U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB/A
(Mark One)
[ ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
[x] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from January 1, 1999 to June 30, 1999
Commission file number 0-27833
International Cosmetics Marketing Co.
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(Name of small business issuer in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0598868
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(I.R.S. Employer Identification No.)
6501 NW Park of Commerce Boulevard, Suite 205, Boca Raton, Florida 33487
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(Address of principal executive offices)(Zip Code)
Issuer's telephone number 561-999-8878
Securities registered under Section 12(b) of the
Exchange Act:
None
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(Title of each class)
Name of each exchange on which registered
not applicable
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Securities registered under Section 12(g) of the Exchange Act:
Common Stock
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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
[ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [x]
State issuer's revenues for its most recent fiscal year. Issuer had no
revenues for the 6 months ended June 30, 1999.
State the aggregate market value of the voting stock held by
non-affiliates computed by reference to the price at which the stock was sold,
or the average bid and asked prices of such stock, as of a specified date within
the past 60 days. The aggregate market value of the voting stock held by
non-affiliates as of March 28, 2000 was approximately $22,191,550.
State the number of shares outstanding of each of the issuer's class of
common equity, as of the latest practicable date. As of March 28, 2000,
4,759,400 shares of Common Stock are issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB into which the document
is incorporated: (1) any annual report to security holders; (2) any proxy or
information statement; and (3) any prospectus filed pursuant to Rule 424(b) of
the Securities Act of 1933 ("Securities Act"). Not Applicable.
Transitional Small Business Disclosure Form (check one):
Yes No X
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PART I
The discussion in this Annual Report on Form 10-KSB regarding the Company and
its business and operations includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1996. Such statements
consist of any statement other than a recitation of historical fact and can 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 management of the
Company over time means that actual events are bearing out as estimated in such
forward looking statements.
From inception, the Company's fiscal year was December 31. On November 23, 1999,
the Company changed its fiscal year to June 30.
Item 1. Business
History
The Company was incorporated in Florida on July 14, 1995 under the name
CindyCo., Inc. for the purpose of providing non-legal services to organizational
and start-up companies. The Company's prior management subsequently determined
to narrow the scope of the Company's stated business purposes to concentrate in
the area of marketing. In August 1999, the Company changed its name to
International Cosmetics Marketing Co., the original officers and directors
resigned, and the current officers and directors were elected to their
positions. Concurrently, the Company entered into an agreement with Beverly
Sassoon International, L.L.C., Beverly Sassoon and Elan Sassoon which grants the
Company various rights which are described in this filing related to the
manufacturing, marketing and distribution of products utilizing the "Beverly
Sassoon" or "Elan Sassoon" names.
As of June 30, 1999, the Company was a development stage company. The
Company's business currently is the development, marketing and distribution of a
broad range of consumer products. The Company commenced operations in late 1999.
The Company will seek to distribute a variety of products which have wide range
of consumer appeal in areas from skin care and cosmetics to nutrition and human
wellness products to apparel and other disposable goods. In order to build a
database from which the Company might select products to market and distribute,
the Company presently anticipates that it will solicit proposals from inventors
who have substantially completed their product development but lack the
expertise or capital to market or distribute it. The Company may also acquire
existing businesses with complimentary operations as a method of expanding our
business and operations. The may develop its own products in the future.
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General
In late 1999, the Company began distributing its products exclusively
through a network marketing system. As of March 27, 2000, the Company has a
network of approximately 2500 independent business associates ("IBA") located
throughout the United States who have purchased the Company's business builder
kit. Approximately, 350 of the Company's IBAs are "commission certified," i. e.,
qualified to earn sales commissions. A commission certified IBA is one who has
(1) activated his or her position in the network by achieving $495 in
commissionable sales (also known as personal volume) which may be the result of
a single order or accumulated during the IBA's first six months being an IBA of
the Company and (2) sponsored two IBAs, one on his or her left side (Team A) and
one on his or her right side (Team B) who have purchased the business builder
kit and who have achieved $495 in personal volume. To remain commission
certified, an IBA must be generating a minimum of $100 in personal volume each
month.
Products
A salient ingredient of all of the Company's skin care, body care, and
nutritional products is the inclusion of an activated oxygen solution. This
solution is called BiOxygen and is the signature ingredient in each of the
Company's current skin care and nutritional products. The Company's products
emphasize common sense healthy living.
The Company is committed to building its brand name and IBA and
customer loyalty by selling premium quality, innovative personal care products
and nutritional supplements that appeal to broad markets. The Company's
philosophy is to combine the best of science and nature and to include in each
of its products the highest quality ingredients with the greatest amount of
benefit to the consumer. Independent IBAs need to have confidence that they are
distributing the best products available that are distinguishable from "off the
shelf" products. The Company is committed to developing and providing quality
products that can be sold at attractive retail prices and allow the Company to
maintain reasonable profit margins.
The Company believes that timely and strategic product introductions
are critical to maintaining the growth of independent distribution channels.
IBAs become enthusiastic about new products and are generally excited to share
new products with their customer base. An expanding product line helps to
attract new IBAs and generate additional revenues.
BiOxygen. BiOxygen is perhaps one of the most important nutritional
supplements for personal health that has been developed in decades. While there
are similar oxygen products, none is specially processed to retain high levels
of oxygen. This oxygen concentrated water solution provides safe oxygen
supplements to aid the body in countless enriching ways. Oxygen removes toxins,
converts nutrients to energy and enhances a person's body energy and vitality.
The Company sells BiOxygen in liquid form in addition to including it in its
skins care and nutritional products.
Skin Care Products.
Beverly Sassoon Skin Care Products.
OxiCleanse. OxiCleanse is a gentle, everyday face
cleanser. Natural exfoliates combined with activated oxygen assists in revealing
the skin's natural tones.
OxiCreme. OxiCreme is an intensive facial and neck
therapy cream. A premium formulated cream combined with oxygen's healing power.
It exclusively refines delicate skin around the face and neck. OxiCreme contains
CoQ10.
OxiSoft. Oxisoft is premium oxygenated moisture.
Added oxygen deeply penetrates and delivers essential moistures to reduce
dryness and premature aging leaving skin silky. OxiSoft also contains CoQ10 and
a vital sunscreen protection.
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OxiSerum-C. OxiSerum-C is an all natural oxygen
enriched emollent solution that invigorates the skin and restores its vital pH
balances. This maximum skin nourishment and moisturing treatment gently works on
all skin types.
OxiTone. OxiTone is a facial and epidermal toner that
works with oxygen to restore the skin's youthful glow.
Elan Sassoon's Men's Body Care Products.
OxiMoist. OxiMoist is a moisturizer designed for all
skin types, especially for men. OxiMoist's synergistic blend of botanical
ingredients encourages the healing of minor nicks and cuts.
OxiScrub. OxiScrub naturally exfoliates and
revitalizes, while BiOxygen stabilized oxygen helps cleanse, disinfect and
nourish skin.
Body ARMO2R.. Body ARMO2R is specially formulated
roll-on deodorant with natural botanicals for use an effective defensive weapon
against prespiration and odors caused by bacteria.
M.E.N. M.E.N. is a male energy nutritional containing
a herbal formula combined with the oxygenating power of magnesium dioxide and
Vitamin C. M.E.N. is formulated to help restore healthy male sexual function and
energy normally affected by age, illness, or daily stress.
Nutritional Dietary Supplement Products.
LTSO Calcium. Lyophyllic Third State Oximinerals (LTSO) are
minerals most easily used by a person's body. LTSO Calcium is a proprietary
homeopathic solution of activated oxygen and vital mineral caldium. LTSO Calcium
is isolated in a concentrated liquid form that provides for far greater
assimilation and is completely plant organic-based.
LTSO Selenium. Selenium is primarily a powerful antioxidant
that reduces free radicals, unstable molecules which are produced by body as a
natural part of the metabolic process. Combined with the benefits of oxygen,
selenium is one of the most bio-compatible form of selenium developed to date.
PhytO2. Phyt02 contains over 90 trace and essential minerals
and vitamins and is one of the highest grade natural amino acid complexes
available. PhytO2 is revolutionary oxygen-enhanced phto-nutrient (plant based)
supplement store in a VegiCap capsule.
OxiDetox. Poor diets, lack of exercise, environmental
pollution and stress depletes the body of oxygen and other vital nutritional
substances. OxiDetox is a revolutionary body cleansing system that helps to
deodorize the digestive system and to help fight off pathogenic bacteria,
parasites as-well-as yeast.
Sports Nutritional Supplements. The Company's sports nutritional
product line combines the benefits of oxygen with training supplements. The
Company's current sports nutritional supplement product line consists of:
SherpaO2. SherpaO2 is a premier concentrated activated oxygen
supplement developed for both professional and amateur athletes.
OxiQuench. OxiQuench is a blended powder carbohydrate energy
drink that drives the body to burn stored fat rather than depleting the cells of
their glucose fuel. Combined with SherpaO2, this aggressive sports nutritional
supplement can enhance training, exercise and performance.
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Oxi-MSM. Oxi-MSM is a heavy-hitting health promoter, providing
vital oxygen and sulfur to cells in the body providing abundant energy and
vitality while freeing a person from a multitude of pains and discomforts.
OxiCramp. OxiCramp with its powerful combination of
oxygenators, pain and fatigue eliminators, and performance enhancers.
Other Products.
Web sites. The Company also provides IBAs with the opportunity
to have a web site for managing their business, e. g., viewing the genealogy of
their downline, for a monthly cost of $19.95.
Preferred Customer Membership Program. The Company is in the
final stages of implementing a preferred customer program whereby non-IBAs can
purchase an annual membership for $29.95 to purchase product at wholesale cost.
Preferred customers are not allowed to resell the product purchased and need to
be introduced by an IBA who will earn commissions on the products purchased by
the preferred customer.
Licensing and Endorsement Agreements
Exclusive License Agreement. Under the terms of the Exclusive License
Agreement with Beverly Sassoon International, LLC., Beverly Sassoon, and Elan
Sassoon which was entered into in August 1999, the Company received the
exclusive rights to manufacture, market and distribute the line of skin care
products and cosmetics which Beverly Sassoon International, LLC. had previously
developed. These products, which include a complete line of skin care products
including moisturizers, treatments and masks, will be marketed and distributed
utilizing the name and likeness of Beverly Sassoon.
The Exclusive License Agreement granted the Company the following rights:
* An exclusive license to utilize Ms. Sassoon's name and
likeness in connection with the manufacture, marketing,
promotion and sale of certain of the Company's products.
* An exclusive license to utilize Mr. Sassoon's name and
likeness in connection with the manufacture, marketing,
promotion and sale of certain of the Company's products.
* An exclusive, worldwide license to manufacture, market and
distribute certain skin care products developed by Beverly
Sassoon International, LLC.
* Upon the expiration of certain existing licenses granted by
Ms. Sassoon to third parties related to the use of her name
and likeness in the marketing and promotion of pet care
products and slimming products, the Company will have the
exclusive license to also utilize Ms. Sassoon's name and
likeness in relation to these types of products.
The term of this Exclusive License Agreement is 99 years, with a 99
year renewal at our option. The Company retains full control over the
manufacturing, development and marketing of its products. Through Beverly
Sassoon International, LLC., Ms. Sassoon and Mr. Sassoon will consult with the
Company in the areas of product development and marketing, and the Company will
utilize their names and/or likenesses in promoting certain of its products and
in the development of certain of its brands. The consideration for the rights
the Company received under this Exclusive License Agreement included:
* Aggregate cash payment to Beverly Sassoon International, LLC
of up to $200,000.
* Issuance of 900,000 shares of our Common Stock to Beverly
Sassoon International, LLC.
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* The future payment of royalties to Beverly Sassoon
International, L.C.C. equal to the greater of 2% of gross
revenues from the sales of any of our products which are
marketed or distributed subject to the terms of the Exclusive
License Agreement, or $25,000 per month. These royalty
payments will end if either Summer Camp West Limited
Partnership, a Georgia limited partnership controlled by
Beverly Sassoon, Romana DOD Limited Partnership, a Georgia
limited partnership controlled by Elan Sassoon or Capital
Distributors, LLC, which is controlled by Beverly Sassoon and
Elan Sassoon, exercises certain options to purchase an
aggregate of 4,850,000 shares of our Common Stock.
Other Agreements. In February 2000, the Company entered into a two year
endorsement contract with a well-known mountain-climber and extreme expedition
trekker to endorse its products as part of the endorser's attempt to climb Mt.
Everest in the spring of 2000.
The Company anticipates that it will also seek to license the use of
the names and likeness of other well-known individuals to assist us in the
development, marketing and establishment of certain of our brands. The Company
has not entered into any discussions with any additional well-known individuals
as of March 28, 2000.
Marketing
In March, 2000, the Company entered into a Memorandum of Understanding
with Torreon Group Holdings, Inc. and two individuals (the "Torreon Group") to
use their best efforts to cause Torreon's sales representatives to become
independent IBAs for the Company and to provide advice to the Company regarding
current sales and marketing structure. The Memorandum of Understanding also
provides for the issuance of up to 201,660 shares of the Company's common stock
to the Torreon Group upon the meeting of certain specified sales milestones. The
Memorandum of Understanding is in the process of being finalized into a binding
agreement. There is no assurance that the Memorandum of Understand can be
converted into a binding agreement.
To facilitate the development of its network marketing organization, in
September 1999, the Company entered into two separate Consulting Agreements to
provide the Company with marketing services. A one (1) year Consulting Agreement
with Viking Holding Company ("Viking"), provides that the consultant will
provide management, network marketing strategic organization and structure
recruiting experienced personnel and financial matters in connection with the
general sales, marketing and operation of the Company's business and products,
and expansion of services and products. The Company issued 200,000 shares of its
Common Stock for the marketing services to be provided by Viking. The shares are
subject to waiver and forfeiture, termination and cancellation in the event the
Company has not within the term of the agreement (i) attained sales in excess of
$5,000,000; and (ii) secured at least 5,000 IBAs. The Company may in its sole
discretion, waive the satisfaction of the performance goals. The Shares are held
in escrow pending satisfaction of the performance goals.
An eighteen (18) month Consulting Agreement with Hatteras Investment
Company ("Hatteras") provides that the consultant will provide management,
network marketing strategic organization and structure recruiting experienced
personnel and financial matters in connection with the general sales, marketing
and operation of the Company's business and products, and expansion of services
and products. The Company issued 200,000 shares of its Common Stock for the
marketing services to be provided by Hatteras. The shares are subject to waiver
and forfeiture, termination and cancellation in the event the Company has not
within the term of the agreement (i) attained sales in excess of $10,000,000;
and (ii) secured at least 10,000 IBAs. The Company may in its sole discretion,
waive the satisfaction of the performance goals. The Shares are held in escrow
pending satisfaction of the performance goals.
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Sales Aids
The Company provides an assortment of sales aids to facilitate the
sales of its products. Sales aids include videotapes, brochures, posters, audio
tapes, promotional clothing, stationery, business cards, and other miscellaneous
items to help create consumer awareness of the Company and its products. IBAs do
not receive commissions on purchases of sales aids.
Refund and Product Return Policy
The Company believes it is a consumer-protective company in the direct
selling industry. An IBAs return of inventory and related refund requests for
any reason, other than shipping discrepancy, customer exchange, or a damage
claim, are treated as a request by the IBA to voluntarily terminate as a IBA for
the Company. When returning product, the IBA is provided with a Return
Merchandise Authorization Number (RMA#) that is used for proper routing of
incoming packages. Products that are returned used or partially used, previously
certified as sold or returned with security seals broken are not eligible for
refund. Return merchandise that is eligible for refund is refunded 90% of the
price paid by the IBA, exclusive of shipping and handling costs. Returned
inventory on which sales commissions have been paid will be charged back to all
affected parties. The Company's refund and product return policy is modified
from the general policy indicated above due to laws and regulations in a limited
number of states, e. g., Georgia.
Distribution System
Overview. The basis of the Company's sales philosophy and distribution
system is network marketing. Under most network marketing systems, IBAs purchase
products for resale to consumers and for personal consumption. Pursuant to the
Company's compensation plan, products are sold exclusively to or through
independent IBAs who are not employees of the Company. Under most network
marketing systems, independent IBAs purchase products for resale and for
personal consumption.
Network marketing is an effective vehicle to distribute the Company's
products because:
- A consumer can be educated about a product in person by an
IBA, which the Company believes is more effective than
traditional marketing avenues.
- Direct sales allow for actual product testing by a potential
consumer.
- The impact of IBA and consumer testimonials is enhanced; and
- As compared to other distribution methods, IBAs can give
customers higher levels of service and attention, by, among
other things, delivering products directly to a consumer and
following up on sales to ensure proper product usage and
customer satisfaction, and to encourage repeat purchases.
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Direct selling as a distribution channel has been enhanced in the past
decade due to advancements in communications, including telecommunications and
Internet connectivity, and the proliferation of the use of videos and fax
machines. Direct selling companies rely on communications, the Internet, and
videos to project a desired image for such companies and their product lines.
The Company believes that high quality sales aids play an important role in the
success of IBA efforts. The Company believes that the Internet will become an
increasingly important business factor as more and more consumers purchase
products over the Internet as opposed to traditional retail and direct sales
channels. As a result, the Company expects that direct sellers will need to
adapt their business models to integrate the Internet into their operations to
remain successful. The Company's web site that can be accessed via the Internet
is www.bsassoon.net. Management is committed to fully utilizing current and
future technological advances to continue enhancing the effectiveness of direct
selling. See "Risk Factors - "Risks Related to Potential Changes in Business
Model."
The Company's network marketing program differs from many other network
marketing programs in several respects. First, currently the Company's
compensation plan allows Company IBAs to develop a seamless national network of
downline IBAs. Second, the Company's order and fulfillment systems eliminate the
need for IBAs to carry significant levels of inventory. Third, the Company's
compensation plan is very financially rewarding. In the early stages of building
its network of IBAs, the Company's commissions (including bonuses) have averaged
approximately 28% of product sales since commencing sales December through March
27, 2000.
The Company's revenue depends directly upon the efforts of IBAs. Growth
in sales volume requires an increase in productivity of IBAs and/or growth in
the total number of IBAs. There can be no assurance that the productivity or
number of IBAs will be sustained at current levels or increased in the future.
See "Risk Factors - Reliance upon Independent IBAs." Furthermore, the loss of
National Manager or Regional Manager IBA levels, which are the Company's two
highest IBA levels, or another key IBA, together with a group of leading IBAs in
such an IBA's downline network, or the loss of a significant number of IBAs for
any reason, could adversely affect the Company.
Sponsoring. The Company relies on its IBAs to sponsor new IBAs. While
the Company provides brochures, magazines, and other sales materials, IBAs are
primarily responsible for educating new IBAs with respect to products, the
Company's compensation plan, and how to build a successful network. See "Risk
Factors - Reliance upon Independent IBAs."
The sponsoring of new IBAs creates multiple levels in the network
marketing structure. Persons whom an IBA sponsors are referred as "downline" or
"sponsored" IBAs. If downline IBAs also sponsor new IBAs, they create additional
levels in the structure, but their downline IBAs remain in the same downline
network as their original sponsoring IBA.
Sponsoring activities are not required of IBAs. However, because of the
financial incentives provided to those who succeed in building an IBA network
that consumes and resells products, the Company believes that most of its IBAs
attempt, with varying degrees of effort and success, to sponsor additional IBAs.
Generally, IBAs invite friends, family members, and acquaintances to sales
meetings, the Company's web site, conference calls, and prerecorded telephone
calls in which Company products are presented and the compensation plan is
explained. People are often attracted to become IBAs after using Company
products and becoming regular retail customers. Once a person becomes an IBA, he
or she is able to purchase products directly from the Company at wholesale
prices for resale to consumers or for personal consumption. The IBA is also
entitled to sponsor other IBAs in order to build a network of IBAs and product
users.
A potential IBA must enter into a standard IBA agreement with the
Company which obligates the IBA to abide by the Company's policies and
procedures. In most of the Company's current markets, IBAs are also required to
purchase an IBA starter kit, which includes the Company's policies and
procedures and are sold for the approximate cost of producing the IBA starter
kit.
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Compensation Plan. Management believes that one of the Company's key
competitive advantages is the Company's compensation plan. Based upon its
knowledge of network marketing compensation plans, the Company believes that the
Company's compensation plan is very financially rewarding. There are two
fundamental ways in which IBAs can earn money: (i) through retail markups, for
which the Company recommends a range from 8% to 100%; and (ii) through a series
of commissions on product sales, which can result in commissions and bonuses.
Personal volume is essentially based upon a factor (usually 100%) of a product's
wholesale cost, net of any point-of-sale taxes. IBAs receive higher levels of
commissions as they advance up the compensation plan. A commission certified IBA
is eligible to earn commissions and is one who has (1) activated his or her
position in the network by achieving $495 in personal volume which may be the
result of a single order or accumulated during the IBA's first six months being
an IBA of the Company and (2) sponsored two IBAs, one on his or her left side
(Team A) and one on his or her right side (Team B) who also have purchased the
business builder kit and achieved $495 in personal volume. To remain commission
certified, an IBA must be generating a minimum of $100 in personal volume each
month.
Commissions are calculated daily - Tuesday through Monday - and paid
weekly. Orders placed on Saturday and Sunday count towards Monday's personal
volume. The calculation of daily commissions is based upon the total personal
volume that accumulated within the weaker of an IBA's two teams. Commissions are
paid at the rate of 10% of the personal volume generated by an IBA's weaker
team. The personal volume must be equal to or exceed $495.00 before a check will
be issued. Total personal volume is used for calculating commissions regardless
of the number of levels in an IBA's organization or network. After a IBA is paid
on the personal volume of his or her weaker team, an equal corresponding amount
of volume is deducted from the IBA's stronger team with the balance carried
forward to the next day - up to a maximum of $5,000 per day. This process
continues until personal volume reaches $5,000 in both teams within the same day
and each day thereafter. This maximum payout of $500 per day can be achieved
once per day for a maximum $2,500 per week, excluding management bonuses.
As part of commissions paid, the Company also pays a $50 quick start
bonus when an IBA's personally sponsored IBA achieves personal volume of $495
and signs up for the Company's Monthly Preferred Product Program in his or her
first order.
The Company's Monthly Preferred Product Program consists of a choice of
nine packages for which IBAs can sign up for a standing monthly order to
simplify an IBA's order of wholesale product. The wholesale cost of the packages
in this program exceed the $100.00 cost. This $100 also carries $100 of personal
volume that assists IBAs in satisfying the $100 personal volume requirement to
remain commission certified.
Management bonuses. IBAs who have at least two (2) IBAs who have
purchased the business builder kit and have $495 in personal volume are
qualified to earn a 25% Area Manager bonus paid on the sales commission of all
of his or her's personally-sponsored IBAs.
IBAs who have at least four (4) IBAs who have purchased the business
builder kit and have $495 in personal volume with at least two (2) of these IBAs
qualifying as Area Managers are qualified to earn a 50% Regional Manager bonus
paid on the sales commission of all of his or her's personally-sponsored IBAs.
IBAs who have at least eight (8) IBAs who have purchased the business
builder kit and have $495 in personal volume with at least four (4) of these
IBAs qualifying as Regional Managers are qualified to earn a 100% National
Manager bonus paid on the sales commission of all of his or her's
personally-sponsored IBAs.
The Company evaluates requests for exceptions to the Company's
compensation plan. While the general policy is to discourage exceptions,
management believes that the flexibility to grant such exceptions is critical in
retaining IBA loyalty and dedication.
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IBA Support. The Company is committed to providing high-level support
services tailored to the needs of its IBAs. The Company meets the needs and
builds the loyalty of its IBAs with personalized IBA service, a support staff
that assists IBAs as they build networks of downline IBAs, and a fair product
return policy. Because many IBAs have only a limited number of hours each week
to concentrate on their component of the Company's business, management believes
that maximizing an IBA's efforts through effective support of each IBA has been
and will continue to be important to the success of the Company.
Through training meetings, regional and annual conventions, IBA focus
groups, regular telephone conference calls, and personal contacts with IBAs, the
Company seeks to understand and satisfy the needs of each IBA. The Company
currently provides Internet and telephonic product fulfillment and tracking
services that result in user-friendly, timely product distribution.
Rules Affecting IBAs. The Company's standard IBA agreement, policies
and procedures and compensation plan contained in every IBA starter kit outline
the scope of permissible IBA marketing activities. The Company's IBA rules and
guidelines are designed to provide network marketing and prudent business
policies and procedures. IBAs are independent contractors and are thus
prohibited from representing themselves as agents or employees of the Company.
IBAs are obligated to present the Company's products and business opportunity
ethically and professionally. IBAs agree that the presentation of the Company's
business opportunity must be consistent with, and limited to, the product claims
and representations made in literature distributed by the Company. Under most
regulations governing nutritional supplements, no medical claims may be made
regarding the products, nor may IBAs prescribe any particular product as
suitable for any specific ailment. See "Risk Factors - Reliance upon Independent
IBAs."
IBAs must represent that the receipt of commissions is based on retail
sales and substantial efforts. IBAs are required to meet a retail sales
requirement of at least five retail sales to five different customers per month.
IBAs are also prohibited from the purchase of products or unreasonably
large quantities of inventory solely to qualify for bonuses or advancement. IBAs
may not "inventory load" nor encourage other IBAs to load up on inventory. Any
time an IBA places an order with the Company, he or she is verifying that at
least seventy percent (70%) of his or her previous order has been sold or
otherwise consumed. This requirement is referred to as the 70% rule.
Exhibiting commission statements or checks is prohibited. Sales aids
such as videotapes, promotional clothing, stationery, and other miscellaneous
items must be produced or pre-approved by the Company.
IBAs may not use any form of media advertising to promote products
without the Company's consent. Products may be promoted only by personal contact
or by literature produced or approved by the Company. Generic business
opportunity advertisements (without using the Company name) may be placed in
accordance with certain guidelines in some states. The Company's logos and names
may not be permanently displayed on physical premises. IBAs may not use the
Company's trademarks or other intellectual property without the Company's
consent.
Products generally may not be sold, and the business opportunity may
not be promoted, in traditional retail environments. Additionally, IBAs may not
sell at conventions, trade shows, flea markets, swap meets, and similar events.
IBAs who own or are employed by a service-related business such as a doctor's
office, hair salon, or health club, may make products available to regular
customers as long as products are not displayed visibly to the general public in
such a way as to attract the general public into the establishment to purchase
products.
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The Company systematically reviews alleged reports of IBA misbehavior.
If the Company determines that an IBA has violated any of the IBA policies or
procedures, it may either terminate the IBA's rights completely or impose
sanctions such as warnings, probation, withdrawal or denial of any award,
suspension of privileges of an IBA, fines or penalties, withholding commissions
until specified conditions are satisfied, or other appropriate injunctive
relief. IBA terminations and IBAs who have been suspended based on violations of
policies and procedures have aggregated about 55 since inception in late 1999.
An IBA may voluntarily terminate his/her contract with the Company at any time.
Payment. IBAs generally pay for products prior to shipment.
Accordingly, the Company carries minimal accounts receivable. IBAs typically pay
for products by credit cards, bank drafts, and in limited circumstances payment
for products is in cash. See "Risk Factors - Reliance on Merchant Account."
Suppliers and Key Vendors
Sourcing and Production. The Company's skin care and nutritional
products are currently purchased from BIO2 International, Inc. (BIO2) of San
Luis Obispo, California. Currently BIO2 purchases the botanical extracts for the
Company's products from Vege Kurl and Vege-Tec of Glendale California and its
nutritional supplement products from Creation's Garden Natural Products, Inc.
(Creations) of Valencia, California. Vegekurll and Creations are FDA approved.
The Company is in the process of entering into a contract with BIO2. There is no
assurance that a contract can be consummated with BIO2. The Company's profit
margins, and its ability to deliver its existing products on a timely basis, are
dependent upon the ability of BIO2 and its suppliers to continue to supply
products in a timely and cost-efficient manner. Furthermore, the Company's
ability to enter new markets and sustain satisfactory levels of sales in each
market depends in part upon the ability of BIO2, its suppliers, and/or other
outside manufacturers to reformulate existing products if necessary to comply
with regulations on market environments. Finally the development of additional
new products in the future will likewise depend in part of the services of
suitable outside manufacturers. The Company believes that, in the event it is
unable to source any products or ingredients from BIO2, the Company could
produce most such products or replace such products or substitute ingredients
without great difficulty or prohibitive increases in the cost of goods sold.
However, there can be no assurance that the loss of this supplier or its
suppliers would not have a material adverse effect on the Company's business and
results of operations. See "Risk Factors - Reliance on Limited Suppliers."
Product Fulfillment. In December 1999, the Company entered into a three
year Order Fulfillment Agreement with Creations (see preceding paragraph).
Creations picks, boxes, ships, re-packs and returns, handles inventory, and
maintains inventory controls. Creations receives orders from the Company's
computer system and by telephone. In the first quarter of 2000, the Company
transferred the customer service function handled by Creations to its corporate
offices in Boca Raton, Florida. In the second quarter of 2000, the Company
intends to transfer order taking handled by Creations to its corporate offices.
There is no assurance that Creations has the capacity to handle the Company's
future order fulfillment requirements. See "Risk Factors - Reliance on Limited
Suppliers."
Computer Services. In November 1999, the Company entered into a one
year agreement with 2021 Interactive, L.L.C. (2021) of Provo, Utah (currently
moving to Dallas, Texas) to provide computer processing services for processing
orders, billing customers, calculating commissions, processing commission
checks, preparing Form 1099 tax information to IBAs, inventory reporting, sales
and sales tax reporting, and providing genealogy information to IBAs on their
individual downlines, and the genealogy to the Company of its entire network
system. There is no assurance that 2021 has the capacity to handle the Company's
future computer processing requirements. See "Risk Factors - Reliance on Limited
Suppliers."
Competition
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Skin Care and Nutritional Products. The markets for skin care and
nutritional products are large and intensely competitive. The Company competes
directly with companies that manufacture and market skin care and nutritional
products in each of the Company's product categories and product lines. The
Company competes with other companies in the skin care and nutritional products
industry by emphasizing the uniqueness, value and premium quality of the
Company's products and convenience of the Company's distribution system. Many of
the Company's competitors have much greater name recognition and financial
resources than the Company. In addition, skin care and nutritional products can
be purchased in a wide variety of channels of distribution. While the Company
believes that consumers appreciate the convenience of ordering products from
home through a sales person, or through a catalog, the buying habits of many
consumers accustomed to purchasing products through traditional retail channels
are difficult to change. The Company's product offerings in each product
category are also relatively small compared to the wide variety of products
offered by many other skin care and nutritional product companies. There can be
no assurance that the Company's business and results of operations will not be
affected materially by market conditions and competition in the future. See
"Risk Factors - Competition."
Network Marketing Companies. The Company also competes with other
direct selling organizations some of which have a longer operating history and
higher visibility, name recognition, and financial resources. The leading
network marketing company in the Company's existing markets is Amway Corporation
and its affiliates. The Company competes for new IBAs on the strength of its
multiple business opportunities, product offerings, compensation plan, and
management strength. Management envisions the entry of many more direct selling
organizations into the marketplace as this channel of distribution expands over
the next several years. There can be no assurance that the Company will be able
to successfully meet the challenges posed by this increased competition. See
"Risk Factors - Competition."
Intellectual Property
Under the terms of the Exclusive License Agreement, the Company has the
rights to all trademarks, copyrights, trade names and other intellectual
property related to the use of the names and likeness of Beverly Sassoon or Elan
Sassoon for products marketed and distributed under the terms of that agreement.
The Company has registered certain fictitious name applications with the state
of Florida in order to conduct business under the names "Beverly Sassoon &
Company", Beverly Sassoon & Co." and "Beverly Sassoon." Ms. Sassoon and Mr.
Sassoon have agreed to execute such additional documents as the Company deems
reasonably necessary to register and protect these intellectual property rights.
As the Company develops other trademarks, trade names, copyrights or other
intellectual property rights, the Company may seek to protect these, as well as
those related to Ms. Sassoon and Mr. Sassoon, by registration in the United
States and other countries where these products may be marketed. Depending upon
the development of the Company's business, the Company may also wish to develop
and market products that incorporate patented or patent-pending formulations, as
well as products covered by design patents or other patent applications. While
the Company may seek to protect its intellectual property, in general, there can
be no assurance that its efforts to protect its intellectual property rights
through copyright, trademark and trade secret laws will be effective to prevent
misappropriation of its products. The Company's failure or inability to protect
its proprietary rights could materially adversely affect its business, financial
condition and results of operations.
Government Regulation
Direct Selling Activities. Direct selling activities are regulated by
various federal, state, and local governmental agencies. These laws and
regulations are generally intended to prevent fraudulent or deceptive schemes,
often referred to as "pyramid," "money games," "business opportunity" or "chain
sales" schemes, that promise quick rewards for little or no effort, require high
entry costs, use high pressure recruiting methods, and/or do not involve
legitimate products. The laws and regulations in the Company's current markets
often (i) impose certain cancellation/product return, inventory buy-backs and
cooling-off rights for consumers and IBAs, (ii) require the Company or its IBAs
to register with the governmental agency, (iii) impose certain reporting
requirements on the Company, and/or (iv) impose various requirements, such as
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requiring IBAs to have certain levels of retail sales to qualify to receive
commissions, to ensure that IBAs are being compensated for sales of products and
not for recruitment of new IBAs.
Based on research conducted in opening its existing markets (including
assistance from legal counsel), the nature and scope of inquiries from
government regulatory authorities, and the Company's history of operations in
such markets to date, the Company believes that its method of distribution is in
compliance in all material respects with the laws and regulations relating to
direct selling activities of the states in which the Company current operates.
See "Risk Factors - Government Regulation of Direct Selling Activities."
Regulation of Skin Care and Nutritional Supplements. The Company's skin
care and nutritional supplement products and related marketing and advertising
are subject to extensive governmental regulation by numerous governmental
agencies and authorities, including the Food and Drug Administration (the
"FDA"), the Federal Trade Commission (the "FTC"), the Consumer Product Safety
Commission, and U. S. Department of Agriculture.
Nutritional supplements are strictly regulated in the Company's
markets. The Company's markets have varied regulations that apply to and
distinguish dietary health supplements from "drugs" or "pharmaceutical
products." For example, the Company's products are regulated by the FDA under
the Federal Food, Drug and Cosmetic Act (the "FDCA"). The FDCA has been amended
several times with respect to nutritional supplements, most recently by the
Nutrition Labeling and Education Act and the Dietary Supplement Health and
Education Act ("DSHEA"). DSHEA establishes rules for determining whether a
product is a nutritional supplement. Under DSHEA, nutritional supplements are
regulated more like foods than drugs, are not subject to the food additive
provisions of the law, and are generally not required to undergo regulatory
clearance prior to market. None of this infringes, however, upon the FDA's power
to remove an unsafe substance from the market, but the law clearly shifts the
burden of proof to the FDA. In the event a product or ingredient in a product,
is classified as a drug or pharmaceutical product, the Company will generally
not be able to distribute such product in such market through its distribution
channel because of the strict restrictions applicable to drug and pharmaceutical
products.
The Company's existing markets also regulate product claims and
advertising. These laws regulate the types of claims and representations that
can be made regarding the efficacy of products, particularly dietary
supplements. For example, the Company is unable to make any claim that any of
its nutritional supplements will diagnose, cure, mitigate, treat or prevent
disease. DSHEA, however, permits substantiated, truthful, and non-misleading
statements of nutritional support to be made in labeling, such as statements
describing general well-being resulting from consumption of a dietary ingredient
or the role of a nutrient or dietary ingredient in affecting or maintaining a
structure or a function of the body. The FDA recently issued a proposed rule
concerning these issues. The FTC similarly requires that any claims be
substantiated. Accordingly, these regulations can limit the ability of the
Company and its IBAs to inform consumers of the full benefits of the Company's
products. See "Risk Factors - Government Regulation of Products and Marketing."
The Company and its vendors are also subject to laws and regulations
governing the manufacturing of its products. For example, the FDA regulations
establish Good Manufacturing Practices for foods and drugs.
Internet Access. Various laws and regulations regarding copyright,
excise tax, and other requirements were adopted prior to the advent of the
Internet and related technologies and do not address unique issues associated
with the Internet and related technologies. There can be no assurance that the
Company's operation will not be adversely affected by the adoption of such laws
or the application of existing laws to the Internet. See "Risk Factors - Risk of
Changes in Internet Regulation."
Other Regulatory Issues. Based on the Company's experience and research
(including assistance from counsel) and the nature and scope of inquiries from
government regulatory authorities, the Company
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believes that it is in material compliance with all regulations applicable to
it. Despite this belief, the Company could be found not to be in material
compliance with existing regulations as a result of, among other things, the
considerable interpretative and enforcement discretion given to regulators or
misconduct by independent IBAs.
Any assertion or determination that the Company or its IBAs are not in
compliance with existing laws or regulations could have a material adverse
effect on the Company's business and results of operations. In addition, the
adoption of new laws or regulations or changes in the interpretation of existing
laws or regulations could generate negative publicity and/or have a material
adverse effect on the Company's business and results of operations. The Company
can not determine the effect, if any, that future governmental regulations or
administrative orders may have on the Company's business and results of
operations. See "Risk Factors - Risks of Government Inquiry and Investigation."
Employees
As of March 28, 2000, the Company has eleven full time employees. As
the Company implements its business plan, it anticipates hiring additional
full-time employees in the areas of sales and marketing and finance and
accounting. None of the employees is represented by union or other collective
bargaining groups. The Company believes its relationship with its employees is
good, and does not currently foresee a shortage of qualified personnel needed to
operate its business.
Risk Factors
There are certain significant risks facing the Company, many of which
are substantial in nature. The following risks and information should be
considered in connection with the other information contained in this filing.
Reliance upon Independent IBAs. The Company distributes its products
exclusively through independent IBAs who have contracted directly with the
Company. IBA agreements are voluntarily terminable by IBAs at any time. The
Company's revenue is directly dependent upon the efforts of these independent
IBAs, and any growth in future sales volume will require an increase in the
productivity of these IBAs and/or growth in the total number of IBAs. As is
typical in the direct selling industry, there is turnover in IBAs, which
requires the sponsoring and training of new IBAs by existing IBAs. The Company
experiences seasonal decreases in IBA sponsoring and product sales because of
holidays and vacation periods. The size of the distribution force can also be
particularly impacted by general economic and business conditions and a number
of intangible factors such as adverse publicity regarding the Company, or the
public's perception of the Company's products, product ingredients, IBAs or
direct selling businesses in general. Because of the number of factors that
impact the sponsoring of new IBAs, and the fact that the Company has little
control over the level of sponsorship of new IBAs, the Company cannot predict
the timing or degree of fluctuations in the size of its distribution force.
There can be no assurance that the number or productivity of the Company's IBAs
will be sustained at current levels or increased in the future. In addition, the
number of IBAs as a percentage of the population in a given market could
theoretically reach levels that become difficult to exceed to the finite number
of persons inclined to pursue a direct selling business opportunity.
Because IBAs are independent contractors, the Company is not in a
position to provide the same level of direction, motivation, and oversight as it
would with respect to its own employees. Although the Company has a compliance
department responsible for the enforcement of the policies and procedures that
govern IBA conduct, it can be difficult to enforce these policies and procedures
because of the number of IBAs and their independent status.
Government Regulation of Direct Selling Activities. Direct selling
activities are regulated by various government agencies. There can be no
assurance that regulatory authorities will not impose new legislation or change
existing legislation that adversely affects the Company's business, or that new
judicial interpretation of existing law may be issued that adversely affect the
Company's business. There can be no
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assurance that the Company will be allowed to conduct business in its current
market or potential new markets. See "Government Regulation - Direct Selling
Activities."
Government Regulation of Products and Marketing. The Company is subject
to or affected by extensive governmental regulations not specifically related to
network marketing. Such regulations govern, among other things: (i) the
Company's skin care and nutritional products, (ii) product formulation,
manufacturing, labeling, and packaging, (iii) product claims and advertising,
whether made by the Company or its IBAs, and (iv) fair trade and IBA practices.
The Company's skin care and nutrition products and related marketing
and advertising also are subject to extensive governmental regulation. The
Company may also be prohibited from making therapeutic claims regarding such
products even if the Company may have research and independent studies
supporting such claims. Present or future health and safety or food and drug
regulations, or judicial interpretations thereof, could delay or prevent the
introduction of new products or suspend the sale of existing products. See
"Government Regulation - Regulation of Skin Care and Nutrition Products."
Risk of Government Inquiry and Investigation. As is the case with most
direct sales companies, the Company has from time to time, received inquiries
from various government regulatory authorities regarding the nature of its
business and other issues such as compliance with local business opportunity and
securities laws. There is no assurance that the Company will not face additional
inquiries and investigations in the future. Any assertion or determination that
the Company, or any of its IBAs, are not in compliance with existing laws or
regulations, could potentially have a material adverse effect on the Company's
business and results of operations. In addition, the adoption of new laws or
regulations or changes in the interpretation of existing laws or regulations
could generate negative publicity and/or have a material adverse effect on its
business and results of operations. The Company cannot determine the effect, if
any, that future governmental regulations or administrative orders may have on
its business and results of operations. Regulatory action, whether or not it
results in a final determination adverse to the Company, has the potential to
create negative publicity, with detrimental effects on the motivation and
recruitment of IBAs and, consequently, on the Company's results of operations.
See "Government Regulation - Other Regulatory Issues."
The Company may also be subject to the risk of private party challenges
to the legality of its network marketing system. For example, in Webster v.
Omnitrition International, Inc., 79 F.3d 776 (9th Cir. 1996), the "multi-level
marketing" program of Omnitrition International, Inc. was challenged in a class
action by certain Omnitrition distributors who alleged that Omnitrition was
operating an illegal "pyramid scheme" in violation of federal and state laws.
The Company believes that its network marketing system satisfies the standards
set forth in the Omnitrition case and other applicable statutes and case law
defining a legal marketing system, in part based upon significant differences
between our marketing system and that described in the Omnitrition case.
However, the regulatory requirements concerning network marketing systems do not
include "bright line" rules, and are inherently fact-based. A future challenge
and subsequent adverse judicial determination with respect to the Company's
network marketing system could have a material adverse effect on the Company's
business and operations. Among other things, such a determination could require
the Company to make modifications to its network marketing system and result in
negative publicity. In addition, adverse rulings by courts in any proceedings
challenging the legality of multi-level marketing systems, even in those not
involving the Company, could have a material adverse effect on our business and
operations. The Company may also be subject to the risk of private party
challenges to the legality of its network marketing system. For example, in
Webster v. Omnitrition International, Inc., 79 F.3d 776 (9th Cir. 1996), the
"multi-level marketing" program of Omnitrition International, Inc. was
challenged in a class action by certain Omnitrition IBAs who alleged that
Omnitrition was operating an illegal "pyramid scheme" in violation of federal
and state laws. The Company believes that its network marketing system satisfies
the standards set forth in the Omnitrition case and other applicable statutes
and case law defining a legal marketing system, in part based upon significant
differences between the Company's marketing system and that described in the
Omnitrition case.
Risk of Internet Changes in Regulation. Various laws and regulations
regarding copyright, excise tax, and other requirements were adopted prior to
the advent of the Internet and related technologies and do not
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address unique issues associated with the Internet and related technologies.
There can be no assurance that the Company's operation will not be adversely
affected by the adoption of such laws or the application of existing laws to the
Internet. Various laws and regulations regarding copyright, excise tax, and
other requirements were adopted prior to the advent of the Internet and related
technologies and do not address unique issues associated with the Internet and
related technologies. There can be no assurance that the Company's operation
will not be adversely affected by the adoption of such laws or the application
of existing laws to the Internet. See "Government Regulation."
Reliance on Suppliers and Key Vendors.. The Company currently acquires
its activiated oxygen, skin care and nutritional supplement products from one
supplier who currently purchases the products from two other suppliers. The loss
of any of these suppliers could have a material adverse effect on the Company's
business and results of operations. See "Suppliers and Key Vendors."
The Company is also dependent on a vendor to satisfy its order
fulfillment requirements and on another vendor to provide computer services. The
loss of either of these two vendors or their inability to fulfill the Company's
future requirements could have a material adverse effect on the Company's
business and results of operations. See "Suppliers and Key Vendors."
Reliance on Merchant Account. The Company's business is heavily
dependent on having a merchant account to accept credit cards since
approximately 80% of its business is currently paid for with credit cards. Due
to relative newness of the Company, the general nature of the network marketing
business, and the fact that most of its credit card transactions are of a
non-swipe nature, the Company is classified as high risk by financial
institutions providing merchant accounts. Since beginning operations in late
1999, the Company believes that it has maintained a satisfactory relationship
with its merchant account provider, Cashgate, Inc. (formerly Trans, Inc.) of San
Francisco, California and its bank, National State Bank of Metropolis, Illinois.
The loss of merchant account privileges could have a material adverse effect on
the Company's business and results of operations. See "Payment."
Competition. The markets for the Company's skin care and nutrition
products are intensely competitive. The Company also competes with other direct
selling organizations. Many of the Company's competitors have much greater name
recognition and financial resources than the Company, which may give them a
competitive advantage. There can be no assurance that the Company's business and
results of operations will not be affected materially by market conditions and
competition in the future. Although the Company distributes certain products it
considers proprietary, it does not currently have patent protection for its
products. In addition, competitors may also introduce products utilizing the
same ingredients as the Company's products. Because of restrictions under
regulatory requirements concerning claims that can be made with respect to
dietary supplements, the Company may have a difficult time differentiating its
products from those of competitors. See "Competition."
Risks Related to Potential Changes in Business Model. The Company
believes that direct sellers will need to adapt their business models to
integrate the Internet into their operations as more and more consumers purchase
goods and services over the Internet instead of through traditional retail and
direct sales channels. The Company cannot assure that it or its IBAs will be
able to adapt to the use of new technology or sales channels or effectively
integrate the Internet into their respective operations. See "Distribution
System."
Potential Effects of Adverse Publicity. The size of the Company's
distribution force and the results of the Company's operations can be
particularly impacted by adverse publicity regarding the Company, or its
competitors, including publicity regarding the legality of network marketing,
the quality of the Company's products and product ingredients or those of its
competitors, regulatory investigations of the Company or the Company's
competitors and their products, IBA actions, and the public's perception of the
Company's IBAs and direct selling businesses generally.
Controls by Existing Debenture Holder. The Company's convertible
debentures payable of $2,000,000 issued during the period August 25, 1999
through March 20, 2000 and held by an individual require the Company to obtain
the debenture holder's prior written consent to (i) declare, order or pay any
dividend (other than dividends payable solely in shares of stock), (ii) redeem
any securities, (iii) adjust the
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salary and benefits for employees that are officers of the Company, (iv) sell
all or substantially all of the assets of the Company, (v) restructure the
Company, including a merger, consolidation, liquidation, recapitalization, or
such other actions (vi) increase or decrease the number of directors of the
Maker, (vii) commence any new business venture, new office, or invest or acquire
any new entity which would require an investment of $25,000 in more in a one
year period, (viii) authorize and/or issue new shares of the Company, (ix) enter
into and approve any agreement or contract for the purchase of goods, services
or other items between the Company, a stockholder, or a member of a
stockholder's immediate family, or (x) enter into a contract for employment or
for a consultant.
Product Liability. The Company may be subject, under applicable laws
and regulations, to liability for loss or injury caused by its products.
Accordingly, the Company maintains a policy covering product liability claims
with a $1,000,000 per claim and $1,000,000 annual aggregate limit and an excess
liability policy with a $1,000,000 per claim and $1,000,000 annual aggregate
limit. Although the Company has not been the subject of product liability
claims, and, if any such claims were to be filed and were to be successful,
there can be no assurance that the Company will be adequately covered by
insurance or have sufficient resources to pay such claims.
Item 2. Description of Property
The Company's principal offices are located at 6501 N.W. Park of
Commerce Boulevard, Suite 205, Boca Raton, Florida 33487. The Company has
entered into a lease agreement with an unrelated third party for this location
of approximately 4,251 square feet of commercial office space. The lease is for
a term of five (5) years, commencing on November 1, 1999 and expiring on October
31, 2004. The Company will pay a base rent, ranging from $5,313.75 per month to
$5,977.25 per month over the term of the lease, along with its pro rata share of
certain common area maintenance, operating expenses, taxes and insurance.
Item 3. Legal Proceedings
None.
Item 4. Submission of Matters to a Vote of Security Holders
None
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's stock has been listed for trading on the OTC Bulletin
Board and trading of the stock commenced on March 28, 2000. In its first day of
trading, the stock traded in the range of $5.00 to $6.75 per share with a
closing bid price of $5.75. As of March 27, 2000, the Company believes that it
had approximately 41 record holders of its common stock.
The Company has never declared or paid any cash dividends on our common
stock. The Company currently expects to retain future earnings, if any, to
finance the growth and development of our business.
Item 6. Management's Discussion and Analysis or Plan of Operation
Read the following discussion together with the information contained
in the Financial Statements and related Notes included elsewhere in this filing.
Operations
The Company had a net loss of $150 for the six months ended June 30,
1999 compared to a net loss of $170 for the twelve months ended December 31,
1998. The Company had no revenues as of June 30, 1999 and
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did not commence operations until late 1999. As reported in the Company's Form
10-QSB for the quarter ended December 31, 1999, the Company had net sales of
$456,244 and a net loss of $362,051 for the six months ended December 31, 1999.
Liquidity and Capital Resources
Funding of the Company's business plan was estimated to be $1-$2
million dollars. The Board of Directors has approved the issuance of convertible
debentures in the principal amount not to exceed $2 million dollars that may be
sold from time to time by the Company to raise start-up capital. As of March 28,
2000, the Company had sold to one accredited investor an aggregate of $2,000,000
in the form of a convertible debenture in a private placement exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act. While no commitments have been received to provide additional
funding inventory and other operating needs for the remainder of the fiscal
year, the Company believes that there are persons or entities that will provide
any needed financing.
Item 7. Financial Statements
Our financial statements are contained in pages F-__ through F-__ as
follows.
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Management
Executive Officers and Directors
The following table sets forth information concerning our executive
officers and directors Members of our Board of Directors will be elected at our
annual meeting of shareholders, and will serve for one year or until their
successors are elected and qualify. Our officers are elected by the Board of
Directors, and their terms of office are at the discretion of the Board of
Directors.
Name Age Position
Stephanie McAnly 56 Director and President
Sonny Spoden 54 Director and Chief Financial Officer
William Wirch 52 Director, Executive Vice President and
Chief Operating Officer
Ms. McAnly has been an officer and director since August 1999.
Stephanie McAnly has served as the Company's President since August 19, 1999.
From July 1998 through August 1999, Ms. McAnly held the position of Director of
Marketing and Training for 1-800-PARTYSHop, Inc., a multilevel marketing company
offering theme party supplies, gifts and accessories. She developed and
implemented the 1-800-PARTYSHop, Inc. national training program, wrote the
policy and training manuals and served as a seminar instructor nationwide. She
was a Master IBA and Corporate Trainer from April 1998 to July 1998 for Premier
Plus, Inc., a multilevel marketing company promoting telecommunications
products, travel packages and golf equipment. And previously, for the period of
October 1995 to April 1998, Ms. McAnly was the Top Money
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Earner and Corporate Trainer for Strategic Telecom Systems, Inc., a multilevel
marketing company promoting telecommunications products. She also served on the
Strategic Telecom President's Advisory Board. From June 1985 through April 1996,
Ms. McAnly was President of the corporation, The Bear Facts, Inc., a childcare
center and preschool educational facility in DeSoto County, Florida. Ms. McAnly
holds both a B.A. in English from the University of Florida and a B.A. in
education from the University of South Florida.
Mr. Spoden has been an officer and director since August 1999. From
January 1996 until May 1999, Mr. Spoden was Chief Financial Officer of Easy
Access International, Inc., a publicly-owned holding company with subsidiaries
engaged in the development, marketing, and distribution of telecommunication
products and services. From 1993 until January 1996, Mr. Spoden was an
independent business and financial advisor in Boca Raton, Florida. From 1969
until 1993, Mr. Spoden was employed by Ernst & Young LLP, and was a general
partner and an accounting and auditing partner for the period 1982 to 1993.
During his career with Ernst & Young LLP, Mr. Spoden was based in the Baltimore,
Maryland office and the National office in New York City (1978 to 1980 and 1988
to 1993). Mr. Spoden received a B. S. with high honors, and a major in finance,
from the University of Maryland in 1969, and has been licensed as a Certified
Public Accountant in three states. For the period 1963 to 1967, Mr. Spoden
served in the U. S. Navy, primarily with the Naval Security Group in Washington,
D.C.
Mr. Wirch was employed as Executive Vice President and Chief Operating
Officer in February 2000 and was appointed to the Board of Directors March 23,
2000. From October 1998 through January 1999, Mr. Wirch was Executive Vice
President and Chief Financial Officer for PetMed Express.com, Inc. (OTC Bulletin
Board: PETS), a mail-order pet pharmacy. For the period 1985 through August
1997, Mr. Wirch held various positions with The Iams Company, including V. P.
International Development of Iams Pet Food International (Europe) and V. P.
Finance and Administration and Chief Financial Officer. For the period 1978
through 1983, Mr. Wirch held various technical and information processing
positions with NCR Corporation. Mr. Wirch was with the U. S. Air Force in 1967.
During the period August 1997 through the present, Mr. Wirch has operated
Rainforest Specialty Cages, Inc., a wholesale IBA of premium cages to the pet
industry, as president and owner. Mr. Wirch received a A.A.S. degree in
accounting from Sinclair Community College (Dayton, Ohio) and a B.B.A. degree in
finance (Summa Cum Laude) from National University (San Diego, California) in
1979.
There are no family relationship between any of the executive officers
and directors. Each director is elected at our annual meeting of shareholders
and holds office until the next annual meeting of shareholders, or until his
successor is elected and qualified.
Compliance with Section 16(a) of the Exchange Act
We were not subject to the reporting requirements of Rule 16a-3(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") during the
six months ended June 30, 1999..
Item 10. Executive Compensation
Cash Compensation
The following table summarizes all compensation recorded by the Company
in each of the last two fiscal years for the Company's Chief Executive Officer
and each other executive officers serving as such whose annual compensation
exceeded $100,000.
<TABLE>
<CAPTION>
Long - Term
Annual Compensation Compensation Awards
---------------------------------------------------------------
Name and Other Annual Restricted Options All Other
Principal Position Year Salary Bonus Compensation Stk Awds SARs(#) LTIP Compen.
- ------------------ ---- ------ --------------------- -------- ------- ---- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Charles B. Pearlman 1998 $0 $0 0 0 0 0
President, Chief 1997 $0 $0 0 0 0 0
Executive Officer,
and Director(1)
</TABLE>
19
<PAGE>
(1) Mr. Pearlman served as our Chief Executive Officer and a director
from our inception in 1995 until August 1999.
OPTION GRANTS IN SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Individual Grants
-----------------
No. of Securities % of Total Options
Underlying Granted to Employees Exercise Expiration
Name Options Granted in Fiscal Year Price Date
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Charles B. Pearlman
President and Director(1) 0 0 0 0
</TABLE>
(1) Mr. Pearlman served as our President and a director from our
inception in 1995 until August 1999.
AGGREGATE OPTION EXERCISES IN SIX MONTHS ENDED JUNE 30, 1999
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
No. of Securities
Underlying Options Value of Unexercised
Shares Options at In-the-Money options at
Acquired on Value June 30, 1999 June 30, 1999
Name Exercise Realized Exercisable Unexercisable Exercisable
Unexercisable
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Charles B. Pearlman
President, Chief
Executive Officer and
Director (1) 0 n/a n/a n/a n/a n/a
</TABLE>
(1) Mr. Pearlman served as our Chief Executive Officer and a director
from our inception in 1995 until August 1999.
1997 Stock Option Plan
Our 1997 Stock Option Plan ("Plan") was adopted by our Board of
Directors and the holders of a majority of our issued and outstanding capital
stock on October 1, 1997, effective as of that date. Under the Plan, we have
reserved an aggregate of 1,000,000 shares of Common Stock for issuance pursuant
to options granted under the Plan ("Plan Options"), of which options to acquire
an aggregate of 325,000 shares have been granted to Ms. McAnly and Messrs.
Spoden and Wirch. The purpose of the Plan is to encourage stock ownership by our
officers, directors and key employees, and to give such persons a greater
personal interest in our success and an added incentive. The Board of Directors
will administer the Plan including, without limitation, the selection of the
persons who will be granted Plan Options under the Plan, the type of Plan
Options to be granted, the number of shares subject to each Plan Option and the
Plan Option price.
20
<PAGE>
Plan Options granted under the Plan may either be options qualifying as
incentive stock options ("Incentive Options") under Section 422 of the Internal
Revenue Code of 1986, as amended, or options that do not so qualify
("Non-Qualified Options"). In addition, the Plan also allows for the inclusion
of a reload option provision ("Reload Option"), which permits an eligible person
to pay the exercise price of the Plan Option with shares of Common Stock owned
by the eligible person, and receive a new Plan Option to purchase shares of
Common Stock equal in number to the tendered shares. Any Incentive Option
granted under the Plan must provide for an exercise price of not less than 100%
of the fair market value of the underlying shares on the date of such grant, but
the exercise price of any Incentive Option granted to an eligible employee
owning more than 10% of the outstanding Common Stock must not be less than 110%
of such fair market value as determined on the date of the grant. The term of
each Plan Option and the manner in which it may be exercised is determined by
the Board of Directors. provided that no Plan Option may be exercisable more
than 10 years after the date of its grant and, in the case of an Incentive
Option granted to an eligible employee owning more than 10% of the Common Stock,
no more than five years after the date of the grant.
The Plan provides that, if our outstanding shares are increased,
decreased, exchanged or otherwise adjusted due to a share dividend, forward or
reverse share split, recapitalization, reorganization, merger, consolidation,
combination or exchange of shares, an appropriate and proportionate adjustment
shall be made in the number or kind of shares subject to the Plan or subject to
unexercised Plan Options and in the purchase price per share under such Plan
Options. Any adjustment, however, does not change the total purchase price
payable for the shares subject to outstanding Plan Options. In the event of our
proposed dissolution or liquidation, a proposed sale of all or substantially all
of our assets, a merger or tender offer for our shares of Common Stock, the
Board of Directors may declare that each Option granted under this Plan shall
terminate as of a date to be fixed by the Board of Directors; provided that not
less than 30 days written notice of the date so fixed shall be given to each
Eligible Person holding an Option, and each such Eligible Person shall have the
right, during the period of 30 days proceeding such termination, to exercise his
Option as to all or any part of the shares, including shares of stock as to
which such Option would not otherwise be exercisable.
The Plan provides that the Plan Options granted thereunder shall be
exercisable from time to time in whole or in part, unless otherwise specified in
the agreement representing the Plan Options or by the Board of Directors. Each
Plan Option may be exercised in whole or in part at any time during the period
from the date of the grant until the end of the period covered by the Plan
Option period. The Plan provides that, with respect to Incentive Stock Options,
the aggregate fair market value (determined as of the time the option is
granted) of the shares of Common Stock, with respect to which Incentive Stock
Options are first exercisable by any option holder during any calendar year
(including all of our incentive stock option plans or any parent or any
subsidiary which are qualified under Section 422 of the Internal Revenue Code of
1986) shall not exceed $100,000.
All Plan Options are nonassignable and nontransferable, except by will
or by the laws of descent and distribution, and during the lifetime of the
optionee, may be exercised only by such optionee. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not our employee but is a member of the Board of
Directors and his service as a director is terminated for any reason, other than
death or disability, the Plan Option granted to him shall lapse to the extent
unexercised on the earlier of the expiration date or 30 days following the date
of termination, except options of William Wirch expire the earlier of the
expiration date or one year following the date of termination. If the optionee
dies during the term of his employment, the Plan Option granted to him shall
lapse to the extent unexercised on the earlier of the expiration date of the
Plan Option or the date one year following the date of the optionee's death. If
the optionee is permanently and totally disabled within the meaning of Section
22(c)(3) of the Internal Revenue Code of 1986, the Plan Option granted to him
lapses to the extent unexercised on the earlier of the expiration date of the
option or one year following the date of such disability.
21
<PAGE>
The Board of Directors may amend, suspend or terminate the Plan at any
time. However, no such action may prejudice the rights of any optionee who has
prior thereto been granted options under this Plan. Further, no amendment to
this Plan which has the effect of (a) increasing the aggregate number of shares
subject to the Plan (except for adjustments due to changes in our
capitalization), or (b) changing the definition of "Eligible Person" under this
Plan, may be effective unless and until approved by our stockholders in the same
manner as approval of the Plan was required. Any such termination of the Plan
shall not affect the validity of any Plan Options previously granted thereunder.
Unless the Plan shall theretofore have been suspended or terminated by the Board
of Directors, the Plan shall terminate on October 1, 2007.
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of March 28, 2000, there are 4,759,400 shares of our Common Stock
issued and outstanding. There are no shares of preferred stock currently issued
and outstanding, and the outstanding options are not presently exercisable. The
following table sets forth, as of the close of business on March 28, 2000, (a)
the name, address and number of shares of each person known by us to be the
beneficial owner of more than five percent of our Common Stock; and (b) the
number of shares of our Common Stock owned by each officer and director, and all
officers and directors as a group, together with their respective percentage
holdings of such shares. Unless otherwise indicated, the address for each person
is 6501 N.W. Park of Commerce Boulevard, Suite 205, Boca Raton, Florida 33487.
<TABLE>
<CAPTION>
Name and Amount of Percentage
Address of Beneficial of
Beneficial Owner(1) Ownership of Stock Class
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Stephanie McAnly(2) 33,333 *
Sonny Spoden(3) 25,000 *
William Wirch(4) 50,000 1.1%
Nico Pronk, Sr. (5) 400,000 8.4%
Beverly Sassoon
International, LLC(6) 900,000 18.8%
All Executive Officers
and Directors as a Group
(three people)(2)(3)(4) 108,333 2.3%
</TABLE>
* less than one percent
(1) Pursuant to Rule 13-d-3 under the Exchange Act, beneficial ownership of a
security consists of sole or shared voting power (including the power to vote or
direct the voting) and/or sole or shared investment power (including the power
to dispose or direct the disposition) with respect to a security whether through
a contract, arrangement, understanding, relationship or otherwise. Unless
otherwise indicated, each person indicated has sole power to vote, or dispose or
direct the disposition of all shares beneficially owned, subject to applicable
unity property laws.
(2) Includes 33,333 shares issuable upon exercise of options granted under the
Company's 1997 Stock Option Plan exercisable for five (5) years at an exercise
price of $2.50 per share. Does not include 66,667 shares issuable upon exercise
of options which shall be vest at a rate of 25,000 options on each August 19,
2001 and August 19, 2002 under the Company's 1997 Stock Option Plan which
options will be exercisable for five (5) years at an exercise price equal $2.50
per share upon vesting at 33,333 shares on August 19, 2000 and 33,334 shares on
August 19, 2001. Does not include 100,000 shares under options which may be
granted and exercisable for five years at an exercise price equal to the then
fair market value of the stock at the date of the grant upon vesting 50,000
shares on August 19, 2001 and 50,000 shares on August 19, 2002.
22
<PAGE>
(3) Includes 25,000 shares issuable upon exercise of options granted under the
Company's 1997 Stock Option Plan exercisable for five (5) years at an exercise
price of $2.50 per share. Does not include 50,000 shares issuable upon exercise
of options which vest at a rate of 25,000 options on each August 19, 2001 and
August 19, 2002 under the Company's 1997 Stock Option Plan which options will be
exercisable for five (5) years at an exercise price equal to $2.50 per share
upon vesting at 25,000 shares on August 19, 2000 and 25,000 shares on August 19,
2001, Does not include 50,000 shares under options which may be granted and
exercisable for five years at an exercise price equal to the then fair market
value of the stock at the date of the grant upon vesting 25,000 shares on August
19, 2001 and 25,000 shares on August 19, 2002.
(4) Includes 50,000 shares issuable upon exercise of options granted under the
Company's Stock Option Plan exercisable for five (5) years at an exercise price
of $2.50 per share. Does not include 100,000 shares issuable upon exercise of
options which shall vest at a rate of 50,000 options on each February 13, 2001
and February 13, 2002 under the Company's 1997 Stock Option Plan which options
will be exercisable for five (5) years at an exercise price of $2.50 per share
upon vesting at 50,000 shares on February 13, 2001 and 50,000 shares on February
13, 2001. Does not include 150,000 shares under options which may be granted and
exercisable for five years at an exercise price equal to the then fair market
value of the stock at the date of the grant upon vesting 75,000 shares on
February 13, 2002 and 75,000 shares on February 13, 2003.
(5) Nico Pronk, Sr. is the holder of convertible debentures in the face amount
of $2,000,000 and convertible into common stock at $5.00 per share. Mr. Pronk's
address is Mr. Nico Pronk, Sr., % 1801 Clint Moore Road, Suite 110, Boca Raton,
Florida 33487.
(6) Beverly Sassoon International, LLC. is a Florida limited liability company
whose principal place of business is P.O. Box 267145, Weston, FL 33326-7145.
Beverly Sassoon, Elan Sassoon and Paul Lambert are the managing members and
control persons of Beverly Sassoon International, LLC. Does not include options
to purchase 4,850,000 shares of our Common Stock, at an exercise price of $.001
per share, which are held by the following individuals and entity:
<TABLE>
<CAPTION>
Holder No. of Shares Underlying Option
------ -------------------------------
<S> <C>
Summer Camp West Limited
Partnership (1) 2,250,000
Romana DOD Limited Partnership (2) 2,000,000
Capital Distributors, LLC (3) 600,000
</TABLE>
(1) On August 19, 1999, options to purchase these shares were
issued to Beverly Sassoon which she subsequently transferred
to Summer Camp West Limited Partnership, a Georgia limited
partnership controlled by Beverly Sassoon.
(2) On August 19, 1999, options to purchase these shares were
issued to Elan Sassoon which he subsequently transferred to
Romana DOD Limited Partnership, a Georgia limited partnership
controlled by Elan Sassoon.
(3) Capital Distributions, LLC is a Florida limited liability
company controlled by Beverly Sassoon and Elan Sassoon.
Item 12. Certain Relationships and Related Transactions
None.
Item 13. Exhibits and Reports on Form 8-K
The following documents are filed as a part of this report or are
incorporated by reference to previous filings, if so indicated:
(a) Exhibits
EXHIBIT NO. DESCRIPTION
10(a) Employment Agreement dated as of February 13, 2000
by and between International Cosmetics Marketing Co.
and William Wirch
(b) Reports on Form 8-K
None.
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
AUDITED FINANCIAL STATEMENTS
For the Six Months Ended June 30, 1999 and 1998
and the Period From July 14, 1995 (Date of Inception) to June 30, 1999
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
CONTENTS
--------
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
- ----------------------------
FINANCIAL STATEMENTS
- --------------------
BALANCE SHEETS F-2
STATEMENTS OF OPERATIONS F-3
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY F-4
STATEMENTS OF CASH FLOWS F-5
NOTES TO FINANCIAL STATEMENTS F-6-13
- -----------------------------
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholders of INTERNATIONAL COSMETICS MARKETING CO.
We have audited the accompanying balance sheet of International Cosmetics
Marketing Co. (a development stage company) as of June 30, 1999 and December 31,
1998 and the related statements of operations, changes in stockholders' equity,
and cash flows for the six months ended June 30, 1999 and 1998 and the period
from July 14, 1995 (date of inception) to June 30, 1999. 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.
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 International Cosmetics
Marketing Co.(a development stage company) as of 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 1998 and for the period from July 14, 1995 (date of
inception) to June 30, 1999 in conformity with generally accepted accounting
principles.
/s/ LONDON WITTE & COMPANY, P.A.
- --------------------------------
LONDON WITTE & COMPANY, P.A.
Certified Public Accountants
February 22, 2000, except for Note 8,
As to which the date is March 14, 2000
F-1
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
June 30, 1999 and December 31, 1998
A S S E T S
June 30, December 31,
1999 1998
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 450 $ 240
Deferred offering costs 9,340 0
-------- ---------
TOTAL CURRENT ASSETS 9,790 240
-------- ---------
TOTAL ASSETS $ 9,790 $ 240
======== =========
L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES
Accrued expenses $ 9,340 $ 0
-------- ---------
TOTAL CURRENT LIABILITIES 9,340 0
-------- ---------
STOCKHOLDERS' EQUITY
Common stock, par value $.001 per share;
25,000,000 shares authorized; 7,450,000
shares issued and outstanding 7,450 7,442
Preferred stock, par value $.001 per share;
5,000,000 shares authorized; no shares
issued and outstanding 0 0
Additional paid-in capital 1,116 764
Deficit accumulated during the development
stage (8,116) (7,966)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY 450 240
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,790 $ 240
======== =========
</TABLE>
See accompanying notes to financial statements and independent auditors' report.
F-2
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 1999 and 1998
and the Period From July 14, 1995 (Date of Inception) to June 30, 1999
INCEPTION
TO
June 30, June 30, June 30,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
REVENUES $ 0 $ 0 $ 0
OPERATING EXPENSES:
General and administrative 150 150 8,116
----------- ----------- -----------
NET LOSS BEFORE INCOME TAXES (150) (150) (8,116)
INCOME TAX EXPENSE (BENEFIT) 0 0 0
----------- ----------- -----------
NET LOSS $ (150) $ (150) $ (8,116)
=========== =========== ===========
NET LOSS PER SHARE - BASIC (0.000020) (0.000020)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING:
Basic 7,450,000 7,431,200
=========== ===========
</TABLE>
See accompanying notes to financial statements and independent auditors' report.
F-3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Six Months Ended June 30, 1999 and 1998
and the Period From July 14, 1995 (Date of Inception) to June 30, 1999
COMMON STOCK AND TOTAL
CAPITAL IN EXCESS ACCUMULATED STOCKHOLDERS'
SHARES OF PAR VALUE DEFICIT EQUITY
------ ------------ ------- ------
<S> <C> <C> <C> <C>
BALANCES AT JULY 14, 1995 0 $ 0 $ 0 $ 0
Issuance of common stock
for organizational costs 7,431,200 7,431 0 7,431
Contribution of capital 0 200 0 200
Net Loss 0 0 (7,631) (7,631)
---------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1996 7,431,200 7,631 (7,631) 0
Contribution of capital 0 165 0 165
Net Loss 0 0 (165) (165)
---------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1997 7,431,200 7,796 (7,796) 0
Issuance of common stock
at $.025 per share 10,400 260 0 260
Contribution of capital 0 150 0 150
Net Loss 0 0 (170) (170)
---------- --------- --------- ---------
BALANCES AT JUNE 30, 1998 7,441,600 8,206 (7,966) 240
Net Loss 0 0 0 0
---------- --------- --------- ---------
BALANCES AT DECEMBER 31, 1998 7,441,600 8,206 (7,966) 240
Issuance of common stock
at $.025 per share 8,400 210 0 210
Contribution of capital 0 150 0 150
Net Loss 0 0 (150) (150)
---------- --------- --------- ---------
BALANCES AT JUNE 30, 1999 7,450,000 $ 8,566 $ (8,116) $ 450
========== ========= ========= =========
</TABLE>
See accompanying notes to financial statements and independent auditors' report.
F-4
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998
and the Period From July 14, 1995 (Date of Inception) to June 30, 1999
INCEPTION
TO
June 30, June 30, June 30,
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (150) $ (150) $(8,116)
------- ------- -------
Adjustments to reconcile net
loss to net cash used by
operating activities:
Changes in operating assets and liabilities:
Deferred offerring costs (9,490) 0 (9,490)
Accrued expenses 9,490 0 9,490
------- ------- -------
Net cash used by operating activities (150) (150) (8,116)
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used by investing activities 0 0 0
------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contribution of capital 150 150 665
Proceeds from common stock issuance 210 0 7,901
------- ------- -------
Net cash provided by financing
activities 360 150 8,566
------- ------- -------
NET INCREASE (DECREASE) IN CASH 210 0 450
CASH AND EQUIVALENTS, BEGINNING 240 0 0
------- ------- -------
CASH AND EQUIVALENTS, ENDING $ 450 $ 0 $ 450
======= ======= =======
</TABLE>
See accompanying notes to financial statements and independent auditors' report.
F-5
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Nature of Operations
International Cosmetics Marketing Co. (formerly CindyCo, Inc.) is a Florida
corporation formed on July 14, 1995. The Company is in the development stage and
has no operating history. The subsistence of the Company is dependent upon
sufficient proceeds being raised through financing or capital contributions. The
Company intends to develop, market and distribute a broad range of consumer
products in the areas of skin care and cosmetic, nutrition and human wellness
products, various apparel and other goods. During December 1999, the Company
began operations.
Basis of Presentation
The Company prepares its financial statements on the accrual basis of
accounting, recognizing income when earned and expenses when incurred.
Fiscal Year Change
On November 29, 1999, the Board of Directors retroactively approved a change in
the Company's fiscal year end from December 31 to June 30. These audited
financial statements are for the six-month transition period ended June 30,
1999, and the comparative financial statements are for the six months ended June
30, 1998.
Cash and Cash Equivalents
For purposes of these financial statements, the Company considers all
unrestricted highly liquid investments with original maturities of three months
or less to be cash equivalents. Cash equivalents are carried at cost, which
approximates market value.
Income Taxes
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 provides a valuation allowance against deferred tax assets if, based
on the weight of evidence available, it
F-6
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
- ------------------------------------------------------------
Income Taxes (cont'd)
is more likely than not that some or all of the deferred tax assets will not be
realized.
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.
Loss Per Share
Basic net income (loss) per common share is computed by dividing net income
(loss) available to common stockholders by the weighted average number of common
shares outstanding for the period. Diluted income (loss) 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 (loss) by
the weighted average number of common shares and all dilutive securities
outstanding. No dilutive securities existed as of the balance sheet dates.
NOTE 2 - COMMON AND PREFERRED STOCK
- -----------------------------------
Common Stock
The Company is authorized to issue 25,000,000 shares of common stock with a per
share par value of $.001. On July 14, 1995, the Board of Directors authorized
the issuance of 7,431,200 common shares in exchange for organizational services
valued at $7,431.20. Subsequent to the balance sheet date, as a part of the
transactions described in Note 6, 4,000,000 of these shares were returned to and
canceled by the Company.
Between October 1998 and February 1999, the Company sold 18,800 shares of common
stock to various individuals pursuant to Rule 506 of Regulation D of the
Securities Act at $.025 per share, for a total of $470. In January 2000, the
Company cancelled these shares.
F-7
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 2 - COMMON AND PREFERRED STOCK (cont'd)
- --------------------------------------------
Common Stock (cont'd)
Each share of common stock entitles its owner to one vote. The common shares
carry no preemptive rights and are not redeemable. Cumulative voting is not
permitted.
Preferred Stock
The Company has authorized the issuance of 5,000,000 shares of preferred stock
with a par value of $.001 per share, bearing such voting, dividend, conversion,
liquidation and other rights and preferences as the Board of Directors may
determine. No shares of preferred stock have been issued.
NOTE 3 - STOCK OPTION PLAN
- --------------------------
On October 1, 1997, the Board of Directors and shareholders approved a stock
option plan entitled the "1997 Stock Option Plan" (the "plan"). Under the plan,
the Company has reserved an aggregate of 1,000,000 shares of common stock for
issuance pursuant to options granted under the plan. The Stock Options Committee
of the Board of Directors of the Company will administer the plan. Options
granted under the plan may either be options qualifying as incentive stock
options under Section 422 of the Internal Revenue Code of 1986, as amended, or
non-qualified options. The term and recipient of each option granted under the
plan, and the manner in which it may be exercised, will be determined by the
Board of Directors or the Stock Option Committee. No plan options have been
granted as of June 30, 1999.
NOTE 4 - DEFERRED TAXES
- -----------------------
Under current tax law, all start up costs must be amortized over a period of not
less than 60 months, starting with the month in which business commences. As of
June 30, 1999, the amount of start up costs was $9,340. Since operations have
not commenced as of June 30, 1999, these costs are a non-amortizable asset for
income tax reporting purposes. Based on the evidence available, the Company has
provided a valuation allowance to offset any deferred tax asset arising from the
future tax benefits from the amortization of its start up costs.
F-8
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 5 - LEASES
- ---------------
On November 1, 1999, the Company entered into a lease agreement with an
unrelated third party to rent approximately 4,251 square feet of commercial
office space at 6501 N.W. Park of Commerce Boulevard, Suite 205, Boca Raton,
Florida for its principal offices. The lease is for a term of 5 years,
commencing on November 1, 1999 and expiring on October 31, 2004. The Company
will pay a $50,000 security deposit, to be paid $10,000 at lease execution and
$40,000 prior to occupancy. The Company will pay a base rent, ranging from
$5,313.75 per month to $5,977.25 per month over the term of the lease, along
with it's pro rata share of certain common area maintenance, operating expenses,
taxes and insurance.
Minimum Future Lease Payments
2000 $ 42,510
2001 63,765
2002 65,465
2003 67,084
2004 70,807
2005 23,909
--------
Total $333,540
========
NOTE 6 - NON-MONETARY TRANSACTIONS
- ----------------------------------
Certain founders of the Company performed organizational services and incurred
certain costs during the initial formation of the Company. On July 14, 1995, the
Board of Directors authorized the issuance of an aggregate of 7,431,200 shares
of common stock for these services, 4,000,000 of which were subsequently
returned to the Company for cancellation in connection with the transactions
described in Note 8.
NOTE 7 - RELATED PARTY TRANSACTIONS
- -----------------------------------
Refer to Note 6, which describes the issuance of founder shares of the Company's
common stock for organizational services. No other related party transactions
occurred during the period of these financial statements.
F-9
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 8 - SUBSEQUENT EVENTS
- --------------------------
On August 19, 1999, the Company entered into an Exclusive License Agreement with
Beverly Sassoon International, LLC, Ms. Beverly Sassoon and Mr. Elan Sassoon.
The agreement granted the Company the following rights: 1) an exclusive license
to utilize Ms. Sassoon's name and likeness with the manufacturing, promotion and
sale of certain products, 2) an exclusive license to utilize Mr. Sassoon's name
and likeness with the manufacturing, promotion and sale of certain products, 3)
an exclusive, worldwide license to manufacture, market and distribute certain
skin care products developed by Beverly Sassoon International, LLC, and 4) upon
the expiration of certain existing licenses granted by Ms. Sassoon to third
parties related to the use of her name and likeness in the marketing and
promotion of pet care and slimming products, the exclusive license to utilize
Ms. Sassoon's name and likeness with regards to these types of products. The
term of this Exclusive License Agreement is 99 years, with a 99 year renewal at
the Company's option.
The Company will retain full control over the manufacturing, development and
marketing of the Company's products. Also, Ms. Sassoon and Mr. Sassoon, through
Beverly Sassoon International, LLC, will consult with the Company in connection
with product development and marketing. As consideration for the rights granted
under this agreement, Beverly Sassoon International, LLC will receive a payment
of $150,000 and an aggregate of up to $50,000 of payments for certain expenses
and 900,000 shares of the Company's common stock.
The Company will pay future royalty payments equal to the greater of 2% of gross
revenues from sales of any products which are marketed or distributed under the
terms of the Exclusive License Agreement, or $25,000 per month. These royalty
payments will end if Summer Camp West Limited Partnership, a Georgia limited
partnership controlled by Beverly Sassoon, Romana DOD Limited Partnership, a
Georgia limited partnership controlled by Elan Sassoon and/or Capital
Distributors, LLC, a Florida limited liability company controlled by Beverly
Sassoon and Elan Sassoon exercise certain options to purchase 4,850,000 shares
of the Company's common stock. The options are exercisable for a period of two
years commencing on the earlier of August 19, 2001 or the 18th month anniversary
of the date the Company's securities are first traded on the Nasdaq Stock Market
in
F-10
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 8 - SUBSEQUENT EVENTS (cont'd)
- -----------------------------------
the following quantities: 1) 2,250,000 shares for Summer Camp West Limited
Partnership, 2) 2,000,000 shares for Romana DOD Limited Partnership, 3) 600,000
shares for Capital Distributors, LLC.
As stated above in Note 2 and Note 6, subsequent to the balance sheet date,
certain founders returned 4,000,000 shares of the Company's common stock to the
Company for cancellation.
Subsequent to the above referenced transactions, the Company issued a total of
400,000 shares of the Company's common stock to consultants for future services
and 28,200 shares to counsel for the Company for legal services rendered.
The 400,000 shares of stock issued to consultants were issued pursuant to
consulting agreements with Hatteras Investment Company and Viking Holding
Company, which were entered into in September 1999. The Company agreed to issue
200,000 shares of common stock to each consultant as compensation for future
services. The consultants will provide advice to and consult with the Company
relating to management, network marketing, strategic planning, corporate
organization and structure, recruiting experienced personnel and financial
matters relating to the Company's general sales, marketing and operations.
The term of the agreement with Hatteras Investment Company is for 18 months from
the date of the agreement and may be extended for an additional 18 months
subsequent to the original term upon the mutual agreement of both parties.
Shares of stock issued as compensation for this agreement are subject to
termination and cancellation in the event that within 18 months after this
agreement the Company has not attained sales in excess of $10,000,000 and the
Company does not have at least 10,000 distributors.
The term of the agreement with Viking Holding Company is for 12 months from the
date of the agreement and may be renewed subsequent to the original term for an
additional 12 months upon the written mutual consent of both parties. Shares of
stock issued as compensation for this agreement are subject to termination and
cancellation in the event that within 12 months after this agreement the Company
has not attained sales in excess of $5,000,000 and the Company does not have at
least 5,000 distributors.
F-11
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 8 - SUBSEQUENT EVENTS (cont'd)
- -----------------------------------
In August 1999, the Company changed its name from CindyCo, Inc. to International
Cosmetics Marketing Co. At the same time, the original officer and director
resigned, and the Company's current officers and directors were elected to their
current positions.
On August 19, 1999, the Company entered into an Employment Agreement with its
President for a term of three years. The agreement provides for a base salary
with increases based on sales volume. The Company has granted the Employee,
subject to certain vesting provisions, 100,000 options to purchase shares of the
Company's common stock at an exercise price of $2.50 per share under the 1997
Stock Option Plan discussed in Note 3. The options are exercisable for a period
of five years from the date of vesting, subject to continued employment with the
Company. The Employee may also be granted an additional 100,000 options to
purchase, subject to certain restrictions, shares of the Company's common stock
at fair market value at the date of the grant.
On August 19, 1999, the Company also entered into an Employment Agreement with
its Chief Financial Officer for a term of three years. The Company has granted
the Employee, subject to certain vesting provisions, 75,000 options to purchase
shares of the Company's common stock at an exercise price of $2.50 per share
under the 1997 Stock Option Plan discussed in Note 3. The options are
exercisable for a period of five years from the date of vesting, subject to
continued employment with the Company. The Employee may also be granted an
additional 60,000 options to purchase, subject to certain restrictions, shares
of the Company's common stock at fair market value at the date of the grant.
On February 13, 2000, the Company entered into an Employment Agreement with its
Vice-president\Chief Operating Officer for a term of three years. The Company
has granted the Employee, subject to certain vesting provisions, 150,000 options
to purchase shares of the Company's common stock at an exercise price of $2.50
per share under the 1997 Stock Option Plan discussed in Note 3. The options are
exercisable for a period of five years from the date of vesting, subject to
continued employment with the Company. The Employee may also be granted an
additional 150,000 options to purchase, subject to certain restrictions, shares
F-12
<PAGE>
INTERNATIONAL COSMETICS MARKETING CO.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
June 30, 1999 and 1998
NOTE 8 - SUBSEQUENT EVENTS (cont'd)
- -----------------------------------
of the Company's common stock at fair market value at the date of the grant.
In August 1999, The Board of Directors authorized and approved the private
offering of up to $2,000,000 principal amount of 0% convertible debentures to
finance its business plan. Each debenture issued is due and payable in full
three years from the date of issuance and is convertible into shares of the
Company's common stock at a conversion price of $5.00 per share, subject to
adjustment in certain circumstances. As of March 14, 2000, $1,950,000 of
debentures had been sold.
In January 2000, the Company cancelled 18,800 shares previously issued under
Rule 506.
F-13
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
as of the _____ day of ________, 2000 (the "Effective Date"), between
International Cosmetics Marketing, Inc., a Florida corporation, whose principal
place of business is 6501 N.W. Park of Commerce Blvd., Suite 205, Boca Raton, FL
33487 and any of its successors or affiliated companies (collectively, the
"Company") and William Wirch, an individual whose address is 10274 Trailwood
Lane, Jupiter, FL 33478 (the "Employee").
RECITALS
WHEREAS, the Company is a Florida corporation and is principally
engaged in the business of marketing, distributing and selling consumer products
(the "Business").
WHEREAS, the Company desires to employ the Employee and the Employee
desires to enter into the employ of the Company.
WHEREAS, the Company has established a valuable reputation and goodwill
in its business, with expertise in all aspects of the Business.
WHEREAS, the Employee, by virtue of the Employee's employment with the
Company, will become familiar with and possessed with the manner, methods, trade
secrets and other confidential information pertaining to the Company's Business,
including the Company's client base and product sources and pricing.
NOW, THEREFORE, in consideration of the mutual agreements herein made,
the Company and the Employee do hereby agree as follows:
1. Recitals. The above recitals are true, correct, and are herein
incorporated by reference.
2. Employment. The Company hereby employs the Employee, and the
Employee hereby accepts employment, upon the terms and conditions hereinafter
set forth.
3. Authority and Power During Employment Period.
a. Duties and Responsibilities. During the term of this Agreement,
the Employee shall serve as Executive Vice President and Chief Operating Officer
of the Company and shall have such responsibilities and duties as are
customarily undertaken by individuals in similar positions as are requested by
the Company's Board of Directors.
1
<PAGE>
b. Time Devoted. Throughout the Term of the Agreement, the Employee
shall devote substantially all of the Employee's business time and attention to
the business and affairs of the Company consistent with the Employee's position
with the Company, except for reasonable vacations and except for illness or
incapacity.
4. Term. The Term of employment hereunder will commence on the
Effective Date as set forth above and end three (3) years from the Effective
Date, unless this Agreement shall have been earlier terminated pursuant to
Section 6 of this Agreement.
5. Compensation and Benefits.
a. Salary. The Employee shall be paid a base salary, payable in
accordance with the Company's policies from time to time for salaried employees,
at the rate of Ninety-Six Thousand Dollars ($96,000) per annum for the first
year, which salary for the second and third year shall be mutually determined by
the parties no later than 90 days prior to the expiration of the first and
second year, respectively.
b. Options. The Employee is granted 150,000 options (the "Options")
to purchase shares of the Company's Common Stock at an exercise price of $2.50
per share. Such Options are granted under the Company's 1997 Stock Option Plan
and pursuant to the form of Option attached hereto as Exhibit A and incorporated
herein by such reference. The Options shall be exercisable for a five (5) year
period from the date of vesting and shall vest, subject to continued employment
of the Employee, (A) 50,000 Options on the date of this Agreement, (B) 50,000
Options one year following the date of this Agreement, and (C) 50,000 Options
two years following the date of this Agreement.
In the event of (i) a sale of all or substantially all of the assets
of the Company; or (ii) a merger, stock exchange or other form of business
combination (the "Business Combination"), the result of which being that the
shareholders of the Company will own, after consummation of such Business
Combination, less than 49% of the then outstanding voting securities of the
Company, then, in such event, on the effective date of either the sale of all or
substantially all of the Company's assets or a Business Combination, all Options
not theretofore vested shall immediately vest and become exercisable.
c. Additional Options.
i. The Employee shall be granted up to 150,000 Options to
purchase shares of the Company's Common Stock at the Fair
Market Value (as hereinafter defined) of the Company's
Common Stock on the trading day immediately preceding the
date of grant. Such Options will be granted under the
Company's 1997 Stock Option Plan and pursuant to the form
2
<PAGE>
of Option attached hereto as Exhibit A and incorporated
herein by such reference. The Options shall be granted and
immediately exercisable for a five (5) year period from the
date of grant, subject to continued employment of the
Employee as follows: (a) 75,000 Option two years following
the date of this Agreement; and (b) 75,000 Options three
years following the date of this Agreement.
ii. For the purposes of this Agreement, "Fair Market Value"
shall be equal to the closing bid price of the Company's
Common Stock as reported on the OTC Bulletin Board or the
primary exchange on which the Company's Common Stock shall
be quoted.
d. Employee Benefits. The Employee shall be entitled to participate
in all benefit programs of the Company currently existing or hereafter made
available to salaried employees including, but not limited to, stock option
plans, pension and other retirement plans, group life insurance,
hospitalization, surgical and major medical coverage, sick leave, salary
continuation, vacation and holidays, long-term disability, and other fringe
benefits.
e. Vacation. During each fiscal year of the Company, the Employee
shall be entitled to such amount of vacation as determined by the Board of
Directors of the Company consistent with the Employee's position and length of
service to the Company.
6. Consequences of Termination of Employment.
a. Disability. In the event of the Employee's disability, the
Employee shall be entitled to compensation in accordance with the Company's
disability compensation practice for its salaried employees. "Disability," for
the purposes of this Agreement, shall be deemed to have occurred in the event
(A) the Employee is unable by reason of sickness or accident, to perform his
duties under this Agreement for an aggregate of 90 days in any 12-month period
or 45 consecutive days, or (B) the Employee has a guardian of the person or
estate appointed by a court of competent jurisdiction. Termination due to
disability shall be deemed to have occurred upon the first day of the month
following the determination of disability as defined in the preceding sentence.
b. Termination by the Company for Cause.
i. Nothing herein shall prevent the Company from terminating the
Employee for "Cause," as hereinafter defined. The Employee shall continue to
receive salary only for the period ending with the date of such termination as
provided in this Section 6(b). Any rights and benefits the Employee may have in
respect of any other compensation shall be
3
<PAGE>
determined in accordance with the terms of such other compensation arrangements
or such plans or programs.
ii. "Cause" shall mean (A) committing or participating in an
injurious act of fraud, gross neglect, misrepresentation, embezzlement or
dishonesty against the Company; (B) committing or participating in any other
injurious act or omission wantonly, willfully, recklessly or in a manner which
was grossly negligent against the Company, monetarily or otherwise; (C) engaging
in a criminal enterprise involving moral turpitude; (D) an act or acts (1)
constituting a felony under the laws of the United States or any state thereof;
or (2) if applicable, loss of any state or federal license required for the
Employee to perform the Employee's material duties or responsibilities for the
Company; or (E) any assignment of this Agreement by the Employee in violation of
Section 13 of this Agreement.
iii. Notwithstanding anything else contained in this Agreement,
this Agreement will not be deemed to have been terminated for Cause unless and
until there shall have been delivered to the Employee a notice of termination
stating that the Employee committed one of the types of conduct described in
(ii) above. Notwithstanding, anything contained herein to the contrary, this
Agreement may be terminated (i) at any time upon the mutual written consent of
the Company and the Employee; or (ii) by either party giving 30 days' prior
written notice to the other party. During such 30 day period, the Employee shall
continue to perform the Employee's duties pursuant to this Agreement, and the
Company shall continue to compensate the Employee in accordance with this
Agreement.
c. Death. In the event of the death of the Employee during the
Term of the Agreement, compensation shall be paid to the Employee's designated
beneficiary, or, in the absence of such designation, to the estate or other
legal representative of the Employee for a period of thirty (30) days from and
after the date of death. Other death benefits will be determined in accordance
with the terms of the Company's benefit programs and plans.
7. Covenant Not to Compete and Non-Disclosure of Information.
a Covenant Not to Compete. The Employee acknowledges and
recognizes the highly competitive nature of the Company's Business and the
goodwill, continued patronage, and specifically the names and addresses of the
Company's Clients and the Company's Sources (as hereinafter defined) constitute
a substantial asset of the Company having been acquired through considerable
time, money and effort. Accordingly, in consideration of the execution of this
Agreement, the Employee agrees to the following:
i. That during the Restricted Period (as hereinafter
defined) and within the Restricted Area (as hereinafter defined), the Employee
will not, individually or in conjunction with others, directly or indirectly,
engage in any Business Activities (as hereinafter defined), whether as an
officer, director, proprietor, employer, partner, independent contractor,
investor
4
<PAGE>
(other than as a holder solely as an investment of less than one percent (1%) of
the outstanding capital stock of a publicly traded corporation), consultant,
advisor, agent or otherwise.
ii. That during the Restricted Period and within the
Restricted Area, the Employee will not, directly or indirectly, compete with the
Company by soliciting, inducing or influencing any of the Company's Clients
which have a business relationship with the Company at the time during the
Restricted Period to discontinue or reduce the extent of such relationship with
the Company.
iii. That during the Restricted Period and within the
Restricted Area, the Employee will not (A) directly or indirectly recruit,
solicit or otherwise influence any employee or agent of the Company to
discontinue such employment or agency relationship with the Company, or (B)
employ or seek to employ, or cause or permit any business which competes
directly or indirectly with the Business Activities of the Company (the
"Competitive Business") to employ or seek to employ for any Competitive Business
employs or seeks to employ such person) employed by the Company.
iv. That during the Restricted Period the Employee will
not interfere with, or disrupt or attempt to disrupt any past, present or
prospective relationship, contractual or otherwise, between the Company and any
supplier, customer, employee or agent of the Company.
b. Non-Disclosure of Information. The Employee acknowledges
that the Company's trade secrets, private or secret processes, methods and
ideas, as they exist from time to time, customer lists and information
concerning the Company's products, Company Sources, services, training methods,
development, technical information, marketing activities and procedures, credit
and financial data concerning the Company and/or the Company's Clients and the
Company's Sources (the "Proprietary Information") are valuable, special and
unique assets of the Company, access to and knowledge of which are essential to
the performance of the Employee hereunder. In light of the highly competitive
nature of the industry in which the Company's Business is conducted, the
Employee agrees that all Proprietary Information, heretofore or in the future
obtained by the Employee as a result of the Employee's association with the
Company shall be considered confidential.
In recognition of this fact, the Employee agrees that the Employee,
during the Restricted Period, will not use or disclose any of such Proprietary
Information for the Employee's own purposes or for the benefit of any person or
other entity or organization (except the Company) under any circumstances unless
such Proprietary Information has been publicly disclosed generally or, unless
upon written advice of legal counsel reasonably satisfactory to the Company, the
Employee is legally required to disclose such Proprietary Information. Documents
(as hereinafter defined) prepared by the Employee or that come into the
Employee's possession during the Employee's association with the Company are and
remain the property of the Company, and when
5
<PAGE>
this Agreement terminates, such Documents shall be returned to the Company at
the Company's principal place of business, as provided in the Notices provision
(Section 9) of this Agreement.
c. Documents. "Documents" shall mean all original written,
recorded, or graphic matters whatsoever, and any and all copies thereof
including, but not limited to: papers; email; books; records; tangible things;
correspondence; communications; telex messages; memoranda; work-papers; reports;
affidavits; statements; summaries; analyses; evaluations; client records and
information; agreements; agendas; advertisements; instructions; charges;
manuals; brochures; publications; directories; industry lists; schedules; price
lists; client lists; statistical records; training manuals; computer printouts;
books of account, records and invoices reflecting business operations; all
things similar to any of the foregoing however denominated. In all cases where
originals are not available, the term "Documents" shall also mean identical
copies of original documents or non-identical copies thereof.
d. Company's Clients. The "Company's Clients" shall be deemed
to be any persons, partnerships, corporations, professional associations or
other organizations for whom the Company has performed Business Activities.
e. Company's Sources. The "Company's Sources" shall be deemed
to be any person, partnership, corporation, professional association or other
organization from whom the Company has, before and during the term of this
Agreement, directly or indirectly purchased products from time to time.
f. Restrictive Period. The "Restrictive Period" shall be deemed
to be eighteen (18) months following termination or expiration of this
Agreement.
g. Restricted Area. The Restricted Area shall be deemed to mean
within Broward County, Dade County, Monroe County and Palm Beach County, Florida
and within any other county of any state in which the Company is providing
service at the time of termination.
h. Business Activities. "Business Activities" shall be deemed
to include the Business, any business activities concerning marketing,
distributing and selling skin care, nutritional and other consumer products
provided by the Company and any additional activities which the Company or any
of its affiliates may engage in during the term of this Agreement.
h. Covenants as Essential Elements of this Agreement. It is
understood by and between the parties hereto that the foregoing covenants
contained in Sections 7a and 7b are essential elements of this Agreement, and
that but for the agreement by the Employee to comply with such covenants, the
Company would not have agreed to enter into this Agreement. Such covenants by
the Employee shall be construed to be agreements independent of any other
provisions of this Agreement. The existence of any other claim or cause of
action, whether predicated on any other provision in this Agreement, or
otherwise, as a result of the relationship
6
<PAGE>
between the parties shall not constitute a defense to the enforcement of such
covenants against the Employee.
i. Survival After Termination of Agreement. Notwithstanding
anything to the contrary contained in this Agreement, the covenants in Sections
7a and 7b shall survive the termination of this Agreement and the Employee's
employment with the Company.
j. Remedies.
i. The Employee acknowledges and agrees that the Company's
remedy at law for a breach or threatened breach of any of the provisions of
Section 7a or 7b herein would be inadequate and the breach shall be per se
deemed as causing irreparable harm to the Company. In recognition of this fact,
in the event of a breach or threatened breach by the Employee of any of the
provisions of Section 7a or 7b, the Employee agrees that, in addition to any
remedy at law available to the Company, including, but not limited to monetary
damages, all rights of the Employee to payment or otherwise under this Agreement
and all amounts then or thereafter due to the Employee from the Company under
this Agreement may be terminated and the Company, without posting any bond,
shall be entitled to obtain, and the Employee agrees not to oppose the Company's
request for equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available to the Company.
ii. The Employee acknowledges that the granting of a
temporary injunction, temporary restraining order or permanent injunction merely
prohibiting the use of Proprietary Information would not be an adequate remedy
upon breach or threatened breach of Section 7a or 7b and consequently agrees,
upon proof of any such breach, to the granting of injunctive relief prohibiting
any form of competition with the Company. Nothing herein contained shall be
construed as prohibiting the Company from pursuing any other remedies available
to it for such breach or threatened breach.
8. Withholding. Anything to the contrary notwithstanding, all
payments required to be made by the Company hereunder to the Employee or the
Employee's estate or beneficiaries shall be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions as the Company may
reasonably determine, the Company may accept other arrangements pursuant to
which it is satisfied that such tax and other payroll obligations will be
satisfied in a manner complying with applicable law or regulation.
9. Notices. Any notice required or permitted to be given under
the terms of this Agreement shall be sufficient if in writing and if sent
postage prepaid by registered or certified mail, return receipt requested; by
overnight delivery; by courier; or by confirmed telecopy, in the case of the
Employee to the Employee's last place of business or residence as shown on the
7
<PAGE>
records of the Company, or in the case of the Company to its principal office as
set forth in the first paragraph of this Agreement, or at such other place as it
may designate.
10. Waiver. Unless agreed in writing, the failure of either
party, at any time, to require performance by the other of any provisions
hereunder shall not affect its right thereafter to enforce the same, nor shall a
waiver by either party of any breach of any provision hereof be taken or held to
be a waiver of any other preceding or succeeding breach of any term or provision
of this Agreement. No extension of time for the performance of any obligation or
act shall be deemed to be an extension of time for the performance of any other
obligation or act hereunder.
11. Completeness and Modification. This Agreement constitutes
the entire understanding between the parties hereto superseding all prior and
contemporaneous agreements or understandings among the parties hereto concerning
the Employment Agreement. This Agreement may be amended, modified, superseded or
canceled, and any of the terms, covenants, representations, warranties or
conditions hereof may be waived, only by a written instrument executed by the
parties or, in the case of a waiver, by the party to be charged.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which shall
constitute but one agreement.
13. Binding Effect/Assignment. This Agreement shall be binding
upon the parties hereto, their heirs, legal representatives, successors and
assigns. This Agreement shall not be assignable by the Employee but shall be
assignable by the Company in connection with the sale, transfer or other
disposition of its business or to any of the Company's affiliates controlled by
or under common control with the Company.
14. Governing Law. This Agreement shall become valid when
executed and accepted by Company. The parties agree that it shall be deemed made
and entered into in the State of Florida and shall be governed and construed
under and in accordance with the laws of the State of Florida. Anything in this
Agreement to the contrary notwithstanding, the Employee shall conduct the
Employee's business in a lawful manner and faithfully comply with applicable
laws or regulations of the state, city or other political subdivision in which
the Employee is located.
15. Further Assurances. All parties hereto shall execute and
deliver such other instruments and do such other acts as may be necessary to
carry out the intent and purposes of this Agreement.
16. Headings. The headings of the sections are for convenience
only and shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
8
<PAGE>
17. Survival. Any termination of this Agreement shall not,
however, affect the ongoing provisions of this Agreement which shall survive
such termination in accordance with their terms.
18. Severability. The invalidity or unenforceability, in whole
or in part, of any covenant, promise or undertaking, or any section, subsection,
paragraph, sentence, clause, phrase or word or of any provision of this
Agreement shall not affect the validity or enforceability of the remaining
portions thereof.
19. Enforcement. Should it become necessary for any party to
institute legal action to enforce the terms and conditions of this Agreement,
the successful party will be awarded reasonable attorneys' fees at all trial and
appellate levels, expenses and costs.
20. Venue. Company and Employee acknowledge and agree that the
U.S. District for the Southern District of Florida, or if such court lacks
jurisdiction, the 17th Judicial Circuit (or its successor) in and for Broward
County, Florida, shall be the venue and exclusive proper forum in which to
adjudicate any case or controversy arising either, directly or indirectly, under
or in connection with this Agreement and the parties further agree that, in the
event of litigation arising out of or in connection with this Agreement in these
courts, they will not contest or challenge the jurisdiction or venue of these
courts.
21. Construction. This Agreement shall be construed within the
fair meaning of each of its terms and not against the party drafting the
document.
22. Independent Legal Counsel. The parties have either (i)
been represented by independent legal counsel in connection with the negotiation
and execution of this Agreement, or (ii) each has had the opportunity to obtain
independent legal counsel, has been advised that it is in their best interests
to do so, and by execution of this Agreement has waived such right.
THE EMPLOYEE ACKNOWLEDGES THAT THE EMPLOYEE HAS READ ALL OF THE TERMS OF THIS
AGREEMENT, UNDERSTANDS THE AGREEMENT, AND AGREES TO ABIDE BY ITS TERMS AND
CONDITIONS.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, International Cosmetics Marketing Co. has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
International Cosmetics Marketing Co.
By: /s/ Stephanie McAnly
---------------------------
Stephanie McAnly, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Stephanie McAnly Director and President March 28, 2000
- -----------------------------
Stephanie McAnly
/s/ Sonny Spoden Director, Chief Financial Officer
- ----------------------------- and Principal Accounting Officer March 28, 2000
Sonny Spoden
/s/ William Wirch Director and Chief Operating
- ---------------------------- Officer March 28, 2000
William Wirch
</TABLE>
