U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended June 30, 2002
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
NATIONAL BEAUTY CORPORATION
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(Exact name of small business issuer as specified in its charter)
BEAUTYMERCHANT.COM, INC.
------------------------
(Former name of registrant)
Nevada 13-3422912
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(State or other jurisdiction of (IRS Employer
incorporation or organization) identification No.)
4810 W. Commercial Boulevard, Ft. Lauderdale, Florida 33319
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(Address of principal executive offices)
(954) 717-8680
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]
Number of shares of common stock outstanding as of
August 5, 2002: 4,400,062
Number of shares of preferred stock outstanding as of
August 5, 2002: 750,000
<PAGE 1>
INDEX TO FORM 10-QSB
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Page No.
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PART I
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Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations - Three and Six Months Ended
June 30, 2002 and 2001 4
Consolidated Statements of Cash Flows -Six Months Ended June 30, 2002
and 2001 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8-12
PART II
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Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2002 AND DECEMBER 31, 2001
(Unaudited)
June 30, 2002 Dec. 31, 2001
ASSETS
------
CURRENT ASSETS:
- -------------------------
Cash and cash equivalents $ 3,750 $ 11,001
Accounts receivable . . . 132 903
Marketable securities . . 1,500 1,743
Inventory . . . . . . . . 4,087 1,700
Prepaid expenses. . . . . 45,000 90,000
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TOTAL CURRENT ASSETS. . . 54,469 105,347
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FIXED ASSETS
- -------------------------
Furniture . . . . . . . . 21,616 21,616
Leasehold improvements. . 3,500 3,500
Equipment . . . . . . . . 34,985 34,985
Accumulated depreciation. (37,361) (35,361)
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NET FIXED ASSETS. . . . . 22,740 24,740
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OTHER ASSETS:
- -------------------------
Deposits. . . . . . . . . 6,656 6,656
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TOTAL OTHER ASSETS. . . . 6,656 6,656
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TOTAL ASSETS. . . . . . . $ 83,865 $136,743
========= =========
See accompanying notes to financial statements
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF JUNE 30, 2002 AND DECEMBER 31, 2001
(Unaudited)
June 30, 2002 Dec. 31, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
- -----------------------------------------------------------------
Accounts payable and accrued expenses . . . . . . . . . . . . . . $ 2,279 $ 2,230
Outstanding checks in excess of bank balance. . . . . . . . . . . 640 11,664
Current portion of capitalized lease obligation . . . . . . . . . 875 2,313
------------ ------------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . 3,794 16,207
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STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------
Common stock ($.001 par value, 100,000,000 shares authorized;
4,400,062 and 1,466,362 issued and outstanding at June 30, 2002
and December 31, 2001, respectively). . . . . . . . . . . . . . . 4,400 1,466
Convertible preferred stock ($.001 par value; 50,000,000 shares
authorized, 750,000 and 950,000 shares issued and outstanding at
June 30, 2002 and December 31, 2001, respectively). . . . . . . . 750 950
Additional paid in capital. . . . . . . . . . . . . . . . . . . . 1,634,976 1,402,450
Retained deficit. . . . . . . . . . . . . . . . . . . . . . . . . (1,560,055) (1,284,330)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . 80,071 120,536
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY. . . . . . . . . . . . $ 83,865 $ 136,743
============ ============
See accompanying notes to financial statements
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NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
Three Months Ended June 30, Six Months Ended June 30,
2002 2001 2002 2001
-----------------------------------------------
REVENUES:
- ---------------------------
Sales . . . . . . . . . . . $ 139,050 $103,028 $ 284,306 $ 190,315
Cost of sales . . . . . . . (68,342) (66,218) (136,886) (126,949)
----------- --------- ----------- ----------
GROSS PROFIT. . . . . . . . 70,708 36,810 147,420 63,366
----------- --------- ----------- ----------
EXPENSES:
- ---------------------------
Selling, general and
administrative. . . . . . . 312,000 62,132 422,902 104,350
----------- --------- ----------- ----------
TOTAL EXPENSES. . . . . . . 312,000 62,132 422,902 104,350
----------- --------- ----------- ----------
OPERATING LOSS. . . . . . . $ (241,292) $(25,322) $ (275,482) $ (40,984)
----------- --------- ----------- ----------
OTHER (EXPENSE):
- ---------------------------
Unrealized loss on trading
securities. . . . . . . . . 0 (25,908) (243) (55,408)
Interest expense. . . . . . - (260) - (520)
----------- --------- ----------- ----------
NET (LOSS). . . . . . . . . $ (241,292) $(51,490) $ (275,725) $ (96,912)
=========== ========= =========== ==========
Net (loss) per share -
basic and fully diluted . $ (0.06) $ (0.76) $ (0.18) $ (1.53)
=========== ========= =========== ==========
Weighted average shares*. 4,208,379 67,824 1,527,939 63,287
=========== ========= =========== ==========
*Includes retroactive adjustment for 1 for 200 reverse stock split effected
during 2001
See accompanying notes to financial statements
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
- -----------------------------------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(275,725) $(96,912)
Adjustments to reconcile net loss to net cash (used in) operating activities:
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 1,892
Common stock issued for services. . . . . . . . . . . . . . . . . . . . . . . 235,260 18,245
Unrealized loss on trading securities . . . . . . . . . . . . . . . . . . . . 243 55,408
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 771 (245)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,387) (523)
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,000 (370)
Deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- (4,100)
Increase (decrease) in operating liabilities
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 -0-
Outstanding checks in excess of bank balance. . . . . . . . . . . . . . . . . (11,024) -0-
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NET CASH (USED IN) OPERATING ACTIVITIES . . . . . . . . . . . . . . . . . . . (5,813) (26,605)
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CASH FLOWS FROM INVESTING ACTIVITIES:
- -----------------------------------------------------------------------------
Expenditures for leaseholds and equipment . . . . . . . . . . . . . . . . . . -0- (4,395)
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NET CASH USED IN INVESTING ACTIVITIES . . . . . . . . . . . . . . . . . . . . -0- (4,395)
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CASH FLOWS FROM FINANCING ACTIVITIES:
- -----------------------------------------------------------------------------
Collection of shareholder loan receivable . . . . . . . . . . . . . . . . . . -0- 6,013
Principal repayments of note payable. . . . . . . . . . . . . . . . . . . . . -0- (6,600)
Principal repayments under capitalized lease. . . . . . . . . . . . . . . . . (1,438) (1,250)
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NET CASH (USED) IN FINANCING ACTIVITIES . . . . . . . . . . . . . . . . . . . (1,438) (1,837)
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . (7,251) (32,837)
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CASH AND CASH EQUIVALENTS,
BEGINNING OF THE YEAR . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,001 56,191
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END OF THE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,750 $ 23,354
========== =========
SUPPLEMENTARY CASH FLOW INFORMATION OF NON-CASH FINANCING:
- -----------------------------------------------------------------------------
Common stock issued for services. . . . . . . . . . . . . . . . . . . . . . . $ 235,260 $ 18,245
========== =========
Assumption of note payable in connection with assets acquisition. . . . . . . $ - $ 15,000
========== =========
See accompanying notes to financial statements
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2002 (UNAUDITED)
ITEM 1.
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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 June
30, 2002, the results of operations for the three month period ended June 30,
2002 and 2001, and cash flows for the six months ended June 30, 2002 and 2001.
The results for the period ended June 30, 2002, are not necessarily indicative
of the results to be expected for the entire fiscal year ending December 31,
2002.
NOTE 2 - (LOSS) PER SHARE
The following represents the calculation of (loss) per share:
Three Three Six Six
Months Ended Months Ended Months Ended Months Ended
BASIC & FULLY DILUTED* June 30, 2002 June 30, 2001 June 30, 2002 June 30, 2001
- ------------------------------- ------------------------------------------------------------------
Net Loss. . . . . . . . . . . . $ (241,292) $ (51,490) $ (275,725) $ (96,912)
Less- preferred stock dividends -0- -0- -0- -0-
------------------------------------------------------------------
Net Loss. . . . . . . . . . . . (241,292) $ (51,490) $ (275,725) $ (96,912)
Weighted average number
of common shares**. . . . . . . 4,208,379 67,824 1,527,939 67,824
------------------------------------------------------------------
Basic & Fully Diluted*
loss per share. . . . . . . . . $ (.06) $ (.76) $ (.18) $ (.76)
==================================================================
* The Company had no common stock equivalents during the periods presented.
** Includes retroactive adjustment for 1 for 200 reverse stock split.
<PAGE 6>
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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In connection with the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), National Beauty Corporation is
hereby providing cautionary statements identifying important factors that could
cause our actual results to differ materially from those projected in forward
looking statements (as such term is defined in the Reform Act) made in this
quarterly Report on Form 10-QSB. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "likely will result," "are expected to," "will continue," "is
anticipated," "estimated," "intends," "plans" and "projection") are not
historical facts and may be forward looking statements and involve estimates and
uncertainties which could cause actual results to differ materially from those
expresses in the forward looking statements. Accordingly, any such statements
are qualified in their entirety by reference to, and are accompanied by, the
following key factors that have a direct bearing on our results of operations:
the absence of contracts with customers or suppliers; our ability to maintain
and develop relationships with customers and suppliers; our ability to
successfully integrate acquired businesses or new brands; the impact of
competitive products and pricing; supply constraints or difficulties; changes in
the retail and beauty industries; the retention and availability of key
personnel; and general economic and business conditions.
We caution that the factors described herein could cause actual results to
differ materially from those expressed in any forward-looking statements that
the investors should not place undue reliance on any such forward-looking
statements. Further, any forward-looking statement speaks only as of the date on
which such statement is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events or circumstances. Consequently, no forward-looking statement can be
guaranteed.
New factors emerge from time to time, and it is not possible for us to predict
all such factors. Further, we cannot assess the impact of each such factor on
our results of operations or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.
Overview
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National Beauty Corporation is distinctive holding company comprised of its
wholly owned subsidiaries: BeautyWorks U.S.A., Inc. Cleaning Express U.S.A.,
Inc. and Hair Max of Florida Inc .Our objective is to enhance and further brand
itself as: (a) provider of quality hair care services at affordable family
pricing. (b) home services provider, specializing in housekeeping. Through the
collective efforts of its subsidiaries, we seek to:
- - Build our customer base as a one-stop provider for residential
housekeeping services;
- - Enhance its brand name reputation of offering convenient, competitive
pricing and participation in special promotions;
- - Expand its business concept by acquiring beauty salons with established
customer bases;
- - Develop and expand a national chain of haircutting and styling stores.
We plan to accomplish the foregoing by:
Business partnerships with commercial realtors
Free product samples of ALISHA hair products;
Attempting to acquire existing beauty service salons;
Seeking to enter into marketing relationships with National advertising
agencies to establish concept branding strategies;
Attempting to market its concept, "A Cut Above The Rest", on a national
basis.
Develop and build Hair Max stores on a regional basis.
Our experienced accomplished management will allow us to develop our Hair Max
concept, and expand rapidly using fast food service techniques, dealing with
customer service. In addition to creating improved compensation and benefits to
employees in the hair service industry, as an incentive to find and retain
quality service personnel.
Products and Geographic Expansion
We intend to expand our service businesses in the Florida area by opening
approximately one additional retail storefront under our BeautyWorks U.S.A. name
during 2002. We are also exploring the possibility of opening up approximately
one additional BeautyWorks U.S.A. store in the Las Vegas, Nevada during 2002. We
began our retail sales operations in early 2000 and will attempt to expand
product sales on a continual basis.
Additional Risk Factor
National Beauty Corporation, a Nevada corporation, has a limited operating
history in its operations, which began in the first quarter of 2000.
Accordingly, you have little or no information upon which to evaluate National
Beauty Corporation's future business, prospects, and revenues. In addition, as a
new sales company, we face intense competition. In addition, there are no
assurances that we will be successful in overcoming the following changes:
- - Whether we will be able to retain existing customers or attract new
customers;
- - Whether we will be able to respond to changing customer demands;
- - Whether we will have adequate systems in place to manage new retail
service stores.
- - Whether we will be able to acquire or develop new store locations, for
desired expansion.
- - Whether we will maintain and increase sufficient customer traffic;
- - Whether we will be able to obtain additional equity or debt financing;
- - Whether we will be competitive in its core businesses;
- - Whether we will successfully locate and acquire existing beauty operations
for BeautyWorks U.S.A.
- - Whether we can hire and retain qualified management.
Our principal suppliers are non-retail wholesale distributors.
We plan to add at least 32 employees during the next 12 months to our retail
operations. If we acquire any beauty salons with existing operations additional
staff will be added to operate these businesses relative to the size of the
operation; however, at this time we are unable to determine how many additional
employees will be required. The three corporate office employees that are
presently on staff will manage new employees.
Recent Acquisition
During the second quarter of 2001, we acquired a full service salon located in
Boca Raton, Florida. This beauty salon currently employs approximately nine
workers and offers hair, nails and skin treatments to local customers. This is
our first acquisition in our recent salon 'roll-up' strategy. We plan to acquire
two additional salons during the fourth quarter of 2002; however, there are no
assurances that it will be successful in these plans.
Additional Financing
We may need to raise additional funds to meet future operating requirements. If
we raise additional funds through issuance of equity or debt securities, such
securities may have rights to our common stock, such as warrants or options. In
addition, shareholders may experience additional dilution from issuance and
exercise of equity or debt securities or warrants or options. There are no
assurances that we will be able to obtain additional financing or that
additional financing will be available at all.
Cleaning Express USA.Cleaning Express USA. We may need to raise additional
funds to meet future operating requirements. If we raise additional funds
through issuance of equity or debt securities, such securities may have rights
to our common stock, such as warrants or options. In addition, shareholders may
experience additional dilution from issuance and exercise of equity or debt
securities or warrants or options. There are no assurances that we will be able
to obtain additional financing or that additional financing will be available at
all.
Marketing for our home cleaning services include print advertising, television
and radio commercials, and a referral program that rewards customers with future
discounts for client referrals.
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 us. There can be no assurance that
we will be able to respond to various competitive factors affecting the
business. We will attempt to compete with its home cleaning industry competitors
by offering quality service at a low price. We plan to further expand in South
Florida by continuing its current marketing strategy.
The primary markets for Cleaning Express USA are individual households. No
single customer now makes up or is expected in future to make up more than ten
percent of the total revenues of Cleaning Express USA. Cleaning Express USA has
three full time employees and contracts with 40-50 workers that are each
independently contracted with us to service and provide home cleaning services
to existing and new customers.
BeautyWorks U.S.A., Inc. National Beauty Corp. expects to tap into the $52
billion beauty industry through its offering of quality service, discount priced
salons. It is estimated that over 90% of all personal care salons are closely
held, or 'mom and pop' owned and operated. Currently, Regis Corp. (NASDAQ:RGIS)
has over 6,000 salon stores and is the only well-known publicly traded company
using this approach. Beautyworks will aim to be both a retailer and provider of
such needed consumer services and provides a one-stop resource for professional
services on hair nails and skin care. The Company also plans to offer such
services as body and spa treatments, facials, massages, waxing, and tans.
We have retained the services of Neal Realty and Development of Fort Lauderdale,
Florida to search for shopping center locations. We believe the beauty services
business industry, is well established.
Initial plans are for multiple store locations in South Palm Beach County, Dade
County and Broward County, Florida, as soon as appropriate locations are
selected Clark County, Nevada is also being considered for a second development
market for Hair Max, Inc. In June 2002, the company made application with the
U.S. Patent and trademark office, to gain exclusive rights to the name and logo
for "HAIR MAX".
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 us. There can
be no assurance that we will be able to respond to various competitive factors
affecting the business.
The company will concentrate all efforts and strategies on increasing the brick
and mortar services business, and not pursue any further Internet or e-commerce
projects at this time.
We are actively seeking partners and compatible businesses to acquire within the
huge beauty services industry.
RESULTS OF OPERATIONS
- -----------------------
Net Income
The Company had a net loss of $(241,292), or $.06 per common share, for the
three months ended June 30, 2002, versus a net loss of $(51,490), or $(.76) for
the same period ended June 30, 2001. The change in net loss was primarily due to
an increase in common shares issued for professional services rendered and
salaries for officers.
Sales
Revenues increased $36,022 or 35% to $139,050 for the three months ended June
30, 2002 as compared with $103,028 for the three months ended June 30, 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 June
30, 2002 increased $249,868 to $312,000. In comparison with the three-month
period ended June 30, 2001, consulting and payroll increased approximately
$217,000 due to our acquisition of the salon in the second quarter of 2001 and
common stock issuances for professional services rendered and salaries for
officers.
Liquidity and Capital Resources
On June 30, 2002, we had cash of $3,750 and working capital of $50,675. This
compares with cash of $11,001 and working capital of $89,140 at December 31,
2001. The decrease in working capital was due to a decrease in cash and
expiration of prepaid expense.
Net cash used in operating activities was $5,813 for the six months ended June
30, 2002 as compared with net cash used in operating activities of $26,605 for
the period ended June 30, 2001. The decrease in cash used was primarily
attributable to an increase in net loss for the period.
Net cash used in investing activities was $-0- for the six months ended June 30,
2002 as compared with net cash used in investing activities of $4,395 for the
period ended June 30, 2001. The use of cash for the period ended June 30, 2001
was for salon equipment expenditures.
Net cash used in financing activities totaled $1,438 for the six months ended
June 30, 2002 as compared with net cash provided by financing activities of
$1,837 for the six months ended June 30, 2001. The decrease in net cash provided
by financing activities was primarily due to the collection of shareholder loan
receivable during 2001.
PART II. OTHER INFORMATION
- --------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NATIONAL BEAUTY CORPORATION
(Registrant)
Date: August 5, 2002 __________________________
/S/Michael J. Bongiovanni
Chief Financial Officer