EUROMED, INC.
8214 WESTCHESTER SUITE 500
DALLAS, TEXAS 75225
214-692-3544
214-987-2091
December 01, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Attention: John L. Krug
Mail Stop 7-6
Re: EuroMed, Inc.
Dear Mr. Krug:
On behalf of EuroMed, Inc. I hereby transmitt the Amendment 1 to the 10q for the
period end 03/31/97.
Best Regards,
Elbert G. Tindell
Chairman of the Board
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Amendment No. 1
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________ TO _________________
EUROMED, INC.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER 0-27720
NEVADA 88-0317700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8214 Westchester, Suite 500
Dallas, Texas 75225
(Address of principal executive offices) (Zip Code)
214-220-0693
(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 (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 No X
As of December 01, 1998, there were 1,407,000 shares outstanding of the
registrant's common stock, $0.01 par value.
<PAGE>
INDEX
PART I. FINANCIAL INFORMATION
PAGE NO.
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Consolidated Balance Sheets -
December 31, 1996 and March 31, 1997 3
Consolidated Statements of Operations -
Three months ended March 31, 1996 and 1997 5
Consolidated Statements of Cash Flows -
Three months ended March 31, 1996 and 1997 6
Notes to Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(Unaudited)
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 411 $ 28
Trade accounts receivable 1,155 1,834
Loan receivable 548 571
Due from affiliated companies and other related parties 695 407
Inventory 4,526 4,187
Other receivables and prepaid expenses 349 392
Investment in Mutarested B.V. and Subsidiary, net of 4,502 4,502
------ -- -----
valuation allowance of $7,227
TOTAL CURRENT ASSETS 12,186 11,921
------- ------
Vehicles, Furniture and Equipment, at cost 815 824
Less: Accumulated depreciation and amortization (406) (445)
----- --- -----
NET VEHICLES, FURNITURE AND EQUIPMENT 409 379
---- ----- ---
Other Assets
Intangible assets less accumulated amortization of 607 581
$256 and $282 in 1996 and 1997, respectively
Other 172 44
---- -------- --
TOTAL OTHER ASSETS 779 625
------ --- ------
TOTAL ASSETS $13,374 $12,925
======= =======
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of US dollars)
<TABLE>
<CAPTION>
December 31, March 31,
1996 1997
(Unaudited)
LIABILITIES AND STOKHOLDERS' EQUITY
<S> <C> <C>
Current liabilties
Loan payable $ 311 $ 311
Bank overdraft 3,540 3,645
Trade accounts payable 3,076 3,391
Due to affiliated companies, controlling interests 69 --
and other related parties
Taxes payable and other accrued expenses 1,061 612
TOTAL CURRENT LIABILITIES 8,057 7,959
Long-term debts
Unsecured loan from B.V. Wisteria -- --
Unsecured loan from Hybrida B.V. -- --
Unsecured loan from Pantapharma B.V. 90 11
Other long-term debt -- --
TOTAL LIABILITIES 8,147 7,970
Stockholders' Equity -- --
Preferred stock, par value $.01 per share;
5,000,000 shares authorized; no shares issued and outstanding
Common Stock, par value $.01 per share; 40 40
10,00,000 shares authorized 4,000,000 shares issued and outstanding
Additional paid-in capital 12,013 12,013
Retained (deficit) (6,661) (6,993)
Cumulative currency translation adjustment (33) 27
5,359 5,087
Less: 23,000 Treasury Shares at cost (132) (132)
TOTAL STOCKHOLDERS' EQUITY 5,227 4,955
TOTAL LIABILITIES AND $13,374 $12,925
STOCKHODERS EQUITY
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands of US dollars, except per share data)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31, March 31,
1996 1997
------------------ --------
<S> <C> <C>
Sales $ 9,368 $ 7,132
Cost of goods sold 8,549 6,863
----------- -----------
Gross profit 819 269
Selling, general and administrative expenses 491 671
---------- ------------
Operating Profit (Loss) 328 (402)
Interest income 25 29
Interest (expense) (71) (74)
----------- -------
Income (loss) before income taxes 282 (447)
Income taxes 106 115
---------- -----------
Net income (loss) $ 176 $ (332)
========== ==========
Earnings (loss) per share $ 0.08 $ (.08)
=========== ===========
Weighted Average Number of
Common Shares Outstanding 2,287,500 4,000,000
========= =========
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,March 31,
1996 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 176 $ (332)
Adjustments to reconcile to cash flows from operations:
Amortization of intangible assets 21 26
Depreciation expense 30 39
Changes in operating assets and liabilities:
Trade accounts receivable 835 (679)
Due from affiliated companies and other
related parties 356 288
Inventory (1,519) 339
Other receivables and prepaid expenses (648) 62
Trade accounts payable 299 315
Due to affiliated companies, controlling
interests and other related parties - (69)
Taxes payable and other accrued expenses 51 (449)
---------- ------
Net cash used in operating activities (399) (460)
--------- ------
</TABLE>
See accompanying notes to consolidated
financial statements.
<PAGE>
EUROMED, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of US dollars)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,March 31,
1996 1997
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of intangible assets (6) -
Borrowings by and repayments
from a customer 19 -
Purchase of vehicles, furniture
and equipment, at cost (42) (9)
------- -----
Net cash used in investing activities (29) (9)
------- -----
CASH FLOW FROM FINANCING ACTIVITIES:
Common stock issued 12 -
Borrowing under bank overdraft facility 879 105
Add paid in capital 5,932 -
Long-term debt borrowings (4) (79)
----- --- ----
Net cash provided by financing activities 6,819 26
- ----- ----
Effect of currency translation adjustment on cash (3) 60
-------- ----
Net increase (decrease) in cash and cash equivalents 6,388 (383)
Cash and cash equivalents
at the beginning of the quarter 64 411
------- ----
Cash and cash equivalents
at the end of the quarter $6,452 $ 28
====== ====
Cash paid during the quarter:
Interest $ 30 $ 74
Income taxes - -
</TABLE>
See accompanying notes to consolidated
financial statements.
EUROMED, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
a. Interim Financial Statements
The consolidated financial information for the interim periods presented herein
has not been audited by independent accountants, but in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the condensed consolidated balance sheets
and the condensed consolidated statements of earnings and cash flows at the
dates and for the periods indicated have been made. Results of operations for
interim periods are not necessarily indicative of results of operations for the
respective full years.
b. Description of business
EuroMed's operating companies, Galenica and Confedera (the "Companies"), both
based in Oosterhout, the Netherlands, have a primary business of the wholesale
distribution of medicines. The companies' customers are primarily located in the
Netherlands. The companies' products are readily available and the companies are
not dependent on a single supplier or a few suppliers.
c. Earnings Per Share
Earnings per share are computed on the weighted average number of shares and
dilutive equivalent shares of common stock outstanding during the three-month
period ended March 31, 1997, using the treasury stock method.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
EuroMed, Inc. ("EuroMed" or the "Company") is an American
pharmaceutical company involved in the import and wholesale distribution of
branded and generic medicines within The Netherlands, and in the export of
generic medicines throughout the world. EuroMed's business is influenced in
general by various economic, market and political trends in The Netherlands and
Europe.
EuroMed operates through its wholly-owned Netherlands subsidiaries,
Galenica and Confedera, in: (i) the parallel import of EuroSpecialties, which
are prescription ("ethical") branded pharmaceuticals registered and marketed
throughout Europe under international patent and a European brand; (ii) the
wholesale distribution of EuroSpecialties and generic pharmaceuticals to
pharmacies and other wholesalers in The Netherlands; (iii) the wholesale
distribution of DutchSpecialties, which are ethical branded pharmaceuticals
under international patent, registered and marketed as a brand specifically
within The Netherlands; (iv) the wholesale distribution of over-the-counter
("non-ethical") pharmaceuticals to pharmacies and other wholesalers in The
Netherlands; and (v) the export of generic pharmaceuticals to developing nations
of the world.
Generics are therapeutically equivalent ethical pharmaceuticals
manufactured after the expiration of any patents, and marketed as more
competitively priced substitutes for branded ethical pharmaceuticals. Parallel
imports are EuroSpecialties purchased with Europe's supranational free market,
the fifteen member European Union ("EU"), imported into The Netherlands, often
repackaged in the Dutch language, and resold wholesale to pharmacies and other
wholesalers at an arbitrage profit. Arbitrage is primarily the result of pricing
practices of multinational pharmaceutical companies, differing national health
and social policies among EU member states, and currency fluctuations within the
EU. The price differences for identical EuroSpecialties in different EU member
states make parallel trade, or the trade of registered pharmaceuticals from a
low-price market into a high-price market, particularly attractive.
The retail price of pharmaceuticals reflects not only direct production
and local distribution costs but also the cost of research and development.
These costs vary enormously from one country to another. Fluctuations in
exchange rates, differential pricing by multinational pharmaceutical companies,
and varying levels of pressure exerted by the system and social security
services in different EU member states, explain the difference in prices within
Europe, especially for relatively old pharmaceuticals.
On June 1, 1996, the government of The Netherlands implemented
legislation that reduced the prices of pharmaceuticals to approximately the
average prices for equivalent items in Belgium, France, Germany and Great
Britain. The law establishes a prohibition on the sale of pharmaceuticals to
retail pharmacies at a higher price than the maximum price decree. This has
effectively reduced the prices paid for pharmaceuticals in The Netherlands an
average of 17.5%.
On March 25, 1997, the Board of Directors approved a five-point
restructuring plan. First, the Company has entered into an agreement to sell its
Pluripharm subsidiary, which it acquired in July 1996, to a pharmacy wholesale
management group located in The Netherlands. This transaction is subject to
certain conditions precedent, including receipt of a fairness opinion. This
transaction will result in the Company receiving approximately 6,100,000 Dutch
Guilders (approximately $3,104,000). In connection therewith, the Company
recognized a loss of approximately $7,227,500 in the year ended December 31,
1996. EuroMed is scheduled to close this agreement in the second quarter of
1997.
<PAGE>
RESULTS OF OPERATIONS
First Quarter ended March 31, 1997 Compared to First Quarter ended March 31,
1996
Sales. Sales of pharmaceuticals decreased 23.9% to $7,132,000 in the
first quarter of 1997 compared with $9,368,000 in the first quarter of 1996. The
decrease in sales of pharmaceuticals was primarily a result of the government
implementing the maximum price law in June of 1996 which had the effect of
lowering the consumption of pharmaceutical products from wholesalers. Further,
the reduction in EuroMed sales can be attributed to the loss of retail clients
purchasing products related to retail outlet acquisition and a more competitive
product discount program being offered by the Company's competitors.
Cost of Goods Sold. Cost of pharmaceuticals sold decreased 19.7% to
$6,863,000 (96.2% of sales) in the first quarter of 1997 compared with
$8,549,000 (91.3% of sales) in the first quarter of 1996. The decrease in the
cost of pharmaceuticals sold was primarily a result of a decrease in sales,
while the increase as a percent of sales was primarily a result of a more
diversified product inventory. Further, EuroMed's cost of goods sold percent was
increased by the selling of inventory purchased at static rates and sold for the
maximum price allowed by The Netherlands maximum price law.
Gross Profit. Gross profit decreased 67.2% to $269,000 (3.8% of sales)
in the first quarter of 1997 compared with $819,000 (8.7% of sales) in the first
quarter of 1996. The decrease in gross profits was primarily a result of a
decrease in sales, while the decrease in gross profit as a percent of sales was
primarily a result of client pharmacies acquiring products at the rates dictated
by the government imposed maximum price law.
Selling and General and Administrative Expenses. Selling, general and
administrative expenses increased 36.7% to $671,000 (9.4% of sales) in the first
quarter of 1997 compared with $491,000 (5.24% of sales) in the first quarter of
1996. The increase in selling, general and administrative expenses was primarily
a result of a decrease in sales and an increase in the number of employees from
22 to 25, while the increase as a percent of sales was primarily a result of
decreased operating efficiencies. Further, the Company has experienced an
increase in professional fees related to the Company's divestiture of the
Pluripharm Division, continuing legal fees related to ongoing litigation, and
ongoing financial auditing costs.
Net Income. Results of operations decreased 288% to a loss of
$(332,000) (4.7% of sales) in the first quarter of 1997 compared with $176,000
net income (1.9% of sales) in the first quarter of 1996. The decrease in net
income was primarily the result of declining sales volume and the effect of the
implementation of the maximum price law upon the margins of the Company.
LIQUIDITY AND CAPITAL RESOURCES
Cash (used in) operations was ($460,000) in the first quarter of 1997
compared with $(399,000) in the first quarter of 1996. This increase is a result
of the Company's $(322,000) operating loss for the 1997 quarter as compared to
$176,000 income in the first quarter of 1996.
EuroMed has experienced an increase in the Accounts Receivable from
1,155,000 in 1996 to 1,834,000 in 1997. The increase in Accounts Receivable is a
result of an increase in payment time for billed product from the Company's
customers (average day sales in accounts receivables were 6.7, 16.2, and 8.6
days for the years ended December 31, 1994, 1995 and 1996, respectively, and 8.4
and 16.5 days for the first quarters of 1996 and 1997, respectively.) The
increase in receivable is a normal fluctuation and the Company expects the
average daily sales in accounts receivables to decline in future quarters.
Net cash provided by financing activities was $26,000 in the first
quarter of 1997 compared with $6,819,000 in the first quarter of 1996. The
initial public offering of shares on March 19, 1996 through the Nasdaq National
Market was the significant source of cash for the first quarter of 1996.
Cash and cash equivalents at the end of the first quarter 1997 was
$28,000 compared with $6,452,000 at the end of the first quarter of 1996.
Management is of the opinion that the proceeds from the Pluripharm
divestiture, together with existing borrowing capacity, should be sufficient to
finance and sustain operations at the present level.
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Number and Description of Exhibit
Number Exhibit Description
2.1 Stock Exchange Agreement, dated as of November 17, 1995, by and
between Registrant and B.V. Wisteria.(1)
2.2 Ratification Agreement.(1)
3.1 Restated Articles of Incorporation of the Registrant.(1)
3.2 Bylaws of the Registrant.(1)
4.1 Specimen Common Stock Certificate.(1)
10.1 Summary of Management Contract dated February 15, 1997, by and
between EuroMed, Inc. and the Anderson Group.(2)
10.2 Summary of Management Contract dated January 1, 1997, by and
between EuroMed, Inc. and Beheer-en Beleggingsmaatschappij File
B.V..(2)
27.1 Financial Data Schedule.(*)
* Filed herewith.
(1) Previously filed as an Exhibit to the company's Registration
Statement No. 33-80805 on Form S-1 and incorporated by herein reference.
(2) Previouly filed as an Exhibit to Report in Form 8-K dated
July 4, 1997, and incorporated herein by referenced
(b) Reports of Form 8-K
None
<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.
EuroMed, Inc.
Dated: December 1, 1998
Signature Title
/s/ Elbert G. Tindell President and
Elbert G. Tindell Chairman of the Board
/s/ Robert A. Shuey III Chief Executive Officer,
Robert A. Shuey, III Chief Financial Officer,
Treasurer and Director
<PAGE>
Exhibit Index
Exhibit No. Description
27.1 Financial Data Schedule.(*)
(*) Filed herewith
QA397.03
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000852447
<NAME> EUROMED INC
<MULTIPLIER> 1
<CURRENCY> $US
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 28,000
<SECURITIES> 0
<RECEIVABLES> 2,812,000
<ALLOWANCES> 0
<INVENTORY> 4,187,000
<CURRENT-ASSETS> 11,921,000
<PP&E> 824,000
<DEPRECIATION> (445,000)
<TOTAL-ASSETS> 12,925,000
<CURRENT-LIABILITIES> 7,959,000
<BONDS> 0
0
0
<COMMON> 40,000
<OTHER-SE> 4,915,000
<TOTAL-LIABILITY-AND-EQUITY> 12,925,000
<SALES> 7,132,000
<TOTAL-REVENUES> 7,161,000
<CGS> 6,863,000
<TOTAL-COSTS> 7,534,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 74,000
<INCOME-PRETAX> (447,000)
<INCOME-TAX> 115,000
<INCOME-CONTINUING> (332,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (332,000)
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
