SKINTEK LABS, INC.
Notes to Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Regulation S-B of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements and should be read in conjunction with Notes to Financial Statements contained in the Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002.
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.
2. Stock Transaction
On March 16, 2001, a newly appointed board member was elected president, and 12,000 shares of the Company's common stock were issued to him as compensation. The stock was valued at $100.00 per share. These shares were issued so the president would have control of the company with 50.3% of the common stock.
On April 4, 2002, the Board of Directors authorized a 500:1 reverse stock split to stockholders of record as of April 15, 2002 and effective on April 18, 2002. The accompanying financial statements and notes have been prepared as if the above reverse stock split occurred at December 31, 2000.
On May 7, 2002, the Company issued 10,500,000 shares of restricted common stock to its president as compensation. The shares were valued at $.10 per share, resulting in compensation of $1,050,000. As per SEC Form S-8 dated May 13, 2002, the Company issued 1,000,000 shares of unrestricted common stock to two consultants and 500,000 to its president as compensation. The shares were valued at $.15 per share, resulting in $150,000 in consultants' compensation and $75,000 in additional officer compensation.
3. Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained recurring operating losses and has minimal assets. These factors raise substantial doubt as to the Company's ability to continue as a going concern. The future of the Company is dependent upon its ability to raise additional working capital and to seek potential merger candidates.
Item 2. Management’s Plan of Operation
Overview
As used in this Quarterly Report, the terms "we", "us", "our", and the "Company" mean Skintek Labs, Inc., a Delaware corporation. On April 30, 2001 we entered into a Share Transfer Agreement with Performance Brands, Inc. ("PBI") and our former president and sole director, Stacy Kaufman. In the agreement we transferred all PBI shares to Kaufman. As a result of the share transfer transaction, we have become a non-operating company without any subsidiaries, and we are seeking a business combination or other transaction with a third party including possible sale of stock resulting in a change in control, which we believe will be in the best interests of our shareholders, including our principal shareholders ("Transaction").
Our current activity is limited to seeking new business opportunities. We will use our limited personnel and financial resources principally in connection with structuring and consummating a Transaction and it may be expected that any Transaction will involve the issuance of our shares of common stock. To the extent that common stock is used as consideration to effect a Transaction, available cash, if any, of which there can be no assurance, will in all likelihood be used to finance new operations that may result from a Transaction. At June 30, 2002, we had no cash or other current assets.
Forward-Looking Statements
To the extent that we make forward-looking statements in the "Management’s Plan of Operation" in this Quarterly Report, we emphasize that forward-looking statements involve risks and uncertainties and our actual results may differ materially from those expressed or implied by our forward looking statements. All forward looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties. Generally forward-looking statements include phrases with words such as "expect", anticipate", "intend", "plan", "believe", "seek", "estimate" and similar expressions to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, our actual results may differ materially from those expressed or implied by these forward-looking statements. All forward-looking statements in this Quarterly Report reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties.
Plan of Operations
This Quarterly Report contains reference to our intent to explore and pursue new business opportunities as a result of our becoming a non-operating company following the disposition of PBI, our former wholly-owned subsidiary, pursuant to the Share Transfer Agreement dated April 30, 2001. Any plan to pursue new business opportunities may involve certain estimates and plans related to us, which assumes certain events, trends and activities will occur and the projected information based on those assumptions. We do not know that any assumptions that we may make will be accurate. In particular, we do not know and cannot predict with any degree of certainty the growth in any business or industry in which we may seek to operate. If our assumptions are wrong about any events, trends and activities, and specifically about which business opportunity to pursue, if any, and because of our limited resources, then our efforts regarding and new business opportunity may also be wrong.
The disclosure contained in this Form 10-QSB reflects a 500 for 1 reverse share recapitalization effective April 18, 2002. This recapitalization was approved by written consent of the majority of the Company's shareholder pursuant the Delaware General Corporation Law.
During the three months ended June 30, 2002, our statement of operations reflects that we had no revenues from any business operations. Our balance sheet reflects no assets and only insignificant liabilities.
During the three-month period ended June 30, 2002, we had total operating expenses of $1,278,502 compared to no operating expenses during the same period of the prior year. We incurred non-cash expenses of $1,125,000 related to the issuance of 10.5 million restricted shares valued at $1,050,000 and 500,000 registered shares valued at $75,000 to our president for compensation. In addition, we incurred non-cash compensation expenses of $150,000 for the issuance of 1,000,000 registered shares to two consultants.
During the three-month periods ended June 30, 2002, our net loss was $1,278,502.
Liquidity and Capital Resources
At June 30, 2002, we had no assets and had only limited liabilities of $23,484, which principally represents an amount due to our sole officer/director for advances made to pay our administrative expenses.
While we have been dependent during this quarter upon limited interim advances of $3,502 made on our behalf by Mr. Baker to pay professional fees, principally related to accounting expenses, we have no written finance agreement with Mr. Baker to provide any continued funding. Mr. Baker is presently negotiating on our behalf with CR Capital Services, Inc., a company specialized in corporate securities compliance services, to be paid for services. No determination has been made regarding the amount or value of the services.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has sustained recurring operating losses and has minimal assets. These factors raise substantial doubt as to the Company's ability to continue as a going concern. The future of the Company is dependent upon its ability to raise additional working capital and to seek potential merger candidates.
We may determine to seek to raise funds from the sale of equity or debt securities, from bank or other borrowings or a combination thereof as part of any consideration in effecting a business combination or other Transaction. However, we have no commitments as of the date hereof to issue any securities, and cannot at this time predict whether equity or debt financing will become available at terms acceptable to us, if at all. We anticipate that in connection with a Transaction, we will, in all likelihood, issue a substantial number of additional shares and to the extent that such additional shares are issued, our shareholders will experience a dilution in their ownership interest. Additionally, if a substantial number of our shares are issued in connection with the consummation of a Transaction, a change in control may be expected to occur.
Our limited resources may make it difficult to borrow funds. The amount and nature of any borrowing by us will depend on numerous factors, including our capital requirements, potential lenders' evaluation of our ability to meet debt service on borrowing and the then prevailing conditions in the financial markets, as well as general economic conditions. We do not have any arrangements with any bank or financial institution to secure additional financing and there can be no assurance that such arrangements if required or otherwise sought, would be available on terms commercially acceptable or otherwise in our best interests. Our inability to borrow funds required to effect or facilitate a Transaction, or to provide funds for an additional infusion of capital into any target business, may have a material adverse effect on our financial condition and future prospects, including the ability to effect a Transaction. To the extent that debt financing ultimately proves to be available, any borrowing will subject us to various risks traditionally associated with indebtedness, including the risks of interest rate fluctuations and insufficiency of cash flow to pay principal and interest. Furthermore, a target business may have already incurred debt financing and, therefore, subject us to all the risks inherent thereto.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Security
During the three-month period ended June 30, 2002, we issued 10.5 million restricted shares, valued at $1,050,000, to Marc Baker, our sole officer and director, for compensation as officer and director of the Company. These restricted shares were reported as non-cash compensation and were expensed during this quarter.
Item 3. Default Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
