<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
Amendment No. 1 to
FORM 10-QSB/A
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: 13,234,000
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 8,609 8,609
----------- ---------
Total Other Assets 11,609 11,609
----------- ---------
TOTAL ASSETS $ 56,551 $ 275,639
=========== =========
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 1,324 1,308
Additional Paid in Capital 1,387,551 874,192
Deficit accumulated during the development stage (1,514,642) (644,526)
----------- ---------
Total Stockholders' Equity (125,767) 230,974
----------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 56,551 $ 275,639
=========== =========
</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 $ 460,445 $ 156,717 $ 870,321 $ 231,133 $ 1,512,362
Depreciation 1,079 1,643 3,204 2,010 9,085
----------- ----------- ----------- ----------- -----------
Total Expenses 461,524 158,360 873,525 233,143 1,521,447
LOSS FROM OPERATIONS (461,524) (158,360) (873,525) (233,143) (1,521,447)
OTHER INCOME
Interest income -0- -0- 3,409 -0- 6,805
----------- ----------- ----------- ----------- -----------
NET LOSS $ (461,524) $ (158,360) $ (870,116) $ (233,143) $(1,514,642)
=========== =========== =========== =========== ===========
NET LOSS PER SHARE
Basic and fully diluted $(0.04) $(0.02) $ (0.07) $ (0.03) $ (0.12)
=========== =========== =========== =========== ===========
Weighted average common
Shares outstanding 13,234,000 12,773,450 13,125,376 10,391,187 12,322,706
=========== =========== =========== =========== ===========
</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 (1,000) 0
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 1,308 849,192 (644,526) 25,000 230,974
Issuance of common stock:
Payment of Common Stock Subscription (25,000) (25,000)
Cash - $ 5 per share, net of costs 19,000 2 94,998 95,000
Cash $100 and investment banking services 30,000 3 120,797 120,800
Consulting services 8,000 1 9,374 9,375
Fair value of options 125,700 125,700
To Employees 100,000 10 187,490 187,500
NET LOSS (870,116) (870,116)
----------- -------- ----------- ------------- ---------- ---------
BALANCE SEPTEMBER 30, 1999 (unaudited) 13,234,000 $ 1,324 $ 1,387,551 $(1,514,642) $ 0 $(125,767)
=========== ======== =========== ============= ========== =========
</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 $ (870,116) $ (1,514,642)
Adjustments:
Depreciation 3,204 9,085
Issuance of stock for services 317,575 317,575
Fair value of options 125,700 125,700
(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 (190,475) (879,964)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of Property, Plant & Equipment 3,628 52,609
Deposits -0- 3,000
Intangibles -0- 8,609
------------ ------------
Net Cash Flows Used by Investing Activities (3,628) (64,218)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Sale of Common Stock 70,100 945,600
------------ ------------
Net Cash Flows Provided by Financing Activities 70,100 945,600
------------ ------------
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 services 130,075 317,575
Issuance of stock to employees 187,500 187,500
317,575 317,575
============ ============
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
NURESCELL INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
1. GENERAL
RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the filing of these financial statements, the Company
discovered an error in its computation of stock-based compensation
pursuant to APB25 and SFAS 123. As a result, the Company's current
year's net income was overstated and additional paid-in capital was
understated for the six month period ended September 30, 1999 by
$459,375 (and $459,375 respectively). In addition, the Company
restated items discussed in Note 12 to the March 31, 2000 financial
statements.
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:
Furniture, fixtures, and equipment 5 years
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, "Accounting For
Stock-Based Compensation" ("SFAS No. 123"), requires a fair value
based method of accounting for non-employee stock options, and
encourages, but does not require the same method of accounting for
employee stock options. The Company elected to continue to account for
stock-based compensation using the intrinsic value method prescribed
in Accounting Principles Board Opinion No. 25, "Accounting for Stock
issued to Employees" ("APB No. 25"), and related interpretations,
under which no compensation cost related to stock options has been
recognized as the exercise price of each option at the date of grant
was equal to the fair value of the underlying common stock.
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:
PERIOD ENDING
SEPTEMBER 30
-------------
2000 $ 41,064
2001 41,064
2002 27,376
--------
Total $109,504
5. INCOME TAXES
For federal income tax purposes, approximately $1,514,642 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. SHAREHOLDERS' DEFICIENCY
The Company has 50,000,000 shares of $.0001 par value common stock
authorized, of which 13,234,000 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.
In June 1999, the Company issued to National Capital Merchant Group,
Ltd. 30,000 shares of the Company's Common Stock valued at $120,800
($4.03) per share for past investment banking services to the Company
and for cash of $100.
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.
In April 1999, the Company granted Robert Shaw, a consultant to the
Company, an option to purchase 15,000 shares of the Company Common
Stock at $1.00 per share for each month that he provides services
under his agreement with the Company. The options were valued at
various prices under SFAS 123. As of September 30, 1999 he was granted
a total of 90,000 options which were valued at $125,700.
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-
