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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File number 1-7301
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COLORMAX TECHNOLOGIES, INC.
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(Exact name of registrant as specified in charter)
Delaware 75-1329265
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
14251 Chambers Road Tustin, CA 92780
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(Address of principal executive offices) (Zip Code)
(714) 730-7900
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Registrant's telephone number, including area code
Renu-U International, Inc.
--------------------------
(Former name, former address, and former fiscal year,
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 for 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the last practicable date.
Class Outstanding as of December 12, 2000
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Common Stock, $0.001 23,436,101
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<TABLE>
INDEX
<CAPTION>
Page
Number
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PART I.
<S> <C> <C>
ITEM 1. Financial Statements (unaudited)................................................3
Condensed Consolidated Balance Sheets
December 31, 1999 and September 30, 2000 (unaudited).........................4
Condensed Consolidated Statements of Operations
For the three and nine months ended September 30, 2000 and 1999
(unaudited)..................................................................5
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2000 and 1999 (unaudited)............6
Notes to Condensed Consolidated Financial Statements............................7
ITEM 2. Management's Discussion and Analysis............................................9
PART II
ITEM 1. Changes in Securities..........................................................11
</TABLE>
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PART I - FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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The accompanying condensed consolidated balance sheets of ColorMax Technologies,
Inc. and subsidiary at September 30, 2000 (unaudited) and December 31, 1999,
the condensed consolidated statements of operations for the nine months ended
September 30, 2000 and 1999 (unaudited) and the three months ended September 30,
2000 and 1999 (unaudited), and the condensed consolidated statement cash flows
for the nine months ended September 30, 2000 and 1999 (unaudited), have been
prepared by the Company's management and they do not include all information and
notes to the financial statements necessary for a complete presentation of the
financial position, results of operations, cash flows, and stockholders' equity
in conformity with generally accepted accounting principles. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results of operations and financial position have been included and all such
adjustments are of a normal recurring nature.
Operating results for the nine months ended September 30, 2000, are not
necessarily indicative of the results that can be expected for the year ending
December 31, 2000.
3
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<TABLE>
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND SEPTEMBER 30, 2000 (UNAUDITED)
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<CAPTION>
ASSETS
September 30, December 31,
2000 1999
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(unaudited)
<S> <C> <C>
Current Assets
Cash 1,252,845 12,299
Accounts Receivable, net 61,887 2,000
Inventory 128,280 6,601
Prepaid Expense 47,911 194,130
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Total Current Assets 1,490,923 215,030
Property and Equipment, net 556,913 113,610
Other Assets
Patents and Distribution Rights, net 202,219 93,333
Deposits 12,019 21,491
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Total Assets 2,262,074 443,464
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable 209,123 108,799
Accrued Liabilities 128,969 139,438
Current Portion of Note Payable - Related Parties 83,300 -
Current Portion of Note Payable 41,971 -
Deferred Revenue 14,100 14,482
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Total Current Liabilities 477,463 262,719
Payable to Related Party 100,000 100,000
Note Payable, net of current portion 62,438 179,300
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Total Liabilities 639,901 542,019
Commitments and Contingencies
Stockholders' Equity (Deficit)
Series A preferred stock, $0.10 par value
1,000,000 shares authorized
0 (unaudited) and 0 shares issued and outstanding - -
Series B preferred stock, $0.001 par value
50,000,000 shares authorized
29,150 (unaudited) and 0 shares issued and outstanding 29 -
Series C preferred stock, $0.001 par value
50,000,000 shares authorized
0 (unaudited) and 0 shares issued and outstanding - -
Common Stock, $0.001 par value
100,000,000 shared authorized
23,369,433 (unaudited) and 22,751,914 shares
issued and outstanding 23,370 22,752
Additional paid-in capital 4,623,046 716,723
Accumulated deficit (3,024,272) (838,030)
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Total Stockholders' Equity (Deficit) 1,622,173 (98,555)
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Total Liabilities and Stockholders' Equity 2,262,074 443,464
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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<TABLE>
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
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<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
2000 1999 2000 1999
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(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
SALES $ 139,841 $ 3,150 $ 229,550 $ 3,150
COST OF SALES 13,956 - 22,310 -
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Gross Profit 125,885 3,150 207,240 3,150
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EXPENSES
General and Administration 880,914 859,469 2,396,569 859,469
Amortization 6,557 - 16,114 -
Depreciation 15,914 2,448 26,685 2,448
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Total Expenses 903,385 861,917 2,439,368 861,917
Other Income, net 5,074 - 45,886 -
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Net Loss (772,426) (858,767) (2,186,242) (858,767)
Preferred Stock Dividends (50,983) - (1,223,586) -
------------- ------------- ------------- -------------
Net Loss Available to Common Shareholders $ (823,409) $ (858,767) $ (3,409,828) $ (858,767)
============= ============= ============= =============
Basic and Diluted Loss Per Common Share $ (0.04) $ (0.12) $ (0.15) $ (0.12)
============= ============= ============= =============
Weighted-Average Shares Outstanding 23,161,230 7,264,155 22,962,075 7,019,892
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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<TABLE>
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
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<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
September 30, September 30,
2000 1999
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(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Loss $(2,186,242) $ (858,767)
Adjustments to reconcile net loss
to net cash used in operating activities
Amortization 16,114 -
Depreciation 26,685 2,448
Bad Debt Expense 69,330 -
Issuance of Common Stock as Compensation Expense 252,000 686,669
Changes in Accounts Receivable (129,217) (2,000)
Changes in Inventory (121,679) -
Changes in Prepaid Expenses and Deposits 155,691 (30,613)
Changes in Accounts Payable 100,323 111,168
Changes in Accrued Liabilities (10,469) -
Change in Deferred Revenue (382) -
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Net Cash used in Operating Activities (1,827,846) (91,094)
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of Equipment (469,988) (35,319)
Purchase of Patents and Distribution Rights (125,000) -
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Net Cash used in Investing Activities (594,988) (35,319)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Notes Payable 382,000 53,300
Payments on Notes Payable (373,590) -
Proceeds from Issuance of Common Stock - 100,000
Proceeds from Issuance of Preferred Stock 3,654,970 -
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Net Cash Provided by Financing Activities 3,663,380 153,300
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Net Increase in Cash 1,240,546 26,887
Cash at Beginning of Period 12,299 -
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Cash at End of Period $ 1,252,845 $ 26,887
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
On June 8, 1999 Colormax Technologies, Inc. and subsidiary, (collectively, the
"Company") acquired all of the outstanding stock of RGB Technology Group Inc.
through a stock for stock exchange in which the sole stockholder (Kimrose
Holdings) of RGB Technology Group Inc. received 6,000,000 (after stock split)
common shares of the Company in exchange for all of the stock of RGB Technology
Group Inc. RGB Technology Group, Inc. was organized in the state of Delaware on
April 28, 1999 for the purpose of marketing ColorMax Lenses and ColorMax Color
Test software. After the completion of the transaction the outstanding stock of
the Company was 6,664,082 common shares of which 6,000,000 was owned by Kimrose
Holdings.
The only asset held by RGB Technology Group, Inc. on June 8, 1999 consisted of
the exclusive marketing rights for the above technology, for use in the United
States, Australia, and New Zealand, which was recorded on the books of RGB with
no value.
In connection with the acquisition, the Company acquired the distribution rights
to ColorMax Products in the United Kingdom, Canada, and Japan from three related
parties in exchange for 4,000,000, 4,000,000, and 6,000,000 shares respectively,
of the Company's common stock. These shares have been recorded as issued in
conjunction with the acquisition of RGB.
For reporting purposes, the acquisition was treated as an acquisition of the
Company by RGB Technology Group, Inc., the acquirer, (a reverse acquisition) and
a recapitalization of RGB Technology Group, Inc. The historical financial
statements prior to June 8, 1999 are those of RGB Technology Group, Inc. No
goodwill was recognized from the consolidation. All material intercompany
accounts and transactions have been eliminated.
The Company has not had any operations in the prior comparable periods,
therefore, no such comparable periods are presented.
Principles of Consolidation
---------------------------
The accompanying financial statements include the accounts of Colormax
Technologies, Inc. and its wholly owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
Basic and Diluted Net Loss Per Share
------------------------------------
The Company utilizes SFAS No. 128, "Earnings per Share." SFAS No. 128 replaced
the previously reported primary and fully diluted loss per share with basic and
diluted loss 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. Basic loss per share is computed using the weighted-average
number of common shares outstanding during the period. Common equivalent shares
are excluded from the computation if their effect is anti-dilutive. As such,
basic and diluted loss per share are the same.
2. PATENTS
During March 2000 the Company purchased two patents and trademarks relating to
soft contact lenses in the United States and in Canada for $125,000. The patents
are being amortized over eight years which is the remaining life left before the
patents expire.
3. NOTES PAYABLE - RELATED PARTIES
The Company has received loans from related parties. As of September 30, 2000,
the note payable to a related party totaled $83,300. The note accrues interest
at 8% and is due on February 1, 2001.
7
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COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 (UNAUDITED)
4. MARKETING RIGHTS
The Company acquired the distribution rights to Colormax products in the
United Kingdom, Canada, and Japan from Harvest Capital Management, Inc., Nano
Material Science, Inc., and GemGroup, Inc., respectively, in exchange for
4,000,000, 4,000,000, and 6,000,000 shares of the Company's common stock. These
shares have been issued in conjunction with the acquisition of RGB.
5. DISTRIBUTION RIGHTS AND PAYABLE TO RELATED PARTY
On May 1, 1999, the Company entered into a 10-year Distributorship Agreement
with Kimrose, which gave the Company the right to distribute ColorMax products
on an exclusive basis in the United States, Australia, and New Zealand. The
agreement calls for a payment of $100,000 for the purchase of the rights. As of
September 30, 2000, the Company recorded distribution rights totaling $85,833,
net of accumulated amortization of $14,167 and a payable to a related party of
$100,000.
6. PREFERRED STOCK
On March 6, 2000 the Company completed a private placement and sale of 40,000
shares of 7% convertible preferred capital stock for cash of $3,654,970 net of
offering costs of $345,030 and included 76,471 warrants convertible to common
stock, 20,000 of the warrants issued was additional offering costs
The terms of the preferred stock includes semi-annual dividend payments in cash
and conversion rights of one share of preferred for one share of common, not to
exceed 50% of holding by each shareholder during any 30 day period upon an
effective registration date with the SEC, with a conversion rate of the lower of
$12.75, or 85% of the low three-day average closing bid price of the Company's
common stock for the 20 consecutive trading days prior to the trading day on
which conversion notice is sent, however, the Company cannot issue more than 20%
of common shares outstanding without shareholder approval. If shareholder
approval cannot be obtained then the Company will be obligated to purchase the
preferred shares at 120% of the original purchase price plus accrued dividends.
In accordance with generally accepted accounting principles, the Company is
required to recognize the benefit received by preferred shareholders on the
preferred stock conversion feature as a return to those shareholders over the
vesting period of the conversion feature. The return to preferred shareholders
is calculated as the difference between the most beneficial conversion rate
available and the trading price of the company's common stock at the time of
issuance, multiplied by the number of shares the preferred would be convertible
into. Related to the preferred stock's conversion feature, the Company
recognized dividends in the amount of $152,948 as of March 31, 2000 and $917,689
and $50,983 in the subsequent two quarters, respectively. These preferred
dividends are reflected as an increase in the net loss available to common
shareholders on the accompanying statement of operations.
7. CONTINGENCIES
The Company is currently disputing the issuance of 66,668 shares of common stock
to a former officer for services. As such, these shares have not been reflected
in the accompanying balance sheet.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following contains some "forward looking statements" which are based upon
our plans, goals, and objectives. Such statements are subject to various risks
and uncertainties. Numerous factors exist within the business world which may
prevent the successful attainment of such plans, goals and objectives.
Consequently, the reader should consider that such risks, uncertainties, and
unknown factors may cause actual results to vary materially from those stated
goals outlined below. Among the factors that may cause our actual results to
differ materially are the factors detailed below and the risks discussed in the
"Risk Factors" section included in our Form SB-2 registration statement filed on
April 20, 2000. You should also consult the risk factors listed from time to
time on our reports and amendments.
OVERVIEW
ColorMax distributes and develops products to help improve color vision
discrimination for people who suffer from genetic colorblindness. Our principal
product, ColorMax Color Vision Enhancement Lenses, is designed as a corrective
aid for red and green colorblindness. The Food and Drug Administration ("FDA")
has cleared ColorMax Color Vision Enhancement Lenses for marketing as
prescription optical aid for the treatment of congenital red-green color vision
defiencies.
PLAN OF OPERATION
ColorMax is the first company to receive FDA clearance for its optical aid for
genetic colorblindness. As the "first mover" in this emerging market, the
company's plan for the following 12 months includes aggressive expansion of its
marketing operations and the increase in our manufacturing capabilities.
Our marketing plan includes key objectives regarding two of our most important
targets: (1) licensed eye care professionals, including optometrists and
ophthalmologists, and (2) colorblind patients.
Eye care professionals act as distributors for our products and are the primary
point of contact with the end user. Our goal is to establish an extensive
distributorship base of authorized ColorMax Providers in all major U.S. markets,
as well as key international markets. We intend on employing aggressive
marketing strategies which will connect with and educate doctors on this new
product. Our marketing program includes interfacing with doctors at optometric
trade shows, the development of continuing education programs, direct sales and
demonstrations, and advertising and promotion in the optometric trade journals.
We have developed practice support materials and programs to assist doctors in
maximizing ColorMax sales at their practice. We will continue our efforts to
build our marketing and practice support divisions over the course of the year.
Our objective is to raise consumer awareness and establish brand name
recognition to the approximately 12 million people in the United States alone
and 250 million people worldwide who suffer from colorblindness. Colorblindness
is a genetic condition which affects 8% of men and 0.5% of women, or 1 in every
twelve men and 1 in every 250 women. Our authorized ColorMax Providers will
market directly to their patients the ColorMax line of products. We also market
to the consumer through a variety of methods including the internet, direct mail
and consumer advertising. We plan on initiating a major consumer advertising
campaign after the establishment of the basic distributorship network.
Our research and development is directed toward new procedures and products
which may prove useful in the detection, diagnosis and treatment of
colorblindness. Currently, we are developing ColorMax Soft Contact Lenses and
intends on seeking regulatory approval. We intend to distribute ColorMax Soft
Contact Lenses through our authorized ColorMax Providers.
The Company's plan for growth may require the acquisition of additional
machinery and equipment to increase manufacturing output to supply ColorMax
products throughout the world. It may also be necessary for the Company to
recruit and hire beyond its current personnel levels to implements its plans for
the year. We anticipate that our current cash and our anticipated cash flow from
operations will be sufficient to meet our working capital needs for the next
twelve months.
9
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion includes our operations.
Revenues totaled $139,841 for the three months ended September 30, 2000 and
$229,550 for the nine month period ended September 30, 2000. The third quarter
sales for the three months ended September 30, 1999 were lens orders from the
original pilot program. The increase in sales during the three months ended
September 30, 2000 in comparison to revenue during the three months ended June
30, 2000 came about as we established a base of practitioners who prescribe
ColorMax lenses. Sales were centered in ColorMax Doctor Test Kits and ColorMax
Color Test Software. As stated in the Plan of Operations, our chief sales
objective is the installation of our distributor base of authorized ColorMax
Providers. All authorized ColorMax Providers must acquire a ColorMax Doctor Test
Kit and Color Test Software in order to test and fit patients for ColorMax
Lenses. Sales of ColorMax Lenses to patients will build once the larger
installed doctor base is established. At the end of the period, there were
approximately 300 authorized ColorMax Providers in the United States, Canada and
Australia. Net accounts receivable totaled $61,887 as of September 30, 2000.
General and administrative expenses and research and development costs totaled
$2,396,569 for the nine months ended September 30, 2000. During the first
quarter, we acquired several patents relating to soft contact lenses for
colorblindness including the U.S. and Canadian Patents and Trademarks to X-Chrom
Soft Contact Lenses for approximately $125,000. The X-Chrom name and trademark
is well known in the optical business.
We had a net loss of $772,426 or $0.04 per share fully diluted for the three
months ended September 30, 2000. The year to date operational loss is due to
expenditures necessary to begin operations, establish a base of practitioners
who will serve to distribute ColorMax corrective lenses and other products as
they are introduced. We also expended funds to increase and monitor our
laboratory facility and to disseminate information about our services and
product line.
Adjustments were made to revenues for the quarters ended March 31, 2000 and June
30, 2000 to reclassify sales with terms that included the right of return as
deferred revenue until such time that the right of return expires. During the
quarters ended March 31, 2000 and June 30, 2000, the Company made significant
sales with terms that included the right to return. ColorMax anticipates that
for those sales with return rights revenue will be recognized once such rights
have expired.
Increasing production quality and capacity was emphasized during the third
quarter. We believe that the increase in production capacity completed at the
end of the period will help the Company to deliver all of its orders and keep up
with demand in future periods.
LIQUIDITY AND CAPITAL RESOURCES
Cash increased by $1,240,546 in the first nine months of 2000 largely due to the
sale of preferred stock and warrants in March. We filed a registration statement
in connection with the offering and the Securities and Exchange Commission
declared the registration statement effective on May 1, 2000 which was
withdrawn. We anticipate that our current cash and our anticipated cash flow
from operations will be sufficient to meet our working capital and capital
equipment needs at least through the next twelve months.
10
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - CHANGES IN SECURITIES
ITEM 1A - STOCK SPLIT
On January 7, 2000, we split our outstanding common stock on a two for one
basis, increasing common shares outstanding from 11,375,957 to 22,751,914.
ITEM 1B - PRIVATE PLACEMENT OF PREFERRED STOCK
On March 6, 2000 we completed a private placement and sale of 40,000 shares of
7% convertible preferred capital stock for cash of $3,654,970 net of offering
costs of $345,030 and included 76,471 warrants convertible to common stock,
20,000 of the warrants issued was additional offering costs
The terms of the preferred stock includes semi-annual dividend payments in cash
and conversion rights of one share of preferred for one share of common, not to
exceed 50% of holding by each shareholder during any 30 day period upon an
effective registration date with the SEC, with a conversion rate of the lower of
$12.75, or 85% of the low three-day average closing bid price of our common
stock for the 20 consecutive trading days prior to the trading day on which
conversion notice is sent, however, we cannot issue more than 20% of common
shares outstanding without shareholder approval. If shareholder approval cannot
be obtained then we will be obligated to purchase the preferred shares at 120%
of the original purchase price plus accrued dividends.
On July 14, 2000, ColorMax issued 32,674 shares of common stock in accordance
with the terms of its private placement agreement.
On August 2, 2000, the Board approved the repurchase of up to 200,000 shares of
its common stock.
On August 24, 2000 ColorMax requested the Securities and Exchange Commission
suspend the effectiveness of the company's SB-2 Registration Statement for the
convertible preferred stock it sold in March 2000 until the statement can be
amended, reviewed and again declared effective by the SEC. The statement was
originally declared effective May 1, 2000.
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 who are duly authorized.
COLORMAX TECHNOLOGIES, INC.
[Registrant]
Dated:
December 13, 2000
By /s/ James Bailey
-------------------------------
James Bailey
Chief Executive Officer
Dated:
December 13, 2000
By /s/ Robert Pasquaye
-------------------------------
Robert Pasquaye
Controller
11
