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, 2000. 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, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001.
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. Divestiture of Ultimate Warlock, Inc.
On or about February 21, 2001, the Company rescinded its acquisition of Ultimate Warlock, Inc., which had been reported on the Form 8-K filed September 22, 2000. This recission was reported on the Form 8-K filed March 7, 2001. The Company has not reflected any effect from this transaction in its current financial statements, as no costs were incurred, and no information is relevant to the past or future operating results of the Company.
3. Stock Transaction
On March 16, 2001, a newly appointed board member was elected president, and 6,000,000 shares of the Company’s common stock were issued to him as compensation. The stock was valued at $0.20 per share. These shares were issued so the president would have control of the company with 50.3% of the common stock.
4. Divestiture of Performance Brands, Inc.
On April 30, 2001, the Company agreed to sell its shares in Performance Brands, Inc., the Subsidiary, in consideration of the cancellation of the 1999 employment agreement between Stacy Kaufman, our former sole executive officer and director and the Company and, in addition, the cancellation of options to purchase 500,000 shares of the Company stock because the Subsidiary failed to achieve the projected sales and profits that led to its purchase. Our financial statements for the period ended September 30, 2001 reflect the divestiture of PBI effective April 30, 2001
The Company has determined the fair value of the assets transferred pursuant to the divestiture were substantially similar to their fair value upon purchase, after the adjustment for an increase in accumulated deficit resulting from operating losses. Both parties have agreed to absorb their own expenses in this transaction. The Company did not recognize any gain or loss in connection with this transaction.
We determined that no impairment charge of our long-lived assets and intangible assets should be recorded at December 31, 2000 and March 31, 2001 because: our fundamental analysis of PBI; discussions with management; the results to the Company in absence of PBI; and PBI continued to operate without the parent Company in the same manner that predated its merger with the Company in 1999.
The accompanying schedule was prepared to illustrate the divestiture.
| | Trial | | Divestiture of | | Trial |
| | Balance | | Performance Brands, Inc. | | Balance |
| | April 30, 2001 | | Debit | | Credit | | April 30, 2001 |
| | | | | | | | |
Cash | $ | 11,814 | $ | | $ | 11,814 | $ | |
Accounts Receivable | | 72,782 | | | | 72,782 | | |
Inventory | | 162,306 | | | | 162,306 | | |
Due from Stockholders | | 67,630 | | | | 67,630 | | |
Property & Equipment | | 88,647 | | | | 88,647 | | |
Less: Accumulated Depreciation | | (47,171) | | 47,171 | | | | |
Security Deposits | | 3,670 | | | | 3,670 | | |
Patent & Trademarks | | 27,242 | | | | 27,242 | | |
Less: Accumulated | | (2,429) | | 2,429 | | | | |
Accounts Payable | | (129,012) | | 129,012 | | | | |
Payroll Taxes Payable | | (1,152) | | 1,152 | | | | |
Settlement Payable | | (15,000) | | 15,000 | | | | |
Note Payable | | (11,654) | | 11,654 | | | | |
Long Term Debt | | (9,459) | | 9,459 | | | | |
Common Stock | | (11,921) | | | | | | (11,921) |
Additional Paid in Capital | | (2,216,729) | | 501,843 | | | | (1,714,886) |
Stock Subscriptions Receivable | | 283,629 | | | | 283,629 | | |
Accumulated Deficit | | 1,726,807 | | | | | | 1,726,807 |
| $ | 0 | $ | 717,720 | $ | 717,720 | $ | 0 |
Item 2. Management’s Plan of Operation
Overview
As used in this Quarterly Report, the terms "we", "us", "our", SKNT 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 this transaction, we have become a non-operating company, no longer have any subsidiaries, and we are seeking a Business Combination.
Our current activity is limited to seeking a Business Combination. We will use our limited personnel and financial resources principally in connection with structuring and consummating a Business Combination. It may be expected that any Business Combination will involve the issuance of our shares of common stock. To the extent that common stock is used as consideration to effect a Business Combination, any available cash, of which there can be no assurance, will be used to finance the operations of the Target Business. At June 30, 2001, after adjustment for the Share Transfer Agreement, 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.
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.
Our balance sheet reflects no assets or liabilities as of June 30, 2001, all of which were transferred to PBI in connection with the Share Transfer Agreement. Please read this Quarterly Report together with our amended Schedule 14C filed with the SEC on February 27, 2002, and our Form 10-QSB/A for the three month period ended March 31, 2001, filed on November 9, 2001. This Quarterly Report does not contain any estimates and/or plans related to the industry in which we formerly operated.
Results of Operations
The discussion below is as of June 30, 2001 and reflects our disposition of PBI in the Share Transfer Agreement on April 30, 2001. Reference is made to the Notes to the Financial Statements included in this Form 10-QSB/A for the three month period ended June 30, 2001, which reflects the disposition of PBI.
Revenues: During the three-month-month periods ended June 30, 2001 and 2000, we had revenues of $71,046 and $330,503, respectively.
Operating Expenses: During the three-month period ended June 30, 2001 and 2000, we had operating expenses of $33,830 and $135,435, respectively. During the six month period ended June 30, 2001, we had operating expenses of $1,383,344, which includes a non-cash expense of $1,200,000 related to the sale of 6 million restricted shares for compensation to our new President on March 16, 2000, on which date the closing bid price of the SKNT shares was $.20. This non-recurring expense was in connection with the sale of voting control which was disclosed in our Schedule 14C Information Statement filed with the SEC. Our operating expense for the six-month period ended June 30, 2000 was $300,289.
Net Loss: During the three-month periods ended June 30, 2001 and 2000, our net income was $1,085 and $31,687, respectively. Our net loss for the six-month periods ended June 30, 2001 and 2000, were $1,208,726 and $56,413, respectively.
Liquidity and Capital Resources
At June 30, 2001, we had no assets or liabilities. This reflects the disposition of PBI during the period ended June 30, 2001. See Note 4 to the Notes to Financial Statements. All of our assets and liabilities were transferred to PBI and Kaufman based on the April 30, 2001 Share Transfer Agreement. Our accumulated deficit at June 30, 2001 increased to $1,726,807 compared to $518,081 at December 31, 2000. This was principally the result of the non-cash expense of $1,200,000 related to the issuance of 6 million restricted shares to our president as discussed above.
We had net cash provided by operating activities during the six month period ended June 30, 2001 of $68,875 compared to net cash used of $22,405 during the comparable period in the prior year. Changes in cash flow from operating activities are attributable to the non-cash compensation in the form of restricted shares. We had net cash provided by investing activities of $157,343 during the six-month period ended June 30, 2001. We had cash used in financing activities of $244,828 mainly related to the disposition of our subsidiary stock, compared to cash used in financing activities of $1,655 during the six months ended June 30, 2000.
There can be no assurance that we will be able to fund any continuing expenses until we find and negotiate a Business Combination, if ever.
While we are dependent upon limited interim payments 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 our attorney and our corporate securities compliance firm CR Capital Services, Inc. to be paid for services in shares. No determination has been made regarding the amount or value of the shares.
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. 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 Business Combination, 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 business combination, a change in control may be expected to occur.
There currently are no limitations on our ability to borrow funds to effect a Business Combination. However, 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 Business Combination, 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 Business Combination. 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
Reference is made to Part I, Item 3, "Legal Proceedings" in our Form 10-KSB/A filed on February 27, 2002. All assets of liabilities of PBI were transferred in connection with the Share Transfer Agreement dated April 30, 2001, including any liabilities or claims under any pending proceeding.
Item 2. Changes in Security
During the three month period ended June 30, 2001, we did not issue any restricted shares.
Item 3. Default Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of our security holders. However, reference is made to our amended Schedule 14C Preliminary Information Statement filed February 27, 2002, regarding the divestiture of PBI by SKNT by the action taken by our board of directors and the consent of shareholders owning a majority of our issued and outstanding shares.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit No. | Document Description |
3(i) | Articles of Incorporation (filed as Exhibits 3.1, 3.2 and 3.3 to the Company's Registration Statement on Form 10-SB/12g and incorporated herein by reference) |
3(ii) | Bylaws (filed as Exhibit 3.4 to the Company's Registration Statement on Form 10-SB/12g and incorporated herein by reference) |
13 | Form 10-KSB/A for the year ended December 31, 2000, filed on July 23, 2001 and incorporated herein by reference. |
19(i) | Amended Schedule 14C Preliminary Information Statements filed on July 23 and November 9, 2001and are incorporated herein by reference. |
19(ii) | Schedule 14C Definitive Information Statement filed on February 27, 2002 and incorporated herein by reference. |
(b) Form 8-K.
The Company did not file a Current Report during the three-month period ending June 30, 2001.
SIGNATURES
In accordance with Section 12 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SKINTEK LABS, INC.
By: /s/ Marc Baker
Marc Baker, President and Director
Dated: February 27, 2002
Hollywood, FL
