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EX-31.1 - BONAMOUR, INC.boni10qex311033113.htm
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q
(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended
March 31, 2013
 
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from
 
to
 

Commission File No.
000-53186

BONAMOUR, INC.
(Exact name of registrant as specified in its charter)

Colorado
 
37-1441050
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

5910 N. Central Expressway, Suite 900, Dallas, Texas
75206-5141
(Address of principal executive offices)
(Zip Code)

(214) 855-0808
(Registrant’s telephone number, including area code)

 
(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  x  No  ¨
 
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨                                                                                     Accelerated filer  ¨

Non-accelerated filer ¨                                                                           Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨  No x

The number of shares outstanding of the Registrant’s Common Stock as of May 9, 2013 was 199,500,000.
 
 
 
 

 

TABLE OF CONTENTS
 
     
   
Page
   
PART I –FINANCIAL INFORMATION
1
ITEM 1.
FINANCIAL STATEMENTS
1
 
Condensed Balance Sheets as of March 31, 2013 (Unaudited) and December 31, 2012 (Audited)
1
 
Condensed Statements of Operations for the Three Months Ended March 31, 2013 and 2012 (Unaudited)
2
 
Condensed Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2012 (Unaudited)
3
 
Notes to Condensed Financial Statements
4
ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
6
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
8
ITEM 4.
CONTROLS AND PROCEDURES
8
     
PART II – OTHER INFORMATION
8
ITEM 1.
LEGAL PROCEEDINGS
8
ITEM 1A.
RISK FACTORS
9
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
9
ITEM 3.
DEFAULTS UPON SENIOR SECURITIES
9
ITEM 4.
MINE SAFETY DISCLOSURES
9
ITEM 5.
OTHER INFORMATION
9
ITEM 6.
EXHIBITS
9
     
SIGNATURES
9
 
 
 
 

 
 
PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

 
BONAMOUR, INC.
 
CONDENSED BALANCE SHEETS
 
               
               
     
March 31,
   
December 31,
 
     
2013
   
2012
 
     
(unaudited)
   
(audited)
 
               
 
ASSETS
           
               
Current Assets:
           
 
Cash
  $ 2,737     $ 26,452  
 
Inventory
    57,990       57,990  
 
Prepaid expense
    37,256       63,402  
 
Advances to officer (Note 3)
    -       25,000  
                   
 
     Total current assets
    97,983       172,844  
                   
Other Assets:
               
 
Software development costs, net of amortization of
               
 
  $8,750 and $7,500, respectively
    6,250       7,500  
                   
 
     Total other assets
    6,250       7,500  
                   
 
     Total assets
  $ 104,233     $ 180,344  
                   
 
 LIABILITIES AND STOCKHOLDERS' DEFICIT
               
 
 
               
Current Liabilities:
               
 
Accounts payable
  $ 94,230     $ 60,765  
 
Loans from related parties
    164,094       21,087  
                   
 
     Total current liabilities
    258,324       81,852  
                   
Commitments and Contingencies
               
                   
Stockholders' Deficit:
               
 
Preferred stock - no par value; 25,000,000 shares authorized;
               
 
       5,000,000 shares of Series A issued and outstanding
    210,000       210,000  
 
Common stock - no par value; 500,000,000 shares authorized;
               
 
       199,500,000 shares issued and outstanding
    15,000       15,000  
 
Additional paid in capital
    32,756       32,756  
 
Accumulated deficit
    (411,847 )     (159,264 )
                   
        Total stockholders' deficit
    (154,091 )     98,492  
                   
     Total liabilities and stockholders' deficit
  $ 104,233     $ 180,344  
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
 
 
1

 
 
BONAMOUR, INC.
 
CONDENSED STATEMENTS OF OPERATIONS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
 
(Unaudited)
 
             
             
   
Three Months Ended
 
   
March 31, 2013
   
March 31, 2012
 
             
             
Revenue
  $ -     $ -  
                 
Operating expenses:
               
Selling, general and administration
    251,333       37,712  
Amortization expense
    1,250       1,250  
     Total operating expenses
    252,583       38,962  
                 
Loss before taxes
    (252,583 )     (38,962 )
                 
Provision for income taxes
    -       -  
                 
Net loss
  $ (252,583 )   $ (38,962 )
                 
Loss per share, basic and diluted
  $ (0.00 )   $ (0.00 )
                 
Weighted average number of shares outstanding
    199,500,000       199,500,000  
 
 
The accompanying notes are an integral part of these condensed financial statements.
 
 
 
2

 
 
BONAMOUR, INC.
 
CONDENSED STATEMENTS OF CASH FLOWS
 
FOR THE THREE MONTHS ENDED MARCH 31, 2013 AND 2012
 
(Unaudited)
 
             
             
   
Three Months Ended
 
   
March 31, 2013
   
March 31, 2012
 
             
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
  Net loss
  $ (252,583 )   $ (38,962 )
     Adjustments to reconcile net loss to net cash flows
               
       provided by (used in) operating activities:
               
             Amortization of software development costs
    1,250       1,250  
             Change in operating assets and liabilities:
               
               Amount due from related party
    25,000       (33,381 )
               Other current assets
    26,146       1,375  
               Accounts payable
    33,465       37,031  
               Amount due related parties
    143,007       -  
                 
                 
Net cash flows used in operating activities
    (23,715 )     (32,687 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
    -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
    -       -  
                 
Decrease in cash
    (23,715 )     (32,687 )
Cash, beginning of period
    26,452       1,511,338  
Cash, end of period
  $ 2,737     $ 1,478,651  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
 
                 
Interest paid
  $ -     $ -  
                 
Income taxes paid
  $ -     $ -  
 
The accompanying notes are an integral part of these condensed financial statements.
 
 
 
 
 
3

 
 
BONAMOUR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Interim Financial Reporting

While the information presented in the accompanying interim financial statements is unaudited, it includes all adjustments, which are, in the opinion of management, necessary to present fairly the financial position, results of operations and cash flows for the interim periods presented in accordance with generally accepted accounting principles in the United States of America ("GAAP").  These interim financial statements follow the same accounting policies and methods of application as used in the December 31, 2012 audited financial statements of Bonamour, Inc. (the “Company”).  All adjustments are of a normal, recurring nature. Interim financial statements and the notes thereto do not contain all of the disclosures normally found in year-end audited financial statements and these Notes to Financial Statements are abbreviated and contain only certain disclosures related to the three month periods ended March 31, 2013 and 2012.  It is suggested that these interim financial statements be read in conjunction with the Company’s audited financial statements and related notes for the year ended December 31, 2012 included in our Form 10-K, filed with the Securities Exchange Commission on April 16, 2013. Operating results for the three months ended March 31, 2013 are not necessarily indicative of the results that can be expected for the year ending December 31, 2013.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

NOTE 2 -- GOING CONCERN

The financial statements of the Company have been prepared in conformity with GAAP, and assume that the Company will continue as a going concern.  The Company expects to incur losses as it expands.  To date, the Company's cash flow requirements have been met through the product sales, sale of its common stock, cash advances from related parties, and established trade credit.  There is no assurance that additional funds will be available for the Company to finance its operations should the Company be unable to realize profitable operations. These conditions, among others, give rise to substantial doubt about the Company’s ability to continue as a going concern.  The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
 
 
 
4

 
 
BONAMOUR, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2013

NOTE 3 – RELATED PARTIES

Allocation of Expenses

During the three months ended March 31, 2013, Bon Amour International, LLC (“BAI”), the majority stockholder of the Company, incurred certain costs associated with the Company’s operations, including human resource costs, travel expense, marketing expense and occupancy costs, totaling $165,533.  In January 2013, the Company made a payment to BAI in the amount of $18,668.  At March 31, 2013 the outstanding balance associated with this allocation was $146,895.

Related Party Loans

During the three months ended March 31, 2013, the Company reduced the outstanding related party loan balance with BAI with (i) a $2,000 on account payment to Nathan W. Halsey’s BAI corporate credit card and (ii) an application of a $1,888 refund paid to BAI in error by one of the Company’s vendors.  BAI is controlled by Mr. Halsey, who also serves as the Company’s sole office and director.  As of March 31, 2013, the Company reported a related party loan amount due to BAI of $10,199.  During the year ended December 31, 2012, Bonamour Asia, LLC, an entity solely owned by Mr. Halsey (“Bonamour Asia”) advanced the Company $7,000 in the form of direct payments to a vendor to the Company.  As of March 31, 2013, the Company reported a related party loan amount due to Bonamour Asia of $7,000.

Advances to Officer

During October and November 2012, the Company advanced Mr. Halsey $25,000.  The amount was repaid in full in February 2013.

Occupancy Cost Allocation

BAI provided office space for the Company at no charge from December 30, 2010 to October 31, 2012.  In November 2012, BAI began billing the Company for office occupancy costs at a rate of $5,000 per month which is included in Allocation of Expenses discussed above.  Management considers the Company's current office space arrangement adequate.

NOTE 4 – INCOME TAXES

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company does not expect to pay any significant federal or state income tax for 2013 as a result of the losses recorded during the three months ended March 31, 2013 and net operating loss carry forwards from prior years.  Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is "more likely than not" that some component or all of the benefits of deferred tax assets will not be realized.  As of March 31, 2013, the Company maintains a full valuation allowance for all deferred tax assets. Based on these requirements, no provision or benefit for income taxes has been recorded.  There were no recorded unrecognized tax benefits at the end of the reporting period.
 
 
 
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ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

We urge you to read the following discussion in conjunction with management’s discussion and analysis contained in our Annual Report on Form 10-K for the year ended December 31, 2012, as well as with our condensed financial statements and the notes thereto included elsewhere herein.

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

Our prospects are subject to uncertainties and risks. In this Quarterly Report on Form 10-Q, we make forward-looking statements in this Item 2 and elsewhere that also involve substantial uncertainties and risks. These forward-looking statements are based upon our current expectations, estimates and projections about our business, and reflect our beliefs and assumptions based upon information available to us at the date of this report. In some cases, you can identify these statements by words such as “if,” “may,” “might,” “will, “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” and other similar terms. These forward-looking statements include, among other things, plans for proposed operations, descriptions of our strategies, our product and market development plans, and other objectives, expectations and intentions, the trends we anticipate in our business and the markets in which we operate, and the competitive nature and anticipated growth of those markets.

We caution readers that forward-looking statements are predictions based on our current expectations about future events. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and assumptions that are difficult to predict. Our actual results, performance or achievements could differ materially from those expressed or implied by the forward-looking statements as a result of a number of factors including, but not limited to, the risks and uncertainties discussed in our other filings with the Securities Exchange Commission (“SEC”). We undertake no obligation to revise or update any forward-looking statement for any reason.

Overview

We are a developer, distributor and reseller of health and beauty products and originator of the “mind- body” system, a line of skincare products that we have developed and nutraceutical products we are developing to help people “live their best life.”  Our products are currently sold under the “Bonamour” name, and while we intend to continue to develop and expand our line of Bonamour-branded mind-body products, we may in the future sell our products under different labels, or serve as a reseller or distributor of health and beauty products for third party brands.

Since early 2011, we have been developing our Bonamour-branded skincare products and our first shipment was delivered to BAI, our primary customer, in November 2012.  Our current focus is on the Asian beauty and wellness market, which we believe has tremendous opportunities for expansion and growth.  While our objectives include branching out to other markets and developing a wider customer base, our sole customer during the during the three months ended March 31, 2013 was BAI, a multi-level marketing company focused on developing a global platform for entrepreneurs, wellness professionals, and individuals, which seeks to develop a global lifestyle wellness brand.  BAI has the exclusive right to sell Bonamour-branded products throughout Asia, and is our largest stockholder, holding approximately 71.6% of our voting common stock and 100% of our issued and outstanding voting Series A Preferred Stock.  BAI is controlled by Nathan Halsey, who also serves as our sole officer and director.  However, BAI is a separate company from us, and we have no economic interest in BAI or its business or operations.

Our principal office is located at 5910 North Central Expressway, Suite 900, Dallas, Texas and our telephone number is (214) 855-0808.  We are traded on the OTC Market Groups, Inc. OTCQB (the “OTCQB”) under the symbol “BONI.”  We do not currently have a corporate website.

Basis of Presentation of Financial Information

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplate continuation of the Company as a going concern, which is dependent upon the Company's ability to establish itself as a profitable business.  At March 31, 2013, the Company had an accumulated deficit of $411,847, and for the three months ended March 31, 2013, incurred net losses of $252,583.  Management expects that the Company will need to raise additional capital to sustain operations until such time as the Company can achieve profitability. However, there can be no assurance that management will be successful in obtaining additional funding or in attaining profitable operations.  The financial statements do not include adjustments relating to the recoverability and realization of assets and classification of liabilities that might be necessary should the Company be unable to continue in operation.
 
 
 
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Critical Accounting Policies

There have been no changes from the Critical Accounting Policies described in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 16, 2013.

Liquidity and Capital Resources

Since our inception, we have not attained a level of operations that allows us to meet our current overhead.  We do not contemplate attaining profitable operations until we execute plans to grow our distribution and sales operations. Nevertheless, there can be no assurance that management will be able to successfully implement such plans and if executed, there can be no assurance that operating levels sufficient to sustain profitability can ever be achieved.  We expect to be dependent upon obtaining additional financing in order to adequately fund working capital, infrastructure and expenses in order to execute plans for future operations, so that we can achieve a level of revenue adequate to support our cost structure, none of which can be assured.  These factors raise substantial doubt about our ability to continue as a going concern and the accompanying financial statements do not include any adjustments related to the recoverability or classification of asset carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

As of March 31, 2013, the Company’s cash balance was $2,737 and we had liabilities totaling $258,324, which include $164,094 of related party debt and $94,230 in accounts payable.  At March 31, 2013 the Company’s working capital deficit was $160,341.

During the three months ended March 31, 2013, BAI incurred certain costs associated with the Company’s operations, including human resource costs, travel expense, marketing expense and occupancy costs, totaling $165,533.  In January 2013, the Company made a payment to BAI in the amount of $18,668.  At March 31, 2013 the outstanding balance associated with this allocation was $146,895.  Also during the three months ended March 31, 2013, the Company reduced the outstanding related party loan balance with BAI with (i) a $2,000 on account payment to Mr. Halsey’s BAI corporate credit card and (ii) an application of a $1,888 refund paid to BAI in error by one of the Company’s vendors.  As of March 31, 2013, the Company reported a related party loan amount due to BAI of $10,199.  During the year ended December 31, 2012, Bonamour Asia, LLC, an entity solely owned by Mr. Halsey (“Bonamour Asia”) advanced the Company $7,000 in the form of direct payments to a vendor to the Company.  As of March 31, 2013, the Company reported a related party loan amount due to Bonamour Asia of $7,000.

Management expects that the Company will need to raise additional capital through debt or equity financings in order sustain operations until such time as the Company can implement its plan of future operation and achieve profitability. The terms of financing of capital that may be raised, if any, may not be on terms acceptable by the Company. If adequate funds cannot be raised outside of the Company, it may request that its current stockholders contribute additional funds to sustain operations.  The Company does not have any arrangements in place that would require any stockholder to advance additional shares to the Company.

Results of Operations

Comparison of Three Months Ended March 31, 2013 and 2012

For the three months ended March 31, 2013 and 2012, the Company’s had no revenue.  For the three months ended March 31, 2013, the Company had operating expenses totaling $252,583 compared to $38,962 for the same period in 2013, an increase of $213,621.  This change is a result of an increased consulting, wages, travel, and computer related expenses partially offset by decreases in legal and accounting fees.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.
 
 
 
7

 

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Nathan W. Halsey, our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) as of March 31, 2013, pursuant to Exchange Act Rule 13a-15. Such disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company is accumulated and communicated to the appropriate management on a basis that permits timely decisions regarding disclosure. Based upon that evaluation, the Company's principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures as of March 31, 2013 were not effective to provide reasonable assurance that information required to be disclosed in the Company’s periodic filings under the Exchange Act is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the quarter ended March 31, 2013 that have materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures provide our principal executive officer and principal financial officer with reasonable assurances that our disclosure controls and procedures will achieve their objectives. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting can or will prevent all human error. A control system, no matter how well designed and implemented, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Furthermore, the design of a control system must reflect the fact that there are internal resource constraints, and the benefit of controls must be weighed relative to their corresponding costs. Because of the limitations in all control systems, no evaluation of controls can provide complete assurance that all control issues and instances of error, if any, within our company are detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur due to human error or mistake. Additionally, controls, no matter how well designed, could be circumvented by the individual acts of specific persons within the organization. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated objectives under all potential future conditions.

Management is aware that there is a lack of segregation of duties at the Company due to the fact that the Company only has one director and executive officer dealing with general administrative and financial matters. This constitutes a material weakness in the internal controls. Management has decided that considering the officer/director involved, the control procedures in place, and the outsourcing of certain financial functions, the risks associated with such lack of segregation were low and the potential benefits of adding additional employees to clearly segregate duties did not justify the expenses associated with such increases. Management periodically reevaluates this situation. In light of the Company’s current cash flow situation, the Company does not intend to increase staffing to mitigate the current lack of segregation of duties within the general administrative and financial functions.

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

None.
 
 
 
8

 

ITEM 1A.  RISK FACTORS

Our Company is a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and as such, is not required to provide the information required under this Item.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEEDS

There are no unreported sales of unregistered securities during the quarter ended March 31, 2013.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.  MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.  OTHER INFORMATION

None.

ITEM 6.  EXHIBITS

The following exhibits are filed with this Quarterly Report on Form 10-Q or are incorporated by reference as described below.

Exhibit
Description
31.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rule 13a-14a/Rule 14d-14(a)
32.1
Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350
101.1
Interactive data files pursuant to Rule 405 of Regulation S-T

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.
     
May 14, 2013
BONAMOUR, INC.
     
 
By:
/s/ Nathan Halsey
 
Nathan Halsey
 
President, Chief Executive Officer and Secretary (Principal Executive Officer, Principal Financial and Accounting Officer and Authorized Signatory)
 
 
 
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