U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _______ to _______
BEAUTYMERCHANT.COM, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3422912
(State or other jurisdiction of (IRS Employer identification No.)
incorporation or organization)
4818 W. Commercial Blvd., Ft. Lauderdale, Florida 33319
(Address of principal executive offices)
(954) 717-8680
(Issuer's telephone number)
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 [ ]
Number of shares of common stock outstanding as of
November 1, 2000: 11,685,065
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
---------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
As of September 30, 2000 & December 31, 1999
ASSETS (Unaudited)
----------------------------
September 30, 2000 December 31, 1999
<S> <C> <C>
CURRENT ASSETS
----------------------------
Cash . . . . . . . . . . . . $ 92,550 111,428
Marketable Securities. . . . 20,000 --
Prepaid Expenses . . . . . . 103,768 391,121
Inventory. . . . . . . . . . 5,742 4,542
Shareholder Loan Receivable. 7,892 7,892
Accounts Receivable. . . . . 17,310 5,385
-------------------- ------------------
TOTAL CURRENT ASSETS . . . 247,262 520,368
PROPERTY AND EQUIPMENT
----------------------------
Furniture. . . . . . . . . . 6,521 6,521
Leasehold improvements . . . 2,000 2,000
Equipment. . . . . . . . . . 32,186 30,620
Accumulated depreciation. . (31,394) (28,544)
-------------------- ------------------
NET PROPERTY AND EQUIPMENT 9,313 10,597
OTHER ASSETS
----------------------------
Deposits . . . . . . . . . . 3,700 3,700
-------------------- ------------------
TOTAL OTHER ASSETS . . . . 3,700 3,700
-------------------- ------------------
TOTAL ASSETS . . . . . . $ 260,275 534,665
==================== ==================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (CONTINUED)
---------------------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
As of September 30, 2000 & December 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
---------------------------------------------
(Unaudited)
September 30, 2000 December 31, 1999
<S> <C> <C>
CURRENT LIABILITIES
---------------------------------------------
Accounts payable and accrued expenses . . . . 3,844 4,930
Current portion of capitalized
lease obligation. . . . . . . . . . . . . . . 1,942 2,182
-------------------- ------------------
TOTAL CURRENT LIABILITIES . . . . . . . . . 5,786 7,112
LONG-TERM DEBT
---------------------------------------------
Capitalized lease obligation. . . . . . . . . 3,310 4,945
---------------------------------------------
STOCKHOLDERS' EQUITY
---------------------------------------------
Common stock. . . . . . . . . . . . . . . . . 11,092 9,706
($.001, par value,100,000,000
authorized- 11,092,065 and 9,706,000
issued and outstanding at September 30,
2000 & December 31, 1999, respectively)
Common stock subscribed($.001,
par value, 593,000 and 3,473,000
subscribed at September 30, 2000 & December
31, 1999, respectively at $.22 per share). . 593 3,473
Convertible preferred stock ($.001
par value, 50,000,000 authorized-
1,000,000 shares issued and outstanding) . . 1,000 1,000
Common stock subscriptions
receivable. . . . . . . . . . . . . . . . . . (130,599) (671,637)
Additional paid-in-capital. . . . . . . . . . 1,157,139 1,413,046
Retained deficit. . . . . . . . . . . . . . . (779,546) (232,980)
Unrealized holding loss
on available-for-sale securities . . . . . . (8,500) --
-------------------- ------------------
TOTAL STOCKHOLDERS'EQUITY . . . . . . . . . . 251,179 522,608
-------------------- ------------------
$ 260,275 534,665
==================== ==================
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
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<PAGE>
--------
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
-------------------------------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
For the Three and Nine Months Ended September 30, 2000 & 1999
Three Three Nine Nine
Months Ended Months Ended Months Ended Months Ended
Sept.30, 1999 Sept. 30, 2000 Sept. 30, 1999 Sept. 30,2000
<S> <C> <C> <C> <C>
REVENUE
--------------------------------
Sales . . . . . . . . . . . . . $ 96,586 $ 105,930 $ 329,062 $ 290,084
Cost of Sales . . . . . . . . . (54,740) (64,343) (184,554) (192,380)
--------------- ---------------- ---------------- ---------------
GROSS PROFIT . . . . . . . . . . 41,846 41,587 144,508 97,704
EXPENSES
--------------------------------
Advertising . . . . . . . . . . $ 29,503 $ 21,439 $ 71,457 $ 97,687
Auto Expenses . . . . . . . . . 1,272 1,940 2,544 5,756
Bad Debt. . . . . . . . . . . . -- 5,736 -- 5,736
Depreciation. . . . . . . . . . 775 950 2,075 2,850
Dues & Fees . . . . . . . . . . 565 -- 2,665 --
Employee Benefits . . . . . . . 3,748 -- 5,321 --
Employee Leasing/Salaries . . . 22,292 98,488 52,744 307,656
Equipment Leasing . . . . . . . 531 -- 1,973 --
Insurance . . . . . . . . . . . -- 7,200 -- 18,405
Miscellaneous Expense . . . . . -- -- 234 661
Office Expenses . . . . . . . . 6,747 8,422 22,716 24,046
Professional Fees . . . . . . . 7,179 25,350 27,703 91,566
Public Trading. . . . . . . . . 975 7,400 8,775 37,365
Rent. . . . . . . . . . . . . . 8,353 6,942 19,299 23,518
Supplies. . . . . . . . . . . . 2,502 72 7,534 1,262
Taxes & Licenses. . . . . . . . -- 62 195 1,036
Training. . . . . . . . . . . . 3,385 -- 3,385 --
Utilities . . . . . . . . . . . 850 402 1,444 1,162
Web Development . . . . . . . . -- 4,564 -- 24,786
--------------- ---------------- ---------------- ---------------
TOTAL EXPENSES . . . . . . . . 88,677 188,967 230,064 643,492
--------------- ---------------- ---------------- ---------------
OPERATING LOSS . . . . . . . . (46,831) (147,380) (85,556) (545,787)
Interest Expense. . . . . . . (260) (260) (881) (780)
Interest Income . . . . . . . -- -- 17,197 --
Deferred Tax Benefit. . . . . 7,064 -- 10,735 --
--------------- ---------------- ---------------- ---------------
NET LOSS . . . . . . . . . . . $ (40,027) $ (147,640) $ (58,505) $ (546,567)
OTHER COMPREHENSIVE
INCOME (LOSS):
Unrealized loss on available-
for-sale securities. . . . . $ -- $ (8,500) $ -- $ (8,500)
COMPREHENSIVE LOSS . . . . . . $ (40,027) $ (156,140) $ (58,505) $ (555,067)
Net Loss Per Share-
Basic and fully diluted. . . . . $ ** $ (.01) $ ** $ (.045)
=============== ================ ================ ===============
Weighted Average Shares. . . . . 12,816,604 12,189,044 12,116,985 12,170,044
=============== ================ ================ ===============
</TABLE>
** Less than $ 0.01
-----------------------
See Accompanying Notes to Consolidated Financial Statements
-----------------------------------------------------------
<PAGE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
-------------------------------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
For the Nine Months Ended September 30, 2000 & 1999
September 30,
1999 2000
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
------------------------------------------
Net Loss . . . . . . . . . . . . . . . . $ (58,505) $(555,067)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation . . . . . . . . . . . . . . 2,075 2,850
Deferred income taxes. . . . . . . . . . (10,735) --
Common stock issued for services . . . . . -- 103,818
Unrealized loss on marketable securities . -- 8,500
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . (4,885) (11,925)
Interest receivable . . . . . . . . . . (17,197) --
Inventory . . . . . . . . . . . . . . . -- (1,200)
Prepaid rent. . . . . . . . . . . . . . . (1,782) --
Prepaid opening expenses. . . . . . . . (7,375) --
Other prepaid expenses. . . . . . . . . . -- 287,353
Decrease in operating
liabilities:
Accounts payable & accrued expenses . . (7,060) (1,086)
-------------------- ----------
NET CASH USED IN
OPERATING ACTIVITIES . . . . . . . . . (105,464) (166,757)
-------------------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
------------------------------------------
Expenditures for property and equipment. (9,295) (1,566)
Deposits paid under lease. . . . . . . . (1,000) --
-------------------- ----------
NET CASH USED IN
INVESTING ACTIVITIES . . . . . . . . . (10,295) (1,566)
-------------------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
------------------------------------------
Common stock issuances . . . . . . . . . 193,095 151,320
Principal repayments under capital lease (1,875) (1,875)
Shareholder loans repayments . . . . . . (39,487) --
Excess of outstanding checks over
bank balance . . . . . . . . . . . . . . (11,366) --
-------------------- ----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES . . . . . . . . . . 140,367 149,445
-------------------- ----------
NET INCREASE (DECREASE)IN CASH
AND CASH EQUIVALENTS . . . . . . . . . . $ 24,608 $ (18,878)
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS-CONT.(Unaudited)
------------------------------------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
For the Nine Months Ended September 30, 2000 &1999
September 30,
1999 2000
<S> <C> <C>
Cash and cash equivalents,
beginning of period . . . . . . . . . . . . . . . . . $ 4,164 $ 111,428
-------------- ---------
CASH AND CASH EQUIVALENTS
END OF PERIOD . . . . . . . . . . . . . . . . . . $ 28,772 $ 92,550
============== =========
Supplementary cash flow disclosure:
Income taxes paid . . . . . . . . . . . . . . . . $ -- $ --
Cash paid for interest. . . . . . . . . . . . . . 881 780
============== =========
Non-cash financing activities:
Common stock issued for services:
$ -- $ 103,818
Common stock exchanged for marketable securities:
$ -- $ 28,500
Common stock subscriptions retired during period:
$ -- $361,301*
============== =========
</TABLE>
*Represents 1,642,279 shares retired of common stock subscribed at $.22.
See Accompanying Notes to Consolidated Financial Statements
-----------------------------------------------------------
<PAGE>
--------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
BEAUTYMERCHANT.COM, INC. & SUBSIDIARIES
September 30, 2000 (UNAUDITED)
ITEM 1.
--------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
In the opinion of management, the unaudited condensed consolidated financial
statements contain all adjustments consisting only of normal recurring accruals
considered necessary to present fairly the Company's financial position at
September 30, 2000, the results of operations for the three and nine month
periods ended September 30, 2000 and 1999, and cash flows for the nine months
ended September 30, 2000 and 1999. The results for the period ended September
30, 2000, are not necessarily indicative of the results to be expected for the
entire fiscal year ending December 31, 2000.
NOTE 2 - EARNINGS (LOSS) PER SHARE
The following represents the calculation of earnings (loss) per share:
<TABLE>
<CAPTION>
Three Three Nine Nine
Months Ended Months Ended Months Ended Months Ended
BASIC & FULLY DILUTED* Sept.30, 1999 Sept.30, 2000 Sept.30, 1999 Sept.30,2000
------------------------------- ------------------ --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net Loss. . . . . . . . . . . . $ (40,027) $ (156,140) $ (58,505) $ (555,067)
Less- preferred stock dividends -- -- -- --
------------- ------------- ------------- ------------
Net Loss. . . . . . . . . . . . $ (40,027) $ (156,140) $ (58,505) $ (555,067)
Weighted average number
Of common shares. . . . . . . . 12,816,604 12,189,044 12,116,985 12,170,044
------------- ------------ ------------- ------------
Basic & Fully Diluted*
loss per share. . . . . . . . . $ ** $ (.01) $ ** $ (.045)
================== =============== =============== ===============
</TABLE>
* The Company had no common stock equivalents during the periods presented
** Less than $(0.01)
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
--------
With the exception of historical facts stated herein, the matters discussed in
this report are "forward looking" statements that involve risks and
uncertainties that could cause actual results to differ materially from
projected results. Such "forward looking" statements include, but are not
necessarily limited to, statements regarding anticipated levels of future
revenues and earnings from operations of the Company. Readers of this report are
cautioned not to put undue reliance on "forward looking" statements, which are,
by their nature, uncertain as reliable indicators of future performance. The
Company disclaims any intent or obligation to publicly update these "forward
looking" statements, whether as a result of new information, future events, or
otherwise. In addition the uncertainties include, but are not limited to
competitive conditions involving E-commerce, and the sales of cosmetics, beauty
and fragrance products over the Internet.
General Description of Business
----------------------------------
CLEANING EXPRESS USA.CLEANING EXPRESS USA. The Company's operations primarily
involve home cleaning services. Through its emphasis on budget pricing, the
Company has developed a market in the home cleaning industry. The Company
currently operates two offices and dispatches 40-50 workers in teams of two
workers on a daily basis. The present geographic area in which the Company
operates includes Broward and South Palm Beach County areas of South Florida.
Marketing for the home cleaning services is accomplished through print ads,
television and radio commercials. Additionally, the Company utilizes a referral
program that rewards customers with future discounts for referring a client.
The home cleaning industry is highly competitive with respect to price, service,
quality and location. There are numerous, well-established, larger competitors
in the home cleaning industry possessing substantially greater financial,
marketing, personnel and other resources than the Company. There can be no
assurance that the Company will be able to respond to various competitive
factors affecting the business. The Company plans to gain a competitive
advantage over its competitors in the home cleaning industry by offering quality
service at a low price. The Company has been successful in achieving this goal
since 1996 and plans to further expand in South Florida by continuing its
current marketing strategy.
The primary market for Cleaning Express USA is individual households. No single
customer makes up more than ten percent of the total revenues of Cleaning
Express USA. The Company does not expect that this will change in the future.
<PAGE>
The Company has three full time employees and contracts with 40-50 workers that
are each independently contracted with the Company to service and provide home
cleaning services to existing and new customers.
BEAUTYMERCHANT.COM, INC.BEAUTYMAX.COM, INC. During January 2000, the Company,
through its wholly owned subsidiary Beautymerchant.com, Inc., a Florida
corporation, developed a retail cosmetic and beauty product e-commerce Internet
site. Beautymerchant.com was developed under the guidance of the CEO, Mr. Ed
Roth, who has served as a management consultant for beauty salons from
1978-1988. During this time, he became familiar with retail cosmetics, hair, and
skin products through attending various trade shows and studying consumer trends
concerning their retailing. The site is designed to create a marketing and
distribution area for cosmetic, hair, nail and skin care and general beauty
lines on a discounted basis. Beautymerchant.com sells and distributes popular
cosmetic, fragrances and beauty products, primarily to females in the 18-40 age
bracket. Additionally, a department will be developed that focuses on the
cosmetic and beauty needs of individuals from a variety of ethnic backgrounds
and skin color. Products, development and resources in this area will be focused
on filling the needs of the African-American community with further expansion to
additional ethnic groups planned for the future.
The Company will attempt to develop the Beautymerchant.com concept, "We sell
beauty for less", and will strive to provide the best prices available.
Currently, the Company is carrying a catalogue format, offering brand name
cosmetics and toiletries, totaling over 8,000 products, with new product lines
being added as web traffic increases. The Company maintains a floating
inventory of Products through its distributors, which is stored at the
distributors location as product sourcing eliminates the need for a costly
extended inventory. Generally, the Company does not purchase the products until
the consumer makes an online purchase. All customer orders are implemented by
online credit card or cyber cash systems with a virtual shopping cart. The
Company offers a secure shopping environment, partnering with Verio and
Mercantec systems for secure credit card transactions and easy to use ordering.
Visitors to the online store are able to shop 24 hours a day, regardless of
location, and will be able to shop and order in English, Spanish, or French.
Beauty products are marketed over the World Wide Web via the Internet. The
Company has agreed to a marketing alliance with MSN.com to advertise on their
portal by means of banner ads and site affiliations. Webcast1 Inc. will provide
links and banner impressions to Beautymerchant.com. The Company also has
entered an agreement with Webcast1 Inc. of Boca Raton, Florida to host the site.
The Company also developed and marketed a 30 second T.V. spot to promote brand
awareness. Other marketing strategies are presently being explored.
<PAGE>
In addition, the Company plans to use in-house marketing and advertising to
promote its products. Advertising is expected to increase leading into the
fourth quarter of 2000.
During the first three quarters, the Company has continually focused on the
development and maintenance of the site. In addition to a remodeling, the
Company has added several new features to the 'virtual store front.' The site
now has a new 'look and feel' in order to better promote the Company's products,
and additional categories have been added.
Beautymerchant.co.uk in England is being planned and developed. At this time, no
opening date has been announced. Beautymerchant.de is also being planned to open
in Germany. However, no opening date has been announced. The Company has
obtained and registered exclusive domain rights in the respective countries. The
Company expects to begin contracting and negotiating with European distributors
during the Year 2000. The company has established worldwide customer service
capabilities with toll free numbers that are converted into E-mail on a daily
basis for prompt response to customer issues. The Company is actively seeking
partners and strategic alliances to help achieve its goal of becoming an online
women's shopping destination.
BEAUTYWORKS U.S.A., INC. Also during the third quarter the Company announced
that it had expanded its business development into a prototype store offering
beauty retailing and beauty services hair styling, and nail services at
affordable pricing. Two retail 'brick and mortar' stores are expected to be
debut in the South Florida area.
The Company has retained the services of Neal Realty and Development of Fort
Lauderdale, Florida to search for shopping center locations. The Company
believes this exciting concept of offering Beauty Merchant products in
conjunction with its salon operation will enhance our Internet E-commerce store,
BeautyMerchant.com. The Company intends on cross-marketing the concepts.
Initial plans are for a prototype store in Broward County, Florida, as soon as
appropriate locations are selected. Las Vegas, Nevada is also being considered
for a second development market for Beautyworks U.S.A., Inc.
<PAGE>
Strategic Alliances
--------------------
In September, 2000, the company entered into a strategic alliance with Network
Commerce Inc. NASDAQ(NWKC), a leading provider of systems and services for the
Internet. Beautymerchant.com will provide product access for NWKC's company
Ubarter.com and their members at full retail price. The company will receive
advertising and marketing opportunities in radio, television and online
promotion. Beautymerchant.com expects to utilize up to $1,000,000 of media on an
annual basis.
The online beauty supply industry is highly competitive with respect to price,
service, quality and Internet marketing. As a result, the potential for failure
in this industry is significant. There are numerous, well-established, larger
competitors in the online beauty supply industry with comprehensive web sites,
possessing substantially greater financial, marketing, personnel and other
resources than the Company. There can be no assurance that the Company will be
able to respond to various competitive factors affecting the business. The
Company plans to gain a competitive advantage over its competitors in online
beauty products industry by offering a variety of quality products at a low
price, directly to the consumer. This will be achieved by working directly with
wholesalers, enabling the Company to get and pass on to the customer the best
prices in the online market. The Company also plans to gain an advantage over
the competition by providing access to the web site in English, French and
Spanish. The Company hopes that this will successfully increase its market
appeal and presence with a wide variety of cultures and communities.
Business Strategy
The Company's objective is to become a leading e-commerce retailer and to
enhance and brand itself as an online shopping destination for beauty products,
fragrances and accessories. The company is building a customer base and
expanding its electronic commerce expertise, while offering consumers
considerable discounts on name-brand beauty products and cosmetics. The category
market for fragrances alone is estimated at $20 billion.
The Company believes that the sale of cosmetics, accessories and hair care
products will offer benefits to customers by providing convenient, competitive
pricing. In addition, customers entering Beautymerchant.com may purchase gift
certificates, browse and search for favorite beauty and cosmetic products and
participate in special promotions. The Company expects to promote brand loyalty
and repeat purchases by providing a positive experience that encourages
customers to return frequently.
<PAGE>
Browsing and Searching
Beautymerchant.com allows its customers to interactively search and browse more
than 8,500 name brand products. The Company has created a "featured brands"
section allowing customers to explore the brand names we offer. Also, an
extended category list allows customers to search for their favorite products by
category. New products are expected to be added weekly.
Secure Credit Card Payment
Beautymerchant.com utilizes secure software through Bank One Inc. a third party
cybercash platform for e-commerce transactions, providing encrypted personal
information, including credit card numbers, names and addresses.
Fulfillment and Availability
All of the Company's products are shipped within 24 hours from distributor
partners. Some products are available within 3-7 days. Others are generally
available within 4-6 weeks. Some back order cosmetics and fragrances may not be
available at all. The Company uses e-mail to notify customers of order
conditions. The Company seeks to provide rapid and reliable fulfillment of
customer orders.
Technology
The Company recently formed an alliance with Webcast1 Inc. of Boca Raton,
Florida, a leading host and web designer, they will be providing web hosting
through Rapid Site/Verio. The Company recently switched its site host due to
continued technical problems and issues. In addition, the E-commerce store has
been completely upgraded with 'state-of-the-art' features. This arrangement will
provide the Company with '24/7' support.
Products and Geographic Expansion
The Company began retail operations in early 2000, and will attempt to expand
product sales on a continual basis. The Company has made significant
improvements over the first quarter.
Affiliate Program
The Company intends to increase market presence through its affiliate program.
A recent agreement was entered into with Commission Junction of Santa Barbara,
California to manage the program. Commission Junction has acquired over 2,700
affiliates through the third quarter.
<PAGE>
Customer Service
The Company believes its ability to establish long-term relationships with its
customers will encourage repeat sales. The Company offers a toll free customer
service telephone number, and encourages e-mail inquiries for customer care 24
hours a day.
Additional Risk Factor
Beautymerchant.com, a Florida corporation, has a limited operating history.
Having just started its retailing operation in the year 2000, the Company has a
short operating history upon which to evaluate its business and prospects. As a
new e-commerce company, Beautymerchant.com faces intense competitors, and must
manage growth effectively. The Company may not succeed in addressing all
challenges and risks, including unpredictability of future revenues. To be
successful, Beautymerchant.com plans to implement the following:
1. Retain existing customers.
2. Attract new customers.
3. Meet customer demands.
4. Fulfill all customer orders.
5. Acquire additional sources for merchandise at discounted prices.
6. Maintain sufficient website traffic.
7. Increase our Internet exposure.
8. Monitor the competition.
(Competition in the Internet and online market will intensify. This increased
competition may reduce our profit margins or market share.)
9. Limit service interruptions.
(Customer access to our website affects the volume of orders. Excessive system
interruptions make our e-commerce store unavailable.
The principal suppliers to Beautymerchant.com are wholesale distributors, who do
not sell retail.
The Beautymerchant.com in-house staff is projected to add 2-5 new employees for
the first 12 months of retail operations. These new employees will be managed by
the three employees that are presently on staff. During the first quarter the
company hired an in-house web developer and designer who regularly updates and
maintains the site.
<PAGE>
Factors contributing to the Quarterly Performance Fluctuations
a) Costs relating to promotion and expansion of E-commerce site.
b) Competitors
c) Online user shopping habits.
d) The ability to attract visitors to Beautymerchant.com, and convert them
to shoppers.
Since the Company's inception, it has incurred losses from operations. The
Company anticipates losses to increase relating to the following factors:
* The development of the Beautymerchant.com brand, marketing and promotion.
* Expanded product offering and increased categories of products.
* Continued website development costs.
* Additional personnel to manage customer service and in-house
marketing.
* Increases in general and administrative costs to support the Company's
growing operations.
The ability to become profitable, depends on the ability to generate higher
revenues and maintain low expense levels. The Company's limited operating
history makes it difficult to forecast its revenues.
Stock Based Compensation
Several key officers and management have elected to be compensated with stock by
S-8 registration. This has provided substantial cash savings.
Additional Financing
The Company may need to raise additional funds to meet operating requirements in
the future. If the Company raises additional funds through issuance of equity
related or debt securities, such securities may have rights to the Company's
common stock, such as warrants or options. Shareholders may experience
additional dilution from exercise of these equity instruments. The Company
cannot be certain that additional financing will be available when required or
at all.
<PAGE>
RESULTS OF OPERATIONS
-----------------------
Net Income
The Company had a net loss of $(156,140), or $(.01) per common share, for the
three months ended September 30, 2000, versus a net loss of $(40,027), or
$(.001) for the same period ended September 30, 1999. The net loss for the nine
months ended September 30, 2000 was $(555,067), or $(.045) per share, versus a
net loss of $(58,505) or $(.001) per share for the nine months ended September
30, 1999. The change in net loss was primarily due to an increase in
administrative expenses relating to the operation and marketing of the
BeautyMerchant.com online superstore.
Sales
Revenues increased $9,344 or 10% to $105,930 for the three months ended
September 30, 2000 as compared with $96,586 for the three months ended September
30, 1999. For the nine months ended September 30, 2000 revenues decreased
$38,978 or 12% as compared with $290,084 for the nine months ended September 30,
2000. The decrease was primarily due to seasonal fluctuations in demand for the
Company's home cleaning services. Average selling prices and gross margins
remained fairly constant.
Expenses
Selling, General, and Administrative expenses for the three months ended
September 30, 2000 increased $100,290 to $188,967. Selling, General, and
Administrative expenses for the nine months ended September 30, 2000 increased
$413,428 to $643,492. In comparison with the nine month period ended September
30, 1999, web development & professional expenses increased $24,786 and $63,863
respectively due to the Company's commencing and operating of the
BeautyMerchant.com virtual online superstore.
Personnel expenses increased $254,912 due primarily to new stock-based personnel
contracts for managers of the BeautyMechant.com online store. Additionally,
public trading expenses increased $28,590 to $37,365 for the nine months ended
September 30, 2000 as compared with $8,775 for the same period in 1999. The
increase was primarily attributable to the initiation of new investor relations
programs.
<PAGE>
Liquidity and Capital Resources
On September 30, 2000, the Company had cash of $92,550 and working capital of
$241,476. This compares with cash of $28,772 and working capital of $51,590 at
September 30, 1999. The increase in working capital was due to an increase in
accounts receivable and prepaid expenses, offset by a decrease in accounts
payable and an increase in cash from proceeds of common stock sales.
Net cash used in operating activities was $166,757 for the nine months ended
September 30, 2000 as compared with net cash used in operating activities of
$105,464 for the period ended September 30, 1999.
Net cash used in investing activities was $1,566 for the nine months ended
September 30, 2000 as compared with cash used in operating activities of $10,295
for the period ended September 30, 1999. Net cash used in investing activities
was primarily from fixed asset purchases during both periods.
Net cash provided by financing activities totaled $149,445 for the nine months
ended September 30, 2000 as compared with net cash provided by financing
activities of $140,367 for the nine months ended September 30, 1999. The
increase in net cash provided by financing activities was primarily due to the
collection of subscribed common stock in the amount of $151,320, which the
Company received from the issuance of approximately 687,818 common shares. The
Company intends to use the funds toward promoting the BeautyMerchant.com
subsidiary.
As of September 30, 2000, the Company is due $130,599 for subscriptions to its
common stock by unrelated investors. The Company is currently attempting to
collect this remaining outstanding balance from the unrelated investors.
However, there can be no assurance that the amount will be collected in full.
Failure to receive these subscriptions or other financing could have a material,
adverse effect on the Company's future operations.
PART II. OTHER INFORMATION
---------
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities
During the quarter ended September 30, 2000, the Company issued 300 shares of
its common stock as compensation to an administrative employee.
<PAGE>
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
27.1 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BEAUTYMERCHANT.COM, INC.
(Registrant)
Date: November 1, 2000 ------------------------
/S/Michael J. Bongiovanni
Chief Financial Officer
<PAGE>
