ADL » Topics » Distribution Channels for Beauty Product Lines

These excerpts taken from the ADL 10-K filed Apr 15, 2009.
Distribution Channels for Beauty Product Lines
 
During the third quarter 2008, JJB entered into distribution agreements with four beauty product distribution companies to open new distribution lines. Sales to these distributors in 2008 consisted primarily of our HPE Solutions. In order to support the development of this channel, the distribution agreements included an allowance for the promotion and marketing of new Goodnak/Nalefen line of skin care lotions. This allowance is equal to 400,000 RMB (approximately $58,400) for every 1,000,000RMB approximately $146,000) of products ordered, and is earned based on sales over the first six months of the distribution agreements
 
This allowance was necessary to develop extensive distribution of the Nalefen line. In addition to the allowance described above, the Company granted distributors of the Nalefen line payment terms of 120 days. Cash flow during the three months ended September 30 and December 31, 2008 was adversely affected as a result of the extended terms. The allowances and extended credit terms expired as of January 2009. The existing contracts expired and JJB is currently in negotiations to renew the agreements. As a result, we expect that revenue in the first quarter of 2009 will be adversely impacted. We anticipate that the new lotion formulations will also be sold through these distributors in 2009, when the products are launched.
 
In addition to China, we believe that some of the beauty products will be good candidates for export to the North American and South American markets. During the fourth quarter of 2008, we entered into an agreement with a U.S. cosmetic laboratory that is assisting in reformulation of the Chinese based formula for the U.S. and South American markets. Subsequent to the reformulation, the products will be tested at a US laboratory for safety and effectiveness. It is estimated that this process will be complete by the end of the third quarter of 2009.
 
Distribution
Channels for Beauty Product Lines



 



During the third quarter 2008, JJB entered into distribution
agreements with four beauty product distribution companies to
open new distribution lines. Sales to these distributors in 2008
consisted primarily of our HPE Solutions. In order to support
the development of this channel, the distribution agreements
included an allowance for the promotion and marketing of new
Goodnak/Nalefen line of skin care lotions. This allowance is
equal to 400,000 RMB (approximately $58,400) for every
1,000,000RMB approximately $146,000) of products ordered, and is
earned based on sales over the first six months of the
distribution agreements


 



This allowance was necessary to develop extensive distribution
of the Nalefen line. In addition to the allowance described
above, the Company granted distributors of the Nalefen line
payment terms of 120 days. Cash flow during the three
months ended September 30 and December 31, 2008 was
adversely affected as a result of the extended terms. The
allowances and extended credit terms expired as of January 2009.
The existing contracts expired and JJB is currently in
negotiations to renew the agreements. As a result, we expect
that revenue in the first quarter of 2009 will be adversely
impacted. We anticipate that the new lotion formulations will
also be sold through these distributors in 2009, when the
products are launched.


 



In addition to China, we believe that some of the beauty
products will be good candidates for export to the North
American and South American markets. During the fourth quarter
of 2008, we entered into an agreement with a U.S. cosmetic
laboratory that is assisting in reformulation of the Chinese
based formula for the U.S. and South American markets.
Subsequent to the reformulation, the products will be tested at
a US laboratory for safety and effectiveness. It is estimated
that this process will be complete by the end of the third
quarter of 2009.


 




EXCERPTS ON THIS PAGE:

10-K (2 sections)
Apr 15, 2009
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