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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-SB
AMENDMENT NO. 1
General Form For Registration of Securities of
Small Business Issuers
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
NURESCELL INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
Nevada 33-0805583
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
2030 Main Street, 13th Floor
Irvine, California 92614
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (949) 260-4925
SECURITIES TO BE REGISTERED UNDER SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
None N/A
SECURITIES TO BE REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock, $.0001 par value
(TITLE OF CLASS)
Class "A" Common Stock Purchase Warrants
(TITLE OF CLASS)
Class "B" Common Stock Purchase Warrants
(TITLE OF CLASS)
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EXPLANATORY NOTE:
Nurescell Inc. (the "Company" or "Registrant") is filing this Amendment
No. 1 to Form 10-SB voluntarily. The Company intends to seek to have its
securities quoted on the OTC Bulletin Board, for which a registration under
the Securities Act of 1934 is now required. As a result of the filing of
this Amendment No. 1 to Form 10-SB (the "Registration Statement"), the
Company will be obligated to file with the Securities and Exchange Commission
certain periodic reports, including an annual report containing audited
financial statements.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
PART I
(Note: The Company has elected to follow Disclosure Alternative 2 in the
preparation of this Registration Statement.)
ITEM 6: DESCRIPTION OF BUSINESS.
THIS REGISTRATION STATEMENT CONTAINS CERTAIN FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. AS A RESULT OF
CERTAIN FACTORS DESCRIBED BELOW AND ELSEWHERE IN THIS REGISTRATION STATEMENT,
AND OTHER FACTORS, ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED
IN THOSE FORWARD-LOOKING STATEMENTS.
GENERAL. The Company was formed in Nevada on May 12, 1998 for the
purpose of developing and commercially exploiting a proprietary radiation
shielding technology (the "Nurescell Technology") for use by the nuclear
power industry and others producing, handling or storing radioactive
materials. The Nurescell Technology is being designed for incorporation into
the structural components of new and existing nuclear reactor facilities in
order to provide a cost-effective safeguard from the lethal effect of
radiation while achieving a minimal disruption to existing physical
facilities. It is also being designed as a containment material which will
provide an attractive alternative to the conventional concrete/steel
entombment and glassification technologies currently used to store
ever-increasing amounts of spent nuclear fuel and other radioactive waste.
In addition, it is expected to provide an innovative shielding material
critical to advanced accelerator and defense research applications. The
Nurescell Technology is based upon a proprietary formulation which was
acquired from Adrian A. Joseph, Ph.D., the Company's President and majority
shareholder, in June 1998. See "Interest of Management and Others in Certain
Transactions." The intended market and primary application for the Company's
products will be nuclear power plants, accelerators and waste storage
facilities worldwide. Based on the potential applications for the Nurescell
Technology, as well as the potential markets, the Company believes that there
is a substantial opportunity to develop a profitable business over the next
two years. However, because the Company is in its start-up and research and
development and testing stage, it currently has no final products and no
sales,
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and is not currently marketing the Nurescell Technology. As a result, there can
be no assurance that the Company or the Nurescell Technology will be successful
or that the Company can or will achieve any sales or profitability.
THE PROPOSED PRODUCTS. The Nurescell Technology is expected to be
superior to existing and competing technology which is based upon a ceramic
silicon foam (also originally developed by Dr. Joseph). It is believed that
products based on the Nurescell Technology will possess characteristics which
include:
- Favorable Heat Transfer and Diffusion Properties
- High Radioactive Resistance
- High Compressive and Tensile Strengths
- Corrosion and Shrinkage Resistance
- Fugitive Gassing Properties
- Resistance to Weathering and Aging
- Ease of Application and Handling
- A Non-Hazardous Application Process
In addition, the Company's products are expected to result in
significant reductions in the weight and volume of encapsulated nuclear waste
and/or on-site spent fuel depository space. If achieved, those characteristics
are believed by the Company to be superior to ceramic silicon foam (which does
not have mechanical strength, shrinks when subjected to high temperatures and is
comprised of hydrogen chains which are a potential danger in high temperature
environments) and thus correct some of the most acute problems associated with
conventional nuclear materials and the resultant radioactive waste problems. In
addition, the physical performance characteristics of Nurescell Technology
materials are expected to expedite advances in nuclear accelerator and
innovative fuel projects, which require special performance materials for their
facilities.
The Company's products are currently in the sample testing stage.
At this point, the Company has completed a "Statement of Work" with the U.S.
Department of Energy ("DOE") and Battelle Memorial Institute, Pacific
Northwest National Laboratory ("PNNL"), and is in the process of finalizing a
Cooperative Research and Development Agreement for product testing and market
development with the DOE and PNNL (the latter of which will conduct the
sample testing). After commencement, it is anticipated that PNNL's test and
evaluation process will take approximately two years.
In parallel with the work by PNNL, the Company has entered into an
agreement with the University of Missouri for product testing with respect to
high levels of alpha, beta and gamma radiation. At this point, samples have
been shipped to the University of Missouri and the first set of test results is
expected around the end of June 1999.
After the performance of the Nurescell Technology has been
satisfactorily evaluated by PNNL, the Company will seek to incorporate Nurescell
Technology products into field studies of specialized applications and into
bench scale and field trials of specialized private enterprise equipment.
Simultaneous with that phase, the Company will use its best efforts to seek out
and form various strategic alliances for the use of its products in nuclear
material handling equipment and applications.
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THE MARKET. The Company considers every nuclear power plant in the
world to be a potential customer for the Nurescell Technology which, because of
its mechanical properties (including structural strength), can be used in
materials for construction of new nuclear facilities or in the retrofitting of
existing facilities. At this time, there are approximately 150 nuclear power
plants in the United States, of which approximately 40 are not currently in
operation. Of the operating nuclear power plants, approximately 50 are owned by
the DOE and the balance are owned by public and private utilities. There are
also currently approximately 360 nuclear power plants in the world which are not
located in the United States or Russia. Because accidents do occur at nuclear
power plants for a variety of reasons, management of the Company believes that a
cost-effective safety shield system for new and existing facilities is in great
demand.
Nurescell also believes that its products can play an important role
in the recovery and reuse of materials from existing nuclear warheads. As
nuclear arsenals in the U.S. and former Soviet Union are dismantled, this
application will grow in importance.
In light of the huge and steadily growing deposits of worldwide
nuclear waste and related materials (447,000 metric tons according to 1995
estimates), the properties of the Nurescell Technology are believed to have a
worldwide market as the means of correcting the existing problems with the
handling and storage of spent reactor fuel and various other radioactive
materials, such as uranium mill tailings and accelerator wastes.
Because of their special shielding needs, it is expected that nuclear
accelerator projects, as well as projects involving innovative fuels and defense
research applications, will find the Nurescell Technology to be an important
factor in implementing those projects.
GOVERNMENTAL REGULATION. In the United States, the nuclear power
industry is highly regulated under the jurisdiction of the DOE and the Nuclear
Regulatory Commission ("NRC"), with the NRC having primary responsibility for
enacting and enforcing regulations designed to ensure the safety of nuclear
power plants. That regulatory authority extends from construction to all phases
of operations. In particular, the NRC has the authority to require nuclear
power plants to utilize specific measures to ensure and enhance their safety.
In the rest of the world, regulatory oversight of nuclear power plants
is effected through a Nuclear Safety Committee which is comprised of
representatives from throughout the world.
COMPETITION. The number of competitors offering proprietary products
designed to accomplish the same or similar effects as the Nurescell Technology
include Lockheed Martin, which utilizes the ceramic silicon foam technology, and
SAE (France), which utilizes a concrete-iron technology, among others. Other
companies may currently have or may succeed in developing products superior to
the Nurescell Technology, or may more effectively market such other products,
either of which could substantially reduce the potential market for products
using the Nurescell Technology.
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MARKETING STRATEGY. At this time, the Company plans to divide its
major market into the following divisions:
- Reactor Spent Nuclear Fuel
- Department of Defense Special Projects
- EM-40 Environmental Management and Site Restoration Programs
- Specialized Advanced Accelerator Materials
- Low Level Nuclear Wastes
The Company's marketing strategy is to develop its products in
accordance with the specifications and design which will be required by the
NRC and DOE and, in some situations, the U.S. Department of Defense ("DOD").
The Company will then seek to present the Nurescell Technology to the NRC,
DOE and, as appropriate, the DOD, with emphasis on both the efficacy of the
technology and the cost savings which the technology will allow by reducing
downtime for maintenance. This presentation will be made with the intent of
having the NRC mandate that the Nurescell Technology be installed in all
nuclear power plants in the United States. The Company believes that
becoming the standard in the United States will then result in the Nurescell
Technology being accepted as the standard worldwide. The Company's marketing
organization structure will be based upon the following:
- The use of Company technical personnel with substantial
nuclear physics and engineering, field technical sales and
corporate product management experience at the corporate
level, each with a specific area of technical expertise.
- Field Technical Sales Representatives with successful,
in-depth experience in nuclear physics and engineering and
technical sales work located in those geographical areas
which will best serve the rapid development of the Company's
business.
- Presentations at nuclear power trade shows where independent
environmental engineering and consulting companies can be
made increasingly aware of the Nurescell Technology and the
unique applications that can serve their clients' needs.
If the Company is able to move ahead as planned, it expects to begin
involvement in a variety of nuclear markets by the end of 1999, including
commercial domestic and international nuclear plants, submarine-based nuclear
reactors, DOD and DOE nuclear waste site restoration projects and nuclear
accelerator materials.
On March 1, 1999, the Company entered into a letter of understanding
("LOU") with Performance Improvement International ("PII"). Under the LOU, PII
will provide certain marketing, product development, specification review and
other services to the Company related to nuclear power plants. PII is headed by
Dr. Chang Chiu, a former Dean of Physics at the Massachusetts Institute of
Technology and the former General Manager of the San Onofre Nuclear Power
Station. The LOU provides that PII will receive 15% of all nuclear power plant
net revenues generated as a direct result of PII's services, as well as
reimbursement of actual expenses (not to exceed $125,000 per year) and options
to purchase 200,000 shares of the Company's Common Stock for $3.00 per share.
The LOU is terminable by the Company for "cause" (as specified in the LOU) or
upon the death or disability of Dr. Chiu. By its terms, the LOU remains in
effect until April 29, 1999, subject to replacement with a more detailed
agreement (which has not yet occurred).
PRODUCT MANUFACTURING AND INSTALLATION. At this time, samples of
Nurescell Technology products that are required by PNNL and the University of
Missouri are being prepared by Thermach Engineering, an experienced
formulation laboratory. Once mass production begins, the Company anticipates
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that a major United States chemical manufacturing company will be a contract
manufacturer of products incorporating the Nurescell Technology. The Company
has also established contacts in Israel with the Atomic Nuclear Commission for
the purpose of establishing a manufacturing capacity. For installation of its
products, the Company anticipates contracting with engineering firms to install
those products in nuclear power plants and other applications identified by the
Company for the encapsulation of nuclear materials. The Company does not
anticipate any difficulty in obtaining the ingredients needed to manufacture its
products.
INTELLECTUAL PROPERTY RIGHTS. At this time, a United States patent
has been applied for with respect to certain elements of the Nurescell
Technology (patent application No. 09/187,641). To date, no patents have been
issued pending the results of further research, testing and legal work. It is
anticipated that the ingredients of the Nurescell Technology will also be
manufactured under secrecy agreements. In addition, the Company will pursue
foreign patents and other U.S. and foreign protection of its intellectual
property to the extent appropriate under the circumstances.
PERSONNEL. The Company currently has five employees (all of whom
are full-time), three part-time consultants and a technical Board of Advisors
currently comprised of one member. It is anticipated that additional
employees will be hired as the needs of the Company require. It is also
anticipated that the Company will utilize third party contractors to handle
various of the Company's needs as they arise.
PLAN OF OPERATION. The Company is in the very early stages of its
development. Consequently, its operations consist principally of research,
development and testing of the basic Nurescell Technology. Although the
Company intends to actively pursue research grants to fund either all or a
portion of this research, development and testing, any such revenues are not
anticipated prior to the third quarter of 1999. Additionally, there are no
assurances that the Company will obtain any grants or that any grant funding
received will be sufficient to meet all the Company's funding requirements,
either within this estimated time frame or in the future. Revenues
associated with actual commercial applications of the Nurescell Technology
are not anticipated for two years. From inception to March 31, 1999, the
Company has obtained approximately $995,000 in financing through the sale of
equity securities through two private offerings (the "Offerings"), each of
which has been completed. See "Recent Sales of Unregistered Securities." To
date, the Company has utilized approximately $645,000 of the proceeds of the
Offerings to (i) commence patent applications for the Nurescell Technology,
(ii) identify, negotiate and finalize suitable research, development and
testing contracts, (iii) identify, negotiate and finalize preliminary
marketing consulting contracts and (iv) provide working capital for the
ongoing administrative and financing acquisition costs of the Company. The
approximately $350,000 of remaining proceeds from the Offerings will be used
to begin initial formal testing of the Nurescell Technology, continue the
pursuit of patents and provide administrative working capital. The Company
anticipates that the $350,000 will provide sufficient capital to enable the
Company to operate for approximately six months. The Company's financial
statements for the period from May 12, 1998 (date of inception) to December
31, 1998 have been prepared assuming the Company will continue as a
going-concern. As noted in the Company's financial statements, the presence
of significant losses, negative cash flows and limited working capital,
together with the uncertainties associated with the ability of the Company to
obtain additional capital, raise substantial doubts as to the Company's
ability to continue as a going-concern. See "Index to Financial Statements."
The Company's ability to continue as a going-concern will be questionable
until such time as it is able to generate sufficient revenues (from research
grants and/or commercial operations) in excess of expenses to sustain its
normal business activities. Until that time, the Company will depend on its
ability to raise additional capital through either commercial loans or equity
or debt offerings. At this time, the Company expects that it will need
approximately $3 million in additional funding over the next two years in
order to complete the necessary research, development and testing of its
Nurescell Technology. The Company currently anticipates the financing of at
least such $3 million to be derived from a "best efforts" private offering of
equity securities which is currently being discussed with a broker-dealer.
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There can, however, be no guarantee that any additional funding will be
available on terms favorable to the Company or its shareholders, if at all.
If sufficient funds are not available when needed, the Company may be
required to curtail its operations, which could have a material adverse
effect on the Company's business, operating results and financial condition.
ITEM 7: DESCRIPTION OF PROPERTY.
The Company leases its approximately 500 square foot executive offices
at 2030 Main Street, 13th Floor, Irvine, California pursuant to a sublease which
expires in May, 1999 and provides for rental payments of $4,025 per month. The
sublease includes the Company's right to use the furniture, fixtures, office
equipment and common facilities at that location. Should the Company be
required to relocate its offices when its sublease expires, management believes
that replacement space is readily available in the same general area.
ITEM 8: DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT EMPLOYEES.
Set forth below is information regarding the directors and executive
officers of the Company. The Company has no significant employees other than
those described below and there are currently no other persons under
consideration to become directors or executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William A. Wilson 84 Chairman of the Board (a Director
position)
Adrian A. Joseph 46 President
Rita M. Lavelle 50 Director and Vice President - Marketing
John R. Longenecker 45 Director and Vice President - Operations
Sharon Nitka 37 Director, Chief Financial Officer and
Secretary
</TABLE>
WILLIAM A. WILSON has been the Chairman of the Board of the Company
since its inception on May 12, 1998. Mr. Wilson has approximately fifty
years of business experience in both the financial and manufacturing fields
and is currently an advisor and consultant to various high technology and
financial companies. Mr. Wilson is the former Chairman of the Board of Web
Wilson Oil Tools, Inc. and San Vicente Investments Co., and a former member
of the Boards of Directors of Jorgensen Steel Company, Penzoil Company,
Disease Detection International, Western Energy Management, Inc., Incomnet,
Inc., National Registry Corporation, Orbit Technologies, Inc. and several
privately held companies. Mr. Wilson currently holds a Board seat with First
Pacific Networks, Inc., which has operated under chapter 11 bankruptcy
protection since 1997. He is also a director and corporate Secretary of
Tresis International, a newly-formed corporation in which Adrian A. Joseph is
the majority shareholder. Mr. Wilson was a delegate to several Republican
conventions, Chairman of the
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Presidential Personnel Selection Committee (Reagan Administration), Presidential
envoy to the Holy See (Vatican), first Ambassador to the Holy See (Reagan
Administration) and a trustee of President Reagan's personal trust. Mr. Wilson
holds a Bachelor of Science degree in Mechanical and Metallurgical Engineering
from Stanford University. Mr. Wilson devotes approximately 20% of his business
time to the Company.
ADRIAN A. JOSEPH, PH.D. has been the President of the Company since
its inception. Dr. Joseph holds a Ph.D. degree in nuclear physics from the
Israel Institute of Technology, which he earned in 1974. For 12 years prior to
the commencement of pre-organization work on the Company (which began in
February 1996), Dr. Joseph was the founder and chief scientist and Chairman of
the Board of Orbit Technologies Inc., a publicly traded company engaged in
developing materials to treat existing hazardous waste. Dr. Joseph resigned his
position with Orbit Technologies Inc. in February 1996, but remains a
shareholder of that company. Dr. Joseph has developed many diverse technologies
and holds 118 issued patents and has over 200 active patent applications on
file. Dr. Joseph's work has included metafusion (a process for the fusion of
metals at room temperature), low-cost titanium refining and extraction,
ultrasound technology for the reduction of viscosity in fluids, and technologies
in the coatings, plastics and foam areas. In 1994, he received an Honors Award
from the Euro-Asian Association of Physicists for High Achievement in Nuclear
Physics. Dr. Joseph also received his Bachelor of Science degree in Electronics
Engineering from the Israel Institute of Technology. Dr. Joseph devotes
essentially all of his business time to the Company.
RITA M. LAVELLE has been a director and Vice-President of the Company
since its inception. Since 1986, Ms. Lavelle has been the President of NuTECH
Enterprises, Inc., an environmental engineering and remediation company. From
1982 through 1983, Ms. Lavelle was appointed by President Ronald Reagan as the
Administrator of Hazardous Waste with the U.S. Environmental Protection Agency,
where she controlled a $2.5 billion budget directing the nationwide enforcement
and compliance efforts for U.S. hazardous waste handling and cleanup commonly
known as the Superfund. Prior thereto, Ms. Lavelle held positions which
included Director of Communications with Cordova Chemical and Aerojet, Director
of Marketing with Intercontinental and Continental Chemicals, Department
Information Officer with the California Department of Consumer Affairs, and
Publications Assistance in Governor Ronald Reagan's Administration in
California. Ms. Lavelle holds an MBA in Finance and Strategic Planning and
Marketing from Pepperdine University and a BA degree in Biology and Mathematics.
Ms. Lavelle devotes approximately 50% of her business time to the Company.
JOHN R. LONGENECKER has been a director and Vice-President of the
Company since its inception. Mr. Longenecker is also the President of
Longenecker & Associates, a management consulting firm with the high
technology and energy related businesses. Prior to the formation of
Longenecker & Associates in 1989, Mr. Longenecker was Chairman of General
Atomics International Services Corporation, a company which operates and
maintains nuclear power stations. From 1983 to 1987, Mr. Longenecker served
in the Reagan administration as the chief executive officer of the U.S.
uranium enrichment business in the DOE, and prior thereto worked in the
United States'
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nuclear reactor development program as the Director of Breeder Demonstration
Projects for the DOE. Mr. Longenecker received both his Bachelor of Science and
Master of Science degrees from Pennsylvania State University and is a member of
their Industrial Professional Advisory Council. Mr. Longenecker devotes
approximately 20% of his business time to the Company.
SHARON NITKA has been a director and the Chief Financial Officer and
Secretary of the Company since its inception and is the sister of Adrian A.
Joseph. During the last five years, Ms. Nitka has also worked as a consultant
for Nagila Foods, Inc. ("Nagila"), a company which, among other things, operates
restaurants and prepares pre-packaged food items. Ms. Nitka's primary focus for
Nagila has been the development of an effective marketing strategy, including
community public relations. Other services for Nagila have included an in-depth
analysis of the operations management, which included creating a new branch of
delivery services and transforming Nagila's manual process to computerized
systems. Ms. Nitka has also held a variety of administrative and management
positions with various other companies. From 1985 to 1990, Ms. Nitka served as
the financial administrator of Orbit Technologies Inc. and a programmer analyst
with Metafuse Limited, both of which are or were controlled by Adrian A. Joseph.
Ms. Nitka holds a Bachelor degree in computer science and business and devotes
approximately 60% of her business time to the Company.
Subject to prior resignation or removal, the Company's directors serve
in that capacity until the next annual meeting of shareholders or until their
successors are elected or appointed and duly qualified. Officers are appointed
by the Board of Directors and serve in that capacity until resignation or
removal. Except as noted above, there are no family relationships by blood,
marriage or adoption among any directors and/or executive officers of the
Company, and there are no arrangements or understandings between any director or
executive officer and any other person pursuant to which such director or
executive officer was selected for his or her office or position. Except as
noted above, within the past five years (i) no petition under the federal
Bankruptcy Act or any state insolvency law has been filed by or against any
executive officer or director of the Company, and no receiver, fiscal agent or
similar officer has been appointed by a court for the business or property of
any such persons, or any partnership in which any of such persons was a general
partner at or within the two years before the time of such filing, or any
corporation or business association of which any such person was an executive
officer at or within the past two years and (ii) no director or executive
officer of the Company has been convicted in a criminal proceeding (excluding
traffic violations and other minor offenses).
ITEM 9: REMUNERATION OF DIRECTORS AND OFFICERS.
COMPENSATION. The following table sets out the compensation paid on
a cash basis from inception to March 31, 1999 to (i) each of the Company's
three highest paid officers or directors and (ii) the Company's officers and
directors as a group:
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<TABLE>
<CAPTION>
NAME OR IDENTITY OF GROUP TITLE COMPENSATION(1)
- ------------------------- ----- ---------------
<S> <C> <C>
Adrian A. Joseph President $136,783(2)
Sharon Nitka Chief Financial Officer,
Secretary and Director $ 30,928(3)
William A. Wilson Director $ 26,333(4)
All officers and directors
as a group (5 persons) $229,225(5)
</TABLE>
_______________
(1) Does not include group life, health, hospitalization or other benefit plans
which do not discriminate in scope, terms or operation in favor of officers
or directors and which are available generally to all salaried employees.
(2) Mr. Joseph has also been issued options for 160,000 shares of Common Stock.
See "Security Ownership of Management and Certain Securityholders."
(3) Ms. Nitka has also been issued options for 60,000 shares of Common Stock.
See "Security Ownership of Management and Certain Securityholders."
(4) Mr. Wilson has also been issued options for 60,000 shares of Common Stock.
See "Security Ownership of Management and Certain Securityholders."
(5) As a group, the Company's officers and directors have also been issued
options for 400,000 shares of Common Stock. See "Security Ownership of
Management and Certain Securityholders."
STOCK OPTION PLAN. Under the Company's 1998 Stock Option Plan (the
"Option Plan"), all officers and directors of the Company, as well as its
employees and consultants, are eligible to be selected to participate. The
purpose of the Option Plan is to promote the interests of the Company by
providing participants with an inducement to maintain their status with the
Company and to further advance the interests of the Company. Options are
granted in consideration of things such as past and potential future
contributions to the Company. The Option Plan is administered by a Stock
Option Committee (the "Committee"), which consists of at least two directors
appointed by the Company's Board of Directors.
As of April 15, 1999, 300,000 options have been issued under the
Option Plan. The aggregate number of shares of Common Stock to be delivered
upon the exercise of all options granted under the Option Plan cannot exceed
360,000 shares. In the event of any merger, reorganization, recapitalization,
stock dividend, stock split or reverse split or other act or event which
effects a restructure of the Company's Common Stock (but not including the
issuance of additional shares of Common Stock or preferred stock), the total
number of shares covered by the Option Plan, the exercise price, and number
of shares covered by outstanding options granted pursuant to the Option
Plan, and the rights, preferences and privileges incident to such shares will
be appropriately adjusted as to any remaining options. Any shares covered by
options granted pursuant to the Option Plan which expire or are cancelled are
available for reissuance under the Option Plan.
The Committee determines the individuals to whom and the times at
which options are granted and the terms of, and number of shares subject to,
each option. The Committee also has the authority to construe and interpret
the Option Plan. There is no maximum or minimum number of shares which may be
subject to options granted to any one individual under the Option Plan. The
exercise price of the stock covered by each option is also determined by the
Committee; provided, however, that (i) as to incentive stock options, such
exercise price will not be less than an amount equal to 100% of the "fair
value" of the stock (as determined pursuant to the Option Plan) on the date
the option is granted (110% for options granted to persons who hold 10% or
more of the Company's Common Stock) and (ii) as to all other options, such
exercise price will not be less than an amount equal to 85% of the fair value
of the stock on the date the option is granted. Upon the exercise of an
option granted under the Option Plan, the exercise price is payable in full
at the time of exercise, either in cash, by check, in stock of the Company
valued at fair market value at the time of each such exercise or, in the
Committee's discretion, by delivery of a promissory note. Subject to the
express provisions of the Option Plan, the terms of each option granted under
the Option Plan, including the exercise price, manner of exercise, vesting
and duration of each option, shall be as specified in the applicable option
agreement between the Company and the option holder.
As a general proposition, if the option holder ceases, for any
reason, to be an employee of the Company, or a director of the Company, as
the case may be, the option holder will have a right thereafter to exercise
the option during a specified period set forth in the option agreement
between the Company and the option holder, which in the event of termination
due to death or permanent disability, will be no more than three years and
which, in all other cases, will be no more than one year.
Options granted under the Option Plan are not assignable or
transferable except by will or the laws of descent and distribution, and are
exercisable during the option holder's lifetime only by the option holder. No
options will be exercisable more than ten years after the date of grant
(five years for options granted to persons holding 10% or more of the
Company's Common Stock).
Upon the anticipated occurrence of certain specified events,
including a merger, consolidation or other transaction in which the Company
ceases to be an independent corporation, the Committee, in its discretion, may
provide that all options granted under the Option Plan will become
exercisable in full for a specified period prior to such event.
The Board of Directors of the Company or the Committee may amend,
suspend or terminate the Option Plan at any time. Unless terminated sooner,
the Option Plan will terminate on June 15, 2008 and no options may be granted
thereafter. No amendment, suspension or termination of the Option Plan will,
without the consent of the option holder, be made which would alter or impair
any rights or obligations under any option then outstanding. Upon the
dissolution or liquidation of the Company, the Option Plan will terminate,
and any option previously granted thereunder and not yet exercisable in full
will also terminate. In the event, however, that the Company is succeeded by
another corporation, the Option Plan and any remaining options granted
thereunder will be assumed by such successor corporation, subject to such
adjustments as may be necessary due to the capital structure of the successor
corporation.
COMPENSATION ARRANGEMENTS. On May 15, 1998, the Company entered
into a three-year employment agreement with Adrian A. Joseph. The employment
agreement automatically renews for succeeding terms of one year, subject to
the prior notification of termination by either the Company or Dr. Joseph.
Annual compensation pursuant to the employment agreement is $180,000 per
year, payable monthly, subject to annual increases at the discretion of the
Company's Board of Directors. Dr. Joseph is also to receive an annual bonus
equal to 10% of the amount of annual Company profits which exceeds $300,000
over the Company's prior year's profits. Although the employment agreement
includes non-disclosure covenants as to the Company's trade secrets, Dr.
Joseph is permitted to pursue other opportunities while serving as President
of the Company, but only with the consent of the Board of Directors.
The Company has also entered into an employment agreement with Sharon
Nitka. That agreement is terminable by the Company at any time, without cause,
and provides for an annual salary of $36,000 plus reimbursement of reasonable
expenses incurred in the furtherance of the Company's business.
The Company has entered into consulting agreements with William A.
Wilson, Rita M. Lavelle and John R. Longenecker, each of whom is a director of
the Company. Pursuant to those agreements (each of which is terminable by
either party on 30-days notice), the
10
<PAGE>
Company pays consulting fees of $2,000 per month (which increased to $4,000
per month for Ms. Lavelle on March 1, 1999), plus reimbursement of
Company-approved expenses.
Except as noted above, the Company does not compensate its directors
for their services as such except for the reimbursement of expenses incurred in
attending Board of Directors meetings.
ITEM 10: SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN SECURITYHOLDERS.
The following table sets forth the record ownership of the Company's
Common Stock (the Company's only class of voting stock) as of April 15, 1999
as to (i) each person or entity who owns more than 10% of any class of the
Company's securities (including those shares subject to outstanding options),
(ii) each person named in the table appearing in "Remuneration of Directors and
Officers" and (iii) all officers and directors of the Company as a group:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF OWNER NUMBER OF SHARES OWNED(1) PERCENT OF CLASS (2)
- ------------------------- ------------------------- --------------------
<S> <C> <C>
Adrian A. and Dianna Joseph 7,889,000(3) 60.6%
2030 Main Street, 13th Floor
Irvine, California 92614
Sharon Nitka 350,000(3) 2.7%
2030 Main Street, 13th Floor
Irvine, California 92614
William A. Wilson 750,000(3) 5.8%
10101 Wilshire Blvd.
Los Angeles, California 90024
All officers and directors 9,889,000(3) 75.9%
as a group (5 persons)
</TABLE>
______________________
(1) To the Company's knowledge, the persons named in the table have sole voting
and investment power with respect to all shares of Common Stock owned by
them, subject to community property laws where applicable.
(2) Based on 13,026,500 shares of Common Stock outstanding, without
taking into account any shares issuable upon the exercise of outstanding
options.
(3) Does not include shares which can be obtained upon exercise of the options
described in the table below.
11
<PAGE>
Other than the Class "A" Common Stock Purchase Warrants, the Company
has no class of non-voting securities presently outstanding. See "Securities
Being Offered."
The following table sets forth the options, warrants and other rights
to purchase securities of the Company which were held as of April 15, 1999 by
(i) each person or entity who owns more than 10% of any class of the Company's
securities, (ii) each person named in the table appearing in "Remuneration of
Directors and Officers" and (iii) all officers and directors of the Company as a
group:
<TABLE>
<CAPTION>
TITLE AND AMOUNT
OF SECURITIES CALLED
FOR BY OPTIONS, EXPIRATION
NAME OF HOLDER WARRANTS OR RIGHTS(1) EXERCISE PRICE DATE
- -------------- --------------------- -------------- ----------
<S> <C> <C> <C>
Adrian A. Joseph 100,000 shares of Common $1.00/share Varies (2)
Stock
60,000 shares of Common $0.55/share Varies (3)
Stock
Sharon Nitka 60,000 shares of Common $0.50/share Varies (3)
Stock
William A. Wilson 60,000 shares of Common $0.50/share Varies (3)
Stock
All officers and 400,000 shares of Common $0.50/share, Varies (2)(3)
directors as a group Stock $0.55/share
(5 persons) and $1.00/share
</TABLE>
________________
(1) All options in this table are fully vested.
(2) Options are exercisable only during the term of Dr. Joseph's employment
agreement, subject to extension to June 1, 2001 under certain
circumstances.
(3) Options are exercisable until July 31, 2003 as to Dr. Joseph, and until
July 31, 2008 as to the other optionees, subject in each case to earlier
termination in the event of death, disability and certain other events.
ITEM 11: INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS.
The following is a description of those transactions by the Company
since its inception or which are presently proposed in which (i) any Company
director, officer, promoter or greater than 10% shareholder (or a relative or
spouse thereof, or any relative of such spouse) has or is to have a direct or
indirect interest and (ii) the amount involved exceeds $50,000.
On June 12, 1998, the Company issued to Adrian A. Joseph (the
Company's President and majority shareholder) 10,000,000 shares of Common Stock
in return for his
12
<PAGE>
assignment of the Nurescell Technology which he developed. At that time, the
Company also paid Dr. Joseph approximately $34,000 for certain materials and
supplies owned by him in connection with the development of that technology.
The Company has also entered into employment agreements with Dr.
Joseph and Sharon Nitka (the Company's Chief Financial Officer and Secretary and
a director), as described above in "Remuneration of Directors and Officers," and
has granted stock options to Dr. Joseph and Ms. Nitka, as described in "Security
Ownership of Management and Certain Securityholders."
The Company has entered into consulting agreements with Rita M.
Lavelle, William A. Wilson and John R. Longenecker (each of whom is a director),
as described above in "Remuneration of Directors and Officers." The Company has
also granted stock options to each of those persons, as described in "Security
Ownership of Management and Certain Securityholders."
ITEM 12: SECURITIES BEING OFFERED.
The Company's Articles of Incorporation, as amended, authorize the
Company to issue 50,000,000 shares of Common Stock, par value $.0001 per
share, and 1,000,000 shares of Preferred Stock, par value $.0001 per share.
As of April 15, 1999, there were 13,026,500 shares of Common Stock issued
and outstanding, subject to increase depending on the results of the Pending
Offering. See "Description of Business - Plan of Operation." None of the
Company's 1,000,000 shares of Preferred Stock are issued or outstanding.
COMMON STOCK. On all matters submitted to a vote of the shareholders, each
holder of Common Stock has the right to one vote for each share held of record.
Subject to preferences that may be applicable to any outstanding Preferred
Stock, holders of Common Stock are entitled to receive ratably such dividends as
may be declared by the Board of Directors out of funds legally available
therefor. In the event of a liquidation, dissolution or winding up of the
Company, holders of Common Stock are entitled to share ratably in all assets
remaining after payment of liabilities and the liquidation preferences of any
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive rights and no right to convert their Common Stock into any other
securities. There are no redemption or sinking fund provisions applicable to
the Common Stock, and all outstanding shares of Common Stock are fully paid and
nonassessable.
Nevada law does not require shareholder approval for the issuance of
authorized but unissued shares of Common Stock. Such issuances may be for a
variety of corporate purposes, including future private and public offerings to
raise additional capital or to facilitate corporate acquisitions.
PREFERRED STOCK. The Company currently has no plans to issue any Preferred
Stock. The
13
<PAGE>
Company's Board of Directors does, however, have the authority, without action
by the shareholders, to issue all or any portion of the authorized but unissued
Preferred Stock in one or more series and to determine the voting rights,
preferences as to dividends and liquidation, conversion rights, and other rights
of such series. The Preferred Stock, if and when issued, may carry rights
superior to those of the Common Stock.
The Company considers it desirable to have Preferred Stock available to
provide increased flexibility in structuring possible future financings and in
meeting corporate needs which may arise. If opportunities arise that would make
it desirable to issue Preferred Stock through either public offerings or private
placements, the provision for Preferred Stock in the Company's Articles of
Incorporation would avoid the possible delay and expense of a shareholders'
meeting, except as may be required by law or regulatory authorities. Issuance
of the Preferred Stock could result, however, in a series of securities
outstanding that would have certain preferences with respect to dividends and
liquidation over the Common Stock which would result in dilution of the income
per share and net book value of the Common Stock. Issuance of additional Common
Stock pursuant to any conversion right which may be attached to the terms of any
series of Preferred Stock may also result in the dilution of the net income per
share and the net book value of the Common Stock. The specific terms of any
series of Preferred Stock will depend primarily on market conditions, terms of a
proposed acquisition or financing, and other factors existing at the time of
issuance. Furthermore, it is not possible at this time to determine in what
respect a particular series of Preferred Stock will be superior to the Company's
Common Stock or any other series of Preferred Stock which the Company may issue.
The Board of Directors does not intend to issue any Preferred Stock except on
terms which it deems to be in the best interest of the Company and its
shareholders.
WARRANTS. The Company has also issued Class "A" Common Stock Purchase
Warrants (the "Class A Warrants") and is required to issue Class "B" Common
Stock Purchase Warrants (the "Class B Warrants") under certain circumstances.
As of April 15, 1999, 98,000 Class A Warrants were outstanding. Class A
Warrants are exercisable commencing November 10, 1999 and expire one year
thereafter (or earlier upon certain events described below if not exercised
prior thereto). The holders of the Class A Warrants are entitled to purchase
one share of Company Common Stock and one Class B Warrant for an aggregate
exercise price of $4.00 per Class A Warrant exercised. Class B Warrants are
also exercisable for a one year period, beginning on the date the Class B
Warrant is issued (subject to earlier expiration upon the occurrence of
certain events, as described below).
Upon surrender of each Class A Warrant with the subscription form duly
executed, together with payment of the exercise price, the holder will be
entitled to receive a certificate for one share of Common Stock and one Class B
Warrant. Likewise, upon surrender of a Class B Warrant with the subscription
form duly executed, together with the payment of $3.00 per Class B Warrant
exercised, the holder will be entitled to receive a certificate for one share of
Common Stock. The shares of Common Stock and the Class B Warrants issued
pursuant to the exercise of the Class A Warrants and Class B Warrants
(collectively, the "Warrants") will be "restricted
14
<PAGE>
securities," as that term is used in Rule 144 under the Securities Act of 1933
(the "Securities Act").
In case of any reorganization, consolidation, merger, liquidation or
dissolution of the Company, the Warrantholders will be given 30-days notice of
such impending event. Exercise of the Warrants at any time prior to such
impending event will entitle the holder to receive the stock or other securities
or property which shareholders of record will receive upon consummation of such
event (in lieu of the stock or the securities or property otherwise receivable
upon the exercise of the Warrants). Failure to exercise after such notice and
prior to the consummation of the corporate transaction shall result in the
automatic expiration of the unexercised Warrants. In the event of a dividend of
the Company Common Stock or a split thereof, the exercise price and number of
shares purchasable upon exercise of the Warrants will be adjusted
proportionately so as to prevent dilution to a Warrantholder.
OPTIONS. The Company has granted options to purchase an aggregate of
400,000 shares of Common Stock to its officers and directors as described above
in "Security Ownership of Management and Certain Securityholders." The only
other Company options presently outstanding are those granted to an initial
investor which provide for the purchase of up to 24,000 shares of Common Stock
at $1.00 per share at any time after November 10, 1999.
APPLICATION OF CALIFORNIA LAW. Under California Corporations Code Section
2115 ("Section 2115"), a corporation that is not incorporated in California
(such as the Company) will still be subject to certain provisions under
California corporate law if, among other things, over one-half of its
outstanding voting securities are held of record by California residents and it
has the requisite level of property holdings, payroll and sales in California.
If the requirements are met, the provisions of the California Corporations Code
which are applicable include: (i) Section 303 (relating to removal of directors
without cause); (ii) Section 304 (relating to removal of directors by court
proceedings); (iii) Section 309 (relating to directors' standard of care); (iv)
Section 317 (indemnification of directors, officers and others); (v) Sections
500 through 505, inclusive (relating to limitations on corporate distributions
in cash or property); (vi) Section 506 (relating to liability of a shareholder
who receives an unlawful distribution; (vii) Section 708, subdivisions (a), (b)
and (c) (relating to a shareholder's right to cumulate votes at an election of
directors); (viii) Section 710 (relating to supermajority vote requirements);
(ix) Chapter 13, commencing with Section 1300 (relating to dissenters' rights);
and (x) Sections 1500 and 1501 (relating to records and reports). Some of the
applicable provisions may provide shareholder rights which are greater than
those available under Nevada law, while others may provide lesser rights.
Because the foregoing is only a summary and is not intended to, and does not,
constitute a complete description of shareholders' rights under California law,
each person is urged to consult his, her or its own counsel with respect to such
rights and how they may differ from the rights available under Nevada law.
Based on the circumstances known at this time, it appears that the Company
currently meets the requirements for application of Section 2115. If such
requirements continue to be met
15
<PAGE>
on the date that determination of the applicability of Section 2115 is made
under California law, it is expected that the Company will become subject to the
specified California corporate law provisions commencing on January 1, 2001.
Thereafter, such corporate law provisions will continue to apply until the end
of the fiscal year in which the Company files a report showing that at least one
of the criteria for application of Section 2115 is no longer being met.
TRANSFER AGENT. The transfer agent and registrar for the Common Stock and
the Warrants is U.S. Stock Transfer Corporation, Glendale, California.
PART II
ITEM 1: MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER SHAREHOLDER MATTERS.
At the present time, there is no public trading market for the
Company's securities. The Company is, however, currently seeking clearance for
quotation in the "Pink Sheets" of the National Quotations Bureau. The Company
also intends to seek to have its securities quoted on the OTC Bulletin Board
after this Registration Statement becomes effective. Should either quotation
forum become available, the prices thereon will represent quotations between
dealers, without adjustment for retail mark-up, mark-down or commission, and
will not necessarily represent actual transactions.
The Company has not paid any cash dividends on its Common Stock since
its incorporation and anticipates that, for the foreseeable future, earnings, if
any, will continue to be retained for use in its business. As of April 15,
1999, the number of record holders of the Company's Common Stock was 208.
ITEM 2: LEGAL PROCEEDINGS.
The Company is not currently a party to any legal proceedings and, to
the knowledge of management, there is no litigation threatened by or against the
Company.
ITEM 3: CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS.
None.
ITEM 4: RECENT SALES OF UNREGISTERED SECURITIES.
On May 15, 1998, the Company privately issued options to purchase
100,000 shares of Common Stock at $1.00 per share to Adrian A. Joseph (the
Company's President) as part of his employment agreement with the Company.
Based on Dr. Joseph's relationship with the Company, the issuance was made
pursuant to the registration exemption under Section 4(2)
16
<PAGE>
of the Securities Act.
On May 18, 1998, the Company privately issued a total of 2,500,000
shares of Common Stock to Sharon Nitka, William A. Wilson, Rita M. Lavelle and
John R. Longenecker (each of whom was (and is) a director and/or officer of the
Company), as well as The Foundation Group (a "sophisticated investor"), for a
total of $2,500 in cash. Based on each investor's relationship with the
Company, the issuance was made pursuant to the registration exemption under
Section 4(2) of the Securities Act.
On June 12, 1998, the Company privately issued 10,000,000 shares of
Common Stock to Adrian A. Joseph in return for the transfer to the Company of
the Nurescell Technology. Based on Dr. Joseph's relationship with the Company,
the issuance was made pursuant to the registration exemption under Section 4(2)
of the Securities Act.
Between August 12 and September 18, 1998, the Company privately
issued a total of 498,000 shares of Common Stock to 42 persons for a total of
$498,000 in cash. All investors met certain suitability standards imposed by
the Company and were considered to be "sophisticated investors." Based on
those suitability standards and the disclosures provided to the investors,
the issuance was made pursuant to the registration exemption under Rule 504
of Regulation D under the Securities Act.
On July 31, 1998, in recognition of their efforts on behalf of the
Company, the Company privately issued options to purchase 60,000 shares of
Common Stock at $0.55 per share to Adrian A. Joseph and options to purchase
another 240,000 shares at $0.50 per share to Sharon Nitka, William A. Wilson,
Rita M. Lavelle and John R. Longenecker. Based on the optionees'
relationship with the Company, the issuance was made pursuant to the
registration exemption under Rule 701 of the Securities Act.
Between September 18, 1998 and March 31, 1999, the Company
privately issued a total of 100,000 units (each unit consisting of one share
of Common Stock and one Class A Warrant) for $5.00 per unit to 22 persons for
a total of $243,500 in cash. All investors met certain suitability
standards imposed by the Company and were considered "sophisticated
investors." Based on those standards and the disclosures provided to
investors, the offering was made pursuant to the registration exemption under
Rule 504 of Regulation D under the Securities Act.
ITEM 5: INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Nevada law, director immunity from liability to a corporation or
its shareholders for monetary liabilities applies automatically unless it is
specifically limited by a corporation's articles of incorporation (which is not
the case with the Company's Articles of Incorporation). Excepted from that
immunity are: (i) a willful failure to deal fairly with the
17
<PAGE>
corporation or its shareholders in connection with a matter in which the
director has a material conflict of interest; (ii) a violation of criminal law
(unless the director had reasonable cause to believe that his or her conduct was
lawful or no reasonable cause to believe that his or her conduct was unlawful);
(iii) a transaction from which the director derived an improper personal profit;
and (iv) willful misconduct.
Under certain circumstances, Nevada law provides for indemnification
of the Company's officers, directors, employees and agents against liabilities
that they may incur in such capacities. In general, any officer, director,
employee or agent may be indemnified against expenses, fines, settlements or
judgments arising in connection with a legal proceeding to which such person is
a party, if that person's actions were in good faith, were believed to be in the
Company's best interest, and were not unlawful. Unless such person is
successful upon the merits in such action, indemnification may be awarded only
after a determination by independent decision of the Board of Directors, by
legal counsel, or by a vote of the shareholders, that the applicable standard of
conduct was met by the person to be indemnified.
The circumstances under which indemnification is granted in connection
with an action brought on behalf of the Company is generally the same as those
set forth above; however, with respect to such actions, indemnification is
granted only with respect to expenses actually incurred in connection with the
defense or settlement of the action. In such actions, the person to be
indemnified must have acted in good faith and in a manner believed to have been
in the Company's best interest, and must not have been adjudged liable for
negligence or misconduct.
At this time, the Company has also entered into an indemnification
agreement with each of its directors and officers. In the future,
indemnification may also be granted pursuant to the terms of Bylaw provisions
that may be adopted, or pursuant to a vote of shareholders or directors. The
statutory provisions also grant the Company the power to purchase and
maintain insurance which protects its officers and directors against any
liabilities incurred in connection with their services in such positions, and
such a policy may be obtained by the Company.
The foregoing is only a summary description and is qualified in its
entirety by reference to the applicable Nevada statutes. The foregoing may also
be affected by the possible application of certain California statutes, as
described above in "Securities Being Offered - Application of California Law."
18
<PAGE>
PART F/S
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountant . . . . . . . . . . . . . . . . . . . . . . . . .F-2
Balance Sheets as of December 31, 1998 and September 30, 1998. . . . . . . . . . .F-3
Statement of Operations for the period from May 12, 1998 (date of inception)
to December 31, 1998 and September 30, 1998. . . . . . . . . . . . . . . . . . .F-4
Statements of Changes in Stockholders' Equity
for the period from May 12, 1998 (date of inception)
to December 31, 1998 and September 30, 1998. . . . . . . . . . . . . . . . . . .F-5
Statements of Cash Flows for the period from May 12, 1998
(date of inception) to December 31, 1998 and September 30, 1998 . . . . . . . . .F-6
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . .F-7
</TABLE>
F-1
<PAGE>
RONALD L. JAMIESON, CPA
Certified Public Accountants
- --------------------------------------------------------------------------------
4281 Katella Ave, Suite 117, Los Alamitos, CA 90720
(714)821-9690 * (562)598-8549 * Fax (714)821-9286
April 26, 1999
To the Board of Directors
Nurescell Inc.
Irvine, CA 92614
I have audited the accompanying balance sheets of Nurescell Inc. (a development
stage company) as of December 31, 1998 and September 30, 1998, and the related
statements of operations, stockholders' equity and cash flows for the period
from May 12, 1998 (inception) to December 31, 1998 and September 30, 1998. These
financial statements are the responsibility of the Company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit 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 presentaion. I
believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the balance sheets of Nurescell as of December 31, 1998 and
September 30, 1998, and the results of its operations and its cash flows for the
period from May 12, 1998 (inception) to December 31, 1998 and September 30,
1998, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company is a development stage
enterprise engaged in developing certain radiation shielding technology. As
discussed in Note 1 to the financial statements, the Company's accumulated
losses from operations and negative operating cash flows; its necessity to
obtain additional financing to fund operations until the necessary regulatory
approvals are obtained, if ever; and its ability to ultimately attain successful
operations raise substantial doubt about its ability to continue as a going
concern. Management's plans concerning these matters are described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
As discussed in Note 2 to the financial statements, the September 30, 1998
statement of cash flows have been restated to reclassify and/or change the
manner of presentation of certain accounts.
/s/ Ronald L. Jamieson
Ronald L. Jamieson, CPA
F-2
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEETS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
DECEMBER 31 SEPTEMBER 30
---------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 85,775 $ 295,845
Advances to employees 12,662 -
Note receivable officer 46,683 20,417
---------- ----------
Total Current Assets 145,120 316,262
PROPERTY PLANT AND EQUIPMENT at cost, less accumulated
depreciation of $3,966 and $1,643, 45,015 45,309
respectively
OTHER ASSETS
Deposits 3,000 3,000
Intangibles 18,239 15,000
Organizational costs, net of accumulated amortization
of $1,592 and $367, respectively 65,447 39,490
---------- ----------
Total Other Assets 86,686 57,490
---------- ----------
TOTAL ASSETS $ 276,821 $ 419,061
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 34,498 $ 22,968
Accrued Salaries 3,000 3,000
Payroll Taxes Payable 3,603 7,854
---------- ----------
Total Current Liabilities 41,101 33,822
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock; $.0001 par, 50,000,000 shares authorized,
13,024,500 and 13,017,800 shares issued and outstanding 1,302 1,302
Additional paid in capital 641,698 608,198
Less: Stock subscription receivable - (17,000)
Deficit accumulated during the development stage (407,280) (207,261)
---------- ----------
Total Stockholders' Equity 235,720 385,239
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 276,821 $ 419,061
---------- ----------
---------- ----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-3
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF OPERATIONS
FOR THE PERIOD FROM MAY 12, 1998 (DATE OF INCEPTION) TO
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
FROM MAY 12 TO
DECEMBER 31 SEPTEMBER 30
----------- ------------
<S> <C> <C>
EXPENSES:
Research and development $ 2,000 $ --
General and administrative 401,837 205,251
Depreciation and amortization 5,557 2,010
----------- -----------
Total expenses 409,394 207,261
OTHER INCOME:
Interest Income (2,114)
----------- -----------
NET LOSS $ (407,280) $ (207,261)
----------- -----------
----------- -----------
NET LOSS PER SHARE
Basic and fully diluted $ (0.03) $ (0.02)
----------- -----------
----------- -----------
Weighted average common shares outstanding 13,021,150 12,708,900
----------- -----------
----------- -----------
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
F-4
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM MAY 12, 1998 (DATE OF INCEPTION) TO
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
ADDITIONAL STOCK
COMMON STOCK PAID-IN SUBSCRIPTION ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE DEFICIT
---------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK:
Cash - founding shareholder 2,500,000 $ 250 $ 2,250
Technology agreement 10,000,000 1,000 9,000
Cash - $1.00 per share 498,000 50 497,950
Cash - $5.00 per share 19,800 2 98,998
STOCK SUBSCRIPTION RECEIVABLE $ (17,000)
NET LOSS $ (207,261)
---------- -------- ---------- ---------- -----------
BALANCE, SEPTMEBER 30, 1998 13,017,800 $ 1,302 $ 608,198 $ (17,000) $ ( 207,261)
---------- -------- ---------- ---------- -----------
ISSUANCE OF COMMON STOCK:
Cash - $5.00 per share 6,700 - 33,500
STOCK SUBSCRIPTION RECEIVABLE
17,000
NET LOSS $ (200,019)
---------- -------- ---------- ---------- -----------
BALANCE, DECEMBER 31, 1998 13,024,500 $ 1,302 $ 641,698 $ - $ (407,280)
---------- -------- ---------- ---------- -----------
---------- -------- ---------- ---------- -----------
</TABLE>
See accompanying notes to financial statement
F-5
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD FROM MAY 12, 1998 (DATE OF INCEPTION) TO
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
FROM MAY 12 TO
DECEMBER 31 SEPTEMBER 30
----------- ------------
<S> <C> <C>
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net loss $ (407,280) $ (207,261)
Adjustments to reconcile net loss to net cash used in
Operating activities:
Depreciation 3,966 1,643
Amortization 1,592 367
Changes in assets and liabilities:
Advances to employees (12,662) -
Deposits (3,000) (3,000)
Organizational costs (67,039) (39,857)
Accounts payable 34,498 22,968
Accrued salaries 3,000 3,000
Accrued payroll taxes 3,603 7,854
----------- ------------
Net Cash Flows Used by Operating Activities (443,322) (214,286)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant & equipment (48,981) (46,952)
Acquisition of intangibles (8,239) (5,000)
----------- ------------
Net Cash Flows Used by Investing Activities (57,220) (51,952)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 633,000 582,500
Proceeds from officer loans (46,683) (20,417)
----------- ------------
Net Cash Flows Provided by Financing Activities 586,317 562,083
----------- ------------
NET INCREASE IN CASH 85,775 295,845
CASH AT BEGINNING OF PERIOD - -
----------- ------------
CASH AT END OF PERIOD $ 85,775 $ 295,845
----------- ------------
----------- ------------
SUPPLEMENTAL DISCLOSURES :
Noncash Investing and Financing Transactions:
Fair market value of intangibles acquired $ 10,000 $ 10,000
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
1. GENERAL
NATURE OF BUSINESS
The Company was incorporated on May 12, 1998, pursuant to the laws of the
State of Nevada under the name Nurescell Inc. The Company is currently
engaged in the research, development and testing of its proprietary
radiation shielding technology.
GOING-CONCERN
The accompanying financial statements have been prepared based on the
assumption that the Company will continue as a going-concern. This
assumption anticipates that the Company will be able to realize assets and
satisfy obligations in the normal course of business. The Company has
accumulated net losses of $407,280 and negative cash flows from operating
activities of $443,322 from inception to December 31, 1998. The Company has
not completed testing and development nor obtained patents on its principal
technology. The technology must undergo further development and testing
before the Company will be able to generate any significant commercial
revenues. The Company anticipates that research, development and testing
will require significant additional financing. Management intends to seek
the additional financing through future private placement offerings, joint
ventures, and research grants. The Company's capacity to operate as a
going-concern is dependent on its ability to obtain adequate financing to
fund its operations until the Company is able to complete the necessary
research, development and testing necessary to generate commercial revenues
sufficient to fund ongoing operations. These factors, among others, 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 this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
Since the Company has no revenues and has not yet commenced its principal
operations, it is considered a "development stage enterprise," as defined
by Statement of Financial Accounting Standards No. 7, Accounting and
Reporting by Development Stage Enterprises.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the statement of cash flows include cash and
cash on deposit. The Company maintains its cash balance in one financial
institution. At September 30, 1998, the Company's cash balance exceeded the
financial institution's insured Federal Deposit Insurance Corporation limit
of $100,000.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Expenditures for maintenance and
repairs are charged to operations as incurred while renewals and
improvements are capitalized. Depreciation of furniture, fixtures, and
equipment is computed using the straight-line method. Estimated useful
lives for reporting purposes are as follows:
Furniture, fixtures, and equipment 5 to 7 years
F-7
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
OTHER ASSETS
Other assets consist of deposits, intangibles, and organizational costs.
Intangibles include patent application (and associated legal costs) and
certain technology acquisition costs. Upon commencement of operations, all
costs associated with obtaining patents and technology acquisition costs
will be amortized on a straight-line basis over a 17-year period. The
Company will evaluate the recoverability of intangibles on an annual basis
by comparing the estimated net realizable value of the intangibles to their
carrying value. Organization costs (exclusive of certain legal costs) are
being amortized on a straight-line basis over a 5-year period.
LOSS PER SHARE
Basic loss per share is computed by dividing loss available to common
shareholders by the weighted-average number of shares outstanding during
the period. Diluted loss per share is computed considering the potential
dilution that could occur from other financial instruments that would
increase the total number of outstanding shares of common stock. Common
stock equivalents, however, have not been included in the computation of
diluted loss per share because their effect would be antidilutive.
RECLASSIFICATIONS
The September 30, 1998 financial statement have been restated to reflect a
non-cash transaction in the Statement of Cash Flows.
3. INTANGIBLE ASSETS
On June 12, 1998, the Company entered into a Sale of Technology Agreement
("Agreement") with Dr. Adrian Joseph (now a Officer of the Company) whereby
the Company acquired all rights, title and interest in a new generation of
flexible containment material ("Nuresfoam") for fissionable nuclear
material ("Technology"). The Technology is based, in part, on prior
patented technology, however the Technology itself has not yet be patented
nor trademarked. An U.S. patent has been applied for with the U.S. Patent
Office, U.S. Patent Application 09/187,641.
As consideration for the sale of the Technology, Dr. Joseph received
10,000,000 shares or 80% of the Company's then outstanding common stock.
The transfer of the Technology was intended to be a tax-free exchange in
accordance with Internal Revenue Code Section 351. The Agreement stated
that the Company valued the Technology at $5,000,000; however, an
independent valuation of the technology was not obtained. Consequently, the
Technology has been recorded at a nominal value of $10,000 based on the
fair value ($.0001 per share) of the common stock issued in exchange for
the Technology on the date of transfer.
4. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space under an operating sublease that requires
minimum monthly payments of $3,719. Rent expense for the period ended
December 31, 1998 was $31,210.
F-8
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
The estimated future minimum lease payments as of December 31, 1998 are as
follows:
<TABLE>
<CAPTION>
PERIOD ENDING
----------------------------
DECEMBER 31 SEPTEMBER 30
----------- ------------
<S> <C> <C>
1998 $ - $ 11,157
1999 19,817 19,817
-------- ----------
Total $ 19,817 $ 30,974
-------- ----------
-------- ----------
</TABLE>
5. INCOME TAXES
For federal income tax purposes, approximately $407,280 of net operating
loss carryforwards exists to offset future taxable income. These
carryforwards expire in 2014. No tax benefit has been reported in the
accompanying financial statements, however, because management believes
that there is at least a 50% chance that the carryforwards will expire
unused. Accordingly, the $176,352 tax benefit of the cumulative
carryforwards has been offset by a valuation allowance of the same amount.
6. COMMON STOCK
The Company has 50,000,000 shares of $.0001 par value common stock
authorized of which 13,024,500 and 13,017,800 shares are issued and
outstanding at December, 31, 1998 and September 30, 1998, respectively.
7. STOCK OPTIONS
Effective June 15, 1998, the stockholders approved an Incentive Stock
Option Plan granting to any Director, Officer, Employee or Consultant to
the Company options to purchase Company Common Stock over a ten-year
period, at the fair market value at time of grant. The aggregate number of
common shares of the Company which may be granted under the plan is 360,000
shares. No options were granted or exercised as of December 31, 1998.
8. STOCK WARRANTS
Effective September 15, 1998 the stockholders approved a plan to issue
units consisting of one share of Common Stock (the "Common Stock") and one
Class "A" Common Stock Purchase Warrant (the "Class A Warrants") of the
Company.
The Class "A" Warrants are exercisable into one (1) share of Common Stock
and one (1) Class "B" Common Stock Purchase Warrant (the "Class "B"
Warrant") commencing the day immediately after the first anniversary of the
closing of the offering (the "A" Exercise Date") and have an exercise price
of $4.00. The Class "A" Warrants expire on the first anniversary of the "A"
Exercise Date (the "A" Expiration Date"). The Class "B" Warrants are
exercisable into one (1) share of Common Stock commencing immediately upon
their issuance (the "B" Exercise Date") and have an exercise price of $3.00
per share of Company Common Stock. The Class "B" Warrants expire on the
first anniversary of the "B" Exercise Date.
F-9
<PAGE>
NURESCELL INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND SEPTEMBER 30, 1998
Prior to permitting the exercise of either the Class "A" or Class "B"
Warrants offered hereby, the Company will be required to either register
the underlying Common Stock or seek an exemption from registration under
both federal and state law. The Common Stock and the Class "A" warrant are
immediately detachable.
9. RELATED PARTIES
The Company has made unsecured loans of $46,683, including interest, to one
of its officers. These 10% interest-bearing loans are evidenced by notes
and are all due within twelve months.
The Company has also entered into consulting contracts with certain
Directors as a means of inducing the Directors to devote additional time
and effort to the Company over and above the time normally expected of a
Director. These contracts provide for payments of $2,000 per month to each
Director under contract, have no stated termination date but are cancelable
by either party on 30 days written notice. Amounts paid by the Company
under these contracts were $22,000 and $26,485, respectively at December
31, 1998 and September 30, 1998.
The Company purchased various chemicals, lab equipment, research material
and start-up expenses from a related party. The purchases of lab equipment,
research materials and start-up expenses have been capitalized and amounted
to $20,000 during the period ended September 30, 1998. The purchase of
chemicals have been expensed in the period from May 12, 1998 (inception) to
September 30, 1998 and amounted to $14,000.
10. SUBSEQUENT EVENTS
SIGNIFICANT CONTRACTS AND AGREEMENTS
On March 1, 1999, the Company entered into a letter of understanding
("LOU") with Performance Improvement International ("PII"). Under the LOU,
PII will provide certain marketing, product development, specification
review and other services to the Company related to nuclear power plants.
PII is headed by Dr. Chang Chiu, a former Dean of Physics at the
Massachusetts Institute of Technology and the former General Manager of the
San Onofre Nuclear Power Station. The LOU provides for PII to receive a
percentage of all nuclear power plant net revenues generated as a direct
result of PII's services.
The Company is currently in discussions with a Southern California based
entity to raise approximately $5,000,000 on a "best efforts" basis through
a private-offering of equity securities. Although the Company has received
a letter of commitment from the entity outlining the general terms of the
fund raising, no formal agreements have been signed to date. These
discussions are preliminary in nature and there is no guarantee that the
Company will be able to consummate any offering whereby the Company will
receive all or any portion of the $5,000,000 at any time during the near or
distant future.
Until recently, the Company has been involved in negotiations with Lawrence
Livermore National Laboratory ("LLNL") in order to establish a working
relationship for the testing and qualification of the Technology. In this
context, the Company and LLNL had negotiated a form of joint venture, known
as "CRADA". As of April 9, 1999, the "CRADA" and the pre-arrangement for
testing has been transferred to Pacific North National Laboratory. The
Company expects to sign a revised "CRADA" in the immediate future.
F-10
<PAGE>
PART III
ITEMS 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS.
The following exhibits are included as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C>
2.1 Articles of Incorporation, as amended*
2.2 Bylaws*
3.1 Form of Class "A" Common Stock
Purchase Warrant Certificate*
3.2 Form of Class "B" Common Stock
Purchase Warrant Certificate*
6.1 Employment Agreement between the
Company and Adrian A. Joseph, Ph.D.
dated May 15, 1998*
6.2 Sale of Technology between the Company
and Adrian A. Joseph dated June 12, 1998*
6.3 Employment Agreement between the
Company and Sharon Nitka dated
June 1, 1998*
6.4 Consulting Agreement between the
Company and John Longenecker
dated June 26, 1998*
6.5 Consulting Agreement between the
Company and William A. Wilson dated
June 10, 1998*
6.6 Consulting Agreement between the Company
and Rita Lavelle dated June 1, 1998*
6.7 Form of Stock Option Agreement between the
Company and its officers and directors*
6.8 1998 Stock Option Plan*
6.9 Form of Indemnification Agreement between
the Company and its officers and directors*
6.10 Letter of Understanding for Proposed Agreement between the
Company and Performance Improvement International dated
March 1, 1999
6.11 Research Plan submitted by the University of Missouri to the
Company
</TABLE>
III - 1
<PAGE>
<TABLE>
<S> <C>
12.1 Consent of Auditor
27 Financial Data Schedule
</TABLE>
- ----------
*Previously filed.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
NURESCELL INC.
By: /s/ ADRIAN A. JOSEPH
-------------------------------
Adrian A. Joseph, President
Dated: May 3, 1999
III - 2
<PAGE>
LETTER OF UNDERSTANDING
FOR PROPOSED AGREEMENT
This Letter of Understanding (LOU) is entered into effective March 1, 1999
between Consultant: Performance Improvement International (PII), 112 W.
Canada, San Clemente, CA 92675 and Client: Nurescell Inc., 2030 Main Street,
13th Floor, Irvine CA, 92614.
SCOPE OF WORK
Consultant will consult with and advise in the following matters:
1. Marketing analysis and salability analysis of high demand segments in
the nuclear industry (commercial power, uranium production and DOE
nuclear facilities).
2. Development of product and material specifications that can meet the
demand of radiation shielding and safety applications in nuclear power
stations and nuclear medical encapsulation applications.
3. Formation of high-level industry committees to help review the
specifications.
4. Facilitation of endorsement of the products and materials to the
nuclear industry.
PURPOSE OF THE SERVICE
The service provided by Consultant and his team will help Nurescell to
finalize the products and to obtain quick access to key design and marketing
information, responsible management personnel and NRC officials that are
needed to develop and capture the application identified by Nurescell and
Consultant in a cost-effective and timely manner, the estimated $2 to $3
Billion Dollars per year radiation shielding market in the nuclear industry.
FEES AND EXPENSES
Consultant will be reimbursed for actual expenses incurred (not to exceed
$125,000.00 per year) based upon duration of three years. Nurescell must
approve all expenses. Consultant will receive 15% of the net revenue derived
from the nuclear industry, (commercial power, uranium production, Department
of Energy nuclear facilities and nuclear medical encapsulation). The 15% will
be payable to Performance Improvement International within 30 days from the
receipt of payment to Nurescell from the contract derived from Consultant.
A retainer will be paid to Consultant by way of a stock option of 200,000
Nurescell shares at $3.00 per share. This option is immediately available to
1
<PAGE>
Consultant upon Consultant forming a nuclear power committee with qualified
power plant managers etc. This option would be instrumental in delivery to
Nurescell $2 to $3 Billion in business per year in radiation shielding and
other applications in the nuclear industry.
PROGRESS REPORT
Consultant will submit a monthly progress report and hold monthly progress
meetings with Nurescell Management.
PAYMENT
Future payments will be made on a monthly basis with 30 days upon receipt of
invoice. Expenses will be reimbursed within 30 days upon receipt of invoice.
Late payment is subject to 8% APR interest.
COMPETITIVE ACTIVITIES
During the term of this agreement Consultant shall not, directly or
indirectly, either as an employee, employer, consultant, agent, principal,
partner, stockholder, corporate officer, director, or in any other individual
or representative capacity, engage or participate in any business that is in
competition in any manner whatsoever with the business of Nurescell Inc.
UNIQUENESS OF CONSULTANT'S SERVICES
Consultant hereby represents and agrees that the services to be performed
under the terms of this contract are of a special, unique, unusual,
extraordinary, and intellectual character that gives them a peculiar value,
the loss of which cannot be reasonably or adequately compensated in damages
in an action at law. Consultant therefore expressly agrees that Nurescell, in
addition to any other rights or remedies that Nurescell may possess, shall be
entitled to injunctive and other equitable relief to prevent or remedy a
breach of this contract by Consultant.
TRADE SECRETS
(a). The parties acknowledge and agree that during the terms of this
agreement and in the course of the discharge of his duties hereunder,
Consultant shall have access to and become acquainted with information
concerning the operation and processes of Nurescell, including without
limitation, financial, personnel, sales, scientific, and other information
that is owned by Nurescell and regularly used in
2
<PAGE>
the operation of Nurescell's business, and that such information constitutes
Nurescell's trade secrets.
(b). Consultant specifically agrees that he shall not misuse, misappropriate,
or disclose any such trade secrets, directly or indirectly, to any other
person or use them in any way, either during the term of this agreement or at
any other time thereafter, except as is required in the course of his
agreement hereunder.
(c). Consultant acknowledges and agrees that the sale or unauthorized use or
disclosure of any of Nurescell's trade secrets obtained by Consultant during
the course of this agreement, including information concerning Nurescell's
current or any future and proposed work, services or products, the facts that
any such work, services, or products are planned, under consideration, or in
production, as well as any descriptions thereof, constitute unfair
competition. Consultant promises and agrees not to engage in any unfair
competition with Nurescell, either during the term of this agreement.
(d). Consultant further agrees that all files, records, documents, drawings,
specifications, equipment, and similar items relating to Nurescell's business
whether prepared by Nurescell or others, are and shall remain exclusively the
property of Nurescell and that they shall be removed from the premises of
Nurescell only with the express prior written consent of Nurescell's Board of
Directors.
TERMINATION OF EMPLOYMENT
TERMINATION FOR CAUSE
(a). Nurescell reserves the right to terminate this agreement if consultant
willfully breaches or habitually neglects the duties which he is required to
perform under the terms of this agreement; or commits such acts of
dishonesty, fraud, misrepresentation or other acts of moral turpitude would
prevent the effective performance of his duties.
(b). Nurescell may at its option terminate this agreement for the reasons
stated above by giving forty-five (45) days written notice of termination to
Consultant without prejudice to any other remedy to which Nurescell may be
entitled either at law, in equity, or under this agreement.
(c). The notice of termination required by this section shall specify the
ground for the termination and shall be supported by a statement of all
relevant facts.
(d). Termination under this section shall be considered "for Cause" for the
purposes of this agreement.
3
<PAGE>
TERMINATION WITHOUT CAUSE
(a). This agreement shall be terminated upon the death of Consultant.
(b). Nurescell reserves the right to terminate this agreement not less than
six (6) months after Consultant suffers any physical or mental disability
that would prevent the performance of his duties under this agreement. Such
a termination shall be effected by giving forty-five (45) days written notice
of termination to Consultant.
(c). Termination under this section shall not be considered "for Cause" for
the purposes of this agreement.
EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION
(a). This agreement shall be terminated by any voluntary or involuntary
dissolution of Nurescell provided, however, that if said dissolution is the
result of either a merger or consolidation in which Nurescell is not the
consolidated or surviving corporation, or a transfer of all or substantially
all of the assets of Nurescell, then at the option of Consultant he shall be
entitled to be paid the balance remaining under this agreement as a
condition precedent to the above-specified events.
PAYMENT ON TERMINATION
Consultant may terminate his obligations under this agreement by giving
Nurescell at least a two (2) months notice in advance.
Signed under seal this 1st day of March, 1999 at , California.
----------------
This letter of understanding will be replaced with a complete detailed
agreement based on the points mentioned and agreed upon in this LOU. This LOU
will be in effect for 60 days and be governed by the laws of the State of
California.
CONSULTANT: NURESCELL:
Performance Improvement International
/s/ Chong Chiu /s/ Adrian Joseph
- ------------------------------------ -------------------------------
By Dr. Chong Chiu, President By Dr. Adrian Joseph, President
Cc: Rita Lavelle
4
<PAGE>
INSTITUTIONAL ENDORSEMENT PAGE
PROJECT TITLE : A Research Plan for testing the Radiation, chemical
and Thermal Resistance, and the Mechanical Properties
of Nurescell
SUBMITTED TO : Nurescell, Inc.
SUBMITTED BY : The Curators of the University of Missouri
The University of Missouri - Columbia
Office of Sponsored Program Administration
310 Jesse Hall
Columbia, Missouri 65211
(573) 882-7560 / FAX No. (573) 884-4078
PROJECT DIRECTOR : William Miller, PhD
Department of Nuclear Engineering
College of Engineering
University of Missouri - Columbia
Columbia, Missouri 65211
(573) 882-9692
PROJECT DURATION : 06/01/99 through 05/31/00
REQUESTED FUNDS : $151,064
BUSINESS OFFICIAL : Joyce M. Pfaff, Interim Associate Director
Office of Sponsored Program Administration
University of Missouri - Columbia
310 Jesse Hall
Columbia, Missouri 65211
(573) 882-9592 / FAX No. (573) 884-4078
APPROVALS :
ACCEPTED BY:
FOR THE CURATORS OF THE Nurescell Inc.
UNIVERSITY OF MISSOURI
/s/ Joyce M. Pfaff /s/ Adrian Joseph
- --------------------- --------------------
Joyce M. Pfaff Adrian Joseph, President
Interim Associate Director
Office of Sponsored Program Administration April 27, 1999
Date: 4/23/99
-----------
Proposal No.: EG-9915054-1
<PAGE>
INTRODUCTION
A novel material "NURESCELL" is being proposed for use by the nuclear
energy industry worldwide. The material corrects some of the miniscule
problems associated with conventional nuclear materials and resultant
radioactive waste problems. In addition, the physical performance
characteristics of the NURESCELL material will expedite advances in
innovative fuels which require resistivity in mechanical application material
performances up to 10 TO THE POWER OF (9) Rads of radiation.
NURESCELL material offers the following advantages over current materials
including, but not limited to, the correction of existing problems with spent
fuel storage, re-generation of spent fuels and safe handling of nuclear
wastes.
Heat Transfer and Diffusion
Radioactive Resistance
High Compressive and Tensile Strengths
Corrosion Resistance
Fugitive Gassing
Weathering and Aging
Ease of Application and Handling
Non-Hazardous Application Processes
In addition, the material will potentially result in significant reductions in
the weight and volume of encapsulated nuclear waste and/or on-site spent
nuclear fuel depository space.
<PAGE>
RESEARCH
To assess the radiation, mechanical, thermal and chemical, properties of
this material, the following research plan is being proposed. This work will
be accomplished in a 12 month period, as a cost of $151,664. The deliverables
will include a minimum of two month progress reports (more often as
experimental data becomes available) and a final report of overall results.
PHASE I - SAMPLE & MATERIAL PREPARATION
In this Phase the samples will be supplied by NURESCELL. An outside
engineering company "THERMACH" will prepare samples according to confidential
formulae, curing the preparation protocol so that the samples can be
replicated in a consistent sustainable manner consistent with ISO QA/QC
requirements. It is expected that a three resultant formulated sample groups:
NURESCELL 100, NURESCELL 200 and NURESCELL 300, will be forwarded to the
Nuclear Engineering Program at Missouri University for the identified
performance validation testing. Sample size and configuration for each of the
identified testing series will also be confirmed and prepared accordingly for
MU's utilization in the identified testing series.
Once the samples are received at MU, they will be divided for use in the
identified series. The samples will be maintained in a secure manner. There
is no requirement for specialized handling, e.g. temperature, pressure or
special media storage. The samples will be maintained in secure ambient
Laboratory conditions.
PHASE II - RADIATION STUDIES
The first activity will be the subjection of the three formulae to
Co-60 gamma-
<PAGE>
rays. Two different sources are available for these irradiations. The first
produces 3.5 kilo-Roentgen per hour and can accommodate samples up to 2
inches in diameter and 6 inches long. The second produces 2.5 Mega Roentgen
per hour and can accommodate samples up to 1.0 inches in diameter and 2
inches long.
The following protocol will test these two dose rates for a set of total
exposures. The samples will be examined and tested for changes in mass,
radiation adsorption, color, temperature and other characteristics. The
protocol is outlined below as Table I.
TABLE I - RADIATION TESTING PROTOCOL
<TABLE>
<CAPTION>
Dose Rate = 3.5 KR/hour Dose Rate = 2.5MR/hour
----------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Time (hours) 24 168 744 10 24 168
Total Exp (KR) 84 588 2600 2500 84,000 420,000
</TABLE>
Sample requirements for Phase II include 15 (18 for irradiation plus 3
controls), 0.5 cm wafers of each formula.
PHASE III - MECHANICAL AND PHYSICAL CHARACTERIZATION
In this series each formula will be tested for mechanical and physical
properties consistent with published ASTM protocols. The properties listed in
Table II will be tested for each formula.
<PAGE>
Table II - Mechanical and Physical Characterizations
Thermal Conductivity
Impact
Tensile Strength
Ductility
Rockwell Hardness
This phase will require 10 wafer samples and 10 tensile strength configured
specimens of each formula.
PHASE IV - THERMAL PHYSICAL TESTING
In these series of tests the effect of long term exposure to temperature
will be determined. In addition to data for dimensional and mass changes,
data will be obtained for off-gassing, only if NURESCELL is not inert but
reactive. If off-gassing is indicated with Draeger Monitors for Hydrogen
and/or Nitrogen, Tedlar Bag samples will be obtained for Gas Chromatograph
(GC) profile.
This protocol for this testing will involve exposure to temperatures of
500Deg.C, 900Deg.C and 1,100Deg.C up to 8 hours. However, if there is
sufficient material and time thermal exposures beyond 1100Deg.C will be used
to determine the ultimate thermal resistance of the material. A total of 15
samples of each formula consisting of 1 in(3) cubes are envisioned for these
tests.
PHASE IV - CHEMICAL TESTING
In the series of tests, NURESCELL's chemical stability will be studied
in a variety of short term tests. Acid baths ranging from 0.1 to 10 M
consisting of HNO(3),
<PAGE>
HCl, HF, and similar tests in NaOH basic solutions will be undertaken. Data
to be obtained includes dimensional changes, mass changes and off-gassing
using Draeger tubes. Long term chemical tests at both room temperature and
90Deg.C are envisioned for periods of 6 months.
The scope of these tests has not been fully defined and will be
negotiated with NURESCELL, Inc. Approximately 60 wafer samples are
envisioned for this program.
PHASE V: REPORTS OF FINDINGS AND DELIVERABLES
As stated in the introduction, two month progress reports will be
provided to NURESCELL at a minimum. Reports may be submitted more often than
this as experimental data become available. All data and reports will be
compiled into a final report at the end of the contract period. These
reports will be collaborative in nature and may also include several
technical papers for publication in technical and professional journals.
OTHER COMMENTS:
1) NURESCELL to provide the University of Missouri with elemental makeup
and density in grams and specific gravity for each formula.
2) It is agreed that the proposed protocol is open to change and
modification based on review of preliminary performance data. In addition it
was agreed that even though NURESCELL at this time concludes a requirement
exists for (3) formulae, these formulae may be modified with further
investigation of applications.
3) This work does not include "accelerated life tests for nucleation and
alpha
<PAGE>
absorption," "impact resistance," or "thixotropy structural analysis for
cross linking completion," phases of work originally proposed in a previous
agreement between NURESCELL and Lawrence Livermore National Laboratory.
Researchers at the University of Missouri need additional information
concerning these protocols and may propose these tests as additional cost
options to this agreement.
<PAGE>
W.H. Miller, PI
6/1/99 - 5/31/00
Nurescell, Inc.
<TABLE>
<CAPTION>
EXPENSE CATEGORY YEAR 1
- --------------------------------------------------------------------------------
<S> <C>
A. Senior Personnel
- --------------------------------------------------------------------------------
1. W. Miller - Project Management, Radiation Damage
- --------------------------------------------------------------------------------
1.0 ay month 11,324
- --------------------------------------------------------------------------------
2. T. Ghosh - Chemical Testing
- --------------------------------------------------------------------------------
1.0 ay month 7,496
- --------------------------------------------------------------------------------
3. V. S. Gopalaratnam - Mechanical Testing
- --------------------------------------------------------------------------------
1.0 ay month 9,041
- --------------------------------------------------------------------------------
Total A 27,861
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
B. Other Personnel
- --------------------------------------------------------------------------------
1. Graduate Research Assistant (2 MS)
- --------------------------------------------------------------------------------
0.5 FTE, 12 mo/yr 28,068
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total A + B 55,929
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
C. Fringe
- --------------------------------------------------------------------------------
1. 25% A 6,965
- --------------------------------------------------------------------------------
2. 8% B 2,245
- --------------------------------------------------------------------------------
3. Tuition for B 7,480
- --------------------------------------------------------------------------------
Total C 16,690
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total A + B + C 72,619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
D. Travel 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
E. Equipment 10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F. Supplies 10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
G. Research Reactor Irradiation Services 10,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
H. Telephone, Paper, Copying, Reports 1,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
I. Materials Consultant 3,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Direct Costs 106,619
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Indirect Costs (MTDC 46%) 44,445
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Total Requested 151,064
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
BUDGET JUSTIFICATION
PERSONNEL
Salaries are based on the current 1998-99 salaries. Dr. Miller's (PI)
current 9-month salary is $101,916. Dr. Ghosh's (Co-PI) current 9-month
salary is $67,464. Dr. Gopalaratnam's (Co-PI) current 9-month salary is
81,369. The University of Missouri typically grants salary increases on
September 1 of each year. Increase percentages vary from year to year and in
employee category and merit based upon guidelines issued by the University of
Missouri system.
Graduate Research Assistant salaries are listed below. These salaries
are for 0.5 FTE; for estimation purposes, salaries for GRA's were increased
by 3% each September 1.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
GRA LEVEL MINIMUM TARGET
<S> <C> <C>
- --------------------------------------------------------------------------------
Masters $1,023/mo $1,144/mo
- --------------------------------------------------------------------------------
Ph.D. $1,037/mo $1,274/mo
- --------------------------------------------------------------------------------
Ph.D. past comps $1,089/mo $1,404/mo
- --------------------------------------------------------------------------------
</TABLE>
FRINGE BENEFITS
A rate of 25% of salaries for full-time employees is used. Rates are
subject to change at any time according to periodic campus studies. The
regional Health and Human Services office normally approves these changes. A
rate of 8% is used for student employees and part-time employees.
Tuition charges. The University of Missouri Columbia has an educational
fee remission program in which tuition for graduate students who are working
on grant/contract projects is paid directly from the grant/contract.
Estimates are based on 9 credit hours per semester (winter/fall) and 4 hours
(summer) for each student. The estimated fee rate schedule provided by the
University administration is $170/sch for 6/1/99 - 5/31/00; $176/sch for
6/1/00 - 5/31/01; and $182/sch for 6/1/01 - 5/31/02.
PERMANENT EQUIPMENT
Funds requested for permanent equipment includes furnaces and off gas
analysis systems.
SUPPLIES
Funds requested for supplies include chemicals and laboratory glassware.
RESEARCH REACTOR IRRADIATION SERVICES
Funds requested for the research reactor irradiation services include
costs associated with conducting necessary irradiation testing.
TELEPHONE, PAPER, COPYING, REPORTS
Funds allocated for this category include those costs necessary for the
dissemination of results from this work. These costs include, among other
things, reproduction costs, mailing costs, expenses directly associated with
producing reports, and costs for placing research results into the public
domain.
<PAGE>
MATERIALS CONSULTANT
Funds requested for the materials consultant include costs associated
with tests and analysis conducted in the departments of Chemical, Mechanical
and Nuclear Engineering.
INDIRECT COSTS
The University of Missouri-Columbia last negotiated an indirect rate
agreement on July 8, 1996 with the U.S. Department of Health and Human
Services (DHHS), Region VII. The indirect rate for on-campus research is 46%
MTDC for the period 7/1/95-6/30/99.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
I consent to inclusion in this Amendment No. 1 to Form 10-SB
Registration Statement of my report dated April 26, 1999 on my audit of the
financial statements of Nurescell Inc.
RONALD L. JAMIESON, CPA
Los Alamitos, California
April 27, 1999
Exhibit 12.1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF NURESCELL INC. (A DEVELOPMENT STAGE COMPANY) FOR THE
PERIOD FROM MAY 12, 1998 (DATE OF INCEPTION) TO DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAY-12-1998
<PERIOD-END> DEC-31-1998
<CASH> 85,775
<SECURITIES> 0
<RECEIVABLES> 46,683
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 145,120
<PP&E> 48,981
<DEPRECIATION> (3,966)
<TOTAL-ASSETS> 276,821
<CURRENT-LIABILITIES> 41,101
<BONDS> 0
0
0
<COMMON> 1,302
<OTHER-SE> 641,698
<TOTAL-LIABILITY-AND-EQUITY> 276,821
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 409,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (407,280)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (407,280)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
