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 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.
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(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 Months Ended June 30, 2002 and 2001 4
Consolidated Statements of Cash Flows
- Three 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, Dec. 31,
2002 2001
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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
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
OTHER ASSETS:
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Deposits 6,656 6,656
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TOTAL OTHER ASSETS 6,656 6,656
TOTAL ASSETS $ 83,865 $ 136,743
========== ==========
See accompanying notes to financial statements
<Page 2>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF JUNE 30, 2002 AND DECEMBER 31, 2001
=============================================================================
(Unaudited)
June 30, Dec. 31,
2002 2001
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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
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TOTAL CURRENT LIABILITIES 3,794 16,207
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STOCKHOLDERS' EQUITY
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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)
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TOTAL STOCKHOLDERS' EQUITY 80,071 120,536
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 83,865 $ 136,743
========== ==========
See accompanying notes to financial statements
<Page 3>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
=============================================================================
Three Months Ended Six Months Ended
June 30, June 30,
2002 2001 2002 2001
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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:
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Selling, general and
administrative 312,000 62,132 422,902 104,350
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TOTAL EXPENSES 312,000 62,132 422,902 104,350
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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* ,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
<Page 4>
NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
=============================================================================
2002 2001
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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-
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NET CASH (USED IN) OPERATING ACTIVITIES 5,211 (26,605)
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CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Collection of shareholder loan receivable -0- 6,013
Expenditures for leaseholds and equipment -0- (4,395)
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NET CASH USED IN INVESTING ACTIVITIES 5,211 1,618
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CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Outstanding checks in excess of bank balance (11,024) -0-
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 (12,462) (7,850)
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS (7,251) (32,837)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE YEAR 11,001 56,191
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END OF THE PERIOD $ 3,750 $ 23,354
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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
<Page 5>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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NATIONAL BEAUTY CORPORATION & SUBSIDIARIES
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.
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 Six Six
BASIC & Months Ended Months Ended Months Ended Months Ended
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.
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.
<PAGE 6>
NOTE 3 - COMMITMENTS
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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
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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 the fixed assets of 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
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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.
To distinguish the cleaning services segment from beauty supply, the company
generated sales of $85,242 and $53,808 during the six months ended June 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.
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.
Non-Operating Expense Items
The unrealized loss on securities in 2002 and 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 included 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. As of June 30, 2002, the securities valuation was written down
to $1,500 to reflect the value of the investments.
Recorded interest expense is attributable to interest paid on the outstanding
shareholder loan balances during the 2002 and 2001 periods.
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.
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
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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
-------------------------
Michael J. Bongiovanni
Chief Financial Officer