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 March 31, 2000
---------------
( ) 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 Rd 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 May 15, 2000
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Common Stock, $0.001 22,902,582
INDEX
Page
Number
------
PART I.
ITEM 1. Financial Statements (unaudited) 3
Balance Sheets 4
March 31, 2000 and December 31, 1999
Statements of Operations
For the three months ended
March 31, 2000 and 1999 6
and the period April 28, 1999
to March 31, 2000
Statements of Cash Flows
For the three months ended
March 31, 2000 and 1999 7
and the period April 28,
1999 to March 31, 2000
Notes to Financial Statements 8
ITEM 2. Management Discussion and Analysis 11
PART 2
ITEM 1. Changes in Securities 13
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The accompanying balance sheets of ColorMax Technologies, Inc. and subsidiary
(development stage company) at March 31, 2000 and December 31 1999, and the
statements of operations for the three months ended March 31, 2000 and 1999 and
the period April 28, 1999 (date of development stage) to March 31, 2000, the
cash flows and the statement of stockholder's equity for the three months
ended March 31, 2000 and 1999, and the period April 28, 1999 to March 31,
2000, 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 quarter ended March 31, 2000, are not necessarily
indicative of the results that can be expected for the year ending December 31,
2000.
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
MAR 31, DEC 31,
2000 1999
-------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,062,935 $ 12,314
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . 93,450 2,000
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,341 6,601
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . 18,594 20,102
--------------------------------------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . 3,182,320 41,017
--------------------------------------------
PROPERTY AND EQUIPMENT - net of accumulated depreciation. . . . . . . . 146,484 113,612
--------------------------------------------
OTHER ASSETS
Patents and marketing rights - net of amortization - Notes 1, 2, 3 1,458,927 1,372,733
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,039 13,519
------------------------------ -----------
$ 4,802,770 $ 1,540,881
============================== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 259,954 $ 246,531
Total Current Liabilities . . . . . . . . . . . . . . . . . . $ 259,954 $ 246,531
------------------------------ -----------
LONG TERM DEBT AND OTHER CONTINGENCIES - Note 7
Notes payable - related parties - Note 5 . . . . . . . . . . . . . 356,725 179,300
------------------------------ -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS - CONTINUED
MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
MAR 31, DEC 31,
2000 1999
------------ ------------
<S> <C> <C>
STOCKHOLDERS' EQUITY
Convertible preferred stock . . . . . . . . . . . . . . . . . . . $ 40 $ -
101,000,000 shares authorized, series A at $.10
par value, series B and C at $.001 par value; 40,000 series B
shares issued and outstanding - Note 6
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,752 22,752
100,000,000 shares authorized, at $0.001 par value;
22,751,914 shares issued and outstanding
Capital in excess of par value . . . . . . . . . . . . . . . . . 6,728,252 3,079,082
Accumulated deficit during development stage - Note 4. . . . . . (2,565,313) (1,986,784)
------------ ------------
Total Stockholders' Equity. . . . . . . . . . . . . . . . . . . . 4,186,091 1,115,050
------------ ------------
$ 4,802,770 $ 1,540,881
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
COLORMAX TECHNOLOGIES INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 AND THE
PERIOD APRIL 28, 1999 (DATE OF INCEPTION) TO MARCH 31, 2000
<TABLE>
<CAPTION>
APR 28, 1999
MAR 31, MAR 31, TO MAR 31
2000 1999 2000
------------------------------------------------
<S> <C> <C> <C>
REVENUES . . . . . . . . . . . . . . $ 104,950 $- $ 108,100
COST OF SALES. . . . . . . . . . . . 2,141 - 2,141
-------------------------------------------------
Gross profit . . . . . . . . . 102,809 105,959
-------------------------------------------------
EXPENSES
Administrative and developmental 637,845 - 2,598,815
Amortization . . . . . . . . . . 38,806 - 62,073
Depreciation . . . . . . . . . . 4,687 - 10,384
--------------------------------------------------
681,338 - 2,671,272
--------------------------------------------------
Net Loss . . . . . . . . . $ (578,529) $ - $(2,565,313)
==================================================
GAIN (LOSS) PER COMMON SHARE
Basic . . . . . . . . . . . . . $ (.025)
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AVERAGE OUTSTANDING SHARES
Basic . . . . . . . . . . . . . 22,751,914
-------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999 AND THE
PERIOD APRIL 28, 1999 (DATE OF INCEPTION) TO MARCH 31, 2000
<TABLE>
<CAPTION>
MAR 31, MAR 31, APR 28, 1999
2000 1999 TO MAR 31, 2000
----------- -------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net profit (loss) . . . . . . . . . . . . . . . . . . . . . . $ (578,529) - $(2,565,313)
Adjustments to reconcile net loss to
net cash provided by operating activities
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . 38,806 - 62,073
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . 4,687 - 10,384
Issuance of common stock for expenses . . . . . . . . . . . . - - 1,556,833
Changes in inventory. . . . . . . . . . . . . . . . . . . . . (740) - (7,341)
Changes in accounts receivable. . . . . . . . . . . . . . . . (91,450) - (93,450)
Changes in prepaid expenses and deposits. . . . . . . . . . . (12) - (33,633)
Changes in accounts payable . . . . . . . . . . . . . . . . . 90,849 - 620,680
Net Cash Used by Operations. . . . . . . . . . . . . . . (436,389) - (449,767)
----------- -------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment . . . . . . . . . . . . . . . . . . . . (37,560) - (111,868)
Purchase of patents . . . . . . . . . . . . . . . . . . . . . (125,000) - (125,000)
----------- -------- -----------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common and preferred stock. . . . . 3,649,570 - 3,749,570
----------- -------- -----------------
Net Increase in Cash. . . . . . . . . . . . . . . . . . . . . . . 3,050,621 - 3,062,935
Cash at Beginning of Period . . . . . . . . . . . . . . . . . . . 12,314 - -
----------- -------- -----------------
Cash at End of Period . . . . . . . . . . . . . . . . . . . . . $3,062,935 $ - $ 3,062,935
==========================================
NONCASH OPERATING AND INVESTING ACTIVITIES
Issuance of 1,373,334 common shares for expenses - 1999 . . . . . $ 293,333
-----------
Issuance of 14,000,000 common shares for marketing rights - 1999. 1,400,000
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Contribution to capital - equipment - 1999. . . . . . . . . . . . 45,000
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
- -------------------
The Company recognizes income and expenses based on the accrual method of
accounting.
Dividend Policy
- ----------------
The Company has not yet adopted a policy regarding payment of dividends.
Income Taxes
- -------------
On March 31, 2000, the Company had a net operating loss carry forward of
$2,565,313. The loss carryforward will expire in 2021.
Principles of Consolidation
- -----------------------------
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiary after the elimination of intercompany transactions.
Marketing Rights
- -----------------
Marketing rights are amortized, on the straight line method, over ten years.
Patents
- -------
Patents are amortized on the straight line method over eight years
Property and Equipment
- ------------------------
Office and manufacturing equipment is being depreciated on the straight line
method over three, five, and seven years and summarized as follows;
Cost $156,867
Accumulated depreciation 10,383
--------
Net 146,484
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Basic and Diluted Net Income (Loss) Per Share
- ----------------------------------------------------
Basic net income (loss) per share amounts are computed based on the weighted
average number of shares actually outstanding, after the stock splits. Diluted
net income (loss) per share amounts are computed using the weighted average
number of common shares and common equivalent shares outstanding as if shares
had been issued on the exercise of the preferred share rights unless the
exercise becomes anti-dilutive and then only the basic per share amounts are
shown in the report.
Comprehensive Income
- ---------------------
The Company adopted Statement of Financial Accounting Standards No. 130. The
adoption of this standard had no impact on the total stockholder's equity on
June 30, 1999.
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Accounting for Stock-Based Compensation
- ------------------------------------------
The Company has adopted Statement of Financial Accounting Standards No. 123 but
has elected to continue to measure compensation cost under APB 25. The adoption
of FASB No. 123 has no impact on the Company's financial statements.
Recent Accounting Pronouncements
- ----------------------------------
The Company does not expect that the adoption of other recent accounting
pronouncements will have a material impact on its financial statements.
Concentration of Credit Risk
- -------------------------------
Financial instruments that potentially subject the Company to significant
concentration of credit risk consists primarily of cash and account receivables.
Cash balances are maintained in accounts that are not federally insured for
amounts over $100,000 but are other wise in financial institutions of high
credit quality. Accounts receivable are unsecured and are derived from revenues
earned however management considers all accounts receivable to be currently
collectable.
Financial Instruments
- ----------------------
The carrying amounts of financial instruments, including all assets and
liabilities shown in the balance sheet, are considered by management to be their
estimated fair values.
Estimates and Assumptions
- ---------------------------
Management uses estimates and assumptions in preparing financial statements in
accordance with generally accepted accounting principles. Those estimates and
assumptions affect the reported amounts of the assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and
expenses. Actual results could vary from the estimates that were assumed in
preparing these financial statements.
2. MARKETING RIGHTS
The Company acquired marketing rights, from related parties, for use in the
countries of the United Kingdom, Canada, and Japan by the issuance of common
stock as outlined in the NonCash Operatingand Investing Activities and Statement
of Stockholders Equity. The marketing rights will continue for ten years with
rights of renewal.
<PAGE>
3. PATENTS
During March 2000 the Company purchased two patents and trademarks relating to
soft contact lenses including the trademarks of the X-Chrom Company in the
United States, U.S. Patent Number 4998817 and in Canada, Canadian Patent Number
1318529 for $125,000. The patents are being amortized over eight years.
4. ACQUISITION OF ALL OUTSTANDING STOCK OF RGB TECHNOLOGY GROUP, INC.
On June 8, 1999 the Company acquired all of the outstanding stock of RGB
Technology Group Inc. through a stock for stock exchange in which the
stockholder (Kimrose Holdings) of RGB Technology Group Inc. received
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
4. ACQUISITION OF ALL OUTSTANDING STOCK OF RGB TECHNOLOGY GROUP, INC.
(continued)
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 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.
For reporting purposes, the acquisition is 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 good
will was recognized from the consolidation. All material intercompany accounts
and transactions have been eliminated.
5. NOTES PAYABLE - RELATED PARTIES
The Company has received loans from related parties amounting to $356,725 with
various due dates after one year with interest at 8%.
6. PREFERRED CAPITAL 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 $3,680,000 net of
offering costs of $320,000 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.
7. CONTINUING AND CONTINGENT LIABILITIES
The Company remains contingently liable on certain accounts payable. During June
1999 the Company transferred all its assets and the business in the physical
care field in exchange for the assumption of all its liabilities, as part of an
acquisition and reorganization as described in note 4. At the report date
$175,000 of assumed liabilities had been paid. The remaining balance of
$204,260 will remain as a contingent liability to the Company until they are
satisfied. Management believes the liabilities will be fully satisfied by the
predecessor.
The Company is obligated under an office and manufacturing facility lease
agreement starting September 1, 1999 and continuing for five years as follows:
Year Amount
---- ------
1 $101,030
2 105,250
COLORMAX TECHNOLOGIES, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
7. CONTINUING AND CONTINGENT LIABILITIES (Continued)
3 109,450
4 113,660
5 117,880
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following contains some "forward looking statements" which are based upon
the plans, goals, and objectives of the Company and its management. 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 the Company's reports and amendments.
OVERVIEW
The Company 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 approved ColorMax Color Vision Enhancement Lenses as a safe and effective
optical aid for the treatment of colorblindness.
PLAN OF OPERATION
The Company is the first to receive FDA clearance for an 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 our marketing
operations and the increase in our manufacturing capabilities.
The Company's marketing plan includes key objectives regarding two of the
Company's most important targets: (1) licensed eye care professionals,
including optometrists and ophthalmologists, and (2) colorblind patients.
Eye care professionals act as distributors for the Company's products and are
the primary point of contact with the end user. The Company's goal is to
establish an extensive distributorship base of authorized ColorMax Providers in
all major U.S. markets, as well as key international markets. The Company
intends on employing aggressive marketing strategies which will connect with and
educate doctors on this new product. The Company's 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. The Company has developed
practice support materials and programs to assist doctors in maximizing ColorMax
sales at their practice. The Company will continue its efforts to build its
marketing and practice support divisions over the course of the year.
The Company's 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% or men and 0.5% of women, or 1 in every
twelve men and 1 in every 250 women. The Company's authorized ColorMax
Providers will market directly to their patients the ColorMax line of products.
The Company also markets to the consumer through a variety of methods including
the internet, direct mail and consumer advertising. The Company plans on
initiating a major consumer advertising campaign after the
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS (CONTINUED)
establishment of the basic distributorship network.
The Company's research and development is directed toward new procedures and
products which may prove useful in the diagnosis and treatment of
colorblindness. Currently, the Company is developing ColorMax Soft Contact
Lenses and intends on seeking regulatory approval. The Company intends to
distribute ColorMax Soft Contact Lenses through its authorized ColorMax
Providers.
The Company's plan for growth requires the acquisition of additional machinery
and equipment to increase manufacturing output to supply ColorMax products
throughout the world. It will be 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 and capital equipment
needs at least through the next twelve months.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion includes the operations of ColorMax Technologies, Inc.
Sales totaled $104,950 for the period ended March 31, 2000. There is no
comparative financial information since we have not started active sales or
operations in the optical area until the Company received FDA approval at the
end of 1999 and then began sales and marketing beginning January 2000. Sales
were primarily in ColorMax Doctor Test Kits and ColorMax Color Test Software. As
stated in the Plan of Operations, the Company's 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 50 authorized
ColorMax Providers in the United States, Canada and Australia. Accounts
Receivable totaled $93,450 for the period.
General and administrative expenses and research and development costs totaled
$637,845 for the period. The Company 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.
The Company had a net loss of $578,529 for the period or $.025 per share fully
diluted. The operational loss is due to the ramp up of our distributorship base
and limited production capacity. The Company believes 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 $3,050,621 in the first three months of 2000 largely due to
the sale of preferred stock and warrants in March. The Company filed a
registration statement in connection with the offering and the Securities and
Exchange Commission declared the registration statement effective on May 1,
2000. 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.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - CHANGES IN SECURITIES
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 $3,680,000 net of
offering costs of $320,000 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.
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: May 15, 2000 By /s/ Donald H Hansan
-------------------------
Donald H. Hansen, O.D.,
President
