Condensed
Consolidated Financial Statements (Unaudited)
|
1 | |
Condensed
Consolidated Balance Sheets as of August 31, 2006 (Unaudited) and
November
30, 2005
|
1 | |
Condensed
Consolidated Statements of Operations for the Three and Nine Months
Ended
August 31, 2006 and 2005 (Unaudited)
|
2 | |
Condensed
Consolidated Statements of Cash Flows for the Nine Months Ended August
31,
2006 and 2005 (Unaudited)
|
3 | |
Condensed
Consolidated Statement of Changes in Stockholders’ Deficiency for the Nine
Months Ended August 31, 2006 (Unaudited)
|
4 | |
Notes
to Condensed Consolidated Financial Statements as of August 31, 2006
(Unaudited)
|
5 | |
Item
2.
|
Management’s
Discussion and Analysis or Plan of Operation
|
7
|
Item
3.
|
Controls
and Procedures
|
16
|
Item
1.
|
Legal
Proceedings
|
17
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
17 |
Item
3.
|
Defaults
Upon Senior Securities
|
17 |
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
17 |
Item
5.
|
Other
Information
|
17 |
Item
6.
|
Exhibits
|
17 |
|
August
31,
2006 |
November
30,
2005 |
|||||
|
(Unaudited)
|
(Note)
|
|
||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
-
|
$
|
182
|
|||
Accounts
receivable
|
4,762
|
23,266
|
|||||
Inventory
|
58,480
|
56,740
|
|||||
Prepaid
expenses and other current assets
|
2,177
|
2,528
|
|||||
Total
current assets
|
65,419
|
82,716
|
|||||
Property
and equipment, net of accumulated depreciation of
$18,271; $16,039-2005
|
6,914
|
8,459
|
|||||
Other
assets
|
25,652
|
20,553
|
|||||
Total
assets
|
$
|
97,985
|
$
|
111,728
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
183,059
|
$
|
36,852
|
|||
Credit
cards payable
|
131,311
|
121,330
|
|||||
Lines
of credit payable
|
176,808
|
181,425
|
|||||
Current
portion of long-term debt
|
2,144
|
2,640
|
|||||
Other
loans
|
13,000
|
-
|
|||||
Due
to stockholders
|
169,157
|
149,443
|
|||||
Total
current liabilities
|
675,479
|
491,690
|
|||||
Long-term
debt, net of current portion
|
306
|
3,228
|
|||||
Total
liabilities
|
675,785
|
494,918
|
|||||
Stockholders’
deficiency:
|
|||||||
Common
stock, $0.001 par value; 500,000,000 shares authorized,
108,567,080 shares issued and outstanding
|
20,000
|
20,000
|
|||||
Common
stock subscribed; no shares issued and outstanding
|
188,500
|
188,500
|
|||||
Additional
paid-in capital
|
180,000
|
180,000
|
|||||
Accumulated
deficit
|
(966,300
|
)
|
(771,690
|
)
|
|||
Total
stockholders’ deficiency
|
(577,800
|
)
|
(383,190
|
)
|
|||
Total
liabilities and stockholders’ deficiency
|
$
|
97,985
|
$
|
111,728
|
Note:
|
The
balance sheet at November 30, 2005 has been derived from the audited
financial statements at that date.
|
Three
months
ended August 31, |
Nine
months ended
August 31 |
||||||||||||
2006
|
2005
|
2006
|
2005
|
||||||||||
Net
sales
|
$
|
181,711
|
$
|
209,531
|
$
|
568,695
|
$
|
621,335
|
|||||
Cost
of sales
|
73,853
|
79,942
|
259,388
|
271,707
|
|||||||||
Gross
profit
|
107,858
|
129,589
|
309,309
|
349,628
|
|||||||||
Operating
expenses
|
149,770
|
156,646
|
468,701
|
393,806
|
|||||||||
Loss
from operations
|
(41,912
|
)
|
(27,057
|
)
|
(159,392
|
)
|
(44,178
|
)
|
|||||
Interest
expense
|
11,132
|
10,062
|
33,081
|
27,319
|
|||||||||
Loss
before provision for income taxes
|
(53,044
|
)
|
(37,119
|
)
|
(192,473
|
)
|
(71,497
|
)
|
|||||
Provision
for income taxes
|
624
|
1,244
|
2,137
|
13,195
|
|||||||||
Net
loss
|
$
|
(53,668
|
)
|
$
|
(38,363
|
)
|
$
|
(194,610
|
)
|
$
|
(74,692
|
)
|
|
Net
loss per share, basic and diluted
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
$
|
0.00
|
|||||
Weighted
average number of common shares outstanding - basic and
diluted
|
108,567,080
|
108,567,080
|
108,567,080
|
108,567,080
|
Nine
months ended August
31,
|
|||||||
2006
|
2005
|
||||||
|
(Unaudited)
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(194,610
|
)
|
$
|
(74,692
|
)
|
|
Adjustments
to reconcile net loss to
net
cash used in operating activities:
|
|||||||
Depreciation
and amortization
|
3,772
|
(3,940
|
)
|
||||
Changes
in assets (increase) decrease:
|
|||||||
Accounts
receivable
|
18,504
|
(3,021
|
)
|
||||
Inventory
|
(1,740
|
)
|
16,300
|
||||
Prepaid
expenses and other current assets
|
351
|
(517
|
)
|
||||
Changes
in liabilities increase (decrease):
|
|||||||
Accounts
payable and accrued expenses
|
146,207
|
4,561
|
|||||
Net
cash used in operating activities
|
(27,516
|
)
|
(53,429
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of equipment
|
(686
|
)
|
(2,931
|
)
|
|||
Purchase
of amortizable assets
|
(6,640
|
)
|
(1,762
|
)
|
|||
Net
cash used in investing activities
|
(7,326
|
)
|
(4,693
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
(repayment) of lines of credit
|
(4,617
|
)
|
8,281
|
||||
Repayment
of long-term debt
|
(3,418
|
)
|
(114
|
)
|
|||
Increase
in due to stockholders
|
19,714
|
37,831
|
|||||
Increase
in credit card payable
|
9,981
|
12,867
|
|||||
Increase
in other loans
|
13,000
|
-
|
|||||
Net
cash provided by financing activities
|
34,660
|
58,865
|
|||||
Net
increase (decrease) in cash
|
(182
|
)
|
743
|
||||
Cash,
beginning of period
|
182
|
-
|
|||||
Cash,
end of period
|
$
|
-
|
$
|
743
|
|||
Supplemental
disclosures of cash flow information:
|
|||||||
Cash
paid during the period for:
|
|||||||
Income
taxes
|
$
|
1,137
|
$
|
1,766
|
|||
Interest
|
33,081
|
27,319
|
Common
Stock
|
Common
Stock
Subscribed |
Additional
Paid
in
|
Accumulated | |||||||||||||||||||
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||||||||||
Balance,
December 1, 2005
|
108,567,080
|
$
|
20,000
|
-
|
$
|
188,500
|
$
|
180,000
|
($771,690
|
)
|
($383,190
|
)
|
||||||||||
Net
loss for the period
|
-
|
-
|
-
|
-
|
-
|
(194,610
|
)
|
(194,610
|
)
|
|||||||||||||
Balance,
August 31, 2006
|
108,567,080
|
$
|
20,000
|
-
|
$
|
188,500
|
$
|
180,000
|
($966,300
|
)
|
($577,800
|
)
|
Contractual
Obligations
(as of August 31, 2006) |
||||||||||
Total
|
1
Year or
Less
|
More Than 1 Year | ||||||||
Credit
Cards payable
|
$
|
131,311
|
$
|
131,311
|
$
|
--
|
||||
Lines
of Credit Payable
|
176,808
|
176,808
|
--
|
|||||||
Due
to Stockholders
|
169,157
|
169,157
|
--
|
|||||||
Other
|
15,450
|
15,144
|
306
|
|||||||
Total
Contractual Obligations
|
$
|
492,726
|
$
|
492,420
|
$
|
306
|
· acquire
intellectual property rights relating to AcnEase®
and other products;
|
· conduct
clinical trials and fund marketing and new product
launches;
|
· establish
U.S. manufacturing capabilities;
and
|
· fund
general working capital requirements if we continue to experience
deficits.
|
|
·
|
demand
and price for our products;
|
|
·
|
the
timing and recognition of product sales;
|
|
·
|
unexpected
delays in developing and introducing products;
|
|
·
|
unexpected
delays in manufacturing our products;
|
|
·
|
increased
expenses, whether related to marketing, product development or
administration or otherwise;
|
|
·
|
insufficient
demand in the marketplace could cause our distributors to return
product;
|
|
·
|
the
mix of revenues derived from products;
|
|
·
|
the
hiring, retention and utilization of personnel; and
|
|
·
|
general
economic factors.
|
· sales
agreements may be difficult to enforce;
|
· receivables
may be difficult to collect through a foreign country’s legal
system;
|
· foreign
countries may impose additional withholding taxes or otherwise tax
foreign
income, impose tariffs or adopt other restrictions on foreign
trade;
|
· intellectual
property rights may be more difficult to enforce in foreign
countries;
|
· terrorist
activity or the outbreak of a pandemic disease may interrupt distribution
channels or adversely impact customers or employees; and
· regulations
may change relating to dietary supplements that may negatively impact
the
ability to market products in those geographical
regions.
|
|
•
|
obtaining
financial and investment information from the investor;
|
|
•
|
obtaining
a written suitability questionnaire and purchase agreement signed
by the
investor; and
|
|
•
|
providing
the investor a written identification of the shares being offered
and the
quantity of the shares.
|
|
•
|
announcements
of research activities and technology innovations or new products
by us or
our competitors;
|
|
•
|
changes
in market valuation of companies in our industry
generally;
|
|
•
|
variations
in operating results;
|
|
•
|
changes
in governmental regulations;
|
|
•
|
results
of research studies of our products or our competitors’
products;
|
|
•
|
regulatory
action or inaction on our products or our competitors’
products;
|
|
•
|
changes
in our financial estimates by securities analysts;
|
|
•
|
general
market conditions for companies in our industry;
|
|
•
|
broad
market fluctuations; and
|
|
•
|
economic
conditions in the United States or abroad.
|
Exhibit
No.
|
Description(1)
|
2.1
|
Fourth
Amended Plans of Reorganization for Pacific Magtron International
Corp.
and LiveWarehouse, Inc. (incorporated by reference to Exhibit 2.1
to
Pacific Magtron International Corp.’s Current Report on Form 8-K filed on
August 16, 2006).
|
2.2
|
Order
Approving Fourth Amended Plans of Reorganization for Pacific Magtron
International Corp. and LiveWarehouse, Inc. entered August 11, 2006
(incorporated by reference to Exhibit 2.2 to Pacific Magtron International
Corp.’s Current Report on Form 8-K filed on August 16,
2006).
|
2.3
|
Agreement
and Plan of Merger, dated as of September 18, 2006, by and among
Pacific
Magtron International Corp., LiveWarehouse, Inc. and Herborium,
Inc.
|
3(i)
|
Second
Amended and Restated Articles of Incorporation of Pacific Magtron
International Corp.
|
3(ii)
|
Amended
and Restated Bylaws of Pacific Magtron International
Corp.
|
10.1
|
Order
Approving Settlement Agreement and Mutual Settlement Agreement and
Release
(incorporated by reference to Exhibit 10.1 to Pacific Magtron
International Corp.’s Current Report on Form 8-K filed on August
16,2006).
|
10.2*
|
Employment
Agreement dated as of September 18, 2006 between Pacific Magtron
International Corp. and Dr. Agnes P. Olszewski
|
10.3*
|
Employment
Agreement dated as of September 18, 2006 between Pacific Magtron
International Corp. and Dr. James P. Gilligan
|
31.1
|
Rule
13a-14(a) Certification of Agnes Olszewski, Chief Executive Officer
and
Chief Financial Officer (filed herewith).
|
32.1
|
Certification
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
906 of
the Sarbanes-Oxley Act of 2002 (filed
herewith).
|
Herborium Group, Inc. | |
By: /s/Agnes Olszewski. | |
Name: Agnes Olszewski. | |
Title: Chief Executive Officer (Principal Executive Officer) and | |
Chief Financial Officer (Principal Accounting Officer) |