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: December 31, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from: to:
Commission file number: 000-26361
Creative Beauty Supply, Inc.
(Exact name of Small Business Issuer in its charter)
NEW JERSEY 22-3392051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
380 Totowa Road, Totawa, NJ 07512
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (973-904-0004
Check mark whether the Issuer (1) has filed all reports required by
Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the Registrant was required to file
such reports), and (2) has been subject to the filing requirements for
at least the past 90 days. YES: X NO:
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PREVIOUS FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by the court.
YES: X NO:
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the last practicable date: 1,864,650
Transitional Small Business Disclosure Format. YES: NO: X
PART I FINANCIAL INFORMATION
CREATIVE BEAUTY SUPPLY, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, March 31,
1999 1999
------------- -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $308,937 $324,683
Accounts receivable 2,665 3,263
Inventory 61,439 72,904
Prepaid expenses 97 2,331
-------- ---------
TOTAL CURRENT ASSETS 373,138 403,181
PROPERTY AND EQUIPMENT,
net of accumulated
depreciation of $8,116
(December 1999) and $7,034
(March 1999) 2,578 4,316
OTHER ASSETS:
Organization cost, net
of accumulated amortization of
$422 (December 1999) and $366
(March 1999) - 197
-------- -------
TOTAL ASSETS $375,716 $407,694
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 9,479 $ 9,863
Payroll taxes withheld
and accrued 1,260 698
Accrued salaries -
officer's salaries 120,481 98,365
Accrued expenses 19,857 19,770
--------- ----------
TOTAL CURRENT LIABILITIES 151,077 128,696
--------- ---------
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.001,
authorized 10,000,000 shares;
issued and outstanding
-0- shares - -
Common stock, par value
$.001, authorized 100,000,000
shares; issued and outstanding
1,864,650 shares 1,865 1,865
Additional paid-in capital 467,541 472,541
Accumulated deficit (244,767) (195,408)
--------- ----------
TOTAL STOCKHOLDERS' EQUITY 224,639 278,998
--------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $375,716 $407,694
</TABLE>
The accompanying note is an integral part
of these financial statements.
<PAGE>4
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three months Ended
December 31, December 31,
------------------ --------------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET SALES $188,809 $201,127 $62,153 $54,404
COST OF GOODS SOLD 151,080 162,850 50,728 44,041
-------- -------- --------- ---------
GROSS PROFIT 37,729 38,277 11,425 10,363
-------- -------- -------- --------
OPERATING EXPENSES:
Salaries - officers 46,092 46,277 15,900 16,181
Payroll taxes 1,928 1,967 687 672
Auto and delivery 10,055 6,865 3,187 2,438
Employee welfare 3,076 1,802 1,103 718
Insurance 2,466 2,323 825 775
Office 1,375 1,757 607 1,170
Professional fees 16,914 10,296 2,450 2,200
Rent 10,800 10,800 3,600 3,600
Store supplies 250 293 - -
Taxes 250 293 - -
Telephone 1,440 1,313 490 400
Utilities 1,478 1,632 595 586
Miscellaneous 468 3,213 75 131
Depreciation and amortization 1,835 1,707 697 569
------- ------- ------ ------
TOTAL OPERATING EXPENSES 99,837 91,492 31,129 30,179
------- ------- ------ -------
LOSS FROM OPERATIONS BEFORE
OTHER INCOME (62,108) (53,215) (19,704) (19,816)
OTHER INCOME:
Interest income 12,749 12,956 4,218 4,427
NET LOSS $ (49,359) $(40,259) $(15,486) $(15,389)
========= ========= ========= ========
LOSS PER COMMON SHARE, BASIC $(.03) $(.02) $(.01) $(.01)
===== ===== ===== =====
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 1,864,650 1,862,952 1,864,650 1,864,650
========== ========= ========= =========
</TABLE>
The accompanying note is an integral part
of these financial statements.
<PAGE>5
CREATIVE BEAUTY SUPPLY, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(49,359) $(40,259)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 1,835 1,707
(Increase) decrease in operating assets:
Accounts receivable 598 (1,474)
Inventory 11,465 (2,274)
Prepaid expenses 2,334 2,251
Increase (decrease) in operating liabilities:
Accounts payable - trade (384) 1,054
Payroll taxes withheld and accrued 562 425
Accrued expenses - officers salaries 22,116 22,500
Accrued expenses 87 150
------ ------
NET CASH USED BY OPERATING ACTIVITIES (10,746) (15,920)
------ -----
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock for cash - 47,750
Registration cost (5,000) -
------ ------
NET CASH PROVIDED BY (USED BY)
FINANCING ACTIVITIES (5,000) 47,750
------ ------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (15,746) 31,830
CASH AND CASH EQUIVALENTS - beginning of period 324,683 291,674
-------- --------
CASH AND CASH EQUIVALENTS - end of period $308,937 $323,504
======== ========
</TABLE>
The accompanying note is an integral part
of these financial statements.
CREATIVE BEAUTY SUPPLY, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10QSB and
Article 10 of Regulation S-X. 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, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the nine months ended December, 1999 are not
necessarily indicative of the results that may be expected for the year
ending March 31, 2000. The unaudited financial statements should be
read in conjunction with the financial statements and footnotes thereto
included in the Company's Form 10SB for the year ended March 31, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Trends and Uncertainties. Demand for the Company's products will be
dependent on, among other things, market acceptance of the Company's
concept and general economic conditions, which are cyclical in nature.
Inasmuch as a major portion of the Company's activities is the receipt
of revenues from the sales of its products, the Company's business
operations may be adversely affected by the Company's competitors and
prolonged recessionary periods.
Hair styles in the industry change drastically from season to season.
The recent trend away from straight hair will have a favorable impact
on the sales of the Company's hair products such as perms, etc.
although the extent of this impact is indeterminable.
Capital and Source of Liquidity. In April, 1999, the Company renewed
its lease for a term of three (3) years commencing May 1, 1999 at a
monthly rental of $1,200 per month for the first twelve (12) months and
$1,300 a month for each of the remaining twenty four (24) months.
Additionally, management intends to lease additional warehouse space.
The increased lease amounts will have a negative effect on the cash
flow of the Company.
For the nine months ended December 31, 1999, the Company had a
registration cost of $5,000 resulting in net cash used by financing
activities of $5,000.
For the nine months ended December 31, 1998, the Company received
$47,750 from the issuance of common stock resulting in net cash
provided by financing activities of $47,750.
For the year ended March 31, 1999, the Company issued common stock for
$47,750. As a result, the Company had net cash flow provided by
financing activities of $47,750.
For the year ended March 31, 1998, the Company issued common stock for
$67,556. As a result, the Company had net cash flow provided by
financing activities of $67,556.
For the nine months ended December 31, 1999 and 1998, the Company
pursued no investing activities.
For the years ended March 31, 1999 and 1998, the Company pursued no
investing activities.
Results of Operations.
December 31, 1999 compared to December 31, 1998. For the nine
months ended December 31, 1999, the Company had a net loss of
($49,359). The Company had net sales of $188,809 with a cost of goods
sold of $151,080 resulting in gross profit of $37,729.
For the nine months ended December 31, 1998, the Company has a net loss
of ($40,259). The Company had net sales of $201,127 with a cost of
goods sold of $162,850 resulting in gross profit of $38,277.
The Company sells approximately over 1,000 different products at
varying mark ups ranging from 10 to 30 percent. The Company has two
types of customers, beauty salons and the general public. The gross
profit margin on sales of merchandises to the general public ranges
from 20 to 30 percent depending on the product sold. The gross margin
on sales of merchandise to beauty salons is somewhat less ranging from
10 to 20 percent depending on the product sold and the discount given.
The Company had operating expenses of $99,837 for the nine months
ended December 31, 1999 compared to $91,492 for the nine months ended
December 31, 1998. For the nine months ended December 31, 1999,
these expenses consisted of officers salaries of $49,092, auto and
delivery of $10,055, professional fees of $16,914, rent of $10,800,
insurance of $2,466, miscellaneous expenses of $468 and other
miscellaneous expenses of $10,042.
For the nine months ended December 31, 1998, these expenses consisted
of officers salaries of $46,277, auto and delivery of $6,865,
professional fees of $10,296, rent of $10,800, miscellaneous of
$3,213, insurance of $2,323, office expenses of $1,757, telephone of
$1,313 and other expenses of $8,648.
The increase in auto and delivery from $6,865 for the nine months
ended December 31, 1998 to $10,055 for the nine months ended December
31, 1999 was due to numerous repairs to the Company's delivery van.
The decrease in miscellaneous expenses from $3,213 for the nine months
ended December 31, 1998 to $468 for the nine months ended December 31,
1999 was due to tradeshow expenses incurred in 1998 which the Company
did not incur in 1999.
The major cause of the Company's losses from operations have been the
low sales volume. Management is looking for new suppliers at more
favorable prices and to increase their customer base and sales volume.
Additionally, management has implemented inventory controls which has
resulted in additional profits.
Management believes that the implementation of its inventory controls
and obtaining supplies from new sources will have a favorable impact on
the Company's results of operations within the next 12 months.
Plan of Operation. During the next twelve months, the Company intends
to obtain new product lines by negotiating with various manufacturers,
hire new sales representatives and hire technician to conduct product
knowledge classes
If the Company does not achieve the milestones within the above time
schedule, their operating costs will be higher and the Company will
lose even more money.
The Company's liquidity will be decreased due to little or no increase
in revenue and higher operating costs.
The Company is not delinquent on any of its obligations even though the
Company has had limited operating revenues. The Company intends to
market its products utilizing cash made available from the sale of its
products. The Company is of the opinion that revenues from the sales
of its products and the proceeds from the sale of its securities will
be sufficient to pay its expenses.
The Company does not have nor does it intend to have pension and/or
other post-retirement benefits in the future.
The Company does not have any or intends to have any derivative
instruments or hedging activities.
Year 2000 Compliance. The Company has conducted a comprehensive review
of its computer systems to identify any business functions that could
be affected by the "Year 2000" issue. As the millennium ("Year 2000")
approaches, businesses may experience problems as the result of
computer programs being written using two digits rather than four to
define the applicable year. The Company has conducted a comprehensive
review of its computer systems to identify those areas that could be
affected by the "Year 2000" issue. Any of the Company's programs that
have time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. If not corrected, this could
result in extensive miscalculations or a major system failure.
The Company relies on industry standard software. Certain
manufacturers have already provided the Company with upgraded software
to address the "Year 2000" issue. The Company believes that by
modifying existing software, the "Year 2000" issue will not pose
significant operational problems and is not anticipated to require
additional expenditures that would materially impact its financial
position or results of operations in any given year. The Company
believes that this modification will be completed in the latter part of
1999 at a minimal cost.
<PAGE>9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Not applicable.
(b) Not applicable.
<PAGE>10
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.
Creative Beauty Supply, Inc.
(Registrant)
Dated: February 15, 2000
By: /s/ Carmine Catizone
----------------------------
Carmine Catizone, President
