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: September 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 BEAUTIY SUPPLY, INC.
BALANCE SHEETS
ASSETS
September 30 March 31,
2001 2001
------------ -----------
(Unaudited)
<s> <c> <c>
CURRENT ASSETS:
Cash and Cash equivalents $ 205,622 $ 235,507
Marketable securities 157,500 178,125
Accounts receivable 1,743 2,406
Inventory 66,234 62,721
Prepaid expenses 2,597 3,637
---------- ----------
TOTAL CURRENT ASSETS 433,696 482,396
PROPERTY AND EQUIPMENT, net of accumulated
Depreciation 268 375
---------- ----------
TOTAL ASSETS $ 433,964 $ 482,771
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 24,453 $ 18,759
Payroll taxes withheld and accrued 1,694 821
Accrued expenses 995 2,453
Deferred income taxes 46,534 55,093
---------- ---------
TOTAL CURRENT LIABILITIES 73,656 77,125
STOCKHOLDERS' EQUITY
Preferred stock, par value $.001,
Authorized 10,000,000 shares issued
And outstanding 0 shares - -
Common stock, par value $.001,
Authorized 100,000,000 shares, issued
and outstanding 1,854,650 shares 1,865 1,865
Additional paid-in-capital 646,291 646,291
Accumulated deficit (348,814) (315,542)
Accumulated other comprehensive income 60,966 73,032
-------- ---------
TOTAL STOCKHOLDERS' EQUITY 360,308 405,646
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 433,694 $ 482,771
========== =========
The accompanying note is an integral part of these financial statements.
3
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
SIX MONTHS ENDED SEPTEMBER 30,
2001 2000
--------- ----------
<s> <c> <c>
NET SALES $ 111,106 $ 124,232
COST OF GOODS SOLD 87,218 88,448
--------- --------
GROSS PROFIT 23,888 35,784
--------- --------
OPERATING EXPENSES:
Salaries - Officers 16,370 30,000
Payroll Taxes 1,474 1,397
Auto and Delivery 3,960 3,726
Employee welfare 3,043 3,162
Insurance 1,552 1,562
Office 1,155 1,591
Professional fees 23,934 24,279
Rent 7,602 7,602
Store supplies 449 757
Taxes 240 240
Telephone 923 1,269
Utilities 1,012 1,075
Miscellaneous 1,181 381
Depreciation and amortization 107 1,082
-------- ---------
TOTAL OPERATING EXPENSES 63,002 78,123
-------- ---------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (39,114) (42,339)
OTHER INCOME
Interest income 5,842 8,337
--------- ---------
NET LOSS (33,272) (34,002)
OTHER COMPREHENSIVE LOSS, NET OF TAXES
Unrealized holding loss arising during
the period, net of income taxes benefit
of $8,560 (12,066) -
-------- ---------
TOTAL COMPREHENSIVE LOSS $ (45,338) $ (34,002)
========= =========
LOSS PER COMMON SHARE, BASIC
AND DILUTED $ (0.02) $ (0.02)
========= =========
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 OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited) continued
THREE MONTHS ENDED SEPTEMBER 30,
2001 2000
--------- ---------
<s> <c> <c>
NET SALES $ 50,700 $ 59,067
COST OF GOODS SOLD 39,798 42,051
-------- --------
GROSS PROFIT 10,902 17,016
-------- --------
OPERATING EXPENSES:
Salaries - Officers 7,865 15,000
Payroll Taxes 728 722
Auto and Delivery 1,784 1,971
Employee welfare 1,400 2,049
Insurance 776 783
Office 390 584
Professional fees 8,639 14,574
Rent 3,801 3,801
Store supplies 294 325
Taxes - 0
Telephone 441 664
Utilities 568 490
Miscellaneous 1,040 96
Depreciation and amortization 53 541
-------- ---------
TOTAL OPERATING EXPENSES 27,779 41,600
-------- ---------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (16,877) (24,584)
OTHER INCOME
Interest income 2,714 4,106
--------- ---------
NET LOSS (14,163) (20,478)
OTHER COMPREHENSIVE LOSS, NET OF TAXES
Unrealized holding loss arising during
The period, net of income taxes benefit
Of $8,560 ( 4,585) -
--------- ----------
TOTAL COMPENSATION LOSS $(18,748) $ (20,478)
========= =========
LOSS PER COMMON SHARE, BASIC
AND DILUTED $ (0.01) $ (0.01)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,864,640 1,864,650
========== =========
The accompanying note is an integral part of
these financial statements.
5
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
2001 2000
--------- ----------
<s> <c> <c>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss (33,272) $(13,524)
Adjustments to reconcile net loss to
Net cash from operating activities:
Depreciation and amortization 107 541
(Increase) decrease in operation assets:
Accounts receivable 663 408
Inventory (3,513) (207)
Prepaid expenses 1,040 754
Increase (decrease) in operating liabilities:
Accounts payable 5,694 6,381
Payroll taxes withheld and accrued 853 993
Accrued expenses (1,457) 6,820
------- -------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (29,885) 2,166
CASH AND CASH EQUIVALENTS - beginning of period 235,507 321,509
-------- --------
CASH AND CASH EQUIVALENTS - end of period $205,622 $323,675
======== ========
The accompanying note is an integral part
of these financial statements.
6
CREATIVE BEAUTY SUPPLY, INC
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 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 six months ending September 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.
7
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 six months ended September 30, 2001 and
2000, the Company pursued no financing activities.
For the six months ended September 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.
September 30, 2001 compared to September 30, 2000
For the six months ended September 30, 2001, the
Company had a net loss of $(33,272). The Company
had net sales of $111,106 with a cost of goods
8
sold of $87,218 resulting in gross profit of
$23,888 for the six months ended September 30,
2001.
The Company had operating expenses of $63,002 for
the six months ended September 30, 2001. These
expenses primarily consisted of officer's salaries
of $16,370, auto and delivery of $3,960,
professional fees of $23,934, rent of $7,602,
telephone of $923, utilities of $1,012, store
supplies of $449, insurance of $1,552, office
expenses of $1,155, payroll taxes of $1,474 and
other miscellaneous expenses of $4,571.
For the six months ended September 30, 2000, the
Company had a net loss of $(34,002). The Company
had net sales of $124,232 with a cost of goods
sold of $88,448 resulting in gross profit of
$35,784 for the six months ended September 30,
2000.
The Company had operating expenses of $78,123 for
the six months ended September 30, 2000. These
expenses primarily consisted of officer's salaries
of $30,000, auto and delivery of $3,726,
professional fees of $24,279, rent of $7,602,
telephone of $1,269, utilities of $1,075, store
supplies of $757, insurance of $1,562, payroll
taxes of $1,397 and other miscellaneous expenses
of $6,456.
The Company's product margin decreased from six
months ended September 30, 2000 to September 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 six months ended September 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 $13,126
in sales for the six months ended September 30,
2001 as compared to the same six months period in
2000.
Salary decreased from $30,000 for the six months
ended September 30, 2000 to $16,370 for the six
months ended September 30, 2001 due to one less
employee.
9
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.
The Company is actively seeking new customers to
increase its volume which will have a favorable
impact on the Company's results of operation
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.
10
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.
11
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: November 13, 2001
By: /s/ Carmine Catizone
----------------------------
Carmine Catizone, President