<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(mark one)
[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 0-26611
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ENDLESS YOUTH PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
NEVADA 93-215736
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3395 South Jones Blvd., Suite 208
Las Vegas, Nevada 89146
(Address of principal executive offices)
(702) 248-1005
(Issuer's telephone number)
------------------
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: Common Stock: 3,306,878 shares as of
December 31, 1999
1
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PART I--FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ENDLESS YOUTH PRODUCTS, INC.
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
December 31, June 30,
ASSETS 1999 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 489,089 $ 355,434
Prepaid advertising (Notes 1 & 2) 0 0
------------ ------------
TOTAL CURRENT ASSETS 489,089 355,434
Property and Equipment
net of accumulated depreciation (Notes 1 & 3) 6,309 8,510
------------ ------------
TOTAL ASSETS $ 495,398 $ 363,944
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS'
DEFICIT
CURRENT LIABILITIES
Accounts payable $ 150,319 $ 236,528
Deferred Revenue (Note 5) 141,667 283,333
Advances from shareholders (Note 6) 332,605 75,388
------------ ------------
TOTAL LIABILITIES 624,591 595,249
SHAREHOLDERS' DEFICIT
Common stock, $.001 par value
Authorized 4,000,000 shares; issued
and outstanding 3,306,878 at
Dec. 31, 1999 and 3,295,708 at
June 30, 1999, respectively (Note 7) 3,306 3,295
Additional paid-in capital 1,543,358 1,541,280
Retained deficit (1,675,857) (1,775,880)
------------ ------------
Total shareholders' Deficit (129,193) (231,305)
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDER'S DEFICIT $ 495,398 $ 363,944
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to financial statements
2
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the three months ended For the six months ended
December 31, December 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Gross Receipts 467,524 58,404 538,799 155,070
Less: Returns and allowances 0 0 0 0
------------ ------------ ------------ ------------
Net Sales 467,524 58,404 538,799 155,070
Cost of Sales 0 0 0 0
------------ ------------ ------------ ------------
Gross Profit 467,524 58,404 538,799 155,070
Selling, General and Administrative
Expenses 383,022 25,842 573,332 305,006
------------ ------------ ------------ ------------
Income (Loss) from Operations 84,502 32,562 (34,533) (149,936)
Other Income and (Expenses)
Interest Income 4,556 0 4,556 0
Other Income 0 0 130,000 0
Interest Expense ------------ ------------ ------------ ------------
Income (Loss) before income taxes 89,058 32,562 100,023 (149,936)
Provision for income taxes - (Note 4) 0 0 0 0
------------ ------------ ------------ ------------
Net income (Loss) 89,058 32,562 100,023 (149,936)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Loss per share amounts:
Basic:
Net income (loss) $ 0.03 $ 0.01 $ 0.03 $ (0.06)
Diluted:
Net income (loss) $ 0.03 $ 0.01 $ 0.03 n\a
Weighted average common and
common equivalent shares:
Basic 3,303,155 2,438,132 3,299,431 2,340,788
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Diluted 3,341,140 2,576,179 3,337,416 n\a
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements
3
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the six months ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998
------------ -------------
<S> <C> <C>
NET INCOME (LOSS) $ 100,023 $ (149,936)
Adjustments to reconcile net income to net cash
provided by operating activites:
Depreciation & Amortization 2,200 5,384
Increase in product development costs 0 (29,461)
Decrease in prepaid advertising 0 94,520
Increase (decrease) in deferred revenue (141,666) 0
Increase (decrease) in accounts payable (86,208) 20,047
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (125,651) (59,446)
------------ ------------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property, plant, and equipment 0 0
------------ ------------
NET CASH PROVIDED BY INVESTING ACTIVITIES 0 0
------------ ------------
CASH FLOW FROM FINANCING ACTIVITES
Proceeds from issuance of common stock 2,089 138,050
Advances from (Repayments to) shareholders 257,217 (61,613)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 259,306 76,437
------------ ------------
NET CHANGE IN CASH 133,655 16,991
CASH AT BEGINNING OF YEAR 355,434 471
------------ ------------
CASH AT END OF YEAR 489,089 17,462
------------ ------------
------------ ------------
Interest expense paid during the period was: 0 0
Income taxes paid during the period was: 0 0
</TABLE>
See accompanying notes to financial statements
4
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Accumu- Net
Common Stock paid in lated Shareholders'
Shares Amount Capital Deficit Equity
--------------- ------------- ------------------ ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1998 3,295,708 $ 3,295 $ 1,541,280 $ (1,775,880) $ (231,305)
Stock issued for services 11,170 11 2,078 0 2,089
Net Income for Period 0 0 0 100,023 100,023
--------------- ------------- ------------------ ------------------- -----------------
Balance at Dec. 31, 1999 3,306,878 $ 3,306 $ 1,543,358 $ (1,675,857) $ (129,193)
--------------- ------------- ------------------ ------------------- -----------------
--------------- ------------- ------------------ ------------------- -----------------
</TABLE>
See accompanying notes to financial statements
5
<PAGE>
ENDLESS YOUTH PRODUCTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND JUNE 30, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
THE COMPANY
Endless Youth Products, Inc., (the Company) incorporated July of 1996 in the
State of Nevada. The Company engages in the business of developing, marketing
and distributing proprietary vitamins, nutritional, skin care, personal care,
and other anti-aging products under the "Endless Youth" trade name. The Company
was in the development stage through June 30, 1998. The year ending June 30,
1999 is the first year during which it is considered an operating company.
CASH EQUIVALENTS
The Company considers all highly liquid certificates of deposit with an original
maturity of three months or less to be cash equivalents.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed using the straight-line
method based on estimated useful lives ranging as follows:
<TABLE>
<S> <C>
Furniture and Fixtures 7 years
Computer Equipment 5 years
</TABLE>
PREPAID ADVERTISING COST
Production costs related to the Company's direct response advertising programs
are capitalized and amortized based on the ratio that current period revenues
bear to the total of current and estimated future period revenues for that
direct-response-advertising cost pool.
REVENUE RECOGNITION
Revenue from product sales is recognized upon shipment. Test market sales
experience as well as research conducted by outside consultants provides the
Company with a reasonable basis for estimating future returns.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
INCOME TAXES
Provisions (benefits) for federal and state income taxes are calculated on
reported financial statement income (loss) based on current tax law and also
include the cumulative effect of any changes in tax rates from those used
previously in determining deferred tax assets and liabilities. Such provisions
(benefits) differ from the amounts currently payable because certain items of
income and expense, known as temporary differences, are recognized in different
tax periods for financial reporting purposes than for income tax purposes.
EARNINGS (LOSS) PER SHARE
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share" (SFAS 128). This statement requires the company to report
basic and diluted earnings (loss) per share. Basic earnings per share is
computed by dividing net income (loss) available to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
earnings per share include the effect of the additional common shares that would
have been outstanding if dilutive stock options had been exercised.
The following table summarized the calculation of basic and diluted earnings per
share for the six months ended December 31,
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
Numerator:
Basic and diluted earnings per share -
net income (loss) $ 100,023 $ (149,936)
Denominator:
Basic earnings per share - weighted average number
of common shares outstanding during the period 3,299,431 2,340,788
Incremental common shares attributable to
assumed exercise of options and warrants 37,985 N/A
Denominator for diluted earnings per share 3,337,416 N/A
Basic earnings per share $ .03 $ (.06)
Diluted earnings per share $ .03 N/A
</TABLE>
6
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
STOCK BASED COMPENSATION
The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". Compensation cost for stock options and warrants is
measured at the excess of the quoted market price of the Company's stock at the
date of grant over the amount the employee must pay to acquire the stock.
Restricted stock is recorded as compensation cost over the requisite vesting
periods based on the market value on the date of grant. Compensation cost for
shares issued under performance share plans is recorded based upon the current
market value of the Company's stock at the time the shares are granted. Options
and warrants issued for outside services are accounted for under SFAS 123 using
the Black-Scholes option-pricing model.
NOTE 2 - PREPAID ADVERTISING COST
Prepaid advertising cost consists of infomercial production costs, which are
capitalized and amortized based on current and estimated future revenues. At
June 30, 1999 the remainder of these direct response advertising costs have been
fully amortized. Amortization expense was $94,520 for the six months ended
December 31, 1998.
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, Plant and Equipment consist of the following at:
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
<S> <C> <C>
Furniture and Fixtures $ 2,986 $ 2,986
Computer Equipment 15,072 15,072
less accumulated depreciation (11,749) (9,548)
---------- ----------
$ 6,309 $ 8,510
---------- ----------
---------- ----------
</TABLE>
Depreciation expense charged to operations was $2,200 and $5,384 for six months
ended December 31, 1999 and 1998.
NOTE 4 - INCOME TAXES
There is no current or deferred income tax expense for the six months ended
December 31, 1999 and 1998. As of June 30, 1999, the Company has net operating
loss carryforwards of $1,597,256. These losses will expire between 2012 and 2014
if not utilized.
7
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NOTE 4 - INCOME TAXES (continued)
SFAS 109 requires that the future tax benefit of net operating loss
carryforwards be recorded as an asset using current tax rates to the extent that
management assesses the utilization of such carryforwards to be more likely then
not. As of December 31, 1999 the Company has recorded a deferred tax asset of
$543,067 with a valuation allowance of $543,067.
The following reconciles the federal statutory income tax rate to the effective
rate of the provision for income taxes.
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
----------------- -----------------
<S> <C> <C>
Federal Statutory rate 34 % 34 %
Valuation allowance adjustment (34)% (34)%
----------------- -----------------
Effective rate 0 % 0 %
----------------- -----------------
----------------- -----------------
</TABLE>
NOTE 5 - DEFERRED REVENUE
In June 1999 the Company entered into an agreement in which the Company received
a license fee in exchange for certain rights and privileges relating to the
Endless Youth product line. In September 1999 the agreement was amended, the
company will recognize revenue from this agreement over a thirteen month period
commencing in June of 1999.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company has a license agreement with one of its officers that is also a
director and shareholder. Under the terms of the agreement, the Company retains
the sole right to market goods and services under the Endless Youth trade name
throughout the world. The licensor extended such worldwide rights to the company
following the initial domestic-only grant of these rights. The Company had
advances from various shareholders of $332,605 and $75,388 as of December 31,
1999 and June 30, 1999, respectively. In July of 1998, $62,113 of advances was
converted to 110,266 shares of stock, based on the market value of stock at the
time of conversion.
NOTE 7 - SHAREHOLDERS' EQUITY
During the six months ended December 31, 1999 and the year ended June 30, 1999
the Company issued 11,170 and 1,045,763 shares of common stock respectively, in
exchange for services rendered. The cost of the services has been charged to
operations, and, additional paid in capital has been increased by $2,078 and
$421,207 for the six months ended December 31, 1999 and the year ended June 30,
1999 respectively, representing the excess fair market value of the services
over the par value of the common stock.
8
<PAGE>
NOTE 7 SHAREHOLDERS' EQUITY (continued)
The Company applies APB 25 in accounting for its employee stock options and
warrants. The option price equals or exceeds the fair market value of the common
shares on the date of the grant and, accordingly, no compensation cost has been
recognized under the provisions of APB 25 for stock options. The Company applies
SFAS 123 for options and warrants issued for outside services. Compensation cost
is measured at the grant date based on the value of the award and is recognized
over the service (or vesting) period.
Had compensation cost for Company's employee stock option and warrant agreements
been determined under SFAS 123, based on the fair market value at the grant
dates, the Company's pro forma net earnings and net earnings per share would
have been reflected as follows at December 31:
<TABLE>
<CAPTION>
1999 1998
---------- -----------
<S> <C> <C>
Net earnings
As reported $ 100,023 $ (149,936)
Pro forma $ 83,533 $ (170,130)
Net earnings per share
As reported $ .03 $ (.06)
Pro forma $ .02 $ (.07)
</TABLE>
The fair value of each option and warrant is estimated on the date of grant
using the Black-Scholes option pricing model with the following weighted-average
assumptions used for those options and warrants granted during years ended June
30, 1999 and 1998, respectively: dividend yield of 0%, expected volatility of
58%, risk-free interest rates of 5%, and expected lives ranging from 1 to 10
years.
NOTE 8 - CONCENTRATION OF CASH
The Company held approximately $389,089 in excess of federal insurance limits on
accounts of financial institutions on December 31, 1999
NOTE 9 - YEAR 2000 COMPLIANCE
The Company primarily uses licensed software products in its operations with a
significant portion of processes and transactions centralized in one particular
software package. The Company has not experienced any problems relating to year
2000 compliance.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Management's discussion and analysis should be read in conjunction with the
Company's financial statements and the notes thereto set forth in this Form
10-QSB commencing on page 2.
GENERAL
Endless Youth Products, Inc., (the "Company") engages in the business of
developing, marketing and distributing proprietary vitamins, nutritional, skin
care, personal care, and other anti-aging products under the "Endless Youth"
trade name. The following discussion is based on the financial statements for
the six months ending December 31, 1998 and 1999. The financial statements have
been prepared in conformity with generally accepted accounting principles.
RESULTS OF OPERATIONS
NET SALES. Net sales for the six months ended December 31, 1999 increased by
$383,729 compared to the six months ended December 31, 1998. Revenues primarily
consist of license fees for the period ended December 31, 1999 and minimum
payments for distribution rights for the period ended December 31, 1998. During
the three months ended December 31, 1999 the company received an additional
$394,681 of licensing fees from Vendor Services, resulting from the settlement
between Vendor Services and Sun Ten
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $268,326 during the six months ended
December 31, 1999 compared to the six months ended December 31, 1998. This
increase was primarily due to increased expenses related to royalties. The
Company's management continues to pursue cost reduction measures consistent with
the level of business wherever opportunities can be identified.
LIQUIDITY AND CAPITAL RESOURCES
Although the Company has a negative working capital and equity, it believes it
has sufficient resources to fund the Company's operations and capital
requirements for the 2000 fiscal year. Deferred revenue will be recognized as
income over the next six months and will not require significant services from
the company. Despite the Company's negative cash flows from operations over the
past two fiscal years it does not anticipate the need for alternative sources of
liquidity. The Company expects positive cash flow during fiscal 2000 primarily
due to licensing fees and minimal monthly expenses.
Prepaid advertising was $94,520 and $0 at December 31, 1998 and December 31,
1999, respectively. The decrease in 1999 resulted from the amortization of the
remaining infomercial costs during the prior fiscal year.
YEAR 2000 COMPLIANCE
The year 2000 issue results from computer programs that do not differentiate
between the year 1900 and the year 2000 because they were using two digits
rather than four to define the applicable year; accordingly computer systems
that have time-sensitive calculations may not properly recognize the year 2000.
The computer equipment and software currently used by the Company is year 2000
compliant and, accordingly the Company has not experienced any problems relating
to year 2000-date issue.
FORWARD LOOKING STATEMENTS
This report on Form 10-QSB contains certain forward-looking statements within
the meaning of section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements relate to matters such as the Company's future
operation results and liquidity. Such forward-looking statements are based on
the beliefs of the Company's management as well as assumptions made by and
information currently available to the Company's management. Such statements are
based on management's current expectations and are subject to certain risks,
uncertainties and assumptions. Should one or more risks or uncertainties
materialize, or should underlying assumptions prove incorrect, the Company's
actual results, performance or achievements could differ materially from those
expressed in, or implied by such forward-looking statements.
10
<PAGE>
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) Exhibits
27.01 Financial data schedule (EDGAR only)
(b) Reports on Form 8-K
Not applicable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ENDLESS YOUTH PRODUCTS, INC.
Date: February 9, 2000 By: /s/ NEAL K. WALLACH
-----------------------------
NEAL K. WALLACH, CHAIRMAN AND
CHIEF EXECUTIVE OFFICER
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ISSUER'S
FORM 10-QSB FOR THE QUARTER ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 489,089
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 489,089
<PP&E> 18,058
<DEPRECIATION> 11,749
<TOTAL-ASSETS> 495,398
<CURRENT-LIABILITIES> 624,591
<BONDS> 0
0
0
<COMMON> 3,306
<OTHER-SE> (132,499)
<TOTAL-LIABILITY-AND-EQUITY> 495,398
<SALES> 467,524
<TOTAL-REVENUES> 467,398
<CGS> 0
<TOTAL-COSTS> 383,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 89,058
<INCOME-TAX> 0
<INCOME-CONTINUING> 89,058
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,058
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
