UNITED STATESS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/12g/A
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GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS
-------------------------------------------------------------
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SKINTEK LABS, INC.
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(Name of Small Business Issuer in its charter)
DELAWARE 65-0636227
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(State or Other Jurisdiction of Incorporation) (IRS Employer Identification No.)
1750 NW 65th Avenue, Plantation, FL 33313
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(Address of Principal Executive Offices) (Zip Code)
954-327-8548
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(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act: None
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(Title of class)
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
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(Title of class)
Page 1 of 49
Table of Content
PART I
Page No.
Item 1. Description of Business 3
Item 2. Management's Discussion and Analysis of Finical
Condition and Results of Operations 8
Item 3. Description of Property 11
Item 4. Security Ownership of Certain Beneficial Owners and
Management 12
Item 5. Directors, Executive Officers, Promoters and Control
Persons 13
Item 6. Executive Compensation 14
Item 7. Certain Relationships and Related Transactions 15
Item 8. Description of Securities 15
PART II
Item 1. Market for Common Equity and Related Stockholder
Matters 16
Item 2. Legal Proceedings 17
Item 3. Changes In and Disagreement with Accountants 17
Item 4. Recent Sales of Unregistered Securities 18
Item 5. Indemnification of Directors and Officers 18
PART F/S
Financial Statements 19
PART III
Item 1. Index to Exhibits 38
Item 2. Description of Exhibits 38
PART I
Item 1. Description of Business
-------------------------------
Organization
Skintek Labs, Inc., a Colorado corporation incorporated
on December 13, 1994 under the name, Biologistics, Inc.
(hereinafter the "Company" or the "Registrant"), to engage in the
business of clinical consulting, contract packaging and labeling
services for clinical studies. The Company never commenced
business operations. On April 22, 1997, as a result of a merger
into its subsidiary, Biologistics, Inc., which was incorporated
on March 19, 1997, the Company became a Delaware corporation.
Performance Brands, Inc., incorporated on September 21,
1995, under the laws of the State of the State of Florida.
Performance Brands is engaged in the wholesale and retail
distribution and sale of a variety of products for the skin-care
market. See "Business-Operations" below. On March 31, 1999, the
Company incorporated a wholly owned subsidiary, PBI Acquisition
Corp. ("PBI") and on the same date, Performance Brands, Inc.
merged with PBI. This merger involved the exchange of shares,
pursuant to which the sole shareholders of Performance Brands,
Inc., Stacy and Cathy Kaufman, exchanged all of their capital
stock of Performance Brands, Inc. for shares of the Company's
common stock. This exchange was accounted for as a reverse
purchase for reporting and accounting purposes. See the
Consolidated Financial Statements of the Company and its
subsidiary, Performance Brands, Inc., which are attached hereto
as Part F/S.
The Company and the Industry
Performance Brands, Inc. has been in business since 1995,
engaged in the sale of products for skin fitness and self-
tanning. Hereinafter, Performance Brands, Inc. and its business
operations shall be referred to as the "Company". The skin
fitness and self-tanning business is part of the Sun and Body
Care Industry, which has been a growing industry. The Company's
products are sold though specific classes of trade: i.e. direct
mail, drug chains, mass market outlets, health food stores, gyms,
and tanning, nail and hair salons, as well as private label
sales.
This growth has been the result, in part, of the
increasing public awareness of the potential danger to skin and
health from prolonged exposure to the sun and the fact that the
ozone layer will continue to erode over the next 20 years. A
recent article in Soap/Cosmetics/Chemical Specialties magazine
projected a trend toward products with higher SPFs (Sun
Protection Factor), which is the measure of the UVB protection in
a sun care product. In the same publication, it was reported that
there was a trend in the US for the use of sunscreens year-round.
As the public becomes more and more educated on the dangers of
excess exposure to the sun, it will be realized that UVA rays are
present the entire year, not just during the summer, when UVB
rays are the strongest. Notwithstanding the foregoing, there can
be no assurance that any future growth in the industry will
benefit the Company, nor that the Company will share in any
increase.
In 1994, the National Weather Service, in its daily
weather reports, started projecting the amount of ultraviolet
intensity expected in 58 different cities in the United Stated
between 11:30a.m. and 12:30p.m. the following day. Called the UV
Index, ultraviolet intensity is ranked on a scale of 1 to 15.
This program, created in cooperation with the Environmental
Protection Agency and the Center for Disease Control and
Protection, relates the UV intensity with the SPF or 20 or higher
is recommended for an index over 10.
Page 3
The Company believes that this focus by Federal agencies
on the impact of the sun's intensity, and the daily reporting on
television and radio and other media of the index, should
continue the trend to greater consumption of protective sun care
products. Nevertheless, there can be no assurance that the
Company's business will share in this growth.
In addition to the Company's line of sun-care products,
the Company also markets a line of body washes, which have been
enjoying increasing consumer use and acceptance. Until
approximately four to five years ago, most Americans relied upon
bar soaps and wash clothes for their personal cleansing needs.
Presently, it is estimated that 25% or more of the population
have already changed the way they bathe, using body washes and
cleansing puffs rather than bar soap. In fact, since their wide
introduction in 1994, body washes have become the fastest growing
trend in the personal cleansing category. The Company believes
that the current trend is to liquid soaps.
Products in the sun and body care business consist
primarily of body lotions, oils, and gells designed either to
prevent the skin from sunburning and/or promote sun tanning. In
addition, there are products designed to moisturize the skin
after sun bathing like aloe vera gels or lotions.
"Body washes" are a form of skin cleansers that are
either poured or squeezed out of a bottle, usually in a bath or
shower. The appearance is of a thick liquid like substance with a
variety of different colors and fragrances. A key attribute to
body washes are the fact that they lather and rinse of easily. In
addition, body washes are considered by many persons to serve as
a better moisturizer than a traditional soap bar. However, it
should be understood that bar soap is widely used and accepted by
a great majority of users historically and there can be no
assurance that body washes will ever become the industry
standard. The manufacturing process of body washes allows more
oil based ingredients to be incorporated into the formula, thus
providing certain moisturizing benefits to the skin. This is not
the case with bar soaps.
"Cleansing puffs" also known as poufs or sponges are
sometimes used in conjunction with body washes to maximize the
amount of lather. Madee of a variety of materials, such as sea
sponges, nylon or a combination of polyurethane/nylon in a form
of an oversized sponge.
Competition and Ease of Entry Into The Sun and Body Care Industry
There are few barriers to entry into the industry.
Further, there exists substantial competition in the sun and body
care industry, virtually of which have longer operating history,
far greater financial, personal and other resources, with
substantial product lines and sales and marketing budgets and
proven records of success. Among other entities that the Company
must compete with include the very large corporations such as
Cheeseborough-Pond's(R), Gillette(R), Proctor & Gamble(R) and
Lever Brothers(R), and the smaller, but well-established
companies such as Tom's of Maine(R) and Freeman Cosmetics(R).
These latter two companies have entered and established
themselves in the specialized body wash product market.
Major corporations as well as individual entrepreneurs
and businesses are capable of modifying existing sun care
formulas on the market and, with a reasonable investment, begin
selling competitive products in a fairly quick time-frame, as
large staffs are not needed to be successful in this industry,
provided that a company has qualified sales and marketing
efforts. After ten years in business, Sun Pharmaceuticals, Ltd.,
manufacturer of the Banana Boatr product line, reached the $80
million sales level, with only 100 employees.
Page 4
The industry is growing in many ways domestically and
internationally, which should continue to serve to attract
competition. There are many new sun care products and many new
consumers, for which the Company must compete.
In order for the Company to be competitive, the Company
must devote substantial time, professional and management
efforts, and retain outside marketing experts, to promote its new
product line, SOAPSCREEN(R), which involves a high front-end
cost, presently estimated at approximately $100,000. The Company
projects that initial sales of its body wash and sunscreen
products under the SOAPSCREEN(R) name will commence in the Spring
of 2000. Further, if the Company is successful in establishing
the SOAPSCREEN(R) product line, it may be expected that
competitive products will enter the market, notwithstanding the
fact that the Company has patent pending status of the Company's
10-SBS Polyscreen formulation.
The Company's ability to compete will also be dependent
upon its success in establishing itself as a leader in the filed
of SPF soaps/body washes, of which . Sunscreens have been used as
a major ingredient in face creams for several years by major
manufacturers, which entities will be in position to compete with
the Company.
With respect to the Company's professional skin fitness
line, sold in gyms and health food stores, the Company has one
principal competitor, Jan Tana. Notwithstanding the belief of the
Company that it will be able to successfully compete, there can
be no assurance that it will be able to compete with any entities
that have established presences in the markets in which the
Company seeks to compete.
The Company will be required to compete with larger, more
established firms, because its primary focus is to market its
products into the niche markets, for specialty products that
include skin care products with sunscreens. The Company's
professional tanning product line, sold under the ProTanr name,
is distributed to the professional gym/health club and the health
food markets. These are examples of the niche markets where
competition is not as intense, and where the Company believes
that it will be able to successfully compete. However, there can
be no assurance that the Company is correct in such belief or
that the competitive conditions will not adversely change, with
more intense competition developing in this "niche" market.
The Company's professional line of indoor tanning
products, marketed under the ProTan(R) name, presently competes
with six key producers, including the established Australian
Gold(R), California Tan(R), Swedish Beauty(R), Supre(R), Power
Tan(R) and Most products. While there can be no assurance, the
Company believes that it will be able to successfully compete on
the basis of quality and price in the market for its ProTan(R)
line. However, in order for the Company to compete, the Company
must maintain and increase its distribution network, which
presently relies upon third persons, in order to maintain and
hopefully increase its distribution network, of which there can
be no assurance.
The Company's ability to compete may be adversely
effected by its limited number of employees, which at present
number only 5 persons. Further, the Company is dependent upon its
successfully access distribution channels, which will be
dependent upon the acceptance of its products in the various
markets into which it presently sells as well as those markets
into which it hopes to expand. In order to be successful, of
which there can be no assurance, the Company must be able to
devote substantial resources to its sales and marketing efforts
and budget, which budget the Company projects shall reach
$1,000,000 during the next twelve months.
Page 5
The Company is dependent upon its ability to generate operating
revenues and/or other sources of revenues, whether debt or
equity, in order to fulfill its plan for its sales and marketing
budget. Futher, the Company to date has not confirmed the
availability of any debt or equity financing or the terms of any
such financing, if available.
The Bar and Liquid Soap Industry
Total 1997 sales of bar soaps for all retail outlets in
the country were $1.4 billion, a slight drop of 4% from the prior
year. However, the sales of other soaps and cleansers (body
washes) increased 33% during that year to $670 million. The
current trend in the industry is to liquid soaps. Until three
years ago, most Americans relied on bar soaps and wash clothes
for their personal cleansing needs. Today, approximately one-
quarter have already changed the way they bathe, using body
washes and cleansing puffs instead. Introduced in 1994, they have
become the fastest growing trend in the personal cleansing
category. According to an article in the October, 1997,
Soap/Cosmetics/Chemical Specialties, "The rising popularity of
the body wash can be attributed to two things--body washes are
cleaner and more convenient to use in the shower or bath and they
simplify the skin care process by combining the cleansing and
moisturizing steps."
The significant growth pattern of body washes has
attracted a variety of products from many manufacturers,
including the long-established and financially strong companies
such as Cheesebrough-Pond's(T), Gillette(R), Procter & Gamble(R),
and Lever Bros.(R) The industry also includes established smaller
producers such as Tom's of Maine(R) and Freeman Cosmetics(R),
which have also entered and become competitive in the specialized
body wash products into the market.
Sources of Supply
The component ingredients for the Company's products are
manufactured by third parties. The Company does not believe that
it is dependent upon any single manufacturer, and that other
sources of supply would be available, if necessary. At present,
Cosmetic Corporation of America, located in Medley, FL ("CCA"),
the prime filler for the new product line, is estimated by the
Company to be operating at significantly less than capacity and
the Company believes that it will be able to continue to utilize
the services and components from CCA for the foreseeable future.
The Company also sources other manufacturers, including Custom
Manufacturing Corporation, Medley, FL, Farmanatural, Davie, FL,
Five Star Brands LLC, Grand Rapids, MI and Rovar Soap Company,
Los Angeles, CA.
While the Company contemplated during the 1998 fiscal
year the possibility of establishing its own manufacturing
facility to fulfill its need for component ingredients and
complete product manufacture, at present the Company believes
that it may continue to rely upon third party manufacturers, to
supply the components for its product lines. In addition to the
use of third party manufacturers to manufacture and supply the
component ingredients for the Company's products, and to
manufacture the packaging for the display and sale of its
finished products, such third parties also provide the Company,
at no additional cost, storage space for such components and
packaging materials, as needed. The Company believes that this
arrangement shall also be satisfactory for the foreseeable
future, and that no additional facilities or space will be
required by the Company.
Page 6
Sales, Marketing and Distribution of Products
The Company's products are sold through a variety of
retail outlets, including drug chains, grocery/supermarkets,
health food stores, and tanning nail and hair/beauty salons,
among other outlets. The Company owns the following registered or
trademarked proprietary names: ProTan(R), SOAPSCREEN(R),
Sunscreen Barrier System(R), Earthen Naturals(TM), Earthen
Treasures(TM), Beauty Bites(TM), and Meta Slim 2000(TM). In
addition, the Company has a patent pending and several PCT
patents pending for its liquid body wash and sunscreen
compositions. The Company presently is marketing and selling
products under the names ProTan(R), SOAPSCREEN(R), Sunscreen
Barrier System(R), Earthen Naturals(TM), Earthen Treasures(TM),
and plans to commence marketing efforts under the trade names,
Beauty Bites(TM), and Meta Slim 2000(TM). There can be no
assurance that the Company will be able to generate market
acceptance for the new products or be able to continue to develop
and grow the market for existing products. The Company also
utilizes approximately fifty wholesale distributors to market and
sell its products, which distributors also inventory, ship and
bill the Company's customers directly, as part of their
distribution services.
The Company also generates sales via mail order, from
direct mail and Internet marketing by the Company. In addition,
the Company uses the services of independent sales brokers
nationwide, who are paid commissions equal to 5% of the sales
generated. These independent brokers primarily sell the Company's
products to the drug, mass retail and grocery/supermarket
markets. The Company also generates sales under a private label
program for products designed and marketed exclusively for a
select group of national direct mail order merchants.
The Company's ability to successfully market and sell its
products will be dependent upon the acceptance of its products in
the various markets into which it presently sells as well as
those markets into which it hopes to expand. In order to be
successful, of which there can be no assurance, the Company must
be able to devote substantial resources to its sales and
marketing efforts and budget, which budget the Company projects
shall reach $1,000,000 during the next twelve months. As noted,
the Company presently sells its products through fifty
distributors, which market to ten thousand outlets, several
national drug and mass market chains and over 200 independent
drug stores, as well as several national catalogs.
Government Regulations
At present, there are no specific regulations or approvals
required by or from the Federal or state government or any agency
for the products manufactured by the Company. Further, all of the
Company's products are manufactured under GRAS ("Generally
Recognized as Safe") for the cosmetic industry.
Generally Recognized as Safe is a category of food
additives established in 1958 by the Food and Drug Administration
as part of a revised Food, Drug, and Cosmetic Act of l938. The
original Generally Regarded as Safe list included approximately
700 food additives that had "stood the test of time", meaning
that they had been subject to human use and or consumption and
were believed to be harmless. A current revision by the FDA to
reevaluate and reclassify all Generally Regarded as Safe
additives is underway, with the potential for the FDA banning any
additives deemed hazardous. While the FDA governs the GRAS
standards, the ongoing revisions are specifically related to the
raw materials which are additives, not to the finished cosmetic
product, which the Company's products are considered.
Page 7
Also, while the skin care industry is basically self-regulated,
the FDA regulations do apply to fragranced personal care
products, perfumes and cosmetics. Since there are limitless skin
care flormulations recognized as "trade secrets" the actual
impact of the FDA regulation is limited. However, by law, all the
ingredients of a product must be listed on the label. These are
listed in order of predominance, which means the percentage of
the make-up or composition of each product.
At present, the FDA does not require safety testing on
any ingredient that goes into cosmetics or perfumes. Only once
the product is on the market does the FDA have any regulatory
authority. The FDA must prove in court that the product is unsafe
before it can require the product to be removed from the
marketplace. Nevertheless, on many occasions, manufacturers will
voluntarily recall a product that is in question, either as a
result of the manufacturer's own determination or any public
report, or otherwise. The FDA does not require companies to
register with the FDA, file the ingredients used, or even keep a
record of injuries related to use of their products. In the event
of any recall of one or more of the Company's products, the
potential adverse impact would be based on the revenues lost from
a particular product that would be recalled. No other actions or
impact should result against the overall business of the Company.
None of the Company's products are hazardous or contain any
hazardous additives and therefore, the Company does not believe
that there could exist any claim from consumers or any businesses
that buy and use the Company's products.
In addition, samples of each of the Company's products
that have been produced are retained for three years, which
samples are not part of inventory and not for resale. As a
result, there are no present or anticipated regulations that have
or may have any effect upon the Company or its business.
Item 2.Management's Discussion and Analysis of Finical Condition
and Results of Operations
- -----------------------------------------------------------------
Results of Operations
During the Company's fiscal years ended December 31, 1998
and 1997, respectively, the Company had sales of $429,914 and
$463,002, respectively. The reason for the slight decline in
sales from fiscal 1997 to 1998, was principally due to the delay
by the Company bringing the new product, SOAPSCREEN(R) to the
market, as a result of the Company's determination to have
clinical testing completed on SOAPSCREEN(R) in order to proceed
with the patent application. It should be understood, however,
that the Company is not dependent upon any single product for a
material percentage of its sales. The Company incurred a net loss
of $469,573 ($0.12 per Share) during 1998, compared to a net
profit of $60,323 ($0.02 per Share) for the prior fiscal year.
For the nine-month period ended September 30, 1999, the
Company had sales of $848,396, compared to sales of $347,349
during the nine month period ended September 30, 1998. This
increase in sales was due to the acceptance of several newly
introduced skin care products, including SOAPSCREEN(R), Slim
Tan(R), expansion of its existing Pro-Tan(R) product line, and
several private label products. The Company was able to introduce
these products and expand its line and marketing as a result of
increased cash flow from operations and funds from financing
activiities. During the nine month period ended September 30,
1999 and 1998, the Company received from financing activities
$445,408 and $66,500, respectively.
Page 8
During such nine month period ended September 30, 1999
and 1998, respectively, the Company had a net loss of $77,405
($0.02 per Share) and $301,264 ($0.09 per Share), respectively.
During the three-month period ended September 30, 1999, the
Company had sales of $305,561 compared to sales of $125,045 for
the comparable three-month period in 1998. For these three-month
periods, the Company had a net loss of $80,914 ($0.01 per Share),
compared to $86,552 ($0.03 per Share) for the prior year. See the
Financial Statements attached hereto, which reflect increased
sales and operating expenses associated with the increased sales
efforts and results.
The Company's net loss for the year ended December 31,
1998, was principally the result of significantly higher
expenditure on selling, general and administrative expenses,
which was $636,743 during 1998, compared to $165,133 during the
prior fiscal year. The Company expended more funds (an increase
of 800%) during 1998, compared to fiscal 1997, for selling
expenses, to pay for the introduction of its SOAPSCREEN(R)
product line. The Company's administrative expense increase by
approximately 225% from 1997 to 1998, which was principally the
result of costs associated with the merger, and general expenses
increased related to the use of outside consultants for the
development and marketing stages to launch the SOAPSCREEN(R)
product line.
The development of the SOAPSCREEN(R) product line
required outside consultants for formula development, clinical
testing and package design. Becasue these consultants provide
services in the area deemed to be "work in progress", stage of
product development, and not in the "finished goods" stage, these
expenses have been classified by the Company as general. The
Company continues to introduce new products, including the launch
of the SlimTan(R) food bar and vitamin supplement line, which it
should begin to sell in January, 2000, and the introduction of
the Quick Tan(R) food bars, also in January, 2000. Both of these
lines are principally aimed at the professional hair, nail and
tanning salon professional markets.The Company believes that it
will be required to continue to expend funds for existing and new
products, which it estimates, will be approximately $1,000,000
over the next 12 months. Of this amount, approximately 5% on
clinical support, such as ingredient research and sunscreen
testing, as applicable, 2% for package design, sales literature
and ad design, 5% for public relations, 10% for trade show
participation and related travel, and 10% on advertising. The
remaining 68% will be allocated to inventory financing and
general operations.
Liquidity and Capital Resources
The Company, at September 30, 1999 had current assets of
$806.476, compared to current assets of $186,927 at December 31,
1998. The increase in current assets is the result of increased
sales, which led to increased cash, accounts receivable,
inventory and stock subscriptions receivable. The Company's
accounts receivable are all current and collectible, with no
return privileges, and the inventory is all ready for sale. The
increase in inventory consists of both finished products and
components used for manufacturing finished products. The
Company's sales policies do not provide any customers with any
return privileges and sales are not contingent.
The Company's current liabilities were $180,263 at
September 30, 1999 compared to $372,033 at December 31, 1998. The
Company achieved this improvement principally as a result of the
conversion of short-term debt into equity, and increased cash
flow from operations. On November 13, 1998, a merger consultant's
note for $82,333 was converted into 164,667 Shares and 208,333
Shares were issued under Rule 144.
Page 9
On March 31, 1999, $541,667 of merger consultant's note was
converted into 1,083,338 Shares, and on July 6, 1999, a total of
1,034,933 Shares were sold to the merger consultant at price of
$.50 per Share, resulting in stock subscriptions receivable of
$392,286, after the quarter's payments to the Company by
consultants. During 1998 and 1999, a merger consultant advanced
the Company $514,000 and paid an additional $117,915 in merger
related expenses for the Company.
There are no trends that the Company is aware of that
would adversely impact upon its liquidity and the Company has no
plans for any large capital expenditures. There is a trend, as
discussed above under Description of Business, as a result of the
increased public awareness of the risks associated with excess
exposure to the sun, of the need for skin protection products,
such as those of the Company. There can be no assurance, however,
of the Company's ability to exploit this increased public
awareness, notwithstanding the growing demand.
The season for the Company's sun protection products is
from January through August. The Company believes that as it adds
to its product line, it would hope to increase the use of its
products year round. Material events that would effect the
Company's financial condition relate directly to the market
acceptance for existing and new products. Any decline in
acceptance would adversely effect the Company's ability to
increase its distribution, which in turn would increase its
sales. The Company's liquidity and future success shall be
dependent upon the market acceptance of the Company's proprietary
liquid body wash with sunscreen, which the Company believes is
the only product of its kind on the market. The Company hopes to
expand into the "functional foods" market with a new line of
products under the Beauty Bites(TM) name. It does not presently
have a budget allocated for this new product line.
Year 2000
The Company acquired its computer systems with an
objective to being Year 2000 compliant. The Company has engaged
the services of a qualified technician to determine the extent to
which it may be vulnerable to third party Year 2000 issues. As a
relatively new corporation, all computer equipment was purchased
in 1998 or later and all such equipment and software is Year 2000
compliant. The Company uses Microsoft software and has installed
all the available updates to this software. Further, Microsoft
updates will be installed if any further software shall become
available from Microsoft prior to the end of 1999. The Company
has expended approximately $5,000 on hardware and software to
become Year 2000 compliant. The Company has assessed and
continues to assess whether its information and non-information
technology systems will be effected by the Year 2000 issues. The
Company has investigated its third party communications suppliers
such as the telephone company and its Internet service provider
and found that all are in the process of becoming Year 2000
compliant in 1999. Based upon current information, management
believes that the necessary modifications have been made
internally to effectively continue the Company into the Year
2000. However, management is continuing to monitor internal
systems, and to assess the readiness of its systems, to ensure
Year 2000 compliance. As a contingency, the Company has
identified other communication suppliers who could provide the
necessary service at a minimal cost to the Company, and a minimal
effect on the operations of the Company. In the event no other
communication suppliers can be found, there could be a material
adverse effect on the Company and its operations. Based upon
current information, the Company does not believe that the costs
associated with Year 2000 compliance shall be material for the
Company.
Page 10
Item 3. Description of Property
- -----------------------------------
The Company presently leases approximately 6800 square
feet of executive office space at 1750 NW 65th Avenue,
Plantation, FL 33313, for $3,500 per month. The condition of the
Company's leased facilities in Plantation, FL are excellent, and
are sufficient for its use for the foreseeable future. The
Company, as noted above, also has available from third party
manufacturers of the components used to manufacture the Company's
products and the manufacturer/suppliers of the packaging for its
products the use of storage space to store such components and
materials at no cost. This arrangement is also adequate for the
Company's purposes for the foreseeable future. For the
foreseeable future, the Company's business will not require any
additional space for such uses as packaging, distribution or
storage.
Page 11
Item 4. Security Ownership of Certain Beneficial Owners and
Management
- -----------------------------------------------------------
As of December 22, 1999, the security ownership of the
following persons and entities, who were either executive
officers of the Company or were known to the Company to own more
than five percent (5%) of the Company's outstanding voting
securities was as follows:
<TABLE>
<S> <C> <C> <C>
(1) (2) (3) (4)
- -----------------------------------------------------------
Title of Class Name and Amount and Percent of
Address of Nature of Class(1)
Beneficial Beneficial
Owner Ownership
Common Stock Stacy Kaufman 3,871,666 (2) 60.3%
1750 NW 65th
Avenue
Plantation, FL
33313
Common Stock Cathy Kaufman 3,083,333 (3) 39.7%
1750 NW 65th
Avenue
Plantation, FL
33313
</TABLE>
______
(1) Based upon 6,421,271 shares issued and outstanding at
December 30, 1999, inclusive of 500,000 shares underlying a stock
option as discussed below.
(2) Includes 3,083,333 shares owned of record and
beneficially by Stacy Kaufman and Cathy Kaufman, jointly and
288,333 owned of record and beneficially by Stacy Kaufman.
(3) A total of 3,083,333 shares are owned of record and
beneficially by Stacy Kaufman and Cathy Kaufman, jointly.
On March 30, 1999, the Company entered into an employment
agreement with Stacy Kaufman, the Company's president and
majority stockholder, in which was included an incentive
compensation stock option plan. This plan allows the president to
purchase up to 2,500,000 shares of common stock by March 29,
2009, when and provided that certain annual revenue levels are
reached, beginning at December 31, 1999. Based upon this
employment agreement, Mr. Kaufman has the right within a date 60
days from the date of this Form 10-SB/12g/A to exercise an option
to purchase 500,000 shares at $.50 per share. These shares were
not included in the diluted shares for the earnings per share
calculation. See the Consolidated Financial Statements attached
hereto.
Page12
Item 5. Directors, Executive Officers, Promoters and
Control Persons
- ----------------------------------------------------
<TABLE>
(a) The directors and executive officers are:
<S> <C> <C>
Name Age Title
Stacy Kaufman 34 President, Chief Executive
Officer, and
a Director
Cathy Kaufman 41 Secretary, Treasurer and a
Director
</TABLE>
All directors hold office until the next annual meeting of
stockholders of the Company and until their successors have been
elected and shall qualify. Officers serve at the discretion of
the Board of Directors. The Company contemplates prior to the end
of the current fiscal year or during the first quarter of fiscal
2000, that it shall enter into an employment agreement with a
chief chemist, Michael Dulak, the terms of which have not been
determined as of the date of this Form 10-SB/12g/A.
Stacy Kaufman has served as President, Chief Executive
Officer and a Director of the Company from its inception, having
organized the Company in September, 1995. Mr. Kaufman serves the
Company in a full time capacity. Mr. Kaufman formulated and
developed SkinTekr brand of products in 1985 and developed the
PRO TANr instant tanning products in 1986. Mr. Kaufman has worked
for the Company and its predecessor for more than the past five
years. Effective March 30, 1999, the Company entered into a five
(5) year executive employment agreement with Stacy Kaufman. See
"Executive Compensation" below.
Cathy Kaufman has been Secretary, Treasurer and a Director
of the Company since September, 1995. During the past five years,
Cathy Kaufman, who is married to Stacy Kaufman, prior to he
employment with the Company, served as comptroller of a private
company has served as comptroller in the mail order business.
Page 13
Item 6. Executive Compensation
- ------------------------------------
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Securities LTIP All other
Principal Annual Restricted Underlying Payouts Compansation
Position Year Salary Bonus($) Compen- Stock Options/SAR's ($) ($)
Sation($) Awards(s)$ (#)
- -------------------------------------------------------------------------------------------------------
Stacy
Kaufman 1998 65,942 0 80,000 0 0 0 0
President
, CEO
Stacy
Kaufman 1997 1,200 0 0 0 0 0 0
President
, CEO
Stacy
Kaufman 1996 0 0 0 0 0 0 0
President
, CEO
Cathy
Kaufman
Secretary 1998 6,350 0 0 0 0 0 0
,Treasurer
Cathy
Kaufman
Secretary 1997 0 0 0 0 0 0 0
,Treasurer
Cathy
Kaufman
Secretary 1996 0 0 0 0 0 0 0
,Treasurer
</TABLE>
Stacy Kaufman has served as the Company's chief executive officer and
president during the respective years set forth above. On March 30 ,1999,
the Company entered into a five (5) year executive employment agreement
with Mr. Kaufman, which provides for annual base salary of $100,100,
subject to an annual increase of 10%, a bonus based upon performance
determined by the board of directors, consisting presently of Mr. Kaufman
and his wife, Cathy Kaufman, and incentive compensation in the form of
stock options, under the Company's 1999 Stock Option Plan. This plan
provides for the right to purchase 2,500,000 shares ("Option Shares"),
exercisable until the close of business on March 29, 2009, at an exercise
price of $.50 per Option Share, which was in excess of 110% of the fair
market value of the Company's shares on the date of the agreement and
grant. The right to exercise the options shall be contingent upon the
Company's receipt of revenues, as follows: if and when the cumulative
revenues reach $700,000, the right to exercise 500,000 Option Shares;
$1,540,000 in revenues, and additional 500,000 Option Shares; $2,548,000 in
revenues, an additional 500,000 Option Shares; $3,757,600 in revenues, and
additional 500,000 Option Shares, and $5,209,120, the last 500,000 in
Option Shares. Cathy Kaufman has served as Secretary and Treasurer during
the respective years set forth above.
Page 14
Item 7.Certain Relationships and Related Transactions
- -----------------------------------------------------
During fiscal 1997 and 1998 and to date, the Company has had no
transactions with related parties, except for the executive employment
agreement between the Company and its president and chief executive
officer, Stacy Kaufman. See the discussion in the footnote to the table
under "Executive Compensation" above.
Item 8. Description of Securities
- -------------------------------------
The Company's authorized capital stock consists of 50,000,000 shares
of common stock, par value $.001 per share, and 1,000,000 shares of
preferred stock, par value $.001, of which 360,000 shares are designated as
series `A' preferred stock. There are no shares of preferred stock issued
or outstanding.
The series `A' preferred stock has the following rights, preferences
and limitations:
(1) Dividends: Mandatory preferential dividends, as a group,
equal to 10% of the Company's adjusted gross profit as reflected on its
annual corporate income tax return, which dividend is to be paid, pro rata,
among the holders of the issued and outstanding shares of A preferred
within ten days of the filing of such return.
(2) Liquidation Preference: In the event of any liquidation,
dissolution or winding-up of the Company, 10% of the Company's assets shall
be distributed, pro rata, to the holders of the A preferred before division
and distribution of assets to the holders of the Company's common stock.
(3) Voting Rights: The holders of A preferred shall have no voting
rights.
(4) Conversion Rights: The holders of A preferred shall have the
right to convert their shares of A preferred into shares of the Company's
common stock on the basis of three shares of common stock for every share
of A preferred delivered to the Company for conversion. The procedure for
delivering the certificates of A preferred to the Company and issuing
common shares therefore shall be as designated by the Company's board of
directors.
The holders of shares of the Company's common stock shall have one
vote on each matter submitted to shareholders for vote, including the
election of directors. There are no pre-emptive rights with respect to the
shares of common stock. Further, holders of the shares of common stock are
entitled to share pro rata on dividends, if and when declared and paid on
the common stock, although there are no present plans that any dividends
will be paid on the shares of common stock for the foreseeable future.
Also, there are no cumulative voting rights for shares of common stock and
therefore, the holders of a majority of the Company's outstanding shares of
common stock, represented by Stacy and Cathy Kaufman, will be able to elect
the entire board of directors. The board of directors of the Company has
the authority to designate the management of the Company and therefore
control the Company.
Page 15
PART II
Item 1. Market for Common Equity and Related Stockholder Matters
- ----------------------------------------------------------------
The Company's common stock is traded over-the-counter in what is
referred to as the "NASDAQ Bulletin Board". As of December 30, 1999, there
were 7 markets makers in the Company's stock. The following information
with respect to the high and low market prices was obtained from the
Company's records. The Company's shares on May 12, 1999 had a 1 for 6
reverse split, and the table below reflects such information.
<TABLE>
<S> <C> <C>
Bid Prices
1997 High Low
Quarter Ending June 30 $ 4 1/2 $ 3
Quarter Ending Sept. 30 $ 5 1/4 $ 2 1/4
Quarter Ending Dec. 31. $ 3 3/8 $ 3
Bid Prices
1998 High Low
Quarter Ending March 31 $ 4 1/8 $ 2 3/4
Quarter Ending June 30 $ 3 3/4 $ 2
Quarter Ending Sept. 30 $ 3 3/8 $ 2 5/8
Quarter Ending Dec. 31 $ 1 1/2 $ 5/16
Bid Prices
1999 High Low
Quarter Ending March 31 $ 4 1/4 $ 3/16
Quarter Ending June 30 $ 4 1/4 $ 3/16
Quarter Ending Sept. 30 $ 2 3/8 $ 1 1/32
Period Ending Dec. 22 $ 1 7/16 $ 3/16
</TABLE>
The Company is filing this Form 10-SB/12g/A for the purpose of
registering as a reporting company under the Securities Exchange Act of
1934 (the "Exchange Act"), and thereby enabling the Company to reapply to
NASDAQ for the purpose of having its shares again trade on the NASDAQ
Bulletin Board. Effective Octboer 7, 1999, the shares ceased to trade on
the NAASDAQ:OTC bulletin board, because the Company was not reporting under
the Exchange Act. The Company intends to apply upon the effective date of
this registration statement to apply to have its shares again trade on the
NASDAQ:OTC:Bulletin Board. As of December 22, 1999, there were 150 holders
of the Company's common stock. The Company has never paid a dividend and
does not anticipate that any dividends will be paid in the near future.
Page 16
Item 2. Legal Proceedings
- -------------------------
The Company is not a party to any litigation that is material. The
Company is a defendant in an action pending in the Circuit Court in and for
Broward County, Florida. The action alleges a claim for $15,000, which is
the minimum amount necessary for jurisdictional purposes in order to
commence an action in such court. The claim of the plaintiff, a model,
alleges that the Company used plaintiff's image without a consent. The
Company does not believe that the action, if adjudicated against the
Company, will not have a material adverse impact upon the Company or its
financial condition. Further, the Company believes that it will be able to
settle this action through negotiations with the plaintiff, at terms
satisfactory to the Company, which it does not believe will exceed $5,000.
Item 3. Changes in and Disagreement with Accountants on Accounting
- ----------------------------------------------------------------------
None. The Company's independent accountant, Grassano Accounting,
P.A., is the successor independent accounting firm to the independent
accountant firm of Grassano and Associates. During the past two years, the
Registrant's financial statements have been audited by the accounting firms
of Grassano Accounting P.A. and its predecessor firm, Grassano and Company.
P.A. The predecessor accounting firm, Grassano and Company P.A., did not
resign, decline to stand for re-election nor was it dismissed. Rather, it
was reorganized as Grassano Accounting P.A. The principal accountant's
report on the financial statements for the past two years did not contain
an adverse opinion or disclaimer of opinion, nor was any report modified as
to uncertainty, audit scope, or accounting principles. There was no
decision to change accounting firms, but rather, the Company's board of
directors ratified, recommended and approved the appointment of the
successor accounting firm. There were no disagreements with the predecessor
accountantinf firm, whether or not resolved, on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope
or procedure, which if not resolved to such accountant's satisfaction,
would have caused it to make reference to the subject matter of the
disagreement(s) in connection with its report.
Page 17
Item 4. Recent Sales of Unregistered Securities
- -----------------------------------------------
The Company sold the following unregistered shares as set forth
below during the past three years. In connection with the transactions, no
commissions were paid to any person or entity, and no underwriter was
involved, nor was any officer, director or affiliate of the Company paid or
given any consideration.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Class of Title and Nature and
Date persons/purchasers Amount Amount
of Securities of Consideration(1)
- -------------------------------------------------------------------------
11/10/98 private 164,667 common Cash $82,333.50
investors shares
11/11/98 consultant 208,333 common Services valued
shares at $104,166.50
03/31/99 private 1,833,333 Cash
investors common shares $541,666.50
07/06/99 private 1,034,933 $517,466.50 in
investors common shares promissory
note. $242,095
of this amount
is due in cash
payable to the
Company. The
balance of
$275,371.50
shall be
satisfied by
the return to
the Company, at
$.50 per share
(550,743 shares)
</TABLE>
(1) Each of the transactions was based upon the exemption from the
registration provisions under Rule 504(D), Regulation D, promulgated
pursuant to the Securities Act of 1933, as amended (the "Act") at $.50 per
share. Under the provisions of Rule 504(D), the Company, as a non-reporting
entity, relied upon this exemption, which permits up the sale of up to
$1,000,000 in securities during a twelve month period. The shares sold to
private investors, all of whom were sophisticated investors, were sold
pursuant to a Regulation D exemption and provided above and the shares bear
an appropriate legend. The shares issued to the consultant were issued for
services in connection with the merger of the PBI into the Company, at a
value of $.50 per share.
Item 5. Indemnification of Directors and Officers
- -----------------------------------------------------
The Company's Certificate of Incorporation provides that the Company
indemnify all persons whom it may indemnify to the fullest extent allowed
by the General Corporation Law of Delaware.
Page 18
PART F/S
Financial Statements
The financial statements for the fiscal years ended December 31,
1998 and 1997, June 30, 1999 and 1998 (unaudited) and for the nine-month
periods ended September 30, 1999 (unaudited) and 1998 (unaudited), are
attached hereto.
Page 19
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINICAL STATEMENTS
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 21
Consolidated Balance Sheets 22-23
Consolidated Statements of Operations 24-25
Consolidated Statements of Stockholders' Equity (Deficit) 26-27
Consolidated Statements of Cash Flows 28-30
Notes to Consolidated Financial Statements 31-36
Page 20
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Skintek Labs, Inc. (formerly Biologistics, Inc.)
Plantation, Florida
We have audited the accompanying consolidated balance sheets of Skintek
Labs, Inc. (formerly Biologistics, Inc.) and Subsidiary (the "Company") as
of June 30, 1999 and December 31, 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the six
months ended June 30, 1999 and 1998, and for the years ended December 31,
1998 and 1997, respectively. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
consolidated financial statements give retroactive effect to the merger of
Skintek Labs, Inc. and Performance Brands, Inc. (the Subsidiary), which has
been accounted for as a reverse purchase as described in Note A of the
accompanying notes to consolidated financial statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors for
1998 and 1997, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Skintek
Labs, Inc. (formerly Biologistics, Inc.) and Subsidiary at June 30, 1999
and December 31, 1998, and the results of its operations and its cash flows
for the six months ended June 30, 1999 and for the years ended December 31,
1998 and 1997, respectively, in conformity with generally accepted
accounting principles.
/s/ Grassano Accounting, P.A.
Boca Raton, Florida
August 16, 1999
Page 21
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<S> <C> <C>
June 30, Dec. 31,
1999 1998
CURRENT ASSETS
Cash $54,175 $ -
Accounts Receivable 227,462 16,889
Inventory 199,005 83,099
Income Tax Receivable 28,948
Due from Stockholders 38,150 60,767
------- -------
TOTAL CURRENT ASSETS 518,792 189,703
------- -------
PROPERTY AND EQUIPMENT
Machinery and Equipment 34,094 21,658
Furniture and Fixtures 9,451 5,551
43,545 27,209
------ ------
Less: Accumulated Depreciation 26,464 24,375
------ ------
NET PROPERTY AND EQUIPMENT 17,081 2,834
------ ------
OTHER ASSETS
Security Deposits 5,385 4,885
Patent( Less: Accumulated
Amortization of $2 in 1999 1,713 -
----- -----
TOTAL OTHER ASSETS 7,098 4,885
----- -----
TOTAL ASSETS $542,971 $197,422
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 22
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT
<TABLE>
<S> <C> <C>
June 30, Dec. 31,
1999 1998
CURRENT LIABILITIES
Accounts Payable $300,611 $265,268
Payroll Taxes Payable 4,733 5,612
Income Taxes Payable 1,576 9,000
Notes Payable 19,569 234,593
------- -------
TOTAL CURRENT LIABILITIES 326,489 514,473
------- -------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $0.001 Par Value,
50,000,000 Shares
Authorized, 4,886,338 Shares
Issued & Outstanding
in 1999 and 3,803,000 Shares
Issued & Outstanding
in 1998 4,886 3,803
Preferred Stock, $0.001 Par Value,
Non-Voting,
1,000,000 Shares Authorized,
Shares Issued & Outstanding - -
Additional Paid in Capital 506,299 (22,642)
Retained Earnings (Accumulated Deficit)(294,703) (298,212)
------- -------
TOTAL STOCKHOLDERS' EQUITY(Deficit) 216,482 (317,051)
------- -------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIT) $542,971 $197,422
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 23
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Six Months Ended For the Years Ended
<S> <C> <C> <C> <C>
June 30, 1999 June 30, 1998 Dec. 31, 1998 Dec. 31,1997
(Unaudited)
SALES $542,835 $222,304 $429,914 $463,002
COST OF SALES 257,448 169,666 262,744 211,067
------- ------- ------- -------
GROSS PROFIT 285,387 52,638 167,170 251,935
------- ------- ------- -------
OPERATING EXPENSES
Selling 115,463 176,392 279,681 28,716
General 59,216 31,313 72,252 48,902
Administrative 128,947 60,087 287,623 87,515
------- ------- ------- -------
TOTAL OPERATING EXPENSES 303,626 267,792 639,556 165,133
------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS (14,503) (215,154) (469,573) 86,802
------- --------- ------- --------
OTHER INCOME AND EXPENSE
Miscellaneous Income 16,413 0 8,029 -
Interest Income 1,677 0 2,312 7,835
Interest Expense (383) (14) (2,317) (11,714)
------ -------- ------- --------
TOTAL OTHER INCOME(EXPENSE) 17,707 (14) 8,024 (3,879)
------ -------- ------- -------
NET INCOME (LOSS) BEFORE
PROVISION FOR (BENEFIT
FROM) INCOME TAXES (3,509) (215,168) (460,942) 84,290
Provision for (Benefit from) 0 0 (44,171) 22,600
Income Taxes
------- ------- ------- ------
NET INCOME (LOSS ) $(3,509) $(215,168) $(416,771) $61,690
NET INCOME (LOSS)
COMMON SHARE
Basic $.00 $(.06) $(.12) $.02
==== ====== ====== ====
Diluted $.00 $(.06) $(.12) $.02
==== ====== ====== ====
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER
COMMON SHARE
Basic 4,347,662 3,430,000 3,479,052 3,364,411
========= ========= ========= =========
Diluted 4,729,894 3,430,000 3,479,052 3,364,411
========= ========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 25
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> Retained Total
Number Number of Common Preferred Retained Total
of Shares Stock Stock Additional Earnings Stockholders
Shares Preferred Paid In Accumulated Equity
common Capital Deficit (Deficit)
- ------------------------------------------------------------------------------------------------------------
Balance at Dec. 3,250,000 360,000 $3,250 $360 $1,490 $56,869 $61,969
31, 1996
May 13, 1997
converted
360,000 preferred
into
180,000 common shares 180,000 (360,000) 180 (360) 180 - -
Net Income - - - - - 61,690 61,690
--------------------------------------------------------------------------------
Balance at Dec. 3,430,000 0 3,430 0 1,670 118,559 123,659
31, 1997
November 13, 1998
converted $82,333
of merger
consultant's note
into 164,667
shares of
common stock and
issued an
additional 208,333
of Sec.144
common shares 373,000 - 373 - 81,960 - 82,333
Merger Costs - - - - (106,272) - (106,272)
Net Loss - - - - - (416,771) (416,771)
--------------------------------------------------------------------------------
Balance at Dec. 31 3,803,000 0 3,803 - (22,642) $(298,212) $(317,051)
1998
March 31, 1999
converted
$541,667 of merger
consultant's note
into
1,083,338 shares
of common stock 1,083,338 - 1,083 - 540,584 - 541,667
Additional Merger - - - - (11,643) (11,643)
Costs
Net Loss - - - - - 3,509 3,509
---------------------------------------------------------------------------------
Balance at June 4,886,338 0 $4,886 $- $506,299 $(279,703) $216,482
30, 1999 =================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 27
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the six Months Ended For the Years Ended
June 30, June 30, Dec. 31, Dec.31,
1999 1998 1998 1997
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $(3,509) $(215,168) $(416,771) $61,690
Adjustments to Reconcile
Net Income
(Loss) to Net Cash
Provided by
Used in) Operating
Activities:
Depr.and Amortization 2,090 304 630 702
Decrease ( Increase)
in Accounts Receivable (210,573) 7,833 (18,492)
Increase in Inventory (115,906) (58,351) (20,958)
Decrease (Increase)
in Income Tax Receivable 28,948 (28,948)
Increase in Security
Deposits (500) (2,150) (2,150)
Increase (Decrease) in
Accounts Payable 35,343 172,682 249,709 (6,491)
Increase (Decrease)
in Payroll Taxes Payable (879) 3,201 4,533 (1,035)
Increase (Decrease) in
Income Taxes Payable (7,424) (10,103) (53,707) 29,512
------- -------- -------- ------
NET CASH PROVIDED
BY (USED IN) OPERATING
ACTIVITIES (265,392) (51,234) (297,222) 44,928
------- ------ ------- ------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Loan Repayments from
(Advances to)
Stockholders (Net) 22,617 31,715 101,078 (44,790)
Purchases of Machinery
and Equipment (16,336) (3,464)
Purchases of
Intangible Assets (1,714)
Purchases of Goodwill (11,643) (106,272)
-------- ------- --------- -------
NET CASH USED IN
INVESTING ACTIVITIES (7,076) 31,715 (8,658) (44,790)
-------- ------ -------- -------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Note Payable 326,643 25,000 305,272
------- ------ ------- -------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 326,643 25,000 305,272
------- ------ ------- -------
NET INCREASE (DECREASE)
IN CASH 54,175 5,481 (608) 138
CASH, BEGINNING OF PERIOD 0 608 608 470
------- ----- --- ---
CASH, END OF PERIOD $54,175 $6,089 $0 $608
======= ====== === ====
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION
Cash paid during the
period for:
Interest $383 $14 $2,317 $11,714
==== === ====== =======
Income Taxes $7,424 $0 $13,968 $0
====== === ======= =======
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these Consolidated Statements.
Page 29
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
SUPPLEMENTARY DISCLOSURE OF NON-CASH OPERATING ACTIVITIES
On May 13, 1997, 360,000 shares of preferred stock were
converted into 180,000 shares of common stock.
On November 13, 1998, $82,333 of merger consultant's note
was converted into 164,667 shares of common stock. 208,333
shares of Section 144 common stock were also issued.
On March 31, 1999, $541,667 of merger consultant's note was
converted into 1,083,338 shares of common stock.
The accompanying Notes to Consolidated Financial Statements
are an integral part of these Consolidated Statements.
Page 30
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On December 13, 1994, Skintek Labs, Inc. (the "Company")
under the name of Biologistics, Inc. was incorporated under
the laws of Colorado, to engage in the business of clinical
consulting, contract packaging and labeling services for
clinical studies. The Company issued stock but never had
any operations. On April 22, 1997, the Company became a
Delaware corporation when it merged itself into its
subsidiary, Biologistics, Inc., incorporated under the laws
of Delaware on March 19, 1997.
Performance Brands, Inc. (the "Subsidiary") was
incorporated September 21, 1995 under the laws of the State
of Florida. The Company is engaged in the wholesale and
retail distribution and sale of various products in the skin-
care market. Currently, these products are being
manufactured, to the Company's specifications, in South
Florida by several independent fillers and by the Company.
On March 31, 1999, the Company incorporated a wholly-
owned subsidiary PBI Acquisition Corp. On the same day
Performance Brands, Inc. merged with PBI Acquisition Corp.
when the sole stockholder exchanged his stock in Performance
Brands, Inc. for 18,500,000 shares of Skintek Labs, Inc.
Then PBI Acquisition Corp. was dissolved, leaving
Performance Brands, Inc. as the surviving subsidiary of
Skintek Labs, Inc. This stock-for-stock transfer was
accounted for as a reverse purchase.
Basis of Presentation and Consolidation
The consolidated financial statements have been
prepared in accordance with generally accepted accounting
principles and include the accounts of Skintek Labs, Inc.
and its wholly-owned subsidiary Performance Brands, Inc. All
material intercompany transactions and balances have been
eliminated in consolidation.
As described in Organization above, effective March 31,
1999, the Company acquired all of the common stock of
Performance Brands, Inc. The business combination was
accounted for as a purchase and accordingly, the Company's
financial statements have been presented to include the
results of Performance Brands, Inc. as though the business
combination occurred as of January 1, 1997.
Accounts Receivable
All accounts receivable are due from unaffiliated third
parties. The Company considers all accounts receivable to be
fully collectible; accordingly no allowance for doubtful
accounts is required. If amounts become uncollactible, the
will be charged to operations when that ditermination is made.
Inventory
Inventory is stated at the lower of cost or market,
using the first-in, first-out (FIFO) method and consists of
bottles of product, empty bottles, displays, and boxes. The
raw materials are expensed as purchased because their
inventoried value would be immaterial.
Property, Equipment and Depreciation
Property additions, major renewals and betterments are
included in the assets accounts at cost. Maintenance, repairs
and minor renewals are charged to earnings when incurred.
Page 31
Depreciation is computed using the modified
accelerated cost recovery system and the straight-line
method over the estimated useful lives of the assets. The
Company has elected to expense, rather than depreciate, the
cost of certain depreciable personal property under Section
179 of the Internal Revenue Code. Although, these methods
are not generally accepted accounting principles, the
difference between them and any other acceptable method is
immaterial to the current financial statements.
Patent
During the six months ending June 30, 1999, the Comapny
paid $1,715 in patent fees, which are being amortized over
seventeen years.
Long-Lived Assets
The Company periodically reviews the values assigned
to long-lived assets, such as property and equipment and
acquired customer bases, to determine whether any
impairments are other than temporary. Management believes
that the long-lived assets in the accompanying balance
sheets are appropriately valued.
Revenue Recognition
Revenue from sales is recognized in the period in
which the products are shipped and invoiced to the customer.
Sales are final upon the shipment of the goods to customers.
The customers are generally the fifty independent
distributors throughout the world and an additional
approximately eighteen hundred wholesale accounts,
principally in the USA and several large American retail
chains.
Paqge 32
Advertising
Costs associated with advertising are expensed in the year
incurred. Advertising expenses, which are comprised
primarily of print media, were $43,763 and $159,914 for the
six months ending on June 30, 1999 and 1998, respectively;
and $194,053 and $3,245 for the years ending on December 31,
1998 and 1997, respectively.
Income Taxes
Since inception, the Company has maintained a fiscal year
ending on each 31st day of December. Provisions for income
taxes have not been presented as there is no taxable income
after consideration of net operating losses, and there are
no timing differences.
Earnings Per Common Share
The Company adopted Statement of Financial Accounting
Standard No. 128 ("FAS 128"), Earnings Per Share for the
period of these financial statements. Basic earning per
common share is computed using the weighted average number
of common shares outstanding. Diluted earnings per common
share is computed using the weighted average number of
shares outstanding adjusted for the incremental shares
attributed to the potential conversion of advances from the
merger consultant to 752,000 shares of common stock as of
March 30, 1999. There was no dilution in the prior periods.
The shares were also numbered as though the May 12, 1999
reverse stock split occurred on January 1, 1997.
Recent Accounting Pronouncements
In 1999, the Company was subject to the provisions of
Statement of Financial Accounting Standards No. 130 ("SFAS
130"), "Reporting Comprehensive Income" and Statement of
Financial Accounting Standards No. 131 ("SFAS 131"),
"Disclosures about Segments of an Enterprise and Related
Information." Neither statement had any impact on the
Company's financial statements as the Company does not have
any "comprehensive income" type earnings (losses) and its
financial statements reflect how the "key operating
decisions maker" views the business. The Company will
continue to review these statements over time, in particular
SFAS 131, to determine if any additional disclosures are
necessary based on evolving circumstances.
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.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including
cash, accounts receivable, accounts payable and accrued
expenses approximated fair value because of the immediate or
short-term maturity of these instruments.
Page 33
NOTE 2 - DUE FROM STOCKHOLDERS
As of December 31, 1997, the Company had advanced the
stockholders $157,440. These advances were evidenced by an
unsecured promissory note at an interest rate of 6%,
principal and accrued interest due on demand or on
December 31, 1998. Interest of $7,835 was accrued as of
December 31, 1997 and added to the balance, resulting in a
due from stockholders of $165,275.
During the year ended December 31, 1998, the stockholders
had repaid $130,000 and borrowed an additional $25,492.
Interest of $2,317 was accrued as of December 31, 1998,
resulting in a balance of $60,767 and evidenced by an
unsecured promissory note at an interest rate of 6%,
principal and accrued interest due on demand or on December
31, 1999.
During the six months ending on June 30, 1999, interest of
$1,677 was accrued, and the stockholders made payments of
$22,617 resulting in a balance of $38,150.
NOTE 3 - NOTES PAYABLE
On September 1, 1999, the Company purchased a forklift for
$12,954, financing $11,654 of the balance owed with a note
secured by the forklift at an interest rate of 12%. The
monthly installments are $338 through December 1, 1999. No
payments have ever been made; consequently, the note is in
default, although no demands for payment have ever been
made.
During 1998 and 1999, a merger consultant advanced the
Subsidiary $514,000 and paid an additional $117,915 in
merger expenses for the Company. As of June 30, 1999, under
a convertible promissory note agreement, $624,000 of these
advances were converted to 1,248,000 shares of the Company's
common stock, leaving a balance of $7,915, principal and
accrued interest at a rate of 7% per annum due March 31,
2000.
NOTE 4 - STOCK TRANSACTIONS AND OPTIONS
Common Stock
The Company initially authorized 50,000 shares of $0.001 par
value common stock. On April 22, 1997 the Company re-
incorporated in Delaware through a merger with its wholly
owned Delaware subsidiary. The Company changed its
authorized capital to 30,000,000 shares of $0.001 par value.
As of December 31, 1998, the Company had issued 4,318,000
shares of common stock. On March 31, 1999, 18,500,000
shares were issued to effect the merger with Performance
Brands, Inc. and 6,500,000 shares were issued for various
items including the settlement of $541,667 of debt. On May
12, 1999, the Company declared a 6 to 1 reverse stock split,
leaving par at $.001, and changing the number of shares
authorized to 50,000,000. As of June 30, 1999, the Company
had issued 4,886,338 shares of its common stock.
Preferred Stock
The Company has authorized 1,000,000 preferred shares $0.001
par value, non-voting, the rights and preferences of which
to be determined by the Board of Directors at the time of
issuance. Currently, there are no preferred shares
outstanding.
The Company has declared no dividends through June 30, 1999.
Page 34
Stock Options
On March 30, 1999, the Company signed a convertible
promissory note agreement with the aforementioned merger
consultant (See Note 3.) in which all of the funds advanced
to the Company and its Subsidiary are convertible into
shares of the Company's common stock: 2 shares of stock for
every $1 advanced. As of June 30, 1999, 1,248,000 shares of
common stock had been issued for $624,000 of the advances.
On March 30, 1999, the Company entered into an employment
agreement with the president and majority stockholder, in
which was included an incentive compensation stock option
plan. This plan allows the president to purchase up to
2,500,000 shares of common stock by March 29, 2009 when
certain annual revenue levels are reached beginning at
December 31, 1999. These shares were not included in the
diluted shares for the earnings per share calculation.
NOTE 5 - PROVISION FOR (BENEFIT FROM) INCOME TAXES
The provision for (benefit from) income taxes consists of
the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Six For the Years
Months Ended Ended
June 30, 1999 June 30, 1998 Dec. 31, 1998 Dec. 31, 1997
Unaudited
Federal
Current Provision $24,400 $- $- $17,828
Current Benefit (24,000) - (44,171) -
Deferred - - - -
------ ------- ------ ------
- - (44,171) 17,828
------ ------- ------ ------
State
Current Provision 4,700 - - 4,772
Current Benefit (4,700) - - -
Deferred - - - -
- - - 4,772
----- ------- ------ ------
Total $- $- $(44,171) $22,600
----- ------- ------ ------
</TABLE>
The Company's Federal and State income tax benefits of $24,400
and $4,700, respectively, resulted from carrying forward the
Subsidiary's remaining net operating loss from 1998. As of
June 30, 1999, the Company has a Federal NOL carryover of
approximately $164,486 and a State NOL carryover of
approximately $361,973, both expiring in the year 2013.
Page 35
NOTE 6 - COMMITMENTS
The Company is obligated for an automobile lease which is
properly treated as a non-cancelable operating lease. The
term of the lease is 36 months with monthly payments of
$466. The amounts due under this operating lease are as
follows for the years ending December 31:
<TABLE>
<S> <C>
1999 $ 2,796
2000 2,329
-----
$ 5,125
=====
</TABLE>
NOTE 7 - LITIGATION
During the six months ending June 30, 1999, a model for a
Subsidiary promotion sued the Subsidiary for back royalties
from the product line advertised. Since the product line
produced approximately $3,000 in profits, the management of
the Subsidiary believes that there will be a nominal
liability from this suit.
Page 36
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(September 1999)
PAGE
Consolidated Balance Sheets 38-39
Consolidated Statements of Operations 40-41
Consolidated Statements of Cash Flows 42-43
Notes to Consolidated Financial Statements 44-49
Page 37
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
ASSETS
<TABLE>
<C> <S> <S>
Sep 30, Dec. 31,
1999 1998
CURRENT ASSETS
Cash $44,249 $ -
Accounts Receivable 132,363 24,722
Inventory 138,216 24,748
Stock Subscriptions Receivable 392,286
Due from Stockholders 99,362 137,457
------- -------
TOTAL CURRENT ASSETS 806,476 186,927
------- -------
PROPERTY AND EQUIPMENT
Machinery and Equipment 37,782 21,658
Furniture and Fixtures 9,451 5,551
------ ------
47,233 27,209
------ ------
Less: Accumulated Depreciation 27,344 24,710
------ ------
NET PROPERTY AND EQUIPMENT 19,889 2,616
------ ------
OTHER ASSETS
Security Deposits 6,745 4,885
Patent (less: Accumulated
Amortization $30 in 1999) 1,687
------ ------
TOTAL OTHER ASSETS 8,432 4,885
------ ------
TOTAL ASSETS $834,797 $194,428
======== ========
</TABLE>
The financial information presented herein has been prepared by
management without audit by independent certified public
accountants.
Page 38
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT
<TABLE>
<CAPTION>
<S> <C> <C>
Sep 30, 1999 Dec. 31, 1998
CURRENT LIABILITIES
Accounts Payable $163,069 $237,945
Payroll Taxes Payable 3,964 8,330
Income Taxes Payable 1,576 47,604
Notes Payable 11,654 78,154
------- -------
TOTAL CURRENT LIABILITIES 180,263 372,033
------- -------
STOCKHOLDERS' EQUITY (DEFICIT)
Common Stock, $0.001 Par Value,
50,000,000 Shares
Authorized, 5,921,271 Shares
Issued & Outstanding
in 1999 and 3,430,000 Shares
Issued & Outstanding
in 1998 5,921 3,430
Preferred Stock, $0.001 Par Value,
Non-Voting,
1,000,000 Shares Authorized,
0 Shares Issued & Outstanding - -
Additional Paid in Capital 1,024,230 1,670
Retained Earnings
(Accumulated Deficit) (375,617) (182,705)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY(DEFICIT) 654,534 (177,605)
--------- ---------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIT) $834,797 $194,428
========= =========
</TABLE>
The financial information presented herein has been prepared by
management without audit by independent certified public
accountants.
Page 39
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three For the Nine Months
Months Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited)(Unaudited)
SALES $305,561 $125,045 $848,396 $347,349
COST OF SALES 207,658 93,372 465,106 263,038
------- ------- ------- -------
GROSS PROFIT 97,903 31,673 383,290 84,311
------- ------- ------- -------
OPERATING EXPENSES
Selling 73,007 46,947 188,470 233,339
General 37,190 20,675 96,406 51,988
Administrative 90,194 58,632 215,100 118,263
------- ------- ------- -------
TOTAL OPERATING
EXPENSES 200,391 126,254 499,976 393,590
------- ------- ------- -------
INCOME (LOSS) FROM
OPERATIONS (102,488) (94,581) (116,686) (309,279)
------- ------- ------- -------
OTHER INCOME
AND EXPENSE
Miscellaneous Income 20,513 8,029 36,926 8,029
Interest Income 1,061 - 2,738 -
Interest Expense - - (383) (14)
------- ------ ------- ------
TOTAL OTHER
INCOME (EXPENSE) 21,574 8,029 39,281 8,015
------- ------ ------- ------
NET INCOME
(LOSS) BEFORE
PROVISION FOR
INCOME TAXES (80,914) (86,552) (77,405) (301,264)
Provision for
Income Taxes 0 0 0 0
------ ------ ------ -------
NET INCOME (LOSS) (80,914) (86,552) (77,405) (301,264)
RETAINED EARNINGS
(ACCUMULATED DEFICIT),
BEGINNING OF PERIOD (279,703) (96,153) (298,212) 118,559
-------- ------ ------- -------
RETAINED EARNINGS
(ACCUMULATED DEFICIT),
END OF PERIOD $(375,617) $(182,705) $(375,617) $(182,705)
======= ======= ======= =======
NET INCOME (LOSS)
COMMON SHARE
Basic $(.01) $(.03) $(.02) $(.09)
====== ====== ====== ======
Diluted $(.01) $(.03) $(.02) $(.09)
====== ====== ====== ======
SHARES USED IN COMPUTING
NET INCOME (LOSS) PER
COMMON SHARE
Basic 5,853,775 3,430,000 4,851,248 3,430,000
========= ========= ========= =========
Diluted 5,853,775 3,430,000 4,851,248 3,430,000
========= ========= ========= =========
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
Page 41
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
For the Three Months For the Nine Months
Ended Ended
Sept. 30, Sept. 30, Sept. 30, Sept. 30,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
CASH FLOWS FROM
OPERATING
ACTIVITIES:
Net Income (Loss) $(80,914) $(86,552) $(77,405) $(301,264)
Adjustments to Reconcile
Net Income
(Loss) to Net Cash
Provided by
(Used in) Operating
Activities
Depreciation and Amortization 906 501 2,996 349
Decrease ( Increase) Increase
in Accounts Receivable 95,099 (115,474)
Increase in Inventory 60,789 (55,117)
Decrease (Increase)
in Income
Taxes Receivable 28,948
Increase in Security Deposits (1,360) (1,860) (2,150)
Increase (Decrease) in
Accounts Payable (137,542) 49,704 (102,199) 222,386
Increase (Decrease) in
Payroll Taxes Payable (769) 4,050 (1,648) 7,251
Increase (Decrease) in Income
Taxes Payable (5,000) (7,424) (15,103)
------- ----- ----- ------
NET CASH PROVIDED
BY (USED IN) OPERATING
ACTIVITIES (63,791) (37,297) (329,183) (88,531)
------ ------ ------- ------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Loan Repayments from
(Advances to)
Stockholders (Net) (61,212) (7,327) (38,595) 24,388
Purchases of Machinery
and Equipment (3,688) (2,965) (20,024) (2,965)
Purchases of
Intangible Assets (1,714)
Purchases of Goodwill (11,643)
------ ------ ------ -----
NET CASH USED IN
INVESTING ACTIVITIES (64,900) (10,292) (71,976) 21,423
------ ------ ------ ------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from Sale
of Common Stock 125,180 41,500 125,180
Proceeds from
Note Payable 326,643 66,500
Reduction of
Note Payable (6,415) (6,415)
------ ------ ------- ------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 118,765 41,500 445,408 66,500
------- ------ ------- ------
NET INCREASE (DECREASE)
IN CASH (9,926) (6,089) 44,249 (608)
CASH, BEGINNING OF PERIOD 54,175 6,089 0 608
------ ----- ------ ------
CASH, END OF PERIOD $44,249 $0 $44,249 $0
======= ===== ======= ======
SUPPLEMENTAL DISCLO-
SURES OF CASH
FLOW INFORMATION
Cash paid during the
period for:
Interest $0 $0 $383 $14
== == ====== ===
Income Taxes $0 $0 $7,424 $0
== == ====== ===
</TABLE>
The financial information presented herein has been prepared by management
without audit by independent certified public accountants.
Page 43
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONT'D)
SUPPLEMENTARY DISCLOSURE OF NON-CASH OPERATING ACTIVITIES
On November 13, 1998, $82,333 of merger consultant's note was
converted into 164,667 shares of common stock. 208,333 shares of
Rule 144 common stock were also issued.
On March 31, 1999, $541,667 of merger consultant's note was
converted into 1,083,338 shares of common stock.
On July 6, 1999, 1,034,933 shares of common stock were sold to
the merger consultant for $.50 per share, resulting in stock
subscriptions receivables of $392,286 at September 30, 1999 after
the quarter's payments by consultants.
The financial information presented herein has been prepared by
management without audit by independent certified public
accountants.
Page 44
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
On December 13, 1994, Skintek Labs, Inc. (the "Company")
under the name of Biologistics, Inc. was incorporated under the
laws of Colorado, to engage in the business of clinical
consulting, contract packaging and labeling services for clinical
studies. The Company issued stock but never had any operations.
On April 22, 1997, the Company became a Delaware corporation when
it merged itself into its subsidiary, Biologistics, Inc.,
incorporated under the laws of Delaware on March 19, 1997.
Performance Brands, Inc. (the "Subsidiary") was
incorporated September 21, 1995 under the laws of the State of
Florida. The Company is engaged in the wholesale and retail
distribution and sale of various products in the skin-care
market. Currently, these products are being manufactured, to the
Company's specifications, in South Florida by several independent
fillers and by the Company.
On March 31, 1999, the Company incorporated a wholly-
owned subsidiary PBI Acquisition Corp. On the same day
Performance Brands, Inc. merged with PBI Acquisition Corp. when
the sole stockholder exchanged his stock in Performance Brands,
Inc. for 18,500,000 shares of Skintek Labs, Inc. Then PBI
Acquisition Corp. was dissolved, leaving Performance Brands, Inc.
as the surviving subsidiary of Skintek Labs, Inc. This stock-for-
stock transfer was accounted for as a reverse purchase.
Basis of Presentation and Consolidation
The consolidated financial statements have been prepared
in accordance with generally accepted accounting principles and
include the accounts of Skintek Labs, Inc. and its wholly-owned
subsidiary Performance Brands, Inc. All material intercompany
transactions and balances have been eliminated in consolidation.
As described in Organization above, effective March 31,
1999, the Company acquired all of the common stock of Performance
Brands, Inc. The business combination was accounted for as a
purchase and accordingly, the Company's financial statements have
been presented to include the results of Performance Brands, Inc.
as though the business combination occurred as of January 1,
1997.
Accounts Receivable
All accounts receivable are due from unaffiliated third
parties. The Company considers all accounts receivable to be
fully collectible; accordingly no allowance for doubtful accounts
is required. If amounts become uncollactible, the will be charged
to operations when that ditermination is made.
Inventory
Inventory is stated at the lower of cost or market, using
the first-in, first-out (FIFO) method and consists of bottles of
product, empty bottles, displays, and boxes. The raw materials
are expensed as purchased because their inventoried value would
be immaterial.
Property, Equipment and Depreciation
Property additions, major renewals and betterments are
included in the assets accounts at cost. Maintenance, repairs
and minor renewals are charged to earnings when incurred.
Page 45
Depreciation is computed using the modified accelerated
cost recovery system and the straight-line method over the
estimated useful lives of the assets. The Company has elected to
expense, rather than depreciate, the cost of certain depreciable
personal property under Section 179 of the Internal Revenue Code.
Although, these methods are not generally accepted accounting
principles, the difference between them and any other acceptable
method is immaterial to the current financial statements.
Intangible Assets
On October 1, 1995, the Company purchased the customer
list and trademarks and certain fixed assets from an affiliated
company. The total purchase price for the assets was $25,000.
The property and equipment were recorded at net book value in the
amount of $702. The customer list and trademarks, which are
intangible assets, were recorded in the amount of $24,298 and are
being amortized over forty years. Goodwill is being amortized
over fifteen years. During the six months ending on June 30,
1999, the Company paid $1,715 in patent fees, which are being
amortized over seventeen years.
Long-Lived Assets
The Company periodically reviews the values assigned to
long-lived assets, such as property and equipment and acquired
customer bases, to determine whether any impairments are other
than temporary. Management believes that the long-lived assets
in the accompanying balance sheets are appropriately valued.
Revenue Recognition
Revenue from sales is recognized in the period in which
the products are shipped and invoiced to the customer. The
customers are generally the fifty independent distributors
throughout the world and an additional approximately eighteen
hundred wholesale accounts, principally in the U.S.A. and several
large American retail chains. Sales are final upon the shipment
of goods to customers.
Advertising
Costs associated with advertising are expensed in the
year incurred. Advertising expenses, which are comprised
primarily of print media, were $52,415 and $22,628 for the three
months ending on September 30, 1999 and 1998, respectively; and
$96,178 and $182,542 for the nine months ending on September 30,
1999 and 1998, respectively.
Income Taxes
Since inception, the Company has maintained a fiscal year
ending on each 31st day of December. Provisions for income taxes
have not been presented as there is no taxable income after
consideration of net operating losses, and there are no timing
differences.
Earnings Per Common Share
The Company adopted Statement of Financial Accounting
Standard No. 128 ("FAS 128"), Earnings Per Share for the period
of these financial statements. Basic earning per common share is
computed using the weighted average number of common shares
outstanding. There was no dilution in the periods reported.
Page 46
Recent Accounting Pronouncements
In 1999, the Company was subject to the provisions of
Statement of Financial Accounting Standards No. 130 ("SFAS 130"),
"Reporting Comprehensive Income" and Statement of Financial
Accounting Standards No. 131 ("SFAS 131"), "Disclosures about
Segments of an Enterprise and Related Information." Neither
statement had any impact on the Company's financial statements as
the Company does not have any "comprehensive income" type
earnings (losses) and its financial statements reflect how the
"key operating decisions maker" views the business. The Company
will continue to review these statements over time, in particular
SFAS 131, to determine if any additional disclosures are
necessary based on evolving circumstances.
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.
Fair Value of Financial Instruments
The carrying amounts of financial instruments including
cash, accounts receivable, accounts payable and accrued expenses
approximated fair value because of the immediate or short-term
maturity of these instruments.
NOTE 2 - DUE FROM STOCKHOLDERS
As of December 31, 1997, the Company had advanced the
stockholders $157,440. These advances were evidenced by an
unsecured promissory note at an interest rate of 6%, principal
and accrued interest due on demand or on December 31, 1998.
Interest of $7,835 was accrued as of December 31, 1997 and added
to the balance, resulting in a due from stockholders of $165,275.
During the year ended December 31, 1998, the stockholders
had repaid $130,000 and borrowed an additional $25,492. Interest
of $2,317 was accrued as of December 31, 1998, resulting in a
balance of $60,767 and evidenced by an unsecured promissory note
at an interest rate of 6%, principal and accrued interest due on
demand or on December 31, 1999.
During the three months ending on September 30, 1999,
interest of $1,061 was accrued, and the stockholders received
advances of $60,151 resulting in a balance of $99,362.
NOTE 3 - NOTES PAYABLE
On September 1, 1999, the Company purchased a forklift
for $12,954, financing $11,654 of the balance owed with a note
secured by the forklift at an interest rate of 12%. The monthly
installments are $338 through December 1, 1999. No payments have
ever been made; consequently, the note is in default, although no
demands for payment have ever been made.
Page 47
During 1998 and 1999, a merger consultant advanced the
Subsidiary $757,095 and paid an additional $117,915 in merger
expenses for the Company. As of September 30, 1999, the Company
had converted all of the consultant's advances into common stock
and had issued additional common stock to the consultant
resulting in stock subscriptions receivable of $392,286.
NOTE 4 - STOCK TRANSACTIONS AND OPTIONS
Common Stock
The Company initially authorized 50,000 shares of $0.001
par value common stock. On April 22, 1997 the Company re-
incorporated in Delaware through a merger with its wholly owned
Delaware subsidiary. The Company changed its authorized capital
to 30,000,000 shares of $0.001 par value. As of December 31,
1998, the Company had issued 4,318,000 shares of common stock. On
March 31, 1999, 18,500,000 shares were issued to effect the
merger with Performance Brands, Inc. and 6,500,000 shares were
issued for various items including the settlement of $541,667 of
debt. On May 12, 1999, the Company declared a 6 to 1 reverse
stock split, leaving par at $.001, and changing the number of
shares authorized to 50,000,000. On July 6, 1999, the Company
issued an additional 1,034,933 shares of its common stock for
$.50 per share. As of September 30, 1999, the Company had issued
5,921,271 shares of its common stock.
Preferred Stock
The Company has authorized 1,000,000 preferred shares
$0.001 par value, non-voting, the rights and preferences of which
to be determined by the Board of Directors at the time of
issuance. Currently, there are no preferred shares outstanding.
The Company has declared no dividends through June 30, 1999.
Stock Options
On March 30, 1999, the Company signed a convertible
promissory note agreement with the aforementioned merger
consultant (See Note 3.) in which all of the funds advanced to
the Company and its Subsidiary are convertible into shares of the
Company's common stock: 2 shares of stock for every $1 advanced.
As of September 30, 1999, 2,282,933 shares of common stock had
been issued for $757,095 of advances.
On March 30, 1999, the Company entered into an employment
agreement with the president and majority stockholder, in which
was included an incentive compensation stock option plan. This
plan allows the president to purchase up to 2,500,000 shares of
common stock by March 29, 2009 when certain annual revenue levels
are reached beginning at December 31, 1999. These shares were
not included in the diluted shares for the earnings per share
calculation.
NOTE 5 - PROVISION FOR INCOME TAXES
No provisions for income taxes were required because of the net
losses realized in all periods.
As of September 30, 1999, the Company has a Federal NOL
carryover of approximately $253,350 and a State NOL carryover of
approximately $450,837, both expiring in the year 2013, resulting
from carrying forward the Subsidiary's remaining net operating
loss from 1998.
Page 48
NOTE 6 - COMMITMENTS
The Company presently rents office and warehouse space
under a monthly lease. On August 25, 1999, the Company signed a
new thirty-six-month office lease, commencing on December 1, 1999
with monthly payments starting at $1,858.
The amounts due under this lease are as follows for the years
ending December 31:
<TABLE>
<S> <C>
1999 $ 1,858
2000 22,400
2001 23,712
2002 22,838
------
$ 70,808
======
</TABLE>
The Company is obligated for an automobile lease which is
properly treated as a non-cancelable operating lease. The term
of the lease is 36 months with monthly payments of $466. The
amounts due under this operating lease are as follows for the
years ending December 31:
<TABLE>
<S> <C>
1999 $ 1,398
2000 2,329
-----
$ 3,727
=====
</TABLE>
NOTE 7 - LITIGATION
During the six months ending June 30, 1999, a model for a
Subsidiary promotion sued the Subsidiary for back royalties from
the product line advertised. Since the product line produced
approximately $3,000 in profits, the management of the Subsidiary
believes that there will be a nominal liability from this suit.
As of December 17, 1999, there had been no resolution.
Page 49
PART III
Item 1. Index to Exhibits
Item 2. Description of Exhibits
Exhibit No. Document Description
3.1 Articles of Incorporation
3.2 Bylaws
10(iii) Material Contracts-Including Employment Agreement,
and Stock Option Plans
23 Consent of Independent Public Accountants
Page 50
SIGNATURES
In accordance with Section 12 of the Securities Exchange
Act of 1934, the registrant caused this registration statement to
be signed on its behalf by the undersigned, thereunto duly
authorized.
SKINTEK LABORATORIES, INC.
Date: December 23, 1999 By:
/s/ Stacy Kaufman, President
