UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the
transition period from -------------- to --------------
Commission File Number: 333-99419
Kingsgate Acquisitions, Inc.
(Successor to Look Models International, Inc.)
---------------------------------------------
(Name of small business
issuer in its charter)
Delaware 5999 98-0211672
- --------------------------------- -------------------------- -------------------
(State or other jurisdiction (Primary standard (IRS Employer
of incorporation or organization) industrial class code No.) Identification No.)
Wolfgang Schwarz
KINGSGATE ACQUISITIONS, INC.
c/o Look Models International, Inc.
Passauerplatz #1
Vienna 1010, Austria
011-43-1-533-5816
(Address and telephone number of principal executive offices,
principal place of business, and name, address and
telephone number of agent for service of process)
Check whether the registrant filed all documents and reports required to be
filed by Section l2, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. NA
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 12, 2003, there are
12,520,000 shares of common stock issued and outstanding. Transitional Small
Business Disclosure Format (Check one): Yes [ ] No [X]
KINGSGATE ACQUISITIONS, INC.
(SUCCESSOR TO LOOK MODELS INTERNATIONAL, INC.)
MARCH 31, 2003 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Special Note Regarding Forward Looking Information 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements 4
Item 2. Management's Discussion and Analysis 15
Item 3. Controls and Procedures 30
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 31
Item 2. Changes in Securities and Use of Proceeds 31
Item 3. Defaults Upon Senior Securities 31
Item 4. Submission of Matters to a Vote of Security Holders 31
Item 5. Other Information 31
Item 6. Exhibits and Reports on Form 8-K 31
2
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
To the extent that the information presented in this Quarterly Report on
Form 10-QSB for the quarter ended March 31, 2003 discusses financial
projections, information or expectations about our products or markets, or
otherwise makes statements about future events, such statements are
forward-looking. Although we believe that the expectations reflected in these
forward-looking statements are based on reasonable assumptions, there are a
number of risks and uncertainties that could cause actual results to differ
materially from such forward-looking statements. These risks and uncertainties
are described, among other places in this Quarterly Report, in "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
In addition, we disclaim any obligations to update any forward-looking
statements to reflect events or circumstances after the date of this Quarterly
Report. When considering such forward-looking statements, you should keep in
mind the risks referenced above and the other cautionary statements in this
Quarterly Report.
3
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KINGSGATE ACQUISITIONS, INC.
(SUCCESSOR TO LOOK MODELS INTERNATIONAL, INC.) (NOTE 3)
CONSOLIDATED BALANCE SHEET
MARCH 31, 2003
(UNAUDITED)
ASSETS
Current assets
Cash and cash equivalents $ 5,500
Trade accounts receivable, net 449,583
Inventories 17,510
Prepaid expenses and other current assets 64,268
---------------
Total current assets
536,861
Property and equipment, net 43,560
Intangible assets, net 100,303
Deposit 16,281
---------------
160,144
Total assets $ 697,005
===============
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities
Trade liabilities $ 602,408
Accrued expenses and other current liabilities 271,645
Advances payable, related party 1,051,081
Short-term borrowings 1,999,789
----------------
Total liabilities (all current)
3,924,923
Commitments and contingencies
Shareholders' deficit:
Preferred stock, $0.001 par value; 5,000,000
shares authorized; none issued
Common stock, $0.001 par value;
45,000,000 shares authorized
12,520,000 shares issued and outstanding 12,520
Additional paid-in-capital 3,235,968
Accumulated deficit (6,270,069)
Accumulated other comprehensive loss (206,337)
---------------
Total shareholders' deficit (3,227,918)
---------------
Total liabilities and shareholders' deficit $ 697,005
================
See notes to consolidated financial statements
4
KINGSGATE ACQUISITIONS, INC.
(SUCCESOR TO LOOK MODELS INTERNATIONAL, INC.) (NOTE 3)
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
March 31, 2003 March 31, 2002
Sales $ 347,487 $ 255,978
Cost of sales (178,409) (92,375)
---------------- ---------------
Gross profit 169,078 163,603
---------------- ---------------
Selling expenses (165,025) (157,715)
Administrative expenses (128,730) (183,555)
---------------- ---------------
(293,755) (341,270)
Loss from operations (124,677) (177,667)
---------------- ---------------
Interest expense (15,017) (19,883)
Other, net 2,548 (8,145)
---------------- ---------------
(12,469) (28,028)
Net loss $ (137,146) $ (205,695)
================ ===============
Net loss per share -
basic and diluted $ (0.01) $ (0.02)
================ ===============
Average shares of common stock
outstanding 12,506,222 12,455,693
================ ================
See notes to consolidated financial statements
5
KINGSGATE ACQUISITIONS, INC.
(SUCCESOR TO LOOK MODELS INTERNATIONAL, INC.)
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' DEFICIT AND COMPREHENSIVE LOSS
THREE MONTHS ENDED MARCH 31, 2003 (UNAUDITED)
Accumulated
Common stock Additional other
---------------------- paid-in Accumulated comprehensive
Shares Amount capital deficit loss Total
----------- -------- ---------- -------------- -------------- -------------
Balances at January 1, 2003 12,500,000 $ 12,500 $ 3,167,988 $ (6,132,923) $ (95,867) $ (3,048,302)
Sale of common stock pursuant to
private placements, net 20,000 20 17,980 18,000
Salary waived by CEO and majority
shareholder 50,000 50,000
Comprehensive loss:
Net loss (137,146) (137,146)
Foreign currency translation adjustment (110,470) (110,470)
Comprehensive loss (247,616)
----------- ---------- ----------- ------------- ----------- -------------
Balances at March 31, 2003 (unaudited) 12,520,000 $ 12,520 $ 3,235,968 $ (6,270,069) $ (206,337) $ (3,227,918)
=========== ========== ============ ============= =========== =============
See notes to consolidated financial statements
6
KINGSGATE ACQUISITIONS, INC.
(SUCCESSOR TO LOOK MODELS INTERNATIONAL, INC.) (NOTE 3)
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
March 31, 2003 March 31, 2002
Cash flows from operating activities:
Net loss $ (137,146) $ (205,695)
------------ -------------
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 9,158 7,866
Salary waived by CEO and majority shareholder 50,000 50,000
Changes in assets and liabilities:
Increase in accounts receivable (246,790) (156,785)
Decrease in inventories 84,558 3,921
Decrease in prepaids and other current assets 25,065 92,253
(Decrease) increase in trade accounts payable 9,104 (133,977)
(Decrease) increase in accrued expenses and
other liabilities 21,503 (53,077)
(Decrease) increase in advance payable related party 137,068 (99,344)
------------ -------------
89,666 (289,143)
------------ -------------
Net cash used in operating activities (47,480) (494,838)
------------ -------------
Cash flows from investing activities:
Capital expenditures (615) (7,454)
------------ -------------
Net cash used in investing activities (615) (7,454)
------------ -------------
Cash flows from financing activities:
Increase in short-term borrowings, net 15,821 487,233
Proceeds from note payable, related party - 70,000
Proceeds from issuance of common stock 18,000 12,619
------------ -------------
Net cash provided by financing activities 33,821 569,852
------------ -------------
Effect of exchange rate changes in cash and cash
equivalents (2,991) 3,046
Net (decrease) increase in cash (17,265) 70,606
Cash and cash equivalents, beginning 22,765 46,203
----------- ------------
Cash and cash equivalents, ending $ 5,500 $ 116,809
============ ============
Supplemental disclosures of cash flow information:
Cash paid for interest $ 15,017 $ 19,883
============ =============
See notes to consolidated financial statements
7
KINGSGATE ACQUISITIONS, INC.
(SUCCESSOR TO LOOK MODELS INTERNATIONAL, INC.) (NOTE 3)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Interim financial statements:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial information and with the
instructions to Form 10-QSB and Regulation S-B. 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 period ended March 31, 2003, are not
necessarily indicative of the results of the full year.
2. Management's plans:
The Company's financial statements for the years ended December 31, 2002
and 2001 (not included herein) and for the three months ended March 31,
2003 and 2002 (unaudited) show that the Company has incurred net losses of
$1,214,553, $1,725,950, $137,146 and $205,695 respectively, and has a
shareholders' deficit and a working capital deficiency of $3,227,918 and
$3,388,062, respectively, as of March 31, 2003. The Company has experienced
uncertainty in meeting its liquidity needs and has relied on outside
investors and its principal shareholder to provide funding. Management's
plans in connection with these criteria are as follows:
a. The Company's president and majority shareholder has agreed to
postpone his claim for amounts owed to him by the Company and to
utilize funds from capital raised from redemption of outstanding
warrants, future equity transactions or profitable operations as a
means of repayment. At March 31, 2003 such amounts were $1,051,081
(unaudited). In addition, the president and majority shareholder has
guaranteed to fund the operating expenses for 2003, and to forego
salary in 2003 until such time as profitable operations, capital
raised from redemption of outstanding warrants, or future equity
transactions provide the Company the ability to pay his salary in
accordance with his employment agreement. The loss for the three
months ended March 31, 2003 includes $50,000 of non-cash foregone
salary imputed to the Company's president.
b. The Company's president has also listed for sale a real estate
investment and has committed to utilize the net proceeds from the
sale, estimated to be approximately $615,000, to support 2003
activities as required. Additionally, the Company has outstanding
claims against third parties which the Company believes will result in
cash receipts and debt extinguishment during 2003 totalling
approximately $165,000.
c. From the Company's operating segments, the following developments are
anticipated to increase revenues and cash flows in 2003:
Model management:
Pursuant to its growth strategy, Look began to globalize its model
mediating activities. In 2002, 75% of the overall revenue resulted from
international bookings, compared to 5% in 2001. This trend is expected to
continue in 2003. The Company's unique Internet portal booking software
allows it to administer all its models worldwide and at the same time
exchange information with partner agencies. The software allows the Company
to enhance model movement activities and to create demand in those markets
where the software permits the direct booking of models. Although Look is
just beginning to utilize this software, model management revenues
increased by more than 55% in 2002 compared to 2001.
8
2. Management's plans (continued):
Cosmetics:
The Company completed a license contract for its fragrance line with
one of the world's largest fragrance producers. This company will
produce and market fragrance products, as well as sponsor Look Model
Search activities and book Look models for its international
campaigns. In addition, it will support Look's efforts to develop new
products. This co-operation is intended to lead to global exposure of
the Company's brands, "Look Models" and "Catwalk", and is considered
an important development in the Company's merchandising concept.
Look Model Search/Event-management:
In 2003, the Company expects to increase significantly the number of
participating countries in its international model search activities.
Look's licensees organized events in Austria, Yugoslavia, Czech Republic,
Slovakia, Hungary, Poland, Macedonia, Bosnia, Lithuania, Latvia, Romania
and Portugal. Due to the Company's Internet portal scouting system,
contestants from an increasing number of countries, including the USA,
South America and Asian countries, apply and take part in the events. The
Company's new event-management concept is based on the Internet and
"fashion days", revolving around the promotion of local designers. This new
concept proved to be very successful in the final show of 2002 in Prague.
This event gained significant media attention, and the Company is
evaluating offers from venue sponsors in Dubai and Monte Carlo for future
international shows.
3. Merger
On September 6, 2002, Look Models International, Inc. (LMI) completed a
merger with Kingsgate Acquisition ("Kingsgate"), a development stage
corporation, organized on September 28, 1999 as a vehicle to acquire or
merge with a business.
Pursuant to the Agreement, the shareholders of LMI sold to Kingsgate 100%
of all the issued and outstanding shares of LMI, in exchange for
10,500,000, $.001 par value, newly issued shares of voting common stock of
Kingsgate. Additionally, 1,000,000, $.001 par value common shares held by
Kingsgate's founders were issued to the president and majority shareholder
of LMI.
The transaction was accounted for as a reverse acquisition of Kingsgate by
LMI, since the shareholders of LMI own approximately 85.2% of the post
acquisition common shares of the consolidated entity immediately after the
completion of the transaction. For accounting purposes, the acquisition has
been treated as an acquisition of Kingsgate by LMI and as a
recapitalization of LMI. Shares of preferred stock authorized, and common
stock authorized, issued and outstanding have been retroactively restated
to present the capital structure of Kingsgate.
4. Concentration of credit risk:
The Company grants credit to its customers, generally without collateral.
At March 31, 2003 $295,694 (unaudited) of net trade receivables were due
from three customers. During the three months ended March 31, 2003
(unaudited) one Eventmanagement, one Model Management and one cosmetics
customer accounted for 45%, 26% and 29% (unaudited) of sales, respectively.
During the three months ended March 31, 2002 (unaudited) one cosmetics
customer accounted for 28% (unaudited) of sales.
9
5. Inventories
Inventories consist of cosmetic products ready for sale and are valued by
using the first-in, first-out (FIFO) method at the lower of cost or market.
6. Property and equipment:
Property and equipment consists of:
Office and computer equipment $ 126,093
Less accumulated depreciation (82,533)
-------------
$ 43,560
Property and equipment is predominantly located in Austria.
7. Short term borrowings:
Short-term borrowings consisted of:
Line of credit, interest at 4.5%; outstanding balance due in June 2003;
collateralized by the Company's receivables
and guaranteed by the Company's president $ 195,808
Line of credit, interest at 4.5%;
outstanding balance due in June 2003;
collateralized by the Company's receivables
and guaranteed by the Company' president 475,915
Line of credit, interest at 7.875%;
outstanding balance due in June 2003;
collateralized by the Company's receivables
and guaranteed by the Company's president 156,610
Overdraft on bank accounts, interest at 4.5% 1,171,456
-----------
$ 1,999,789
10
8. Income taxes:
The reconciliation between the effective tax rate and the statuary U.S.
federal income tax rate is as follows:
March 31, 2003 March 31, 2002
(unaudited) (unaudited)
-------------- --------------
Computed "expected" tax benefit 34.00% 34.00%
Operating losses for which a
benefit has not been recognized (34.00%) (34.00%)
---------- ---------
- -
========== =========
The Company's deferred tax assets are as follows:
March 31, 2003 March 31, 2002
(unaudited) (unaudited)
Net operating loss carry forwards (foreign) $ 839,512 $ 659,157
Net operating loss carry forwards (U.S.) 993,704 794,746
Deferred tax asset valuation allowance (1,833,216) (1,453,903)
------------ ------------
Net deferred tax assets $ - $ -
============ ============
In foreign tax jurisdictions, the company is subject to income tax on an
entity basis on income arising in or derived from the tax jurisdiction in
which each entity is domiciled. The Company's Bahamian subsidiary is not
liable for income tax. The Company's Austrian and Czech Republic operations
are subject to income tax at 34%. Other European operations are not
significant.
At March 31, 2003 (unaudited) the Company has foreign operating loss
carryforwards of approximately $2,469,000, and U.S. operating loss
carryforwards of approximately $2,923,000. At March 31, 2002 (unaudited)
the Company had foreign operating loss carryforwards of $1,938,639, and
U.S. operating loss carryforwards of $2,300,000. Effective January 1, 2001
the Austrian tax law was changed so that loss carryforwards can only be
used to offset up to 75% of the taxable income of a single year.
Austrian tax losses are available for offset indefinitely, and U.S. tax
losses are available for offset through 2023.
The income tax returns of the Company's Austrian subsidiaries have been
audited through 1997. The Company does not believe that income tax audits
(if any) for later years will result in any material Austrian income taxes.
9. Related parties:
Advances payable, related party, represent amounts advanced to the Company
by the Company's president and principal shareholder. The advances are
unsecured payable on demand and do not bear interest. The Company's
president has agreed to postpone his claim for amounts owed to him by the
Company through 2003, or until funds are acquired through redemption of
outstanding warrants or future equity transactions which will provide the
means for repayment.
11
10. Shareholders' equity:
During the three months ended March 31, 2003, the Company issued 20,000
shares of common stock for $18,000 net. These shares were issued in private
placements.
During the three months ended March 31, 2003 the Company's president and
majority shareholder waived salary of $50,000 (unaudited) due under the
terms of his employment contract with the Company. The Company has
accounted for the waived salary as a capital contribution by the majority
shareholder resulting in an increase in additional paid-in capital of
$50,000 (unaudited).
11. Operating segments:
The Company classifies its businesses into three operating segments. The
segments have been defined by the services each segment offers. The
services offered are described below:
Event Management:
Look Eventmanagement GmbH handles the sourcing of new models and their
development, and the organization of promotional events. It was founded
1986 under its former name Wolfgang Schwarz Sport- und
Kulturveranstaltungen GmbH, Vienna.
Model Management:
Look Model Management GmbH is a model agency operating in Austria.
Cosmetics:
In 2000, the Company started a new operating segment by entering into the
cosmetics business. The products include Eau de toilette, perfumes, body
milk and body splash. In 2001, the Company introduced the sale of
sunscreens.
A summary of sales by country is as follows:
March 31, 2003 (unaudited)
Event- Model
management management Cosmetics Total
---------- ---------- --------- -----
Austria $ 110,264 $ 36,042 $ 82 $ 146,388
United States of America 4,217 - - 4,217
Other countries 48,097 64,308 84,477 196,882
---------- --------- ------ --------
Totals $ 162,578 $ 100,350 $ 84,559 $ 347,487
========== ========= ======== ==========
12
10. Operating segments (continued):
March 31, 2002 (unaudited)
Event- Model
management management Cosmetics Total
---------- ---------- --------- -----
Austria $ 40,475 $ 44,192 $ - $ 84,667
United States of America - - 93,201 93,201
Other countries 16,270 61,840 - 78,110
--------- ---------- -------- ---------
Totals $ 56,745 $ 106,032 $ 93,201 $ 255,978
========== ========== ======== =========
Information about the Company's operating segments:
March 31, 2003 (unaudited)
Event- Model
management management Cosmetics Corporate Total
---------- ---------- --------- ---------- ------
Total revenue $ 162,578 $ 100,350 $ 84,559 - $ 347,487
Profit (loss) from
operations 22,533 28,231 (874) $ (174,567) (124,677)
Interest expense (11,746) (3,271) - - (15,017)
Net income (loss) 15,341 22,954 (874) (174,567) (137,146)
Salary waived by CEO
and majority shareholder 50,000 50,000
Capital expenditures - 615 - - 615
Depreciation and
amortization 3,279 1,994 - 3,885 9,158
13
10. Operating segments (continued):
March 31, 2002 (unaudited)
Event- Model
management management Cosmetics Corporate Total
---------- ---------- --------- --------- --------
Total revenue $ 56,745 $ 106,032 $ 93,201 - $ 255,978
Profit (loss) from
operations (103,456) (20,077) 77,914 $ (132,048) (177,667)
Interest expense (15,719) (4,164) - - (19,883)
Net income (loss) (127,320) (24,241) 77,914 (132,048) (205,695)
Salary waived by CEO
and majority shareholder - - - 50,000 50,000
Capital expenditures 6,996 458 - - 7,454
Depreciation and
amortization 1,883 2,650 - 3,333 7,866
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
You should read the following discussion and analysis as well as the
consolidated financial statements and their accompanying notes, included
elsewhere in this prospectus. This discussion and analysis is a presentation by
management of their financial condition and result of their operations, as our
company has assumed their business operations.
Certain statements contained under this caption and elsewhere in this
prospectus, regarding matters that are not historical facts are forward-looking
statements. All statements that address operating performance, events or
developments that the management of Look Models expects to incur in the future,
including statements relating to sales and earning growth or statements
expressing general optimism about future operating results are forward-looking
statements. These forward-looking statements are based on Look Models
management's current views and assumptions regarding future events and operating
performance. Many factors could cause actual results to differ materially from
estimates contained in these forward-looking statements. The differences may be
caused by a variety of factors, including, but not limited to, adverse economic
conditions, competitive pressures, inadequate capital, unexpected costs, lower
revenues or net income, the possibility of fluctuation and volatility of our
operating results and financial condition, inability to carry out marketing and
sales plans and loss of key executives, among other things.
15
Critical Accounting Policies and Estimates
- -------------------------------------------
The discussion and analysis of our financial condition and results of
operations are based upon our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect our reported assets, liabilities, revenues
and expenses, and our related disclosure of contingent assets and liabilities.
On an on-going basis, we evaluate our estimates, including those related to
revenue recognition, bad debts, intangible assets and income taxes.
We believe the following critical accounting policies and the related
judgments and estimates affect the preparation of our consolidated financial
statements.
We recognize revenue when it is earned and record accounts receivable at
that time. We do not account for revenue based on contractual arrangements in
advance of their being earned.
We maintain allowances for doubtful accounts for estimated losses resulting
from the inability of our customers to make required payments. If the financial
condition of our customers were to deteriorate, resulting in an impairment of
their ability to make payments, additional allowances may be required which
would result in an additional general and administrative expense in the period
such determination was made.
We do not have any of the following:
o Off-balance sheet arrangements.
o Certain trading activities that include non-exchange traded contracts
accounted for at fair value.
o Relationships and transactions with persons or entities that derive
benefits from any non-independent relationships other than related party
transactions discussed herein.
Foreign Exchange Issues
- -----------------------
Foreign currency translation:
- -----------------------------
The financial position and results of operations of Look Models' foreign
subsidiaries are measured using local currency as the functional currency. The
functional currency for most foreign operations is the Austrian Schilling, which
was replaced by the Euro in January 2002. Conversion to the Euro is not expected
to have an impact on Look Models' financial condition and results of operations.
Revenues and expenses of such subsidiaries have been translated into U.S.
dollars at average exchange rates prevailing during the period. Assets and
liabilities have been translated at the rate of exchange at the balance sheet
date. Translation gains and losses are included in other comprehensive income.
Aggregate foreign currency transaction gains and losses are included in the
results of operations as incurred.
16
KINGSGATE ACQUISITIONS, INC.
(SUCCESSOR TO LOOK MODELS INTERNATIONAL, INC.)
RESULTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2002 AND 2001
AND THREE MONTHS ENDED MARCH 31, 2003 AND 2002
December 31, December 31, March 31, March 31,
2002 2001 2003 2002
------------ ------------ ----------- -----------
Sales $ 1,146,849 $ 1,076,237 $ 347,487 $ 255,978
Cost of sales (784,900) (662,601) (178,409) (92,375)
------------- -------------- ------------ ------------
Gross profit 361,949 413,636 169,078 163,603
------------- -------------- ------------ ------------
Selling expenses (610,018) (430,375) (165,025) (157,715)
Administrative expenses (868,456) (1,648,951) (128,730) (183,555)
------------- -------------- ------------ ------------
(1,478,474) (2,079,326) (293,755) (341,270)
Loss from operations (1,116,525) (1,665,690) (124,677) (177,667)
------------- -------------- ------------ ------------
Interest expense (134,417) (55,826) (15,017) (19,883)
Other, net 36,389 (4,434) 2,548 (8,145)
------------- -------------- ------------ ------------
(98,028) (60,260) (12,469) (28,028)
------------- -------------- ------------ ------------
Net loss $ (1,214,553) $ (1,725,950) $ (137,146) $ (205,695)
============= ============== ============ ============
Net loss per share -
basic and diluted $ (0.10) $ (0.14) $ (0.01) $ (0.02)
============= ============== ============ ============
Weighted average shares of
common stock
outstanding 12,477,533 12,323,269 12,506,222 12,455,693
============= ============== ============ ============
17
Results of Operations
- ---------------------
2002 Compared with 2001
- -----------------------
For the year ended December 31, 2002, revenue increased from the year ended
December 31, 2001. Revenue for the year ended December 31, 2001 was $1,076,237,
and revenue for the year ended December 31, 2002 was $1,146,849 (a 6.6%
increase). Management believes that the increase can be attributed to the
globalization of its model mediating activities resulting in an increased number
of models Look Models has placed internationally and the ensuing increase in
mother agency fees. In 2002, 75% of the overall revenue resulted from
international bookings, compared to 5% in 2001. Management believes that its
models had an increased willingness to travel internationally after the post
September 11th fear of travel began to wane. Management also believes that the
increase can be attributed to cost cutting measures and more successful model
placement. Management also attributes the increase in revenue to the higher
margin from sales of sunscreen products. The cost of sales of $784,900, for the
year ended December 31, 2002, is higher than the cost of sales of $662,601 in
the year ended December 31, 2001 (an 18.5% increase). The increase in the cost
of sales is due to additional development fees associated with the Look and
Catwalk brand identity and costs associated with the development Look's
event-management concept based on the Internet and "fashion days". Accordingly,
there was a decrease in Look Models' gross margin for the year ended December
31, 2002. Specifically, the gross profit for the year ended December 31, 2001
was $413,636, or 38.4%, but, for the year ended December 31, 2002, the gross
profit was $361,949,or 31.6%. This decrease in gross margin can be primarily
attributed to the higher cost of sales in gross margin from sales of sunscreen
products. There were no sales of sunscreen products during the year ended
December 31, 2002. Selling expenses for the year ended December 31, 2002, as
compared to the selling expenses for the year ended December 31, 2001 show an
increase from $430,375 to $610,018, or 41.7%. These higher costs are due
increased salaries, increased travel and telecommunication expenses, which
includes installation and connection fees for our Internet portal.
Administrative expenses decreased in 2002 compared to those of 2001.
Administrative expenses were $1,648,951 in 2001, and were $868,456 in 2002, a
47.2% decrease. This is because the company did not re-incur certain costs
attributed to preparing for its public registration, and in upgrading its
accounting and financial controls. Look Models posted a net loss for the year
ended December 31, 2002 of $1,214,553. The net loss for 2002 was a decrease of
29.6% over the net loss in 2001 of $1,725,950. The 2002 loss includes $200,000
of non-cash foregone salary imputed to the company's president.
The loss in 2002 can be divided into a loss from U.S. operations, and a
loss from European operations. The loss in 2002 from U.S. operations was
$580,149, while the loss from European operations was $634,404. The U.S.
operations are those of the holding company, which received funds from non U.S.
investors and dispensed funds to its European subsidiaries for working capital
purposes, and paid obligations to both U.S. and non-U.S. vendors, primarily in
satisfaction of transaction based expenses. Other than the distribution of
products to Models Prefer, Ltd. ("Models Prefer") there are no operations
currently being conducted in the U.S. The loss from operations in Europe of
$634,404 was lower in 2002 than it was in 2001. In 2001 the net loss from Europe
was $652,992. The 2002 loss from U.S. operations of approximately $580,149 is
significantly less than the 2001 loss from U.S. operations of $1,072,958.
18
Three months ended March 31, 2003 compared with the three months ended March 31,
2002
For the three months ended March 31, 2003, revenue increased from the three
months ended March 31, 2002. Revenue for the three months ended March 31, 2002
was $255,978, and revenue for the three months ended March 31, 2003 was
$347,487(a 35.8% increase). This increase is due to two factors, first, the
purchase of a large stock of our cosmetics by Coty Beauty and, second, to a
large commission fee earned from the placement of Naomi Campell. The cost of
sales of $178,409 for the three months ended March 31, 2003 is higher than the
cost of sales of $92,375 in the three months ended March 31, 2002. This increase
is due to the costs underlying the sale of our cosmetics to Coty Beauty and the
costs surrounding Ms. Campell's placement. Accordingly, there was an increase in
Look Models' gross profit for the three months ended March 31, 2003.
Specifically, the gross profit for the period ended March 31, 2002 was $163,603,
or 63% and for the three months ended March 31, 2003, the gross profit was
$169,078, or 48.7%. This decrease in gross margin results primarily from the
Company's cosmetic segment. Selling expenses for the three months ended March
31, 2003 as compared to the selling expenses for the three months ended March
31, 2002 show a slight increase from $157,715 to $165,025, or 5%. Management
does not view this as material. Administrative expenses decreased for the three
months ended March 31, 2003 compared to those for the three months ended March
31, 2002. Administrative expenses were $128,730 for the three months ended March
31, 2003, and were $183,555 for the three months ended March 31, 2002, a 29.9%
decrease. This is because the Company did not re-incur certain costs attributed
to preparing for its public registration. It is also a result of the Company's
upgrading its accounting and financial controls. Look Models posted a net loss
for the three months ended March 31, 2003 of $137,146. The net loss for the
three months ended March 31, 2003 was a decrease of 33.3% over the net loss for
the three months ended March 31, 2002 of $205,695.
The loss for the three months ended March 31, 2003 can be divided into a
loss from U.S. operations, and a profit from European operations. The loss for
the three months ended March 31, 2003 form U.S. operations was $174,567, while
the profit from European operations was $37,421. For the three months ended
March 31, 2002, the Company incurred a loss from European operations of $73,647
and a loss from U.S. operations of $132,048. The loss from U.S. operations for
the three months ended March 31, 2003 of $174,567 shows an increase of 32%
compared to the loss for the three months ended March 31, 2002. The increase is
mainly due to costs incurred from the organization of the International Fashion
Day event in Prague. Management allocates costs and earnings from an
international event like the International Fashion Days showcasing international
talent to U.S. operations.
While Look Models has experienced uncertainty in meeting its cash flow
needs and has relied on outside investors and its principal shareholder to
provide funding, Look Model's management plans to attain profitability and meet
cash flow needs going forward as follows:
a. Look Models' president and majority shareholder, Wolfgang Schwarz, has made
a firm commitment to fund the operating expenses for 2003 and to forego
salary in 2003 until such time as profitable operations, capital raised
from redemption of outstanding warrants, or future equity transactions
provide Look Models the ability to pay his salary in accordance with his
employment agreement. Mr. Schwarz has certified this commitment to Look
Models in writing. This funding, if necessary, will be made as an at-market
interest bearing loan to Look Models.
b. Mr. Schwarz has agreed to postpone his claim for amounts owed to him by
Look Models and to utilize funds from capital raised from redemption of
outstanding warrants, future equity transactions or profitable operations
as a means of repayment. At December 31, 2002 and March 31, 2003 such
amounts were $892,121 and $1,051,081 respectively.
c. Management believes that the increase in revenue Look Models has
experienced will continue. For the three month ended March 31, 2003, Look
Models' revenue was $347,487 compared to $255,978 for the three months
ended March 31, 2002.
d. From Look Models' operating segments, the following developments are
anticipated to increase revenues and cash flows in year 2003:
Model management:
-----------------
Pursuant to its growth strategy, Look Model's began to globalize its model
mediating activities. In 2002, 75% of the overall revenue resulted from
international bookings, compared to 5% in 2001. This trend is expected to
continue in 2003. The software allows Look Models to enhance model movement
activities and to create demand in those markets where the software permits the
direct booking of models. Although Look Models is just beginning to utilize this
software, model management revenues increased by more than 40 % compared to
2002.
19
Cosmetics:
----------
Look Models is finalizing a license contract for its fragrance line with
one of the world's largest fragrance producers, Coty. Look Models will produce
and market fragrance products.
Look Model Search/Event-management:
-----------------------------------
In 2003, Look Models expects to increase significantly the number of
participating countries in its international model search activities. Look
Models' licensees organized events in Austria, Yugoslavia, Czech Republic,
Slovakia, Hungary, Poland, Macedonia, Bosnia, Lithuania, Latvia, Romania and
Portugal. Due to the Look Models' Internet portal scouting system, contestants
from an increasing number of countries, including the USA, South America and
Asian countries, apply and take part in the events. Look Models' new
event-management concept is based on the Internet and "fashion days", revolving
around the promotion of local designers. This new concept proved to be very
successful in our final show of 2002 in Prague. This event gained significant
media attention, and Look Models is evaluating offers from venue sponsors in
Dubai and Monte Carlo for future international shows.
e. Look Models is seeking to eliminate non-recurring expenses. See Liquidity
and Capital Resources, below.
f. Look Models is seeking to eliminate non-cash charges, such as payment in
stock for services rendered to Look Models.
Liquidity and Capital Resources
- -------------------------------
Working Capital, Debt and Liquidity.
- ------------------------------------
Although Look Models had a shareholders' deficit as of December 31, 2002
and March 31, 2003 of $3,048,302 and $3,227,918, respectively, Look Models
believes that it will have the capital resources for the next twelve (12) months
in order to operate its business due to:
20
(1) Funding Commitment. Look Models' president and majority shareholder,
Wolfgang Schwarz, has guaranteed to fund the operating expenses for 2003
and to forego salary in 2003 until such time as profitable operations, if
necessary, capital raised from redemption of outstanding warrants, or
future equity transactions provide Look Models the ability to pay his
salary in accordance with his employment agreement. Mr. Schwarz has
certified this commitment to Look Models in writing. This funding, if
necessary, will be made as an at-market interest bearing loan to Look
Models.
(2) There are several trends and events that have, or are reasonably likely to
have, a material impact on Look Models' short-term or long-term liquidity
Look Models is currently negotiating to obtain financing from a private
equity fund. Look Models believes that it is currently at the due diligence
stage of these negotiations. Look Models is negotiating additional equity
funding from foreign investors and has completed the combination with
Kingsgate Acquisitions, Inc., which is expected to provide access to the
U.S. capital markets. Additional funding is intended to increase both the
short-term, and the long-term liquidity position of Look Models.Look Models
intends to use this financing for working capital, and to cover the
transaction costs it will incur in the next several months. Look Models
believes that its Internet booking system, as well as the maturity in age
of its models database, and the execution of several pending licensing
transactions will add to its short-term liquidity. Look Models is
attempting to license its "Look" and "Catwalk" brands for franchise
purposes, and to increase the number of licensees of its brands. Turkey and
Russia are two markets where the "Look" brand will be developed and the
"Catwalk" products will be sold. Look Models is not aware of other known
trends, events or uncertainties, other than general business upswings or
downturns that will have a material impact on its short-term or long-term
liquidity.
(3) Look Models' internal and external sources of liquidity are as follows:
Externally, Look Models hopes to continue its past strategy of obtaining
funding from the sale of its stock to outside investors, some of whom are
already current shareholders of Look Models. Internally, Look Models
expects to fund its operations from revenues and acquisitions using stock,
and expects to increase its revenues, while stabilizing its expenses. For
the three month ended March 31, 2003, Look Models' revenue was $347,487
(unaudited) compared to $255,978 for the three months ended March 31, 2002.
Additionally, Look Models' has outstanding claims against third parties
which management believes will result in cash receipts and debt
extinguishment during 2003 totaling approximately $165,000. The $165,000 is
comprised of $115,000 withheld from Dialpack payments as compensation for
Dialpack's breach of contract and $50,000 reimbursement for stolen goods
from a transportation company.
(4) Non-Cash Expenses. As reflected in the Statement of Changes in
Shareholder's Deficit and Comprehensive Income there are charges associated
with the Kingsgate transaction and for payments made using stock that are
reflected in the administrative expenses. These expenses are primarily
professional and other fees relating to the transaction, including fees
necessary to provide adequate documentation of international contracts and
agreements, developing its licensing and brand extension business,
negotiations with Kingsgate, etc.
21
(5) Deferred Repayment. The President and majority shareholder of Look Models
has deferred repayment of loans due to him for one (1) year, or until Look
Models returns to profitability, or is successful in securing follow-on
financing. An example of follow-on financing that would be used to repay
Mr. Schwarz' loan is through warrant exercise. If our offering, which is
currently in registration is fully subscribed there will be 6,000,000
warrants outstanding. Upon exercise of these 6,000,000 warrants, Look
Models will receive gross proceeds of $6,250,000. We intend to use 25% of
the warrant proceeds to pay outstanding officer loans and 75% of the
warrant proceeds for marketing our cosmetics and accessory lines. There can
be no assurance that the warrants will be exercised or that Look Models
will return to profitability. Mr. Schwarz has not guaranteed the extension
of this loan and could, potentially, seek some loan repayment out of
revenues generated.
(6) Lines of Credit and Overdrafts. Look Models has the following lines of
credit from Tiroler Sparkasse Bank, Austria:
At March 31, 2003 short-term borrowings consisted of:
Line of credit, interest at 4.5%; outstanding balance
due in September 2003; collateralized by the Company's
receivables and guaranteed by the Company's president $ 195,808
Line of credit, interest at 4.5%; outstanding balance
due in September 2003; collateralized by the Company's
receivables and guaranteed by the Company's president 475,915
Line of credit, interest at 7.875%; outstanding balance
due in September 2003; collateralized by the Company's
receivables and guaranteed by the Company's president 156,610
Overdraft on bank accounts, interest at 4.5% 1,171,456
----------
$ 1,999,789
=============
Net Cash Used in Investing Activities
- -------------------------------------
Look Models has no material commitments for capital expenditures, as it has
already expended the majority of necessary funding in developing its licensing
and brand extension businesses, but Look Models will need working capital to
continue to purchase inventory of dispensers, perfume, eau de toilette and body
splash. Look Models is currently developing a new range of products, and is
attempting to negotiate royalty based contracts with large cosmetic companies
for these products. Look Models also intends to license products under its brand
names, particularly to licensees that will sponsor the LOOK MODEL SEARCH
International Final. Look Models also has commitments to various entities and
individuals for transactional fees, disbursements, professional fees, and other
related costs in conjunction with completing this transaction. These costs are
not expected to exceed $250,000, and Look Models intends to partly finance these
expenditures internally from revenue, but primarily, Look Models intends to use
financing and offering proceeds to make such expenditures.
22
Seasonality
- -----------
There are seasonable aspects that can have a material effect on the
financial condition or results of operation of Look Models, such as lower demand
during off-season periods. Partially offsetting the seasonality is the fact that
Look Models has a presence in various markets. A slowdown in one market is
sometimes offset by buoyancy in another market, resulting in such fluctuations
having less of an overall effect on Look Models' annual revenue stream. For
example, the different seasons result in the need for models in different
venues. Spring and fall bring the need for models to display fashions for the
industry retail viewers. Summer and Winter require models in on-site swimwear
and Winter sports shoots.
Planned Acquisitions
- ----------------------
As Look Models believes it would be more cost effective to acquire existing
agencies in certain markets, rather than to open up new offices in said markets.
Look Models plans to form strategic alliances, through either commission
agreements or acquisitions of modeling agencies in some of the world's modeling
centers, such as New York, London, Paris, Milan, and Munich. Look Models may
also seek to purchase companies, or assets that will benefit, or assist its
production and distribution capabilities in its cosmetics business. In general,
Look Models intends to use stock in large part to finance acquisitions. If funds
are required, such funds would come out of revenue or working capital, if
available, or could be raised through subsequent offerings. In November 2002,
Mr. Schwarz executed a contract to acquire Munich Models GmbH, a privately owned
German model agency. This contract was subsequently terminated by the parties
because Look Models did not have the finances to complete the acquisition. Look
Models still continues to do business with Munich Models and considers its
relationship with the company to be a good one. The letter of termination from
Munich Models did not address the possibility of entering into another agreement
at a later time. In the event our company is able to raise funds and re-open
negotiations with Munich Models, we would like to use proceeds from this
offering for the costs associated with the acquisition and integration costs of
this agency. We are not currently involved in negotiations to acquire any other
agency.
Planned Ventures
- ----------------
Look Models has commenced preliminary discussions with Fashion T.V., a
media company, which is televised worldwide through cable and satellite and has
approximately 300 million viewers. The two companies are collaborating a deal
whereby Fashion T.V. would cover all Look Models' national model contests as
well as the International final event. This collaboration would allow Look
Models to have a participating partner to share the expenses of the event, while
maximizing revenue by increasing visibility of the event through greater media
coverage of the event.
Expected Market, Product, Region of Influence
- ----------------------------------------------
Look Models anticipates that its services will continue to be demanded by
many young girls from Eastern Europe seeking to enter the modeling world. Look
Models also anticipates it will be sought out by aspiring models in the Western
world once it has established a presence in one or more major modeling markets.
Look Models currently represents high profile models as well as new talent. An
expected market is the development of young models. In the event marketing,
licensing and sponsorship businesses, Look Models targets companies with
expertise in event marketing, and is focusing its efforts to sign up licensees
in major European markets. In 2002 Look Models signed agreements in Portugal,
Germany, Czech Republic, Slovakia, Turkey, Poland, Hungary, Yugoslavia.
23
In the cosmetics business, Look Models targets the young female market in
Europe. Look Models hopes to establish a brand name in Europe before launching
its products in the United States. Look Models plans to extend its product line
to develop products that are identified with its models, such as handbags,
accessories, sunglasses, and so forth. Look Models is developing four sample
collections of "cult items" such as leather jackets, caps, model backpacks,
workout outfits and lingerie.
Look Models has negotiated a deal with Coty Beauty, a division of Coty, to
develop a fragrance line under the Pret-a-Porter brand. The parties are
currently drafting a written license agreement. Look Models has received a
letter dated March 28, 2003, from Massimillano Ferari, Marketing Director of
Coty Beauty confirming Coty's intent to finalize their agreement with Look
Models.
Projected Financial Information and Management
- ----------------------------------------------
Expectation on the Nature of Future Business
- ---------------------------------------------
Investors should not place undue certainty on projections. We can provide
no assurances that any of our projections will ever be met.
1. Licenses and Sponsoring:
- ---------------------------
Beginning in 1999 and continuing through 2002, Look Models decided to
create awareness for its brand name, its products, and its business model.
Accordingly, Look Models invested in, and developed partnerships with outside
parties for the purpose of organizing national and international model search
events. Initially, Look Models funded all the model search events itself, in
order to develop a reputation as a leader in the search for new faces. The model
search process also provides Look Models with a steady stream of young models
that join Look Models' portfolio of faces for future placement. Look Models now
intends to generate revenue from these relationships by entering into licensing
and sponsorship deals. In 2003, Look Models is focusing on exploiting both
existing and new markets, and expects to negotiate licensing and sponsorship
deals.
The structure of a licensing deal is as follows:
Look Models is paid an initial licensing fee of anywhere from $15,000.00 -
$50,000.00 per country, and retains a portion of the revenue from sponsors at
the events.
2. Merchandising:
- ------------------
Look Models has invested heavily in product development and marketing, and
has developed a line of products that will utilize its "Look Models", and its
"Catwalk" brands. The products are aimed at the young female market worldwide.
The products being developed are perfume, eau de toilette, body milk, body
splash, perfume towelettes, aromatherapy, sunscreen, and lingerie. Look Models
works with Uli Petzold, an internationally renowned designer who is a director
of Look Models, in the creation of these products. At this time, Look Models'
products have a presence in Austria, the Czech Republic, Slovakia and Turkey.
--------
1 These notes are arranged by dividing Look Models into four (4) revenue
producing units,
24
3. Modeling and licensing:
- --------------------------
Through the acquisition of agencies in major markets, Look Models hopes to
increase its revenue stream. Additionally, due to the fact that several of its
models will be finishing school this year, Look Models expects to add to its
revenue base from these new faces. These models will be able to generate
additional revenue due to the fact that they will have completed their studies.
Without the acquisition of "big market" agencies, Look Models, based upon
historical figures, would expect to increase its revenue by 30% per annum.
4. E-Commerce:
- --------------
Look Models has constructed what it believes to be the first Internet
portal with a copyrighted proprietary software that enables worldwide bookings
online. The website has been operational since July 2002. Given that this is the
first time that a model agency network has built a fully operating model booking
portal, there are no historical figures to use for revenue projections herein.
We believe that the portal will increase revenues and decrease operating
expenses, without taking revenue from the existing modeling business. The portal
will allow Look Models to book models worldwide by electronic means without
interfering with the models' local agency's office and the current base of
operation of the models. As these transactions will be new, they will not be
taking revenue from Look Models' existing modeling business. Look Models will
promote its portal aggressively and believes that this global booking structure
is the future of the business.
Clients have already taken advantage of utilizing Look Models' new software
such as Nina Ricci, Paris, Grey Worldwide, TRIUMPH international, Chanel, many
mail order companies and the major fashion magazines, such as Vogue, Elle,
Glamour and Marie Claire. In 2002, 76.16% ($ 443,545) of the overall Model
Management's revenue ($ 582,401) resulted from international bookings. For the
three months ended March 31, 2003, 64% ($64,308) of the overall Model
Management's revenue ($100,350) resulted from international bookings. The
software allows the Company to enhance model movement activities and to create
demand in those markets where the software permits the direct booking of models.
Although we are just beginning to utilize our software, model management
revenues increased by more than 55% in 2002 compared to 2001.
The sources of income for the e-commerce division are:
1. Modeling commissions; 2. Portal advertising revenue; 3. Revenue from
portal links; and 4. Product sales.
25
Description of Material Risks and Management's strategy of offset risk
- ----------------------------------------------------------------------
Look Models effectively invests in the future of young models in the hope
that it will benefit when these models develop in their careers. Look Models may
never receive a return on its investment in a significant number of its models
due to a variety of factors, such as changing consumer tastes, personal
difficulties of the models, emotional inability to perform in the modeling
world, lack of modeling assignments, economic downturns, more Affordable
replacements for models, to name a few. Look Models also faces the risk that its
models may dishonor contracts they have with the agency, refuse to sign
contracts with the agency, or leave the agency to join another agency. While
Look Models plans to issue shares of stock to each of its models as an incentive
to remain with Look Models, and to build loyalty and an ownership mentality in
its models, management has not worked out the specifics of this program. It is
anticipated that this program will be a privately issued employee stock plan
issued pursuant to an exemption from registration under the Securities Act of
1933. Additionally, management intends to closely marshal and enforce its
contractual relationships with all its models, and with the outside agencies
with which Look Models shares bookings, and, therefore, fees.
Significant Accounting Policies
- -------------------------------
Stock-based compensation:
- -------------------------
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation" allows companies to choose whether to account for
employee stock-based compensation on a fair value method, or to account for such
compensation under the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"). The Company has chosen to account for employee stock-based
compensation using APB 25.
Segment reporting:
- ------------------
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). The Company's results of
operations and financial position were not affected by the implementation of
SFAS No. 131.
Operating segments:
- -------------------
The Group classifies its businesses into three operating segments. The
segments have been defined by the services each segment offers. The services
offered are described below:
Event management:
- -----------------
Look Eventmanagement GmbH handles the sourcing of new models and their
development, and the organization of promotional events. It was founded 1986
under its former name Wolfgang Schwarz Sport- und Kulturveranstaltungen GmbH,
Vienna.
Model management:
- -----------------
Look Model Management GmbH is a model agency operating in Austria.
26
Cosmetics:
- ----------
In 2000, the Company started a new operating segment by entering into the
cosmetics business. The products include Eau de toilette, perfumes, body milk
and body splash. In 2001, the Company introduced the sale of sunscreens.
A summary of sales by country is as follows:
Year ended December 31, 2002
----------------------------
Event- Model
Management Management Cosmetics Total
------------ ---------- --------- ----------
Austria $ 103,717 $ 138,856 $ 341 $ 242,914
USA 26,488 - 309,603 336,091
Other countries 124,299 443,545 - 567,844
------------ ---------- --------- ----------
Totals $ 254,504 $ 582,401 $ 309,944 $ 1,146,849
============ =========== ============ ============
Year ended December 31, 2001
----------------------------
Event- Model
Management Management Cosmetics Total
------------ ---------- --------- ----------
Austria $ 72,601 $ 392,497 $ 1,043 $ 466,141
USA 74,473 - 277,029 351,502
Other countries 247,772 - 10,822 258,594
------------ ---------- --------- ----------
Totals $ 394,846 $ 392,497 $ 288,894 $ 1,076,237
============ =========== ============ ============
27
Three months ended March 31, 2003
---------------------------------
Event- Model
Management Management Cosmetics Total
------------ ---------- --------- ----------
Austria $ 110,264 $ 36,042 $ 82 $ 146,388
USA 4,217 - - 4,217
Other countries 48,097 64,308 84,477 196,882
----------- ---------- ---------- ----------
Totals $ 162,578 $ 100,350 $ 84,559 $ 347,487
Three months ended March 31, 2002
---------------------------------
Event- Model
Management Management Cosmetics Total
------------ ---------- --------- ----------
Austria $ 40,475 $ 44,192 $ - $ 84,667
USA - - 93,201 93,201
Other countries 16,270 61,840 - 78,110
----------- ---------- ---------- ----------
Totals $ 56,745 $ 106,032 $ 93,201 $ 255,978
Information about the Company's operating segments:
Year ended December 31, 2002
----------------------------
Event- Model
management Management Cosmetics Corporate Total
-----------------------------------------------------------------------------
Total revenue $ 254,504 $ 582,401 $ 309,944 - $ 1,146,849
Profit (loss) from
operations (439,967) (178,524) 82,115 $(580,149) (1,116,525)
Interest expense (108,140) (26,277) - - (134,417)
Net income (loss) (524,549) (191,970) 82,115 (580,149) (1,214,553)
Salary waived by CEO 200,000 200,000
and majority
shareholder
Capital expenditures 13,443 14,240 - - 27,683
Depreciation and
amortization 12,326 10,161 - 15,543 38,030
Year ended December 31, 2001
----------------------------
Event- Model
management Management Cosmetics Corporate Total
-----------------------------------------------------------------------------
Total revenue $ 394,846 $ 392,497 $ 288,894 - $1,076,237
Profit (loss) from
operations (368,282) (313,551) 89,101 $ (1,072,958 (1,665,690)
Interest expense (44,103) (11,723) - - (55,826)
Net income (loss) (415,489) (326,604) 89,101 (1,072,958) (1,725,950)
Shared issued for services - - - 270,000 270,000
Capital expenditures 7,472 - - 16,534 24,006
Depreciation and
amortization 9,030 7,388 - 15,544 31,962
28
Three months ended March 31, 2003
---------------------------------
Event- Model
management Management Cosmetics Corporate Total
-----------------------------------------------------------------------------
Total revenue $ 162,578 $ 100,350 $ 84,559 $ - $ 347,487
Profit(loss) from 22,533 28,231 (874) (174,567) (124,677)
operations
Interest expense (11,746) (3,271) 0 0 (15,017)
Net income(loss) 15,341 22,954 (874) (174,567) (137,146)
Salary waived by CEO 50,000 50,000
and majority shareholder
Capital expenditures - 615 - - 615
Depreciations and 3,279 1,994 - 3,885 9,158
amortization
Event- Model
management Management Cosmetics Corporate Total
-----------------------------------------------------------------------------
Total revenue $ 56,745 $ 106,032 $ 93,201 $ - $ 255,978
Profit(loss) from (103,456) (20,077) 77,914 (132,048) (177,667)
operations
Interest expense (15,719) (4,164) 0 0 (19,883)
Net income(loss) (127,320) (24,241) 77,914 (132,048) (205,695)
Salary waived by CEO - - - 50,000 50,000
and majority shareholder
Capital expenditures 6,996 458 - - 7,454
Depreciations and 1,883 2,650 - 3,333 7,866
amortization
29
ITEM 3. CONTROLS AND PROCEDURES
On March 14, 2003, the Company's management concluded its evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. As of the Evaluation Date, the Company's Chief Executive Officer
and its Chief Financial Officer concluded that the Company maintains disclosure
controls and procedures that are effective in providing reasonable assurance
that information required to be disclosed in the Company's reports under the
Securities Act of 1934 (Exchange Act) is recorded, processed, summarized and
reported within the time periods specified in the SEC's rules and forms, and
that such information is accumulated and communicated to the Company's
management, including its Chief Executive Officer and its Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. The Company's management necessarily applied its judgement in
assessing the costs and benefits of such controls and procedures, which, by
their nature, can provide only reasonable assurance regarding management's
control objectives. There have been no significant changes in the Company's
controls or in other factors that could significantly affect these controls
subsequent to the Evaluation Date.
30
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Kingsgate is not presently a party to any litigation, nor, to the knowledge
of management, is any litigation threatened against Kingsgate which may
materially affect Kingsgate.
Item 2. Changes in Securities
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security-Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Form 8-K disclosing a change in auditors was filed with the Securities and
Exchange Commission on December 5, 2002. Form 8-K disclosing the acquisition of
Look Models International, Inc. was filed with the Securities and Exchange
Commission on December 5, 2002.
Exhibit 99.1 Form 906 Certification.
31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
KINGSGATE ACQUISITIONS, INC.
July 9, 2003 By: /s/Wolfgang Schwarz
---------------------------
Wolfgang Schwarz
President
Principal Executive Officer
By: /s/Andreas Seiser
July 9, 2003 --------------------------
Andreas Seiser
Treasurer
Principal Financial Officer
Principal Accounting Officer
CERTIFICATION PERSUANT TO RULE 13A-14 OR 15D-14 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Wolfgang Schwarz, and I, Andreas Seiser, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Kingsgate
Acquisitions, Inc.;
2. Based on my knowledge, this 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 other 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 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
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.
By: /s/Wolfgang Schwarz
---------------------------
Wolfgang Schwarz
President
Principal Executive Officer
By: /s/Andreas Seiser
--------------------------
Andreas Seiser
Treasurer
Principal Financial Officer
Principal Accounting Officer
Date: July 9, 2003
EXHIBIT 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Kingsgate Acquisitions, Inc.
(the "Company") on Form 10-QSB for the period ending March 31, 2003 as filed
with the Securities and Exchange Commission on the date hereof (the "Report"),
I, Wolfgang Schwarz, President, Chief Executive Officer, , and I, Andreas
Seiser, Chief Financial Officer and Principal Accounting Officer certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section 12(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and result of operations of the Company,
as of, and for the periods presented in the Report.
By: /s/Wolfgang Schwarz
---------------------------
Wolfgang Schwarz
President
Principal Executive Officer
By: /s/Andreas Seiser
--------------------------
Andreas Seiser
Treasurer
Principal Financial Officer
Principal Accounting Officer
July 9, 2003
A signed original of this written statement required by section 906 has
been provided to Kingsgate Acquisitions, Inc. and will be retained by Kingsgate
Acquisitions, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.