U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT NO. 1
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 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
---------------------------
(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
November 14, 2002: 4,871,062
Number of shares of preferred stock outstanding as of
November 14, 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
- September 30, 2002 and December 31, 2001 3
Consolidated Statements of Operations
- Three and Nine Months Ended September 30, 2002 and 2001 4
Consolidated Statements of Cash Flows
- Three and Nine Months Ended September 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 SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
=============================================================================
(Unaudited)
Sept. 30, Dec. 31,
2002 2001
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ASSETS
------
CURRENT ASSETS:
- ---------------
Cash and cash equivalents $ 6,983 $ 11,001
Accounts receivable 132 903
Marketable securities 1,500 1,743
Inventory 4,087 1,700
Prepaid rent 2,226 -
Prepaid consulting 22,500 90,000
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TOTAL CURRENT ASSETS 37,428 105,347
FIXED ASSETS
- ------------
Furniture 21,616 21,616
Leasehold improvements 9,500 3,500
Equipment 47,668 34,985
Accumulated depreciation (38,361) (35,361)
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NET FIXED ASSETS 40,423 24,740
OTHER ASSETS:
- -------------
Deposits 8,882 6,656
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TOTAL OTHER ASSETS 8,882 6,656
TOTAL ASSETS $ 86,733 $ 136,743
========== ==========
See accompanying notes to consolidated financial statements
<Page 2>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF SEPTEMBER 30, 2002 AND DECEMBER 31, 2001
=============================================================================
(Unaudited)
Sept. 30, Dec. 31,
2002 2001
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
- -------------------
Accounts payable and accrued expenses $ 4,005 $ 2,230
Outstanding checks in excess of bank balance 261 11,664
Shareholder loan payable 25,000 -
Current portion of capitalized lease obligation - 2,313
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TOTAL CURRENT LIABILITIES 29,266 16,207
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STOCKHOLDERS' EQUITY
- --------------------
Common stock ($.001 par value, 100,000,000
shares authorized; 4,746,062 and
1,466,362 issued and outstanding at
September 30, 2002 and December 31, 2001,
respectively) 4,746 1,466
Series A convertible preferred stock
($.001 par value; 40,000,000 shares
authorized, 750,000 and 950,000 shares
issued and outstanding at September 30,
2002 and December 31, 2001, respectively) 750 950
Series B 2% convertible preferred stock
($.001 par value; 1,000 shares
authorized, -0- shares issued and
outstanding at September 30, 2002 and
December 31, 2001, respectively) - -
Additional paid in capital 1,679,610 1,402,450
Retained deficit (1,627,639) (1,284,330)
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TOTAL STOCKHOLDERS' EQUITY 57,467 120,536
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 86,733 $ 136,743
========== ==========
See accompanying notes to consolidated financial statements
<Page 3>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
=============================================================================
Three Months Ended Nine Months Ended
Sept. 30, Sept. 30,
2002 2001 2002 2001
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REVENUES:
- ---------
Sales $ 120,546 $ 135,036 $ 404,852 $ 25,351
Cost of sales (60,257) (70,862) (197,143) (197,811)
---------- ---------- ---------- ----------
GROSS PROFIT 60,289 64,174 207,709 127,540
EXPENSES:
- ---------
Selling, general
and administrative 127,873 79,405 551,018 183,755
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TOTAL EXPENSES 127,873 79,405 551,018 183,755
---------- ---------- ---------- ----------
OPERATING LOSS $ (67,584) $ (15,231) $ (343,309) $ (56,215)
OTHER (EXPENSE):
- ----------------
Unrealized loss on
trading securities - (6,592) - (62,000)
Interest expense - (260) - (780)
---------- ---------- ---------- ----------
NET (LOSS) $ (67,584) $ (22,083) $ (343,309) $ (118,995)
========== ========== ========== ==========
Net (loss) per share -
basic and fully diluted $ (0.01) $ (0.07) $ (0.09) $ (0.76)
========== ========== ========== ==========
Weighted average shares* 4,705,062 322,361 3,832,434 155,694
========== ========== ========== ==========
*Includes retroactive adjustment for 1 for 200 reverse stock split effected
during 2001.
See accompanying notes to consolidated financial statements
<Page 4>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
=============================================================================
2002 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ (343,309) $ (118,195)
Adjustments to reconcile net loss to
net cash (used in) operating activities:
Depreciation 3,000 2,842
Common stock issued for services 280,240 36,365
Unrealized loss on trading securities 243 62,000
(Increase) decrease in operating assets:
Accounts receivable 771 (245)
Inventory (2,387) (523)
Prepaid consulting 67,500 (1,370)
Prepaid rent (2,226) -0-
Deposits (2,226) (4,100)
Increase (decrease) in operating liabilities
Accounts payable 1,775 -0-
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NET CASH (USED IN) OPERATING ACTIVITIES 3,381 (23,226)
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CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Expenditures for leaseholds and equipment (18,683) (4,395)
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NET CASH USED IN INVESTING ACTIVITIES (18,683) (4,395)
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CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Proceeds from shareholder loan payable 25,000 -0-
Collection of shareholder loan receivable -0- 6,013
Outstanding checks in excess of bank balance (11,403) -0-
Principal repayments of note payable -0- (11,945)
Principal repayments under capitalized lease (2,313) (1,875)
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NET CASH PROVIDED BY (USED)
IN FINANCING ACTIVITIES 11,284 (7,807)
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS (4,018) (35,428)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE YEAR 11,001 56,191
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END OF THE PERIOD $ 6,983 $ 20,763
========== ==========
SUPPLEMENTARY CASH FLOW INFORMATION OF NON-CASH FINANCING:
- ----------------------------------------------------------
Common stock issued for services $ 280,240 $ 36,365
========== ==========
Assumption of note payable in
connection with assets acquisition $ - $ 15,000
========== ==========
See accompanying notes to consolidated financial statements
<Page 5>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
September 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
September 30, 2002, the results of operations for the three and nine month
periods ended September 30, 2002 and 2001, and cash flows for the nine months
ended September 30, 2002 and 2001. The results for the period ended September
30, 2002, are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2002.
Revenue recognition is a critical accounting policy of ours since it represents
the majority of our entire financial statements taken as a whole. It is also
important in light of the Staff Accounting Bulletins published by the Securities
and Exchange Commission the past few years.
NOTE 2 - (LOSS) PER SHARE
The following represents the calculation of (loss) per share:
Three Three Nine Nine
BASIC & Months Ended Months Ended Months Ended Months Ended
FULLY DILUTED* Sept 30, 2002 Sept 30, 2001 Sept 30, 2002 Sept 30, 2001
- -------------- ----------------------------- -----------------------------
Net Loss . . . .$ (67,584) $ (22,083) $ (343,309) $ (118,995)
Less- preferred
stock dividends. . . -0- -0- -0- -0-
----------------------------- -----------------------------
Net Loss . . . .$ (67,584) $ (22,083) $ (343,309) $ (118,995)
Weighted average number
of common shares** .4,705,062 322,361 3,832,434 155,694
----------------------------- -----------------------------
Basic & Fully Diluted*
loss per share .$ (.01) $ (.07) $ (.09) $ (.76)
============================= =============================
* The Company had no common stock equivalents during the periods presented.
** Includes retroactive adjustment for 1 for 200 reverse stock split.
<PAGE 6>
Basic EPS equals diluted EPS because of the loss above. Preferred stock had no
effect on the calculation of EPS. Common stock purchase options are common stock
equivalents that were excluded from the computation of diluted loss per share.
NOTE 3 - COMMITMENTS
The Company is committed to two employment agreements through April 1, 2007.
Pursuant to the agreements, two of the Company's officers and majority
shareholders shall receive total combined annual salaries of $325,000 and a
combined 300,000 preferred shares per annum.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- --------
National Beauty Corp. is hereby providing cautionary statements identifying
important factors that could cause our actual results to differ materially from
those projected in forward looking statements 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 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, Hair Max of Florida, Inc. f/k/a
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 Hair Max of
Florida, Inc. subsidiary. National Beauty intends to operate a chain of
haircutting stores, located inside or next to major retailers, through Hair Max.
National Beauty's business plan entails developing beauty 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. There is currently one Hairmax store in Boca Raton, Florida.
After some minor construction delays, the second Hair Max store is planned to
open by the fourth quarter of 2002 in Coral Springs, Florida. Further, National
Beauty plans to open ten stores in Las Vegas, Nevada over the next two years,
beginning with two stores in early spring 2003. Overall, National Beauty plans
to roll out 150 haircutting stores across the nation. We expect to add at least
24 employees during the next 12 months to our retail operations. We are unable
to determine how many additional employees will be required exactly, for support
operations. The three corporate office employees that are presently on staff
will manage new employees.
We have retained the services of Neal Realty and Development of Fort Lauderdale,
Florida to search for shopping center locations in Florida, as well as Lucchesi
and Associates of Las Vegas, Nevada to represent, find and negotiate suitable
locations for Hair Max in Southern Nevada. On August 1, 2002, the company signed
a 5-year lease for a new store in Coral Springs, Florida, that is expected to
begin operation by the fourth quarter of 2002.
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".
RESULTS OF OPERATIONS
- -----------------------
Net Income
The company had a net loss of $(67,584), or $(.01) per common share, for the
three months ended September 30, 2002, versus a net loss of $(22,083), or $(.07)
for the same period ended September 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 decreased $14,490 or 11% to $120,546 for the three months ended
September 30, 2002 as compared with $135,036 for the three months ended
September 30, 2001. The decrease was primarily due a decline in cleaning
division sales in the third quarter of 2002 compared to the comparable period in
2001. Average selling prices and gross margins remained fairly constant. To
distinguish the cleaning services segment from beauty supply, the company
generated sales of $76,662 and $43,884 during the three months ended September
30, 2002 from those segments, respectively. The CEO reviewing the general ledger
and check registers on a timely basis measures segment performance. Product
sales are immaterial to beauty salon sales, taken as a whole. The company
estimates that no more than 5% of above mentioned beauty sales is product
related.
The profitability measure used by the chief decision makers in allocating
resources and assessing segment performance is net cash flows. Net cash flows
are monitored closely for each segment on a timely basis and adjustments, if
any, are made in order to strive for optimal profits. The CEO is the Chief
Operating Decision Maker. The Chief Operating Decision Maker uses net cash flow
as his primary profitability measure in assessing segment performance and
allocating resources.
Expenses
Selling, General, and Administrative expenses for the three months ended
September 30, 2002 increased $48,468 to $127,873. In comparison with the
three-month period ended September 30, 2001, consulting and payroll increased by
$44,980 due to common stock issuances for professional services rendered and
salaries for officers in the third quarter of 2002. There were 346,000 shares
issued to consultants and an officer in the third quarter of 2002. The shares
were priced and recorded at 13 cents per share representing the closing stock
price on the dates of issuances.
The unrealized loss on securities in the prior period of 2001 is a result of a
write down in the fair value of the securities during the respective periods. As
to trading losses, 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. Since the stock is restricted, there are no controls
to limit the losses in those securities. Ed Roth, CEO, keeps the certificates in
safe keeping under lock and key as an internal control over safeguarding of the
corporate asset. Management's intent is to add value to shareholders by trying
to sell the securities at the most desirable amount without affecting the stock
price in an illiquid stock position. These stocks do not trade much and are
highly illiquid.
Liquidity and Capital Resources
On September 30, 2002, we had cash of $6,983 and working capital of $8,162. 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 consulting fees. Note that the company has a $25,000
shareholder loan payable to an officer. This resulted from proceeds of $25,000
from the shareholder and related officer in the third quarter of 2002 that were
used to acquire fixed assets for the new Hair Max salon that will be opened in
the forth quarter of 2002. The fixed asset expenditures consisted of signage,
leasehold improvements and salon equipment purchases that were acquired in the
third quarter of 2002 with the proceeds from the loan. The loan has a two-year
pay back term at 15% interest per annum. However, the company repaid the loan in
October 2002. Accordingly, the loan is presented as a short-term liability.
Net cash used in operating activities was $3,381 for the nine months ended
September 30, 2002 as compared with net cash used in operating activities of
$23,226 for the same period ended September 30, 2001. The decrease in cash used
was primarily attributable to an increase in net loss for the 2002 period.
Net cash used in investing activities was $18,683 for the nine months ended
September 30, 2002 as compared with net cash used in investing activities of
$4,395 for the period ended September 30, 2001. The use of cash for the period
ended September 30, 2002 and 2001 was for salon equipment expenditures in both
periods.
Net cash provided by financing activities totaled $11,284 for the nine months
ended September 30, 2002 as compared with net cash used in financing activities
of $7,807 for the nine months ended September 30, 2001. The increase in net cash
provided by financing activities was primarily due to the proceeds of the
aforementioned shareholder loan during the third quarter of 2002.
Note that 30,000,000 common shares were placed in escrow subsequent to the
quarter ended September 30, 2002 for the merger with Zzyzx Zzazx Zzozx, Inc. See
Form 8-K previously issued in October 2002 for details of this transaction.
These shares are technically issued but not outstanding.
ITEM 3. CONTROLS AND PROCEDURES
- --------
(a) On September 30, 2002, our Chief Executive Officer and Chief Financial
Officer made an evaluation of our disclosure controls and procedures. In
our opinion, the disclosure controls and procedures are adequate because
the systems of controls and procedures are designed to assure, among other
items, that 1) recorded transactions are valid; 2) valid transactions are
recorded; and 3) transactions are recorded in the proper period in a timely
manner to produce financial statements which present fairly the financial
condition, results of operations and cash flows for the respective periods
being presented. Moreover, the evaluation did not reveal any significant
deficiencies or material weaknesses in our disclosure controls and
procedures.
(b) There have been no significant changes in our internal controls or in other
factors that could significantly affect these controls since the last
evaluation.
The CEO is the Chief Operating Decision Maker. The Chief Operating Decision
Maker uses net cash flow as his primary profitability measure in assessing
segment performance and allocating resources.
PART II. OTHER INFORMATION
- ---------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
On August 19, 2002, the shareholders of 100% of National Beauty Corp.'s issued
and outstanding shares of Series A convertible preferred stock authorized the
reduction in the number of shares of Series A convertible preferred stock from
50,000,000 to 40,000,000 in order to allow creation of the Series B 2%
convertible preferred stock.
On July 8, 2002, National Beauty issued 200,000 shares of restricted common
stock to American Market Support for investor relations services, for
consideration of payment in full. 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.
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
Incorporated by reference.
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: November 14, 2002 /S/ Michael J. Bongiovanni
--------------------------
Michael J. Bongiovanni
Chief Financial Officer
Date: November 14, 2002
/S/ Edward A. Roth
------------------
Edward A. Roth
Chief Executive Officer