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, 2003
[ ] 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, Totowa, 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:
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: 3,494,650
Transitional Small Business Disclosure Format. YES: NO: X
2
CREATIVE BEAUTY SUPPLY, INC.
BALANCE SHEETS
ASSETS
SEPTEMBER 30, MARCH 31,
2003 2003
---------- ----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 291,621 $ 332,755
Marketable securities 120,000 160,000
Accounts receivable 1,238 1,554
Inventory 60,182 63,912
Prepaid expenses 2,252 2,858
---------- ----------
TOTAL CURRENT ASSETS 475,293 561,079
PROPERTY AND EQUIPMENT, net of accumulated
depreciation 6,967 7,906
---------- ----------
TOTAL ASSETS $ 482,260 $ 568,985
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 18,320 $ 18,468
Payroll taxes withheld and accrued 2,062 1,202
Accrued expenses 16,754 16,095
---------- ----------
TOTAL CURRENT LIABILITIES 37,136 35,765
---------- ----------
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 3,494,650 shares 3,495 3,495
Additional paid-in-capital 1,288,781 1,288,781
Accumulated deficit (767,152) (719,056)
Accumulated other comprehensive loss (80,000) (40,000)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 445,124 533,220
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 482,260 $ 568,985
========== ==========
The accompanying notes are an integral part of these financial
statements
3
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
<s> <c> <c> <c> <c>
NET SALES $ 91,313 $ 103,193 $ 41,801 $ 49,464
COST OF GOODS SOLD 68,028 77,459 31,141 36,893
---------- ---------- ---------- ----------
GROSS PROFIT 23,285 25,734 10,660 12,571
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Salaries - officers 13,520 16,190 5,450 8,020
Payroll taxes 1,209 1,361 531 674
Auto and delivery 3,120 4,308 843 1,639
Employee welfare 5,641 4,655 2,997 2,441
Insurance 1,946 2,320 993 1,491
Office 933 1,277 568 426
Professional fees 36,458 40,233 16,429 12,598
Rent 7,800 7,755 3,900 3,900
Store supplies 167 675 100 404
Taxes 559 240 - -
Telephone 1,497 1,696 851 731
Utilities 859 1,096 474 619
Miscellaneous 487 558 238 277
Depreciation 939 824 469 692
---------- ---------- ---------- ----------
TOTAL OPERATING EXPENSES 75,135 83,188 33,843 33,912
---------- ---------- ---------- ----------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (51,850) (57,454) (23,183) (21,341)
---------- ---------- ---------- ----------
OTHER INCOME:
Gain on sale of securities - 8,333 - -
Gain on sale of assets - 700 - 700
Interest income 3,754 8,172 1,667 4,045
---------- ---------- ---------- ----------
TOTAL OTHER INCOME 3,754 17,205 1,667 4,745
---------- ---------- ---------- ----------
NET LOSS $ (48,096) $ (40,249) $ (21,516) $ (16,596)
========== ========== ========== ==========
LOSS PER COMMON SHARE, BASIC
AND DILUTED $ (0.01) $ (0.01) $ (0.01) NIL
========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 3,494,650 3,494,650 3,494,650 3,494,650
========== ========== ========== ==========
The accompanying notes are an integral part of these financial
statements
4
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED)
2003 2002
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (48,096) $ (40,249)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 939 824
Gain on sale of marketable securities - (8,333)
Gain on sale of assets - (700)
Changes in operating assets and liabilities:
Accounts receivable 316 538
Inventory 3,730 (741)
Prepaid expenses 606 (166)
Accounts payable (148) 27,205
Payroll taxes withheld and accrued 860 48
Accrued expenses 659 1,061
---------- ----------
Net cash used in operating activities (41,134) (20,513)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - (9,394)
Proceeds from sale of marketable securities - 25,000
Proceeds from sale of assets - 700
---------- ----------
Net cash provided by investing activities - 16,306
---------- ----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (41,134) (4,207)
---------- ----------
CASH AND CASH EQUIVALENTS-beginning of period 332,755 383,108
---------- ----------
CASH AND CASH EQUIVALENTS-end of period $ 291,621 $ 378,901
========== ==========
The accompanying notes are an integral part of these financial
statements
5
CREATIVE BEAUTY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2003
(Unaudited)
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with accounting principles generally accepted in the United
States 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 accounting
principles generally accepted in the United States 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 ended September 30, 2003 are not necessarily indicative of the
results that may be expected for the year ended March 31, 2004. The
unaudited financial statements should be read in conjunction with the
financial statements and footnotes thereto included in the Company's
Form 10-KSB for the year ended March 31, 2003.
NOTE 2 INVENTORY
The Company's policy is to compute inventory for interim reporting on
the gross profit method using the gross profit for the prior fiscal
year.
NOTE 3 OTHER COMPREHENSIVE LOSS
Other comprehensive loss for the six months ended September 30, 2003
consisted of an unrealized holding loss on marketable equity securities
arising during the period (net of income taxes of -0- after applying
net operating loss carry forwards) in the amount of $40,000.
Other comprehensive loss for the six months ended September 30, 2002
consisted of an unrealized holding loss on marketable equity securities
arising during the period (net of income tax benefit of $63,569) in the
amount of $392,099.
NOTE 4 MARKETABLE SECURITIES
The cost and fair value of marketable equity securities that are
available-for-sale are as follows:
6
September 30, March 31,
2003 2003
---------- ----------
Cost $ 200,000 $ 200,000
Gross unrealized loss (80,000) (40,000)
---------- ----------
$ 120,000 $ 160,000
========== ==========
The unrealized loss of marketable equity securities that are available
for sale are as follows:
September 30, March 31,
2003 2003
---------- ----------
Net unrealized loss $ (80,000) $ (40,000)
Deferred income taxes - -
---------- ----------
$ (80,000) $ (40,000)
========== ==========
These amounts are presented as accumulated other comprehensive loss.
During the six months ended September 30, 2003 and 2002 sales proceeds
and gross realized gains and losses on securities classified as
available-for-sale were:
2003 2002
---------- ----------
Sales proceeds - $ 25,000
========== ==========
Gross realized gains - $ 8,333
========== ==========
The method used to determine the costs of securities sold was the
actual cost per share.
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.
Hairstyles in the industry change drastically from season to season.
The recent trend away from straight hair is expected to 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.
Results of Operations.
The Company sells approximately 1,000 different products at varying
mark ups ranging from 20 to 40 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 generally ranges
from 30 to 40 percent depending on the product sold. The gross margin
on sales of merchandise to beauty salons is somewhat less generally
ranging from 20 to 28 percent depending on the product sold and the
discount given. The Company's product margin increased for September
30, 2003 over September 30, 2002 due to a change in sales mix.
Although sales decreased (wholesale decreased by 9.8% and retail
decreased by 12.8%) products sold were sold at higher margins resulting
in a higher gross margin for the six months ended September 30, 2003.
Six Months Ended September 30, 2003 as compared to six months ended
September 30, 2002:
For the six months ended September 30, 2003, the Company had a net loss
of $(48,096). The Company had net sales of $91,313 with a cost of
goods sold of $68,028 resulting in gross profit of $23,285 for the six
months ended September 30, 2003.
The Company had operating expenses of $75,135 for the six months ended
September 30, 2003. These expenses primarily consisted of officer's
salaries of $13,520, payroll taxes of $1,209, auto and delivery of
$3,120, employee welfare of $5,641, insurance of $1,946, office expense
of $933, professional fees of $36,458, rent of $7,800,Store supplies of
$167, taxes of $559, telephone of $1,497, utilities of $859,
miscellaneous of $487 and depreciation of $939.
For the six months ended September 30, 2002, the Company had a net loss
of $(40,249). The Company had net sales of $103,193 with a cost of
goods sold of $77,459 resulting in gross profit of $25,734 for the six
months ended September 30, 2002.
8
The Company had operating expenses of $83,188 for the six months ended
September 30, 2002. These expenses primarily consisted of officer's
salaries of $16,190, payroll taxes of $1,361, auto and delivery of
$4,308, employee welfare of $4,655, insurance of $2,320, office of
$1,277, professional fees of $40,233, rent of $7,755, store supplies of
$675, taxes of $240, telephone of $1,696, utilities of $1,096,
miscellaneous of $558 and depreciation of $824.
Assets for the six months ended September 30, 2003 decreased by
approximately $86,725. This was a direct result from the decreases in
cash and cash equivalents of $41,134 and the market value of securities
held for sale of $40,000.
Liabilities for the six months ended September 30, 2003 increased by
approximately $1,371. This was a direct result of an increase in net
accounts payable and accrued expenses of $511 and payroll tax
liabilities of $860.
Working capital at September 30, 2003 was approximately $438,157 and at
March 31, 2003 it was $525,314, a decrease of approximately $87,157.
The decrease was a direct result from the decrease in current assets of
$85,786 net of an increase of current liabilities of $1,371.
Cash decreased by $41,134, market value of securities held for sale
decreased by $40,000 and inventory decreased by $3,730. Accounts
payable decreased by $148 while accrued expenses increased by $659.
Stockholders Equity decreased by the loss for the six months plus other
comprehensive loss of $40,000. There were no equity transactions during
the period.
Sales for the six months ended September 30, 2003 were $91,313 as
compared to $103,193 for the six months ended September 30, 2002, a
11.5% decrease. Gross profit for the six months ended September 30,
2003 was $23,285 as compared to $25,734 for the six months ended
September 30, 2002, a 9.5% decrease.
Operating expenses for the six months ended September 30, 2003 were
$75,135 as compared to $83,188 for the six months ended September 30,
2002, a decrease of 9.7%. This decrease was a direct result in
decreases in officers' salaries of $2,670, auto and delivery of $1,188
and professional fees of $3,775.
Sales for the two periods were as follows:
2003 2002
---------- ----------
Wholesale $ 40,979 $ 45,441
Retail 50,334 57,752
---------- ----------
$ 91,313 $ 103,193
========== ==========
9
Sales are decreasing due to loss of customers causing a decrease in
sales volume. Wholesale sales have decreased by approximately 9.8% and
retail sales have decreased by approximately 12.8%.
The unrealized loss from marketable securities held for sale was due
directly from the decrease in market value over the six month period.
Three months ended September 30, 2003 as compared to three months ended
September 30, 2002:
For the three months ended September 30, 2003, the Company had a net
loss of $(21,516). The Company had net sales of $41,801 with cost of
goods sold of $31,141 resulting in gross profit of $10,660 for the
three months ended September 30, 2003.
The Company had operating expenses of $33,843 for the three months
ended September 30, 2003. Those expenses primarily consisted of
officer's salaries of $5,450, payroll taxes of $531, auto and delivery
of $843, employee welfare of $2,997, insurance of $993, office of $568,
professional fees of $16,429, rent of $3,900, store supplies of $100,
telephone of $851, utilities of $474, miscellaneous of $238 and
depreciation of $469.
For the three months ended September 30, 2002, the Company had a net
loss of ($21,341). The Company had sales of $49,464 with cost of goods
sold of $36,893 resulting in gross profit of $12,571 for the three
months ended September 30, 2002.
The Company had operating expenses of $33,912 for the three months
ended September 30, 2002. These expenses primarily consisted of
officer's salaries of $8,020, payroll taxes of $674, auto and delivery
of $1,639, employee welfare of $2,441, insurance of $1,491, office of
$426, professional fees of $12,598, rent of $3,900, store supplies of
$404, telephone of $731, utilities of $619, miscellaneous of $277 and
depreciation of $692.
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 for the next twelve months.
The Company does not have nor does it intend to have pension and/or
other post-retirement benefits in the future.
10
The Company does not have any or intends to have any derivative
instruments or hedging activities.
Item 3. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our
chief executive officer and chief financial officer, conducted an
evaluation of our "disclosure controls and procedures" (as defined in
Securities Exchange Act of 1934 (the "Exchange Act") Rules 13a-14(c))
within 90 days of the filing date of this quarterly report on Form
10QSB (the "Evaluation Date"). Based on their evaluation, our chief
executive officer and chief financial officer have concluded that as of
the Evaluation Date, our disclosure controls and procedures are
effective to ensure that all material information required to be filed
in this quarterly report on Form 10-QSB has been made known to them in
a timely fashion.
Changes in Internal Controls
There have been no significant changes (including corrective actions
with regard to significant deficiencies or material weaknesses) in our
internal controls or in other factors that could significantly affect
these controls subsequent to the Evaluation Date set forth above.
11
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) Exhibit 99 - Certifications pursuant to
18 U.S.C. Section 1350
(b) Not applicable.
12
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 18, 2003
By: /s/ Carmine Catizone
----------------------------
Carmine Catizone, President
13
CERTIFICATIONS
I, Carmine Catizone, certify that:
1. I have reviewed this quarterly report on Form 10QSB of Creative
Beauty Supply, Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present, in all material respects, the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
14
(6) The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 18, 2003
/s/Carmine Catizone
- --------------------------
Carmine Catizone
Chief Executive Officer
15
CERTIFICATION
I, Daniel Generelli, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Creative
Beauty Supply, Inc.
2. Based on my knowledge, the quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly
present, in all material respects, the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods
presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and
the audit committee of the registrant's board of directors (or persons
performing the equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
16
(6) The registrant's other certifying officers and I have indicated
in this quarterly report whether or not there were significant changes
in internal controls or in other factors that could significantly
affect internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: November 18, 2003
/s/Daniel Generelli
- --------------------------------
Daniel Generelli, Chief Financial Officer