U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
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{} TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________to________________
Commission File Number: 0-27833
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INTERNATIONAL COSMETICS MARKETING CO.
(Exact name of small business issuer as specified in its charter)
Florida 65-0598868
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(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
6501 N.W. Park of Commerce Boulevard, Suite 205, Boca Raton, Florida 33487
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(Address of Principal executive offices)
Issuer's telephone number, including area code: (561) 999-8878
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.)
YES [X] NO_____
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APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 4,759,400 shares as of February
10, 2000.
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INTERNATIONAL COSMETICS MARKETING CO.
Form 10-QSB for the quarter ended December 31, 1999
TABLE OF CONTENTS AND INFORMATION REQUIRED IN REPORT
Page
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Part 1. Financial Information
Item 1. Financial Statements
Unaudited Balance Sheet 2
Unaudited Statements of Operations 3
Unaudited Statements of Cash Flows 4
Notes to Financial Statements 5
Item II. Management's Discussion and Analysis of Financial Condition and
Results of Operations 7
Part II Other Information
Item 1 Legal Proceedings 9
Item 2 Changes in Securities and Use of Proceeds 9
Item 3 Defaults upon Senior Securities 9
Item 4 Submission of Matters to a Vote of Security Holders 9
Item 5 Other Information 9
Item 6 Exhibits and Reports on Form 8-K 9
SIGNATURES 10
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International Cosmetics Marketing Co.
Unaudited Balance Sheets
December 31, June 30,
1999 1999
<S> <C> <C>
ASSETS
Current Assets:
Cash $ 318,606 $ 450
Receivables - credit cards and bank drafts 144,839 --
Inventory - finished goods 303,226 --
Deposits for inventory purchases 374,756 --
Prepaid expenses 33,394 --
Deferred offering costs -- 9,340
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Total current assets 1,174,821 9,790
Office furniture and equipment, net 60,363 --
License agreement, net 217,865 --
Other, primarily deposits 82,572 --
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Total assets $ 1,535,621 $ 9,790
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LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Curremt Liabilities:
Accounts payable and accrued liabilities $ 229,720 $ 9,340
Payable to licensor 75,002 --
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Total current liabilities 304,722 9,340
0% convertible debentures 1,550,000 --
Commitments and contingencies
Stockholders' Equity (Deficiency):
Common stock, par value $.001 per share, 25,000,000 shares authorized;
4,778,200 and 7,450,000 shares issued and
and outstanding 4,778 7,450
Additional paid-in capital 46,288 1,116
Accumulated deficit (370,167) (8,116)
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Total stockholders' equity (deficiency) (319,101) 450
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Total liabilities and stockholders' equity (deficiency) $ 1,535,621 $ 9,790
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The accompanying notes are an integral part of these financial statements.
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International Cosmetics Marketing Co.
Unaudited Statements of Operations
Six Months Three Months Three Months
Ended Ended Ended
December 31, December 31, December 31,
1999 1999 1998
<S> <C> <C> <C>
Net sales $ 456,244 $ 456,244 $ --
Cost of sales 109,677 109,677 --
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Gross profit 346,567 346,567 --
Operating expenses:
Commissions 124,115 124,115 --
Royalty 100,000 75,000 --
Selling, general and administrative 484,503 340,690 --
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Total operating expenses 708,618 539,805 --
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Operating loss (362,051) (193,238) --
Provision for income taxes -- -- --
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Net loss $ (362,051) $ (193,238) $ --
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Net loss per share:
Basic $ (0.11) $ (0.04) $ --
Diluted $ -- $ -- $ --
Weighted average common shares outstanding:
Basic 3,421,985 4,778,200 7,441,600
Diluted 10,510,446 9,628,200 7,441,600
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The accompanying notes are an integral part of these financial statements.
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<CAPTION>
International Cosmetics Marketing Co.
Unaudited Statements of Cash Flows
Six Months Three Months Three Months
Ended Ended Ended
December 31, December 31, December 31,
1999 1999 1998
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net loss $ (362,051) $ (193,238) $ --
Adjustments to reconcile net loss to net cash used
in operations:
Depreciation expense 3,726 3,401 --
License amortization expense 4,635 3,478 --
Legal expense 10,000 -- --
Consulting expenses 2,083 -- --
Changes in operating assets and liabilities:
Receivables from credit cards and bank drafts (144,839) (144,839) --
Inventory - finished goods (303,226) (303,226) --
Deposits for inventory purchases (374,756) (274,522) --
Prepaid expenses (26,310) (19,076) --
Deferred offering costs 9,340 -- --
Accounts payable and accrued liabilities 220,381 200,227 --
Payable to licensor 75,002 (62,499) --
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Net cash used in operating activities (886,015) (790,294) --
Cash Flows From Investing Activities
Purchase of office furniture and equipment (64,090) (52,396) --
Deposits for services (81,739) (64,922)
License agreement (200,000) -- --
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Net cash used in investing activities (345,829) (117,318) --
Cash Flows from Financing Activities
Issuance of convertible debentures 1,550,000 1,125,000 --
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Net cash provided by financing activities 1,550,000 1,125,000 --
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Net increase in cash 318,156 217,388 --
Cash, beginning of period 450 101,218 450
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Cash, end of period $ 318,606 $ 318,606 $ 450
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Supplemental Disclosure of Noncash Investing and Financing Activities:
900,000 shares issued of stock in August 1999 issued in acquisition of
license agreement valued at $22,500. 28,200 shares of stock issued in
August 1999 for legal services valued at $10,000.
400,000 shares of stock issued conditionally in September 1999 for
consulting services valued at $10,000.
The accompanying notes are an integral part of these financial statements.
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International Cosmetics Marketing Co.
Notes to Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations
International Cosmetics Marketing Co. (the "Company"), d/b/a Beverly Sassoon &
Co., is a network marketing company involved in the distribution and sale of
products in the areas of skin care and cosmetics, nutrition and human wellness
products, various apparel and other goods. The company commenced operations in
the fall of 1999. The subsistence of the Company is dependent upon sufficient
proceeds being raised through financing or capital contributions and increasing
sales and profitable operations. The Company's operations are currently limited
to the United States.
Basis of Presentation
The Company prepares its financial statements on the accrual basis of
accounting, recognizing income when earned and expenses when incurred. The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do not include all
of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
accompanying unaudited financial statements contain all adjustments, consisting
of normal recurring adjustments, considered necessary for a fair statement of
the Company's financial information as of December 31, 1999 and June 30, 1998
and for the three-month periods ended December 31, 1999 and 1998 and the six
months ended December 31, 1999. The results of operations of any interim period
are not necessarily indicative of the results of operations to be expected for
the fiscal year. For further information, refer to the financial statements for
December 31, 1998 and June 30, 1999 and accompanying footnotes included in the
Company's Form 10-SB.
Financial Statement Estimates
The preparation of financial statements in conformity with Generally Accepted
Accounting Principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Inventory
Inventory is stated at cost using the average cost method.
Office Furniture and Equipment
Office furniture and equipment are stated at cost. Depreciation is calculated
based on estimated useful lives of the assets ranging from three to five years.
License Amortization
The exclusive license agreement is being amortized over sixteen years.
Revenue
Sales are recognized as revenue at the time products are shipped.
Income Taxes
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Deferred tax assets and liabilities are determined based upon differences
between financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which differences are expected to
reverse. The Company has not recognized any benefit for its net operating loss
through December 31, 1999 in the accompanying financial statements as the
realization of this deferred tax benefit is not more likely than not. A 100%
valuation allowance has been recognized to offset the entire effect of the
Company' net deferred tax assets.
Loss Per Share
Basic net income (loss) per common share is computed by dividing net income
(loss) available to common stockholders for the period. Diluted income per
common share reflects the maximum dilution that would have resulted from the
assumed exercise related to dilutive securities and is computed by dividing net
income by the weighted average number of common shares and all dilutive
securities outstanding. Options for 341,250 shares at December 31, 1999 were not
dilutive.
2. Fiscal Year End
In November 1999 the board of directors of the Company authorized changing the
Company's fiscal year from December 31 to June 30, effective June 30, 1999.
3. Subsequent Event
In January, 2000, the Company cancelled 18,800 shares of common stock previously
issued prior to June 30, 1999.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
1999 compared to 1998
Net sales increased to $456,244 from zero for the three-month and six-month
periods ended December 31, 1999 compared with the same periods in 1998. The
increase in net sales resulted primarily from the Company commencing operations
in the fall of 1999.
Gross profit as a percentage of net sales was 75.96% for the three-month
and six-month periods ended December 31, 1999, compared to zero for the same
periods in 1998. The increase in gross profit resulted primarily from the
Company commencing operations in the fall of 1999.
Commissions earned by distributors of the Company's products as a
percentage of net sales were 27.20% for the three-month three-month and
six-month periods ended December 31, 1999, compared to zero for the same periods
in 1998. The increase in commissions resulted primarily from the Company
commencing operations in the fall of 1999.
Royalty expense increased $75,000 for the three-month period ended December
31, 1999 and $100,000 for the six-month period ended December 31, 1999, compared
with the same periods in 1998. The increase in royalty expense resulted from the
Company entering into an exclusive license agreement in August, 1999.
Selling, general and administrative expenses as a percentage of net sales
were 74.67% for the three-month period ended December 31, 1999 and 106.19% for
the six-month period ended December 31, 1999, compared to zero for the same
periods in 1998. The increase in selling, general and administrative expenses
resulted primarily from the Company commencing operations in the fall of 1999.
Net loss increased by $193,238 for the three-month period ended December
31, 1999 and $362,051 for the six-month period ended December 31, 1999 from zero
for the same periods in 1998 due to the Company commencing operations in the
fall of 1999. Net loss as a percentage of net sales was 42.35% for the
three-month period ended December 31, 1999 and 79.35% for the six-month period
ended December 31, 1999 compared to zero for the same periods in 1998 due to the
Company commencing operations in the fall of 1999.
Liquidity and Capital Resources
The Company's principal needs for funds have been for working capital
(principally inventory purchases), commissions, royalty expense, operating
expenses, capital expenditures, and the development of operations for the U.S.
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market. The Company has generally relied on cash flow from the issuance of
convertible debentures and cash collected on sales that commenced in December
1999 to fund operating activities. The Company expects to need additional
funding from the issuance of convertible debentures or other sources in the
quarter to end March 31, 2000 to fund expected growth of the Company. The Board
of Directors had previously approved the issuance of convertible debentures in
the principal amount not to exceed $2,000,000 that may be sold from time to time
by the Company to raise start-up capital. As of February 10, 2000, the Company
has issued convertible debentures and received funding of $1,550,000. While no
commitments have been received to provide the balance of the funding, the
Company believes that there are persons or entities that will provide the
balance of any needed financing on terms offered by the Company.
The Company is currently generating negative cash flow from operations
since it only had its first sales in December 1999 after commencing operations
in August 1999. The Company does not generally extend credit to distributors but
requires payment by credit card or bank draft prior to shipping of products.
This process eliminates the need for significant accounts receivable from
distributors. During the three-month and six-month periods ended December 31,
1999, the Company had negative cash flow from operations of $790,294 and
$886,015, respectively. This negative cash flow from operations primarily
related to the Company's net loss, receivables from its credit card merchant
account and bank drafts, inventory and deposits for inventory purchases, and
reduction of liability to licensor.
As of December 31, 1999, working capital was $870,099 compared to $9,790 at
June 30, 1999. This increase is primarily due to funds from the issuance of
convertible debentures. Cash at December 31, 1999 and June 30, 1999 was $318,606
and $450, respectively.
Capital expenditures, primarily for office furniture and equipment were
$52,396 for the three-month period ended December 31, 1999 and $64,090 for the
six-month period ended December 31, 1999. In addition, the Company anticipates
additional similar capital expenditures of $40,000 for the remainder of the
fiscal year to enhance its infrastructure, including computer systems to
accommodate anticipated future growth.
Expenditures for deposits for services, principally lease for office space
and merchant account for credit cards, were $64,922 for the three-month period
ended December 31, 1999 and $81,739 for the six-month period ended December 31,
1999. Except for deposits for inventory purchases, no significant additional
deposits are anticipated for these items for the remainder of the fiscal year.
The Company leases office space under a non-cancelable operating lease
expiring October 31, 2004. Minimum future operating lease obligations at
December 31, 1999 were $277,175, including $33,881 for the remainder of the
fiscal year.
Seasonality and Cyclicality
In addition to general economic factors, the direct selling industry is
impacted by seasonal factors and trends such as major cultural events and
vacation patterns.
Note Regarding Forward-Looking Statements
Certain statements made above, including those in the Liquidity and Capital
Resources section, herein are "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995. Such statements consist of
any statement other than a recitation of historical fact and be identified by
the use of forward-looking terminology such as "may," "expect," "anticipate," "
estimate,", or "continue" or the negative thereof or other variations thereon or
comparable terminology. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward looking statements. The Company does not
have a policy of updating or revising forward-looking statements and thus it
should not be assumed that silence by its management over time means that actual
events are bearing out as estimated in such forward looking statements.
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PART II
OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities and Use of Proceeds
Information in response to the requirements of this Item is disclosed above, in
PART I, Item 2., under the Liquidity and Capital Resources section.
Item 3 Defaults upon Senior Securities
None
Item 4 Submission of Matters to a Vote of Security Holders
None
Item 5 Other Information
In January, 2000, the Company cancelled 18,800 shares of common stock previously
issued prior to June 30, 1999.
Item 6 Exhibits and Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned as duly authorized.
International Cosmetics Marketing Co.
(Registrant)
/s/ Stephanie McAnly /s/ Sonny Spoden
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Stephanie McAnly Sonny Spoden
Chief Executive Officer Chief Financial Officer
Dated: February 10, 2000
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