<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/X/ For quarterly period ended September 30, 1999
OR
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT
Commission file number 0-25377
NURESCELL INC.
A Nevada Corporation IRS Employer Identification No.:
33-0805583
Principal Executive Offices:
1400 Bristol Street North, Suite 240
Newport Beach, California 92660
(949) 752-0071
-------------------
Check whether Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
Number of shares of Common Stock outstanding at November 10, 1999: 13,194,000
Transitional Small Business Disclosure Format (check one): Yes /X/ No / /
<PAGE>
PART I
FINANCIAL INFORMATION
NURESCELL INC.
(A Development Stage Company)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, March 31,
1999 1999
------------- ---------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,418 $ 125,421
Stock subscriptions receivable -0- 25,000
Advances to employees -0- 12,075
Note receivable officer -0- 54,673
Other receivables -0- 3,761
----------- ---------
Total Current Assets 1,418 220,930
Property, Plant and Equipment at cost, less
accumulated depreciation and amortization of $9,085 43,524 43,100
Other Assets
Deposits 3,000 3,000
Intangibles 18,609 18,609
----------- ---------
Total Other Assets 21,609 21,609
----------- ---------
TOTAL ASSETS $ 66,551 $ 285,639
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable $ 88,469 $ 34,826
Due to officer 12,370
Accrued Salaries 75,000 3,000
Payroll Taxes Payable 6,479 6,839
----------- ---------
Total Current Liabilities 182,318 44,665
Stockholders' Equity
Capital Stock 1,312 1,308
Additional Paid in Capital 938,188 884,192
Deficit accumulated during the development stage (1,055,267) (644,526)
----------- ---------
Total Stockholders' Equity (115,767) 240,974
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 66,551 $ 285,639
=========== =========
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the period For the period
Three months Three months Six months May 12, 1998 (Date of May 12, 1998 (Date of
ended ended ended Inception) to Inception) to
September 30, 1999 September 30, 1998 September 30, 1999 September 30, 1998 September 30, 1999
------------------ ------------------- ------------------ --------------------- -------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C>
OPERATING EXPENSES:
General and administration $ 196,021 $ 156,717 $ 410,946 $ 231,133 $ 1,052,287
Depreciation 1,079 1,643 3,204 2,010 9,085
----------- ----------- ----------- ----------- -----------
Total Expenses 197,100 158,360 414,150 233,143 1,062,072
LOSS FROM OPERATIONS (197,100) (158,360) (414,150) (233,143) (1,062,072)
OTHER INCOME
Interest income -0- -0- 3,409 -0- 6,805
----------- ----------- ----------- ----------- -----------
NET LOSS $ (197,100) $ (158,360) $ (410,741) $ (233,143) $(1,055,267)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
NET LOSS PER SHARE
Basic and fully diluted $(0.02) $(0.02) $ (0.03) $ (0.03) $ (0.09)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common
Shares outstanding 13,096,000 12,773,450 13,095,377 10,391,187 12,294,542
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the period May 12, 1998 (Date of Inception) to September 30, 1999
<TABLE>
<CAPTION>
RETAINED
EARNINGS
ADDITIONAL (DEFICIT) DURING COMMON
COMMON STOCK PAID-IN THE DEVELOPMENT STOCK
SHARES AMOUNT CAPITAL STAGE SUBSCRIBED TOTAL
----------- -------- --------- ---------------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Issuance of common stock:
Cash - Founding Stockholders 2,500,000 $ 250 $ 2,250 $ 2,500
Technology Purchase 10,000,000 1,000 9,000 10,000
Cash - $ 1 per share 498,000 50 497,950 498,000
Cash - $ 5 per share, net of cost 79,000 8 349,992 350,000
Common stock subscriptions $ 25,000 25,000
NET LOSS (644,526) (644,526)
----------- -------- ----------- ------------- ---------- ---------
Balance March 31, 1999 13,077,000 1,308 859,192 (644,526) 25,000 240,974
Issuance of common stock:
Cash $100 and investment
banking services 30,000 3 74,997 75,000
Consulting services 8,000 1 3,999 4,000
Payment of capital stock subscriptions (25,000) (25,000)
NET LOSS (410,741) (410,741)
----------- -------- ----------- ------------- ---------- ---------
BALANCE SEPTEMBER 30, 1999 (unaudited) 13,115,000 $ 1,312 $ 938,188 $(1,055,267) $ - $(115,767)
=========== ======== =========== ============= ========== =========
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the period
Six months May 12, 1998
ended (date of inception) to
September 30, 1999 September 30, 1999
------------------- ---------------------
(Unaudited) (Unaudited)
<S> <C> <C>
INCREASE (DECREASE) IN CASH:
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss $ (410,741) $ (1,055,267)
Adjustments:
Depreciation 3,204 9,085
Issuance of stock for services 53,900 53,900
(Increase) Decrease in:
Advances to employees 12,075 -0-
Notes Receivable - Officers 54,673 -0-
Other Receivables 3,761 -0-
Subscription Receivable 25,000 -0-
Increase (Decrease) in:
Due to Officers 12,370 12,370
Accounts Payable 53,643 88,469
Accrued Salaries 72,000 75,000
Payroll Taxes Payable (360) 6,479
------------ ------------
Net Cash Flows Used by Operating Activities (120,475) (809,964)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property, Plant & Equipment 3,628 52,609
Deposits -0- 3,000
Intangibles -0- 18,609
------------ ------------
Net Cash Flows Used by Investing Activities (3,628) (74,218)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock 100 885,600
------------ ------------
Net Cash Flows Provided by Financing Activities 100 885,600
------------ ------------
Net increase (decrease) in cash (124,003) 1,418
Cash at beginning of period 125,421 -0-
------------ ------------
Cash at end of period $ 1,418 $ 1,418
============ ============
Non cash transactions
Issuance of stock for purchased technology $ 10,000
Issuance of stock for services 53,900 53,900
============ ============
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
BASIS OF PRESENTATION
The interim financial statements presented have been prepared by
Nurescell Inc. (the Company) without audit and, in the opinion of
the management, reflect all adjustments of a normal recurring
nature necessary for a fair statement of (a) the results of
operations for the three months ended September 30, 1999, (b) the
financial position at September 30, 1999 and (c) the cash flows for
the six months ended September 30, 1999. Interim results are not
necessarily indicative of results for a full year.
The balance sheet presented as of March 31, 1999 has been derived
from the financial statements that have been audited by the
Company's independent public accountants. The financial statements
and notes included herein should be read in conjunction with the
financial statements and notes included in the Company's Annual
Report on Form 10-KSB.
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 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 $1,055,267 and negative
cash flows from operating activities of $863,864 from inception to
September 30, 1999. The Company has successfully completed
radiation shielding testing for the first five product formulations
of its principal technology, and commercial marketing of those
products has begun. The technology continues to undergo advanced
independent performance testing to validate its use in the nuclear
industry, and that testing will require significant additional
financing. The Company has identified a qualified ISO Certified
manufacturer for its technology, and manufacturing procedures and
equipment are in process of being implemented to accomplish large
scale production in a rigidly enforced quality control environment
by that manufacturer. The Company will not be able to generate
significant commercial revenues until the manufacturing
implementation steps are approved and in place. Patents on the
Company's principal technology are patent-pending for the United
States, but the patents have not yet been issued. Patent
applications have been filed for other countries through European
PCT, but those patents have also not been issued. 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
FISCAL YEAR END
The Company's fiscal year end is March 31, 1999.
START-UP ACTIVITIES
In 1998, the American Institute of Certified Public Accountants
(AICPA) amended the AICPA SOP and Audit and Accounting Guides
addressing the reporting of costs of start-up activities. Effective
for fiscal years beginning after December 15, 1998, SOP No. 98 require
costs of start-up activities and organizational costs to be expenses
as incurred. Because early application is encouraged in prior periods,
the Company has restated the financial statements to conform. To date,
approximately $111,590 of startup costs and organizational expense
have been expensed.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. The accompanying financial statements include all
adjustments which, in the opinion of management of the Company, are
necessary in order to make these financial statements not misleading.
-6-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed as incurred.
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 SFAS 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. During the prior fiscal year, the
Company's cash balance periodically 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:
<TABLE>
<S> <C>
Furniture, fixtures, and equipment 5 years
</TABLE>
OTHER ASSETS
Other assets consist of deposits and intangibles. 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 and start-up
costs have been expensed in accordance with SOP-98.5.
LOSS PER SHARE
In 1997 the SFAS issued Statement No. 128, Earnings per Share. Unlike
primary loss per share, basic loss per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted loss
per share is very similar to the previously reported fully diluted
loss per share. The basic and diluted loss per share is computed based
on the weighed average number of common shares outstanding. Common
equivalent shares are not included in the per share calculations where
the effect of their inclusion would be antidilutive. Options to
purchase shares of common stock are not included in the computations
of diluted loss per share since the effect would be antidilutive.
-7-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
INCOME TAXES
The Company accounts for its income taxes in accordance with the
standards specified in SFAS No. 109, Accounting for Income Taxes.
3. INTANGIBLE ASSETS
On June 12, 1998 the Company entered into a Sales of Technology
Agreement ("Agreement") with Dr. Adrian Joseph (now an 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 been patented nor trademarked.
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 $3,422. Rent expense for the
period ended September 30, 1999 was $23,302.
Effective June 1, 1999, the Company has moved to a new location and
has entered into a new three year lease that requires minimum monthly
payments of $3,422.
The estimated future minimum lease payments under all operating leases
for the periods ending September 30, are as follows:
<TABLE>
<CAPTION>
PERIOD ENDING
SEPTEMBER 30
-------------
<S> <C>
2000 $ 41,064
2001 41,064
2002 27,376
--------
Total $109,504
</TABLE>
5. INCOME TAXES
For federal income tax purposes, approximately $1,076,367 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%
-8-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
chance that the carryforwards will expire unused. Accordingly, at
March 31, 1999, the $279,080 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 13,096,000 shares were issued and outstanding at
September 30, 1999.
Common stock issued from issuance of $5.00 shares has been reflected
net of offering expenses of approximately $45,000.
7. STOCK OPTIONS
Effective June 15, 1998, the stockholders approved an Incentive Stock
Option Plan granting to any director, employee or consultant of 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. As of September 30, 1999, options for 300,000
shares have been granted under the Plan, none of which have been
exercised.
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 of the units (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.
Prior to permitting the exercise of either the Class "A" or Class "B"
Warrants, 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 Warrants
are immediately detachable.
9. RELATED PARTIES
The Company has received unsecured advances of $12,370, from one of
its officers.
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
-9-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
time normally expected of a director. These contracts provide for
payments of $2,000 to $4,000 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 $138,012, respectively at September 30, 1999.
The Company purchased various chemicals, lab equipment, research
material and start-up expenses from a related party. The purchase of
lab equipment, research materials and start-up expenses amounted to
$20,000 during the period ended March 31, 1999. The purchase of
chemicals for the period ended March 31, 1999 amounted to $14,000.
There were no purchases from related parties in the quarter ended
September 30, 1999.
10. SUBSEQUENT EVENTS
SIGNIFICANT CONTRACTS AND AGREEMENTS
On June 25, 1999, the Company entered into a consulting agreement with
Dr. Chong Chiu. Under that agreement, Dr. Chiu will provide certain
marketing, product development, specification review and other
services to the Company related to nuclear power plants. Dr. Chiu is a
former Dean of Physics at the Massachusetts Institute of Technology
and the former General Manager of the San Onofre Nuclear Power
Station. The agreement provides for Dr. Chiu to receive a percentage
of all nuclear power plant revenues generated as a direct result of
his services.
The Company is currently in discussions with several parties to
raise approximately $5,000,000. Those discussions have advanced
significantly with one particular party, and an agreement to
proceed has been signed (although there is no guarantee that the
Company will be able to consummate any financing whereby the Company
will receive all or any portion of the $5,000,000 at any time
during the near or distant future).
The Company is currently drafting a Proposed Scope of Work for
Battelle Memorial Institute, Pacific Northwest Division (PNNL) for
the testing and qualification of the Technology using the resources
at PNNL's facility.
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. This work
will be accomplished in a twelve month period at an approximate cost
of $151,064.
After the performance of the Technology has been validated by
independent third parties, the Company will seek to incorporate
Technology based 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.
The Company has received a purchase order for its material to be
used at San Onofre Nuclear Generating Station. The Company has also
entered into a public relations/investor relations relationship
with Citigate Dewe Rogerson and has taken preliminary steps in
entering into an exclusive relationship with Lone Star Lead
Construction with respect to the use of the Technology in the
design, fabrication, installation and construction of rooms, doors
and structures in the areas of healthcare and non-destructive
testing.
The Company has agreed to repurchase 2,000 shares at the original cost
of $10,000 from an investor.
The Company, in return for introducing investors to the Company, has
offered to select individuals options to purchase one share of the
Company common stock at one dollar ($1.00) for every share of the
Company common stock sold to any investor introduced to the Company by
such individual. This option is to be exercised only twelve (12)
months after the completion of the transaction mentioned above, (i.e.
"exercising day") and the option will be good for twenty-four (24)
months after the exercising day.
-10-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
SECURITIES OFFERINGS
The Company has filed a Form 10-SB registration statement with the
Securities and Exchange Commission, which filing has now become
effective.
The Company's Common Stock is quoted on the OTC Bulletin Board under
the symbol "NUSL", and has been so quoted since June 10, 1999. Prior
to that date, there was no public trading market for the Company's
equity securities. In addition, the Company's Class "A" Common Stock
Purchase Warrants are quoted on the OTC Bulletin Board under the
symbol "NUSLW".
-11-
<PAGE>
PLAN OF OPERATION. Nurescell Inc. (the "Company" or "Registrant") is a
development stage company. Its operations principally consist of research,
development, and testing for its proprietary radiation shielding technology
(the "Nurescell Technology"). The Company is presently focused on independent
third party validation for the performance of its product, the obtaining of
patents globally for its technology, the establishment of manufacturing
procedures and processes, and the introduction of its product to the nuclear
industry. 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 fiscal quarter ending December
31, 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 from the commercial use of the Nurescell
Technology will begin when the Company completes the implementation of
production procedures with its manufacturer. There are currently existing
orders to be filled. From inception to September 30, 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. Through September 30, 1999, the Company has utilized all of
the proceeds of the Offerings to (i) commence and pursue patent applications
for the Nurescell Technology, (ii) identify, negotiate and finalize suitable
research, development and testing contracts, and begin initial formal testing
of the Nurescell Technology, (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 Company is presently funded for working capital by loans from
its Chief Executive Officer, Dr. Adrian Joseph, who has committed to the
Company's Board of Directors that he will continue to finance the Company
until the Company is self-supporting.
The Company's financial statements for the quarter ended September 30,
1999 have been prepared assuming the Company will continue as a
going-concern. As noted in the Company's financial statements for the year
ended March 31, 1999, as filed with the Company's report on Form 10-KSB for
that period, 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. 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 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
is currently seeking financing of approximately $5,000,000, and an agreement to
proceed has been reached with one party. There can, however, be no guarantee
that such financing will be obtained or that any additional financing 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 will be
required to severely curtail its operations, which would
-12-
<PAGE>
have a material adverse effect on the Company's business, operating results
and financial condition.
PART II
OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On July 28, 1999, the Company privately issued 30,000 shares of Common
Stock valued at fair market value of $2.50 per share to National Capital
Merchant Group, Ltd. for $100 cash and investment banking services. Based on
the investor's relationship with the Company, the issuance was made pursuant
to the registration exemption under Section 4(2) of the Securities Act of
1933 (the "Act").
On September 28, 1999, the Company privately issued 8,000 shares of
Common Stock valued at fair market value of $0.50 per share to James Barone in
lieu of consulting fees. Based on Mr. Barone's relationship with the Company,
the issuance was made pursuant to the registration exemption under Section
4(2) of the Act.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are attached hereto:
6.1 Employment Agreement between the Company and Harold L.
Rapp dated August 6, 1999
27 Financial Data Schedule
(b) One report on Form 8-K was filed during the Company's fiscal
quarter ended September 30, 1999. Such report is dated July 1,
1999 and provided disclosure under Item 4 regarding changes in
the Company's certifying accountant. No financial statements
were required to be filed with such report.
-13-
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: November 10, 1999 NURESCELL INC.
By: /s/ HAROLD L. RAPP
----------------------------
Harold L. Rapp, President
By: /s/ SHARON NITKA
----------------------------
Sharon Nitka,
Chief Financial Officer
-14-
<PAGE>
EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION
6.1 Employment Agreement between the Company and Harold L.
Rapp dated August 6, 1999
27 Financial Data Schedule
-15-
<PAGE>
EMPLOYMENT AGREEMENT
(PRESIDENT)
Nurescell, Inc., a Nevada corporation with its principal place of
business located at 1400 Bristol Street North, Suite 240, Newport Beach,
California ("Employer") and Harold L. Rapp whose resident address is P.O. Box
762, Sierra Madre, California 91025 ("Employee") in consideration of the
mutual promises and covenants made herein and other valuable consideration
agree as follows:
ARTICLE 1. ENGAGEMENT
1.1 TITLE, BOARD MEMBERSHIPS. Employer hereby engages Employee and Employee
hereby accepts employment with Employer, to perform Employee's services as
President of Employer and such other services as may be required of Employee
under this Agreement, on the terms and conditions hereinafter set forth.
Employee further agrees to accept election and to serve during all or any
part of the Term (as that Term is defined in Section 2 hereof) of this
Agreement as an officer and/or director of Employer and of any subsidiary or
affiliate of Employer, without compensation therefor, except as set forth in
this Agreement, if elected to any such position by the shareholders of
Employer or by the Board of Directors of Employer (the "Board") or of any
subsidiary or affiliate, as the case may be.
1.2 DUTIES, PLACE OF EMPLOYMENT. Employee shall perform all duties
customarily performed by Employees employed in the capacity of President of
companies engaged in the business of Employer and shall use and devote his
full time and efforts in the discharge of his duties. Employee shall perform
his duties at Employer's principal offices in Newport Beach, California, but
shall travel to and from such address as may be reasonably required in the
performance of such duties. Subject to the terms of this Agreement, Employee
shall comply promptly and faithfully with Employer's reasonable instructions,
directions, requests, rules and regulations. Employer shall not be deemed to
have waived the right to require Employee to perform any duties hereunder by
assigning Employee to any other duties or services.
1.3 "EMPLOYMENT TERM" DEFINED. "Employment term" refers to the entire
period of employment of Employee by Employer, whether for the periods
provided above, or whether terminated earlier as hereinafter provided or
extended by mutual agreement between Employer and Employee.
1
<PAGE>
ARTICLE 2. DUTIES AND OBLIGATIONS OF EMPLOYEE
2.1 DUTIES, PLACE OF EMPLOYMENT. Employee shall perform all duties
customarily performed by Employees employed in the capacity of President of
companies engaged in the business of Employer and shall use and devote his
full time and efforts in the discharge of his duties. Employee shall perform
his duties at Employer's principal offices in Newport Beach, California, but
shall travel to and from such address as may be reasonably required in the
performance of such duties.
2.2 MATTERS REQUIRING CONSENT OF BOARD OF DIRECTORS. Employee shall not,
without specific approval of Employer's Board of Directors, do or contract to
do any of the following:
(1) Borrow on behalf of Employer.
(2) Permit any customer of Employer to become indebted to
Employer.
(3) Purchase capital equipment for amounts in excess of the
amounts budgeted for expenditure by the Board of Directors.
(4) Sell any single capital asset of Employer.
(5) Terminate the services of any other officer of Employer or
hire any replacement of any officer whose services have been
terminated without the prior written approval of the Board of
Directors.
(6) Commit Employer to the expenditure of more than $10,000 for
any purpose without the prior written approval of the Board
of Directors.
2.3 DEVOTION TO EMPLOYER'S BUSINESS.
(a) Employee shall devote his entire productive time, ability,
and attention to the business of Employer during the term of this contract.
(b) Employee shall not engage in any other business duties or
pursuits whatsoever, or directly or indirectly render any services of a
business, commercial, or professional nature to any other person or
organization, whether for compensation or otherwise, without the prior written
consent of Employer's Board of Directors.
(c) This agreement shall not prohibit Employee from making
passive personal investments or conducting private business affairs if those
activities do not materially interfere with the services required under this
agreement. However, Employee shall not directly or indirectly acquire, hold, or
retain any interest in any
2
<PAGE>
business competing with or similar in nature to the business of Employer.
2.4 COMPETITIVE ACTIVITIES.
(a) During the term of this contract Employee 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 Employer.
(b) Employee agrees that during the term of this contract and for
a period of one (1) year after termination of this agreement, Employee shall not
directly or indirectly solicit, hire, recruit, or encourage any other employee
of Employer to leave Employer.
2.5 UNIQUENESS OF EMPLOYEE'S SERVICES. Employee 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. Employee therefore
expressly agrees that Employer, in addition to any other rights or remedies
that Employer may possess, shall be entitled to injunctive and other
equitable relief to prevent or remedy a breach of this contract by Employee.
2.6 INDEMNIFICATION FOR NEGLIGENCE OR MISCONDUCT. Employee shall indemnify
and hold Employer harmless from all liability for loss, damage, or injury to
persons or property resulting from the negligence or misconduct of Employee.
2.7 TRADE SECRETS.
(a) The parties acknowledge and agree that during the term of
this agreement and in the course of the discharge of his duties hereunder,
Employee shall have access to and become acquainted with financial, personnel,
sales, scientific, technical and other information regarding formulas, patterns,
compilations, programs, devices, methods, techniques, operations, plans and
processes that are owned by Employer, actually or potentially used in the
operation of Employer's business, or obtained from third parties under an
agreement of confidentiality, and that such information constitutes Employer's
"trade secrets."
(b) Employee specifically agrees that he shall not misuse,
misappropriate, or disclose in writing, orally or by electronic means, any 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 employment.
3
<PAGE>
(c) Employee acknowledges and agrees that the sale or
unauthorized use or disclosure in writing, orally or by electronic means, of any
of Employer's trade secrets obtained by Employee during the course of his
employment under this agreement, including information concerning Employer's
actual or potential 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. Employee
promises and agrees not to engage in any unfair competition with Employer,
either during the term of this agreement or at any other time thereafter.
(d) Employee further agrees that all files, records, document,
drawings, specifications, equipment, software, and similar items whether
maintained in hard copy or on line relating to Employer's business, whether
prepared by Employee or others, are and shall remain exclusively the property of
Employer and that they shall not be removed from the premises or, if kept
on-line, from the computer systems of Employer without the prior written
permission of the Board of Directors.
ARTICLE 3. TERM
3.1 The term ("Term") of this Agreement shall commence as of the date
hereof and shall continue until July 31, 2000 and thereafter shall
automatically renew for consecutive one year terms unless (i) terminated by
written notice given by either party to the other at least sixty (60) days
prior to the end of the initial term or any subsequent one year term or (ii)
terminated sooner pursuant to Section 6 of this Agreement. If the Term is
extended pursuant to this Section 3, during such period of extension Employer
shall pay Employee all compensation to which Employee is entitled under this
Agreement.
ARTICLE 4. COMPENSATION
During the Term as full compensation for all services to be performed by
Employee pursuant to this Agreement, Employer agrees to pay Employee the base
salary and bonuses set forth in this Section 4, in addition to such other
benefits and compensation as are provided elsewhere in this Agreement.
4.1 BASE SALARY. Employee shall be entitled to an annual base salary of
One Hundred Forty-Four Thousand Dollars ($144,000.00). The base salary shall
be paid to Employee twice a month during the Term.
4.2 COMMITMENT PAYMENTS. As further consideration for the commitment and
obligations of Employee hereunder, Employer shall issue to Employee, One
Hundred Thousand (100,000) shares of Employer's stock at the end of every six
(6) month period
4
<PAGE>
of employment, with the first issuance of shares made on or
before December 15, 1999 and every six (6) months thereafter during the term
of this Agreement. In addition, Employee will receive a stock option for the
purchase of Two Hundred Fifty Thousand (250,000) shares of Employers stock
at the option price of $.75 per share, exercisable on the anniversary date of
each year of employment, commencing the first year of employment and ending
upon termination of this Agreement or July 31, 2000 whichever sooner occurs.
Notice of the exercise of any option rights hereunder must be given no
earlier than thirty (30) days prior to the anniversary date and no later than
seven (7) days after such anniversary date. It is understood, however, that
all said shares are to be deemed "restricted shares" and are received for
Employee's own account and not with a view to or for sale in connection with
any distribution of said shares. All such rights under this Agreement shall
be deemed personal and not subject to transfer or assignment by Employee. To
the extent that any such rights become the subject of a stock option plan of
the Employer, Employee shall be subject to all terms and conditions thereof.
Notwithstanding the foregoing, to the extent not previously exercisable, the
stock option shall become exercisable in its entirety in the event that (i)
there occurs a Change in Control of Employer (as defined herein), (ii)
Employer concludes the sale of substantially all of its assets other than in
a transaction which is intended primarily to effect a corporate
reorganization without material change in beneficial ownership of the
material business of Employer, or (iii) Employee is terminated by Employer
other than for Cause (as hereinafter defined). Employee understands that the
shares of common stock acquired hereunder will not be registered under
federal and state securities laws and may not be transferred without
registration thereunder or pursuant to an exemption therefrom and will bear
or legend to that effect.
4.3 BONUS. Nothing herein contained shall preclude the Board of Directors
of Employer from authorizing the payment to Employee of a bonus, whether in
cash or capital stock, based upon Employee's performance or other reasonable
criteria. The payment of such additional compensation shall not operate as
an amendment obligating Employer to make any similar payment or to pay
additional compensation at any future time or for any future period or be
deemed to affect the base salary in any manner.
4.4 ADDITIONAL BENEFITS.
(a) MEDICAL INSURANCE. Employer shall provide Employee during
the Term with group accident, medical, dental and hospital insurance coverage,
provided however, that such insurance shall only be provided when determined by
the Board of Directors to be within the financial resources of the Company.
(b) BENEFITS GENERALLY OFFERED. In addition to any other
compensation or benefits to be received by Employee pursuant to the terms of
this Agreement, Employee shall be entitled to participate, to the extent
allowable in accordance with his
5
<PAGE>
status, in all employee benefits offered from time to time by Employer to its
senior officers; including, but not limited to, stock option plans, group
life, disability and any other insurance and profit sharing plans.
ARTICLE 5. VACATION
Employee shall be entitled to two (2) weeks paid vacation for each year
worked during the Term.
ARTICLE 6. TERMINATION
6.1 TERMINATION FOR CAUSE
(a) Employer reserves the right to terminate this agreement if
Employee willfully breaches or habitually neglects the duties which he is
required to perform under the terms of this agreement, or commits acts of
dishonesty, fraud, misrepresentation, or other acts of moral turpitude, that
would prevent the effective performance of his duties.
(b) Employer may at its option terminate this agreement for
the reasons stated in this Section by giving written notice of termination to
Employee without prejudice to any other remedy to which Employer 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 relevant facts.
(d) Termination under this section shall be considered "for
cause" for the purpose of this agreement.
6.2 TERMINATION WITHOUT CAUSE
(a) This agreement shall be terminated upon the death of
Employee.
(b) Employer reserves the right to terminate this agreement if
Employee suffers any physical or mental disability that would prevent the
performance of his essential job duties under this agreement, unless
reasonable accommodation can be made to allow Employee to continue working.
Such a termination shall be effected by giving fifteen (15) days written
notice of termination to Employee.
(c) Termination under this section shall not be considered
"for cause"
6
<PAGE>
for the purposes of this agreement.
6.3 EFFECT OF MERGER, TRANSFER OF ASSETS, OR DISSOLUTION.
(a) This agreement shall be terminated by any voluntary or
involuntary dissolution of Employer resulting from either a merger or
consolidation in which Employer is not the consolidated or surviving
corporation, or a transfer of all or substantially all of the assets of
Employer.
(b) Termination under this section shall not be considered
"for cause" for the purposes of this agreement.
ARTICLE 7. PAYMENTS UPON TERMINATION OF EMPLOYMENT
7.1 PAYMENTS. In the event of the termination of Employee's employment
under this Agreement by Employer, other than termination for "Cause," or if
Employee voluntarily terminates his employment within 90 days prior to or 180
days after a Change of Control (the "Change of Control Period"), Employee
shall have no duty to mitigate and Employer shall upon such termination pay
to Employee (i) three months base salary and (ii) continue payment of health
benefits for a period of three months (together, the "Severance Benefits"),
provided, however, if Employer terminates Employee's employment during the
Change of Control Period, then Employer shall pay Employee Severance Benefits
for a period of one year.
ARTICLE 8. EMPLOYEE'S REPRESENTATIONS AND WARRANTIES
Employee hereby warrants and represents to Employer and Employer as
follows, each of which representation and warranty is material and is being
relied upon by Employer and Employer and each of which is true at and as of
the date hereof:
8.1 EMPLOYEE'S KNOWLEDGE. That Employee has a pre-existing business or
personal relationship with Employer, that he is aware of the business affairs
and financial condition of Employer. Employee acknowledges that Employer has
made available to Employee the opportunity to ask questions and receive
answers from Employer and that Employee could be reasonably assumed to have
the capacity to protect his own interests in connection with entering into
this agreement.
8.2 NO INCONSISTENT OBLIGATIONS. Employee is under no contractual or other
restriction or obligation, compliance with which is inconsistent with the
execution of this Agreement, the performance of Employee's obligations
hereunder or the other rights of Employer hereunder; and
7
<PAGE>
8.3 NO INFIRMITY. Employee is under no physical or mental disability that
would hinder the performance of Employee's obligations under this Agreement.
ARTICLE 9. PERSONAL NATURE
This Agreement is personal, being entered into upon the singular
skill, qualifications and experience of Employee. Employee shall not assign
this Agreement or any rights, benefits, duties or obligations hereunder
without the express written consent of Employer. Employee hereby grants to
Employer the right to use Employee's name, likeness and/or biography in
connection with the services performed by Employee hereunder and in
connection with the advertising or exploitation of any project with respect
to which Employee performs services hereunder.
ARTICLE 10. NOTICES
Any and all notices or other communications required or permitted by
this Agreement or by law shall be deemed duly served and given when actually
received by personal delivery or by certified mail, return receipt requested,
with first class postage prepaid thereon, to the party to whom such notice or
communication is directed, addressed as follows:
EMPLOYER: NURESCELL INC.
1400 Bristol Street North, Suite 240
Newport Beach, CA 92660
EMPLOYEE: HAROLD L. RAPP
P.O. Box 762
Sierra Madre, CA 91025
Each of the parties hereto may change its address for purposes of this
Section 11 by giving written notice of such change in the manner provided for
in this Section 11.
ARTICLE 11. GOOD FAITH
All approvals and consents required to be given by any party to this
Agreement shall be given or withheld in good faith and may not be
unreasonably withheld. Each party hereto shall use due diligence in its
attempt to accomplish any act required to be accomplished by that party.
ARTICLE 12. ATTORNEY'S FEES AND EXPENSES
In the event that it should become necessary for any party to this
Agreement to
8
<PAGE>
bring an action, including any agreed upon arbitration, either
at law or in equity, to enforce or interpret the terms of this Agreement, the
prevailing party in such action shall be entitled to recover its reasonable
attorneys' fees and expenses as a part of any judgment therein, in addition
to any other award which may be granted.
ARTICLE 13. APPLICABLE LAW/VENUE
This Agreement is executed and intended to be performed in the State of
California and the laws of such state shall govern its interpretation and
effect. If suit is instituted by any party hereto by any other party hereto
for any cause or matter arising from or in connection with the respective
rights or obligations of the parties hereunder, the sole jurisdiction and
venue for such action shall be the Superior Court of the State of California
in and for Orange County.
ARTICLE 14. INTEGRATED AGREEMENT
This Agreement constitutes the entire agreement of the parties with
respect to the subject matter of this Agreement.
ARTICLE 15. SEVERABILITY
Any provision in this Agreement which is, by competent judicial
authority, declared illegal, invalid or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the extent of such
illegality, invalidity or unenforceability without invalidating the remaining
provisions hereof or affecting the legality, validity or enforceability of
such provision in any other jurisdiction. The parties hereto agree to
negotiate in good faith to replace any illegal, invalid or unenforceable
provision of this Agreement with a legal, valid and enforceable provision
that, to the extent possible, will preserve the economic bargain of this
Agreement, or otherwise to amend this Agreement, including the provision
relating to choice of law, to achieve such result.
ARTICLE 16. WAIVER
No waiver of any of the provisions of this Agreement shall be deemed,
or shall constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver shall be
binding unless executed in writing by the party making the waiver.
16.1 PARTIAL INVALIDITY. If any provision in this agreement is held by a
court of competent jurisdiction to be invalid, void, or unenforceable, the
remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
<PAGE>
16.2 LAW GOVERNING AGREEMENT. This agreement shall be governed by and
construed in accordance with the laws of the State of California. The
parties agree to submit to the jurisdiction and venue of the Orange County
Superior Court.
16.3 SUMS DUE DECEASED EMPLOYEE. If Employee dies prior to the expiration of
the term of his employment, any sums that may be due him from Employer under
this agreement as of the date of death shall be paid to Employee's spouse, if
any, or if employee is not married, then to his heirs.
ARTICLE 17. APPROVAL OF THE BOARD OF DIRECTORS
The Board of Directors has approved the terms of this Agreement and
shall execute an appropriate resolution which shall be certified by the
Secretary thereof.
ARTICLE 18. COUNTERPARTS; EXECUTION BY FACSIMILE
This Agreement and/or any amendments to this Agreement may be executed
in one or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument. This
Agreement is effective when each party has received an executed version
transmitted to such party via facsimile by the other party.
Executed on ___________, 19_____, at _________________, California.
EMPLOYER EMPLOYEE
NURESCELL, INC., a Nevada
Corporation _____________________________
HAROLD L. RAPP
_____________________________
By___________________________
Chairman of the Board
<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 APRIL 1, 1999 TO SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,418
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,418
<PP&E> 52,609
<DEPRECIATION> 9,085
<TOTAL-ASSETS> 66,551
<CURRENT-LIABILITIES> 182,318
<BONDS> 0
0
0
<COMMON> 1,312
<OTHER-SE> (117,079)
<TOTAL-LIABILITY-AND-EQUITY> 66,551
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 414,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,409)
<INCOME-PRETAX> (410,741)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (410,741)
<EPS-BASIC> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
