General
Reviv3 Procare is engaged in the manufacturing, marketing, sale and distribution of professional quality hair and skin care products under various trademarks and brands, and has adopted and used the trademark products for distribution throughout the United States, Canada, Europe and Asia pursuant to the terms of 11 exclusive and non-exclusive distribution agreements with various parties throughout our targeted markets. Our manufacturing operations are outsourced and fulfilled through our co-packers and manufacturing partners. Currently, we produce 8 products with 14 separate sku’s and plan to expand our product lines over the next 12 months.
The personal care product industry boasts roughly 750 companies that generate a combined annual revenue of more than $40 billion. The 50 largest companies comprise almost 70% of the entire revenue. Still, we believe the market will bear competition from small companies able to offer specialized products or cater to particular niche markets.
Makeup, deodorant and nail products comprise 33% of health and beauty care industry revenue. Hair care products generate 25% of personal care product revenue, while creams and lotions comprise 21%. Perfumes, mouthwashes, shaving preparations and other products make up the remaining revenue for beauty skin care product revenues.
Reviv3 Procare stands for skin health and benefits of healthy scalp and hair follicle. Currently, we sell our Reviv3 Procare hair and skincare products under the Reviv3 Procare brand which includes 8 distinct products. Our Reviv3 System is a series of products which are meant to be used together or stand-alone basis. The hair care products consists of PREP shampoo, PRIME conditioner, and TREAT maintenance care. We also sell an introductory kit which includes all three Reviv3 System products. In addition, we have products dedicated to hair treatment and repair. Currently we have 3 products in our treatment and repair line. BOOST is designed to deliver nutrients and increase circulation to the scalp, MEND Deep Hair Repair Mask for added moisture and PROTECT, a heat protectant product to prevent damage from irons and dryers. We also have a stand-alone Thickening Spray for giving hair more volume and body.
Recent additions to our products lines are our series of baby care products. We’ve recently created a baby shampoo, lotion and body wash. These products will be sold under the brand LANU which we launched in January of 2018.
Competition
Hair care and cosmetics markets are highly competitive and although there are many companies offering similar products in the market today, we believe we are able to compete directly with these companies and products by offering quality products which will distinguish our performance and develop brand loyalty.
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Top Brands/Market Leaders
Large Names
Other Competitors
Patents and Trademarks
We currently hold four trademarks properly registered in their respective jurisdiction. Specifically, we hold a word mark for “Reviv3 Procare” issued on November 1, 2016 as well as trademark for our logo that was registered on October 20, 2015. We also have our original logo trademarked for the Reviv3 Procare brand registered on March 17, 2015. In addition, we have registered the name “Reviv3 Procare” in the Russian Federation, issued on June 13, 2017. On August 17, 2017, we applied for the mark “Lanu” for our new product line, which application is currently pending.
We do not have any additional trademarks, but as we establish new product lines, we will immediately file for trademark protection. Our formulas are proprietary, but we have not yet taken steps to establish a patent for our processes, formulations or products, generally.
Governmental Regulation
Currently there are no governmental regulations which affect our operations.
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Customers
The beauty industry is known to be resilient during economic downturns - even faring well during the Great Recession of 2008. Though consumers tend to be more price conscious during those times, they do not stop spending. So in today’s environment of rising per capita incomes the beauty business is booming.
In 2015 the industry generated $56.2 billion in the United States. Hair care is the largest segment with 86,000 locations. Skin care is a close second and growing fast, expected to have revenue of almost $11 billion by 2018. This growth is being driven in part by a generally increasing awareness of the importance of skin care, but also specifically due to an increase in the market for men.
Market and Revenue Generation
The company is focused on expanding its business-to-business salon sales through its network of domestic and international distributors. We are also continuing our focus on direct-to-consumer marketing programs through our own ecommerce site and various third party online platforms. In addition, we are exploring other revenue channels such as co-branding and private label manufacturing.
Employees
We currently have 6 full time employees, including our officers and a director. There are no formal employment agreements in place. We have currently engaged 4 individuals as outside consultants for sales, marketing and design. No formal agreements are in place.
Seasonality and Cyclical Nature of our Business
We do not believe our business is subject to substantial seasonal fluctuations. We may experience lower sales in difficult economic scenarios but we do not foresee the seasonality of our products to be a significant factor. Seasonality trends could however have a material impact on our financial condition and results of operations in the future but we are not currently aware of the total impact that could result.
Our Office
Our principal executive office is located at 9480 Telstar Avenue, El Monte, CA 91731. Our telephone number is (888) 638-8883. We lease our offices pursuant to a written lease dated in September 2016. The term of our lease is from October 2016 and expiring in October 2019. Our current monthly base rent is $6,996.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
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We own no properties.
We are not aware of any pending or threatened legal proceedings in which we are involved.
None.
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Our stock is listed for trading on the OTCPink under the symbol "RVIV". The shares of common stock began trading in the first quarter of 2019. There are no outstanding options or warrants to purchase, or securities convertible into, our common stock. There is currently no trading market for the Company.
Holders
On August 10, 2018, we had 73 shareholders of record of our common stock.
Dividend Policy
We have not declared any cash dividends on our common stock since our inception. There are no dividend restrictions that limit our ability to pay cash dividends on our common stock in our Articles of Incorporation or Bylaws.
Penny Stock Regulations and Restrictions on Marketability
The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading, (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws, (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price, (d) contains a toll-free telephone number for inquiries on disciplinary actions, (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks, and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.
The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock, (b) the compensation of the broker-dealer and its salesperson in the transaction, (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock, and (d) a monthly account statement showing the market value of each penny stock held in the customer's account.
In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.
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These disclosure requirements may have the effect of reducing the trading activity for our common stock. Therefore, stockholders may have difficulty selling their shares of our common stock.
Securities authorized for issuance under equity compensation plans
We have no equity compensation plans and accordingly we have no shares authorized for issuance under an equity compensation plan.
Transfer Agent
West Coast Stock Transfer
721 N. Vulcan Ave. Ste. 205
Encinitas, CA 92024.
(619) 664-4780
http://www.westcoaststocktransfer.com
Recent Sales of Unregistered Securities
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included in this Report beginning on page F-1. The results shown herein are not necessarily indicative of the results to be expected in any future periods. This discussion contains forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.
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Significant Accounting Policies
Our discussion and analysis of our results of operations and liquidity and capital resources are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. Significant estimates made by management include, but are not limited to, the allowance for doubtful accounts, inventory valuations, the useful life of property and equipment, the valuation of deferred tax assets, the value of stock-based compensation, and the fair value of non-cash common stock issuances. We base our estimates on historical and anticipated results and trends and on various other assumptions that we believe are reasonable under the circumstances, including assumptions as to future events. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results that differ from our estimates could have a significant adverse effect on our operating results and financial position. We believe that the following significant accounting policies and assumptions may involve a higher degree of judgment and complexity than others.
Emerging Growth Company
We qualify as an “emerging growth company” under the JOBS Act. As a result, we are permitted to, and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.
We will remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our total annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, which would occur if the market value of our ordinary shares that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
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Results of Operations
For the year ended May 31, 2018 and 2017
Our results of operations are summarized below.
For the year ended May 31, 2018, revenues increased by approximately $351,000, or 60%, as compared to the year ended May 31, 2017 which is primarily due to increase in sales to one of our new direct customers that accounted for approximately 45% of our total revenues during the year ended May 31, 2018.
Cost of sales includes primarily the cost of product and shipping fees. For the year ended May 31, 2018, cost of sales increased by approximately $295,000, or 105%, as compared to the year ended May 31, 2017. The increase is primarily attributable to increase in sales during the year ended May 31, 2018 and increase in shipping costs. primarily due to increased purchases to keep up with the increase sales demand as reflected by our increase revenues.
For the years ended May 31, 2018 and 2017, gross profit margins were at 38% and 52%, respectively. The decrease in gross profit margins is primarily attributable in increase in shipping costs and low gross profit margin generated from sales to one of our new direct customers during the year ended May 31, 2018.
For the years ended May 31, 2018 and 2017, we incurred operating expenses of $695,817 and $838,632, respectively, and a net loss of $(342,539) and $(538,777), respectively. The operating expenses are costs related to marketing and selling expenses, compensation and related taxes, professional and consulting fees, and general and administrative costs. Operating expenses decreased by approximately $143,000 or 17% primarily due to a decreased stock based consulting expenses related to business advisory service agreements, increase in operational efficiencies and marketing. Our operating expense decreases were partially offset by increase in professional and consulting expenses due to increase accounting expenses related to our public filings and increase in general administrative expenses primarily attributable to increase rent expenses.
Liquidity and Capital Resources
For the Years ended May 31, 2018 and 2017
The following table provides detailed information about our net cash flows: