2
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, 1999
[ ] 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: 1,865,650
Transitional Small Business Disclosure Format. YES: NO: X
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PART I FINANCIAL INFORMATION
CREATIVE BEAUTY SUPPLY, INC.
BALANCE SHEETS
ASSETS
September 30, March 31,
1999 1999
------------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $319,080 $324,683
Accounts receivable 3,652 3,263
Inventory 57,436 72,904
Prepaid expenses 810 2,331
-------- ---------
TOTAL CURRENT ASSETS 380,978 403,181
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $8,116
(September 1999) and $7,034
(March 1999) 3,234 4,316
OTHER ASSETS:
Organization cost, net
of accumulated amortization of
$422 (September 1999) and $366
(March 1999) 141 197
-------- -------
TOTAL ASSETS $384,353 $407,694
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 10,243 $ 9,863
Payroll taxes withheld
and accrued 687 698
Accrued salaries -
officer's salaries 113,558 98,365
Accrued expenses 19,740 19,770
--------- ----------
TOTAL CURRENT LIABILITIES 144,228 128,696
--------- ---------
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
1,864,650 shares 1,865 1,865
Additional paid-in capital 467,541 472,541
Accumulated deficit (229,281) (195,408)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 240,125 278,998
--------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $384,353 $407,694
The accompanying note is an integral part
of these financial statements.
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CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Months Ended Six months Ended
September 30, September 30,
------------------ --------------------
1999 1998 1999 1998
------ ------ ------ ------
NET SALES 126,656 $146,723 $ 61,777 $ 76,402
COST OF GOODS SOLD 100,352 118,809 48,435 62,318
-------- -------- --------- ---------
GROSS PROFIT 26,304 27,914 13,342 14,084
-------- -------- -------- --------
OPERATING EXPENSES:
Salaries - officers 30,192 30,096 15,192 14,519
Payroll taxes 1,241 1,295 566 596
Auto and delivery 6,868 4,427 2,539 1,745
Employee welfare 1,973 1,084 1,124 610
Insurance 1,641 1,548 812 774
Office 768 587 436 336
Professional fees 14,464 8,096 4,905 500
Rent 7,200 7,200 3,600 3,600
Store supplies 747 508 443 245
Taxes 250 293 - 93
Telephone 950 913 480 481
Utilities 883 1,046 391 443
Miscellaneous 393 3,082 310 89
Depreciation and amortization 1,138 1,138 569 569
------- ------- ------ ------
TOTAL OPERATING EXPENSES 68,708 61,313 31,367 24,600
------- ------- ------ -------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (42,404) (33,399) (18,025) (10,516)
OTHER INCOME:
Interest income 8,531 8,529 4,211 4,430
NET LOSS $ (33,873) $ (24,870) $ (13,814) $ (6,086)
========= ========= ========= ========
LOSS PER COMMON SHARE, BASIC $(.02) $(.01) $(.01) $(.01)
===== ===== ===== =====
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,862,099 1,840,083 1,864,650 1,863,802
========== ========= ========= =========
The accompanying note is an integral part
of these financial statements.
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CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
1999 1998
-------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(33,873) $(23,370)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 1,138 1,138
(Increase) decrease in operating assets:
Accounts receivable (389) (1,021)
Inventory 15,468 (10,203)
Prepaid expenses 1,521 252
Increase (decrease) in operating liabilities:
Accounts payable - trade 380 9,394
Payroll taxes withheld and accrued (11) (9)
Accrued expenses - officers salaries 15,193 15,096
Accrued expenses (30) 64
------ ------
NET CASH USED BY OPERATING ACTIVITIES (603) (8,659)
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash - 47,750
Registration cost (5,000) -
------ ------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES (5,000) 47,750
------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (5,603) 39,091
CASH AND CASH EQUIVALENTS - beginning of period 324,683 291,674
-------- --------
CASH AND CASH EQUIVALENTS - end of period $319,080 $330,765
======== =========
The accompanying note is an integral part
of these financial statements.
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CREATIVE BEAUTY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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 ended September 30, 1999 are not
necessarily indicative of the results that may be expected for the year
ending March 31, 2000. The unaudited financial statements should be
read in conjunction with the financial statements and footnotes thereto
included in the Company's Form 10SB for the year ended March 31, 1999.
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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.
Additionally, management intends to lease additional warehouse space.
The increased lease amounts will have a negative effect on the cash
flow of the Company.
For the six months ended September 30, 1999, the Company had a
registration cost of $5,000 resulting in net cash used by financing
activities of $5,000.
For the six months ended September 30, 1998, the Company received
$47,750 from the issuance of common stock resulting in net cash
provided by financing activities of $47,750.
For the year ended March 31, 1999, the Company issued common stock for
$47,750. As a result, the Company had net cash flow provided by
financing activities of $47,750.
For the year ended March 31, 1998, the Company issued common stock for
$67,556. As a result, the Company had net cash flow provided by
financing activities of $67,556.
For the six months ended September 30, 1999 and 1998, the Company
pursued no investing activities.
For the years ended March 31, 1999 and 1998, the Company pursued no
investing activities.
Results of Operations.
September 30, 1999 compared to September 30, 1998. For the six
months ended September 30, 1999, the Company had a net loss of
($33,873). The Company had net sales of $126,656 with a cost of goods
sold of $100,352 resulting in gross profit of $26,304.
For the six months ended September 30, 1998, the Company has a net loss
of ($24,870). The Company had net sales of $146,723 with a cost of
goods sold of $118,809 resulting in gross profit of $27,914.
The Company sells approximately over 1,000 different products at
varying mark ups ranging from 10 to 30 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 30 percent depending on the product sold. The gross margin
on sales of merchandise to beauty salons is somewhat less ranging from
10 to 20 percent depending on the product sold and the discount given.
The Company had operating expenses of $68,708 for the six months
ended September 30, 1999 compared to $61,313 for the six months ended
September 30, 1998. For the six months ended September 30, 1999,
these expenses consisted of officers salaries of $30,192, auto and
delivery of $6,868, professional fees of $14,464, rent of $7,200,
insurance of $1,641, miscellaneous expenses of $393 and other
miscellaneous expenses of $7,950.
For the six months ended September 30, 1998, these expenses consisted
of officers salaries of $30,096, auto and delivery of $4,427,
professional fees of $8,096, rent of $7,200, miscellaneous of $3,082
and other expenses of $8,412.
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The increase in auto and delivery from $4,427 for the six months
ended September 30, 1998 to $6,868 for the six months ended September
30, 1999 was due to numerous repairs to the Company's delivery van.
The decrease in miscellaneous expenses from $3,082 for the six months
ended September 30, 1998 to $393 for the six months ended September 30,
1999 was due to tradeshow expenses incurred in 1998 which the Company
did not incur in 1999.
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.
Additionally, management has implemented inventory controls which has
resulted in additional profits.
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 intends
to obtain new product lines by negotiating with various manufacturers,
hire new sales representatives and hire technician to conduct product
knowledge classes
If the Company does not achieve the milestones within the above time
schedule, their operating costs will be higher and the Company will
lose even more money.
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.
Year 2000 Compliance. The Company has conducted a comprehensive review
of its computer systems to identify any business functions that could
be affected by the "Year 2000" issue. As the millennium ("Year 2000")
approaches, businesses may experience problems as the result of
computer programs being written using two digits rather than four to
define the applicable year. The Company has conducted a comprehensive
review of its computer systems to identify those areas that could be
affected by the "Year 2000" issue. Any of the Company's programs that
have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. If not corrected, this could
result in extensive miscalculations or a major system failure.
The Company relies on industry standard software. Certain
manufacturers have already provided the Company with upgraded software
to address the "Year 2000" issue. The Company believes that by
modifying existing software, the "Year 2000" issue will not pose
significant operational problems and is not anticipated to require
additional expenditures that would materially impact its financial
position or results of operations in any given year. The Company
believes that this modification will be completed in the latter part of
1999 at a minimal cost.
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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.
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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, 1999
By: /s/ Carmine Catizone
----------------------------
Carmine Catizone, President