29171
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Med Gen Inc.
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[Exact name of small business issuer as specified in its charter]
Nevada 65-0703559
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(State of incorporation) (IRS Employer
Identification No.)
7284 W. Palmetto Park Road, Suite 106, Boca Raton, FL 33433
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(Address of principal executive offices)
(561) 750-1100
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(Issuer's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 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 ___
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, Par Value $.001 per share
4,184,716 Shares outstanding as of June 30, 2000
Transitional Small Business Disclosure Format (check one): Yes [_] No [X]
<PAGE> 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MED GEN, INC.
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CONDENSED STATEMENTS OF OPERATIONS
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THREE AND NINE MONTHS ENDED JUNE 30, 2000 AND 1999
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, JUNE 30,
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2000 1999 2000 1999
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<S> <C> <C> <C> <C>
NET SALES $ 264,876 $ 798,033 $ 1,150,201 $ 1,167,091
COST OF GOODS SOLD 41,193 348,637 290,080 525,229
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GROSS PROFIT 223,683 449,396 860,121 641,862
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OPERATING EXPENSES
General and
administrative 266,434 198,937 617,174 294,766
Selling expenses 64,091 35,795 282,374 173,229
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Total operating 330,525 234,732 899,548 467,995
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INCOME (LOSS) FROM
OPERATIONS (106,842) 214,664 (39,427) 173,867
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OTHER (EXPENSE) INCOME ( 1,408) ( 158) ( 2,817) ( 158)
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NET INCOME (LOSS)
BEFORE INCOME TAX
EXPENSE (108,250) 214,506 (42,244) 173,709
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INCOME TAX EXPENSE - - - -
NET INCOME (LOSS) (108,250) 214,506 (42,244) 173,709
ACCUMULATED DEFICIT
BEGINNING OF PERIOD (1,347,222) (1,229,103) (1,413,228) (1,188,306)
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ACCUMULATED DEFICIT
END OF PERIOD $(1,455,472) $(1,014,597) $(1,455,472) $(1,014,597)
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</TABLE>
Read the accompanying notes to the financial statements.
<PAGE> 2
MED GEN, INC.
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CONDENSED BALANCE SHEET
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JUNE 30, 2000
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ASSETS
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CURRENT ASSETS
Cash $ 52,761
Accounts receivable, net 188,133
Inventory 88,193
Prepaid expenses 69,013
Due from related parties 99,567
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Total current assets 497,667
FURNITURE AND EQUIPMENT, net 46,564
SECURITY DEPOSITS 92,170
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TOTAL ASSETS $ 636,401
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 300,423
Customer deposits 8,332
Loan payable 100,000
Note payable 45,000
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Total current liabilities 453,755
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value
5,000 shares authorized, -0-
shares issued and outstanding -
Common stock, $.001 par value
15,000,000 shares authorized,
4,374,740 issued and outstanding 4,375
Additional paid-in capital 1,633,743
Accumulated deficit (1,455,472)
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Total stockholders' equity 182,646
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 636,401
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Read the accompanying notes to the financial statements.
<PAGE> 3
MED GEN, INC.
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CONDENSED STATEMENT OF CASH FLOWS
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FOR THE NINE MONTHS ENDED JUNE 30, 2000 AND 1999
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<TABLE>
<CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES ($117,164) $ 82,587
CASH FLOWS FROM INVESTING ( 31,949) ( 5,324)
CASH FLOWS FROM FINANCING 201,874 (44,880)
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NET INCREASE (DECREASE) IN CASH 52,761 32,383
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CASH - BEGINNING OF PERIOD - 13,572
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CASH - END OF PERIOD $ 52,761 $ 45,955
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</TABLE>
Read the accompanying notes to financial statements.
<PAGE> 4
MED GEN, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE NINE MONTHS ENDED JUNE 30, 2000
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NOTE 1. BASIS OF PRESENTATION
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The accompanying unaudited financial statements have
been prepared in accordance with generally accepted
accounting principles for interim financial information
and item 310(b) of Regulation S-B. They do not include
all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. In the opinion of management,
all adjustments (consisting only of normal recurring
adjustments) considered necessary for a fair
presentation have been included. The results of
operations for the periods presented are not
necessarily indicative of the results to be expected
for the full year. For further information, refer to
the financial statements of the Company as of September
30, 1999 contained in the Company's Form 10-SB.
NOTE 2. CAPITAL STOCK
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In May and June 2000, the Company sold 190,000 shares
of its common stock for $70,000.
In May 2000, the Company issued 500,000 shares of its
common stock to be held in escrow as collateral for a
$100,000 loan it received.
The Company issued 328,000 shares of its common stock,
valued at $25,518, to employees as bonuses.
NOTE 3. COMMITMENTS AND CONTINGENCIES
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In May 2000, the Company entered into an agreement to
exclusively market and employ the trademarks of the
Blair Barie hand and foot care product line. Under the
terms of this agreement, the Company will pay to
Barielle International, Inc. a total sum of $500,000,
payable in a sum equal to seven and a half percent
(7.5%) of gross sales made by Med Gen, Inc. of Barielle
products. In addition, the agreement also includes a
consulting agreement, whereby the Company will grant,
as consideration of consulting services, 300,000
options to acquire shares of Med Gen, Inc. common stock
over a three year period. As of June 30, 2000, no
options have been exercised.
<PAGE> 5
MED GEN, INC.
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NOTES TO FINANCIAL STATEMENTS
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FOR THE NINE MONTHS ENDED JUNE 30, 2000
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NOTE 3. COMMITMENTS AND CONTINGENCIES (continued)
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On June 2, 2000 the Company entered into a Letter of
Intent to provide $400,000 of working capital to Saf-
Tech, LLC. Under the terms of the agreement, once the
Company's common stock reaches $10 per share for a
period of five full trading days, the Company will
issue 40,000 shares of its common stock to Saf-Tech,
LLC. If the stock fails to reach $10 per share within
180 days of the date of the agreement, the Company has
the right to terminate this agreement. If the shares
are issued, the Company acquires a 5% ownership
interest in Saf-Tech, LLC. In consideration of this
Letter of Intent, Saf-Tech granted the Company a 1.5%
ownership interest.
NOTE 4. SUBSEQUENT EVENTS
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In July 2000, the Company sued its former United
Kingdom distributor for "passing off" or duplicating
its Snorenz product as a new product labeled
"Snoreeze". The lawsuit was dismissed.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Form 10-QSB contains forward-looking statements which are
made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995, and which are subject to the
risks and uncertainties which could cause actual results to
differ materially from those discussed in the forward-looking
statements and from historical results of operations. Among the
risks and uncertainties which could cause such a difference, are
those relating to the Company's reliance upon suppliers,
dependence upon key personnel, its ability to manage growth, the
impact of economic conditions generally and in the nutrition and
healthy lifestyle industries in particular, product demand,
market competition, risk inherent in the Company's operations
and other unknown factors. Further information is contained in
the Company's Form 10-SB12G for the fiscal year ended September
30, 1999, as filed with the SEC.
RESULTS OF OPERATIONS
Three months ended June 30, 2000 compared to three months ended
June 30, 1999.
Revenues decreased for the comparable periods from $798,033 to
$264,876. This decrease in revenues was the result of the loss
of our largest selling account, Tru-Vantage International (TVI)
in the Fall of 1999, due to the separation of TVI from its
parent company, Nightingale-Conant. Between March and August of
1999, TVI sales accounted for over $800,000 in revenues verses
nothing this year.
<PAGE> 6
Gross profit was $223,683 in the current quarter, against
$449,396 a year ago. However, gross profit margins improved from
56% in fiscal 1999 to 84% in the fiscal 2000 third quarter. This
improvement continues to reflect the trend towards more higher
margin direct sales through the Internet and the lack of
infomercial production costs, and initial retail stocking fees
experienced in the year ago quarter.
Operating expenses increased from $234,732 a year ago, to
$330,525. The Company would have been operationally profitable
except for the non-recurring extraordinary legal fees of
approximately $100,000 and other costs incurred when the Company
brought a lawsuit against a former distributor in England for
breach of contract. The lawsuit was dismissed. Rental expense
and accounting fees have also increased over the year ago
quarter.
The Company experienced a net loss in the current quarter of
($108,250) verses a gain in the year ago quarter of $214,664.
Management believes that net profits will resume next quarter as
some one time expenses will not be repeated and sales revenues
increase from additional retail store presence and further
expansion into overseas markets.
LIQUIDITY AND CAPITAL RESOURCES
Cash on hand at the end of the quarter was $52,761. However, the
Company has drawn down on $45,000 of its $50,000 available line
of revolving credit, which was established in August 1999, and
is personally guaranteed by the Chairman. The Company also
borrowed $100,000 on a one-year note against collateral of
500,000 shares of common stock held in escrow for legal fees
incurred in the current quarter. If the Company elects not to
repay the note at the end of the term, then shares may be
liquidated from the escrow account in a sufficient quantity to
satisfy the principal and interest then due. Any shares
remaining may then be returned to the Treasury. The Company
feels it has sufficient cash resources, receivables and cash
flow to provide for all general corporate operations in the
foreseeable future.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Med Gen Inc.
(Registrant)
Date: 8/11/00 By:/s/Paul B. Kravitz
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Paul B. Kravitz
Chief Executive Officer
Date: 8/11/00 By:/s/Paul S. Mitchell
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Paul S. Mitchell
President
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