U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: June 30, 2001
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from: to:
Commission file number: 000-26361
Creative Beauty Supply, Inc.
(Exact name of Small Business Issuer in its charter)
NEW JERSEY 22-3392051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
380 Totowa Road, Totawa, NJ 07512
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: 973-904-0004
Check mark whether the Issuer (1) has filed all
reports required by Section 13 or 15(d) of the
Exchange Act 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 the filing requirements for at
least the past 90 days. YES: X NO:
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PREVIOUS FIVE YEARS
Check whether the registrant filed all documents
and reports required to be filed by Section 12,
13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed
by the court. YES: X NO:
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of
the issuer's classes of common stock, as of the
last practicable date: 1,864,650
Transitional Small Business Disclosure Format.
YES: NO: X
2
PART I FINANCIAL INFORMATION
CREATIVE BEAUTY SUPPLY, INC.
BALANCE SHEETS
ASSETS
June 30, March 31,
2001 2001
------- ---------
(Unaudited)
<s> <c> <c>
CURRENT ASSETS:
Cash and cash equivalents $ 224,329 $ 235,507
Marketable securities 165,000 178,125
Accounts receivable 2,956 2,406
Inventory 68,430 62,721
Prepaid Expenses 2,861 3,637
---------- ----------
TOTAL CURRENT ASSETS 464,576 482,396
PROPERTY AND EQUIPMENT, net of
accumulated depreciation 321 375
--------- -----------
TOTAL ASSETS $ 464,897 $ 482,771
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable-trade $ 33,831 $ 18,759
Payroll taxes withheld and accrued 1,291 821
Accrued expenses 1,270 2,452
Deferred income taxes 49,449 55,093
--------- --------
TOTAL CURRENT LIABILITIES 85,841 77,125
--------- --------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001,
Authorized 10,000,000 shares,
-0- issued and outstanding, - -
Common stock, par value $.001, authorized
100,000,000 shares, issued and outstanding
1,864,650 shares 1,865 1,865
Additional paid-in-capital 646,291 646,291
Accumulated deficit (334,651) (315,542)
Accumulated other comprehensive income 65,551 73,032
---------- ---------
TOTAL STOCKHOLDER'S EQUITY 379,056 405,646
--------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 464,897 $ 482,771
========= =========
The accompanying note is an integral part of these
financial statements.
3
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Three Months Ended June, 30, 2001 and 2000
(Unaudited)
2001 2000
--------- ---------
<s> <c> <c>
NET SALES $ 60,406 $ 65,165
COST OF GOODS SOLD 47,420 46,397
--------- --------
GROSS PROFIT 12,986 18,768
--------- --------
OPERATING EXPENSES:
Salaries - officers 8,505 15,000
Payroll taxes 746 675
Auto and delivery 2,176 1,755
Employee welfare 1,643 1,133
Insurance 766 779
Office 765 1,007
Professional fees 15,295 9,705
Rent 3,801 3,801
Store supplies 155 432
Taxes 240 240
Telephone 482 605
Utilities 444 585
Miscellaneous 141 285
Depreciation and amortization 54 541
--------- ---------
TOTAL OPERATING EXPENSES 35,223 36,523
--------- ---------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (22,237) (17,755)
OTHER INCOME
Interest income 3,128 4,231
--------- ----------
NET LOSS (19,109) (13,524)
OTHER COMPREHENSIVE LOSS, NET OF TAXES
Unrealized holding loss arising during
The period, net of income taxes benefit
Of $5,644 ( 7,481) -
----------- ----------
TOTAL COMPREHENSIVE LOSS $ (26,590) $ (13,524)
=========== ===========
LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.01) $ (0.01)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,864,650 1,864,650
=========== ===========
The accompanying note is an integral part of these financial
statements.
4
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
2001 2000
--------- ----------
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (19,109) $ (13,524)
Adjustments to reconcile net loss to
Net cash from operating activities:
Depreciation and amortization 54 541
(Increase) decrease in operating assets:
Accounts receivable (550) 408
Inventory (5,709) (207)
Prepaid expenses 776 754
Increase (decrease)in operating
liabilities:
Accounts payable 15,072 6,381
Payroll taxes withheld and accrued (1,182) 993
Accrued expenses 470 6,820
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (10,178) 2,166
CASH AND CASH EQUIVALENTS -
Beginning of period 235,507 321,509
------- -------
CASH AND CASH EQUIVALENTS -
End of period $225,329 $323,675
======== ========
The accompanying note is an integral part
of these financial statements
5
CREATIVE BEAUTY SUPPLY, INC
NOTES TO FINANCIAL STATEMENTS
JUNE 30,2001
NOTE 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 10QSB and Article 10 of Regulation S-X.
Accordingly, they do not include all of the
information and footnotes required by generally
accepted accounting principles for complete
financial statements. 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 three months ending June 30,2001
are not necessarily indicative of the results that
may be expected for the year ended March 31, 2002.
The unaudited financial statements should be read
in conjunction with the financial statements and
footnotes thereto included in the Company's Form
10KSB for the year ended March 31, 2001
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Trends and Uncertainties. Demand for the
Company's products will be dependent on, among
other things, market acceptance of the Company's
concept and general economic conditions, which are
cyclical in nature. Inasmuch as a major portion
of the Company's activities is the receipt of
revenues from the sales of its products, the
Company's business operations may be adversely
affected by the Company's competitors and
prolonged recessionary periods.
Hair styles in the industry change drastically
from season to season. The recent trend away
from straight hair will have a favorable impact on
the sales of the Company's hair products such as
perms, etc. although the extent of this impact is
indeterminable.
Capital and Source of Liquidity. In April 1999,
the Company renewed its lease for a term of three
(3) years commencing May 1, 1999 at a monthly
rental of $1,200 per month for the first twelve
(12) months and $1,300 a month for each of the
remaining twenty four (24) months.
For the three months ended June 30, 2001 and 2000,
the Company pursued no financing activities.
For the three months ended June 30, 2001 and 2000,
the Company pursued no investing activities.
Results of Operations.
The Company sells approximately 1,000 different
products at varying mark ups ranging from 15 to 35
percent. The Company has two types of customers,
beauty salons and the general public. The gross
profit margin on sales of merchandises to the
general public ranges from 20 to 35 percent
depending on the product sold. The gross margin
on sales of merchandise to beauty salons is
somewhat less ranging from 15 to 25 percent
depending on the product sold and the discount
given. The Company's product margins are
decreasing due to stiffer competition and a sales
mix shift from retail to wholesale sales (retail
sales decreasing, wholesale sales increasing).
7
June 30, 2001 compared to June 30, 2000
For the three months ended June 30, 2001, the
Company had a net loss of $(19,109). The Company
had net sales of $60,406 with a cost of goods sold
of $47,420 resulting in gross profit of $12,986
for the three months ended June 30, 2001.
The Company had operating expenses of $35,223 for
the three months ended June 30, 2001. These
expenses primarily consisted of officer's salaries
of $8,505, auto and delivery of $2,176,
professional fees of $15,295, rent of $3,801,
telephone of $482, utilities of $444, store
supplies of $155, insurance of $766, office
expenses of $765, payroll and other taxes of $986
and other miscellaneous expenses of $1,848.
For the three months ended June 30, 2000, the
Company had a net loss of $(13,524). The Company
had net sales of $65,165 with a cost of goods sold
of $46,397 resulting in gross profit of $18,768
for the three months ended June 30, 2000.
The Company had operating expenses of $36,523 for
the three months ended June 30, 2000. These
expenses primarily consisted of officer's salaries
of $15,000, auto and delivery of $1,755,
professional fees of $9,705, rent of $3,801,
telephone of $605, utilities of $585, store
supplies of $432, insurance of $779, payroll and
other taxes of $915 and other miscellaneous
expenses of $2,946.
The Company's product margin decreased from three
months ended June 30, 2000 to June 30, 2001 by
approximately 7% (from 28.8% to 21,5%). This
decrease represents an approximately 26% decrease
in gross margin. The decrease is a direct result
from the change in sales mix, lower volume
purchases from suppliers resulting in higher unit
cost, and increased competition. The Company did
not take advantage of purchase discounts offered.
The Company raised its prices in 2000 that
resulted in lower sales in 2001. For the three
months ended June 30, 2000, the Company had 479
invoices to customers while in 2001, the Company
had only 454 invoices, a decrease of 5%, resulting
in a decrease of $4,759 in sales for the three
months ended June 30, 2001 as compared to the same
three months period in 2000.
Salary decreased from $15,000 to $8,505 due to one
less employee.
8
Professional fees increased due to additional
cost associated with the annual filing of Form
10KSB and its amendments, higher fees charged by
stock transfer agent and normal fee increases by
all professionals.
The major cause of the Company's losses from
operations have been the low sales volume.
Management is looking for new suppliers at more
favorable prices and to increase their customer
base and sales volume.
Management believes that the implementation of
its inventory controls and obtaining supplies
from new sources will have a favorable impact on
the Company's results of operations within the
next 12 months.
Plan of Operation. During the next twelve months,
the Company may obtain new product lines by
negotiating with various manufacturers. The
Company does not intend to hire any additional
employees.
The Company's liquidity will be decreased due to
little or no increase in revenue and higher
operating costs.
The Company is not delinquent on any of its
obligations even though the Company has had
limited operating revenues. The Company intends
to market its products utilizing cash made
available from the sale of its products. The
Company is of the opinion that revenues from the
sales of its products and the proceeds from the
sale of its securities will be sufficient to pay
its expenses.
The Company does not have nor does it intend to
have pension and/or other post-retirement benefits
in the future.
The Company does not have any or intends to have
any derivative instruments or hedging activities.
9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Not applicable.
(b) Not applicable.
10
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.
Creative Beauty Supply, Inc.
(Registrant)
Dated: August 14, 2001
By: /s/ Carmine Catizone
----------------------------
Carmine Catizone, President
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