4
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 10, 2002.
REGISTRATION NO. ____________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM SB-2REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
National Beauty Corp.
---------------------
(Name Of Small Business Issuer In Its Charter)
Nevada 2844 13-3422912
(State or Other Jurisdiction (Primary Standard
of Incorporation Industrial Classification (I.R.S. Employer
or Organization) Code Number) Identification No.)
4818 West Commercial Blvd.
Ft. Lauderdale, Florida 33319
(954) 717-8680
--------------
(Address and Telephone Number of Principal Executive Offices)
4818 West Commercial Blvd.
Ft. Lauderdale, Florida 33319
(954) 717-8680
--------------
(Address of Principal Place of Business or Intended Principal Place of Business)
Mr. Ed Roth
-----------
4818 West Commercial Blvd.
Ft. Lauderdale, Florida 33319
(954) 717-8680
(Name, Address, and Telephone Number of Agent for Service)
Copy to:
Weed & Co. LLP
4695 MacArthur Court, Suite 1430
Newport Beach, CA 92660
Telephone (949) 475-9086
Facsimile (949) 475-9087
Approximate Date of Commencement of Proposed Sale to the Public: as soon as
possible after this registration statement becomes effective
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. [X]
________________________________________________________________
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
_______________________________________________________________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
_______________________________________________________________
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
_______________________________________________________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
-------------------------------
Title Of Each. . . Proposed Proposed
Class Of . . . . . Maximum Maximum
Securities . . . . Amount Offering Aggregate Amount Of
To Be. . . . . . . To Be Price Offering Registration
Registered . . . . Registered Per Unit Price Fee
---------- --------- ---------- -------------
Units(1) . . . . . 4,000,000 -- -- --
- ------------------ ---------- --------- ---------- -------------
Common Stock,
...001 par value(2) 4,000,000 $ .50 $2,000,000 $ 184.00
- ------------------ ---------- --------- ---------- -------------
Warrants to
Purchase
Common
Stock(3) . . . . . 4,000,000 $ .25 $1,000,000 $ 92.00
- ------------------ ---------- --------- ---------- -------------
Common Stock,
...001 par value(4) 1,325,000 $ .13 $ 172,250 $ 15.85
- ------------------ ---------- --------- ---------- -------------
Total. . . . . . . 9,325,000 N/A $3,172,250 $ 291.85
- ------------------ ---------- --------- ---------- -------------
(1) Includes 4,000,000 shares of common stock and warrants exercisable to
purchase 4,000,000 shares of common stock.
(2) Represents 4,000,000 shares of common stock included in the units offered by
National Beauty Corp. The units are being offered to the public at a price of
$.50 per share.
(3) Represents 4,000,000 shares of common stock underlying the warrants included
in the units offered by National Beauty Corp. The exercise price for the
warrants is $.25 per share.
(4) Represents 1,325,000 shares being offered by selling shareholders. This
calculation is made solely for the purpose of determining the registration fee
pursuant to the provisions of Rule 457(c) under the Securities Act and is based
on and is calculated on the basis of the average of the high and low prices
reported and last sale reported on the OTC Bulletin Board as of July 9, 2002.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PROSPECTUS
National Beauty, Inc.
4,000,000 Units
1,325,000 Shares of Common Stock
This prospectus relates to the public offering, which is not being underwritten,
of 4,000,000 units of National Beauty, Inc., a Nevada corporation ("National
Beauty") at a price of $.50 per unit. Each unit consists of one share of common
stock, $.001 par value, and one warrant exercisable to purchase one share of
common stock at an exercise price of $.25 per share. There is no minimum number
of units that National Beauty has to sell. There is no escrow account. National
Beauty will use all money received from the offering and there will be no
refunds. The offering will terminate nine months after the effective date of
this registration statement.
Further, concurrent with this offering, National Beauty is registering 1,325,000
additional shares which may be resold from time to time by stockholders of the
company. National Beauty has been advised by the selling stockholders that they
or their successors may sell all or a portion of the securities offered in the
over the counter market, in privately negotiated transactions, or otherwise,
including sales through or directly to a broker or brokers. Sales will be at
prices and terms then prevailing or at prices related to the then current market
prices or at negotiated prices. In connection with any sales, any broker or
dealer participating in these sales may be deemed to be an underwriter within
the meaning of the Securities Act of 1933. National Beauty will not receive
proceeds from the sales by the selling stockholders. National Beauty will bear
all expenses incurred in connection with the offering. None of the selling
stockholders are officers, directors and affiliates of the registrant.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE __ OF THIS
PROSPECTUS BEFORE PURCHASING ANY OF THE COMMON STOCK OFFERED BY THIS PROSPECTUS.
Per Unit Total(1)
-------- --------
Public offering price $.50 $2,000,000
- --------------------- ---- ----------
Exercise price of warrants $.25 $1,000,000
- -------------------------- ---- ----------
Total proceeds to National
Beauty $3,000,000(2)
- ------- -------------
(1) Assuming all shares are purchased and all warrants are exercised.
(2) Before deducting offering expenses.
National Beauty's common stock is currently trading on the OTC Bulletin Board
under the symbol "NBEU." This is a self-underwritten offering, to be conducted
by the officers and directors of National Beauty.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The registrant may amend this registration statement. A registration statement
relating to these securities has been filed with the Securities and Exchange
Commission. National Beauty may not sell these securities until the
registration statement filed with the Securities and Exchange Commission is
effective. This prospectus is not an offer to sell these securities and it is
not soliciting an offer to buy these securities in any state where the offer or
sale is not permitted.
The date of this prospectus is July 10, 2002.
TABLE OF CONTENTS
-----------------
Prospectus Summary
Risk Factors
Use of Proceeds
Determination of Offering Price
Dilution
Selling Security Holders
Plan of Distribution
Legal Proceedings .
Directors, Executive Officers, Promoters and Control Persons
Security Ownership of Certain Beneficial Owners and Management
Description of Securities
Experts
Disclosure of Commission Position on Indemnification for Securities Act
Liabilities
Organization Within Last Five Years
Description of Business
Management's Discussion and Analysis or Plan of Operation
Description of Property
Certain Relationships and Related Transactions
Market for Common Equity and Related Stockholder Matters
Executive Compensation
Financial Statements
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure
PROSPECTUS SUMMARY
National Beauty Corp.
National Beauty Corp., formerly known as Beautymerchant.com, Inc., was
incorporated in Nevada in 1987. The company has primarily operated through its
wholly owned subsidiaries, Cleaning Express USA, Beauty Works USA, Inc. and
Beauty Merchant, Inc. Cleaning Express USA is a full service cleaning company
offering daily residential cleaning services, carpet cleaning and other related
services in the South Florida area. During April 2000, the company began
operations as an E-commerce distributor of beauty products under its Beauty
Merchant, Inc. subsidiary and ceased these operations in 2001. Through its
Beauty Works USA, Inc. subsidiary, National Beauty currently offers beauty
services and products through its retail beauty salon in the South Florida area.
As of December 31, 2001, National Beauty had generated $431,810 in revenue
and had incurred a net loss of $257,044. Over the last fiscal year, National
Beauty did not expend any funds for research and development activities. As of
March 31, 2002, National Beauty generated $145,256 in revenues and had a net
loss of $34,433.
National Beauty's business plan entails acquiring existing beauty service
operations, developing these salons and marketing the company's own private
label beauty products through these operations. National Beauty is also pursuing
the development of its "HAIRMAX" concept, which aims to locate hair salons,
offering quality and inexpensive hair services, in larger retailers. National
Beauty has filed a trademark application on the HAIRMAX name and logo.
National Beauty 's common stock trades on the OTCBB under the symbol
"NBEU."
National Beauty's executive office is located at 4818 West Commercial
Blvd., Ft. Lauderdale, Florida 33319. The telephone number is (949) 717-8680.
OFFERING
Units Offered by National . . . . . . . . . . . . 4,000,000 shares of common stock,
Beauty. . . . . . . . . . . . . . . . . . . . . . 4,000,000shares underlying warrants to
purchase common stock
Price per Unit. . . . . . . . . . . . . . . . . . $ .50
Common Stock Offered by the Selling
Shareholders. . . . . . . . . . . . . . . . . . . 1,325,000 shares
Common Stock. . . . . . . . . . . . . . . . . . . 4,525,062 shares
Currently Outstanding
Risk Factors . . . . . . . . . . . . . . . . . . . Investment in the shares involves a high
Degree of risk.
SELECTED FINANCIAL INFORMATION
The Selected Financial Information should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto appearing in this
Prospectus.
SUMMARY OF CONSOLIDATED STATEMENTS OF OPERATIONS
Fiscal Year Ended Three Months Ended
December 31 March 31 (unaudited)
-----------
2001 2002
---- ----
Revenue $431,810 $145,256
Net income (loss) . $(257,044) $(34,433)
Net income (loss) per share $(.57) $(.01)
Number of shares outstanding 1,466,362 3,736,362
SUMMARY OF CONSOLIDATED BALANCE SHEETS
At December At March 31,
31, 2001 2002 (unaudited)
-------- ----------------
Current assets $105,347 $126,698
Current liabilities $16,207 $4,891
Working capital $89,140 $121,807
Total assets $136,743 $157,094
Total liabilities . $16,207 $4,891
Retained deficit . $(1,284,330) $(1,318,763)
Stockholders' equity $120,536 $152,203
RISK FACTORS
An investment in the shares offered hereby involves a high degree of risk.
Prospective investors should carefully consider the following factors concerning
the business of National Beauty and its subsidiaries and the offering, and
should consult independent advisors as to the technical, tax, business and legal
considerations regarding an investment in the shares.
NATIONAL BEAUTY HAS A LIMITED OPERATING HISTORY IN REGARD TO ITS CURRENT
BUSINESS PLAN, HAS NOT GENERATED SIGNIFICANT REVENUES AND MAY NOT BE SUCCESSFUL
IN THE BEAUTY SUPPLY AND SERVICE INDUSTRIES.
...
National Beauty is in the early stages of developing its beauty service
business and has engaged only in very limited operations, none of which have
generated substantial revenues. Further, National Beauty does not have
significant experience in the beauty industry and is subject to all the risks
inherent in an immature business enterprise, including the absence of an
extensive operating history upon which to base a future forecast. Risks to
National Beauty's operations include, but are not limited to:
- - inability to manage growth and expanding operations;
- - inability to predict interest in National Beauty's services;
- - inability to increase brand awareness;
- - attracting, retaining and motivating qualified personnel; and
- - maintaining current and developing strategic relationships.
To be successful, National Beauty must:
- - retain existing customers;
- - attract new customers;
- - meet customer demands;
- - fulfill all customer needs;
- - acquire additional sources for merchandise at discounted prices;
- - develop and brand HAIRMAX stores as a consumer choice;
- - increase its media exposure;
- - monitor the competition; and
- - maintain the ability to hire and retain qualified service personnel such
as hairstylists.
NATIONAL BEAUTY HAS INCURRED SIGNIFICANT LOSSES AND FOR THE YEARS ENDED DECEMBER
31, 2000 AND DECEMBER 31, 2001, HAD NET LOSSES OF $794,306 AND 257,044,
RESPECTIVELY, AND ACCORDINGLY, MAY NOT BE ABLE TO GENERATE SUFFICIENT REVENUES
TO ACHIEVE OR SUSTAIN PROFITABILITY IN THE FUTURE.
For the years ended December 31, 2001 and December 31, 2000, National
Beauty's net operating loss was $257,044 and $794,306, respectively. For the
three months ended March 31, 2002, National Beauty incurred a net loss of
$34,433. National Beauty may continue to experience net-operating losses through
the next two years and therefore, National Beauty may not be able to generate
sufficient revenues to achieve or sustain profitability in the future. National
Beauty's losses are primarily due to expenses incurred in payroll expenses and
consulting services. National Beauty expects to incur losses at least through
fiscal 2002 due to the following factors:
- - the development of the HAIRMAX brand, marketing and promotion;
- - expanded offering of service;
- - continued store development costs;
- - additional personnel to manage customer service and in-house marketing;
and
- - increases in general and administrative costs to support the company's
growing operations.
NATIONAL BEAUTY'S GROWTH MAY REQUIRE SUBSTANTIAL EXPENDITURES WHICH NATIONAL
BEAUTY MAY NOT BE ABLE TO FUND.
Cash flows used in National Beauty's operations were a negative $23,482 for
the year ended December 31, 2001, and a negative $291,498 for the year ended
December 31, 2000. Further, cash flows used in National Beauty's operations as
of March 31, 2002 were a negative $4,128. National Beauty's success and ongoing
financial viability is contingent upon the success of its new business model and
the generation of related cash flows. National Beauty's failure to meet these
contingencies may cause it to delay or suspend its operations.
National Beauty has funded its cash needs from inception through December 31,
2001 with a series of debt and equity transactions, including private
placements. National Beauty may require financing in addition to this amount,
which may not be available on reasonable terms, if at all.
NATIONAL BEAUTY'S PROCUREMENT OF ADDITIONAL FINANCING, IF AVAILABLE, MAY DILUTE
THE OWNERSHIP INTERESTS OF INVESTORS.
National Beauty may raise additional funds through the issuance of equity,
equity-related or convertible debt securities. The issuance of additional
common stock dilutes existing stockholders. Further procurement of additional
financing through the issuance of equity, equity-related or convertible debt
securities or preferred stock may further dilute existing stock. Further, the
perceived risk of dilution may cause selling shareholders, as well as other
holders, to sell their shares, which would contribute to downward movement in
the price of your shares.
NATIONAL BEAUTY'S SYSTEMS, PROCEDURES, CONTROLS AND EXISTING SPACE MAY NOT BE
ADEQUATE TO SUPPORT EXPANSION OF NATIONAL BEAUTY'S OPERATIONS, WHICH MAY STRAIN
NATIONAL BEAUTY'S RESOURCES AND THEREFORE, DETRIMENTALLY AFFECT ITS FUTURE
OPERATIONS.
National Beauty may expand its operations rapidly, which may create
significant demands on National Beauty's personnel and other administrative
resources, operations and management. These demands on National Beauty's
administrative and operational capabilities could adversely effect:
- - the quality of its services,
- - its ability to retain and attract research and development staff,
- - its ability to retain and attract administrative personnel and management,
and
- - its ability to collect revenues, if any.
Further, National Beauty's systems, procedures, controls and existing space
may not be adequate to support expansion of National Beauty's operations.
National Beauty's business model requires the acquisition of property for new
salons. National Beauty's future operating results will depend, among other
things, on its ability to manage changing business conditions and to continue to
improve its operational, financial control and reporting systems.
ANY POTENTIAL ACQUISITION NATIONAL BEAUTY MAKES COULD DISRUPT ITS BUSINESS AND
HARM ITS FINANCIAL CONDITION.
An element of National Beauty's growth strategy includes the acquisition of
companies which it believes have synergistic business models. Acquisitions
entail a number of risks that could materially and adversely affect its business
and operating results, including:
- - Problems integrating the acquired operations, technologies or products;
- - Diversion of National Beauty's management's time and attention from its
core business;
- - Difficulties in retaining business relations with suppliers and customers
of the acquired company;
- - Risks associated with entering markets in which it lacks prior experience;
and
- - Potential loss of key employees from the acquired company.
NATIONAL BEAUTY'S OPERATIONS ARE DEPENDANT ON LOCATING ADEQUATE STORE
LOCATIONS, SUFFICIENT SOURCES OF SUPPLY AND QUALIFIED PERSONNEL TO STAFF THESE
LOCATIONS, FAILURE TO DO SO COULD REDUCE OR CURTAIL OPERATIONS.
National Beauty intends to offer beauty services and products to the public
through the development of new and existing salons, which may be difficult to
locate or acquire. The principal suppliers to the company are wholesale
distributors, who do not sell retail. As such, sources of supply for National
Beauty' s proposed products may be difficult to locate or may not provide
sufficient supplies at a reasonable cost. Further, National Beauty does not have
manufacturing expertise, facilities or capabilities and does not intend to
manufacture any products. Even if an acceptable supplier or manufacturer can be
found, termination of the services of these suppliers or manufacturers could
result in interruptions in the ability to manufacture the products until an
alternative source can be secured. Further, National Beauty will be dependant on
its ability to hire and retain qualified service and management personnel to
staff the new stores it expects to establish.
NATIONAL BEAUTY IS DEPENDENT ON MEMBERS OF ITS KEY PERSONNEL, PARTICULARLY MR.
EDWARD ROTH FOR HIS KNOWLEDGE OF THE BEAUTY SERVICE INDUSTRY, AND THE LOSS OF
KEY PERSONNEL MAY HINDER THE COMPANY'S DEVELOPMENT.
The success of National Beauty is dependent upon, among other things, the
service of Mr. Edward Roth, President of National Beauty. Because of Mr. Roth's
experience in the beauty service industry, the loss of Mr. Roth could have a
material adverse effect on the company's plan to offer beauty products and
services to the public. Further, Mr. Roth and Alisha Roth, the company's
Secretary, Treasurer and director, have managed the operations of Cleaning
Express USA since inception. As such, the loss of either of these individuals
could adversely affect the operations of Cleaning Express USA, as well as the
company as a whole. National Beauty has entered into an employment agreements
with Mr. Roth and Ms. Roth but does not maintain any key-man life insurance.
NATIONAL BEAUTY FACES SUBSTANTIAL COMPETITION FROM COMPETITORS WITH
SIGNIFICANTLY GREATER HUMAN AND FINANCIAL RESOURCES, EXPERIENCE, AND TECHNICAL
STAFF, WHICH COULD REDUCE OR ELIMINATE NATIONAL BEAUTY'S ABILITY TO COMPETE IN A
DESIGNATED MARKET.
There are many companies, substantially all with significantly greater
resources, including financial resources, experience and staff than National
Beauty. These companies, such as Regis Corp., have or may successfully develop
products and services which meet some of the needs intended to be met by
National Beauty' proposed products and services. Some of these companies have
established strong market positions in their products and services. These
competitors may respond vigorously to any threat in their market shares and
therefore, National Beauty may not be able to compete successfully in the
future.
NATIONAL BEAUTY'S COMMON STOCK PRICE IS HIGHLY VOLATILE AND ANY FLUCTUATIONS
THAT OCCUR FOLLOWING COMPLETION OF THIS OFFERING MAY REDUCE THE MARKET PRICE
AND/OR LIQUIDITY OF NATIONAL BEAUTY'S COMMON STOCK.
The market price of the common stock has been, and is likely to remain,
highly volatile as is frequently the case with unseasoned public companies. The
following developments affecting National Beauty or its competitors could cause
the market price of the common stock to fluctuate substantially and reduce the
liquidity of the common stock:
- - quarterly operating losses of National Beauty,
- - deviations in losses of operations from estimates of securities analysts,
and
- - changes in general conditions in the economy, or in the beauty service
industry.
The equity markets have, on occasion, experienced significant price and
volume fluctuations that have affected the market prices for many companies'
securities and that have often been unrelated to the operating performance of
these companies.
NATIONAL BEAUTY'S COMMON STOCK IS TRADED ON A LIMITED PUBLIC MARKET, WHICH MAY
IMPACT STOCKHOLDERS' ABILITY TO LIQUIDATE THEIR INVESTMENTS.
National Beauty 's common stock is traded on the Nasdaq OTC Bulletin Board
which tends to be comprised of small businesses of regional interest with
limited trading activity. National Beauty intends to submit an application to
list the common stock on Nasdaq's National Market System or Small Cap System as
soon as it meets the listing qualifications, however, National Beauty's
securities may not qualify for listing on Nasdaq's National Market System or
Small Cap System or on any other exchange.
APPLICABLE SEC RULES GOVERNING THE TRADING OF "PENNY STOCKS" LIMITS THE TRADING
AND LIQUIDITY OF NATIONAL BEAUTY'S COMMON STOCK WHICH MAY ADVERSELY AFFECT THE
TRADING PRICE OF ITS COMMON STOCK.
National Beauty's common stock currently trades on the OTC Bulletin Board.
Since its common stock continues to trade below $5.00 per share, its common
stock is considered a "penny stock" and is subject to SEC rules and regulations
which impose limitations upon the manner in which National Beauty's shares can
be publicly traded. These regulations require the delivery, prior to any
transaction involving a penny stock, of a disclosure schedule explaining the
penny stock market and the associated risks. Under these regulations, certain
brokers who recommend such securities to persons other than established
customers or certain accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. These regulations have the effect of
limiting the trading activity of National Beauty's common stock and reducing the
liquidity of an investment in its common stock.
AVAILABLE INFORMATION
National Beauty files annual, quarterly and special reports, proxy
statements and other information with the Securities and Exchange Commission.
You may read and copy any document National Beauty files with the Commission at
the Commission's Public Reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information
on the public reference room. National Beauty 's Commission filings are also
available to the public at the Commission's web site at http://www.sec.gov.
You may also request a copy of these filings, at no cost, by writing or
telephoning as follows:
National Beauty Corp. Attention: Investor Relations, 4818 West Commercial
Blvd., Ft. Lauderdale, Florida 33319 (954) 717-8680.
This prospectus is part of a registration statement on Form SB-2 National
Beauty filed with the SEC under the Securities Act. You should rely only on the
information or representations provided in this prospectus. National Beauty has
not authorized anyone to provide you with different information other than the
information contained in this prospectus. National Beauty is not making an offer
of these securities in any state where the offer is not permitted. You should
not assume that the information in this prospectus is accurate as of any date
other than the date on the front of the document.
FORWARD-LOOKING STATEMENTS
Except for historical information contained herein, the matters discussed
in this prospectus are forward-looking statements that are subject to certain
risks and uncertainties that could cause actual results to differ materially
from those set forth in such forward looking statements. Such risks and
uncertainties include, without limitation, National Beauty 's dependence on the
timely development, introduction and customer acceptance of products and
services, the impact of competition and downward pricing pressures, the ability
of National Beauty to generate revenues and raise any needed capital, the effect
of changing economic conditions, and risks in product development.
USE OF PROCEEDS
The following table sets forth the estimated application of proceeds from
the sale of the units offered, assuming that all units offered are sold and all
warrants included in the units are exercised.
Amount %
---------- -----
Net Proceeds from
Offering. . . . . . . $2,955,000 100%
Use of Net Proceeds . $2,955,000 100%
Acquisition of Beauty
Salons* . . . . . . . $2,920,000 98.8%
Contingency Reserve . $ 35,000 1.2%
* Estimated to be approximately $40,000 per salon, the breakdown is as follows:
Acquisition of a
Beauty Salon. . . . $40,000 100%
Beauty Stations
(approximately 8
stations will be
needed per salon
, amounts include
chairs, mirrors and
equipment). . . . . $20,000 50%
Leasehold
Improvements . . . . $10,000 25%
Grand
Opening/Marketing
Costs. . . . . . . . $10,000 25%
The allocations listed above are, for the most part, estimates and
approximations only. National Beauty may not be able to sell all of the units in
this offering, if any, and may be forced to delay these acquisitions. National
Beauty intends to use the funds from this offering to acquire as many salons as
possible.
DETERMINATION OF OFFERING PRICE
Not applicable.
DILUTION
Not applicable.
SELLING SECURITY HOLDERS
The following table provides information with respect to the selling
shareholders' beneficial ownership of National Beauty's common stock as of July
10, 2002, and as adjusted to give effect to the sale of all of the shares
offered. None of the selling shareholders currently is an affiliate of ours, and
none of them has had a material relationship with National Beauty during the
past three years. The selling shareholders possess sole voting and investment
power with respect to the securities shown.
PERCENT OF
NUMBER OF CLASS OF
SHARES SHARES
NUMBER OF SHARES BENEFICIALLY BENEFICIALLY
BENEFICIALLY NUMBER OWNED AFTER OWNED AFTER
NAME AND ADDRESS OF SELLING OWNED PRIOR TO OF SHARES THE OFFERING IS THE OFFERING IS
STOCKHOLDER THE OFFERING OFFERED HEREBY COMPLETE COMPLETE
=============== ===============
Richard O. Weed
4695 MacArthur Court, Suite 1430
Newport Beach, CA 92660(1) 125,000 125,000 0 0
================================= ================ ============== =============== ===============
Ballantyne Capital Group, LLC
15800 John J. Delaney Drive,
Suite 325
Charlotte, NC 28277(2) 1,000,000 1,000,000 0 0
================================= ================ ============== =============== ===============
American Market Support
Network, Inc.
5599 San Felipe, Suite 975
Houston, TX 77056 200,000 200,000 0 0
================================= ================ ============== =============== ===============
(1) Richard O. Weed of Weed & Co. LLP acquired his shares in consideration for
legal services rendered.
(2) Shares have been issued to Ballantyne pursuant to a Consultant Agreement
between Ballantyne and National Beauty, whereby Ballantyne has agreed to provide
public relations services to National Beauty.
(3) 200,000 shares were issued to American Market Support Network, Inc. for
investor relations services provided to National Beauty.
PLAN OF DISTRIBUTION
1,325,000 SHARES SOLD BY SELLING STOCKHOLDERS
National Beauty is registering 1,325,000 shares of common stock on behalf
of the selling stockholders. As used in this prospectus, the term "selling
stockholders" includes pledgees, transferees or other successors-in-interest
selling shares received from the selling stockholder, as a pledgor, a borrower
or in connection with other non-sale-related transfers after the date of this
prospectus. This prospectus may also be used by transferees of the selling
stockholders, including broker-dealers or other transferees who borrow or
purchase the shares to settle or close out short sales of shares of common
stock. The selling stockholders will act independently of National Beauty in
making decisions with respect to the timing, manner, and size of each sale or
non-sale related transfer. National Beauty will not receive any of the proceeds
from the sales by the selling stockholders.
The selling stockholders may sell their shares of common stock directly to
purchasers from time to time. Alternatively, they may from time to time offer
the common stock to or through underwriters, broker/dealers or agents, who may
receive compensation in the form of underwriting discounts, concessions or
commissions from the selling stockholders or the purchasers of the securities
for whom they may act as agents. The selling stockholders and any underwriters,
broker/dealers or agents that participate in the distribution of common stock
may be deemed to be "underwriters" within the meaning of the Securities Act and
any profit on the sale of the securities and any discounts, commissions,
concessions or other compensation received by any underwriter, broker/dealer or
agent may be deemed to be underwriting discounts and commissions under the
Securities Act.
The common stock may be sold from time to time in one or more transactions
at fixed prices, at prevailing market prices at the time of sale, at varying
prices determined at the time of sale or at negotiated prices. The sale of the
common stock may be effected by means of one or more of the following
transactions, which may involve block transactions,
- - in the over-the-counter market, or
- - in transactions otherwise than on exchanges or services, including
transactions pursuant to Rule 144 or another exemption from registration.
In connection with sales of the common stock or otherwise, the selling
stockholders may enter into hedging transactions with broker/dealers, who in
turn may engage in short sales of the common stock in the course of hedging the
positions they assume. The selling stockholders may also sell common stock
short and deliver common stock to close out short positions, or loan or pledge
common stock to broker/dealers who in turn may sell the securities.
At the time a particular offering of the common stock is made, a prospectus
supplement, if required, will be distributed which will set forth the aggregate
amount common stock being offered and the terms of the offering, including the
name or names of any underwriters, broker/dealers or agents, any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any discounts, and commissions or concessions allowed or
re-allowed or paid to broker/dealers.
To comply with the securities laws of certain jurisdictions, if applicable,
the common stock will be offered or sold in jurisdictions only through
registered or licensed brokers or dealers.
The selling stockholders will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, which provisions may
limit the timing of sales of the common stock by the selling stockholders. The
foregoing may affect the marketability of the securities.
4,000,000 UNITS TO BE SOLD BY NATIONAL BEAUTY
National Beauty is offering 4,000,000 units at a purchase price of $.50 per
share on a delayed or continuous offering basis pursuant to Rule 415 of the
Securities Act of 1933 Rules. The units consist of one share of common stock and
one warrant exercisable to purchase common stock at an exercise price of $.25
per share. There are no minimum units that National Beauty has to sell. There
is no escrow account. National Beauty will use all money received from the
offering and there will be no refunds. This offering will terminate nine months
after the effective date of the registration statement. This is a self
underwritten offering.
National Beauty reserves the right to use selling agents with the
appropriate modification to the registration statement, as necessary. If
National Beauty makes arrangements to use selling agents after effectiveness of
this registration statement, then National Beauty will need to file a
post-effective amendment to the registration statement identifying the
broker-dealer, providing the required information on the plan of distribution
and use of proceeds, revising the disclosures in the registration statement, and
filing the agreement as an exhibit to the registration statement. Further,
prior to any involvement of any broker-dealer in the offering, such
broker-dealer must seek and obtain clearance of the underwriting compensation
and arrangements from the NASD Corporate Finance Department.
National Beauty's officers and directors will be conducting the offering.
Under Section 15 of the Securities Exchange Act of 1934, National Beauty's
officers and directors are exempt from registration as broker-dealers under the
Act because they are not, and have not in the past been, engaged in the business
of effecting transactions in securities for the account of others or engaged in
the regular business of buying or selling securities for their own account.
The offer to sell and any sales will be made only by this prospectus.
None of the persons associated with National Beauty:
(1) are subject to a statutory disqualification, as that term is defined in
section 3(a)(39) of the Securities Act of 1933, as amended;
(2) will be compensated in connection with their participation in this
offering by the payment of commissions or other remuneration based either
directly or indirectly on transactions in these securities; or
(3) are associated persons of a broker or dealer.
Furthermore, the persons associated with National Beauty that participate
in this offering meet all of the following requirements:
(1) each primarily performs, or is intended to primarily perform at the end
of the offering, substantial duties for or on behalf of National Beauty
otherwise than in connection with transactions in securities;
(2) none were a broker or dealer, or an associated person of a broker or
dealer, within the preceding 12 months; and
(3) none participate in selling an offering of securities for any issuer
more than once every 12 months.
To subscribe to the units, subscribers are to deliver to the company (1) a
completed and duly executed copy of the subscription agreement and (2)
immediately available funds in the amount of $.50 per unit.
LEGAL PROCEEDINGS
There are no material legal proceedings to which National Beauty is a party
or to which any of National Beauty's properties are subject.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Identification of Directors and Executive Officers.
The following table sets forth certain information concerning National Beauty's
directors and executive officers:
Name Age Service Position with Company
- ---- --- ------- ---------------------
Edward A. Roth 44 1997 to present Chairman, President & CEO
Alisha Roth 36 1997 to present Secretary, Treasurer, Director
Barbara Patigalia 51 1997 to present Director
Michael J. Bongiovanni 40 2000 to present Chief Financial Officer,
Director
All Directors serve for one-year terms, which expire at the annual shareholders
meeting in 2002.
All officers serve at the pleasure of the Board.
There are no arrangements or understandings pursuant to which any of them were
elected as officers.
Edward A. Roth has been President and Director of National Beauty since 1997.
Mr. Roth previously served as Vice-President and Director of Operations for
Cleaning Express USA since its inception in November 1994. During this period,
Mr. Roth developed and implemented all operations and developments creating a
company that started with less than 50 customers, and today services over 8,000
customers in South Florida. Mr. Roth was President of Advanced Appearance, a
chain of Beauty Salons, in Alabama and Florida from 1978 to 1988. Prior to this
Mr. Roth served as a management consultant working independently for 20 years.
Mr. Roth has attended Auburn University majoring in business and marketing, and
is also a veteran of the United States Air Force. Edward A. Roth is married to
Alisha M. Roth, the company's Secretary, Treasurer and director.
Alisha M. Roth has served as Secretary, Treasurer and Director of National
Beauty since 1997. Mrs. Roth served previously as President of Cleaning Express
USA, and during her tenure she was in charge of staffing and customer relations.
Mrs. Roth has been with Cleaning Express USA since 1994, prior to that she was a
resident of Trinidad, West Indies. Mrs. Roth has owned and operated her own
business in the restaurant and pre-school development areas, and has eight years
of management experience. Alisha M. Roth is married to Edward A. Roth.
Barbara Patigalia is a language pathologist with the Head Start program in
Maryland, and serves as President of the League of Women Voters in Potomac,
Maryland. Ms. Patigalia had no business experience during the last five years,
except other than through her role as a director of National Beauty.
Michael J. Bongiovanni has been Chief Financial Officer of National Beauty since
April 2000. Mr. Bongiovanni is responsible for SEC reporting compliance and
financial analysis of new operations including Beautyworks USA, Inc. Mr.
Bongiovanni has served numerous publicly traded companies in financial
consulting and business management since 1980. Mr. Bongiovanni received his
Masters of Accounting degree at Florida Atlantic University.
There have been no events under any bankruptcy act, no criminal proceedings and
no judgments or injunctions material to the evaluation of the ability and
integrity of any director or executive officer during the past five years.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires National
Beauty's directors and officers and persons who own more than 10 percent of
National Beauty 's equity securities, to file reports of ownership and changes
in ownership with the SEC. Directors, officers and greater than ten percent
shareholders are required by SEC regulation to furnish National Beauty with
copies of all Section 16(a) reports filed.
Based solely on information it received from persons required to file,
National Beauty believes that all filing requirements applicable to its
officers, directors and greater than ten percent shareholders were complied
with.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table, based upon figures obtained from National Beauty's
transfer agent, sets forth certain information as of June 28, 2002 relating to
the beneficial ownership of National Beauty common stock by (i) all persons
known by National Beauty to beneficially own more than 5% of the outstanding
shares of its stock, (ii) each officer and director of National Beauty and (iii)
all officers and directors of National Beauty as a group. The table includes all
shares underlying options or warrants that are currently exercisable or that
will become exercisable within sixty days. As of June 28, 2002, National Beauty
had 4,525,062 shares of its common stock issued or issuable and outstanding.
Amount and
Nature of Percent of
Name and Address of Beneficial Shares Outstanding
Title of Class . . . . . . Beneficial Owner Owned* Ownership
========================== =========================== ================== =========================
Edward A. Roth and
Alisha Roth (1)
4818 W. Commercial
Common Stock,. . . . . . . Blvd.
...001 Par Value. . . . . . Ft. Lauderdale, FL 33319 2,806,500 62%
- -------------------------- --------------------------- ------------------ -------------------------
Michael J. Bongiovanni
4818 W. Commercial
Common Stock,. . . . . . . Blvd.
...001 Par Value. . . . . . Ft. Lauderdale, FL 33319 25,000 Less than 1%
- -------------------------- --------------------------- ------------------ -------------------------
Barbara Patagalia
4818 W. Commercial
Common Stock,. . . . . . . Blvd.
...001 Par Value. . . . . . Ft. Lauderdale, FL 33319 2,065 Less than 1%
- -------------------------- --------------------------- ------------------ -------------------------
Common Stock,. . . . . . . .All Officers and Directors
...001 Par Value. . . . . . as a Group 2,833,565 62.6%
- -------------------------- --------------------------- ------------------ -------------------------
Edward A. Roth and
Alisha Roth (3)
Preferred Stock, . . . . . 4818 W. Commercial
...001 Par Value. . . . . . Blvd.
(2) Ft. Lauderdale, FL 33319 950,000 100%
- --------------------------- --------------------------- ------------------ -------------------------
*All shareholders listed have direct beneficial ownership over their shares.
(1) Edward and Alisha Roth own the common shares as joint tenants.
(2) Each share of preferred stock is convertible into ten shares of common
stock.
(3) Edward and Alisha Roth own the preferred shares as joint tenants.
DESCRIPTION OF SECURITIES
The following summary is a description of material provisions of National
Beauty's Articles of Incorporation and Bylaws.
COMMON STOCK
Pursuant to National Beauty's Articles of Incorporation, the Board of
Directors has authority to issue up to 100,000,000 shares of common stock, par
value $0.001 per share. As of July 10, 2002, there were 4,525,062 shares issued
and outstanding, one vote for each share held on all matters. Cumulative voting
in elections of directors and all other matters brought before stockholders
meetings, whether they are annual or special, is not provided for under National
Beauty's Articles of Incorporation or Bylaws. National Beauty has not paid cash
dividends on its common stock and does not intend to do so in the foreseeable
future. National Beauty intends to retain earnings, if any, to provide funds for
its operations. Future dividend policy will be determined by the board of
directors based upon conditions then existing including National Beauty's
earnings and financial condition, capital requirements and other relevant
factors.
PREFERRED STOCK
Pursuant to National Beauty's Articles of Incorporation, the Board of
Directors has the authority, without further action by the stockholders, to
issue up to 50,000,000 shares of preferred stock in one or more series. Further,
the Board of Directors may fix the designations, preferences, rights and the
qualifications, limitations of restrictions on these shares, including:
- - dividend rights,
- - conversion rights,
- - voting rights,
- - terms of redemption, and
- - liquidation preferences.
Any or all of these rights may be greater than the rights of the common stock.
The Board of Directors, without stockholder approval, can issue preferred stock
with voting, conversion or other rights that could adversely affect the voting
power and other rights of the holders of common stock. Preferred stock could
thus be issued quickly with terms calculated to delay or prevent a change in
control of National Beauty or make removal of management more difficult.
Additionally, the issuance of preferred stock may have the effect of decreasing
the market price of the common stock, and may adversely affect the voting and
other rights of the holders of common stock.
National Beauty's Board of Directors has designated 50,000,000 shares of
convertible preferred stock as Series A Voting Convertible Preferred Stock of
which 950,000 shares are issued and outstanding. The Series A is senior to the
common stock and all other shares of preferred stock that may be later
authorized. The holders of the Series A Preferred shall be entitled to receive
common stock dividends or other distributions when, as, and if declared by the
directors of the company, with the holders of the common stock on an as
converted basis.
Each share of the Series A is convertible into common stock at the option of the
holder, at any time after the issuance of the shares, on an one for ten basis.
In the event of liquidation, dissolution or winding up of National Beauty, the
holders of the Series A shall be entitled to receive, prior to the holders of
common stock or other series of preferred stock, $1.00 per share, plus all
declared but unpaid dividends. The Series A is entitled to vote, on an as
converted basis, on any matter submitted to the common stock holders including
the election of the board of directors.
WARRANTS
National Beauty plans to issue one warrant for each share of common stock
purchased, Each warrant will have an exercise price of $.25 per share and will
expire within three years of issuance. Each series of warrants will be
evidenced by certificates issued under a separate warrant agreement. The warrant
agreement will be entered into between National Beauty and the warrant agent.
The exercise price and number of shares of National Beauty common stock or
other securities issuable on exercise of the warrants are subject to adjustment
to protect against dilution if National Beauty:
- - issues a stock dividend,
- - undertakes a stock split,
- - recapitalization,
- - reorganization,
- - merger,
- - consolidation, or
- - other similar event.
Before exercising their warrants, holders of warrants will not have any of
the rights of holders of the securities purchasable upon such exercise,
including:
- - the right to receive dividends, if any, or payments, or upon the
liquidation, dissolution or winding up of National Beauty, or
- - to exercise voting rights, if any.
TRANSFER AGENT
Florida Atlantic Stock Transfer, Inc. located in Tamarac, Florida serves as
the transfer agent for National Beauty.
EXPERTS
Perrella & Associates, P.A., independent auditors, have audited National
Beauty's financial statements included in its Annual Report on Form 10-KSB for
the year ended December 31, 2001, which is incorporated by reference in this
prospectus and elsewhere in the registration statement.
Weed & Co. LLP, legal counsel to National Beauty, has expressed an opinion
concerning the validity of the securities being registered. Richard O. Weed of
Weed & Co. LLP owns 125,000 shares of restricted National Beauty common stock
and options to purchase 34,000 shares of National Beauty's common stock at an
exercise of $0.48 per share. These stock options expire on December 31, 2005.
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT
LIABILITIES
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities, other than the payment by National Beauty of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding, is asserted by such
director, officer or controlling person in connection with the securities being
registered, National Beauty will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
ORGANIZATION WITHIN LAST FIVE YEARS
None.
DESCRIPTION OF BUSINESS
CORPORATE ORGANIZATION
National Beauty Corp., a Nevada corporation, was originally incorporated in 1987
as Tri-Capital Corporation. In 1988, the company changed its name to Advanced
Appearance of America, which operated beauty salons until 1995. At that time,
National Beauty discontinued its operations and went inactive until early 1998.
In March of 1998, National Beauty changed its name to ATR Industries, Inc. On
June 1, 1998, National Beauty acquired ATR Industries, Inc. of Florida, formerly
known as Cleaning Express USA and Cleaning Express of South Palm Beach, Inc., a
private Florida Corporation, for 3,000,000 restricted shares of common stock.
In September 1999, ATR Industries, Inc. changed its name to Beautymerchant.com
and in March 2001, the company changed its name to National Beauty Corp.
National Beauty has operated primarily through its wholly owned subsidiaries,
Cleaning Express USA, Beauty Works USA, Inc. and Beautymerchant.com, Inc. Since
1998, National Beauty has concentrated its operations primarily on the home
cleaning services industry. In January 2000, National Beauty began a new
division of operations related to the preparation, development and marketing of
cosmetics and beauty products via an e-commerce Internet site. These operations
were conducted through National Beauty's wholly owned subsidiary
Beautymerchant.com, Inc. In 2001, after a developmental period, National Beauty
ceased any further investment into Beautymerchant.com Inc. because it had
encountered numerous distribution and inventory problems. National Beauty
currently offers beauty services and products through its retail beauty salon in
the south Florida area under its Beauty Works USA subsidiary.
DESCRIPTION OF BUSINESS
CLEANING EXPRESS USA
Cleaning Express USA's operations primarily involve home cleaning services.
Through its emphasis on budget pricing, Cleaning Express USA has developed a
market in the home cleaning industry. Cleaning Express USA currently operates
two offices and dispatches 40-50 workers in teams of two workers on a daily
basis. The present geographic area in which the Cleaning Express USA operates
includes Broward and South Palm Beach County areas of South Florida.
Marketing for the home cleaning services is accomplished through print ads,
television and radio commercials. Additionally, Cleaning Express USA utilizes a
referral program that rewards customers with future discounts for referring a
client.
The home cleaning industry is highly competitive with respect to price, service,
quality and location. There are numerous, well-established, larger competitors
in the home cleaning industry possessing substantially greater financial,
marketing, personnel and other resources than National Beauty. National Beauty
may not be able to respond to various competitive factors affecting the
business. National Beauty plans to gain a competitive advantage over its
competitors in the home cleaning industry by offering quality service at a low
price. National Beauty plans to further expand Cleaning Express USA's operations
in South Florida by continuing its current marketing strategy.
The primary market for Cleaning Express USA is individual households. No single
customer makes up more than ten percent of the total revenues of Cleaning
Express USA. National Beauty does not expect that this will change in the
future.
Cleaning Express USA has three full time employees and 40-50 workers that are
each independently contracted with the company to service and provide home
cleaning services to existing and new customers.
BEAUTYMERCHANT.COM, INC.
During January 2000, National Beauty, through its wholly owned subsidiary
Beautymerchant.com, Inc., a Florida corporation, developed a retail cosmetic and
beauty product e-commerce Internet site. Beautymerchant.com was developed under
the guidance of the CEO, Mr. Ed Roth. Beautymerchant.com sold and distributed
popular cosmetic, fragrances and beauty products.
In 2001, the company ceased any further investment into Beautymerchant.com Inc.
since it encountered numerous distribution and inventory problems.
BEAUTYWORKS U.S.A., INC.
Beautyworks USA is designed to tap into the beauty industry through its offering
of personal care salons. Beautyworks USA will aim to be both a retailer and
provider of such needed consumer services and provide a one-stop resource for
professional services on hair, with emphasis on haircutting and related
haircolor services, under the name HAIRMAX. During the second quarter of 2001,
Beautyworks U.S.A. acquired a full service beauty salon located in Boca Raton,
Florida and conducted 12 months of research and development of marketing and
operational techniques. National Beauty is expecting to continue to build and
or acquire retail salons. Management is presently discussing potential
acquisitions, as well as new locations. This development strategy is expected to
be implemented in Nevada next. The principal suppliers to the company are
wholesale distributors who do not sell retail.
The beauty services industry is highly competitive with respect to price,
service, and location. As a result, the potential for failure in this industry
is significant. There are numerous, well-established, larger competitors in the
beauty services industry with considerable expertise, possessing substantially
greater financial, marketing, personnel and other resources than National
Beauty. Currently, Regis Corp. (NASDAQ:RGIS) has over 8,000 salon stores and is
the only well-known publicly traded company.
YOURSALONAPPT.COM
Plans have been formulated to develop and market www.yoursalonappt.com, a
consumer to business application service provider. In the opinion of management,
this developmental information and interactive consumer to business portal, when
fully developed will assist thousands of hair, nail, and spa customers by
providing appointment services that have traditionally made by telephone, during
normal business hours. This application service provider will allow customers
access to appointment setters, 7 days a week, 24 hours a day, regardless normal
business hours. In addition, consumers will have access to information that will
provide them with a registry and directory of national salons and beauty spas.
Initial development is expected to begin in the 2nd quarter of 2003, with
projected completion later in the year. Risks and uncertainties include, but are
not limited to, consumer spending habits, availability of funds for project
completion, and general acceptance of new technology functions in the beauty
service industry. The primary market will be the United States, but could be
extended worldwide.
Business Strategy
National Beauty's objective is to become a leading provider of beauty services.
Through its subsidiaries, National Beauty will attempt to:
- - Build its customer base by serving as a one-stop provider for discounted
haircutting and styling, along with hair coloring services;
- - Enhancing its brand name reputation by offering convenient, competitive
pricing and participation in special promotions; and
- - Expanding its business concept by developing "HAIRMAX" a newly developed
concept, conceived after 12 months of research and development in the hair
services industry, focused on quality haircutting and coloring services, and
offering them in a convenient high traffic location, such as a large retailer,
at below market prices, using a strategy of aggressive marketing.
National Beauty plans help enhance and brand its operations by:
- - Billboard, radio, television and newspaper advertising;
- - Offering free samples of hair products;
- - Attempting to acquire two existing beauty service salons by August 2002;
and open 25 new stores in early 2003.
- - Seeking to enter into marketing relationships with national advertising
agencies to establish concept branding strategies;
- - Attempting to market its concept, "Max service" and "Max value", on a
national basis.
- - Establish strategic relationships with large retailers and expand the
"store in store" concept.
Beautyworks USA Inc. is presently the operations holding company for salon
operations in Florida.
Beautyworks USA presently employs nine full time employees and plans to add at
least 30-35 new employees during the next twelve months to supervise and
administer its retail operations. Further, if National Beauty acquires any
beauty salons with existing operations, additional staff will be added to
operate these salons if necessary.
National Beauty has filed a trademark application on the HAIRMAX name and logo.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Introduction
National Beauty Corp., formerly known as Beautymerchant.com, Inc., was
incorporated in Nevada in 1987. The company has primarily operated through its
wholly owned subsidiaries, Cleaning Express USA, Beauty Works USA, Inc. and
Beauty Merchant, Inc. Cleaning Express USA is a full service cleaning company
offering daily residential cleaning services, carpet cleaning and other related
services in the South Florida area. During April 2000, the company began
operations as an e-commerce distributor of beauty products under its Beauty
Merchant, Inc. subsidiary and ceased these operations in 2001. National Beauty
currently offers beauty services and products though its retail beauty salon in
the South Florida area through its Beauty Works USA, Inc. subsidiary.
Results of Operations
Quarter Ended March 31, 2002 Compared to the Quarter Ended March 31, 2001
Net Income
National Beauty had a net loss of $34,433, or $.01 per common share, for the
three months ended March 31, 2002, versus a net loss of $45,422, or less than
$.01 for the same period ended March 31, 2001. The change in net loss was
primarily due to a decrease in administrative expenses relating to the operation
and marketing of the BeautyMerchant.com online superstore.
Sales
Revenues increased $57,969 or 66% to $145,256 for the three months ended March
31, 2002 as compared with $87,287 for the three months ended March 31, 2001. The
increase was primarily due to the acquisition of the salon in the second quarter
of 2001 that generated additional revenues. Average selling prices and gross
margins remained fairly constant.
Expenses
Selling, general and administrative expenses for the three months ended March
31, 2002 increased $68,424 to $110,902. In comparison with the three-month
period ended March 31, 2001, consulting and payroll increased $34,255 and
$20,445, respectively, due to National Beauty's acquisition of the salon in the
second quarter of 2001.
Year Ended December 31, 2001 Compared to Year Ended December 31, 2000
Sales
Sales for the year ended December 31, 2001 increased to $437,225 from $376,450
for the year ended December 31, 2000, an increase of 16%. The increase in
revenues was primarily attributable to an increase in the revenues from
Beautyworks U.S.A., Inc., the Boca Raton beauty salon subsidiary, somewhat
offset by revenues earned by the Cleaning Express USA subsidiary.
Net sales from the home cleaning segment have accounted for approximately 64% of
total net sales in 2001 and 90% of the net sales in 2000. National Beauty plans
to accelerate growth of beauty salon sales in 2002 by increasing expenditures on
marketing and growing public awareness of services.
Income / Losses
Net losses for the year ended December 31, 2001 decreased to $257,044 from
$794,306 for the year ended December 31, 2000, a decrease of 68%. The
substantial decrease in losses was attributable primarily to a decrease in
non-cash expenses relating to payroll expenses and consulting services, which
were $387,346 and $96,097 for 2000, respectively, compared to $42,519 in payroll
expenses for 2001.
National Beauty expects to continue to incur losses at least through fiscal 2002
and may not be able to achieve or maintain profitability or sustain its revenue
growth in the future.
Expenses
Selling, general and administrative expenses for the year ended December 31,
2001, decreased to $344,662 from $906,322 for the year ended December 31, 2000,
a decrease of 62%. The decrease in selling, general and administrative expenses
was the result of significant decreases in payroll expenses and consulting fees
that were $387,346 and $96,097, respectively.
Depreciation and amortization expenses for the years ended December 31, 2001 and
December 31, 2000 were $3,017 and $3,800, respectively. The decrease was due to
differences in accelerated depreciation percentages between the year 2001 and
the year 2000.
National Beauty has attempted to reduce rent expenses by closing one of the two
cleaning offices in 2001 and consolidating operations in the other Fort
Lauderdale office. This reduces overhead expenses by a projected 10% for the
coming year. In addition, the company has taken steps to change daily operations
of Cleaning Express USA, projecting a savings of 5-10% over the new year.
Specifically, National Beauty is anticipating a lower labor cost associated with
its cleaning services and nominal web site maintenance leading into 2002.
National Beauty expects increases in overall expenses through 2002 as it
moves toward increasing development and marketing of its Beauty Works, USA
subsidiary, developing the HAIRMAX concept, and related acquisitions of beauty
salons.
Cost of Sales
The cost of sales for the year ended December 31, 2001 was $282,123 compared to
$263,394 for the year ended December 31, 2000. The increase in the cost of sales
was primarily attributable to an increase in cleaning and beauty salon sales.
Cost of sales as a percentage of sales for December 31, 2001 and 2000 was 65%
and 69%, respectively.
The largest factor in the variation from year to year in the cost of sales as a
percentage of net sales was the cost of labor.
Impact of Inflation
National Beauty believes that inflation has had a negligible effect on
operations over the past two years. National Beauty believes that it can offset
inflationary increases in the cost of labor by increasing sales and improving
operating efficiencies.
Trends, Events, and Uncertainties
Demand for National Beauty's home cleaning services and beauty salon services
will be dependent on, among other things, market acceptance of the National
Beauty's concept and general economic conditions, which are cyclical in nature.
Inasmuch as a major portion of National Beauty's activities is the receipt of
revenues from the sales of its products, National Beauty's business operations
may be adversely affected by National Beauty's competitors and prolonged
recessionary periods.
Liquidity and Capital Resources
Quarter Ended March 31, 2002 Compared to the Quarter Ended March 31, 2001
On March 31, 2002, National Beauty had cash of $5,154 and working capital of
$121,807. This compares with cash of $11,001 and working capital of $91,312 at
March 31, 2001. The increase in working capital was due to an increase in
prepaid expenses.
Net cash used in operating activities was $4,128 for the three months ended
March 31, 2002 as compared with net cash used in operating activities of $12,411
for the period ended March 31, 2001. The decrease in cash used was primarily
attributable to a decrease in net loss for the period.
Net cash used in investing activities was $-0- for the three months ended March
31, 2002 as compared with net cash used in investing activities of $-0- for the
period ended March 31, 2001.
Net cash used in financing activities totaled $719 for the three months ended
March 31, 2002 as compared with net cash provided by financing activities of
$5,388 for the three months ended March 31, 2001. The decrease in net cash
provided by financing activities was primarily due to the collection of
shareholder loan receivable during 2001.
Years Ended December 31, 2001 and December 31, 2000
Cash flows used in operations were a negative $23,482 for the year ended
December 31, 2001, and a negative $291,498 for the year ended December 31, 2000.
Negative cash flows from operating activities for the years ended December 31,
2001 and 2000 are primarily attributable to losses from operations, partially
offset by the common stock issued for services in both years and an unrealized
loss on trading securities in 2001.
Cash flows from investing activities were a negative $4,395 for the year ended
December 31, 2001 and a negative $1,565 for the same period in 2000. The
negative cash flows were primarily attributable to new equipment purchases
during 2001 and 2000.
Cash flows used in financing activities were $17,313 for the year ended December
31, 2001 and cash flows generated from financing activities were $237,826 for
the year ended December 31, 2000. The negative cash flows in 2001 pertained to
repayments on a note payable and capitalized lease obligation. The positive cash
flows in 2000 were primarily due to the private placement of common stock sold
during 2000 less the effects of repayments on a capitalized lease obligation.
National Beauty has funded its cash needs from inception through December 31,
2001 with a series of debt and equity transactions, including private
placements.
During October 2000, National Beauty signed an agreement with Standart Capital,
S.A., Inc. of West Palm Beach, Florida, an investment-banking firm, to assist in
a private placement stock offering for National Beauty. Under the terms of the
agreement, Standart Capital, S.A. agreed to use its best efforts to locate
funding for National Beauty between $500,000 and $3 million within the next 24
months. No funds were raised for National Beauty and ultimately, the company
terminated this agreement.
During the year ended December 31, 2000, National Beauty collected aggregate
proceeds from unrelated investors of $240,326 under a limited Regulation D
private placement.
Web site development costs paid to the web designer for development, marketing
and advertisements for Beautymerchant.com were approximately $27,000 during the
year 2000. In 2001, because of numerous distribution and inventory problems,
after a developmental period, National Beauty ceased any further investment into
Beautymerchant.com Inc.
On a long-term basis, liquidity is dependent on continuation and expansion of
operations, receipt of revenues, additional infusions of capital and debt
financing. National Beauty is considering launching a wide scale marketing and
advertising campaign. The current capital and revenues are not sufficient to
fund such a campaign. If National Beauty chooses to launch such a campaign it
well require substantially more capital. If necessary, National Beauty plans to
raise this capital through an additional follow-on stock offering. The funds
raised from this offering will be used to develop and execute the marketing and
advertising strategy that may include the use of television, radio, print and
Internet advertising. Funds would also be used to acquire beauty salons.
However, National Beauty may not be able to obtain additional equity or debt
financing in the future, if at all. If National Beauty is unable to raise
additional capital, the growth potential will be adversely affected.
Additionally, National Beauty will have to significantly modify its plans.
Financing activities for the years ended December 31, 2001 and 2000 consisted of
principal repayments under the company's capitalized lease obligation its office
equipment. Principal repayments under the capitalized lease obligation for the
years ended December 31, 2001 and 2000 were $2,313 and $2,500, respectively.
Principal repayments of the note payable balance were made in the amount of
$15,000 in 2001.
DESCRIPTION OF PROPERTY
National Beauty has leased its executive offices at 4818 West Commercial Blvd,
Lauderhill, Florida 33319 for $1,987 per month. Effective July 1, 2002, National
Beauty will relocate to 4810 West Commercial Blvd., Tamarac, Florida 33319, an
1,000 square foot administrative office space. The lease expires on June 30,
2005, with an option to renew until June 30, 2007. Payments on the lease are as
follows:
From 7/1/02 to 6/30/03 ($1,100.00 per month)
------------------- --------
From 7/1/03 to 6/30/04 ($1,200.00 per month)
------------------- --------
From 7/1/04 to 6/30/05 ($1,300.00 per month)
From 7/1/05 to 6/30/06 ($1,400.00 per month)
------------------- --------
From 7/1/06 to 6/30/07 ($1,500.00 per month)
National Beauty also leases its beauty salon facility of 1,200 square feet at
the Del Mar Shopping Village, located at Powerline Road at Palmetto Park Road,
Boca Raton, Florida, for $3,100 per month. This lease expires September 30,
2005. Management of National Beauty considers these facilities to be adequate
for its requirements for the immediate future.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The principal market in which National Beauty's common stock is traded
is the Over-the-Counter Bulletin Board. The table below presents the high and
low bid price for the Company's common stock each quarter during the past two
years and reflects inter-dealer prices, without retail markup, markdown, or
commission, and may not represent actual transactions. National Beauty obtained
the following information from brokers who make a market in National Beauty's
securities.
Bid
---
Quarter Ended Low High
03/31/00 $ .94 $1.56
06/30/00 .38 1.25
09/30/00 .21 .43
12/31/00 .07 .36
03/31/01 .08 .44
06/30/01 .05 .16
09/30/01 .04 8.00
12/31/01 .36 1.36
03/31/02 .25 .70
(b) Holders. The approximate number of holders of record of National Beauty's
common stock as of June 28, 2002 was 36.
(c) National Beauty has not paid dividends from inception to date and does not
currently intend to do so.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth in summary form the compensation received during
each of the National Beauty's last three completed fiscal years by the Chief
Executive Officer and President of National Beauty. No executive officer of
National Beauty, including the Chief Executive Officer and President, received
total salary and bonus exceeding $100,000 during any of the last three fiscal
years.
Other Awards/Stock LTIP Restricted
Name and. . . Fiscal Annual Compen Underlying Pay- Stock
Position. . . Year Salary Bonuses - sation Options/SARs Outs Bonuses
- ------------- ----------- -------------- -------- ----------- ------------ ----- -------
(1) (2) (3) (5) (4)
----------- -------------- -------- -----------
Edward A. . . 2001 $ 65,000 -0- -0- -0- -0- -0-
Roth, CEO . . 2000 $ 233,121 -0- -0- -0- -0- -0-
and President 1999 $ 43,215 -0- -0- -0- -0- -0-
- ------------- ----------- -------------- -------- ----------- ------------ ----- -------
Michael J.. . 2001 $ 15,000 -0- -0- -0- -0- -0-
Bongiovanni,. 2000 $ 46,800 -0- -0- -0- -0- -0-
CFO. . . . . 1999 $ -0- -0- -0- -0- -0- -0-
- ------------- ----------- -------------- -------- ----------- ------------ ----- -------
Alisha Roth,. 2001 $ -0- -0- -0- -0- -0- -0-
Secretary,. . 2000 $ 60,000 -0- -0- -0- -0- -0-
Treasurer . . 1999 $ -0- -0- -0- -0- -0- -0-
- ------------- ----------- -------------- -------- ----------- ------------ ----- -------
(1) The dollar value of base salary, cash and non-cash, received.
Information on the stock-based compensation can be found in the accompanying
audited financial statements.
(2) The dollar value of bonus, cash and non-cash, received.
(3) During the periods covered by the summary compensation table, National
Beauty did not pay any other annual compensation not properly categorized as
salary or bonus, including perquisites and other personal benefits, securities
or property.
(4) During the periods covered by the summary compensation table, National
Beauty did not make any award of restricted stock.
(5) No other compensation
Compensation of Directors
National Beauty pays its non-employee directors' 1,000 shares of the
company's restricted common stock per year for Directors' meetings attended. It
is anticipated that no more than twelve meetings will occur each year.
Employment Contracts and Termination of Employment and Change-In Control
Arrangements
On April 1, 2002, the board approved a five year employment agreement with
Edward Roth, President and CEO, whereby Mr. Roth would be compensated with an
annual salary of $250,000 and 250,000 shares of preferred stock per annum.
On April 1, 2002, the board approved a five year employment agreement with
Alisha Roth, Vice President, whereby Ms. Roth would be compensated with an
annual salary of $125,000.
2002 Non-Qualified Stock Compensation Plan
- ----------------------------------------------
The board of directors of National Beauty adopted the 2002 Non-Qualified
Stock Compensation Plan in December 2001. Under the Stock Plan, 1,000,000 shares
of National Beauty's common stock, subject to adjustments, are reserved for
issuance upon the exercise of options or restricted stock grants. There are
currently 600,000 shares issued under the plan. Options granted under the Stock
Plan may be either (a) options intended to constitute incentive stock options
under Section 422 of the Internal Revenue Code of 1986 or (b) nonqualified stock
options. Incentive stock options may be granted under the Stock Plan to
employees, including officers and directors who are employees, of on the date of
grant. Nonqualified options may be granted to (a) officers and directors of
National Beauty on the date of the grant, without regard to whether they are
employees, and (b) consultants, advisors, agents or independent representatives
of National Beauty.
By its terms, the Stock Plan is to be administered by a committee appointed by
the board of directors which shall consist of either the entire board of
directors, or by a committee of three or more persons, who must be directors,
all of whom must be disinterested persons and who serve at the discretion of the
board of directors. Subject to the provisions of the Stock Plan, the committee
has the authority to determine the persons to whom restricted stock or options
will be granted, the exercise price, the term during which options may be
exercised and other terms and conditions as it deems appropriate.
Incentive stock options granted under the Stock Plan may not have an
exercise price less than the fair market value of the common stock on the date
of the grant, i.e. 110% of the fair market value in the case of employees
holding ten percent or more of the voting stock of National Beauty. Options
granted under the Stock Plan will expire, not more than ten years from the date
of the grant, five years in the case of incentive options of employees holding
ten percent or more of the voting stock of National Beauty, subject to earlier
termination under the Stock Plan. Optionees under the Stock Plan may exercise
their options by paying cash, by using the cashless exercise procedure allowed
under Federal Reserve Regulation T or by tendering shares of National Beauty's
common stock that they already own.
FINANCIAL STATEMENTS
-16-
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Board of Directors and Stockholders:
NATIONAL BEAUTY CORP. (FKA Beautymerchant, Inc.)
4818 West Commercial Boulevard
Fort Lauderdale, Florida 33319
We have audited the accompanying consolidated balance sheet of National Beauty
Corp. (FKA Beautymerchant, Inc., a Nevada corporation) and its wholly owned
subsidiaries as of December 31, 2001 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the years ended December
31, 2001 and 2000. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall consolidated financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
National Beauty Corp. (a Nevada corporation) and its wholly-owned subsidiaries
as of December 31, 2001, and the consolidated results of its operations and its
cash flows for the years ended December 31, 2001 and 2000 in conformity with
accounting principles generally accepted in the United States of America.
Pompano Beach, FL
March 15, 2002
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 2001
=================
ASSETS
---------
CURRENT ASSETS
- --------------------------------
Cash . . . . . . . . . . . . . $ 11,001
Accounts receivable. . . . . . 903
Marketable securities. . . . . . 1,743
Inventory. . . . . . . . . . . . 1,700
Prepaid expenses . . . . . . . 90,000
---------
TOTAL CURRENT ASSETS . . . . 105,347
---------
PROPERTY AND EQUIPMENT
- --------------------------------
Furniture. . . . . . . . . . . 21,616
Leasehold improvements . . . . 3,500
Equipment. . . . . . . . . . . 34,985
Accumulated depreciation . . . (35,361)
---------
NET PROPERTY AND EQUIPMENT 24,740
---------
OTHER ASSETS
- --------------------------------
Deposits . . . . . . . . . . . 6,656
---------
TOTAL OTHER ASSETS . . . . . 6,656
---------
TOTAL ASSETS . . . . . . . $136,743
==========
The accompanying notes are an integral part of these consolidated financial
statements.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
December 31, 2001
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- ------------------------------------------------
Accounts payable and accrued expenses. . . . . $ 2,230
Outstanding checks in excess of bank balance . 11,664
Current portion of capitalized
lease obligation. . . . . . . . . . . 2,313
------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . 16,207
------------
COMMITMENTS - NOTE C
- ------------------------------------------------
STOCKHOLDERS' EQUITY
- ------------------------------------------------
Convertible preferred stock ($.001 par value;
50,000,000 shares authorized, 950,000
shares issued and outstanding) . . . . . . . . 950
Common stock ($.001 par value; 100,000,000
shares authorized, 1,466,362 shares issued
and outstanding). . . . . . . . . . . . . . 1,466
Additional paid-in-capital . . . . . . . . . . . 1,402,450
Retained deficit . . . . . . . . . . . . . . . (1,284,330)
------------
TOTAL STOCKHOLDERS' EQUITY . . . . . . . . . . . 120,536
------------
$136,743
============
The accompanying notes are an integral part of these consolidated financial
---------------------------------------------------------------------------
statements.
-----------
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended December 31, 2001 and 2000
==============================================
2001 2000
---------- -----------
REVENUES:
- ----------------------------------------------------
Sales. . . . . . . . . . . . . . . . . . . . . . . $ 431,810 $ 340,413
Cost of Sales. . . . . . . . . . . . . . . . . . . (275,974) (221,268)
---------- -----------
Gross profit . . . . . . . . . . . . . . . . . . . 155,836 119,145
---------- -----------
EXPENSES:
- ----------------------------------------------------
Selling, general and administrative. . . . . . . . 336,240 816,126
---------- -----------
Total expenses . . . . . . . . . . . . . . . . . . 336,240 816,126
---------- -----------
Loss from operations . . . . . . . . . . . . . . . (180,404) (696,981)
---------- -----------
OTHER EXPENSES:
- ----------------------------------------------------
Unrealized Loss on Trading Securities. . . . . . . (66,257) -0-
Interest Expense. . . . . . . . . . . . . . . . . (1,227) (1,040)
---------- -----------
Total Other Expenses . . . . . . . . . . . . . . . (67,484) (1,040)
---------- -----------
Loss from continuing operations. . . . . . . . . . (247,888) (698,021)
Net loss from discontinued operations. . . . . . . (9,156) (96,285)
---------- -----------
NET LOSS . . . . . . . . . . . . . . . . . . . . $(257,044) $ (794,306)
========== ===========
Basic and fully diluted net loss per common share:
Continuing operations. . . . . . . . . . . . . . $ (.55) $ (10.84)
Discontinued operations. . . . . . . . . . . . . (.02) (1.50)
---------- -----------
Basic and fully diluted net loss per common share $ (.57) $ (12.34)
========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001 and 2000
2001 2000
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
- ----------------------------------------------------
Net loss . . . . . . . . . . . . . . . . . . . . . $(257,044) $(794,306)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation . . . . . . . . . . . . . . . . . . . 3,017 3,800
Common stock issued in exchange for services . . . 235,044 103,908
Unrealized loss on trading securities. . . . . . . 66,257 -0-
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . 781 3,700
Shareholder loan receivable. . . . . . . . . . . . 7,892 -0-
Inventory . . . . . . . . . . . . . . . . . . . . 1,863 979
Prepaid expenses. . . . . . . . . . . . . . . . . (90,000) 393,121
Deposits. . . . . . . . . . . . . . . . . . . . . (2,956) -0-
(Decrease) in operating liabilities:
Outstanding checks in excess of bank balance. . . 11,664 -0-
Accounts payable & accrued expenses . . . . . . . -0- (4,700)
---------- ----------
NET CASH USED IN
OPERATING ACTIVITIES . . . . . . . . . . . . . . (23,482) (293,498)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ----------------------------------------------------
Purchases of property and equipment. . . . . . . . (4,395) (1,565)
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES . . . . . . . . . . . . . . (4,395) (1,565)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ----------------------------------------------------
Proceeds from common stock issuances/subscriptions -0- 242,326
Repayment of note payable. . . . . . . . . . . . . (15,000) -0-
Principal repayments under capital lease . . . . . (2,313) (2,500)
---------- ----------
NET CASH PROVIDED BY (USED
IN) FINANCING ACTIVITIES . . . . . . . . . . . . $ (17,313) $ 239,826
---------- ----------
The accompanying notes are an integral part of these consolidated financial
statements.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS (CONT.)
For the Years Ended December 31, 2001 and 2000
==============================================
2001 2000
--------- ---------
NET (DECREASE) IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . . $(45,190) $(55,237)
Cash and cash equivalents, beginning of year 56,191 111,428
--------- ---------
CASH AND CASH EQUIVALENTS,
END OF YEAR. . . . . . . . . . . . . . . . $ 11,001 $ 56,191
========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
- -----------------------------------
Supplemental disclosures of cash flow information for the year ended December
31, 2001 and 2000 is summarized as follows:
Cash paid during the year for:
2001 2000
-------- --------
Income Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . $ -0- $ -0-
======== ========
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,227 $ 1,040
======== ========
NON-CASH FINANCING ACTIVITES:
- -------------------------------------------------------------------
Assumption of note payable with acquisition . . . . . . . . . . . . $ 15,000 $ -0-
======== ========
Common stock issued to officers for services,
charged to prepaid expenses . . . . . . . . . . . . . . . . . . . $ 28,500 $ -0-
======== ========
Common stock issued to others for
services, charged to prepaid expenses . . . . . . . . . . . . . . $ 61,500 $ -0-
======== ========
Common stock issued to officers for other services. . . . . . . . . $ 25,044 $103,908
======== ========
Common stock issued to others for other services. . . . . . . . . . $120,000 $103,908
======== ========
Common stock issued in exchange for marketable securities $ -0- $ 68,000
======== ========
Retirement of common stock. . . . . . . . . . . . . . . . . . . . . $ -0- $359,667
======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2001 and 2000
==============================================
Convertible Common
Common Stock Preferred Stock Stock
Shares Amount Shares Amount Subscribed
------------- -----------------
Balances, January 1, 2000* . . . . . . . . . . . 58,843 $ 59 1,000,000 $ 1,000 $ 17
Common stock issued for services . . . . . . . . 741 -0- -0- -0- 103,908
Proceeds from common stock
subscriptions. . . . . . . . . . . . . . . . . . 5,508 6 -0- -0- (6)
Common stock exchanged for marketable securities 1,545 2 -0- -0- (2)
Retirement of shares during the year . . . . . . (8,212) (9) -0- -0- (9)
Net loss for the year. . . . . . . . . . . . . . -0- -0- -0- -0- -0-
------------- ----------------- ----------- --------------- ------------
Balances, December 31, 2000. . . . . . . . . . . 58,425 $ 58 1,000,000 $ 1,000 -0-
------------- ----------------- ----------- --------------- ------------
Common stock issued for services . . . . . . . . 907,937 908 -0- -0- -0-
Conversion of preferred shares into
common shares by officers. . . . . . . . . . . . 500,000 500 (50,000) (50) -0-
------------- ----------------- ----------- --------------- ------------
Net loss for the year. . . . . . . . . . . . . . -0- -0- -0- -0- -0-
Balances, December 31, 2001. . . . . . . . . . . 1,466,362 $ 1,466 950,000 $ 950 -0-
------------- ----------------- ----------- --------------- ------------
*Includes retroactive adjustments
due to stock split.
Additional
Subscriptions Paid-in Retained
Receivable Capital Deficit
------------
Balances, January 1, 2000* . . . . . . . . . . . $ (671,637) $1,425,709 $ (232,980)
Common stock issued for services . . . . . . . . -0-
Proceeds from common stock
subscriptions. . . . . . . . . . . . . . . . . . 242,326 -0- -0-
Common stock exchanged for marketable securities 68,000 -0- -0-
Retirement of shares during the year . . . . . . 361,311 (361,303) -0-
Net loss for the year. . . . . . . . . . . . . . -0- -0- (794,306)
------------ ----------- ------------
Balances, December 31, 2000. . . . . . . . . . . -0- $1,168,314 $(1,027,286)
------------ ----------- ------------
Common stock issued for services . . . . . . . . -0- 234,136 -0-
Conversion of preferred shares into
common shares by officers. . . . . . . . . . . . -0- -0- -0-
Net loss for the year. . . . . . . . . . . . . . -0- -0- (257,044)
------------ ----------- ------------
Balances, December 31, 2001. . . . . . . . . . . -0- $1,402,450 $(1,284,330)
------------ ----------- ------------
*Includes retroactive adjustments
due to stock split.
The accompanying notes are an integral part of these consolidated financial
---------------------------------------------------------------------------
statements.
-----------
------
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Business Activity - National Beauty Corp. (formerly known as Beautymerchant.com,
- -----------------
Inc.) (a Nevada corporation) legally changed its corporate name in 2001 and was
also formerly known as ATR Industries, Inc., a Nevada corporation, which was
incorporated in 1987.
These financial statements include its wholly owned subsidiaries, Cleaning
Express USA, Beauty Works USA, Inc. and Beauty Merchant, Inc. The company is a
full service cleaning company offering daily residential cleaning services,
carpet cleaning and other related services in the South Florida area under the
name of Cleaning Express USA. During April 2000, the Company began operations as
an E-commerce distributor of beauty products under its Beauty Merchant, Inc.
subsidiary and ceased these operations in 2001. The Company currently offers
beauty services and products though its retail beauty salon in the South Florida
area under its Beauty Works USA, Inc. subsidiary.
During the year ended December 31, 2001, the Company enacted a 200 for 1 reverse
stock split on its common stock. All common stock amounts in the accompanying
financial statements have been retroactively restated to reflect this
capitalization change.
Accounts Receivable - Accounts receivable are charged to bad debt expense as
- --------------------
they are deemed uncollectible based upon a periodic review of the accounts. The
Company performs ongoing credit reviews of its customer accounts.
Property and Equipment - Property and Equipment are recorded at cost.
- ------------------------
Maintenance and repair costs are expensed as incurred. Depreciation is provided
using the straight-line method and other methods that approximate the
straight-line method. It is calculated over recovery periods as prescribed by
management which range from 5 years for equipment to 7 years for furniture.
Leasehold improvements are amortized over the terms of the office operating
leases.
When an asset is disposed of, its cost and related accumulated depreciation are
removed from the accounts. The difference between undepreciated cost and
proceeds from disposition is recorded as gain or loss.
The Company makes ongoing evaluations of the values of its assets to determine
whether an impairment write-down should be recognized in accordance with SFAS
No. 144. To date, no such impairment write-down has been deemed necessary.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
- -----------------------------------------------------------
Marketable Securities - Marketable securities include the Company's investment
- ----------------------
in equity securities recorded at fair market value. The marketable securities
were classified as trading securities with holding gains and losses recognized
in current period operations.
Cash and Cash Equivalents - For purposes of the Statement of Cash Flows, the
- ----------------------------
Company considers highly liquid investments with an original maturity of three
months or less to be cash equivalents.
Revenue Recognition- Revenue for the residential cleaning operations is
- --------------------
recognized when cleaning services are performed.
Revenues for beauty services are recognized when the services are rendered.
Revenues for beauty products are recognized when the products are shipped
provided collection of the resulting receivable is probable and the earnings
process is complete. If any material contingencies are present, revenue
recognition is delayed until all material contingencies are eliminated. Material
contingencies are circumstances in which there are any potential uncertainties
as to the completion of the revenue process being complete. Further, no revenue
is recognized unless collection of the applicable consideration is probable.
Probable collection is determined at the time collection occurs or is more than
reasonably possible it will be collected.
Income Taxes - Income taxes are provided for the tax effects of transactions
- -------------
reported in the financial statements and consist of deferred taxes related
primarily to differences between the basis of certain assets and liabilities for
financial and tax reporting. Deferred taxes represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
The income tax benefit consists of taxes currently refundable due to net
operating loss carryback provisions for federal and state governments. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or the entire deferred
tax asset will not be realized. Deferred tax assets and liabilities are adjusted
for the effect of changes in tax laws and rates on the date of enactment.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT.)
- -----------------------------------------------------------
Use of Estimates - The preparation of financial statements in conformity with
- ------------------
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities at
the date of financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Advertising - The Company charges the costs of advertising to expense when
- -----------
incurred.
Earnings Per Share- The Companyreports earnings per share in accordance with
- --------------------
Statement of Financial Accounting Standard (SFAS) No.128. This statement
requires dual presentation of basic and diluted earnings (loss) with a
reconciliation of the numerator and denominator of the loss per share
computations. Basic earnings per share amounts are based on the weighted average
shares of common outstanding. If applicable, diluted earnings per share would
assume the conversion, exercise or issuance of all potential common stock
instruments such as options, warrants and convertible securities, unless the
effect is to reduce a loss or increase earnings per share. Accordingly, this
presentation has been adopted for the period presented. There were no
adjustments required to net loss for the period presented in the computation of
diluted earnings per share.
Comprehensive Income (Loss) - The Company adopted Financial Accounting Standards
- ---------------------------
Board Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", which establishes standards for the reporting and display
of comprehensive income (loss) and its components in the financial statements.
There were no material items of comprehensive income (loss) applicable to the
Company during the period covered in the financial statements.
NOTE B - ACQUISITION
- --------------------
During 2001, the Company acquired the fixed assets of a beauty salon in South
Florida. The Company financed the acquisition with a short-term note with the
unrelated seller in the amount of $15,000 at 8% interest per annum. This note
was paid in full with interest thereto during 2001. The Company also assumed the
lease from the seller. See footnote G for the minimum lease commitments. Since
the acquisition does not meet the conditions of a significant acquisition, pro
forma information has not been provided.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTEC - DISCONTINUED OPERATIONS
- -------------------------------
In November 2001, the Board of Directors approved a plan for the disposal of it
e-commence segment. The results of beautymerchant.com have been reported as
discontinued operations for all periods presented.
NOTE D - STOCKHOLDERS' EQUITY
- ---------------------------------
During the year ended December 31, 2000, the Company issued 741 shares of its
common stock for services to employees and consultants. The stock issued was
valued at the market price at the time of issuance, yielding an aggregate value
of $103,907. The total amount was expensed during the year ended December 31,
2000 and is included in the accompanying financial statements in selling,
general and administrative expenses.
During the year ended December 31, 2000, the Company retired 8,212 of the common
shares that had been subscribed at $44 per share ($.22 pre-split).
Also during the year ended December 31, 2000, the Company received $242,326 in
proceeds from common stock subscribed during the year ended December 31, 1999.
The Company also received $68,000 in marketable securities in exchange for
common stock subscribed during the year ended December 31,2000.
The Company has 950,000 shares of preferred stock outstanding at December 31,
2001, which is convertible at the option of the shareholder into 9,500,000
shares of common stock.
During 2001, the Company's officers converted 50,000 preferred shares into
500,000 common shares.
During the year ended December, 31 2001, the Company issued 607,937 shares of
its common stock for services rendered by officers and outside consultants. The
shares were valued at the date of issuance yielding an aggregate market value of
$145,044, which was expensed during the year.
On December 27, 2001, the Company issued 95,000 and 205,000 common shares to its
officers and outside consultants, respectively. These common shares were paid in
advance for services to be received by the Company in 2002 and are reflected as
Prepaid Expenses in the accompanying balance sheet. The shares were priced at
the date of issuance yielding an aggregate market value of $90,000. In addition,
34,000 options were granted to an outside consultant as part of compensation.
The options are exercisable at $.48 per share prior to December 31, 2005. The
options did not yield a material expense using the Black-Scholes Option Pricing
Model.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE E - INCOME TAXES
- ---------------------
The Company has approximately $726,000 of federal and state net operating losses
that expire in various years through the year 2015.
Due to operating losses, there is no provision for current federal or state
income taxes for the years ended December 31, 2001 and 2000.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amount used for federal and state income tax purposes.
The Company's deferred tax asset at December 31, 2001 consists of net operating
loss carryforwards calculated using federal and state effective tax rates.
Because of the Company's lack of earnings history, the deferred tax asset has
been fully offset by a valuation allowance. The valuation allowance increased by
approximately $8,000 and $141,000 for the years ended December 31, 2001 and
2000, respectively.
The Company's net deferred tax asset as of December 31, 2001 is as follows:
Net operating loss carryforwards $ 276,000
Valuation allowance (276,000)
-------------
Net deferred tax asset $ --
============
The reconciliation of income taxes computed at the federal statutory income tax
rate to total income taxes for the years ended December 31, 2001 and 2000 is as
follows:
2001 2000
---- ----
Income tax computed at the federal statutory rate 34% 34%
State income taxes, net of federal tax benefit 4% 4%
----- ----
Valuation allowance (38%) (38%)
----- ----
Total deferred tax asset 0% 0%
===== =====
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE F - OBLIGATION UNDER CAPITAL LEASE
- ---------------------------------------------
The Company is leasing equipment under a noncancelable capital lease that
expires in December, 2002. The obligation under the capital lease has been
recorded in the accompanying Balance Sheet at the net present value of the
future minimum lease payments, discounted at an interest rate of 20%. The book
value of the equipment was approximately $1,500 at December 31, 2001.
Minimum future obligations under this capital lease at December 31, 2001 are as
follows:
Year Amount
- ---- ------
2002 $ 3,540
--------
Total minimum obligation 3,540
Less amount representing interest 1,227
---------
Present value of net
minimum obligation 2,313
Less current portion 2,313
---------
$ -0-
==========
NOTE G - COMMITMENTS
- --------------------
The Company leases its offices in Fort Lauderdale, Florida and a beauty salon in
Boca Raton, Florida under non-cancelable operating leases that expire from
varying dates through September 30, 2005. Future minimum rental payments as of
December 31, 2001 in the aggregate and for each of the four succeeding years are
as follows:
Year Amount
- ---- ------
2002 $ 61,050
2003 37,200
2004 37,200
2005 27,900
---------
$163,350
========
Rent expense for 2001 and 2000 was $47,467 and $32,526, respectively.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE G - COMMITMENTS (CONT')
- ----------------------------
In 1999, the Company committed itself to compensate each of its Board of
Directors in the amount of 1,000 shares of its common stock annually and 10,000
common stock purchase options over a thirty six-month period. As of the date of
this report, no option agreement has been officially adopted, there is no fair
market value for the options and none of the equity instruments have been issued
with the exception of 1,000 restricted common shares issued to each of its
directors in 2001.
NOTE H - SEGMENT INFORMATION
- --------------------------------
Based on the criteria established by SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information," the Company operates in two principal
business segments - (1) residential cleaning service and (2) retail beauty
salons. In accordance with SFAS 131, the Company is required to describe its
reportable segments and provide data that is consistent with the data made
available to the Company's management to assess performance and make decisions.
Information from the internal management reports may differ from the amounts
reported under accounting principles generally accepted in the United States of
America due to certain corporate level adjustments related to vendor reserves
for potential under-delivery of minimum guaranteed orders. The assets of the
discontinued subsidiary are reflected as corporate assets. Summarized revenues
and expense information by segment for 2001, as excerpted from the internal
management reports, is as follows:
2001 2000
---- ----
Residential Cleaning:
- ---------------------
Residential cleaning sales $281,124 $ 340,413
Cost of sales (182,731) (221,268)
Corporate and other expenses (220,436) (819,626)
--------- ---------
Segment loss (122,043) (700,481)
Total assets 9,550 9,550
Capital expenditures -0- -0-
Depreciation -0- 200
Interest expense 240 208
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE H - SEGMENT INFORMATION (CONT')
- -----------------------------------------
2001 2000
---- ----
Retail beauty salon:
- --------------------
Retail beauty salon sales $150,686 N/A
Cost of sales ( 93,243) -0-
Corporate and other expenses (117,031) -0-
---------- ------
Segment loss (59,588) -0-
Total assets 13,500 -0-
Capital expenditures 1,538 -0-
Depreciation 1,056 -0-
Interest expense 429 -0-
Corporate:
- ----------
Corporate revenues $ N/A $ N/A
Cost of sales -0- -0-
Unallocated and other expenses (66,257) -0-
---------- -----
Segment loss (66,257) -0-
Total assets 113,693 139,843
Capital expenditures 2,857 1,565
Depreciation 1,961 3,600
Interest expense 558 832
NOTE I - SUBSEQUENT EVENTS
- --------------------------
Subsequent to December 31, 2001, one of the Company's officers converted 200,000
shares of the Company's preferred stock in to 2,000,000 shares of common stock.
NATIONAL BEAUTY CORP. & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Years Ended December 31, 2001 and 2000
==============================================
NOTE J - RECENT ACCOUNTING PRONOUNCEMENTS
- ----------------------------------------------
In July 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No.143, "Accounting for Asset Retirement
Obligations" which addresses the accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and the associated
retirement costs. SFAS No. 143 requires that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value cannot be made. SFAS No. 143 is
effective for financial statements issued for fiscal years beginning after June
15, 2002. The Company does not expect SFAS No. 143 to have a material effect on
its financial condition or cash flows.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets". SFAS No. 144 generally establishes a standard
framework which to measure impairment of long-lived assets and expands the
Accounting Principles Board ("APB") 30, "Reporting the Results of Operations -
Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently Occurring Events and Transactions" to include a
component of the entity (rather than a segment of the business). SFAF No. 144 is
effective for financial statements issued for fiscal years beginning after
December 15, 2001. The Company does not expect SFAS No. 144 to have a material
effect on its financial condition and cash flows.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2002 AND DECEMBER 31, 2001
(Unaudited)
ASSETS March 31, 2002 Dec. 31, 2001
- ------------------------- -------------- --------------
CURRENT ASSETS:
- -------------------------
Cash and cash equivalents $ 6,154 $ 11,001
Accounts receivable . . . 132 903
Marketable securities . . 1,500 1,743
Inventory . . . . . . . . 4,087 1,700
Prepaid expenses. . . . . 114,825 90,000
---------------- ---------------
TOTAL CURRENT ASSETS. . . 126,698 105,347
---------------- ---------------
FIXED ASSETS
- -------------------------
Furniture . . . . . . . . 21,616 21,616
Leasehold improvements. . 3,500 3,500
Equipment . . . . . . . . 34,985 34,985
Accumulated depreciation. (36,361) (35,361)
---------------- ---------------
NET FIXED ASSETS. . . . . 23,740 24,740
---------------- ---------------
OTHER ASSETS:
- -------------------------
Deposits. . . . . . . . . 6,656 6,656
---------------- ---------------
TOTAL OTHER ASSETS. . . . 6,656 6,656
---------------- ---------------
TOTAL ASSETS. . . . . . . $ 157,094 $ 136,743
---------------- ---------------
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF MARCH 31, 2002 AND DECEMBER 31, 2001
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, 2002 Dec. 31, 2001
- ----------------------------------------------------------------- ---------------------------------
CURRENT LIABILITIES
- -----------------------------------------------------------------
Accounts payable and accrued expenses . . . . . . . . . . . . . . $ 2,230 $ 2,230
Outstanding checks in excess of bank balance. . . . . . . . . . . 1,067 11,664
Current portion of capitalized lease obligation . . . . . . . . . 1,594 2,313
---------------- ---------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . 4,891 16,207
---------------- ---------------
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------
Common stock ($.001 par value, 100,000,000 shares authorized;
3,736,362 and 1,466,362 issued and outstanding at March 31, 2002
and December 31, 2001, respectively). . . . . . . . . . . . . . . 3,736 1,466
Convertible preferred stock ($.001 par value; 50,000,000 shares
authorized, 750,000 and 950,000 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively) . . . . . . . 750 950
Additional paid in capital. . . . . . . . . . . . . . . . . . . . 1,466,480 1,402,450
Retained deficit. . . . . . . . . . . . . . . . . . . . . . . . . (1,318,763) (1,284,330)
---------------- ---------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . 152,203 120,536
---------------- ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . . . . . . . $ 157,094 $ 136,743
---------------- ---------------
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
2002 2001
REVENUES:
- --------------------------------------
Sales. . . . . . . . . . . . . . . . . $ 145,256 $ 87,287
Cost of Sales. . . . . . . . . . . . . (68,544) (60,731)
----------- ------------
GROSS PROFIT . . . . . . . . . . . . . 76,712 26,556
----------- ------------
EXPENSES:
- --------------------------------------
Advertising. . . . . . . . . . . . . . 6,471 13,511
Automobile . . . . . . . . . . . . . . 283 3,259
Bank service charges . . . . . . . . . 1,099 1,170
Consulting . . . . . . . . . . . . . . 37,500 3,245
Depreciation . . . . . . . . . . . . . 1,000 800
Insurance. . . . . . . . . . . . . . . 1,141 5,544
Office expenses. . . . . . . . . . . . 2,180 2,221
Payroll. . . . . . . . . . . . . . . . 20,445 -0-
Professional fees. . . . . . . . . . . 13,970 1,375
Public trading . . . . . . . . . . . . 1,315 -0-
Rent . . . . . . . . . . . . . . . . . 15,166 6,771
Repairs & maintenance. . . . . . . . . 106 60
Taxes & licenses . . . . . . . . . . . 6,871 1,425
Telephone. . . . . . . . . . . . . . . 1,988 2,508
Travel . . . . . . . . . . . . . . . . -0- 460
Utilities. . . . . . . . . . . . . . . 1,367 129
----------- ------------
TOTAL EXPENSES . . . . . . . . . . . . 110,902 42,478
----------- ------------
OPERATING (LOSS) . . . . . . . . . . . $ (34,190) $ (15,922)
OTHER (EXPENSE):
- --------------------------------------
Unrealized loss on trading securities. (243) (29,500)
Interest Expense . . . . . . . . . . . -0- -0-
----------- ------------
NET (LOSS) . . . . . . . . . . . . . . $ (34,433) $ (45,422)
----------- ------------
Net (Loss) per Share -
basic and fully diluted. . . . . . . ($0.01) $ **
=========== ============
Weighted Average Shares. . . . . . . 2,583,862 11,706,701
=========== ============
** Less than $.01
See accompanying notes to financial statements
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
- -----------------------------------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(34,433) $(45,422)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000 800
Common stock issued for services. . . . . . . . . . . . . . . . . . . . . . . 66,100 3,245
Unrealized loss on trading securities . . . . . . . . . . . . . . . . . . . . 243 29,500
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771 (245)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387) (289)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,825) -0-
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- -0-
(Decrease) in outstanding checks in excess of bank balance. . . . . . . . . . (10,597) -0-
--------- ---------
NET CASH (USED IN) OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . (4,128) (12,411)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -----------------------------------------------------------------------------
Expenditures for leaseholds and equipment . . . . . . . . . . . . . . . . . . -0- -0-
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . -0- -0-
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------
Repayment of shareholder loan receivable. . . . . . . . . . . . . . . . . . . -0- 6,013
Principal repayments under capitalized lease. . . . . . . . . . . . . . . . . (719) (625)
--------- ---------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES. . . . . . . . . . . . . . . (719) 5,388
--------- ---------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . (4,847) (7,023)
--------- ---------
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,001 56,191
--------- ---------
END OF THE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,154 $ 49,168
--------- ---------
SUPPLEMENTARY CASH FLOW INFORMATION
- -----------------------------------------------------------------------------
OF NON-CASH FINANCING:
- -----------------------------------------------------------------------------
Common stock issued for services. . . . . . . . . . . . . . . . . . . . . . . $ 66,100 $ 3,245
--------- ---------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
March 31, 2002 (UNAUDITED)
ITEM 1.
- -------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. 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, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at March
31, 2002, the results of operations for the three month period ended March 31,
2002 and 2001, and cash flows for the three months ended March 31, 2002 and
2001. The results for the period ended March 31, 2002, are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2002.
NOTE 2 - EARNINGS (LOSS) PER SHARE
The following represents the calculation of earnings (loss) per share:
Three Three
Months Ended Months Ended
BASIC & FULLY DILUTED* March 31, 2002 March 31, 2001
- --------------------- -------------- --------------
Net Loss $ (34,433) $ (45,422)
Less- preferred stock dividends -0- -0-
------------ --------------
Net Loss $ (34,433) $ (45,422)
Weighted average number
of common shares 2,583,862 11,706,701
------------- --------------
Basic & Fully Diluted*
loss per share $ (.01) $ **
============= ==============
* The Company had no common stock equivalents during the periods presented
** Less than $(0.01)
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There were no changes in or disagreements with National Beauty's
independent accountants on financial statement disclosure or auditing scope or
procedure during the two year period prior covered by their report.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Nevada law, a corporation may indemnify its officers, directors,
employees and agents under certain circumstances, including indemnification of
such person against liability under the Securities Act of 1933. A true and
correct copy of Section 78.7502 of Nevada Revised Statutes that addresses
indemnification of officers, directors, employees and agents is attached hereto
as Exhibit 99.1.
In addition, Section 78.037 of the Nevada Revised Statutes and National
Beauty's Articles of Incorporation and Bylaws provide that a director of this
corporation shall not be personally liable to the corporation or its
stockholders for monetary damages due to breach of fiduciary duty as a director
except for liability (a) for acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law; or (b) for the payments of
distribution in violation of Nevada Revised Statute 78.300.
The effect of these provisions may be to eliminate the rights of National
Beauty and its stockholders (through stockholders' derivative suit on behalf of
National Beauty) to recover monetary damages against a director for breach of
fiduciary duty as a director (including breaches resulting from negligent or
grossly negligent behavior) except in the situations described in clauses (a) -
(b) of the preceding paragraph.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth the expenses in connection with the issuance and
distribution of the Securities being registered, other than underwriting
discounts and commissions. National Beauty shall bear all such expenses. All
amounts set forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $415.52
Legal Fees and Expenses $25,000.00
Accounting Fees and Expenses $15,000.00
Miscellaneous $5,000.00
---------
TOTAL $45,415.52
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
On July 1, 2002, National Beauty agreed to issue 200,000 shares of common stock
to American Market Support Network, Inc. in consideration of investor services
to be rendered.
On April 17, 2002, National Beauty issued 10,000 shares of common stock to
Richard McCaffrey and 30,000 shares of common stock to National Financial
Communications Corp. in consideration of investor relations services rendered to
the company.
On February 27, 2002, National Beauty issued 125,000 shares of common stock to
Richard O. Weed in consideration of legal services rendered in approximately the
amount of $25,000.
On February 11, 2002, National Beauty issued 1,000,000 shares, respectively, to
Edward Roth and Alisha Roth, officers and directors of the company, in
consideration of services rendered.
On January 3, 2002, National Beauty issued 30,000 shares of common stock to
National Financial Communications Corp. in consideration of investor relations
services rendered to the company.
On September 14, 2001, National Beauty issued 2,000 shares, 2,000 shares and
25,000 shares to Geoff Gazda, Barbara Patigalia and Michael Bongiovanni,
respectively, in consideration of services rendered as directors of the company.
On September 14, 2001, National Beauty issued 150,000 shares to Gerald Sklar.
On August 15, 2001, National Beauty issued 250,000 shares, respectively, to
Edward Roth and Alisha Roth, officers and directors of the company, in
consideration of services rendered.
On May 9, 2001, National Beauty issued 1,650 shares, 8,100 shares and 900
shares, respectively, to Thomas Engelbert, Action Stocks, Inc. and James
Williams.
On July 28, 2000, National Beauty issued 375 shares and 1 share, respectively,
to Richard Barson and John Schertl.
On May 9, 2000, National Beauty issued 250 shares to Market Voice, Inc.
On January 26, 2000, National Beauty issued 8 shares to Brenda Lee Hamilton.
On November 18, 1999, National Beauty issued 1,250 shares and 300 shares ,
respectively, to Edward Roth and Alisha Roth, officers and directors of the
company, in consideration of services rendered.
On November 1, 1999, National Beauty issued 25 shares, 100 shares and 17 shares,
respectively, to Brenda Lee Hamilton, Richard D. Surber and Chris Cottone.
Exemption from registration under the Securities Act of 1933 ("Act") is claimed
for the sale of these securities in reliance upon the exemption offered by
Section 4(2) of the Act, which exempts transactions by issuers not involving a
public offering. Use of this exemption is based on the following facts:
- - Neither National Beauty nor any person acting on behalf of National Beauty
solicited any offer to buy or sell the securities by any form of general
solicitation or advertising;
- - The purchasers represented that they were acquiring the securities as a
principal for their own account for investment purposes only and without a view
towards distribution or reselling these securities unless pursuant to an
effective registration statement or exemption from registration in compliance
with federal or state securities laws; and
- - The securities were issued with the understanding that they may only be
disposed of pursuant to an effective registration statement or exemption from
registration in compliance with federal or state securities laws.
ITEM 27. EXHIBITS
The following is a list of exhibits required by Item 601 of Regulation S-B that
are filed or incorporated by reference. The exhibits that are incorporated by
reference from National Beauty's prior SEC filings are noted on the exhibit
index. The other exhibits are attached hereto and being filed with the SEC as
part of this registration statement.
Exhibit
Number Description of Exhibits
- ------ -----------------------
3(i)(a) Articles of Incorporation of Tri-Capital Corporation, Inc.(1)
3(ii) Bylaws of Tri-Capital Corporation, Inc.(1)
3(iii) Articles of Amendment to the Articles of Incorporation of Tri Capital
Corporation, Inc.
3(iv) Certificate of Amendment to the Articles of Incorporation of Advanced
Appearance of America, Inc.
3(v) Certificate of Amendment to the Articles of Incorporation of ATR
Industries, Inc.
3(vi) Certificate of Amendment to the Articles of Incorporation of ATR
Industries, Inc.
3(vii) Certificate of Amendment to the Articles of Incorporation of ATR
Industries, Inc.
3(viii) Certificate of Amendment to the Articles of Incorporation of
Beautymerchant.com, Inc.
3(ix) Certificate of Amendment to the Articles of Incorporation of National
Beauty Corp.
3(x) Certificate of Amendment to the Articles of Incorporation of National
Beauty Corp.
4.1 Form of Common Stock Certificate of National Beauty, Inc.
4.2 Warrant Agreement
4.3 Common Stock Purchase Warrant
4.4 Certificate of Designation of the Rights and Preferences of the
Series A Convertible Preferred Stock of National Beauty Corp.
5.1 Opinion of Weed & Co. LLP re: Legality
10.1 Employment Agreement with Edward Anthony Roth(1)
10.2 Employment Agreement with Alisha Roth(1)
10.3 Consulting Agreement with Ballantyne Capital Group, LLC
10.4 Commercial Lease between Commercial Villas and Beautyworks USA of
Florida Inc.
10.5 Third Lease Amendment Agreement and Assignment of Lease
10.6 Form of Subscription Agreement
10.7 Investor Relations Services Agreement
21 Subsidiaries of National Beauty
23.1 Consent of Independent Auditors, Perrella & Associates, P.A.
23.2 Consent of Weed & Co. LLP
99.1 Section 78.7502 of Nevada Revised Statutes (2)
(1) Previously filed with National Beauty's filing of Form 10-SB and subsequent
amendments thereto (File No. 00030212).
(2) Previously filed with National Beauty's filing of a Form S-8 on August 21,
2001.
...
ITEM 28. UNDERTAKINGS.
National Beauty hereby undertakes to:
(a)(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933;
(ii) Reflect in the prospectus any facts or events which, individually or
together, represent a fundamental change in the information in the registration
statement; and
(iii) Include any additional or changed material information on the plan of
distribution not previously disclosed in the registration statement or any
material change to such information provided.
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
(b) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in the Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the city of Fort
Lauderdale, State of Florida, on July 10, 2002.
National Beauty Corp.
By: /s/ Edward Roth
Name: Edward Roth
Title: President
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
Signature Date
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/s/ Edward A. Roth July 10, 2002
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Edward A. Roth
President & CEO
/s/ Alisha Roth July 10, 2002
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Alisha Roth
Secretary, Treasurer
Director
/s/ Barbara Patagalia July 10, 2002
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Barbara Patagalia
Director
/s/Michael J. Bongiovanni July 10, 2002
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Michael J. Bongiovanni
Chief Financial Officer