US SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB/12G/A
General Form for registration of securities of small business issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
SKINTEK LABS, INC.
------------------
(Name of Small Business Issuer in its charter)
DELAWARE 65-0636227
-------- ----------
(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
1750 NW 65th Avenue, Plantation,FL 33313
---------------------------------- -----
Address of Principal Executive Offices) (Zip Code)
954-327-8548
------------
(Issuer's telephone number)
Securities registered under Section 12 (b) of the Exchange Act: None
(Title of class) ----
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, par value $.001
-----------------------------
(Title of class)
Page 1 of 39
<PAGE>
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.
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>
<PAGE>
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.
Authorities in the sun care industry have noted that
the significant growth appears to be in "niche" products,
those that are prepared for a select market or packaged for
a select markets. Examples are products oriented toward
children, products asserting to be "all natural", self-
tanning products, and products that combine sunscreen with
insect repellent, among other products.
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.
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'sr, Gilletter,
Proctor & Gambler and Lever Brothersr, and the smaller, but
well-established companies such as Tom's of Mainer and
Freeman Cosmeticsr. 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.
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, SOAPSCREENr, 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 SOAPSCREENr name
will commence in the Spring of 2000. Further, if the Company
is successful in establishing the SOAPSCREENr 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. 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.
</page>
<PAGE>
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. The Company
believes that it will be able to successfully compete.
Notwithstanding the foregoing, the Company believes
that it will be able 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.
The Company's professional line of indoor tanning
products, marketed under the ProTanr name, presently
competes with six key producers, including the established
Australian Goldr, California Tanr, Swedish Beautyr, Suprer,
Power Tanr 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 ProTanr line. However, in order for the
Company to compete, the Company must maintain and increase
its distribution network.
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'sr, Gilletter, Procter &
Gambler, and Lever Bros.r The industry also includes
established smaller producers such as Tom's of Mainer and
Freeman Cosmeticsr, 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.
</page>
<PAGE>
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.
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: ProTanr(R),
SOAPSCREEN(R), Sunscreen Barrier System, Earthen Naturals(R),
Earthen Treasures(R), Beauty Bites(TM), and Meta Slim 2000.
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, SOAPSCREEN, Sunscreen
Barrier System(R), Earthen Naturals(TM), Earthen Treasures, and
plans to commence marketing efforts under the trade names,
Beauty Bites, 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 announcement in June, 1999, of the Company's
proprietary, patent pending liquid body wash and sunscreen
formula under the registered trademark, SOAPSCREEN. 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.
</page>
<PAGE>
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. Further, each of the Company's
products that are or have been produced are retained for
three years. 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 due to
the delay in the Company bringing certain new products to
the market. 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
six month period ended June 30, 1999, the Company had sales
of $542,835, compared to sales of $222,304 during the six
month period ended June 30, 1998. During such six month
periods, the Company has net income of $3,204 ($0.001 per
Share) compared to a net loss of $215,168 ($0.06 per Share)
respectively.
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
SOAPSCREENr 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 slightly related
to the use of outside consultants for the development and
marketing stages to launch the SOAPSCREENr product line. The
Company believes that it will be required to continue to
expend funds for sales and marketing, which it estimates
will be approximately $1,000,000 over the next 12 months.
The Company, as noted above, had net income, albeit
limited, during the six month period ended June 30, 1999,
compared to a net loss during the six month period ended
June 30, 1998. The reason for the small net income during
the 1999 period, compared to the net loss for the comparable
period of the prior year, was the result of the Company's
increase in sales without a corresponding increase, in terms
of percentage, of GS &A.
</page>
<PAGE>
Liquidity and Capital Resources
-------------------------------
The Company, at June 30, 1999 had current assets of
$518,792, compared to current assets of $189,703 at December
31, 1998. The increase in current assets is the result of
increased sales, which led to increased cash and accounts
receivable, all of which are current and the Company
believes fully collectible. 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 $326,489 at June
30, 19999 compared to $514,473 at December 31, 1998,
reflecting a decrease of $187,984 or 36.5%. The Company
achieved this improvement as a result of the conversion of
debt advanced by several persons in the aggregate amount
$541,667 into 1,083,338 shares during the first quarter of
fiscal 1999. At June 30, 1999, a total sum of $624,000 of
such debt was converted by such persons into a total of
1,248,000 shares. This is compared to the conversion of
$82,333 in debt into 164,667 shared during the last quarter
of fiscal 1998. 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 name. It does not presently have a budget allocated
for this new product line.
Year 2000
---------
The Year 2000 issue results from certain computer systems
and software applications that use only two digits (rather
than four) to define the applicable year. As a result, such
systems and applications may recognize a date of "00" as
1900 instead of the intended year 2000, which could result
in data miscalculations and software failures. The Company
has conducted a preliminary assessment of its key computer
systems and software applications and believes they are Year
2000 compliant. The Company is in the process of
communicating with all key suppliers, financial institutions
and customers to identify and coordinate the resolution of
any Year 2000 issues that might arise. Based on the initial
assessment, the Company believes the cost of addressing the
Year 2000 issue should not have a material impact on the
Company's financial position or results of operations.
</page>
<PAGE>
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.
Item 4. Security Ownership of Certain Beneficial
Owners and Management
As of September 15, 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>
<CAPTION>
<S> <C> <C> <C>
(1) (2) (3) (4)
Title of Class Name and Address of Amount and Percent
Beneficial Owner Nature of of
Beneficial Ownership Class (1)
-------------------------------------------------------------------------
Common Stock Stacy Kaufman 3,371,666 (2) 56.94%
1750 NW 65th Avenue
Plantation, FL 33313
Common Stock Cathy Kaufman 0 (3) 52.1%
1750 NW 65th Avenue
Plantation, FL 33313
</TABLE>
___________
(1) Based upon 5,921,271 shares issued and
outstanding at September 15, 1999, but does not include
shares underlying stock options 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. These shares were not included in the diluted shares
for the earnings per share calculation. See the Consolidated
Financial Statements attached hereto.
</page>
<PAGE>
Item 5. Directors, Executive Officers, Promoters and
Control Persons.
------------------------------------------------------
(a) The directors and executive officers are:
<TABLE>
<CAPTION>
<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.
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>
<PAGE>
Item 6. Executive Compensation
--------------------------------
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C>
Long Term Compensation
Annual Compensation Awards Payouts
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities All other
Name and Annual Compen- Stock Underlying LTIP Compen-
Principal sation Award(s) Options/SAR's Payouts sation
Position (*) Year Salary Bonus($) ($) ($) (#) ($) ($)
--------------------------------------------------------------------------------------------------------
Stacy Kaufman
President, CEO 1998 65,942 0 80,000 0 0 0 0
Stacy Kaufman
President, CEO 1997 1,200 0 0 0 0 0 0
Stacy Kaufman
President, CEO 1996 0 0 0 0 0 0 0
Cathy Kaufman
Secretary, Treas. 1998 6,350 0 0 0 0 0
Cathy Kaufman
Secretary, Treas. 1997 0 0 0 0 0 0
Cathy Kaufman
Secretary, Treas. 1996 0 0 0 0 0 0
</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>
<PAGE>
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. 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 9. 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 September 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>
<CAPTION>
Bid Prices
-------------------
1997 High Low
---------------------- ------ -----
<S> <C> <C>
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 September 30 $ 2 3/8 $ 1 1/32
</TABLE>
The Company is filing this Form 10-SB for the purpose of
enabling the Company's shares to continue to trade on the NASDAQ
Bulletin Board. In the event that the Company's Form 10-SB has not
been declared effective by the SEC prior to October 7, 1999, then the
Company be required to file appropriate documentation with NASDAQ in
order for its shares to be quoted on the "pink sheets" and following
the effective date of the Form 10-SB, the Company will then file to
have its shares quoted again on the NASDAQ Bulletin Board. As of
September 30, 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>
<PAGE>
Item 10. 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 Amount Nature and Amount
Date persons/purchasers of Securities of Consideration
(1)
11/10/98 private investors 164,667 common shares Cash $82,333.50
11/11/98 consultant 208,333 common shares Services valued at
$104,166.50
03/31/99 private investors 1,083,333 common shares Cash $541,666.50
07/06/99 private investors 1,034,933 common shares $517,466.50 in
promissory note,
of which $242,095
is due in cash
payable to the Company
and the remainder in
other consideration
and securities.
</TABLE>
(1) Each of the transactions was based upon a share value of $.50
per share. The shares sold to private investors, all of whom were
sophisticated investors, were sold pursuant to a private offering
exemption and the shares bear an appropriate restrictive 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 11. 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 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.
Item 12. 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.
Item 13. Financial Statements
-----------------------------
The financial statements for the fiscal years ended December 31,
1998 and 1997, and for the six month periods ended June 30, 1999 and
1998 (unaudited), are attached hereto.
Item 14. Changes In and Disagreement With Accountants on
Accounting and Financial Disclosure.
----------------------------------------------------------------
None. The Company's independent accountant, Grassano Accounting,
P.A., is the successor independent accounting firm to the prior
independent accountants, Grassano and Associates.
Item 15. Exhibits and Reports on Form 8-K.
-----------------------------------------------
<TABLE>
<S> <C>
Exhibit No. Document Description
----------- --------------------
3.1 Articles of Incorporation (to be filed by amendment)
3.2 Bylaws (to be filed by amendment)
10(iii) Material Contracts-Including Employment Agreement,
and Stock Option Plans (to be filed by amendment)
23 Consents of Independent Public Accountants
</TABLE>
</page>
<PAGE>
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINICAL STATEMENTS
</page>
<PAGE>
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
REPORTS OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS 22
Consolidated Balance Sheets 25-26
Consolidated Statements of Operations 27-28
Consolidated Statements of Stockholders' Equity (Deficit) 29-30
Consolidated Statements of Cash Flows 31-32
Notes to Consolidated Financial Statements 33-39
</page>
<PAGE>
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 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 did not audit the
financial statements of Skintek Labs, Inc. (formerly Biologistics,
Inc.) for the nine months ended September 30, 1998 and for the year
ended December 31, 1997, and we did not audit the financial
statements of Performance Brands, Inc., the Company's wholly owned
subsidiary, for the years ended December 31, 1998 and 1997,
respectively.
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, 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, 1999 and 1998,
respectively, in conformity with generally accepted accounting
principles.
We have compiled the accompanying consolidated statement of
operations of Skintek Labs, Inc. (formerly Biologistics, Inc.) and
Subsidiary for the six months ended June 30, 1998 and the related
consolidated statement of cash flows for the six months then ended in
accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public
Accountants. The consolidated financial statements give retroactive
effect to the merger of Skintek Labs, Inc. and Performance Brands,
Inc. A compilation is limited to presenting in the form of financial
statements information that is the representation of management. We
have not audited or reviewed the consolidated financial statements
mentioned in this paragraph and, accordingly, do not express an
opinion or any other form of assurance on them.
/s/ Grassano Accounting P.A.
Boca Raton, Florida
August 16, 1999
Page 22
</page>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Biologistics, Inc.
Hollywood, FL 33020
Members of the Board:
We have audited the accompanying balance sheets of Biologistics, Inc.
as of September 30, 1998 and December 31, 1997 and 1996 and the related
statements of operations and stockholders' equity (deficit) and
statements of cash flows for the nine months ended September 30, 1998,
the year ended December 31, 1997 and the period from July 16, 1996
through December 31, 1996. These financial statements are the
responsibility of the Company's owner and management. Our
responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of
Biologistics, Inc. as of September 30, 1998 and December 31, 1997 and
1996, and the results of its operations and its cash flows for the
periods then ended in conformity with generally accepted accounting
principles.
/s/ Grassano & Company, P.A.
Boca Raton, Florida
October 2, 1998
Page 23
</page>
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Performance Brands, Inc.
1750 NW 65th Avenue
Plantation, FL 33313
Members of the Board:
We have audited the accompanying balance sheets of Performance Brands,
Inc. as of December 31, 1998 and 1997 and the related statements of
operations and retained earnings and cash flows for the years then
ended. These financial statements are the responsibility of Company's
management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Performance
Brands, Inc. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 6 to
the financial statements, the Company has suffered a significant loss
from operations during the year with a drop of sales and a marked
increase in the cost of sales and selling expenses and has a net
capital deficiency that raises substantial doubt about its ability to
continue as a going concern.
/s/ Grassano & Company, P.A.
Boca Raton, Florida
April 9, 1999
Page 24
</page>
<PAGE>
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<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
--------- --------
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
Intangible Assets (Less: Accumulated
Amortization of $2,281 in 1999
and $1,974 in 1998) 23,732 22,324
Goodwill (Less Accumulated
Amortization of $6,549 in 1999 and
$2,813 in 1998) 129,366 121,459
--------- -------
TOTAL OTHER ASSETS 158,483 148,668
--------- -------
TOTAL ASSETS $694,356 $341,205
========= ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these Consolidated Statements.
Page 25
</page>
<PAGE>
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES & STOCKHOLDERS' EQUITY (DEFICIT
<TABLE>
<CAPTION>
<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, 0 Shares Issued &
Outstanding - -
Additional Paid in Capital 642,214 101,630
Retained Earnings(Accumulated Deficit) (279,233) (278,701)
-------- --------
TOTAL STOCKHOLDERS' EQUITY(Deficit) 367,867 (173,268)
-------- --------
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIT) $694,356 $341,205
======== ========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 26
</page>
<PAGE>
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, June 30, 1998 Dec. 31, Dec. 31,
1999 1998 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 (532) (215,168) (464,362) 82,923
Provision for(Benefit from)INCOME TAX 0 0 (44,171) 22,600
------- -------- -------- ---------
NET INCOME (LOSS) $(532) $(215,168) $(420,191) $60,323
======= ======== ======== =========
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 28
</page>
<PAGE>
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 Additional Earnings Stockhol
of Shares Stock Stock Paid In Accumulated ders'
Shares Preferred Capitaln Deficit Equity
common (Deficit)
--------------------------------------------------------------------------------
Balance at Dec. 3,250,000 360,000 $3,250 $360 $19,490 $81,167 $104,267
31, 1996
May 13, 1997
converted
360,000 preferred
into 180,000
common shares 180,000 (360,000) 180 (360) 180 - -
Net Income - - - - - 60,323 60,323
Balance at Dec. 3,430,000 0 3,430 0 19,670 141,490 164,590
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
Net Loss - - - - - (420,191) (420,191)
---------------------------------------------------------------------------------
Balance at Dec. 3,803,000 0 $3,803 $- $101,630 $(278,701) $(173,268)
31, 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
Net Loss - - - - - 532 532
---------------------------------------------------------------------------------
Balance at June 4,886,338 0 $4,886 $- $642,214 $(279,233 $367,867
30, 1999 =================================================================================
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these Consolidated Statements.
Page 30
</page>
<PAGE>
SKINTEK LABS, INC.
(FORMERLY BIOLOGISTICS, INC)
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
For the Six Months Ended For the Years Ended
<S> <C> <C> <C> <C>
June 30, June 30, Dec. 31, Dec. 31,
1999 1998 1998 1997
(Unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Income (Loss) $(532) $(215,168) $(420,191) $60,323
Adjustments to Reconcile
Net Income (Loss) to Net
Cash Provided by (Used in)
Operating Activities
Depreciation and Amortization 6,131 304 4,050 2,069
Decrease ( Increase) Increase
in Accounts Receivable (210,573) - 7,833 (18,492)
Increase in Inventory (115,906) - (58,351) (20,958)
Decrease (Increase) in Income
Taxes 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 32
</page>
<PAGE>
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 33
</page>
<PAGE>
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.
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 34
</page>
<PAGE>
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 15 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 US and several large American retail
chains.
Page 35
</page>
<PAGE>
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.
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 36
</page>
<PAGE>
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>
<PAGE>
Page 37
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>
For the Six Months Ended For the Years Ended
<S> <C> <C> <C> <C>
June 30, June 30, Dec. 31, Dec. 31,
1999 1998 1998 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 38
</page>
<PAGE>
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 39
</page>
