BONAMOUR, INC. - FORM 10-K - March 31, 2014

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)

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

For the fiscal year ended
December 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.)

2301 Cedar Springs Road, Suite 450, Dallas, Texas
75201
(Address of principal executive offices)
(Zip Code)

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

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class
  
Name of each exchange on which registered
 
None
  
 
None
     

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, without par value
(Title of class)

Indicate by check mark if the registrant is a well-seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes  ¨  No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.   Yes  x  No  ¨
 
Indicate by check mark whether the registrant has (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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not 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-K or any amendment to this Form 10-K. ¨

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 aggregate market value of the voting and non-voting common equity held by non-affiliates as of June 30, 2013 was $19,531,239 (computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity as of the last business day of the registrant's most recently completed second fiscal quarter). For purposes of the foregoing calculation only, directors, executive officers, and holders of 10% or more of the issuer’s common capital stock have been deemed affiliates.

The number of shares outstanding of the Registrant’s Common Stock as of March 18, 2014 was 199,500,000.

DOCUMENTS INCORPORATED BY REFERENCE: None.


 
 
 
 

TABLE OF CONTENTS
 
     
   
Page
INTRODUCTORY COMMENT
1
FORWARD LOOKING STATEMENTS
1
   
PART I
2
ITEM 1.
BUSINESS
2
ITEM 1A.
RISK FACTORS
7
ITEM 1B.
UNRESOLVED STAFF COMMENTS
8
ITEM 2.
PROPERTIES
8
ITEM 3.
LEGAL PROCEEDINGS
8
ITEM 4.
MINE SAFETY DISCLOSURES.
8
     
PART II
8
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
8
ITEM 6.
SELECTED FINANCIAL DATA
9
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
9
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
13
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
F-1
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
13
ITEM 9A.
CONTROLS AND PROCEDURES
13
ITEM 9B.
OTHER INFORMATION
15
     
PART III
15
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
15
ITEM 11.
EXECUTIVE COMPENSATION
17
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
17
ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
18
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
19
 
 
  
PART IV
19
ITEM 15.
EXHIBITS, FINANCIAL STATEMENT SCHEDULES
19
     
SIGNATURES
  
21
 
 
 
 
 
 
 
INTRODUCTORY COMMENT

Throughout this Annual Report on Form 10-K (this "Report”), the terms “we,”  “us,”  “our,”  “Bonamour,” or the “Company” refers to Bonamour, Inc., a Colorado corporation.
 
 
FORWARD LOOKING STATEMENTS

When used in this Report, the words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding events, conditions and financial trends which may affect the Company’s future plans of operations, business strategy, operating results and financial position. Such statements are not guarantees of future performance and are subject to risks and uncertainties described herein and actual results may differ materially from those included within the forward-looking statements. Additional factors are described in the Company’s other public reports and filings with the Securities and Exchange Commission (the “SEC”).  Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date made.  The Company undertakes no obligation to publicly release the result of any revision of these forward-looking statements to reflect events or circumstances after the date they are made or to reflect the occurrence of unanticipated events.

This Report contains certain estimates and plans related to us and the industry in which we operate, which assume certain events, trends and activities will occur and the projected information based on those assumptions.  We do not know that all of our assumptions are accurate.  If our assumptions are wrong about any events, trends and activities, then our estimates for future growth for our business may also be wrong.  There can be no assurance that any of our estimates as to our business growth will be achieved.

The following discussion and analysis should be read in conjunction with our financial statements and the notes associated with them contained elsewhere in this Report.  This discussion should not be construed to imply that the results discussed in this Report will necessarily continue into the future or that any conclusion reached in this Report will necessarily be indicative of actual operating results in the future.  The discussion represents only the best assessment of management.


 
 
 
1
 
 
PART I

ITEM 1.                      BUSINESS

Development of the Company
 
We were incorporated under the laws of Colorado on August 9, 2002, as a developer of a software program used to centralize the booking of recreational and vacation activities.  In 2003, the Company’s initial capital proved insufficient to complete its planned business, and we ceased such business operations.  We later undertook to operate as a business that would provide unclaimed property location services to the public and businesses by obtaining information regarding lost or forgotten estates, unclaimed assets and/or financial belongings, until late 2010, when the Company underwent a change in control and the majority of our common stock was acquired by Halter Capital Corporation (“Halter Capital”).
 
At the end of 2010, we again underwent a change in control when Halter Capital and its affiliates entered into a Stock Purchase Agreement by and among the Company, certain shareholders of the Company and Bon Amour International, LLC (“BAI”), pursuant to which BAI acquired 95,000 shares of Company common stock for cash consideration of $5,000.  Subsequently, on December 30, 2010, the Company also entered into a Stock Purchase Agreement by and among the Company, Halter Capital and BAI, pursuant to which BAI acquired 1,255,000 shares of Company common stock (representing approximately 83.7% of our issued and outstanding common stock) from Halter Capital for cash consideration of $370,000.  The foregoing stock purchase transactions (collectively, the “BAI Acquisition”) both closed on January 6, 2011, and resulted in a change of control of the Company, as BAI acquired 90% of the then outstanding common stock of the Company. Upon the completion of the BAI Acquisition, Nathan W. Halsey was appointed as the sole director of the Company. Mr. Halsey was subsequently appointed as the Company’s President, Chief Executive Officer, and Secretary effective January 27, 2011.
 
With the approval of the Company's Board of Directors and a majority of its shareholders, the Company filed Articles of Amendment to its Articles of Incorporation effective March 9, 2011 (the "Amendment").  The Amendment effected a change in the Company’s capital structure and authorized shareholder action by less than unanimous consent without a meeting. Prior to the Amendment, the Company was authorized to issue 100,000,000 shares of common stock, without par value ("Common Stock").  The Amendment authorized the Company to issue up to 500,000,000 shares of Common Stock.
 
On March 10, 2011, the Company executed a 133 for 1 forward split of its issued and outstanding Common Stock, effected in the form of a stock dividend. As a result of the forward split, the Company issued 198,000,000 shares to its shareholders of record on March 10, 2011. We subsequently filed an amendment to our Articles of Incorporation effective November 20, 2011, which (i) changed the Company’s name to Bonamour, Inc, (ii) amended the terms of our preferred stock, and (iii) designated Series A Preferred Stock of the Company.
 
Effective December 31, 2011, we issued 5,000,000 shares of our Series A Preferred Stock (the “Preferred Stock”) to BAI in cancellation of $210,000 in loans advanced by BAI to us.
 
Overview of Business

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 BonamourTM-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.
 
 
 
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Since the completion of the Bonamour Acquisition in early 2011, we have been developing our Bonamour-branded skincare products and our first shipment was delivered to BAI 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 2012 fiscal year 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 shareholder, holding approximately 71.6% of our voting stock.  BAI is controlled by Nathan Halsey, who also serves as our sole office 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 2301 Cedar Springs Road, Suite 450, Dallas, Texas 75201 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.
 
Our Principal Products

Beauty Products

We have developed and received orders for three skin care products, which we market as Bonamour’s “Rejuvenating TrioTM”.   These products include a rejuvenating skin cleanser, a cellular renewal complex and an anti-aging eye cream.  All three products are formulated with our proprietary Bonamour BlendTM + Active Plant Stem Cell Technology to help promote the production of collagen and protect against free radical damage.  These products are branded klenz, hi-drat, and ke-rekt, and will be sold by BAI in Asia.  In addition, during 2012, we developed an activating mineral mist, which is sold by Bonamour under the akte-vat label.

KLENZ is Bonamour’s rejuvenating skin cleanser.  It has been formulated to remove excess oil, makeup and debris from the skin, while leaving the skin clean and hydrated.  The cleanser is designed to cleanse and soften the skin, while minimizing the appearance of fine lines, wrinkles and pigmentation irregularities using the exfoliating benefits of glycolic acid.

HI-DRAT is our cellular renewal complex.  It has been formatted to slow the effects of aging and promote the production of collagen.  It utilizes powerful antioxidants to protect against free radical damage. HI-DRAT is suitable for all skin types and formulated to help smooth away fine lines and wrinkles while rejuvenating the overall skin’s health.

KE-REKT is our anti-aging eye repair cream.  It has been formulated with vitamin A and peptides to help reduce the appearance of fine lines and wrinkles.  It contains Argan, which accelerates skin’s natural repair process and helps combat chronological aging and loss of firmness.  In addition, caffeine, vitamin K and arnica work to reduce the appearance of dark circles and puffiness. Organic aloe and cucumber extract are used to soothe the eye area, while hyaluronic acid aids hydration of the area.

AKTE-VAT is our activating mineral mist.  This weightless mist has been formulated to purify the skin and stimulate enzymatic activity to help increase the fibroblast production of pre-collagen.  The mist locks in moisture and supplies vital nutrients to help give the skin a younger appearance.

Products Under Development

Nutraceutical Products

We have also begun the process of developing a line of nutraceutical products. Nutraceuticals are products derived from food sources that provide health benefits in addition to the basic nutritional value found in foods.
 
 
 
3
 

The first nutraceutical under development is DE-TOX, a hand, skin and nail detoxification treatment designed to help defend the body against aging free radical damage.  De-tox will be a vitamin packed drink that is formulated to improve the overall look and feel of the skin while relieving stress and fatigue, resulting in a more radiant and glowing appearance. We believe pocket size packets will make it easy to take on the go.

In addition, we are in the process of developing an “energy shot” as well as a “sleep shot” for private label use.  These products are not expected to be branded with the Bonamour trademark.

Due to the production, development and distribution process associated with our current line of beauty products, the further development of nutraceutical products has been put on hold, though we hope to further develop and market these products sometime in the future.

Principal Markets

We currently focus the sales of our products in distinct markets.  In Asia, we will serve as the distributor of Bonamour products to BAI.  BAI is a multi-level marketing company, similar to Avon or Mary Kay Cosmetics, which focuses on the Asian marketplace, specifically in Macau and Hong Kong.  Individuals purchase BAI distributorships and sell BAI’s products exclusively through the BAI program.  We will provide the products sold by BAI participants, and we expect this to be our primary market for the near future. Pursuant to a license agreement with BAI (described below), BAI has the exclusive right to sell products branded with the Bonamour logo throughout all of Asia (the “BAI”).

We intend to market our proprietary Bonamour products in the United States exclusively through doctor’s offices, and do not anticipate selling the products outside of the medical/spa context. We do not plan to make Bonamour-branded products available for resale within the United States via Internet purchase or make it available to be sold in retail establishments.

We may in the future offer private label skin care and nutraceutical products within the United States and throughout the world.  In such instances, a third party retailer would place an order for a skincare or nutraceutical product, which we would then formulate and arrange for the manufacture of using their private label.  We would then manufacture, source and distribute these products on behalf of the third party.  By way of illustration, we may in the future provide skincare products to hotels or other retail establishments that would bear the name of such third party, rather than our own.

Customers

During the 2011 fiscal year, we received one order for our products, which was fulfilled in November 2012. This order, from BAI, represents our only order for products since the Bonamour Acquisition. BAI is also a majority shareholder of Bonamour, and shares common management.  Management expects this relationship to continue and for BAI to be a significant customer in the future.  Our business is currently dependent upon the continuance of BAI as a significant part of the Company’s business, and the loss of BAI as a customer would have a material adverse effect on our results of operations.  In our current state, we do not believe our operations can succeed without BAI as a significant customer.

License Agreement

We have a license agreement with BAI (the “License Agreement”), wherein we granted BAI the exclusive right to distribute our products throughout Asia (the “BAI Territories”).  We currently anticipate that all products branded with the Bonamour trademark will be distributed to BAI through us, though the agreement does not mandate that we develop all BAI products.  To the extent BAI distributes Bonamour-branded products that are not sourced by us, the License Agreement provides us with quality control and inspection rights to help ensure that all products bearing the Bonamour name meet our standards.  In addition, we have the right to approve any marketing or advertising of Bonamour-branded products.  BAI will not pay any royalties to us for use of the Bonamour trademark.  The License Agreement is for a 1-year term, and will renew automatically for one-year periods unless terminated by either party on or before 30 days prior to the end of any term.
 
 
 
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Potential Licensing Revenues

In addition to generating revenues through direct-to-consumer sales and wholesale distribution and the existing License Agreement with BAI, we may elect to pursue licensing arrangements with third parties to manufacture and distribute our products outside the BAI Territories.  If we seek to license our product, we intend to pre-approve all products manufactured and sold by our licensee in order to maintain consistent quality and performance and ensure that the licensed products meet the same quality and compliance standards as the products that we sell directly.

Distribution Methods

We sell our products primarily directly to distributors with established consumer and retail channels or distributors we believe can establish such channels. Although we do not currently have any arrangements with any distributor other than BAI, we plan to expand our distribution network by licensing rights to BAI and other distributors to sell Bonamour-branded products in territories other than the BAI Territories.  We may also serve as a distributor of health and beauty products to third parties bearing names other than Bonamour.

Advertising and Marketing

We do not have any current plans to market the products we distribute.  As of the date of this Report, we only distribute Bonamour-branded products to BAI, and BAI is responsible for all advertising and marketing associated with such products.  As a result, our relationship with BAI and any future distributors of our products will be critical to our success, generally, and, more specifically, create significant product and brand exposure that contributes to our credibility and reputation.

Product Research, Design and Development

Our products are manufactured and produced by third parties and developed in collaboration with a product formulator retained by us and any company for whom we develop a product.  We believe that this approach enables us to create a technically advanced and quality product in accordance with our specifications, while focusing our product development efforts on design, fit, performance and product end use results.

We seek to educate distributors, retailers and end users regarding our products and the potential for our innovative technology to deliver superior results and other benefits and brand identity to enhance our customers' perception and understanding of product use and benefits.

Our current Rejuvenating Trio of products, which we are in the process of sourcing to BAI, were developed by BAI, who bore all of the costs of their development.  As a result, since entering the skincare distribution market, we have not expended any resources on research and development activities.  In the future, we expect to incur some or all of the costs associated with the development of any products we distribute.

Sourcing, Manufacturing and Quality Assurance

We have made arrangements with Cosmetic Laboratories, a private label manufacturer located in Irving, Texas, to produce and package our Bonamour-branded products.  Cosmetic Laboratories has over twenty years of experience in private label manufacturing and packaging. We expect Cosmetic Laboratories will handle the manufacture, packaging and shipping of our products, and initially, it will serve as our sole supplier of such services.  Cosmetic Laboratories will assist us in multiple stages of production, such as procuring materials and providing finished products and packing and distribution, which helps us to control the cost of goods sold. Although we may elect to use a different manufacturer or multiple manufacturers in the future, there can be no assurance that this concentration will decrease over time.
 
 
 
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Cosmetic Laboratories has been, and any manufacturer we may retain at a later date will be, evaluated for quality systems, social compliance and financial strength by us prior to being selected and on an ongoing basis.  We may enter into a variety of agreements with our manufacturers, including non-disclosure and confidentiality agreements, and plan to require all of our manufacturers to adhere to a code of conduct regarding quality of manufacturing and working conditions and other social concerns.  We do not, however, have any long-term agreements requiring us to utilize any manufacturer, including Cosmetic Laboratories, and no manufacturer is required to produce our products in the long-term.  In the event Cosmetic Laboratories becomes unable to fulfill our manufacturing or production needs, we believe we would be able to retain alternative manufacturers for our products on substantially similar terms.

Intellectual Property

BAI filed a trademark registration for the Bonamour name with the United States Patent and Trademark Office which it has assigned to us.  The Bonamour trademark has not yet received a registration with the United States Patent and Trademark Office, and we are currently in the process of procuring such registration.  In addition, we have entered into a licensing agreement with BAI, granting BAI the exclusive right to use such trademark in Asia.

We believe we own the internally-developed material trademarks and other intellectual property rights used and/or to be used in connection with the marketing, distribution and sale of our products where our products are expected to be initially manufactured and sold or will be manufactured and sold.  We have applied, or intend to apply, to register trademarks and plan to develop domain names for our primary trademarks and obtain copyright registrations for marketing media and material, as well as for certain artwork.  We intend to continue to strategically register, both domestically and internationally, trademarks and copyrights, including for any intellectual property we develop and utilize in the future.

We believe that the distinctive trademarks that we will use in connection with our products will be important in building our brand image and distinguishing our products from the products of others.  We believe that our trademarks are (or will be) among our most valuable assets.  In addition to our distinctive trademarks, we also expect to place significant value on our trade dress, which is the overall image and appearance of our products, and we believe that our trade dress will help to distinguish our products in the marketplace.

The intellectual property rights in the ingredients, materials, technology and processes used to manufacture and produce our products are generally owned or controlled by our suppliers. As a result, our ability to obtain patent protection for our products may be limited.  We currently do not own any issued patents.  We plan to focus our efforts on obtaining patent protection for what we believe to be strategic in the marketplace.  We may file patent applications that we believe offer a unique utility or function and continue to file patent applications if and as we deem appropriate to protect our business, products and our rights.

Competition

The market for skin care products is highly competitive and highly fragmented and may include many new competitors as well as increased competition from established companies expanding their production and marketing of skin care products and related products.  Many of the ingredients, materials and technologies used in manufacturing and producing our products are generally not unique to us, and we do not currently own any patents. Many of our actual and potential competitors are much larger companies with stronger brand recognition and significantly greater resources than us.

In addition, we may compete with others for distribution services and sales channel relationships and purchasing decisions at retailers.  We believe that our ability to compete in the short term will depend on our ability to develop and maintain good relationships with BAI, and its sales representatives and retailers and that our ability to compete in the long term will depend on strong sales of our products.  However, notwithstanding good relationships and strong sales, if distributors and retailers earn greater margins from our competitors' products, they may favor our competitors and their products.
 
 
 
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We believe that we will be able to compete successfully in the short term if we are able to achieve our brand image and recognition initiatives and that our overall success in the long term will depend on the performance and quality of our products and our distribution strategies and policies.  In the future we expect to compete for consumer preferences and expect that we may face greater competition on pricing.  This may favor larger competitors with lower costs per unit of product produced that can spread the effect of price discounts across a larger array of products and across a larger customer base than ours.  The purchasing decisions of consumers for our products often reflect highly subjective preferences that can be influenced by many factors, including advertising, media, product sponsorships, product improvements and changing trends and styles.

Regulation

We believe we are operating within existing federal, state and local environmental laws and regulations and are taking action to ensure compliance therewith. Compliance with such laws and regulations is not expected to materially affect our capital expenditures, earnings or competitive position.

Employees

As of March 18, 2014, we did not have any employees. Although we may hire employees in the future, we do not currently expect our business to require a significant number of employees, even if our business plan is successful. As our sole officer and director, Mr. Halsey is expected to be responsible for managing all of our affairs, including our administrative affairs and our public company reporting obligations.  Mr. Halsey is also expected to be responsible for directly or indirectly hiring and supervising all of the service providers or other personnel responsible for our operations and sales.

Mr. Halsey will be responsible for negotiating service contracts and other agreements between the Company and our manufacturers and suppliers and other third parties.  Except as otherwise described herein, we have not yet entered into any employment, non-compete, confidentiality, intellectual property, non-solicitation or other agreement with BAI or Mr. Halsey or any other service providers or personnel and may never enter into any such agreements.

Additional Information

We are required to file annual reports on Form 10-K and quarterly reports on Form 10-Q with the SEC on a regular basis, and are required to disclose certain material events in a current report on Form 8-K. The public may read and copy any materials that we file with the SEC at the Public Reference Room at the SEC located at 100 F Street NE, Washington, DC 20549, on official business days during the hours of 10 a.m. to 3 p.m.  The public may also obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.  The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at http://www.sec.gov.
 
 
ITEM 1A.                      RISK FACTORS

The 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.



 
7
 

ITEM 1B.                      UNRESOLVED STAFF COMMENTS

None.
 
 
ITEM 2.                      PROPERTIES

Our principal office is located at 2301 Cedar Springs Road, Suite 450, Dallas, Texas 75201, in office space leased by BAI, our principal shareholder. BAI provides principal office space to us at $1,000 per month, and we are not subject to a written lease agreement.  We believe this property is in generally good condition and is suitable to carry on our business.  We also believe that if required, suitable alternative office space will be available on commercially reasonable terms.
 
 
ITEM 3.                      LEGAL PROCEEDINGS

There are no material pending legal or governmental proceedings relating to our Company or properties to which we are a party, and to our knowledge, there are no material proceedings in which any of our directors, executive officers, affiliates or shareholders are a party adverse to us or have a material interest adverse to us.

ITEM 4.                      MINE SAFETY DISCLOSURES.

Not applicable.
PART II

ITEM 5.                      MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information

           Our Common Stock is quoted on the OTCQB under the symbol “BONI.”  The following table sets forth, for the periods indicated, the high and low sales prices of our Common Stock as reported on the OTCQB. This information has been obtained from the OTCQB.
 
 
Quarter Ended
  
High
    
Low
  
Fiscal Year 2013
            
Fourth Quarter
   $ 0.37     $ 0.13  
Third Quarter
   $ 0.51     $ 0.14  
Second Quarter
   $ 0.53     $ 0.35  
First Quarter
   $ 0.45       0.20  
                 
Fiscal Year 2012
                
Fourth Quarter
   $ 0.40     $ 0.20  
Third Quarter
   $ 0.45     $ 0.30  
Second Quarter
   $ 0.60     $ 0.32  
First Quarter
   $ 1.51     $ 0.30  

On March 18, 2014, the last sale price of our Common Stock reported by the OTCQB was $0.05.

Holders

Records of Securities Transfer Corporation, our transfer agent, indicate that as of March 18, 2014, we had 401 record holders of our Common Stock.  The number of registered shareholders excludes any estimate by us of the number of beneficial owners of shares of Common Stock held in “street name.”  As of March 18, 2014, we had 199,500,000 shares of our Common Stock outstanding.
 
 
 
8
 

Dividends

We do not anticipate that we will declare or pay any dividends in the foreseeable future. Any future determination to pay cash dividends will be at the discretion of our Board of Directors and will be dependent upon our financial condition, operating results, capital requirements, applicable contractual restrictions, restrictions in our organizational documents, and any other factors that our Board of Directors deems relevant.
 
Securities Authorized for Issuance under Equity Compensation Plans

 The Company has no equity compensation plans.

Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

 ITEM 6.                      SELECTED FINANCIAL DATA

The 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 7.                      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

Cautionary Notice Regarding Forward Looking Statements

This Report contains a number of forward-looking statements that reflect management's current views and expectations with respect to our business, strategies, products, future results and events and financial performance.  All statements made in this Report other than statements of historical fact, including statements that address operating performance, events or developments that management expects or anticipates will or may occur in the future, revenues, profitability, adequacy of funds from operations, statements expressing general optimism about future operating results and non-historical information, are forward looking statements.  In particular, the words "believe," "expect," "intend," “anticipate," "estimate," "may," "will," variations of such words, and similar expressions identify forward-looking statements, but are not the exclusive means of identifying such statements and their absence does not mean that the statement is not forward-looking.  These forward-looking statements are subject to certain risks and uncertainties, including those discussed below.  Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated or implied by these forward-looking statements.  We do not undertake any obligation to revise any forward-looking statements whether because of new information, future events, or otherwise.

Readers should not place undue reliance on these forward-looking statements, which are based on management's current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below) and apply only as of the date of this Report.  Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements.
 

 
 
9
 

Overview

The Company is in the business of the manufacture, distribution and sale of proprietary, Bonamour -branded beauty products for resale. In addition to its beauty products, which currently include only skincare products, the Company is currently developing nutraceutical products both under the Bonamour name and for resale by third parties under alternate names.

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 contemplates continuation of the Company as a going concern, dependent upon the Company's ability, among other matters, to establish itself as a profitable business.  At December 31, 2013, the Company had an accumulated deficit of $546,417.  To date, the Company’s sales have been to a related party (see NOTE 4-RELATED PARTIES in the accompanying financial statements for more details).

The Company’s ability to continue in business is dependent upon obtaining sufficient financing and continued profitable operations.  However, there can be no assurance that management will be successful in obtaining additional funding or in continuing profitable operations, and therefore, these matters raise substantial doubt about the Company's ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they 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.

Recently Issued Accounting Pronouncements

During the year ended December 31, 2013 and through March 31, 2014, there were several new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”).  Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.

All other new accounting pronouncements issued but not yet effective or adopted have been deemed not to be relevant to us, and are therefore not expected to have any impact once adopted.

Significant Accounting Policies

Cash

For purposes of the statements of cash flows, the Company considers amounts held by financial institutions and short-term investments with an original maturity of 90 days or less at the time of purchase to be cash and cash equivalents.  Beginning 2013, insurance coverage reverted to $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may exceed federally insured limits.  The Company had no amounts on deposit in excess of federally insured limits at December 31, 2013.

Trade Accounts Receivable

Trade accounts receivable are customer obligations due under normal trade terms.  The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions.  Trade accounts receivable passed due by more than 90 days are considered delinquent.  Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer.  Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received.  At December 31, 2013 and 2012, the Company had no trade accounts receivable.
 
 
 
10
 

Inventory

Inventory represents packaged health and beauty products and containers which are valued at the lower of cost or market using the average cost method.

Revenue Recognition

Revenue is recognized when 1) persuasive evidence of a sales arrangement exists, 2) the selling price is fixed or determinable, 3) delivery of the product or service occurs, and 4) collection is probable. 

Fair Value of Financial Instruments

In accordance with the reporting requirements of ASC Topic 825, Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.  The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at the balance sheet date, nor gains or losses reported in the statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held during the years ended December 31, 2013 and 2012.

Fair Value Measurements

ASC Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and requires certain disclosures about fair value measurements.  In general, fair values of financial instruments are based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the customer’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

In accordance with ASC Topic 740, Income Taxes, the Company recognizes the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position.  Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized.  Changes in recognition or measurement are reflected in the period in which those changes in judgment occur.  The Company recognizes both interest and penalties related to uncertain tax positions as part of its income tax provision.
 

 
 
11
 

Earnings Per Share

The Company calculates earnings per share ("EPS") in accordance with ASC Topic 260, Earnings Per Share, which requires the computation and disclosure of two EPS amounts, basic and diluted.  Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period.  Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period. Such potentially dilutive common shares consist of stock options and warrants to purchase common stock of the Company of which the Company had none at December 31, 2013 and 2012.

Stock Based Compensation

The Company recognizes compensation expense for all stock based payments granted based on the grant date fair value estimated in accordance with ASC Topic 718, Compensation, Stock Compensation.  Compensation expense is generally recognized on a straight-line basis over the employee’s requisite service period based on the award's estimated lives for fixed awards with ratable vesting provisions.  The Company recognized no stock based compensation during the years ended December 31, 2013 and 2012.

Use of Estimates

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities.  We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Liquidity and Capital Resources

As of December 31, 2013, the Company’s cash balance was $44.  Our ability to increase our revenue in order to maintain profitability is solely dependent upon the purchase requirements of our sole current customer and related party, BAI.  If BAI’s purchase requirements do not meet our revenue objective, we will not be able to sustain profitability and will be required to obtain funds through debt or equity financing sources, however, there can be no assurance that management will be able to successfully obtain this financing.

Results of Operations

Comparison of Years Ended December 31, 2013 and 2012

For the year ended December 31, 2013 the Company had revenue of $202,765 compared to $560,000 in revenues for the year ended December 31, 2012.  The revenue in 2013 and 2012 were derived from the sale of our health and beauty products to BAI, our principal stockholder.

For the years ended December 31, 2013 and 2012, the Company’s cost of goods sold totaled $112,330 and $43,701, respectively, resulting in a gross profit margin of 45% and 92%, respectively.

For the year ended December 31, 2013, the Company had operating expenses totaling $477,588 compared to $412,792 for the same period in 2012, an increase of $64,796.  This change is primarily a result of increases in human resource cost (approximately $62,000), third party services (approximately $61,000), marketing costs (approximately $35,000) and office (approximately $26,000) and other expenses (approximately $5,000) which were offset by decreases in professional fees (approximately $104,000) and travel expenses (approximately $20,000).
 
 
 
12
 

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements.

ITEM 7A.                   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 8.                      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

All financial statements required by this Item are listed in Part IV, Item 15 of this Form 10-K, are presented beginning on Page F-1, and are incorporated herein by this reference.

ITEM 9.                      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTINGAND FINANCIAL DISCLOSURE

None.

ITEM 9A.                   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 December 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 December 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.

Management's Annual Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company's internal control over financial reporting includes those policies and procedures that:
 
  ● pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; 
  ● provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and
  ● provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.
 
 
 
13
 
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In connection with the preparation of our annual financial statements, we have assessed the effectiveness of internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework.  Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.  Based on this evaluation and qualified by the “Limitations on Effectiveness of Controls” set forth in this Item 9A below, management has determined that as of December 31, 2013, our internal controls over financial reporting were not effective and there are material weaknesses in our internal control over financial reporting.

The Company’s management has identified a material weakness in the effectiveness of internal control over financial reporting related to a shortage of resources in the accounting department required to assure appropriate segregation of duties with employees having appropriate accounting qualifications.

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, wherein non-accelerated filers are exempt from Sarbanes-Oxley internal control audit requirements.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during the fourth quarter of the year ended December 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.
 
 
 
14
 

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 significant deficiency 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.

ITEM 9B.                    OTHER INFORMATION

None.

PART III

ITEM 10.                     DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following individual currently serves and has served during the fiscal year ended December 31, 2013, as the sole director and executive officer of our Company.  All directors of our Company hold office until the next annual meeting of shareholders or until their successors have been elected and qualified.  The executive officers of our Company are appointed by our Board of Directors and hold office until their death, resignation or removal from office.

 
Executive
Officer and Director
 
 
Age
 
Date of
Appointment
 
 
  Position(s) Held
Nathan W. Halsey
37
January 20, 2011
  Director, President, Chief Executive Officer and Secretary

           Mr. Halsey was appointed as the sole member of the Board of Directors pursuant to the terms of the BAI Acquisition effective January 20, 2011. Subsequently, Mr. Halsey was appointed by the Board of Directors to serve as President, Chief Executive Officer, and Secretary of the Company, effective January 27, 2011. There are no other arrangements or understandings between our sole director and executive officer and any other person pursuant to which any director or officer was or is to be selected as a director or officer, and there are no arrangements, plans or understandings as to whether non-management shareholders will exercise their voting rights to continue to elect the current Board of Directors.  There are also no arrangements, agreements or understandings to our knowledge between non-management shareholders that may directly or indirectly participate in or influence the management of our affairs.

The following is a brief account of the business experience during at least the past five years of our current sole director and executive officer identified above.

Nathan W. Halsey - President, Chief Executive Officer, Secretary and Director

On January 20, 2011, Mr. Halsey was appointed to serve as a director of the Company replacing Kevin B. Halter, Jr. upon his resignation as the former sole director of the Company.  Subsequently, Mr. Halsey was appointed to serve as our President, Chief Executive Officer and Secretary effective January 27, 2011. Mr. Halsey is also the sole Manager, Chief Executive Officer and President of Bon Amour International, LLC, our principal shareholder. Mr. Halsey also serves as Chief Executive Officer, President, Secretary and a director of TexStar Oil Corporation. Mr. Halsey began his career as a management and strategy consultant for Ernst & Young, LLP. In this capacity, Mr. Halsey provided transformation advisory services to telecommunications companies. Mr. Halsey’s clients included businesses that ranged in size from start‐ups to Fortune 500 companies such as AT&T. In 2003, Mr. Halsey founded NWH Management, LLC, a holding and investment company with a focus on energy exploration and commercial real estate development. Between 2003 and 2008, Mr. Halsey oversaw the launch of three start-up portfolio companies, managed over $150 million in investments in energy exploration, commercial real estate development and private equity participation in early stage technology companies. In 2009, Mr. Halsey became sole Manager, Chief Executive Officer and President of Bon Amour International, LLC, a NWH Management, LLC portfolio company. In May 2010, Nathan oversaw the opening of the Bonamour Asia regional headquarters office in Hong Kong. In its first four months of operations, Bonamour Asia expanded from Hong Kong to Singapore, Malaysia, and Indonesia.
 
 
 
15
 

Significant Employees

We have no employees as of the date of this report.

Family Relationships
 
There are no family relationships between any of our current and/or former directors and executive officers.

Involvement In Certain Legal Proceedings

During the past ten years, neither Nathan W. Halsey, the Company's sole officer and director, nor any business in which he was an executive officer, have been involved in a bankruptcy petition, been subject to a criminal proceeding (excluding traffic violations and other minor offenses), been subject to any order enjoining or suspending their involvement in any type of business, or been party to an alleged violation of a securities law, commodities law, law or regulation respecting financial institutions or insurance companies, law or regulation prohibiting mail or wire fraud, or rules of any organization that has disciplinary authority over its members.

Compliance with Section 16(a) of the Exchange Act

 Section 16(a) of the Exchange Act requires each person who is a director or officer of Bonamour or beneficial owner of more than 10% of any class of any of our equity securities registered pursuant to Section 12 of the Exchange Act to file statements on Forms 3, 4 and 5 with the SEC to report transactions and holdings in and of any registered or unregistered class of any of our equity securities beneficially owned by such person.

To our knowledge (based solely upon a review of any Forms 3 and 4 furnished to us under Rule 16a-3(e) during our most recently concluded fiscal year, any Forms 5 furnished to us with respect to such fiscal year and any applicable written representations), except as set forth below, no person who was subject to Section 16 at any time during such fiscal year failed to file on a timely basis, as disclosed in such Forms, reports required by Section 16(a) during such fiscal year or prior fiscal years, except as otherwise disclosed herein.

Bon Amour International, LLC, a direct beneficial owner of more than 10% of our common stock, failed to file a Form 4 to report (before the end of the second business day following) reporting the transfer of shares of the Company’s common stock to third parties.  While the Company does not have detailed information regarding such transfers, it is the Company’s understanding that since the filing of the Company’s Annual Report on Form 10-K for the period ended December 31, 2011, Bon Amour International, LLC has transferred 37,518,289 shares of the Company’s common stock.  The Company has requested that Bon Amour International, LLC file one or more late Form 4’s disclosing such transfers as soon as possible.



 
16
 

Code of Ethics for Financial Executives

The Company has adopted a Financial Code of Ethics applicable to our directors, officers and employees. A copy of the Company’s Financial Code of Ethics is attached as Exhibit 14.2 to the Company’s Registration Statement on Form 10 filed on April 22, 2008.  The Company will provide a copy of this policy free of charge upon written request to Nathan W. Halsey, President, Bonamour, Inc., 2301 Cedar Springs Road, Suite 450, Dallas, Texas 75201.
 
Board Committees and Financial Expert
 
The Company does not currently maintain separate audit, nominating or compensation committees.  When necessary, the entire Board of Directors performs the tasks that would be required of those committees. Furthermore, we do not have a qualified financial expert serving on the Board of Directors at this time, because we have not been able to hire a qualified candidate and we have inadequate financial resources at this time to hire such an expert.

ITEM 11.                     EXECUTIVE COMPENSATION

None of our executive officers have received compensation for services rendered in any capacity on behalf of the Company during the years ended December 31, 2013 and 2012.

The Company has not entered into an employment agreement or consulting agreement with Nathan W. Halsey, the sole officer and director of the Company, and there are no arrangements or plans pursuant to which the Company provides pension, retirement, perquisites or similar benefits for executive officers.

Although the Company does not currently compensate its officers, we reserve the right to provide compensation at some time in the future. Our decision to compensate officers will depend on the availability of cash resources with respect to the need for cash to further our business purposes.

Outstanding Equity Awards

The Company has no equity compensation plans.
 
Compensation of Directors

The Company does not pay compensation to its directors for their service at this time.  Furthermore, the Company has no present formal plan for compensating our directors for their service in their capacity as such.


ITEM 12.                     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth the ownership, as of March 18, 2014, of each class of our voting securities by each person known by us to be the beneficial owner of more than 5% of such securities, each of our directors and executive officers; and all of our directors and executive officers as a group.   The information presented below regarding beneficial ownership of our securities has been presented in accordance with the rules of the SEC and is not necessarily indicative of ownership for any other purpose.  This table is based upon information derived from our stock records.  Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.  Except as otherwise listed below, the address of each person is c/o Bonamour, Inc., 2301 Cedar Springs Road, Suite 450, Dallas, Texas 75201. Except as set forth below, applicable percentages are based upon 199,500,000 shares of Common Stock and 5,000,000 shares of our Series A Preferred Stock outstanding as of March 18, 2014.
 
 
 
17
 

Title of
Class
Name of Beneficial Owner
  
Beneficial Ownership
 
Shares
Percentage
Common
Nathan Halsey
President, Chief Executive Officer,
Secretary and Director
  
 
142,031,711(1)
 
         71.2%
Series A
Preferred
Nathan Halsey
President, Chief Executive Officer,
Secretary and Director
  
 
5,000,000(1)
 
       100.0%
Common
Bon Amour International, LLC
  
142,031,711
71.2%
Series A
Preferred
Bon Amour International, LLC
  
 
5,000,000
 
100.00%
Common
All Current Officers and Directors
as a group
(1 person – Does not include Former
Directors/Officers)
  
 
142,031,711
71.2%
Series A
Preferred
All Current Officers and Directors
as a group
(1 person – Does not include Former
Directors/Officers)
  
 
5,000,000
100.0%
 
 
 
(1) By virtue of his position as the sole Manager, Chief Executive Officer and President of Bon Amour International, LLC, Mr. Halsey may be deemed to beneficially own the 142,031,711 shares of the Company's Common Stock and 5,000,000 shares of the Company’s Series A Preferred Stock beneficially owned by Bon Amour International, LLC. Mr. Halsey disclaims beneficial ownership of these shares.

ITEM 13.                     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Transactions with Related Persons

During the year ended December 31, 2013, BAI, our principal stockholder, incurred certain costs associated with the Company’s operations, including human resource costs, travel expense, marketing expense and occupancy costs, totaling $267,826.  In January 2013, the Company made a payment to BAI in the amount of $18,668.

During 2013, through cash advances or vendor payments, BAI advanced the Company $224,465.  During 2013, the Company reduced the outstanding related party loan balance with BAI with (i) a $2,000 payment to a BAI corporate credit card account issued in the name of Nathan Halsey, our sole officer and director, (ii) an application of a $1,888 refund paid to BAI in error by one of the Company’s vendors, (iii) a cash repayment of $1,150, and (iv) an application of $55,870 to partially offset accounts receivables with BAI of $202,765.   BAI is controlled by Mr. Halsey.

In November 2012, BAI began billing the Company for office occupancy costs at a rate of $5,000 per month. In July 2013, BAI reduced its office occupancy cost rate to $1,000 per month.
 
 
 
18
 

Director Independence

           Our securities are not currently listed on a national securities exchange or interdealer quotation system which would require that the Board of Directors include a majority of directors that are “independent.” Furthermore, no members of our Board of Directors would qualify as “independent” directors as such term is defined in the Nasdaq Global Market listing standards.

ITEM 14.                     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

The aggregate fees billed by Turner Stone & Company, LLP for professional services rendered for the audit of our annual financial statements for 2013 and 2012 and the reviews of the financial statements included in our Forms 10-Q or services normally provided by the accountant in connection with statutory and regulatory filings for those fiscal years were $24,840 and $22,860, respectively.

Audit-Related Fees

No fees or expenses were billed by Turner Stone & Company, LLP in fiscal years 2013 or 2012 for professional services rendered, other than the fees disclosed above under the caption “Audit Fees” for assurance and related services relating to performance of the audit or review of our financial statements.

Tax Fees

No fees or expenses were billed by Turner Stone & Company, LLP in fiscal years 2013 or 2012 for professional services rendered for tax compliance, tax advice or tax planning.

All Other Fees

We incurred no other fees or expenses for the 2013 or 2012 fiscal years for any other products or professional services rendered by Turner Stone & Company, LLP other than as described above.

PART IV

ITEM 15.                      EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a)  
Financial Statements

The following documents are filed as part of this Annual Report on Form 10-K beginning on the pages referenced below:

 
Page
Report of Independent Registered Public Accounting Firm
F-1
Balance Sheets as of December 31, 2013 and 2012
F-2
Statements of Operations for the years ended December 31, 2013 and 2012
F-3
Statement of Stockholders’ Equity (Deficit) for the years ended December 31, 2013 and 2012
F-4
Statements of Cash Flows for the years ended December 31, 2013 and 2012
F-5
Notes to Consolidated Financial Statements
F-6 – F12
 
 

 
19
 

(b)  
Exhibits

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

Exhibit
Description
3.1
Articles of Incorporation of Ventura Assets Limited dated August 9, 2002 and filed with the Colorado Secretary of State August 21, 2002 (incorporated by reference to Exhibit 3.1 of the Company’s Registration Statement on Form 10 filed with the Commission on April 22, 2008).
3.2
Articles of Amendment to the Articles of Incorporation of Ventura Assets Limited effective March 9, 2011 (incorporated by reference to Exhibit 3.2 of the Company’s Report on Form 10-K for the fiscal year ended December 31, 2010).
3.3
Articles of Amendment to the Articles of Incorporation of Ventura Assets Limited effective November 20, 2011(incorporated by reference to Ex. 3.3 of the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2011 (the ‘September 2011 Q”).
3.4
Certificate of Designation of Series A Preferred Stock of Bonamour, Inc. dated effective November 20, 2011 (incorporated by reference to Exhibit 3.4 of the September 2011 Q).
3.5
Bylaws (incorporated by reference to Exhibit 3.2 of the Company’s Registration Statement on Form 10 filed with the Commission on April 22, 2008).
14.1
Ventura Assets Limited Financial Code of Ethics Bylaws (incorporated by reference to Exhibit 14.2 of the Company’s Registration Statement on Form 10 filed with the Commission on April 22, 2008).
31.1
Certification of Principal Executive Officer pursuant to Rule 13a-14a/Rule 14d-14(a)*
31.2
Certification of 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. 1350*
101.1
Interactive data files pursuant to Rule 405 of Regulation S-T*
* Filed herewith.
 
 
 
20
 

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
 
     
DATE: March 31, 2014
BONAMOUR, INC.
     
 
By:
/s/ Nathan Halsey
 
Nathan Halsey
 
President, Chief Executive Officer and Secretary (Principal Executive Officer and Principal Financial and Accounting Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

SIGNATURE
  
TITLE
  
DATE
         
/s/ Nathan Halsey                      
Nathan Halsey
  
President, Chief Executive Officer, Secretary and
Director (Principal Executive Officer and
Principal Financial and Accounting Officer)
  
March 31, 2014



 
21
 
 


Report of Independent Registered Public Accounting Firm


Director and Stockholders
Bonamour, Inc.
Dallas, Texas

We have audited the accompanying balance sheets of Bonamour, Inc. (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, stockholders’ equity (deficit) and cash flows for the years ended December 31, 2013 and 2012. 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 audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 audits provide 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 the Company at December 31, 2013 and 2012 and the results of its operations and its cash flows for the years ended December 31, 2013 and 2012, in conformity with U.S. generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has an accumulated deficit and, to date, the Company’s sales have all been to a related party, both of which raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


Turner, Stone & Company, L.L.P.


Certified Public Accountants
Dallas, Texas
March 31, 2014
 
 
 
F - 1
 

BONAMOUR, INC.
  
BALANCE SHEETS
  
               
               
     
December 31,
  
     
2013
    
2012
  
               
 
ASSETS
  
               
Current Assets:
            
 
Cash
   $ 44     $ 26,452  
 
Inventory
     3,840       57,990  
 
Prepaid expense
     -       63,402  
 
Advances to officer (Note 4)
     -       25,000  
                   
 
     Total current assets
     3,884       172,844  
                   
Other Assets:
                
 
Software development costs, net of amortization of
                
 
  $12,500 and $7,500, respectively
     2,500       7,500  
                   
 
     Total other assets
     2,500       7,500  
                   
 
     Total assets
   $ 6,384     $ 180,344  
                   
 
 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  
 
 
                
Current Liabilities:
                
 
Accounts payable
   $ 15,139     $ 60,765  
 
Advances from related parties (Note 4)
     279,906       21,087  
                   
 
     Total current liabilities
     295,045       81,852  
                   
Commitments and Contingencies (Note 7)
                
                   
Stockholders' Equity (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
     (546,417 )     (159,264 )
                   
      
     Total stockholders' equity (deficit)
     (288,661 )     98,492  
                   
 
Total liabilities and stockholders' equity (deficit)     
   $ 6,384     $ 180,344  
 
 
The accompanying footnotes are an integral part of these financial statements.
 
 
F - 2
 
 
BONAMOUR, INC.
  
STATEMENTS OF OPERATIONS
  
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
  
             
             
   
Years Ended
  
   
December 31,
  
   
2013
    
2012
  
             
             
Revenue, net
   $ 202,765     $ 560,000  
                 
Cost of goods sold
     112,330       43,701  
                 
Gross profit
     90,435       516,299  
                 
Operating expenses:
                
Selling, general and administration
     472,588       407,792  
Amortization expense
     5,000       5,000  
     Total operating expenses
     477,588       412,792  
                 
Income (loss) before provision for income taxes
     (387,153 )     103,507  
                 
Provision for income taxes
     -       -  
                 
Net income (loss)
   $ (387,153 )   $ 103,507  
                 
Earning (loss) per share, basic and diluted
   $ (0.00 )   $ 0.00  
                 
Weighted average number of shares outstanding
     199,500,000       199,500,000  
 
 
The accompanying footnotes are an integral part of these financial statements.
 
 
 
F - 3
 
 
BONAMOUR, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
                             
                             
                             
   
Preferred Stock
  
Common Stock
  
Additional Paid
Accumulated
    
   
Shares
  
Amount
  
Shares
  
Amount
  
in Capital
  
Deficit
  
Total
                             
                             
                             
Balance, January 1, 2012
  
        5,000,000
  
 $        210,000
  
    199,500,000
  
 $          15,000
  
 $          32,756
  
 $      (262,771)
  
 $          (5,015)
                             
Net income
  
                    -
  
                    -
  
                    -
  
                    -
  
                    -
  
           103,507
  
           103,507
                             
Balance, December 31, 2012
  
        5,000,000
  
           210,000
  
    199,500,000
  
             15,000
  
             32,756
  
         (159,264)
  
             98,492
                             
Net loss
  
                    -
  
                    -
  
                    -
  
                    -
  
                    -
  
         (387,153)
  
         (387,153)
                             
Balance, December 31, 2013
  
        5,000,000
  
 $        210,000
  
    199,500,000
  
 $          15,000
  
 $          32,756
  
 $      (546,417)
  
 $      (288,661)
 
 
 
The accompanying footnotes are an integral part of these financial statements.
 
 
 
F - 4
 
 
BONAMOUR, INC.
  
STATEMENTS OF CASH FLOWS
  
FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012
  
             
             
   
Years Ended
  
   
December 31,
  
   
2013
    
2012
  
             
             
CASH FLOWS FROM OPERATING ACTIVITIES
            
  Net income (loss)
   $ (387,153 )   $ 103,507  
     Adjustments to reconcile net income (loss) to net
                
       cash flows used in operating activities:
                
             Amortization of software development costs
     5,000       5,000  
             Change in operating assets and liabilities:
                
             Inventory
     54,150       (57,990 )
             Prepaid expense
     63,402       (85,652 )
             Accounts payable
     (45,626 )     40,412  
             Customer deposit-related party
     -       (1,511,250 )
             Advances from related parties
     283,819       21,087  
                 
                 
Net cash used in operating activities
     (26,408 )     (1,484,886 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
     -       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
     -       -  
                 
Decrease  in cash
     (26,408 )     (1,484,886 )
Cash, beginning of year
     26,452       1,511,338  
Cash, end of year
   $ 44     $ 26,452  
                 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  
                 
Interest paid
   $ -     $ -  
                 
Income taxes paid
   $ -     $ -  
 
The accompanying footnotes are an integral part of these financial statements.
 

 
F - 5
 

BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS
 
NOTE 1 – ORGANIZATION AND BUSINESS

Bonamour, Inc., f/k/a Ventura Assets Limited (“Bonamour” or the “Company”) was incorporated under the laws of Colorado on August 9, 2002.  Effective as of November 20, 2011, the Company amended its Articles of Incorporation to change its name from Ventura Assets Limited to Bonamour, Inc.

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 BonamourTM-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.

On December 30, 2010, the Company entered into a Stock Purchase Agreement (the “December 2010 SPA”) with Halter Capital Corporation (“Halter Capital”) and Bon Amour International, LLC, a Texas limited liability company (“BAI”) (see NOTE 4 – RELATED PARTIES for more details), pursuant to which BAI acquired 166,915,000 post forward split shares of the Company’s common stock (representing approximately 83.7% of its then issued and outstanding common stock) from Halter Capital for cash consideration of $370,000 (“Bonamour Acquisition”).  The December 2010 SPA transaction closed on January 6, 2011, and resulted in a change of control of the Company.

Since the completion of the Bonamour Acquisition in early 2011, we have been developing our Bonamour-branded skincare products and made delivery of our first shipment in November of 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, currently our sole customer is 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 shareholder, holding approximately 71% of our Common Stock and 100% of our 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 Common Stock is quoted on the OTC Market Groups, Inc. OTCQB under the symbol "BONI."

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and going concern uncertainty

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”), which contemplates continuation of the Company as a going concern, dependent upon the Company's ability, among other matters, to establish itself as a profitable business.  At December 31, 2013, the Company had an accumulated deficit of $546,417.  To date, the Company’s sales have been to a related party (see NOTE 4 – RELATED PARTIES for more details).

The Company’s ability to continue in business is dependent upon obtaining sufficient financing and continued profitable operations.  However, there can be no assurance that management will be successful in obtaining additional funding or in continuing profitable operations, and therefore, these matters raise substantial doubt about the Company's ability to continue as a going concern.  These financial statements do not include any adjustments that might result from the outcome of these uncertainties, nor do they 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.
 
 
 
F - 6
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

Cash

For purposes of the statements of cash flows, the Company considers amounts held by financial institutions and short-term investments with an original maturity of 90 days or less at the time of purchase to be cash and cash equivalents.  Beginning 2013, insurance coverage reverted to $250,000 per depositor at each financial institution, and our non-interest bearing cash balances may exceed federally insured limits.  The Company had no amounts on deposit in excess of federally insured limits at December 31, 2013.

Trade Accounts Receivable

Trade accounts receivable are customer obligations due under normal trade terms.  The Company provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions.  Trade accounts receivable past due by more than 90 days are considered delinquent.  Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances of the customer.  Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received.  At December 31, 2013 and 2012, the Company had no trade accounts receivable.

Inventory

Inventory represents packaged health and beauty products and containers which are valued at the lower of cost or market using the average cost method.

Revenue Recognition

Revenue is recognized when 1) persuasive evidence of a sales arrangement exists, 2) the selling price is fixed or determinable, 3) delivery of the product or service occurs, and 4) collection is probable.

Fair value of financial instruments

In accordance with the reporting requirements of ASC Topic 825, Financial Instruments, the Company calculates the fair value of its assets and liabilities which qualify as financial instruments under this standard and includes this additional information in the notes to the financial statements when the fair value is different than the carrying value of those financial instruments.  The Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently, the Company did not have any fair value adjustments for assets and liabilities measured at fair value at the balance sheet dates, nor gains or losses reported in the statements of operations that are attributable to the change in unrealized gains or losses relating to those assets and liabilities still held during the years ended December 31, 2013 and 2012.
 
 
 
F - 7
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

Fair value measurements

ASC Topic 820, Fair Value Measurement, defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and requires certain disclosures about fair value measurements.  In general, fair values of financial instruments are based upon quoted market prices, where available.  If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters.  Valuation adjustments may be made to ensure that financial instruments are recorded at fair value.  These adjustments may include amounts to reflect counterparty credit quality and the customer’s creditworthiness, among other things, as well as unobservable parameters.  Any such valuation adjustments are applied consistently over time.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized when the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not be realized.

In accordance with ASC Topic 740, Income Taxes, the Company recognizes the effect of uncertain income tax positions only if the positions are more likely than not of being sustained in an audit, based on the technical merits of the position.  Recognized uncertain income tax positions are measured at the largest amount that is greater than 50% likely of being realized.  Changes in recognition or measurement are reflected in the period in which those changes in judgment occur.  The Company recognizes both interest and penalties related to uncertain tax positions as part of its income tax provision.

Earnings Per Share

The Company calculates earnings per share ("EPS") in accordance with ASC Topic 260, Earnings Per Share, which requires the computation and disclosure of two EPS amounts, basic and diluted.  Basic EPS is computed based on the weighted average number of shares of common stock outstanding during the period.  Diluted EPS is computed based on the weighted average number of common shares outstanding plus all potentially dilutive common shares outstanding during the period. Such potential dilutive common shares consist of stock options and warrants to purchase common stock of the Company of which the Company had none at December 31, 2013 and 2012.

Stock Based Compensation

The Company recognizes compensation expense for all stock based payments granted based on the grant date fair value estimated in accordance with ASC Topic 718, Compensation, Stock Compensation.  Compensation expense is generally recognized on a straight-line basis over the employee’s requisite service period based on the award's estimated lives for fixed awards with ratable vesting provisions.  The Company recognized no stock based compensation during the years ended December 31, 2013 and 2012.

Use of Estimates

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities.  We evaluate our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
 
 
F - 8
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

Recently Issued and Newly Adopted Accounting Pronouncements

During the year ended December 31, 2013 and through March 31, 2014 there were several new accounting pronouncements issued by the FASB.  Each of these pronouncements, as applicable, has been or will be adopted by the Company. Management does not believe the adoption of any of these accounting pronouncements has had or will have a material impact on the Company’s financial statements.

NOTE 3 – INVENTORY

Inventory consists of the following:
   
December 31,
  
   
2013
    
2012
  
Finished product
   $ 313     $ 54,463  
Containers
     3,527       3,527  
     TOTAL INVENTORY
   $ 3,840     $ 57,990  

NOTE 4 – RELATED PARTIES

Sales Deposit

On December 28, 2011, the Company accepted a purchase order from BAI, pursuant to which the Company will deliver certain Bonamour branded products (the “Bonamour Trio”), to BAI for consumer resale by BAI in Asia.  The payment terms called for an advance payment of $1,511,250.  The payment was received on December 30, 2011 and recorded as customer deposit-related party (the “Deposit”) on the Company’s financial statements.  In August 2012, a review of the project status revealed an overpayment of the Deposit in the amount of $906,750.  Between June and December 2012 the entire amount was repaid to BAI.  In November 2012, the Company recorded sales of its Bonamour Trio to BAI in the amount of $560,000 and applied this amount to the outstanding Deposit balance.  On September 30 and December 31, 2012, the Company offset $11,379 and $23,450, respectively, of the Deposit against amounts due to the Company by BAI.  As of December 31, 2012, the remaining balance of $9,671 was reclassified to loans from related parties in the accompanying financial statements.

Allocation of Expenses

During the year ended December 31, 2013, BAI incurred certain costs associated with the Company’s operations, including human resource costs, travel expense, marketing expense and occupancy costs, totaling $267,826.  In January 2013, the Company made a payment to BAI in the amount of $18,668.

In April 2013, the Company applied $146,895 to partially offset accounts receivables with BAI.  At December 31, 2013 the outstanding balance associated with this allocation was $102,263.
 
 
 
F - 9
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

Related Party Advances

During 2013 and 2012, through cash advances or vendor payments, BAI advanced the Company $224,465 and $14,087, respectively.  During 2013, the Company reduced the outstanding related party loan balance with BAI with (i) a $2,000 payment to a BAI corporate credit card account issued in the name of Nathan Halsey, our sole officer and director, (ii) an application of a $1,888 refund paid to BAI in error by one of the Company’s vendors, (iii) a cash repayment of $1,150, and (iv) an application of $55,870 to partially offset accounts receivables with BAI of $202,765 (see Allocation of Expenses above).   BAI is controlled by Mr. Halsey.  As of December 31, 2013, the Company reported $177,644 as the related party loan amount due to BAI.

During the year ended December 31, 2012, Bonamour Asia, LLC (“Bonamour Asia”), an entity solely owned by Mr. Halsey, advanced the Company $7,000 in the form of direct payments to a vendor to the Company.  In September 2013, the Company repaid the advances from Bonamour Asia in full.

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. In July 2013, BAI reduced its office occupancy cost rate to $1,000 per month, all of which is included in the Allocation of Expenses discussed above.  Management considers the Company's current office space arrangement adequate.

NOTE 5 – CAPITAL STOCK

At December 31, 2013, the Company had 500,000,000 authorized shares of Common Stock with a no par value and 25,000,000 authorized shares of Preferred Stock with no par value.

Common Stock

In August 2002, the Company issued 1,500,000 shares of Common Stock as founder shares resulting in gross proceeds of $15,000.  On March 10, 2011 the Company executed a 133 for 1 forward split of its issued and outstanding Common Stock affected in the form of a stock dividend.  As a result of the forward split, the Company issued 198,000,000 shares to its shareholders of record on March 10, 2011.

Preferred Stock

Effective as of November 20, 2011, the Board of Directors designated 10,000,000 shares of authorized preferred stock of the Company as Series A Preferred Stock.  Each holder of the Series A Preferred Stock is entitled to 20 votes for each share of Series A Preferred Stock held on any matter submitted to shareholders.  Shares of Series A Preferred Stock rank pari passu with the Company’s Common Stock with respect to dividends and any liquidation, winding up or dissolution of the Company.  On December 31, 2011, the Company issued 5,000,000 shares of its Series A Preferred Stock to BAI.
 
 
 
F - 10
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

At December 31, 2012, the Company had the above 5,000,000 shares of its Preferred Stock issued and outstanding.  The Company is authorized to issue up to 25,000,000 shares of Preferred Stock with designations, rights and preferences determined from time to time by the Board of Directors.  Accordingly, the Board of Directors is empowered, without shareholder approval, to issue Preferred Stock with dividend, liquidation, conversion, voting, or other rights which could adversely affect the voting power or other rights of the holders of the Common Stock.  In the event of issuance, the Preferred Stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.  If the Company issues shares of Preferred Stock and it is subsequently liquidated or dissolved, the preferred shareholders may have preferential rights to receive a liquidating distribution for their shares prior to any distribution to common shareholders.

NOTE 6 – INCOME TAXES

The Company had a federal net operating tax loss carry-forward of approximately $471,000 as of December 31, 2013.  The tax loss carry-forwards are available to offset future taxable income with the federal and state carry-forwards beginning to expire in 2031.

The difference between the expected income tax expense (benefit) and the actual tax expense (benefit) computed by using the Federal statutory rate of 34% is as follows:

   
Years Ended December 31,
  
   
2013
    
2012
  
             
Expected income tax expense (benefit) at statutory rate of 34%
   $ (136,000 )   $ 36,000  
Other
     8,000       -0-  
Change in valuation allowance
     128,000       (36,000 )
Income tax expense (benefit)
   $ -0-     $ -0-  

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes.  Temporary differences, which give rise to a net deferred tax asset, are as follows:

   
December 31,
  
   
2013
    
2012
  
Deferred Tax Assets:
            
             
Tax benefit of net operating loss carry-forward
   $ 171,000     $ 43,000  
Timing differences
     (3,000 )     (3,000 )
Less: valuation allowance
     (168,000 )     (40,000 )
Net deferred tax asset
   $ -0-     $ -0-  

In 2013 the deferred tax valuation allowance increased by $128,000, while in 2012 the deferred tax valuation allowance decreased $36,000.  The realization of the tax benefits is subject to the sufficiency of taxable income in future years.  The combined deferred tax assets represent the amounts expected to be realized before expiration.

The Company periodically assesses the likelihood that it will be able to recover its deferred tax assets.  The Company considers all available evidence, both positive and negative, including historical levels of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits.  As of December 31, 2013 and 2012, the Company established valuation allowances equal to the full amount of the net deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.
 
 
 
F - 11
 
 
BONAMOUR, INC.
NOTES TO FINANCIAL STATEMENTS

For the years ended December 31, 2013 and 2012, no amounts have been recognized for uncertain tax positions and no amounts have been recognized related to interest or penalties related to uncertain tax positions. The Company has determined that it is not reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company is currently subject to a three year statute of limitations by major tax jurisdictions.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

At December 31, 2013 and 2012 the Company was not obligated under any significant commitments or contingencies, except as set forth in NOTE 4 – RELATED PARTIES.


 
F - 12
 

BONAMOUR, INC. Reports