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 March 31, 2004
[ ] 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)
NATIONAL BEAUTY CORP.
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(Former name of registrant)
Nevada 13-3422912
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(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
9900 West Sample Road, Coral Springs, Florida 33065
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(Address of principal executive offices)
(954) 825-0299
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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
May 26, 2004: 17,788,108
Number of shares of preferred stock outstanding as of
May 26, 2004: 2,850,000
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
Condensed Consolidated Balance Sheet
- March 31, 2004 (unaudited) 3
Condensed Consolidated Statements of Operations
- Three Months Ended March 31, 2004 and 2003 (unaudited) 4
Condensed Consolidated Statements of Cash Flows
- Three Months Ended March 31, 2004 and 2003 (unaudited) 5
Notes to Condensed Consolidated Financial Statements
(unaudited) 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
ITEM 1.
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HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2004 (UNAUDITED)
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ASSETS
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CURRENT ASSETS:
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Cash and cash equivalents $ 1,936
Marketable securities 6,374
Inventory 500
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TOTAL CURRENT ASSETS 8,810
PROPERTY AND EQUIPMENT:
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Property and equipment 136,791
Accumulated depreciation (69,886)
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NET FIXED ASSETS 66,905
OTHER ASSETS:
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Deposits 8,882
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TOTAL OTHER ASSETS 8,882
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TOTAL ASSETS $ 84,597
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See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET (CONTINUED)
AS OF MARCH 31, 2004 (UNAUDITED)
================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
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CURRENT LIABILITIES
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Accounts payable and accrued expenses $ 118,506
Shareholder loan payable 70,537
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TOTAL CURRENT LIABILITIES 189,043
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STOCKHOLDERS' DEFICIT
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Series A convertible preferred stock ($.001 par value;
40,000,000 shares authorized, 1,550,000 shares issued
and outstanding) 1,550
Series B 2% convertible preferred stock ($.001 par value;
1,000 shares authorized, -0- shares issued and outstanding) -
Common stock ($.001 par value, 100,000,000 shares
authorized; 11,256,108 issued and outstanding) 11,256
Additional paid in capital 5,850,669
Retained deficit (5,967,921)
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TOTAL STOCKHOLDERS' DEFICIT (104,446)
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 84,597
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See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH, 2004 AND 2003
==================================================================================
Three Months Ended March 31,
2004 2003
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REVENUES:
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Sales $ 175,369 $ 121,098
Cost of sales (44,197) (45,751)
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GROSS PROFIT 131,172 75,347
EXPENSES:
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Common stock issued for consulting services 236,992 10,000
Other selling, general and administrative 176,270 116,580
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TOTAL EXPENSES 413,262 126,580
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OPERATING LOSS $ (282,090) $ (51,233)
OTHER EXPENSE:
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Unrealized gain on marketable securities $ 958 $ -
Interest (1,381) -
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NET LOSS $ (282,513) $ (51,233)
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Net loss per share - basic and fully diluted $ (0.03) $ (0.03)
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Weighted average shares outstanding 10,439,296 1,770,886
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See accompanying notes to consolidated financial statements
HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003
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2004 2003
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CASH FLOWS FROM OPERATING ACTIVITIES:
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Net loss $ (282,513) $ (51,233)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 5,000 2,500
Common stock issued for services 236,992 10,000
Unrealized gain on maretable securities (958)
Increase (decrease) in operating liabilities:
Accrued interest on shareholder loan payable 1,381
Accounts payable and accrued expenses 38,040 684
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NET CASH USED IN OPERATING ACTIVITIES (2,058) (38,049)
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CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Proceeds from shareholder loan payable - -
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NET CASH PROVIDED BY FINANCING
ACTIVITIES - -
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NET DECREASE IN CASH AND CASH EQUIVALENTS (2,058) (38,049)
CASH AND CASH EQUIVALENTS
BEGINNING OF THE PERIOD 3,994 98,837
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END OF THE PERIOD $ 1,936 $ 60,788
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SUPPLEMENTARY CASH FLOW INFORMATION OF NON-CASH FINANCING:
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Common stock issued for services $ 236,992 $ 10,000
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Interest paid $ - $ -
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Income taxes paid $ - $ -
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See accompanying notes to consolidated financial statements
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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HAIRMAX INTERNATIONAL CORP. & SUBSIDIARIES
March 31, 2004 (UNAUDITED)
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 March
31, 2004, the results of operations for the three month period ended March 31,
2004 and 2003, and cash flows for the three months ended March 31, 2004 and
2003. The results for the period ended March 31, 2004 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2004. These financial statement should be read in conjunction with
the financial statements and notes for the year ended December 31, 2003
appearing in the Company's annual report on Form 10-KSB as filed with the
Securities and Exchange Commission.
Revenue Recognition - Revenue for the residential cleaning operations is
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recognized when cleaning services are performed. Revenues for beauty salon
services are recognized when the services are rendered. Revenues for beauty
products are recognized when the retail products are sold at the beauty salon
locations
Management's Use of Estimates - The preparation of financial statements in
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conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Loss Per Share - We report loss per share in accordance with Statement of
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Financial Accounting Standard (SFAS) No.128. This statement requires dual
presentation of basic and diluted earnings (loss) with a reconciliation of the
numerator and denominator of the loss per share computations. Basic earnings per
share amounts are based on the weighted average shares of common outstanding. If
applicable, diluted earnings per share would assume the conversion, exercise or
issuance of all potential common stock instruments such as options, warrants and
convertible securities, unless the effect is to reduce a loss or increase
earnings per share. There were no adjustments required to net loss for the
period presented in the computation of diluted earnings per share.
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:
2004 2003
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Revenue:
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Residential cleaning $ 59,544 $ 61,276
Beauty salons 125,825 59,822
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$ 175,369 $ 121,098
Net Loss:
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Residential cleaning $ (69,021) $ (69,087)
Beauty salons (214,450) 17,854
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$ (283,471) $ (51,233)
Identifiable Assets:
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Residential cleaning $ 29,452 $ 33,953
Beauty salons 54,187 70,523
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$ 83,639 $ 104,476
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.
NOTE 4 - COMMON STOCK AND RELATED PARTY TRANSACTIONS
During the quarter ended March 31, 2004, the Company issued 1,219,500 and
406,750 shares of its common stock for services rendered by officers and outside
consultants, respectively. The shares were valued at the date of issuance
yielding an aggregate fair value of $191,905 and $45,087 for shares issued to
officers and outside consultants, respectively.
NOTE 5 - SUBSEQUENT EVENTS IN EQUITY TRANSACTIONS
Subsequent to March 31, 2004, the Company issued 5,175,000 shares of its common
stock for services to be rendered by its officers over the following 18 months.
The shares were valued at the date of issuance yielding an aggregate fair value
of $537,900.
Subsequent to March 31, 2004, the Company issued 1,200,000 shares of its common
stock for services rendered in its cleaning services business. The shares were
valued at the date of issuance yielding an aggregate fair value of $132,000.
On April 27,2004 the Company issued 300,000 shares of its Preferred Class A
shares to officers pursuant to their employment contracts.
On April 27, 2004 the Company issued 1,000,000 shares of its Preferred Class A
shares to an officer in satisfaction of of the entire shareholder loan payable.
NOTE 6 - GOING CONCERN
We have suffered recurring losses from operations, have a negative working
capital and have a stockholders' deficit as of March 31, 2004. In addition, we
have yet to generate an internal cash flow from its business operations. These
factors raise substantial doubt as to our ability to continue as a going
concern.
Management's plans with regard to these matters encompass the following actions:
1) obtain funding from new investors to alleviate our capital deficiency, 2)
implement a plan focusing on developing and expanding our subsidiaries through
increased sales and marketing efforts, and 3) develop a new acquisition strategy
to acquire small, privately held hair salons. Our continued existence is
dependent upon its ability to resolve it liquidity problems and increase
profitability in its current business operations. However, the outcome of
management's plans cannot be ascertained with any degree of certainty. The
accompanying consolidated financial statements do not include any adjustments
that might result from the outcome of these risks and uncertainties.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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HairMax International, Inc. 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 2005, we
expect to have five operating salons, in place, and a training center in South
Florida. We are presently working with several business development consultants,
and plans to pursue celebrity affiliation with the Hairmax concept, and the
franchise development program. There are currently three HairMax stores in South
Florida. HairMax of Nevada, inc. currently operates two stores in Nevada.
Overall we plan on acquiring existing salon operations, from private owners. In
our opinion, we will be able to increase sales significantly, by purchasing
successful salon operations, and add them to our portfolio of developing
companies. We recently targeted several potential salons, and expects
aggressively seek to purchase them, if we are successful in negotiating for
acquisition plans to expand internationally.
We expect to add at least 18 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.
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. 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 Loss
The company had a net loss of $(283,471) and $(51,233), or $(.03) and $(.001)
per common share, for the three months ended March 31, 2004 and 2003,
respectively. The change in net loss was primarily due to an increase in common
shares issued for professional services rendered and salaries for officers.
Sales
Cleaning revenues decreased $1,732 or 2.8% to $59,544 for the three months ended
March 31, 2004, from $61,276 for the three months ended March 31, 2003. The
decrease was primarily due a decline in cleaning division demand in the first
quarter of 2004 compared to the comparable period in 2003. The Company is also
concentrating more on its beauty salon segment. Average selling prices and gross
margins remained fairly constant. Beauty salon revenues increased $66,003 or
110% to $125,825 for the three months ended March 31, 2004 as compared with
$59,822 for the three months ended March 31, 2003. The increase in the first
quarter of 2004 was primarily due increased demand due to stores being matured
in the areas opened.
Expenses
Selling, general, and administrative expenses for the three months ended March
31, 2004 increased $286,682 or 226% to $413,262. In comparison with the three
month period ended March 31, 2003 amount of $126,580, consulting and payroll
increased due to common stock issuances for professional services rendered and
salaries for officers in the first quarter of 2004. There were 1,626,250 common
shares issued to consultants and officers in the first quarter of 2004 that were
valued at the closing stock prices at the dates of issuances, or $236,992 in
total. After March 31, 2004, there were 1,000,000 preferred shares issued to an
officer in satisfaction of the entire shareholder loan payable. After March 31,
2004, there was also 250,000 and 50,000 preferred shares issued to officers as
annual compensation according to the employment agreements with them and as
mentioned in Note 3 above.
Liquidity and Capital Resources
On March 31, 2004, we had cash of $1,936 and a working capital deficit of
$181,191. This compares with cash of $3,994 and a working capital deficit of
$139,712 at December 31, 2003. The decrease in cash and working capital was due
to an increase in net loss for the first quarter of 2004. Operating activities
had a net usage of cash in the amount of $2,058 during the three months ended
March 31, 2004 reflecting an excess of expenditures over revenues.
Net cash used in operating activities was $2,058 for the three months ended
March 31, 2004 as compared with net cash used in operating activities of $38,049
for the same period ended March 31, 2003. The decrease in cash used was
primarily attributable to a decrease in cash used in operations for the 2004
period.
Net cash provided by financing activities was for the three months ended March
31, 2004 was $-0- as compared with net cash provided by financing activities of
$-0- for the three months ended March 31, 2003. There was no increase or
decrease in net cash provided by financing activities as interest accrued on the
shareholder loan made by the officer to us was included in operating activities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET 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) As of the end of the period covered by this report, we carried out an
evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13(a)-15(e)) pursuant to the Exchange Act Rule 13(a)-14.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer have concluded that our disclosure controls and procedures are
effective.
(b) No change in our internal control over financial reporting occurred during
our last fiscal quarter that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
During the three months ended March 31, 2004, we issued 3,146,000 and 1,065,000
registered common shares to Edward Roth and Alisha Roth pursuant to their
employment agreements.
During the three months ended March 31, 2004, we issued 726,250 registered
common shares to various consultants for services rendered during the quarter
then ended.
There were no unregistered sales of securities during the three months ended
March 31, 2004.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
A majority of the security holders voted to issue common stock to various
officers and consultants during the three months ended March 31, 2004.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits are incorporated by reference.
(b) b) On January 2, 2004, we filed an 8-K that disclosed the favorable outcome
to our litigation against David Dadon.
(c) --Signature page follows-
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, INC.,
(Registrant)
/S/ Michael J. Bongiovanni
Date: May 26, 2004 --------------------------
Michael J. Bongiovanni
Chief Financial Officer
/S/ Edward A. Roth
Date: May 26, 2004 ------------------
Edward A. Roth
Chief Executive Officer