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 September 30, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
HAIRMAX INTERNATIONAL CORP.
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(Exact name of small business issuer as specified in its charter)
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 19, 2003: 4,214,858
Number of shares of preferred stock outstanding as of
November 19, 2003: 2,050,000
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 2003 3
Consolidated Statements of Operations
- Three and Nine Months Ended September 30, 2003 and 2002 4
Consolidated Statements of Cash Flows
- Three and Nine Months Ended September 30, 2003 and 2002 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations 8-12
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 12
Item 4. Controls and Procedures 12
PART II
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Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 2003 (UNAUDITED)
=============================================================================
ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents $ 39,778
Inventory 500
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TOTAL CURRENT ASSETS 40,278
FIXED ASSETS
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Furniture and fixtures 40,749
Leasehold improvements 9,500
Equipment and machinery 36,698
Accumulated depreciation (54,136)
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NET FIXED ASSETS 32,811
OTHER ASSETS:
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Deposits 8,882
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TOTAL OTHER ASSETS 8,882
TOTAL ASSETS $ 81,971
============
See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF SEPTEMBER 30, 2003 (UNAUDITED)
=============================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
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Accounts payable and accrued expenses $ 6,637
Note payable to officer 30,000
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TOTAL CURRENT LIABILITIES 36,637
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STOCKHOLDERS' EQUITY
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Common stock ($.001 par value, 600,000,000 shares
authorized; 1,970,358 issued
and outstanding at September 30, 2003) 1,970
Series A convertible preferred stock ($.001 par value;
40,000,000 shares authorized, 2,050,000 shares
issued and outstanding at September 30, 2003) 2,050
Series B 2% convertible preferred stock ($.001 par
value; 1,000 shares authorized, -0- shares issued
and outstanding at March 31, 2003 and December 31,
2002, respectively) -
Additional paid in capital 2,940,003
Retained deficit (2,898,689)
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TOTAL STOCKHOLDERS' EQUITY 45,334
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 81,971
============
See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
============================================================================
Three Months Ended Nine Months Ended
September 30, September 30,
2003 2002 2003 2002
---------- ---------- ---------- ----------
REVENUES:
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Sales $ 108,684 $ 120,546 $ 337,265 $ 404,852
Cost of sales (48,248) (60,257) (147,800) (197,143)
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GROSS PROFIT 60,436 60,289 189,465 207,709
EXPENSES:
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Selling, general and
administrative 484,611 127,873 916,033 550,775
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TOTAL EXPENSES 484,611 127,873 916,033 550,775
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OPERATING LOSS $ (424,175) $ (67,584) $ (726,568) $ (343,066)
OTHER (EXPENSE):
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Unrealized loss on
trading securities - - - (243)
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NET (LOSS) $ (424,175) $ (67,584) $ (726,568) $ (343,309)
========== ========== ========== ==========
Net (loss) per share -
basic and fully
diluted $ (0.65) $ (0.72) $ (1.13) $ (4.48)
========== ========== ========== ==========
Weighted average
shares outstanding * 657,191 94,101 644,490 76,649
========== ========== ========== ==========
* Retroactively restated for a 50 for 1 reverse stock split on August 1, 2003.
See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
==========================================================================
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ (726,568) $ (343,309)
Adjustments to reconcile net loss to net
cash (used in) operating activities:
Depreciation 7,500 3,000
Common stock issued for services 371,281 280,240
Preferred stock issued for services 160,000 -
Unrealized loss on trading securities - 243
(Increase) decrease in operating assets:
Accounts receivable - 771
Inventory - (2,387)
Prepaid expenses - 63,048
Increase (decrease) in operating liabilities
Accounts payable 6,605 1,775
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (181,182) 3,381
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases of fixed assets (3,505) (18,683)
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NET CASH USED IN INVESTING ACTIVITIES (3,505) (18,683)
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CASH FLOWS FROM FINANCING ACTIVITIES:
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Proceeds from shareholder loan payable 30,000 25,000
Outstanding checks in excess of bank balance
- (11,403)
Collections on common stock issuances 95,628 -
Principal repayments under capitalized lease - (2,313)
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NET CASH PROVIDED BY FINANCING ACTIVITIES 125,628 11,284
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NET (DECREASE) IN CASH AND CASH EQUIVALENTS (59,059) (4,018)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 98,837 11,001
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END OF THE PERIOD $ 39,778 $ 6,983
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SUPPLEMENTARY CASH FLOW INFORMATION OF NON-CASH FINANCING:
- ----------------------------------------------------------
Common stock issued for services $ 371,281 $ 280,240
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Preferred stock issued for services $ 160,000 $ -
========== ==========
See accompanying notes to consolidated financial statements
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
September 30, 2003 (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 accounting principles generally accepted in the
United States of America 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, 2003, the results of operations for the three and nine month
period ended September 30, 2003 and 2003, and cash flows for the nine months
ended September 30, 2003 and 2002. The results for the period ended September
30, 2003 are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2003. These financial statement should be
read in conjunction with the financial statements and notes for the year ended
December 31, 2002 appearing in the Company's annual report on Form 10-KSB as
filed with the Securities and Exchange Commission.
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 - 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 generally accepted accounting principles. The assets of the
discontinued subsidiary are reflected as corporate assets. Summarized revenues
and expense information by segment for 2003 and 2002, as excerpted from the
internal management reports, is as follows:
2003 2002
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Revenue:
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Residential cleaning $ 158,453 $ 238,152
Beauty salons 178,812 166,700
Corporate -0- -0-
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$ 337,265 $ 404,852
Net (Loss):
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Residential cleaning $ (289,231) $ (261,303)
Beauty salons 22,501 1,235
Corporate (459,838) (82,998)
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$ (726,568) $ (343,066)
Identifiable Assets:
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Residential cleaning $ 9,050 $ 6,252
Beauty salons 12,500 42,822
Corporate 60,421 37,569
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$ 81,971 $ 86,773
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
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Hairmax International 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
expressed 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 and
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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Hairmax International Corp., formerly known as National Beauty Corp, 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 Hairmax of Nevada, Inc. Cleaning Express USA, Inc. 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. Hairmax International currently offers hairstyling beauty services and
products through its retail beauty salons in the South Florida area through its
Hair Max of Florida, Inc. subsidiary. Hairmax International intends to operate a
chain of haircutting stores, located inside or next to major retailers, through
Hair Max subsidiaries.
Hairmax International's business plan entails developing hairstyling salons and
marketing the company's services, through a niche concept, "WE STYLE FOR LESS",
including marketing our own private label beauty products through these
operations. Hairmax International is also pursuing the development of its
"HAIRMAX" franchise concept, which it expects to launch and market in first
quarter 2004, the company expects to have five operating salons, in place, and a
training center in South Florida. The company is presently working with several
business development consultants, and plans to pursue celebrity affiliation with
the Hairmax concept, and the franchise development program. There is currently
one Hairmax store in Boca Raton, Florida. After some minor construction delays,
the second Hair Max store opened in the first quarter of 2003 in Coral Springs,
Florida, and expects to open the third Hairmax in South Florida, during the
fourth quarterHairmax of Nevada Inc, the second location in Las Vegas, Nevada,
is expected to open during the fourth quarter of 2003, with plans to open ten
stores in Las Vegas, Nevada over the next two years, beginning with two stores
in 2003. Overall, we plan to roll out 150 haircutting stores across the nation,
with plans to expand internationally.
We expect to add at least 24 employees, through our subsidiary companies during
the next 12 months to our retail operations. We are unable to determine how many
additional employees will be required for support operations. The corporate
staff of four office employees and various consultants that are presently on
staff will manage new employees.
Max Entertainment Corp: The Company recently established a new subsidiary, the
company has plans to develop several entertainment projects, and expects to
cross market with the Beauty services industry. During October 2003, the company
retained the services of David Dadon and Howard Jacobson, to provide expertise
in TV and film production and distribution, as Independent Contractors. On
October 27, 2003, we entered into an agreement for purchase and distribution
rights for a new action, feature film "Revenge Games".
On November 16, 3003, the company terminated the services of the Independent
Contractors for cause, and has subsequently decided to cease future operations
for the subsidiary Max Entertainment Corp.
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. The company has selected Las Vegas, Nevada for a second development
market for Hairmax "We style for less" concept. 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 registration is still pending.
RESULTS OF OPERATIONS
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Net Income
The company had a net loss of $(424,175) and $(726,568), or $(.65) and $(1.13)
per common share, for the three and nine months ended September 30, 2003,
respectively, versus a net loss of $(67,584) and $(343,309), or $(.72) and
$(4.48), respectively, for the same period ended September 30, 2002. The change
in net loss was primarily due to an increase in common and preferred shares
issued for professional services rendered and salaries for officers. Sales
Cleaning revenues decreased $2,493 and $79,699 or 5% and 33% to $46,342 and
$158,453 for the three and nine months ended September 30, 2003, respectively,
as compared with $48,385 and $238,152 for the three and nine months ended
September 30, 2002. The decrease was primarily due a decline in cleaning
division demand in the first through third quarters of 2003 compared to the
comparable period in 2002. The Company is also concentrating more on its beauty
salon segment. Average selling prices and gross margins remained fairly
constant. Beauty salon revenues increased $12,635 and $12,112 or 25% and 7% to
$62,342 and $178,812 for the three and nine months ended September 30, 2003,
respectively, as compared with $49,707 and $166,700 for the three and nine
months ended September 30, 2002. The increase in the third quarter of 2003 was
primarily due increased demand due to stores being matured in the areas opened.
Expenses
Selling, general, and administrative expenses for the three and nine months
ended September 30, 2003 increased $356,7387 and $365,258 to $484,611 and
$916,033, respectively. In comparison with the nine-month period ended September
30, 2002, consulting and payroll increased due to common stock issuances for
professional services rendered and salaries for officers in the first through
third quarters of 2003, preferred stock issuances in the second quarter of 2003,
and the addition of an area manager in the first quarter of 2003 to oversee
beauty salon operations. There were 200,000 pre-split (4,000 post-split) common
shares issued to a consultant in the first quarter of 2003 and 590,394 common
shares issued to consultants and officers in the third quarter of 2003. The
shares were priced and recorded at the closing stock price on the date of
issuances. There were also 1,400,000 preferred shares issued to officers in the
second quarter of 2003 for services rendered in the amount of $160,000 and
100,000 preferred shares converted into 1,000,000 common shares in the third
quarter of 2003.
Liquidity and Capital Resources
On September 30, 2003, we had cash of $39,778 and working capital of $3,641.
This compares with cash of $98,837 and working capital of $98,405 at December
31, 2002. The decrease in cash and working capital was due to an increase in net
loss for the first through third quarters of 2003. Operating activities had a
net usage of cash in the amount of $181,182 during the nine months ended
September 30, 2003 reflecting an excess of expenditures over revenues.
Net cash used in operating activities was $181,182 for the nine months ended
September 30, 2003 as compared with net cash provided by operating activities of
$3,381 for the same period ended September 30, 2002. The increase in cash used
was primarily attributable to an increase in net loss for the 2003 period and
common and preferred stock issuances to officers and consultants.
Net cash provided by financing activities was for the nine months ended
September 30, 2003 was $125,628 as compared with net cash provided by financing
activities of $11,284 for the nine months ended September 30, 2002. The increase
in net cash provided by financing activities was solely due to the collections
on common stock issuances and proceeds from a loan made by the officer to us.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKER RISK
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We do not have any material risk with respect to changes in foreign currency
exchange rates, commodities prices or interest rates. We do not believe that we
have any other relevant market risk with respect to the categories intended to
be discussed in this item of this report.
ITEM 4. CONTROLS AND PROCEDURES
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(a) On September 30, 2003, 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
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Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
During the three months ended September 30, 2003, we issued 250,000 common
shares to Edward Roth pursuant to his employment agreement.
During the three months ended September 30, 2003, we issued 340,394 common
shares to various consultants for services rendered during the quarter then
ended.
During the three months ended September 30, 2003, we issued 1,000,000 common
shares to Edward Roth upon conversion of 100,000 shares of preferred stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The majority of the security holders voted to issue common stock of the Company
to various officers and consultants during the nine months ended September 30,
2003.
Subsequent to September 30, 2003, we refer your attention to Form 8-K as filed.
See discussion of our issuance of 2,000,000 common shares for the purchase of
the full title and worldwide distribution rights of the movie Revenge Games, in
accordance with the purchase agreement dated October 27, 2003.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
Incorporated by reference.
SIGNATURES
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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.
HAIRMAX INTERNATIONAL CORPORATION
(Registrant)
Date: November 19, 2003 /S/ Michael J. Bongiovanni
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Michael J. Bongiovanni
Chief Financial Officer
Date: November 19, 2003
/S/ Edward A. Roth
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Edward A. Roth
Chief Executive Officer