FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
Of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1998
Commission File Number 1-7301
RENU-U INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-1329265
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3789 SOUTH 500 WEST
SALT LAKE CITY, UTAH 84115
(Address of principal executive offices)
Registrant's telephone number
including area code (801) 262-5052
Former Address, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the
registrant was required to file such reports)
Yes X No
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
9,961,241
(Number of shares of common
stock the registrant had outstanding
as of August 4, 1998
PART 1
ITEM 1 - FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not misleading.
In the opinion of the Company, all adjustments, consisting of only normal
recurring adjustments, necessary to present fairly the financial position of
the Company as of March 31, 1998 and the results of its operations and
changes in its financial position from January 1, 1983 through March 31,
1998 have been made. The results of its operations for such interim period is
not necessarily indicative of the results to be expected for the entire year.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
In early 1996, the Company commenced work with Dr. Jean-Francois Hibbert,
MD, and later Dr. Michael Wall, MD. This work has resulted in the Company
developing a new business opportunity in the field of pain management and
physical wellness utilizing the Company's Bio- Resonance Therapy ("BRT").
Consequently, the Company is working towards owning and operating pain
management and physical wellness centers (hereafter "the Centers"),leasing
commercial BRT units, and selling hand-held BRT units domestically and
internationally.
An initial Center was located in New York in 1997, but was moved in May
1998 due to logistical difficulties in operating the center at a great distance
from the Company's headquarters in Salt Lake City, Utah. Management currently
intends to open a center in Utah starting in September 1998.
Each Center will occupy approximately 2500 sq. feet of space and be
equipped with the Company's Bio-Resonance Therapeutical devices. The Centers
will be staffed by approximately six employees under the direction of a medical
doctor. As the business develops, the Company intends to license and
franchise these Centers. Eventually, the Centers will offer clients a complete
fitness and wellness therapy package, including Bio Resonance Therapy,
flexibility training, and nutrition consultation. The Centers will primarily
compete with medical facilities that focus on pain management and therapy.
The Centers will be unique, however, in that they will provide BRT using
the equipment designed by the Company.
BRT theories were first developed in the far east in the 1970s and were
based on the theory of human energy fields. The Company and its consultants
have designed and improved the BRT devices (hereafter "Device") to be more
efficient and effective. The Device operates on both 110 volts and 220
volts to generate an evenly heated pattern of energy field. The designers
believe this field duplicates the natural energy field generated by the human
body and, therefore, assists the human body to minimize or reduce pain and
self heal. A BRT would be categorized under FDA guidelines as a non-invasive
medical device. Some of the components for these Devices will be imported
and then assembled in the United States exclusively for the Company.
Management does not anticipate any difficulty in obtaining the necessary
devices.
The Company has worked with the foreign manufacturer for the past
eighteen months to develop a hand-held BRT unit and have now commenced
production and marketing. This smaller unit will operate under the same
principals as the device installed in the Centers, but at significantly
lower capacity. These smaller devices will be marketed through a variety of
marketing channels for home use. In May of 1998 the Company entered into an
exclusive product license agreement with Sureal International, Inc.
Pursuant to the Agreement, Sureal has the exclusive right for merchandising,
marketing, distribution, promotion and selling of hand held BRT units under
the trade name Sureal BRT or Sureal Bio-Resonance Therapy for as long as the
minimum unit purchases are met. The exclusivity excludes Thailand,
Singapore, Malaysia, Indonesia, Hong Kong, China and Taiwan as territories.
The minimum purchases are 3,000 units within six months of the agreement,
2,000 units for the three month period after November 1, 1998, and then 3,000
units per month thereafter. Sureal has already paid the Company a $5,000
good faith payment towards the licensing fee of $250,000. The licensing fee
is due upon the earlier of nine months from the date of the agreement, or upon
completion of a public offering by Sureal. Management has been informed that
Sureal expects to have their offering completed by the end of October 1998.
As part of its business, the Company will sell the smaller units and
lease larger units to institutions like hospitals and fitness centers. The
Company currently has an order to lease approximately 50 commercial units,
with 12 units already delivered to customers.
The Registrant is currently conducting only limited business operations.
At March 31, 1998, the Registrant had current assets of $35,472 and current
liabilities of $262,630. The Company had total assets of $86,634 and total
liabilities of $383,630. During 1997, the Registrant began operations in
Tarrytown, New York under the direction of Dr. Jean-Francois Hibbert. For
the first quarter, the center generated approximately $14,000 in treatment
revenue while the overhead for the New York center was estimated at $20,000 to
$25,000 (Excluding the $36,000 lease buyout)(See Properties).
During the first quarter, the Company generated a loss of ($65,547)
compared to ($23,314) in the prior year. The increase is due entirely to the
loss from the operation of the New York Center and the loss from the buyout
of the leasehold in New York.
In 1997, the Company expended approximately $10,000 in new equipment for
the New York center (which will be transferred and used in the Salt Lake
center) and $25,000 towards the purchase of the proprietary molds used in the
production of the new BRT hand held devices. So far in 1998, the Company
has expended over $40,000 towards the manufacture and delivery of inventory.
With the purchase and sale of the BRT inventory, the opening of its Salt
Lake City wellness center, and ongoing financial support by the principle
shareholder/directors, the Company is expected to meet its financial needs
through 1998. In 1998, the Company has negotiated $92,000 in short term
debt into long term debt and will renegotiate its $96,000 bond issuance for at
least another one year. Working capital loans from the principle shareholder
are not payable until the Company has sufficient capital for its operating
needs. It is estimated that sales of the hand held unit will exceed $240,000
for 1998 along with an expected receipt of up to $250,000 in licensing fees
from Sureal (see earlier discussion).
The Company is expecting to need another $80,000 for the purchase of
inventory , $20,000 for the purchase of additional fixed assets, and $25,000
in further research and development and other capital needs for the next
twelve months.
The Company believes that during 1998 sufficient funds will be generated
from the sales of the BRT units, medical treatment revenue from the wellness
centers, and franchise fees from Sureal to pay not only the ongoing overhead of
the Company, but also to pay all past due accounts payable and retire all
current notes payable due within the next twelve months.
If any funds remain to pay any long term debt or accounts payable to
related parties, the Company will carefully evaluate the future operating and
capital needs before any such funds are expended. The Company does believe
that by reducing or eliminating all short term debt, other short term
financing will become available, if needed, to fund the seasonal and/or
cyclical financing needs of the Company beyond the next twelve months.
If the Registrant needs additional funding beyond managements' current
expectations in order to pay its obligations, file periodic reports and
continue its currently planned business of owning and operating pain management
centers, the Registrant will need to enter into an agreement for the
provisions of such additional funding and no assurances can be given that such
funding will be available to the Registrant on terms acceptable to it or at
all.
As a small business, shareholders of the Company must bare the risks
associated with ownership in a company in its early stages of development with
limited or no resources, undeveloped product markets and limited staffing and
facilities. Additionally, due to current market factors of "low price"
securities, often referred to as "penny stocks", shareholders of the Company
must bare the risk of owning securities with limited liquidity or no
liquidity at all.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Renu-U International, Inc.
Date: August 10, 1998 /s/Frank Nelson
President and Principal
Financial Officer
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Balance Sheets
ASSETS
March 31,
1998 December 31,
(Unaudited) 1997
Current Assets
Cash $ 6,422 $ 1,695
Prepaid expenses 31,050 -
35,472 1,695
Fixed Assets
Office equipment (Note 1) (Note 3) 42,230 18,167
Other Assets
Medical equipment (Note 3) 7,207 7,207
Deposits (Note 4) 350 25,350
$ 87,259 $ 52,419
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 85,742 $ 78,656
Accounts payable - related party (Note 3) 74,538 58,236
Deferred Revenue 10,000 -
Short term notes (Note 9) 92,350 25,300
262,630 162,192
Long term debt (Note 5) 121,000 121,000
Contingencies & Commitments (Notes 4 & 8) - -
Stockholders' Equity
Preferred stock, $.10 par value 1,000,000 shares
authorized, no shares issued or outstanding - -
Common stock $.001 par value, 100,000,000 shares
authorized, 9,961,241 shares issued and outstanding 9,961 9,961
Capital in excess of par 753,342 753,342
Treasury stock (3,675) (3,675)
Accumulated deficit during development stage (1,055,999) (990,401)
(296,371) (230,773)
$ 87,259 $ 52,419
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Operations
(Unaudited)
For the Period
During the
Development
Stage from
For the Three Months January 1, 1983
Ended March 31, Through March 31,
1998 1997 1998
Revenue:
Sales & service $14,312 $ - $ 41,461
Expenses
Selling, General &
Administrative Expenses 43,893 23,696 514,891
Loss From Abandonment Of
Leasehold 36,000 - 36,000
Total Expenses 79,893 23,696 550,891
Other Income (Expense):
Interest income - 382 4,533
Net Loss $ (65,598) $ (23,314) $ (504,897)
Net Loss Per Share
(Note 1) $ (.01) $ (.00) $ (.06)
Average shares
outstanding 9,961,241 9,961,241 8,164,850
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Period
During the
Development
Stage from
For the Three Months January 1, 1983
Ended March 31, Through March 31,
1998 1997 1998
Cash Flow Used for Operations:
Net loss from operations $(65,598) $(23,314) $(504,897)
Items not requiring cash flow
during the current period:
Depreciation 937 858 4,523
Increase in Inventory (31,050) - (31,050)
Issuance of stock for services - - 28,795
Decrease in Deposits 25,000 - 25,000
Bad debts - - 18,000
Decrease in notes receivable - - (3,000)
Increase /decrease in accounts
payable 23,388 (70) 185,529
Increase in deferred revenue 10,000 - 10,000
Expenses paid by an officer - - 90,807
Net Cash Flow Used for
Operations (37,323) (22,526) (176,293)
Cash Flow Provided From Financing
Activities:
Issuance of capital stock for
cash - - 175,000
Issuance of notes payable 67,050 - 188,050
Net Cash Flow Provided
From Financing Activities 67,050 - 363,050
Cash Flow Used for Investing
Activities:
Cash invested in subsidiary - - (105,000)
Cash paid for fixed assets (25,000) (2,732) (43,903)
Cash paid for deposits - (5,039) (27,757)
Cash paid for treasury stock - (3,675) (3,675)
Net Cash Flow Used for Investing
Activities (25,000) (11,446) (180,335)
Net Cash Flow 4,727 (33,972) 6,422
Cash - Beginning of Period 1,695 53,229 -
Cash - End of Period $ 6,422 19,257 $6,422
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
a. Organization
The Company was incorporated under the laws of the State of Delaware
on June 14, 1971. The Company was involved in various activities over the
years, none of which proved successful. During the year 1983, the Company
discontinued all operations and has had no significant revenues from any
activity since that time and is classified as a development stage company per
SFAS #7.
In 1996, the Company commenced work with Dr. Jean-Francoi Hibbert,
of Harris, New York. This work resultedin the Company developing a new
business opportunity in the field of physical care and development.
Consequently, the Company is working towards owning and operating pain
management and physical wellness centers. The Centers will focus on providing
physical and nutritional consultation and treatment. The Company has also
completed a line of its own "Bio-Resonance Therapy" (BRT) devices which are
used in self-treatment of a variety of physical ailments. These hand held
units will be sold beginning in April 1998.
b. Income Taxes
The Company adopted Statement of Financial Accounting Standards No.
109 "Accounting for Income Taxes" in the fiscal year ended December 31, 1996
and has applied the provisions of the statement on a retroactive basis to
the previous fiscal year which resulted in no significant adjustment.
Statement of Financial Accounting Standards No. 109 "Accounting for
Income Taxes" requires an asset and liability approach for financial accounting
and reporting for income tax purposes. This statement recognizes (a) the
amount of taxes payable or refundable for the current year and (b) deferred
tax liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.
Deferred income taxes result from temporary differences in the
recognition of accounting transactions for tax and financial reporting
purposes. There were no temporary differences at December 31, 1997 and earlier
years, accordingly, no deferred tax liabilities have been recognized for all
years.
The Company had cumulative net operating loss carryforwards of
approximately $440,000 at December 31, 1997 and $280,000 at December 31, 1996.
No effect has been shown in the financial statements for the net operating
loss carryforwards as the likelihood of future tax benefit from suchnet
operating loss carryforwards is not presently determinable. Accordingly, the
potential tax benefits of the net operating loss carryforward estimated based
upon current tax rates of $150,000 at December 31, 1997 and $95,000 at
December 31, 1996 have been offset by valuation reserves of the same amount.
The net change in deferred tax asset and offsetting valuation reserve
amounted to $55,000 for 1997 and $17,000 for 1996. The net operating losses
begin to expire in the year 1998.
c. Loss Per Share
The computation of loss per share of common stock is based on the
weighted average number of shares outstanding during the period.
d. Cash and Cash Equivalent
For the purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments with maturity of three months or
less to be cash equivalents.
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31, 1998
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
e. Property and Equipment
Property is recorded at cost or estimated fair value at the time of
acquisition (purchase or donation by officer/director).
Property and Equipment consist of the following:
March 31,
1998 1997 1996
Office & Computer Equipment $46,753 $21,752 $10,976
Less: Accumulated Depreciation (4,523) (3,585) (591)
Total Property and Equipment $ 42,230 $ 18,167 $10,385
Depreciation expense is computed on the straight-line method over
the estimated useful lives of the assets (three to seven years).
Depreciation expense for the period ended March 31, 1998, December 31, 1997
and 1996 is $937, $2,995 and $516 respectively.
NOTE 2 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. Currently, the Company does not have significant
cash or other material assets, nor does it have an established source of
revenues sufficient to cover its operating costs and to allow it to continue as
a going concern. It is the intent of the Company to develop its business in
the field of physical care and development. (See Note 1)
NOTE 3 - RELATED PARTY TRANSACTIONS
Frank Nelson, a major shareholder/officer, paid expenses of the
Company totaling $10,013 in 1996 in behalf of the Company. These expenses are
shown as a contribution to capital. During 1996, Mr. Nelson also contributed
$7,650 worth of office and medical equipment for future use in clinics that
will be opened in the coming years.
Mr. Nelson also rents space to the Company on a month to month basis
for $500 a month. ($300 a month prior to May 1, 1997).
In June 1996, Mr. Nelson provided $50,000 in long-term financing for
the Company (See Note 5).
During 1997, Mr. Nelson and his daughter provided another $49,336 in
working capital to help fund the company during its development stage. The
loans are non-interest bearing and are to be paid when the Company has
sufficient capital for its operating needs. In 1998, Mr. Nelson provided
another $21,696 in the first 3 months of 1998.
During 1997, Dr. Fancois Hibbert, a company director and officer
provided $4,105 in working capital loans for it's New York operation. Dr.
Hibbert was paid back $600 in the first three months of 1998.
During 1997, Mr. Nelson and Mr. Jimmy Lu, officers of the
corporation, signed on as personal guarantors for several bank loans.
(See Notes 5 & 9).
NOTE 4 - LEASE COMMITMENT
The Company (in the name of Mr. Nelson) leased an automobile for
company use. The lease terms are as follows.
Payments $308 per month
Length 36 months
Deposit $350
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31,1998
NOTE 4 - LEASE COMMITMENT (Continued)
Future lease commitments:
1998 $ 3,696
1999 $ 2,156
NOTE 5 - LONG TERM DEBT
During 1996, the Company borrowed $96,000 from 3 private individuals
($50,000 from Frank Nelson) to provide financing for the Company operations.
The notes are dated July 1, 1996 with a maturity date of June 30, 1998,
stated interest rate of 12%, unsecured. The notes are convertible into
common stock at 75% of a ten day average trading bid price. These notes are
classified as long term since the notes will be renegotiated in July 1998.
In 1997, Mr. Nelson helped secure a line of credit in the amount of
$25,000 that was used as an advance to purchase proprietary molds which will
be used to produce inventory being manufactured overseas (see Note 9). The
line of credit is similar to a credit card where interest only is paid
monthly with no minimum principle due.
NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosure
about Fair Value of Financial Instruments". The carrying amounts and fair
value of the Company's financial instruments at December 31, 1997 and 1996 are
as follows:
December 31, 1997 December 31, 1996
Carrying Fair Carrying Fair
Amounts Values Amounts Values
Cash and cash equivalents $1,695 $1,695 $ - $ -
Long-term debt including
current maturities $121,000 $121,000 $96,000 $96,000
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Cash and Cash Equivalents
The carrying amounts reported on the balance sheet for cash and cash
equivalents approximate their fair value.
Long-term Debt
The fair values of long-term debt are estimated using discounted
cash flow analyses based on the Company's incremental borrowing rate as the
discount rate.
NOTE 7 - USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect reported amounts of assets and liabilities, disclosure
of contingent assets and liabilities at the date of the financial statements
and revenues and expenses during the reporting period. In these financial
statements, assets, liabilities and earnings involve extensive reliance on
management's estimates. Actual results could differ from those estimates.
RENU-U INTERNATIONAL, INC.
(A Development Stage Company)
Notes to Financial Statements
March 31,1998
NOTE 8 - NEW YORK OPERATIONS
In 1997, the Company opened a wellness treatment center in
Tarrytown, New York. A lease was signed for office space and another lease
was signed for personal property used in the treatments provided by the center.
Early in 1998, the center was closed. A buyout of the lease for the office
space was negotiated ($36,000)(See Note 5) and the personal property was
returned to the vendor. Currently, the Company is negotiating for a buyout of
the lease for equipment, although as of this audit date, such negotiations are
ongoing. Although the amount of loss could be upwards of $25,000 (the full
claim of the leasing company), the Company cannot estimate the amount of loss
at the current time.
NOTE 9 - SHORT TERM DEBT
In 1998, Mr. Nelson secured a loan for $31,050 for the first
purchase of BRT Hand held units for sale in the United States. The shipment
was received in March. The note was due July 15, 1998 and then renewed to July
15, 1999.
In 1997, Mr. Nelson and Jimmy Lu, two company officers, personally
guaranteed a note for $25,300 for use as Company working capital. The note was
due in March 1998 and was renegotiated in May into a long term note along with
a line of credit that the Company had to secure the lease in New York (See
Note 8). The New York lease was canceled in March for a one time fee of
$36,000 in which the line of credit was activated and the fee paid. The new
note was renegotiated in May on all notes as a four year obligation with
monthly payments of $2,029. Interest rate is stated at 14.00%
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