SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q SB
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
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For Quarter Ended November 30, 2000 Commission file number 0-21 725
SILK BOTANICALS.COM, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0886132
------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
975 S. Congress Ave. #102
Delray Beach, Fl. 33445
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(Address of principal executive offices)
Registrant's telephone number, including area code: (561) 265-3600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 such filing
requirements for the past 90 days.
Yes:____Y_____ No: __________
REGISTRANT IS A CORPORATION
<PAGE>
TABLE OF CONTENTS
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Item 1. Financial Statements
Page
----
Accountants' Review Report 1
Financial Statements:
Balance Sheet 2
Statements of Operations 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-12
Item 2. Results of Operations and Management's Discussion and
Analysis of Financial Condition 13-14
Signatures 15
<PAGE>
Accountants' Review Report
To the Board of Directors and Stockholders
of Silk Botanicals.com, Inc.
Delray Beach, Florida
We have reviewed the accompanying balance sheet of Silk Botanicals.com, Inc. (a
Florida corporation) as of November 30, 2000 and the related statements of
operations for the quarters and six-month periods ended November 30, 2000 and
1999. We have also reviewed the related statements of cash flows for the
six-month periods ended November 30, 2000 and 1999, as well as the related
statements of changes in stockholders' equity (deficit) for the years ended May
31, 2000 and 1999, and for the six-month period ended November 30, 2000. All
information included in these financial statements is the responsibility of the
Company's management.
A review consists principally of inquiries of company personnel and analytical
procedures applied to financial data. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective of
which is the expression of an opinion regarding the financial statements taken
as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
January 10, 2001
1
<PAGE>
SILK BOTANICALS.COM, INC.
BALANCE SHEET
November 30, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash $ 7,941
Accounts receivable (net of allowance for 93,228
doubtful accounts of $4,000)
Inventory 100,768
Prepaid expenses 2,275
---------
Total Current Assets 204,212
---------
PROPERTY & EQUIPMENT, net of 2,284
accumulated depreciation
OTHER ASSETS:
License rights (net of valuation allowance & 31,880
accumulated amortization)
Deferred tax asset 1,165
---------
Total Other Assets 33,045
---------
TOTAL ASSETS $ 239,541
=========
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 23,456
Income taxes payable 3,927
Accounts payable due to related party 396
Other current liabilities 16,100
---------
Total Current Liabilities 43,879
---------
TOTAL LIABILITIES 43,879
STOCKHOLDERS' EQUITY:
Series A preferred stock, $.001 par value, 1,900 shares authorized,
issued and outstanding 2
Preferred stock, $.001 par value, 49,998,100 shares authorized, none
issued and outstanding --
Common stock, $.001 par value, 300,000,000 shares authorized,
6,250,000 shares issued and outstanding 6,250
Additional paid-in capital 851,460
Deficit accumulated during the development stage (899,126)
Retained earnings 37,076
---------
Total Stockholders' Equity 195,662
---------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 239,541
=========
</TABLE>
See Accountants' Review Report and Accompanying Notes
2
<PAGE>
SILK BOTANICALS.COM, INC.
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 AND 1999, AND
YEAR-TO-DATE THROUGH NOVEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
FOR THE QUARTERS ENDED YTD THROUGH
NOV. 30, NOV. 30, NOV. 30, NOV. 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $ 174,601 $ 168,782 $ 340,283 $ 281,244
COST OF SALES 126,947 133,241 248,969 211,964
----------- ----------- ----------- -----------
GROSS PROFIT 47,654 35,541 91,314 69,280
----------- ----------- ----------- -----------
MARKETING EXPENSES 6,755 15,907 16,166 23,220
GENERAL AND ADMINISTRATIVE
EXPENSES 19,633 16,619 57,167 52,605
OTHER EXPENSES, net 740 -- 1,375 --
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR
INCOME TAXES 20,526 3,015 16,606 (6,545)
Provision for Income Taxes -- -- -- --
----------- ----------- ----------- -----------
NET INCOME $ 20,526 $ 3,015 $ 16,606 $ (6,545)
=========== =========== =========== ===========
Income (loss) per share (after preferred
dividends):
Basic and diluted $ 0.00 $ 0.00 $ 0.00 $ (0.00)
=========== =========== =========== ===========
Weighted average shares outstanding -
basic & diluted 6,250,000 6,250,000 6,250,000 6,250,000
=========== =========== =========== ===========
</TABLE>
See Accountants' Review Report and Accompanying Notes
3
<PAGE>
SILK BOTANICALS.COM, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED MAY 31, 2000 AND 1999
AND FOR THE SIX MONTHS ENDED NOVEMBER 30, 2000
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
PREFERRED STOCK COMMON STOCK PAID-IN DEVELOPMENT RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE EARNINGS TOTAL
--------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MAY 31, 1998 -- $ -- 4,435,813 $ 4,436 $ -- $ (4,436) $ -- $ --
Issuance of preferred stock 1,900 2 -- -- -- -- -- 2
Issuance of stock to additional -- -- 335,187 335 -- -- -- 335
founding stockholders
Issuance of stock in a 504 offering -- -- 1,452,750 1,453 671,460 -- -- 672,913
Issuance of stock for services rendered -- -- 26,250 26 -- -- -- 26
Net (loss) -- -- -- -- -- (694,690) -- (694,690)
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, MAY 31, 1999 1,900 2 6,250,000 6,250 671,460 (699,126) -- (21,414)
--------- --------- --------- --------- --------- --------- --------- ---------
Issuance of warrants 180,000 180,000
Preferred stock dividend -- -- -- -- -- -- (8,550) (8,550)
Net income -- -- -- -- -- -- 34,720 34,720
BALANCE, MAY 31, 2000 1,900 2 6,250,000 6,250 851,460 (699,126) 26,170 184,756
--------- --------- --------- --------- --------- --------- --------- ---------
Preferred stock dividend -- -- -- -- -- -- (5,700) (5,700)
Net income -- -- -- -- -- -- 16,606 16,606
--------- --------- --------- --------- --------- --------- --------- ---------
BALANCE, NOVEMBER 30, 2000 1,900 $ 2 6,250,000 $ 6,250 $ 851,460 $(699,126) $ 37,076 $ 195,662
========= ========= ========= ========= ========= ========= ========= =========
</TABLE>
See Accountants' Review Report and Accompanying Notes
4
<PAGE>
SILK BOTANICALS.COM, INC.
STATEMENTS OF CASH FLOWS
YEAR-TO-DATE THROUGH NOVEMBER 30, 2000 AND 1999
<TABLE>
<CAPTION>
YTD THROUGH
NOV. 30, NOV. 30,
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 16,606 $ (6,545)
Adjustments to Reconcile Net Loss to
Net Cash Used in Operating Activities:
Depreciation and amortization 4,122 3,792
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 28,355 (67,144)
(Increase) decrease in inventory (38,430) 5,275
(Increase) decrease in prepaid expenses 1,000 --
Increase (decrease) in accounts payable (1,337) --
Increase (decrease) in due to related parties (30,576) 45,424
Increase in other current liabilities 20,456 48,363
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NET CASH PROVIDED BY OPERATING ACTIVITIES 196 29,165
CASH FLOWS FROM FINANCING ACTIVITIES:
Preferred stock dividend (5,700) (5,700)
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NET CASH USED IN FINANCING ACTIVITIES (5,700) (5,700)
------------- -------------
NET INCREASE (DECREASE) IN CASH (5,504) 23,465
CASH AT BEGINNING OF PERIOD 13,445 --
------------- -------------
CASH AT END OF PERIOD $ 7,941 $ 23,465
============= =============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 1,375 $ --
Cash paid for income taxes -- --
</TABLE>
See Accountants' Review Report and Accompanying Notes
5
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization:
Silk Botanicals.Com, Inc. (the "Company"), formally known as
Diversified Restaurant Holdings, Inc., was organized November 20, 1998
in the State of Florida. The Company was a development stage company
until June 1999, when it commenced operations. The Company develops,
markets and distributes high-quality artificial flowers, artificial
greenery and floral arrangements under the trademark names Forever
Fresh(R), Living Silk(TM) and Silk Botanicals(TM) in the wholesale
market. All of the Company's product is purchased from a company
related by common ownership. Major customers include wholesale store
chains and supermarkets.
On April 9, 1999, the Company acquired all the outstanding common stock
of JRB Marketing of South Florida, Inc. ("JRB"), a Florida corporation
formed October 2, 1996. For accounting purposes, the transaction was
treated as a reverse acquisition of the Company by JRB and as a
recapitalization of JRB. The recapitalization resulted in the issuance
of 4,435,813 shares of the Company and the recording of $4,436 in
expenses. The historical financial statements prior to November 20,
1998 are those of JRB. No pro forma information is presented, as the
acquisition was not a business combination. At the time of this
transaction, JRB had no assets, liabilities or operations. As such, the
financial statements of the Company reflect the accounting for JRB as
if JRB had been the reporting entity from inception.
Prior to acquiring JRB, the Company owned 99% of the stock of Southern
Dragon, Inc. ("Southern"), a development stage company in the
restaurant industry. On March 31, 1999, the Company sold the stock of
Southern back to Southern and began concentrating on the development,
marketing and distribution of artificial flowers, greenery and floral
arrangements.
On August 2, 1999, the Company officially changed its name to Silk
Botanicals.Com, Inc. from Diversified Restaurant Holdings, Inc.
On August 20, 1999, the Company's Board of Directors approved a 1 for 4
reverse split of its common stock, retroactively effective as of May
31, 1999. All common shares and the per share amounts in the
accompanying audited financial statements have been restated for the
effects of the reverse split.
Revenue Recognition:
Revenue is recognized, net of discounts and estimated returns, upon
shipment of product.
Inventory:
Inventory consists primarily of finished floral and greenery
arrangements and is valued at the lower of cost (first-in, first-out
method) or market.
6
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Furniture and Equipment:
Furniture and equipment are recorded at cost. Depreciation is
calculated on a straight-line basis over the estimated useful lives of
the assets.
License Rights:
The license rights acquired by the Company have been recorded at cost
less a valuation allowance. The rights and valuation allowance are
amortized on the straight-line basis over the term of the license right
agreements, which is six years.
Fair Value of Financial Instruments:
The carrying amount of trade receivables and payables approximate fair
value.
Income Taxes:
The Company accounts for income taxes on an asset and liability
approach to financial accounting. Deferred income tax assets and
liabilities are computed annually for the difference between the
financial statement and tax basis of assets and liabilities that will
result in taxable or deductible amounts in the future, based on enacted
tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period, plus or minus the change during the period
in deferred tax assets and liabilities.
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 and disclosure of contingent 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.
Start-Up Costs:
In April 1998, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of
Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP
98-5"). SOP 98-5 requires that start-up costs, including organizational
costs, be expensed as incurred. The Company has accepted early adoption
of SOP 98-5 and expensed all start-up costs.
7
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Earnings per Share:
The Company has utilized Financial Accounting Standards No. 128
"Earnings per Share" ("FAS 128"). FAS 128 requires presentation of
earnings or loss per share on basic and diluted earnings per share.
Basic earnings or loss per share is computed by dividing net income
available to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share is
computed using the weighted average number of common shares outstanding
and potentially diluted common shares during the period. The warrants
were anti-dilutive at November 30, 2000 as the exercise price was in
excess of the market price. The computation of fully diluted earnings
per share is not presented as it would be anti-dilutive.
Impairment of Long-Lived Assets
The Company evaluates the recoverability of its property and equipment,
and other assets in accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
to be Disposed of" ("SFAS 121"). SFAS 121 requires recognition of
impairment of long-lived assets in the event the net book value of such
assets exceeds the estimated future undiscounted cash flows
attributable to such assets or the business to which such intangible
assets relate. No impairments were required to be recognized during the
quarters ended November 30, 2000 and 1999.
Segment Reporting:
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS 131"). This statement
requires companies to report information about operating segments in
interim and annual financial statements. It also requires segment
disclosures about products and services, geographic areas and major
customers. The Company has determined that it did not have any
separately reportable operating segments as of November 30, 2000 and
1999.
Advertising:
Advertising costs ($375 and $450 for the quarters ended November 30,
2000 and 1999, respectively) are charged to expense as incurred.
8
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Contingencies:
Certain conditions may exist as of the date the financial statements
are issued, which may result in a loss to the Company but which will
only be resolved when one or more future events occur or fail to occur.
The Company's management and its legal counsel assess such contingent
liabilities, and such assessment inherently involves an exercise of
judgement. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may
result in such proceedings, the Company's legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well
as the perceived merits of the amount of relief sought or expected to
be sought therein. If the assessment of a contingency indicates that it
is probable that a material loss has been incurred and the amount of
the liability can be estimated, then the estimated liability would be
accrued in the Company's financial statements. If the assessment
indicates that a potentially material loss contingency is not probable
but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate
of the range of possible loss if determinable and material, would be
disclosed. Loss contingencies considered remote are generally not
disclosed unless they involve guarantees, in which case the nature of
the guarantee would be disclosed.
Basis of Presentation:
The accompanying interim financial statements contain all adjustments
necessary in management's opinion for a fair presentation of financial
position and results of operations. Those adjustments included only
normal recurring accruals.
2. CONCENTRATIONS
Business Risk:
The Company's revenues and profitability is affected by many
conditions, including changes in economic conditions, inflation, and
political events. Because these factors are unpredictable and beyond
the Company's control, earnings may fluctuate from year to year.
Major customers accounted for 48% of revenues for the quarters ended
November 30, 2000 and November 30, 1999.
3. PROPERTY AND EQUIPMENT
Property and Equipment consists of the following as of November 30,
2000:
Computer equipment $ 3,481
Less: Accumulated depreciation (1,197)
--------
$ 2,284
========
9
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
3. PROPERTY AND EQUIPMENT (continued)
Depreciation expense was $291 and $126 for the quarters ended November
30, 2000 and 1999, respectively.
4. RELATED PARTY TRANSACTIONS
The Company purchases its silk botanical products from established
manufacturers owned by the Company's president and majority stockholder
(herein after, "Manufacturer"); however, the Company may purchase its
products from other suppliers. On April 1, 1999, the Company entered
into a non-exclusive manufacturing and distribution agreement with the
Manufacturer for a term of six years with the right to extend the
agreement for six additional six-year terms. The Manufacturer will
invoice the Company for products and distribution of products at rates
to be negotiated periodically between the Company and the Manufacturer.
Additionally, the Company subleases office facilities and certain
office equipment from the Manufacturer. The Company issued 1,900 shares
of preferred stock to the Manufacturer for the license rights to the
trademarks Living Silk(R) and Silk Botanicals(TM), and for certain
manufacturing processes. The Company owed the Manufacturer $396 at
November 30, 2000 which is recorded as an accounts payable, for
operational expenses. During the quarters ended November 30, 2000 and
1999, the Company paid $148,804 and $118,148, respectively, to the
Manufacturer.
No formal arrangement on terms and conditions relating to advances,
should they be required, had been entered into by the Company with the
Manufacturer.
5. LICENSE RIGHTS
On December 21, 1998, the Company purchased an exclusive license for
the right to assemble and distribute the "water-look" floral
arrangements and the trademark and copyright materials of Forever
Fresh(R) from a third party manufacturer and distributor in South
Florida. The term of the license agreement is for six years with the
right to extend for additional terms of six years each, unless
terminated by either party at the end of any six-year term. As part of
the agreement, the Company paid $42,500 for the license rights. The
Manufacturer advanced the funds for the payment. Additionally, the
Company agreed to make royalty payments to the licensor of 5% of the
net amount invoiced by the Company or any affiliate, for Forever
Fresh(R) products during the initial six year term. For additional
periods of up to six, six-year terms, the Company agreed to pay to the
licensor one quarter of one percent (.25%) of its net sales per annum
of all Forever Fresh(R) products sold to any third party. At November
30, 2000 license rights of $42,500 are presented net of $10,620 of
accumulated amortization.
During April 1999, the Company entered into an exclusive license
agreement to market and distribute artificial greenery and floral
arrangements with the Living Silk and Silk Botanicals trademarks owned
by the Manufacturer. Additionally, the license agreement granted the
10
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
5. LICENSE RIGHTS (continued)
Company the exclusive right to use the manufacturing process of the
Living Silk(TM) and Silk Botanicals(TM) products. As consideration for
the license agreement, the Company issued preferred stock to the
Manufacturer valued at $190,000. Since the transaction was a
nonmonetary transaction between related parties, a valuation allowance
of $190,000 has been provided against the license rights and as an
offset to stockholder equity. The Company further agreed to pay the
Manufacturer, royalty payments of 5% of the net amount invoiced by the
Company or any affiliates for Living Silk(TM) or Silk Botanicals(TM)
products invoiced to any third party during the initial six-year term.
For additional periods of up to six, six-year terms, the Company agreed
to pay one quarter of one percent (.25%) of its net sales per annum for
all Living Silk(TM) and Silk Botanicals(TM) products sold to any third
party.
6. EQUITY
Preferred Stock - On October 6, 2000, the Company increased the number
of authorized shares of preferred stock from 5,000,000 to 50,000,000,
of which a total of 1,900 shares had previously been designated as
Series A preferred stock. This series is entitled to receive dividends
at the rate of $6.00 per share per annum, payable quarterly. Such
dividends are cumulative and hold a preference over any other
distribution. This series has no voting rights or conversion features.
The rights, preferences and limitations of any additional series of
preferred stock will be determined by the Board of Directors. Dividends
in arrears at November 30, 2000 are $5,700.
Common Stock - On November 20, 1998, the Company issued 335,187 shares
of common stock to additional founders of the Company and recorded an
expense of $335 for the issuance. These shares were issued at par value
since no operations existed in the Company. Between November 30, 1998
and March 31, 1999, the Company issued 26,250 shares of common stock as
compensation for services rendered and recorded an expense of $26. From
January 2, 1999 until March 31, 1999, the Company issued 99,000 shares
of common stock for cash of $49,500, which was utilized by Southern
prior to the recapitalization. The Company issued, from April 1, 1999
through April 6, 1999, 1,353,750 shares of common stock and recorded an
expense of $671,460, which approximates market value. All of the stock
issued has been restated to reflect the reverse stock split of 1 for 4.
On October 6, 2000, the Company increased the number of authorized
shares of common stock from 25,000,000 to 300,000,000.
Warrants - In March of 2000 the Company issued warrants for 360,000
shares of common stock. The warrants were issued for $0.50 each for a
total of $180,000. The warrants have an exercise price of $2.50 per
share and are exercisable as follows; 240,000 from April 30, 2000 to
April 30, 2002 and 120,000 from May 7, 2000 to May 7, 2002. The
warrants carry a provision to issue options for up to 360,000 shares
exercisable over the same time frame as the corresponding warrant at a
price of $3.00 per share, if and when the warrants are exercised.
11
<PAGE>
SILK BOTANICALS.COM, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED NOVEMBER 30, 2000 and 1999
(See Accountants' Review Report)
7. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of $1,318 in trade
accounts payable and $22,138 in accrued expenses at November 30, 2000.
8. OTHER CURRENT LIABILITIES
Other current liabilities consists of credit card debt at 15.4% as of
November 30, 2000.
9. COMMITMENTS - RELATED PARTY
The Company has a lease, which expires April 30, 2001, with the
Manufacturer for 500 square feet of furnished office space, including
office equipment, and approximately 1,500 square feet of warehouse and
shipping space at a cost of $10 per square foot. For the fiscal
quarters ended November 30, 2000 and 1999, rental expenses incurred
were $5,000 and $5,000, respectively. Minimum future rental payments
under the non-cancelable operating lease as of November 30, 2000 are as
follows:
2001 $13,333
10. CONTINGENCIES
The Company is involved in various claims which have arisen as a result
of the funding of the warrants. The Company, after conferring with its
legal counsel, is unable to predict the outcome of these matters but
does not believe, based upon currently available facts, that the
ultimate resolution of such matters will have a material adverse effect
on the financial statements of the Company.
12
<PAGE>
Item 2. Results of Operations and Management's Discussion & Analysis of
Financial Condition
1.) Sales Revenues for the second quarter ending November 30, 2000
increased to $174,601 which was a 3.4% increase over Sales Revenue for the
second quarter ending November 1999 of $168,782. Cost of Goods Sold ratio
decreased to 72.7%, compared to 79.9% last year, producing a Gross Profit of
$47,654, compared to $35,541 last year, which was a 34.1% increase in Gross
Profit. The Net Income was increased to $20,526 this year, compared to $3,015
last year, a 581% improvement over last year.
Sales Revenues for the first six months ending November 30, 2000 increased to
$340,283 which was a 21% increase. Cost of Goods Sold ratio decreased to 73.2%,
compared to 75.4% last year. Gross profit increased $22,034 or 31.8% compared to
the first six months of last year. Net income for the first six months increased
to $16,606 compared to a net loss of $6,545 for the first six months of last
year.
2.) Forward Looking Information
Certain statements in this section and elsewhere in this report are
forward-looking in nature and relate to trends and events that may affect The
Company's future, financial position and operating results. The words "expect",
"anticipate", "intend", and "project" and similar words or expressions are
intended to identify forward-looking statements. These statements speak only as
of the date of this report. The statements are based upon current expectations,
are inherently uncertain, are subject to risks, and should be viewed with
caution. Actual results and experience may differ materially from the
forward-looking statements as a result of many factors, including: changes in
economic conditions in the various markets served by The Company's operations,
increased competition, and other unanticipated events and conditions. It is not
possible to foresee or identify all such factors. The Company makes no
commitment to update any forward-looking statement or to disclose any facts,
events, or circumstances after the date hereof which may affect the accuracy of
any forward-looking statement, except as may be required by law.
3.) Common and Preferred Stock
The Company has increased the number of shares of Common Stock that The Company
is authorized to issue from 25,000,000 to 300,000,000 shares of Common Stock
having a par value of $.001 each. Additionally, The Company has increased the
number of shares of Preferred Stock which The Company is authorized to issue
from 5,000,000 to 50,000,000 shares of Preferred Stock, having a par value of
$.001 each. The Preferred Stock may be issued in series from time to time with
such designation, rights preferences and limitations as the Board of Directors
of The Company may determine by resolution.
13
<PAGE>
A written consent, signed by the Director and the number of share-
holders sufficient for approval, was delivered to the corporation on
the 4th day of October, 2000 and, in accordance with the provisions of
the Florida Business Corporation Act, was effective upon filing of
Articles of Amendment to the Articles of Incorporation with the Secre-
tary of State of Florida on October 6th, 2000.
3.) Subsequent Events
On January 3, 2001 the Company filed a preliminary information statement with
the Securities and Exchange Commission that it is the intention of the Company
to affect a reverse stock split of its common stock. The reverse stock split
will take place on or about January 30, 2001.
14
<PAGE>
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.
SILK BOTANICALS. COM, INC.
A Florida Corporation
By: /S/ Joseph R. Bergmann
----------------------
Joseph R. Bergmann
President
Date: January 10, 2001
15
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SILK BOTANICALS.COM, INC.
PART II - OTHER INFORMATION
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
(a) 27 Financial Data Schedule
(b) None
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule
