Condensed
Consolidated Financial Statements (Unaudited)
|
|
Condensed
Consolidated Balance Sheets as of February 28, 2007 (Unaudited)
and
November 30, 2006
|
|
Condensed
Consolidated Statements of Operations for the Three Months Ended
February
28, 2007 and 2006 (Unaudited)
|
|
Condensed
Consolidated Statements of Cash Flows for the Three Months Ended
February
28, 2007 and 2006 (Unaudited)
|
|
Condensed
Consolidated Statement of Changes in Stockholders’ Deficiency for the
Three Months Ended February 28, 2007 (Unaudited)
|
|
|
|
Notes
to Condensed Consolidated Financial Statements as of February 28,
2007
(Unaudited)
|
|
ITEM
2.
|
Management’s
Discussion and Analysis or Plan of Operation
|
ITEM
3.
|
Controls
and Procedures
|
ITEM
1.
|
Legal
Proceedings
|
|
|
ITEM
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
ITEM
3.
|
Defaults
Upon Senior Securities
|
ITEM
4.
|
Submission
of Matters to a Vote of Security Holders
|
ITEM
5.
|
Other
Information
|
ITEM
6.
|
Exhibits
|
February,
28,
2007
|
November
30,
2006
|
||||||
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
1,973
|
$
|
4,649
|
|||
Accounts
receivable
|
4,112
|
5,416
|
|||||
Inventory
|
80,884
|
73,890
|
|||||
Prepaid
expenses and other current assets
|
398
|
442
|
|||||
Total
current assets
|
87,367
|
84,397
|
|||||
Property
and equipment, net of accumulated depreciation
of
$19,500; $19,015-2006
|
5,685
|
6,170
|
|||||
Other
assets, net of accumulated amortization
of
$7,817; $7,269-2006
|
29,180
|
27,728
|
|||||
TOTAL
ASSETS
|
$
|
122,232
|
$
|
118,295
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable and accrued expenses
|
$
|
410,639
|
$
|
344,655
|
|||
Credit
cards payable
|
136,628
|
134,126
|
|||||
Lines
of credit payable
|
171,123
|
172,913
|
|||||
Due
to others
|
33,856
|
34,513
|
|||||
Current
portion of long-term debt
|
1,200
|
1,353
|
|||||
Due
to stockholders
|
148,902
|
153,682
|
|||||
Total
current liabilities
|
902,348
|
841,242
|
|||||
Stockholders’
deficiency:
|
|||||||
Common
stock, $0.001 par value; 500,000,000 shares
authorized,
114,067,080 shares issued and outstanding
(108,567,080
- November 30, 2006)
|
25,500
|
20,000
|
|||||
Common
stock subscribed; no shares issued and outstanding
|
188,500
|
188,500
|
|||||
Additional
paid-in capital
|
624,500
|
180,000
|
|||||
Deferred
compensation
|
(412,500
|
)
|
-
|
||||
Accumulated
deficit
|
(1,206,116
|
)
|
(1,111,447
|
)
|
|||
Total
stockholders’ deficiency
|
(780,116
|
)
|
(722,947
|
)
|
|||
TOTAL
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
|
$
|
122,232
|
$
|
118,295
|
Three
months ended
February
28,
|
|||||||
2007
|
2006
|
||||||
NET
SALES
|
$
|
215,359
|
$
|
163,213
|
|||
COST
OF SALES
|
76,005
|
71,455
|
|||||
GROSS
PROFIT
|
139,354
|
91,758
|
|||||
OPERATING
EXPENSES
|
|||||||
Marketing
and selling
|
75,715
|
76,898
|
|||||
General
and administrative
|
146,834
|
63,861
|
|||||
TOTAL
OPERATING EXPENSES
|
222,549
|
140,759
|
|||||
LOSS
FROM OPERATIONS
|
(83,195
|
)
|
(49,001
|
)
|
|||
Interest
expense
|
10,694
|
10,809
|
|||||
LOSS
BEFORE PROVISION FOR INCOME TAXES
|
(93,889
|
)
|
(59,810
|
)
|
|||
Provision
for income taxes
|
780
|
500
|
|||||
NET
LOSS
|
$
|
(94,669
|
)
|
$
|
(60,310
|
)
|
|
Net
loss per share, basic and diluted
|
$
|
0.00
|
$
|
0.00
|
|||
Weighted
average number of common shares outstanding - basic and
diluted
|
110,522,636
|
108,567,080
|
|
Three
months ended
February
28,
|
|
|||||
|
|
2007
|
|
2006
|
|
||
|
|
(Unaudited)
|
|
||||
CASH
FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
|
|
|
|
|
|
||
Net
loss
|
|
$
|
(94,669
|
)
|
$
|
(60,310
|
)
|
Adjustments
to reconcile net loss to
net
cash used in operating activities:
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
1,033
|
|
|
668
|
|
Amortization
of deferred compensation
|
|
|
37,500
|
|
|
-
|
|
Changes
in assets (increase) decrease:
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
1,304
|
|
|
18,865
|
|
Inventory
|
|
|
(6,994
|
)
|
|
4,455
|
|
Prepaid
expenses and other current assets
|
|
|
44
|
|
|
1,408
|
|
Changes
in liabilities increase (decrease):
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
|
|
65,984
|
|
|
25,615
|
|
Net
cash provided by (used in) operating activities
|
|
|
4,202
|
|
|
(9,299
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS USED IN INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
Purchase
of amortizable assets
|
|
|
(2,000
|
)
|
|
(2,747
|
)
|
|
|
|
|
|
|
|
|
CASH
FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
Repayment
of lines of credit
|
|
|
(1,790
|
)
|
|
(255
|
)
|
Proceeds
from (repayment of) debt
|
|
|
(153
|
)
|
|
3,735
|
|
Decrease
in other loans
|
|
|
(657
|
)
|
|
(2,481
|
)
|
Increase
in credit card payable
|
|
|
2,502
|
|
|
2,849
|
|
Increase
(decrease) in due to stockholders
|
|
|
(4,780
|
)
|
|
11,194
|
|
Net
cash provided by (used in) financing activities
|
|
|
(4,878
|
)
|
|
15,042
|
|
|
|
|
|
|
|
|
|
NET
INCREASE (DECREASE) IN CASH
|
|
|
(2,676
|
)
|
|
2,996
|
|
CASH,
BEGINNING OF PERIOD
|
|
|
4,649
|
|
|
182
|
|
|
|
|
|
|
|
|
|
CASH,
END OF PERIOD
|
|
$
|
1,973
|
|
$
|
3,178
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
Cash
paid during the period for:
|
|
|
|
|
|
|
|
Income
taxes
|
|
$
|
-
|
|
$
|
-
|
|
Interest
|
|
|
10
562
|
|
|
10,650
|
|
Supplemental
disclosure of non-cash information:
|
During
the three months ended February 28, 2007, the Company issued 5,500,000
shares of common stock
and agreed to issue 3,500,000 shares of common stock valued at
$450,000
for professional services.
|
Common
Stock
|
Common
Stock Subscribed
|
Additional
Paid
in
|
Deferred |
Accumulated
|
|||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Compensation
|
Deficit
|
Total
|
||||||||||||||||||
BALANCE,
DECEMBER 1, 2006
|
108,567,080
|
$
|
20,000
|
-
|
$
|
188,500
|
$
|
180,000
|
$
|
-
|
($1,111,447
|
)
|
($722,947
|
)
|
|||||||||||
Common
stock issued/to be issued to consultant for services
|
5,500,000
|
5,500
|
-
|
-
|
444,500
|
(412,500
|
)
|
-
|
37,500
|
||||||||||||||||
Net
loss for the period
|
-
|
-
|
-
|
-
|
-
|
-
|
(94,669
|
)
|
(94,669
|
)
|
|||||||||||||||
BALANCE,
FEBRUARY 28, 2007
|
114,067,080
|
$
|
25,500
|
-
|
$
|
188,500
|
$
|
624,500
|
$
|
(412,500
|
)
|
($1,206116
|
)
|
($780,116
|
)
|
NOTE
1.
|
ORGANIZATION
AND NATURE OF BUSINESS
|
NOTE
2.
|
BASIS
OF ACCOUNTING AND SIGNIFICANT ACCOUNTING
POLICIES
|
NOTE
3.
|
DUE
TO STOCKHOLDERS
|
NOTE
4.
|
STOCKHOLDERS’
DEFICIENCY
|
|
2007
|
2006
|
|||||
Net
sales
|
100.0
|
%
|
100.0
|
%
|
|||
Cost
of sales
|
35.3
|
43.8
|
|||||
Gross
profit
|
64.7
|
56.2
|
|||||
Operating
expenses
|
103.3
|
86.2
|
|||||
Loss
from operations before other expense
|
(38.6
|
)
|
(30.0
|
)
|
|||
Other
expense
|
(5.0
|
)
|
(6.6
|
)
|
|||
Provision
for income taxes
|
(0.4
|
)
|
(0.3
|
)
|
|||
Net
loss
|
(44.0
|
)%
|
(36.9
|
)%
|
Contractual
Obligations
|
||||||||||
|
(as
of February 28, 2007)
|
|||||||||
|
Total
|
1
Year or Less
|
More
Than 1 Year
|
|||||||
Credit
Cards payable
|
$
|
136,628
|
$
|
136,628
|
$
|
--
|
||||
Lines
of Credit Payable
|
171,123
|
171,123
|
--
|
|||||||
Due
to Stockholders
|
148,902
|
148,902
|
--
|
|||||||
Other
|
35,056
|
35,056
|
--
|
|||||||
Total
Contractual Obligations
|
$
|
491,709
|
$
|
491,709
|
$
|
--
|
· 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.
(incorporated by reference to Exhibit 2.3 to the Company’s Current Report
on Form 8-K filed on September 22, 2006)
|
3(i)
|
Second
Amended and Restated Articles of Incorporation of Pacific Magtron
International Corp. (incorporated by reference to Exhibit 3(i)
to the
Company’s Current Report on Form 8-K filed on September 22,
2006)
|
3(ii)
|
Amended
and Restated Bylaws of Pacific Magtron International Corp. (incorporated
by reference to Exhibit 3(ii) to the Company’s Current Report on Form 8-K
filed on September 22, 2006)
|
31
|
Rule
13a-14(a) Certification of Agnes Olszewski
|
32
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
|
By:
/s/Agnes Olszewski.
------------------------
Name:
Agnes Olszewski.
Title:
Chief Executive Officer (Principal Executive Officer)
and
Chief
Financial Officer (Principal Accounting Officer)
Date:
April18, 2007
|