UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - SB
AMENDMENT NO. 5
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12 (b)
OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
RENT USA, INC.
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(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
NEVADA 33-5695839
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(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
PO BOX 10, SAN DIMAS, CA 91773-0010
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(909) 590-3063
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(ISSUER'S TELEPHONE NUMBER)
SECURITIES TO BE REGISTERED UNDER SECTION 12 (b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH
TO BE SO REGISTERED EACH CLASS IS TO BE REGISTERED
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SECURITIES TO BE REGISTERED UNDER SECTION 12 (g) OF THE ACT:
Common Stock - .001 Par Value
Preferred Stock - -.001 Par Value
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(TITLE OF CLASS)
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FORWARD LOOKING STATEMENTS
Rent USA, Inc., a developmental stage company ("Rent USA, Inc.," or the
"Company") cautions readers that certain important factors may affect the
Company's actual results and could cause such results to differ materially from
any forward-looking statements that may be deemed to have been made in this Form
10-SB or that are otherwise made by or on behalf of the Company. For this
purpose, any statements contained in the Form 10-SB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the generality of the foregoing, words such as "may," "expect," "believe,"
"anticipate," "intend," "could," "estimate," "plans," or "continue" or the
negative or other variations thereof or comparable terminology are intended to
identify forward-looking statements. Factors that may affect the Company's
results include, but are not limited to, the Company's limited operating
history, its ability to produce additional products and services, its dependence
on a limited number of customers and key personnel, its possible need for
additional financing, its dependence on certain industries, and competition from
its competitors. With respect to any forward-looking statements contained
herein, the Company believes that it is subject to a number of risk factors,
including: the Company's ability to implement its product strategies to develop
its business in emerging markets; competitive actions; and, general economic and
business conditions. Any forward-looking statements in this report should be
evaluated in light of these important risk factors. The Company is also subject
to other risks detailed herein or set forth from time to time in the Company's
filings with the Securities and Exchange Commission.
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
TABLE OF CONTENTS
Part I 4
Item 1. Description of Business 4
Item 2. Management's Discussion and Analysis or Plan of Operation 5
Item 3. Description of Property 19
Item 4. Security Ownership of Management and
Others and Certain Security Holders 20
Item 5. Directors, Executives, Officers and Significant Employees 24
Item 6. Remuneration of Directors and Executive Officers 25
Item 7. Interest of Management and Others in Certain Transactions 25
Item 8. Legal Proceedings 25
Part II 25
Item 1. Market Price of and Dividends of the
Registrant's Common Equity and Other
Stockholder Matters 25
Item 2. Recent Sales of Unregistered Securities 25
Item 3. Description of Securities 25
Item 4. Indemnification of Directors and Officers 26
Part F/S 27
Item 1. Financial Statements 27
Item 2. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 37
Part III 37
Item 1. Index to Exhibits 37
Item 2. Description of Exhibits 37
Signatures 38
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Part I
Item 1. Description of Business
Rent USA, Inc., a developmental stage company, hereinafter referred to as "the
Company", is filing this Form 10-SB on a voluntary basis in order to make its
financial information equally available to any interested parties or investors.
The Company was originally organized under the laws of the State of Delaware in
1998, as RENT USA, INC, Delaware Company. On November 17, 1999 the Company
changed its domicile to the State of Nevada and is now doing business as RENT
USA, INC., a Nevada Corporation.(See Part III, Articles of Incorporation and
Agreement and Plan of Merger, which is the document vehicle required by the
state of Nevada to change the company to Nevada).
Rent USA is in the business of selling and renting construction and multipurpose
equipment to construction firms, contractors, and other users of commercial
machinery. It also intends to to sell equipment to the mining industry and has
signed a binding letter of intent to purchase Calico Rock, a company that mines,
crushes and markets colored garden rock to distributors and wholesalers in the
home improvement business.
On November 17, 1999, the Company purchased heavy duty construction equipment
valued at $7,154,158.00 in return for 1,098,289 common shares of stock and a
deferred cash payment of $1,661,721.00. The stock given in exchange for the
equipment was valued at $5.00 per share for purposes of this acquisition. The
determination to select $5.00 per share as the share price for the equipment was
arbitrary and determined as a matter of negotiations between the buyer and
seller. The purchase of the equipment was from an unaffiliated and unrelated
company, Pacific Standard Financial Group, Inc. ["PSFG"]. The equipment had been
originally purchased by PSFG from Williamson Equipment, Inc. dba California
Equipment Sales and Big Iron Rental. The Company agreed to become obligated to
Bill Williamson of Williamson Equipment for $1,661,721.00 which was to be paid
no later than June 3, 2000. The 1,098,289 shares of common stock were actually
issued on December 10, 1999. The stock was issued pursuant to Section 4(2) of
the Securities & Exchange Act of 1933, as amended, which allows the issuance of
unregistered securities in exchange for assets. These shares are commonly
referred to as "restricted stock" which under certain circumstances may, in the
future, be sold in compliance with Rule 144 adopted under the Securities Act. In
general, under Rule 144, subject to the satisfaction of certain other
conditions, a person, including an affiliate of the Company, who has
beneficially owned restricted shares of Common Stock for at least one year is
entitled to sell, in certain brokerage transactions, within any three-month
period, a number of shares that does not exceed the greater of 1% of the total
number of outstanding shares of the same class, or if the Common Stock is quoted
on NASD or a stock exchange, the average weekly trading volume during the four
calendar weeks immediately preceding the sale. A person who presently is not and
who has not been an affiliate of the Company for at least three months
immediately preceding the sale and who has beneficially owned the shares of
Common Stock for at least two years is entitled to sell such shares under Rule
144 without regard to any of the volume limitations described above.
Based upon the appraisal of the equipment by T.E. Kaplan who rendered an
appraisal of the actual cash value as of June 10, 1999, the breakdown of
equipment which was obtained by PSFG from California Equipment Sales and from
Big Iron Rental was as follows:
California Equipment Sales New & Used Heavy Equipment $ 2,926,411.00
Attachments 752,879.25
Parts 723,189.00
Shop & Tools 535,038.75
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Total: $ 4,937,518.00
Big Iron Rental New & Used Heavy Equipment $ 1,873,600.00
General Office 74,305.00
Shop & Tools 268,735.00
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Total: $ 2,216,640.00
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Grand Total: $ 7,154,158.00
The promissory note to Bill Williamson became due on June 3, 2000 and was not
paid. Mr. Williamson sent a letter to the Company dated August 15, 2000
extending the time for the Company to negotiate a new agreement through January
1, 2001.
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The Company also entered into a Marketing Agreement with Northland Supply
Company ["Northland"], a sole proprietorship owned by Denzel Harvey, a disabled
veteran and brother of Al Harvey, the founding Chief Executive Officer of the
Company. Under the terms of this agreement Rent USA, Inc. will provide Northland
with rental equipment and supplies which Northland will, in turn, rent to the
construction industry. Northland is certified by the State of California as a
Disabled Veterans Business Enterprise (DVBE) provider under the state of DVBE
California program.
Item 2. Management's Discussion and Analysis or Plan of Operation
Customer Profile-General
------------------------
The Company intends to set up three divisions, the first to be known as Equip
USA is expected to result in approximately 25% of the Company gross income and
will provide services in the following four categories:
1. Equipment Rentals - the principal service, consists of renting equipment to
small and large contractors, and construction companies.
2. Equipment Sales - The sale of new and used equipment to small and large
contractors and construction companies. The Company is presently negotiating an
agreement whereby it will become a dealer for New Holland, a manufacturer of
heavy construction equipment.
3. Re-Rentals - this means re-renting equipment which the Company must rent from
others and does not own, then re-renting that equipment to an end user at an
anticipated 20% markup over the amount which the Company must pay the owner of
the equipment.
4. Trade Rentals - this means renting equipment on a long term basis to other
rental yards, which they, in turn, will mark up and re-rent to the general
public at a markup, generally 20%.
Presently, the Company has no agreements other than with Northland for
re-rentals or trade rentals. Also, presently, the Company has no agreements with
anyone for equipment sales. As a result, at the beginning, the only source of
income will be from the rental of equipment which the Company owns to
contractors and to Northland.
Also, the Company has not yet made any definitive agreement with New Holland and
until a franchise for the sale of New Holland equipment is executed and floor
financing arranged, the Company will not begin to sell new equipment.
Sale of used equipment and rental of equipment which the Company either owns or
has on consignment for that purpose from others is the primary business of the
Company at present.
The other divisions which the Company intends to form are Equip Mining Systems
which will specialize in the sale of mining equipment and the acquisition of the
Calico Rock, a long time wholesale supplier of crushed rock in the Western
United States which will then be known as Calico Mines once it has been acquired
by Rent USA.
Geographic Service Area
-----------------------
The proposed geographic marketing area for the company at present will be
limited to the southwest United States and will only include Southern
California, Nevada, Utah and Arizona.
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Industry Analysis
-----------------
According to the American Rental Association, the trade group for the equipment
rental business, construction and development in the United States has
continually increased over the last twenty years. Due to this gradual increase
of activity, demand for rental construction equipment and machinery has been
sustained at a relatively high level. The Association states that it has seen
gradual movement in the business from small, family owned, single facility
rental yards to large corporations with multiple facilities. As detailed in
"1999 Rental Year in Review" during the past year, there were changes that were
"unprecedented in the world of tool rentals. "These changes represented mergers,
hostile takeovers and consolidations." As a result, the Company believes that in
a time of large corporations without the local service which small business
owners formerly gave their customers, there is an opportunity for Rent USA to
take advantage of this consolidation to build a business limited to heavy
construction machinery and equipment by providing superior customer service
through a strategy of being in close proximity to the customer, by being able to
respond to customer needs in a timely and appropriate manner.
The equipment rental market as a whole has been growing at a rapid rate in
excess of 20% annually based on revenues reported to the American Rental
Association by its 7200 member organizations throughout the United States. The
market for these products amounted to $3 billion in 1996, increased to 3.5
billion in 1997 and continued to rise by a similar increase in 1998, according
to Rental Equipment Register, the trade publication of the American Rental
Association.
These trends which have been noticed by the American Rental Association have not
been broken down into regions and for that reason, the Company has no definitive
evidence that these trends exist in the Southwestern United States where the
Company intends to build its business. However, there is, likewise, no evidence
to the contrary and management believes that the national trends apply to the
Southwestern United States as well as to other areas.
It is management's opinion that one of the areas of greatest growth in the
equipment rental market is in the area of rentals to contractors fulfilling
state and federal contracts. This is the area where Northland will have an
advantage because of its DVBE certification. There are only 600 DVBE registered
businesses in the California and only one in the heavy construction field
according to the Disabled Veterans Alliance. The alliance between the Company
and Northland should have a positive impact on the ability of the Company to
obtain business. The reason for this is due to the fact that Northland has an
advantage over other non DVBE companies when bidding on federally mandated
construction projects. The most recent version of the law passed by Congress and
by the California State Legislature requires that at least 3% of all contracts
let in State and federally mandated projects be to DVBE owned companies. It
should be noted that Rent USA, Inc. is not a DVBE registered company nor does it
intend to obtain such a registration. However, the Company's alliance with
Northland, will, in management's opinion, have a positive and beneficial affect.
5
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Currently, the entire equipment rental market is shared by approximately 7,000
equipment rental yards across the United States, with United Rental Corporation
positioned as the market leader.
Through acquisitions, United Rental has amassed over $1.7 billion in rental
revenues for fiscal 1998. United Rental began its acquisition strategies upon
its inception in 1997.
The service area for Rent USA, Inc. is a twelve-month construction Area. The
Southwestern United States does not experience any disruption in construction
due to weather or other seasonal issues which should also be advantageous to
assuring regular cash flow.
Because the company has no operating history, it is impossible at this time to
state the utilization rate for the Company's equipment, that is, the percentage
of time which the equipment will be rented to customers as opposed to the time
that it sits in the yard unrented and not generating income. The Company
believes that its utilization rate will be comparable to those in the industry,
averaging approximately 55%.
Prospects for Growth
--------------------
The Company's goal is to become a highly visible and regionally known company
providing affordable and well maintained equipment for the construction
industry.
This is to be accomplished in two ways. The first is direct rental of equipment
which the Company already owns to the construction industry. Because this
equipment is housed mainly in the Southern California area near the Nevada
border, it can be rented in either the Southern California or Southern Nevada
areas.
The second way in which the Company intends to grow is through the acquisition
of other heavy equipment rental yards who are already in business in the
targeted area of Southern California, Nevada, Utah and Arizona. It is
anticipated that these acquisitions will be made in exchange for common or
preferred stock in the Company and, in certain circumstances, for cash in
addition to either common or preferred stock, or both.
Presently, the Company has one acquisition which it has targeted and with whom
the Company has executed a binding letter of intent. That company is Calico Rock
which is in the mining of colored rock which is crushed for use in home gardens.
Presently, the Company has no targeted acquisition in the business of equipment
rental.
When the Company does find an acquisition target, one of the requirements will
be that the financial statements of that acquired entity must be audited as a
condition to the merger or acquisition.
Management developed projections for the first year of operations which showed
that based upon the amount of business available in the Company's immediate
service area of California and Nevada, and based upon the Company's in-house
survey of major construction jobs which will require the rental of heavy
equipment during the next year. Additionally, the Company is negotiating an
agreement with New Holland, a major heavy equipment manufacturer, to become a
licensed dealer for new heavy construction machinery in Southern California and
Nevada. If this negotiation is successful, then the Company is hopeful that it
can build gross revenues of approximately $800,000.00 per month by the end of
the first calendar year of New Holland operations. The Company developed
projections which were attached as Exhibit 2.1 to Amendment No. 3 of the
Registration Statement which purported to show how the Company intended to
develop its business over the first calendar year beginning in January, 2000.
However, this newest amendment to the Registration Statement, Amendment No. 5,
is being filed during mid November, 2000, and the assumption that the Company
would commence the sale of new equipment during 2000. That has not occurred and
the Company has been required to rely strictly on equipment rentals and sales of
used equipment during the year 2000. The Company does not believe that Exhibit
2.1 any longer represents a correct or complete view of the Company's operations
for 2000. An accurate accounting for the first 3 quarters of 2000 are set forth
in the Forms 10-QSB filed by the Company for the first, second and third quarter
respectively and your attention is directed toward those documents for a more
complete understanding of the Company's present financial situation.
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The Company believes that once the acquisition of Calico Rock is completed,
Equip Mining Systems becomes well established and Equip USA commences the sale
of new as well as used equipment, about 25% of the Company's gross annual
business will be from the Equip USA rental and sales operation, approximately
%30 from Equip Mining Systems and the balance of 45% from Calico Mines.
According to the projections filed with the third quarter Form 10-QSB Report for
the Company which should be read in conjunction with this Registration
Statement, Amendment No. 5, the Company will produce gross income during the
first full year of operations expected to commence in May of 2001 and end in
May, 2002 of approximately $16,000,000 with a gross profit margin of 35% and a
bottom line net income after taxes of approximately 12.2%.
Rent USA, Inc.
Income Statement
YEAR 1
----------------------------------------------------
Rent USA Equip Mining Calico
Equip USA Systems Mines
NET SALES $16,405,976 $4,100,000 $7,023,500 $5,282,476
COGS $10,663,703 $2,610,235 $5,351,718 $2,701,750
Gross Profit $5,742,273 $1,489,765 $1,671,782 $2,580,726
Gross Margin % 35.0% 36.3% 23.8% 48.9%
SG&A $2,563,185 $775,575 $844,241 $943,370
NBIT $3,179,088 $714,190 $827,542 $1,637,356
NBIT % 19.4% 17.4% 11.8% 31.0%
Interest Expense $107,374 $107,374 $0 $0
Income Taxes $1,075,100 $212,386 $289,640 $573,075
Net Income $1,996,614 $394,431 $537,902 $1,064,281
Net Income % 12.2% 9.6% 7.7% 20.1%
These forecasts should be read in conjunction with the
Attached Summary of Significant Assumptions
Rent USA, Inc.
And Subsidiaries
Summary of Significant Assumptions
And
Notes to Prospective Financial Statements
The financial forecasts which appear herein above present to the best of
management's knowledge and belief the Company's financial position, results of
operations and cash flows for the forecast periods. Accordingly, the forecast
reflects its judgment as of the date of this filing of the expected conditions
and its expected course of action. The assumptions disclosed herein are those
that management believes are significant to the forecast. There usually will be
differences between forecasted and actual results because events and
circumstances frequently do not occur as expected and those differences may be
material.
The projected amounts of sales and net income are based upon the hypothetical
assumption that the Company operated Equip USA, Equip Mining Systems and Calico
Mines for an entire year. Such projections reflect to the best of management's
knowledge and belief the operating results that would be obtained, given that
hypothetical assumption.
None of the forecasts which are contained herein were examined by the Company's
auditor, John Spurgeon, CPA and as a result, he can assume no responsibility for
them. They are purely management's belief as to what will occur in the event the
Company is able to complete all of the acquisitions which it presently intends
to undertake.
1. Summary of Significant Assumptions
a. Intended Acquisitions - The financial forecasts assume the Company will
acquire Calico Mines and will be able to complete its launch of Equip Mining
Systems. The funds required to operate Calico Mines and Equip Mining Systems are
expected to be derived from the proceeds of a rights offering to shareholders of
Senior Care Industries, Inc. which will be registered by the filing of a Form
SB-2. The Company expects to raise a maximum of approximately $2,300,000.00 from
that rights offering.
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Rent USA, Inc.
And Subsidiaries
Summary of Significant Assumptions
And
Notes to Prospective Financial Statements
(Continued)
The rights offering is expected to be completed during the first six months of
2001 and the capital obtained from that offering will immediately be infused
into the Company and used to complete operate Calico Mines and Equip Mining
Systems.
b. Sales - The Company assumes that sales will increase approximately 8% per
annum over the five year period of the projections. Based upon management's
study of the market for its equipment and on the study of the needs for crushed
rock in the Western area serviced by Calico Mines presently, it believes that a
forecast of an 8% increase in business per annum is justified. The sales
forecast depends upon the Company being able to complete its anticipated
acquisition of Calico Mines and the launch of Equip Mining Systems by mid 2001.
c. Cost of Sales - The principal components of the cost to produce the Company's
forecasted revenue is the purchase of equipment for resale, labor,
transportation, equipment maintenance and mine overhead at Calico Mines.
d. Selling, General and Administrative Overhead - The principal cost of selling
relate to sales person salaries and commissions, transportation costs, and
advertising. Generally, each of these costs varies according to the amount of
product sold and accordingly, have been estimated based upon estimated sales
volume. General and administrative overhead are fixed costs which have been
estimated based upon Management's experience plus known increases and
adjustments for anticipated inflation based upon recent inflationary trends.
e. Interest - The Company presently has various equity lines of credit and
intends to develop additional lines of credit which will carry interest at a
rate ranging from 9.5% to 12% interest over the period of the forecasts. Due to
the Company's business of selling new and used equipment, there will always be a
borrowing component for flooring of equipment held for resale.
f. Income Taxes - The income tax provisions are based upon the current statutory
rates in effect for corporations. Because the Company may expand its operations
into other states than where it operates presently, such as Nevada, where there
is no state income tax to states where there may be a state income tax, the
total tax provision in relation to income before taxes may change during the
forecast period of five years.
2. Summary of Significant Accounting Principles
The following are the significant accounting policies the Company uses in the
preparation of its financial statements:
Former Development Stage Company
Effective this year, the Company began its planned operations and generates
significant revenues and is no longer in the development stage as defined under
Financial Accounting Standards Board Statement No. 7.
Use of estimates
The preparation of the forecasts were made in conformity with generally accepted
accounting principles requiring management to make certain estimates and
assumptions that directly affect the results of reported assets, liabilities,
revenue, and expenses. Actual results may differ from these estimates.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Revenue Recognition
Revenues are recognized as earned as time passes from rights to use assets
(rentals) which extend continuously over time based on contractual prices
established in advance.
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Rent USA, Inc.
And Subsidiaries
Summary of Significant Assumptions
And
Notes to Prospective Financial Statements
(Continued)
Accounts Receivable
Management of the Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made.
Bad Debt Expense
There was no bad debt expense either for 2000 or 1999.
Property and Equipment
Property and Equipment are valued at cost. Maintenance and repair costs are
charged to expenses as incurred.
Depreciation
Depreciation is computed on the straight- line method based on the estimated
useful lives of the assets. Depreciation expense was $398,464 and $0 for 2000
and 1999, respectively.
Income Taxes
Income Taxes The Company accounts income taxes in accordance with Financial
Accounting standards Board Statement No. 109 "Accounting For Income Taxes" (SFAS
No. 109). SFAS No. 109 requires a company to recognize deferred tax liabilities
and assets for the expected future income tax consequences of events that have
been recognized in the Company's financial statements. Under this method,
deferred tax assets and liabilities are determined based on temporary
differences between the financial carrying amounts and the tax bases of assets
and liabilities using the enacted tax rates in effect in the years in which the
temporary differences are expected to reverse.
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Continued Discussion of Prospects for Growth
--------------------------------------------
In an earlier version of this Registration Statement, the Company had projected
that it could expect gross revenues of approximately $9,500,000.00 during the
year 2000 as a result of income from planned acquisitions. However, those
projections were far too aggressive and presently, are not justified mainly
because the Company has made no acquisitions during the year 2000 and because it
has not yet completed its agreements with New Holland. As a result, the
Company's actual revenues during the year 2000 to date have been minimal.
Actual revenue trends can be traced more accurately from the quarterly reports
filed by the Company for the first, second and third quarter of 2000 and should
be read in conjunction with this Registration Statement.
Additionally, the Company presently has no financial
resources and no ability to develop its business without financial assistance.
The Company intends to pay for future acquisitions using cash, capital stock,
notes and/or assumption of indebtedness. To the extent that cash generated
internally and cash available under credit facilities is not sufficient to
provide the capital required for such purposes and future operations, the
Company will require additional debt and/or equity financing in order to provide
for such capital. There can be no assurance, however, that such financing will
be available or, if available, will be available on terms satisfactory to the
Company. Failure by the Company to obtain sufficient additional capital in the
future could limit the Company's ability to implement its business strategy.
Future debt financings, if available, may result in increased interest and
amortization expense, increased leverage and decreased income available to fund
further acquisitions and expansion, and may limit the Company's ability to
withstand competitive pressures and render the Company more vulnerable to
economic downturns. Future equity financings may dilute the equity interest of
existing stockholders.
If the Company is unable to obtain financing, it will not be able to meet its
projected revenue goals.
Advertising and Promotion
-------------------------
The Company's overall advertising and promotional objectives are to position the
firm as a leader in the equipment rental market in its regional area of Southern
California, Nevada, Utah and Arizona.
The Company intends to develop an advertising campaign built around the message
of "we will be there when you need a job done right", beginning with a "who we
are" statement and supporting it with ads that reinforce this message.
Additionally, the Company intends to develop a consistent and ongoing program to
reach out to the market throughout the year to always look toward increasing
market share once its revenue stream begins. Combined with standard advertising
practices, the Company intends to gain recognition through direct mail and
targeted marketing efforts (such as phone solicitations, and Internet
advertisements) to past and current customers of Denzel Harvey, the owner of
Northland who has been in business since 1995 and past customers of Al Harvey
who has been involved in the equipment rental business since 1992.
Whether the Company will be able to gain the leadership position it contemplates
by its advertising campaign will depend upon many factors which are beyond the
control of the Company and which may result in the Company failing to obtain the
objectives which were intended.
Competition
-----------
The equipment rental industry is highly fragmented and competitive. The
Company's competitors include: public companies or divisions of public companies
(such as Hertz Equipment Rental Corporation, Prime Service, Inc. United Rentals,
Inc. and Rental Service Corporation); regional competitors which operate in one
or more states; small, independent businesses with one or two rental locations;
and equipment vendors and dealers who both sell and rent equipment directly to
customers.
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With respect to the Company's plans to sell new equipment as a dealer for New
Holland, it will have major competition from other heavy equipment dealers who
are more intrenched into the marketplace including dealerships for such well
known manufacturers as Caterpillar and John Deere. New Holland has an old name
in the farm equipment manufacturing business but is new to the heavy
construction equipment business having been recently purchased by Fiat of Italy.
The Company believes that, in general, large companies enjoy significant
competitive advantages compared to smaller operators, including greater
purchasing power, a lower cost of capital, the ability to provide customers with
a broader range of equipment and services and with newer and better maintained
equipment, and greater flexibility to transfer equipment among locations in
response to customer demand. Certain of the Company's competitors are larger and
have greater financial resources than the Company.
As noted above, there are only 600 DVBE registered businesses in the California
and only one in the heavy construction field according to the Disabled Veterans
Alliance. The alliance between the Company and Northland should have a positive
impact on the ability of the Company to obtain business. The reason for this is
due to the fact that Northland has an advantage over other non DVBE companies
when bidding on federally mandated construction projects. However, the program
passed by the California State Legislature requires 3% of all contracts let in
State and federally mandated projects be to DVBE owned companies. Even though
there are no other disabled veteran owned companies bidding for heavy equipment
rentals in California, this program only gives the bidder an advantage in
bidding and is no assurance that Northland will obtain the bid which could well
go to lower bidders or bidders who are more suited to furnishing the exact
equipment needed for a particular job.It should be noted that Rent USA, Inc.
It should also be remembered that Rent USA is not a DVBE registered company nor
does it intend to obtain such a registration. However, the Company's alliance
with Northland, will, in management's opinion, have a positive and beneficial
affect.
Patents
-------
The Company does not hold trademarks, copyrights or patents.
Regulations
-----------
The Disabled Veterans Business Enterprise (DVBE) program in California and by
Congress on a Federal level gives an entitlement to disabled veterans on a par
with minorities. Because of the agreement between the Company and Northland
which is owned by Denzel Harvey, a disabled veteran, Northland is able to
favorably compete on all expenditures for State of California and Federal public
works projects. The agreement between Northland and the Company provides for an
exclusive marketing arrangement whereby the Company will provide the material,
equipment and supplies for all of Northland's projects. The agreement is for
seven years and is renewable. The agreement is written and signed by both
parties. Other than this law, no material regulations govern this business
enterprise beyond standard business practices and licenses.
Employees
---------
The Company has no organized labor and/or union agreements. The heavy equipment
rental industry has minimal seasonal impact to the employees. The Company will
maintain industry standard health and other necessary benefits for its key
employees which will be expanded upon on further filings and when the Company
has additional cash flow necessary to offer these benefits.
When this Registration Statement was originally filed, the Company held a 7 year
term Employment Contract with the Chief Execution Officer, Al Harvey dated July
27, 1998. The contract agreed upon the duties and compensation between the two
parties. (See attached Employment Contract in Part III Item 1 in this
registration). That Agreement has subsequently been voided due to Mr. Harvey's
retirement from the Company.
As the Company phases in its new business enterprises, the need for additional
personnel will grow considerably.
12
<PAGE>
During September, 2000, the Company engaged various new executive personnel
including a new chief financial officer, a chief operations officer and entered
into a joint venture to begin operations of Equip Mining Systems with Dan
Hodges. Once Equip USA begins selling both new and used equipment, the Company
anticipates at the outset a total of 3 sales personnel, 5 maintenance persons in
that division, one other sales person working with Dan Hodges in Equip Mining
Systems, two maintenance persons in that division and additional personnel in
Calico Mines. Presently Calico Mines employs approximately 50 persons and those
employees will be coming on board at Rent USA as the Calico Mining division of
the Company.
At the present time, the Company has five executive personnel, two yard persons,
and one clerical person and a bookkeeper.
Risk Factors
------------
Principal components of the Company's growth strategy includes expansion through
an ongoing acquisition program, the opening of start-up locations, and internal
growth. However, there can be no assurance that the Company will successfully
implement its growth strategy or that, if implemented, such strategy will result
in ongoing profitability. In addition, the Company may not make acquisitions
unless certain financial conditions are satisfied or the consent of new lenders
is obtained.
Furthermore, there can be no assurance that the Company's growth rate will be
comparable to the past or future growth rate of the overall equipment rental
industry or any segment thereof. The Company's growth strategy involves a number
of risks and uncertainties, including:
AVAILABILITY OF ACQUISITION TARGET AND SITES FOR START UP LOCATIONS.
The Company may encounter substantial competition in its efforts to identify and
acquire appropriate acquisition candidates and sites for start-up locations,
which could have the effect of increasing prices for acquisitions or such sites.
There can be no assurance that the Company will succeed in identifying
appropriate acquisition candidates or sites for start-up locations or that the
Company will be able to acquire any acquisition candidate or site that it does
identify on terms that are acceptable to the Company.
CERTAIN RISKS RELATED TO START UP LOCATIONS.
The Company expects that start-up locations may initially have a negative impact
on results of operations and margins due to several factors, including: (i) the
Company will incur significant start-up expenses in connection with establishing
each start-up location and (ii) it will generally take some time following the
commencement of operations at a start-up location before profitability can be
achieved. There can be no assurance that any start-up location will become
profitable within the first several years of operations, if at all.
NEED TO INTEGRATE NEW OPERATIONS.
As the Company grows, the Company intends to focus substantial efforts on the
efficient integration of new operations, the elimination of duplicitous costs
and the reduction of overhead. There can be no assurance, however, that the
Company will be successful in these efforts or that these efforts may not in
certain circumstances adversely affect existing operations.
NEED TO RECRUIT ADDITIONAL PERSONNEL.
The Company will require additional personnel in order to implement its growth
strategy and support expanded operations. Accordingly, the Company is in the
process of recruiting additional operating, acquisition, finance and other
personnel from the equipment rental industry and from other industries. There
can be no assurance, however, that the Company will succeed in recruiting the
requisite qualified personnel as and when needed.
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<PAGE>
DEPENDENCE ON ADDITIONAL CAPITAL TO FINANCE GROWTH
The Company's growth strategy will require substantial capital investment.
Capital will be required by the Company for, among other purposes, completing
acquisitions, establishing new rental locations, integrating completed
acquisitions, acquiring rental equipment and maintaining the condition of its
rental equipment. The Company intends to pay for future acquisitions using cash,
capital stock, notes and/or assumption of indebtedness. To the extent that cash
generated internally and cash available under credit facilities is not
sufficient to provide the capital required for such purposes and future
operations, the Company will require additional debt and/or equity financing in
order to provide for such capital. There can be no assurance, however, that such
financing will be available or, if available, will be available on terms
satisfactory to the Company. Failure by the Company to obtain sufficient
additional capital in the future could limit the Company's ability to implement
its business strategy. Future debt financings, if available, may result in
increased interest and amortization expense, increased leverage and decreased
income available to fund further acquisitions and expansion, and may limit the
Company's ability to withstand competitive pressures and render the Company more
vulnerable to economic downturns. Future equity financings may dilute the equity
interest of existing stockholders.
POSSIBLE UNDISCOVERED LIABILITIES OF ACQUIRED COMPANIES
Although the Company will perform due diligence investigation of each business
that it might acquire, there may nevertheless be liabilities of the Acquired
Companies or future acquired companies that the Company fails or is unable to
discover during its due diligence investigation and for which the Company, as a
successor owner, may be responsible. The Company will seek to minimize the
impact of these liabilities by obtaining indemnities and warranties from the
seller, which may be supported by deferring payment of a portion of the purchase
price. However, these indemnities and warranties, if obtained, may not fully
cover the liabilities due to their limited scope, amount, or duration, the
financial limitations of the indemnitor or warrantor, or other reasons.
DEPENDENCE ON MANAGEMENT
The Company is highly dependent upon its senior management team. The loss of the
services of any member of senior management may have a material adverse effect
on the Company. The Company does not presently maintain "key man" life insurance
with respect to members of senior management. The Company's rental locations
shall be managed by local managers who have extensive experience in the
equipment rental industry and substantial knowledge of the local markets served.
These managers shall be generally former owners or employees of the businesses
acquired by the Company. The loss of one or more of these managers may have a
material adverse effect on the Company in the event that the Company is unable
to find a suitable replacement in a timely manner.
NEED FOR INTEGRATED INFORMATION TECHNOLOGY SYSTEMS
The Company is in the process of analyzing an integrated information technology
system that will link all future locations, integrate operating and financial
data on a Company-wide basis, and enable the real-time tracking of rental
transactions, equipment availability, inventory and other data. The Company
expects that this system will become operational at substantially all the
Company's locations by September 2000. The Company thereafter will be required
to expand the system on an ongoing basis as it adds locations. Although the
Company expects the system to become operational in September 2000, there can be
no assurance that the Company will not encounter unexpected delays or that such
system when operational will function in accordance with the Company's
expectations. Failure of the system to become operational or to function as
expected could negatively impact the Company's ability to implement its growth
strategy. Until the new system is operational, each acquired business will
continue to use the systems that it had in place at the time it was acquired.
COMPETITION
The equipment rental industry is highly competitive and rapidly consolidating.
The Company's competitors include public companies or divisions of public
companies; regional competitors which operate in one or more states; small,
independent businesses with one or two rental locations; and equipment vendors
and dealers who both sell and rent equipment directly to customers. Certain of
the Company's competitors are larger and have greater financial resources than
the Company. There can be no assurance that the Company will not encounter
increased competition from existing competitors or new market entrants or that
equipment manufacturers will not commence, or increase their efforts, to rent or
sell equipment directly to the Company's customers. In addition, to the extent
that competitors seek to gain or retain market share by reducing prices, the
Company may be required to lower its prices, thereby affecting operating
results.
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<PAGE>
SENSITIVITY TO GENERAL ECONOMIC AND WEATHER CONDITIONS
The Company believes that the equipment rental business is sensitive to changes
in economic conditions and that demand for rental equipment can be reduced
significantly by adverse weather conditions. There can be no assurance that the
Company's business and financial condition will not be adversely affected by (i)
changes in general economic conditions, including national, regional and local
changes in construction and industrial activity, (ii) increases in interest
rates that may result in a higher cost of capital to the Company, or (iii)
adverse weather conditions that may decrease construction and industrial
activity.
QUARTERLY FLUCTUATIONS OF OPERATING RESULTS
The Company expects that its revenues and operating results may fluctuate from
quarter to quarter due to a number of factors, including: seasonal rental
patterns of the Company's customers (with rental activity tending to be lower in
the winter); changes in general economic conditions in the Company's markets;
the timing of acquisitions and the opening of start-up locations (which
generally will require a period of time to become profitable) and related costs;
the effect of the integration of acquired businesses and start-up locations; the
timing of expenditures for new equipment and the disposition of used equipment;
and price changes in response to competitive factors. These factors, among
others, may result in the Company's results of operations in some future periods
not meeting expectations, which could have a material adverse impact on the
market price of the Common Stock.
LIABILITY AND INSURANCE
The Company maintains liability insurance which is currently limited to
$1,000,000.00 per occurrence. The Company is subject to various possible claims,
including claims for personal injury or death caused by equipment rented or sold
by the Company or motor vehicle accidents involving Company delivery and service
personnel and compensation and other employment related claims which could
exceed the amount of any insurance which the Company presently carries. In
addition, the Company does not maintain insurance coverage for environmental
liability, since the Company believes that the cost for such coverage is high
relative to the benefit that it provides. Furthermore, certain types of claims,
such as claims for punitive damages or for damages arising from intentional
misconduct, which are often alleged in third party lawsuits, might not be
covered by the Company's insurance. There can be no assurance that insurance
will continue to be available to the Company on economically reasonable terms,
if at all, that existing or future claims will not exceed the level of the
Company's insurance or relate to matters not covered by the Company's insurance
(such as environmental liability), or that the Company will have sufficient
capital available to pay any uninsured claims.
ENVIRONMENTAL REGULATION
The Company uses hazardous materials, such as solvents, to clean and maintain
its rental equipment and generates and disposes of wastes such as used motor
oil, radiator fluid, solvents and batteries. In addition, the Company currently
dispenses, or may in the future dispense, petroleum products from underground
and above-ground storage tanks located at certain rental locations. These and
other activities of the Company are subject to various federal, state and local
laws and regulations governing the generation, handling, storage,
transportation, treatment and disposal of hazardous substances and wastes. Under
such laws, an owner or lessee of real estate may be liable for, among other
things, (i) the costs of removal or remediation of certain hazardous or toxic
substances located on, in, or emanating from, such property, as well as related
costs of investigation and property damage and substantial penalties for
violations of such laws, and (ii) environmental contamination at facilities
where its waste is or has been disposed. Such laws often impose such liability
without regard to whether the owner or lessee knew of, or was responsible for,
the presence of such hazardous or toxic substances. Although the Company
investigates each business or property that it acquires or leases and believes
there are no existing material liabilities relating to non-compliance with
environmental laws and regulations, there can be no assurance that there are no
undiscovered potential liabilities relating to non-compliance with environmental
laws and regulations, that historic or current operations have not resulted in
undiscovered conditions that will require investigation and/or remediation under
environmental laws, or that future uses or conditions will not result in the
imposition of environmental liability upon the Company or expose the Company to
third-party actions such as tort suits. Furthermore, there can be no assurance
that changes in environmental regulations in the future will not require the
Company to make significant capital expenditures to change methods of disposal
of hazardous materials or otherwise alter aspects of its operations.
15
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CONFLICTS OF INTEREST.
Certain conflicts of interest exist between the Company and its officers and
directors. They have other business interests to which they devote attention,
and they may be expected to continue to do so although management time should be
devoted to the business of the Company. As a result, conflicts of interest may
arise that can be resolved only through exercise of such judgment as is
consistent with their fiduciary duties to the Company.
POSSIBLE NEED FOR ADDITIONAL FINANCING.
The Company has no funds, and as such, funds may not be adequate to take
advantage of any available business opportunities. Even if the Company's funds
prove to be sufficient to acquire an interest in, or complete a transaction
with, a business opportunity, the Company may not have enough capital to exploit
the opportunity. The ultimate success of the Company may depend upon its ability
to raise additional capital. The Company has not investigated the availability,
source, or terms that might govern the acquisition of additional capital and
will not do so until it determines a need for additional financing. If
additional capital is needed, there is no assurance that funds will be available
from any source or, if available, that they can be obtained on terms acceptable
to the Company. If not available, the Company's operations will be limited to
those that can be financed with its modest capital.
REGULATION OF PENNY STOCKS.
The Company's securities are subject to a Securities and Exchange Commission
rule that imposes special sales practice requirements upon broker-dealers who
sell such securities to persons other than established customers or accredited
investors. For purposes of the rule, the phrase "accredited investors" means, in
general terms, institutions with assets in excess of $5,000,000, or individuals
having a net worth in excess of $1,000,000 or having an annual income that
exceeds $200,000 (or that, when combined with a spouse's income, exceeds
$300,000). For transactions covered by the rule, the broker-dealer must make a
special suitability determination for the purchaser and receive the purchaser's
written agreement to the transaction prior to the sale. Consequently, the rule
may affect the ability of broker-dealers to sell the Company's securities and
also may affect the ability of purchasers in this offering to sell their
securities in any market that might develop therefore.
In addition, the Securities and Exchange Commission has adopted a number of
rules to regulate "penny stocks." Such rules include Rules 3a51-1, 15g-1, 15g-2,
15g-3, 15g-4, 15g-5, 15g-6, and 15g-7 under the Securities Exchange Act of 1934,
as amended. Because the securities of the Company may constitute "penny stocks"
within the meaning of the rules, the rules would apply to the Company and to its
securities. The rules may further affect the ability of owners of Shares to sell
the securities of the Company in any market that might develop for them.
Shareholders should be aware that, according to Securities and Exchange
Commission Release No. 34-29093, the market for penny stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the security by one or a few broker-dealers that are often
related to the promoter or issuer; (ii) manipulation of prices through
prearranged matching of purchases and sales and false and misleading press
releases; (iii) "boiler room" practices involving high-pressure sales tactics
and unrealistic price projections by inexperienced sales persons; (iv) excessive
and undisclosed bid-ask differentials and markups by selling broker-dealers; and
(v) the wholesale dumping of the same securities by promoters and broker-dealers
after prices have been manipulated to a desired level, along with the resulting
inevitable collapse of those prices and with consequent investor losses. The
Company's management is aware of the abuses that have occurred historically in
the penny stock market. Although the Company does not expect to be in a position
to dictate the behavior of the market or of broker-dealers who participate in
the market, management will strive within the confines of practical limitations
to prevent the described patterns from being established with respect to the
Company's securities.
NO OPERATING HISTORY.
The Company has no operating history and no revenues from operations. The
Company faces all of the risks of a new business and the special risks inherent
in the investigation, acquisition, or involvement in a new business opportunity.
The Company must be regarded as a new or "start-up" venture with all of the
unforeseen costs, expenses, problems, and difficulties to which such ventures
are subject.
NO ASSURANCE OF SUCCESS OR PROFITABILITY.
There is no assurance that the Company will generate revenues or profits, or
that the market price of the Company's Common Stock will be increased thereby.
16
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IMPRACTICABILITY OF EXHAUSTIVE INVESTIGATION.
The Company's limited funds and the lack of full-time management will likely
make it impracticable to conduct a complete and exhaustive investigation and
analysis of a business opportunity before the Company commits its capital or
other resources thereto.
Management decisions, therefore, will likely be made without detailed
feasibility studies, independent analysis, market surveys and the like which, if
the Company had more funds available to it, would be desirable. The Company will
be particularly dependent in making decisions upon information provided by the
promoter, owner, sponsor, or others associated with the business opportunity
seeking the Company's participation. A significant portion of the Company's
available funds may be expended for investigative expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.
LACK OF DIVERSIFICATION.
Because of the limited financial resources that the Company has, it is unlikely
that the Company will be able to diversify its operations. The Company's
probable inability to diversify its activities into more than one area will
subject the Company to economic fluctuations within its target industry and
therefore increase the risks associated with the Company's operations.
DEPENDENCE UPON MANAGEMENT; LIMITED PARTICIPATION OF MANAGEMENT.
The Company currently has several key individuals who are serving as its
officers and directors. The Company will be heavily dependent upon their skills,
talents, and abilities to implement its business plan, and may, from time to
time, find that the inability of the officers and directors to devote full time
attention to the business of the Company results in a delay in progress toward
implementing its business plan. Because investors will not be able to evaluate
the merits of possible business opportunities by the Company, they should
critically assess the information concerning the Company's officers and
directors.
LACK OF CONTINUITY IN MANAGEMENT.
The Company does not have an employment agreement with any of its officers and
directors other than Al Harvey, the Chief Executive Officer, and as a result,
there is no assurance that they will continue to manage the Company in the
future.
INDEMNIFICATION OF OFFICERS AND DIRECTORS.
The Company's Articles of Incorporation provide for the indemnification of its
directors, officers, employees, and agents, under certain circumstances, against
attorney's fees and other expenses incurred by them in any litigation to which
they become a party arising from their association with or activities on behalf
of the Company. The Company will also bear the expenses of such litigation for
any of its directors, officers, employees, or agents, upon such person's promise
to repay the Company therefore if it is ultimately determined that any such
person shall not have been entitled to indemnification. This indemnification
policy could result in substantial expenditures by the Company which it will be
unable to recoup.
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<PAGE>
DIRECTOR'S LIABILITY LIMITED.
The Company's Articles of Incorporation exclude personal liability of its
directors to the Company and its stockholders for monetary damages for breach of
fiduciary duty except in certain specified circumstances. Accordingly, the
Company will have a much more limited right of action against its directors than
otherwise would be the case. This provision does not affect the liability of any
director under federal or applicable state securities laws.
DEPENDENCE UPON OUTSIDE ADVISORS.
To supplement the business experience of its officers and directors, the Company
may be required to employ accountants, technical experts, appraisers, attorneys,
or other consultants or advisors. The selection of any such advisors will be
made by the Company's President without any input from stockholders.
Furthermore, it is anticipated that such persons may be engaged on an "as
needed" basis without a continuing fiduciary or other obligation to the Company.
In the event the President of the Company considers it necessary to hire outside
advisors, they may elect to hire persons who are affiliates, if they are able to
provide the required services.
LEVERAGED TRANSACTIONS.
There is a possibility that any acquisition of a business opportunity by the
Company may be leveraged, i.e., the Company may finance the acquisition of the
business opportunity by borrowing against the assets of the business opportunity
to be acquired, or against the projected future revenues or profits of the
business opportunity. This could increase the Company's exposure to larger
losses. A business opportunity acquired through a leveraged transaction is
profitable only if it generates enough revenues to cover the related debt and
expenses. Failure to make payments on the debt incurred to purchase the business
opportunity could result in the loss of a portion or all of the assets acquired.
There is no assurance that any business opportunity acquired through a leveraged
transaction will generate sufficient revenues to cover the related debt and
expenses.
NO FORESEEABLE DIVIDENDS.
The Company has not paid dividends on its Common Stock and does not anticipate
paying such dividends in the foreseeable future.
LOSS OF CONTROL BY PRESENT MANAGEMENT AND STOCKHOLDERS.
The Company may consider an acquisition in which the Company would issue as
consideration for the business opportunity to be acquired an amount of the
Company's authorized but un-issued Common Stock that would, upon issuance,
represent the great majority of the voting power and equity of the Company. The
result of such an acquisition would be that the acquired company's stockholders
and management would control the Company, and the Company's management could be
replaced by persons unknown at this time. Such a merger would result in a
greatly reduced percentage of ownership of the Company by its current
shareholders. In addition, the Company's President could sell his control block
of stock at a premium price to the acquired company's stockholders.
LIMITED PUBLIC MARKET EXISTS.
There is a limited public market for the Company's common stock, and no
assurance can be given that a market will continue or that a shareholder ever
will be able to liquidate his investment without considerable delay, if at all.
The market price for the Company's stock may be highly volatile. Factors such as
those discussed in this "Risk Factors" section may have a significant impact
upon the market price of the securities offered hereby. Owing to the low price
of the securities, many brokerage firms may not be willing to effect
transactions in the securities. Even if a purchaser finds a broker willing to
effect a transaction in these securities, the combination of brokerage
commissions, state transfer taxes, if any, and any other selling costs may
exceed the selling price. Further, many lending institutions will not permit the
use of such securities as collateral for any loans.
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Legal and Governmental
----------------------
Expansive rights were given to DVBE companies through California law in 1989 and
Federal law in 1999. Although unlikely, it is proper to note that Federal DVBE
guidelines, which were signed into law (public law 106-50) in the Third Quarter
of 1999, and/or the State of California DVBE guidelines could conceivably be
revised downward at some future date. This might cause a loss of business that
would otherwise come to the Company through its exclusive agreement with
Northland, a DVBE certified company. This in turn might cause a loss of income
and viability in the marketplace. The Company will remain abreast of this
possibility and other legal issues facing the rental industry through following
research reported in the "Rental Equipment Register" (RER) and other industry
publications, and by retaining on-going legal and accountant counsel to address
legal and tax issues.
Delay in Financing and Resulting Delays in Operations
-----------------------------------------------------
The Company has been attempting to negotiate a dealership agreement with New
Holland for the sale of new heavy construction equipment. To floor this
equipment on the Company's lots will require a large credit line approximating
$5,000,000.00. Finalizing the agreement with New Holland has taken far longer
than originally expected to finalize the Company's territory. As a result, the
Company's revenues during the year 2000 have been minimal.
Once the territory which the Company will represent for New Holland is
finalized, then the Company believes that it will be able to obtain the required
flooring.
Also, the Company has not had sufficient working capital to begin full scale
operations for Equip Mining Systems and Calico Mines.
On October 3, 2000, a controlling interest in the Company was purchased by
Senior Care Industries, Inc. and a rights offering will be made to Senior Care
shareholders which is intended to raise a total of $2,300,000 for working
capital. Until the offering becomes effective following the filing of a Form
SB-2, it is not expected that the Company will have the necessary working
capital to commence full operations as anticipated. Presently, the rights
offering should result in an infusion of capital into the Company by May or June
of 2001. Those funds will be used as working capital for all divisions but
particularly Equip Mining Systems and Calico Mines.
Item 3. Description of Property
The Company has agreed to lease a 2 acre yard and office space in Chino,
California. The lease term expires on February 28, 2003. The base rent is $3,250
per month. Until the Company actually commences business operations, the rent
has been paid by Al Harvey who holds the lease to the premises in Chino where
the Company's equipment is stored.
The Company also owns heavy construction equipment which was valued as of
February 10, 1999 by T.E. Kaplan, heavy construction equipment appraiser, as
having a present fair market value of $4,800,011.00, attachments such as dozer
blades, shovels and buckets, with a value of $752,879.25, new parts for the
heavy equipment in inventory with a value of $723,189.00, office equipment, shop
equipment and tools with a value of $878,078.75.
As noted above, a promissory note to Williamson Equipment, Inc. became due on
June 3, 2000 and was not paid. Mr. Williamson sent a letter on or about August
15, 2000 wherein he agreed to extend the time for the Company to negotiate an
alternative payment plan or to make the payment through January 1, 2001.
However, if the Company is unable to make that payment on or before January 1,
2001, the Company will be required to surrender all right, title and interest in
the equipment to Williamson thus resulting in a decrease in the value of
equipment which the Company still would own from $7,154,158.00 less accumulated
depreciation to $2,216,640.00 less accumulated depreciation.
Presently, the Company has no ability to pay the promissory note to Williamson
and there is no assurance that the Company will be able to negotiate any
agreement with Williamson which avert the return of title to the equipment to
Williamson effective January 1, 2001.
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Item 4. Security Ownership of Management and Others and Certain Security
Holders
The Company is authorized to issue 20,000,000 shares of common stock. It had
6,098,289 shares of common stock outstanding as of December 31, 1999 with
approximately 30 shareholders of record.
On March 26, 1999, the Company sold 5,000,000 shares of common stock for
$5,000.00 in cash which was exempt from registration pursuant to Regulation D,
Section 504 of the Securities & Exchange Act of 1933, as amended, to expand its
shareholder base.
Then, on December 10, 1999, the Company issued 1,098,289 shares to PSFG in
exchange for the purchase of heavy construction equipment, attachments such as
dozer blades, shovels and buckets, new parts for the heavy equipment in
inventory, office equipment, shop equipment and tools with a total value of
$7,154,158.00. The stock given in exchange for the equipment was valued at $5.00
per share for purposes of this acquisition. The determination to select $5.00
per share as the share price for the equipment was arbitrary and determined as a
matter of negotiations between the buyer and seller.
The following table sets forth information, to the best knowledge of the Company
as of December 31, 1999, with respect to each person known by the Company to own
beneficially more than 5% of the Company's outstanding common stock, and the
officers and directors of the Company.
Name and Address of Amount of Percentage
Beneficial Owner Ownership Ownership
---------------- --------- ---------
Pacific Standard Financial
Group (1) 1,098,289 18.009%
Al Harvey, Chief Executive
Officer and Director 1,500 .024%
(1) The majority beneficial owner of Pacific Standard Financial Group recently
changed. Mark Roser had been the majority shareholder. The new majority
shareholder is Rudy Reyes. The address for Rudy Reyes is:
Rudy Reyes
Pacific Standard Financial Group, Inc.
31705 West Nine Drive
Laguna Niguel, CA 92677
There are numerous other minority shareholders of the company among whom are the
following:
Jon King
Barbara Green
Pam Richards
Dan Shaw
Diane Taylor
Diane Jensen
Shauri Law
Gary King
Cecil Jacobson
The addresses for these persons may be obtained by making a request to Rudy
Reyes at the address set forth above.
Item 5. Directors, Executives, Officers and Significant Employees
Since the original Registration Statement was filed by the Company, the Company
has undergone considerable changes in its staff of officers and directors. These
changes came about mostly due to considerable delay in the Company being able to
complete its financing and begin full operations.
The directors and officers of the Company were originally as follows:
Name Age Position
------------ ------- --------------------
Al Harvey 56 Chairman, Chief Executive Officer, Director
Dan McCoy 37 President, Chief Financial Officer, Director
Gary Hulbert 63 Vice President & Regional Manager
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Responsibilities of Former Management
-------------------------------------
Al Harvey, Chairman and CEO
Mr. Harvey develops and maintains the company vision. Oversees all areas and
company departments. Approves all financial obligations. Seeks business
opportunities and strategic alliances with other organizations. Plans, develops
and establishes policies and objectives of business organization in accordance
with board directives and company charter. Directs and coordinates financial
programs to provide funding for new or continuing operations in order to
maximize return on investments and increase productivity.
Goals include: To form Rent USA into one of the premier equipment rental
companies in the Unites States by maintaining quality of equipment, service and
reliability to facilitate increased revenues, profitability, and exposure.
Dan McCoy, President and CFO
Works closely with CEO to develop revenue and profitability goals. Works with
investors and creditors to raise required capital to meet Companies funding
requirements. Works with CEO to target and review feasibility of potential
acquisitions. Overseas Company's overall accounting and tax liabilities. Works
with Sales Manager to establish optimal sales levels and pricing.
Gary Hulbert, Vice President and Regional Manager
Oversees the Southern California Divisions of the Company to ensure maximum
profitability and adherence to Board mandated policies and directives.
Former Management Team Backgrounds
----------------------------------
The strength of Rent USA's management team stems from combined expertise in both
management and technical areas. This has produced outstanding results over the
past years. In addition, the leadership and alignment characteristics of Rent
USA's management team have resulted in the establishment of broad and flexible
goals designed to meet the ever-changing demands of the quickly moving
marketplace requiring Rent USA's products. This is evident when the team
responds to situations requiring new and innovative capabilities.
Al Harvey, Chairman & CEO
Mr. Harvey's professional experience includes virtually every aspect of the
equipment rental industry. He has been involved in the construction and rental
industry for over 30 years. Mr. Harvey has acquired specific knowledge of the
needs of construction
Daniel L. McCoy, President & CFO
Mr. McCoy has extensive experience in the banking and finance area. Previous
position held include: January 1995 to December 1999, President and founder of
Ayrlett Company a manufacture and marketer of injection molded plastic valves
used in the plumbing industry. January 1994 to January 1995, Fist Vice President
International Industrial Bank of Moscow Russia. June 1991 to December 1993, Vice
President & Manger International Banking, Union Bank of California. 1986 to June
1991, Vice President & Manager, International Treasury Services for Standard
Chartered Bank of London.
Gary Hulbert, Vice President & Regional Manager
With more than 40 years heavy equipment sales and management experience, Mr.
Hulbert brings great depth to the Rent USA management team. Owner Southland
Equipment December 1999 to May 1989, Equipment Salesman Western Equipment Sales
November 1985 to May 1989, Operations Manager Scott Machinery Co.82-85, Partner
Sealpoint Diving & Salvage Company 79-82, 59 Sheppard Machinery mechanic, parts
& branch.
21
<PAGE>
Remuneration of Former Directors and Executive Officers
-------------------------------------------------------
Annual (a)Off Balance
Name: Comp. Sheet Sales
------------------------------------------------------------
Al Harvey, CEO $ 225,000
Dan McCoy, PRES &CFO $ 150,000
Gary Hulbert, VP&RM $ 84,000 1%
Open - Controller $ 42,000
(a) percent representative of off balance sheet sales handled personally by Gary
Hulbert. "Off balance sheet" sales refers to equipment sales, primary of used
equipment belonging to Company's customers, that are sold by Company on a
consignment basis and are not placed on the Company's balance sheet during the
sales period. For conducting or arranging such sales, Company will earn a
commission from seller. Typically this commission is equivalent to 6%-12% of the
sales price.
As of August 1, 2000, Dan McCoy resigned and Gary Hulbert took other employment.
Neither of them are any longer connected to the Company in any manner nor do
they have anything owed to them either by way of salary or other compensation.
Dan McCoy was replaced by Charles C. Hooper as President, Chief Financial
Officer and Director. Mr. Hooper is 52 years of age.
Gary Hulbert has not as yet been replaced.
Mr. Hulbert resigned effective August 1, 2000 because the Company was unable to
pay any salary to him and because he was unable to make commissions as had been
originally anticipated when he came on board at the time the Company was first
organized. No salary was ever paid to Mr. Hulbert and no commissions were made
by him during the time that he was associated with the Company.
Dan McCoy was terminated by the Board of Directors effective August 1, 2000 due
to unreconcilable differences between management's view of the Company and Mr.
McCoy's view of how the Company should develop. He was immediately replaced by
Mr. Hooper.
Present Management
------------------
Following the purchase of a controlling interest in Rent USA by Senior
Care Industries, Inc., on October 3, 2000, John W. Cruickshank, Senior Vice
President of Senior Care Industries was asked by the Senior Care Board of
Directors to become an officer and director of Rent USA and he agreed.
The following persons are presently officers and directors of Rent USA:
Name Age Position
--------------------------------------------------------------------------------
Jeffrey P. Harvey 40 Chairman, Chief Executive Officer, Director
Charles "Cort" Hooper 52 President, Chief Financial Officer, Director
Jim Flippen 54 Chief Operating Officer
Art Wigand 57 Chief Financial Officer
John W. Cruickshank 60 Secretary, Director
Management Responsibilities
---------------------------
Jeff Harvey, Chairman, Chief Executive Officer, Director
Mr. Harvey will act to develop and maintain the company vision. He will
oversee all areas and company departments. He will Approve all financial
obligations, will seek business opportunities and strategic alliances with other
organizations, will plan, develop and establish policies and objectives of
business organization in accordance with board directives and company charter,
direct and coordinate financial programs to provide funding for new or
continuing operations in order to maximize return on investments and increase
productivity.
Goals include: To form Rent USA into one of the premier equipment
rental companies in the Unites States by maintaining quality of equipment,
service and reliability to facilitate increased revenues, profitability, and
exposure.
22
<PAGE>
Charles C. Hooper, President, Director
Mr. Hooper will work closely with Jeff Harvey to develop revenue and
profitability goals. His essential obligation is to work with investors and
creditors to raise required capital to meet Companies funding requirements, to
work with CEO to target and review feasibility of potential acquisitions and to
oversee the Company's overall accounting and tax liabilities. Finally, he will
work with Sales Managers to establish optimal sales levels and pricing.
Jim Flippen, Chief Operating Officer
Mr. Flippen has the experience and dedication to assemble a cost
effective organization with emphasis on business development from concept
through negotiation and development of cash flow models from start up to
maintenance of an organization. His experience includes financing, leasing,
plant design and setup, cost accounting and control, quality control, production
and a safe working environment. Mr. Flippen believes that the worker environment
should be exciting, challenging and goal oriented with a fun everyday experience
for all persons involved.
Arthur Wigand, Chief Financial Officer
Mr. Wigand brings a broad based manufacturing and engineering
background to the Company with a stong emphasis on strategic planning and
execution, organizational skills and bottom line management capabilities. His
experience demonstrates his expertise in increasing profit and expanding the
capabilities of the company. He will be the hands on financial person
experienced in both governmental and commercial sales with experience in both
domestic and international sales.
John W. Cruickshank, Secretary, Director
Mr. Cruickshank will act to coordinate all legal and accounting aspects
of the Company's business and will work closely with the other executive
officers to assist in negotiation and implementation of funding requirments. Mr.
Cruickshank is also Senior Vice President of Senior Care Industries, Inc. and
acts as the liaison between management of Rent USA and the executive team and
Board of Senior Care Industries, Inc.
Management Team Backgrounds
Jeff Harvey, Chairman, Chief Executive Officer, Director
Prior to coming with Rent USA, Mr. Harvey had been a marketing
consultant to Glyphics Communications, Mediaworks and Northland Rental & Supply
since 1998. Mr. Harvey was director or marketing for Dynacom Teleconferencing in
Salt Lake City, UT from 1996 to 1998. Dynacom Teleconferencing was acquired by
Glyphics Communications in 1998. Mr. Harvey is a licenced real estate appraiser
in the State of Utah. His experience in the rental and heavy equipment business
spans the last two decades where he learned the business under his father, Al
Harvey, former Chairman of Rent USA and founder of the Company. From 1994 to
1997, Mr. Harvey was on the PGA Golf Professional circuit, prior to that time
having attended the University of Utah and is preparing to enter a series of
courses to obtain a graduate degree in Business Management. From 1991 to 1994,
Mr. Harvey was employed at Northland Rental & Supply and assisted Denzel Harvey,
his uncle, in developing the DVBE program and Northland's current business model
in the State of California. From 1983 to 1990, he was employed in the equipment
rental business by Rent-a- Tool in the Utah market. Mr. Harvey is also a member
of the National Honor Society.
Charles C. Hooper, President, Director
Mr. Hooper was from 1986 until coming with the Company, the Chief
Executive Officer of Mojave Natural Resources in Temecula, California, a company
which produces decorative rock and construction aggregate and industrial
minerals. From 1978 until 1990, he was also the owner of Old Town Financial in
La Jolla, California, a developer of shopping centers, office buildings,
condominiums, apartments, health clubs, single family homes and ranch estates.
He began his career in 1968 with Litton Industries as a reliability systems
engineer which designed and built missle guidance systems for the U.S. Army
ground to air combat installations. He was an officer in the U.S. Navy during
the Viet Nam war and became an instructor at the Naval War College. He served
two tours in Viet Nam as Navy Seal and trained submarine diving officers. From
1974 until 1986 he was the owner of Organizational Diagnostics Associates in San
Diego, California, a private financial and business consulting firm to Fortune
500 and local companies pioneering the development of financial and legal
software systems. Mr. Hooper is a graduate of the University of California at
Los Angeles with High Honors, has a Master of Science Degree from the U.S. Naval
23
<PAGE>
Post Graduate School and has done doctorate work in finance and human behavior.
He has also taken a number of continuing education courses in finance, real
estate and insurance. He is a 22 year member of the San Diego Yacht Club, a
member of Toastmasters International, The Veterans of Foreign Wars, the
California Mining Association and the Pacific S.W. Quarter Horse Association.
Jim Flippen, Chief Operating Officer
Mr. Flippen has over thirty years of experience in the Civil
Engineering Contracting field, is a graduate civil engineer and started his own
engineering contracting firm in Los Angeles, J.C. Flippen & Son in 1969 with
clients including among others, Atlantic Richfield, Mobil Oil, Union Oil and the
Parsons Group building annual sales to in excess of 8 million dollars when the
company was sold in 1981. He then founded Recycled Asphalt Materials Systems,
perfecting a way to recycle 100% of used asphalt paving back to its original
state. By 1985 he had three of these plants working in Arizona along with a
crushing facility with annual sales of 10 million dollars. This business was
sold in 1986 to Tanner Industries. He then moved to San Diego and founded
Flippen Engineering, Inc. specializing in sand and gravel mining and recovery
and handling the engineering aspects of a number of large development projects
including high end resindential, commercial and a Robert Trent Jones golf
course. In 1997, he retired and became a consultant specializing in new business
development, feasibility studies of acquisitions for quarry development, asphalt
plants and batch plants, working on such specific developmental projects as the
new San Francisco ball park, the San Francisco BART Airport extension and U.S.
Steel hazardous waste clean up.
Arthur Wigand, Chief Financial Officer
From 1986 to 1989, Mr. Wigand was Vice President of Operations at Compudyne Air
Traffic Control in San Diego, California, later becoming Vice President and
general manager of OAR Corporation directing all California operations including
maintenance of a positive cash flow, established material production and
scheduling systems and acquired a new product line for the company which
represented an additional $1,000,000 in sales annually. In 1995, Mr. Wigand
became Vice President of Direction Finder Products for product development,
customer service, scheduling and profit and loss for the product group
establishing a joint venture with Hughes STX to develop and manufacture search
and rescue direction finding equipment. From 1996 through 1998, he became
President of Cubic Communications transitioning the company from a government as
the sole customer to commercial applications for the company's products. He
reengineered plant operations, created and implemented marketing strategies and
penetrated new markets.
John W. Cruickshank, Secretary, Director
Mr. Cruickshank is a graduate of the University of Vermont and Boston
College Law School and comes to the company with over 30 years of legal
experience. He is Senior Vice President of Senior Care Industries, Inc. and acts
as spokesperson for that company. He also acts as coordinator of all legal and
accounting aspects of the Senior Care's business and works closely with the
other executive officers to assist in negotiation and implementation of funding
requirments for that company as well as Rent USA. He is also a member of the
Board of Directors of Freedom Surf, Inc. [OTCBB: FRSH & FRANKFURT FRX].
Item 6. Remuneration of Directors and Executive Officers
Annual
Name: Comp.
-----------------------------------
Jeff Harvey, CEO $ 225,000
Charles Hooper $ 150,000
Jim Flippen $ 95,000
Arthur Wigand $ 95,000
John Cruickshank $ 60,000
Directors are not compensated at this time for serving in the capacity as a
director and it is not anticipated that directors will receive any compensation
for their service.
All directors serve for a term of one year. Election of directors will occur at
the annual shareholder's meeting to be held in January, 2001.
24
<PAGE>
Item 7. Interest of Management and Others in Certain Transactions
There are no conflicts of interest, self dealing, or contracts (other than
employment contracts) signed between the company and principals of the company,
and there are no loans made by the company to any officers or directors other
than as set forth below:
Northland Supply Company ["Northland"] is a sole proprietorship owned by Denzel
Harvey, a disabled veteran and brother of Al Harvey, the Chief Executive Officer
of the Company. Under the terms of this agreement Rent USA, Inc. will provide
Northland with rental equipment and supplies which Northland will, in turn, rent
to the construction industry. Northland is certified by the State of California
as a Disabled Veterans Business Enterprise (DVBE) provider under the state of
DVBE California program.
The Company commenced a study to determine whether the prices which it charges
to Northland and the amounts which Northland pays to Rent USA for the use of
Rent USA equipment is fair and equitable to the Company and whether those
charges would be similar if Northland were not owned by the brother of Al
Harvey, the founder of the Company. The Company determined that the prices
charged to Northland were approximately the same as the Company would charge to
any wholesaler of rental equipment and that the difference between charges to
Northland and others is the approximately the same.
Item 8. Legal Proceedings
There is no litigation pending at this time.
Part II
Item 1. Market Price of and Dividends of the Registrant's Common Equity and
Other Stockholder Matters
Dividends have not been issued by the Company. The market value is to be
determined.
The Company's stock is not presently listed on any stock exchange and is not
being publicly traded. It is anticipated that the Company will apply to become
registered for sales on the OTC and OTCBB of the NASDAQ stock exchange.
Item 2. Recent Sales of Unregistered Securities
On March 26, 1999, the Company sold 5,000,000 common shares in connection with
an exempt offering pursuant to Section 504 of Regulation D and raised $5,000.00
which was paid to the Company by the shareholders subscribing those shares.
On December 10, 1999, the Company issued 1,098,289 shares to PSFG in exchange
for the purchase of heavy construction equipment as follows:
New & Used Heavy Equipment $ 4,800,011.00
Attachments 752,879.25
Parts 723,189.00
Shop & Tools 791,924.75
General Office 74,305.00
--------------
Total: $ 7,154,158.00
Less Debt: 1,661,746.00
--------------
Net Value of Assets: $ 5,492,412.00
Based upon this valuation, 1 share was issued for each $5.00 in value. The price
of $5.00 per share was arbitrarily determined based upon negotiation at the time
since the stock was not traded and had no intrinsic market value.
Item 3. Description of Securities
The Company is authorized to issue 20,000,000 shares of Common Stock, par value
$0.001 per share and 5,000,000 shares of Preferred Stock, par value $0.001 per
share. The Company's presently has 6,089,289 shares of Common Stock issued and
outstanding which are held by approximately 30 shareholders of record. 5,000,000
shares are free trading and 1,089,289 are restricted having been issued in
exchange for the purchase of assets. No preferred stock is issued or
outstanding. The free trading shares were issued in connection with a
registration pursuant to Regulation D, Section 504 wherein the Company issued
5,000,000 shares in exchange for the payment of $5,000.00 by the shareholders
subscribing to the shares in the Company.
25
<PAGE>
Common Stock.
All shares of Common Stock have equal voting rights and, when validly issued and
outstanding, are entitled to one vote per share in all matters to be voted upon
by shareholders. The shares of Common Stock have no preemptive, subscription,
conversion or redemption rights and may be issued only as fully paid and
non-assessable shares. Cumulative voting in the election of directors is not
permitted, which means that the holders of a majority of the issued and
outstanding shares of Common Stock represented at any meeting at which a quorum
is present will be able to elect the entire Board of Directors if they so choose
and, in such event, the holders of the remaining shares of Common Stock will not
be able to elect any Directors. In the event of liquidation of the Company, each
shareholder is entitled to receive a proportionate share of the Company's assets
available for distribution to shareholders after the payment of liabilities and
after distribution in full of preferential amounts, if any. All shares of the
Company's Common Stock issued and outstanding are fully-paid and non-assessable.
Holders of the Common Stock are entitled to a pro-rata share in dividends and
distributions with respect to the Common Stock, as may be declared by the Board
of Directors out of funds legally available therefore.
Preferred Shares.
Shares of Preferred Stock may be issued from time to time in one or more Series
as may be determined by the Board of Directors. The voting powers and
preferences, the relative rights of each such Series and the qualifications,
limitations and restrictions thereof shall be established by the Board of
Directors, except that no holder of Preferred Stock shall have preemptive
rights.
Item 4. Indemnification of Directors and Officers
The Nevada Revised Statutes and the Company's Articles of Incorporation and
Bylaws authorize indemnification of a director, officer, employee or agent of
the Company against expenses incurred by him or her in connection with any
action, suit, or proceeding to which such person is named a party by reason of
having acted or served in such capacity, except for liabilities arising from
such person's own misconduct or negligence in performance of duty. In addition,
even a director, officer, employee or agent of the Company who was found liable
for misconduct or negligence in the performance of duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers, or persons controlling
the Company pursuant to the foregoing provisions, the Company has been informed
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
26
<PAGE>
Part F/S
Item 1. Financial Statements
The audited financial statements of the Company and related notes which are
included in this offering have been examined by James E. Slayton, CPA, and have
been so included in reliance upon the opinion of such accountant given upon
their authority as an expert in auditing and accounting.
The following documents are filed as part of this report:
a) Rent USA, Inc.
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
December 31, 1999
TABLE OF CONTENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
BALANCE SHEET - ASSETS F-2
BALANCE SHEET - LIABILITIES AND SHAREHOLDER'S EQUITY F-3
STATEMENT OF OPERATIONS F-4
STATEMENT OF STOCKHOLDERS' EQUITY F-5
STATEMENT OF CASH FLOWS F-6
NOTES TO FINANCIAL STATEMENTS F-7
27
<PAGE>
James E. Slayton, CPA
2858 WEST MARKET STREET
SUITE C
FAIRLAWN, OHIO 44333
1-330-865-3553
INDEPENDENT AUDITORS' REPORT
Board of Directors December 31, 1999
Rent USA, Inc. (The Company) Revised August 25, 2000
Las Vegas, Nevada 89109
I have audited the Balance Sheet of Rent USA, Inc. (A Development Stage
Company) for the period from July 27, 1998 [Date of Inception] to December 31,
1998, the fiscal year ended December 31, 1999 and the cumulative period from
inception to December 31, 1999 and the related Statements of Operations,
Stockholders' Equity and Cash Flows for the period July 27, 1998 (Date of
Inception) to December 31, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statement presentation. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. I believe that my audit provides a reasonable basis for my
opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Rent USA, Inc., (A
Development Stage Company), as of December 31, 1999, and the results of its
operations and cash flows for the period July 27, 1998 (Date of Inception) to
December 31, 1998, the fiscal year ended December 31, 1999, and the cumulative
period from inception to December 31, 1999, in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company has had limited operations and has not
generated significant revenues from planned principal operations. This raises
substantial doubt about its ability to continue as a going concern. Management's
plan in regard to these matters is also described in Note 3. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ James E. Slayton
-------------------------
James E. Slayton, CPA
Ohio License ID# 04-1-15582
F-1
<PAGE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF
December 31, 1999
ASSETS
ASSETS
CURRENT ASSETS
Cash 0.00
--------------
Total Current Assets 0.00
PROPERTY AND EQUIPMENT
Property and Equipment(net of depreciation 7,110,588.00
--------------
Total Property and Equipment 7,110,588.00
OTHER ASSETS
Organization Costs(net of amortization) 0.00
--------------
Total Other Assets 0.00
--------------
TOTAL ASSETS $7,110,588.00
==============
See accompanying notes to financial statements
F-2
<PAGE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS OF
December 31, 1999
LIABILITIES & EQUITY
CURRENT LIABILITES
Accounts Payable 910.00
--------------
Total Current Liabilities 910.00
OTHER LIABILITIES
Noncurrent Liabilities 1,661,721.00
--------------
Total Other Liabilities 1,661,721.00
--------------
Total Liabilities 1,662,631.00
EQUITY
Common Stock, $0.001 par value, authorized 20,000,000
shares; issued and outstanding at 12/31/1999,
6,098,289 common shares 6,098.00
Additional Paid in Capital 5,490,347.00
Preferred Stock, $0.001 par value, authorized 5,000,000,
none issued 0.00
Retained Earnings (Deficit accumulated during development
stage) (48,488.00)
--------------
Total Stockholders' Equity 5,447,957.00
--------------
TOTAL LIABILITIES & OWNER'S EQUITY $7,110,588.00
==============
See accompanying notes to financial statements
F-3
<PAGE>
<TABLE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
FOR PERIOD
July 27, 1998 (Date of Inception) to December 31, 1999
<CAPTION>
Date of Inception Twelve Months Date of Inception
to to to
Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1998
------------- ------------- -------------
<S> <C> <C> <C>
REVENUE
Sales 0.00 0.00 0.00
COSTS AND EXPENSES
General and Administrative 5,910.00 5,910.00 0.00
Depreciation Expense 42,578.00 42,578.00 0.00
----------- ----------- -----------
Total Costs and Expenses 48,488.00 48,468.00 0.00
----------- ----------- ----------
Net Income or (Loss) (48,488.00) (48,488.00) 0.00
----------- ----------- ----------
Weighted average number of common
shares outstanding 5,109,829 5,109,629 0.00
Basic Net Loss Per Share (0.01) (0.01)
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
<TABLE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR PERIOD
July 27, 1998(Date of Inception) to December 31, 1999
<CAPTION>
Deficit
Accumulated
Common Additional During Total
Stock Paid-in Development Stockholder's
Shares Amount Capital Stage Equity
------------ ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Balances as of
December 31, 1998 0 0 0 0 0
March 26, 1999 5,000,000 5,000.00 0.00 5,000.00
Issued for cash
December 10, 1999 1,098,289 1,098.00 5,490,347.00 5,491,445.00
Issued as part of
December 10, 1999
purchase agreement
Net loss (48,488.00) (48,488.00)
------------ ------------ ------------- ------------ --------------
Balances as of
December 31, 1999 6,098,289 $ 6,098.00 $5,490,347.00 ($48,488.00) $5,447,957.00
============ ============ ============= ============ ==============
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR PERIOD
July 27, 1998 (Date of Inception) to December 31, 1999
<CAPTION>
Date of Inception Twelve Months Date of Inception
to to to
Dec. 31, 1999 Dec. 31, 1999 Dec. 31, 1998
------------- ------------- -------------
<S> <C> <C> <C>
CASH FLOWS FROM
OPERATING ACTIVITIES
Net (loss) from operations ($48,488.00) ($48,488.00) 0.00
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation Expense 42,578.00 42,578.00 0.00
Increase in accounts payable 910.00 910.00 0.00
----------- ----------- -----------
Net cash provided by
operating activities (5,000.00) (5,000.00) 0.00
CASH FLOWS FROM INVESTING ACTIVITIES
Net cash in investing activities 0.00 0.00 0.00
----------- ----------- -----------
Net cash used by investing activities 0.00 0.00 0.00
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of Capital Stock 5,000.00 5,000.00 0.00
----------- ----------- -----------
Net cash provided by
financing activities 5,000.00 5,000.00 0.00
Net increase (decrease) in cash 0.00 0.00 0.00
Balances as at end of period 0.00 0.00 0.00
</TABLE>
See accompanying notes to financial statements
F-6
<PAGE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized July 27, 1998 (Date of Inception) under the laws
of the State of Delaware, as Rent USA, Inc. (The Company) has no operations and
in accordance with SFAS #7, the Company is considered a development stage
company.
On March 26, 1999, the Company issued 5,000,000 shares of its $.001 par
value common stock for $5,000.00 in cash to expand its shareholder base.
On or about November 17, 1999, the Company incorporated in Nevada solely
for the purpose of moving the corporate domicile to Nevada.
On December 10, 1999, the Company issued 1,098,289 shares of its $.001
par value common stock as part of an asset purchase agreement which became
effective on November 17, 1999. The Company assumed related liabilities in the
amount of $1,661,721.00.
The Company has 20,000,000 of $.001 par value common stock authorized and
5,000,000 of $.001 par value preferred stock authorized.
There have been no other issuances of equity or Common Stock.
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES
Accounting policies and procedures have not been determined except as
follows:
1. The Company uses the accrual method of accounting.
2. Recognition of revenue from sales:
Revenues from equipment rentals are recognized as earned as time passes
from rights to use assets (rentals) which extend continuously over time based on
contractual rights established in advance.
Revenues from facilitating sales of used equipment are recognized only when
the asset sale is consummated and until that time no revenue is recognized.
The Company had no revenue from sales of any kind through the end of the
period which was on December 31, 1999.
3. The cost of organization was expensed when incurred.
4. Basic earnings per share is computed using the weighted average
number of shares of common stock outstanding.
5. The Company has not yet adopted any policy regarding payment of
dividends. No dividends have been paid since inception.
6. The cost of equipment is depreciated over the estimated useful life of
the equipment utilizing the straight line method of depreciation utilizing the
following depreciation schedule:
Heavy Equipment 10 years, straight line method Shop & Tools 7 years, straight
line method Furniture & Other Equipment 5 years, straight line method
The amount of depreciation recorded during the calendar year 1999 was
$42,578.00.
F-7
<PAGE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES - CONTINUED
7. The Company experienced losses since its inception on July 28, 1998
(Date of inception) to December 31, 1999. The Company will review its need for a
provision for federal income tax after each operating quarter and each period
for which a statement of operations is issued. There has not been any deferred
tax benefits recorded as management has deemed it less than likely that the net
operating losses will be utilized.
8. The Company has adopted December 31 as its fiscal year end.
9. The Company records its inventory at cost.
10. The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make estimates and
assumptions which affect the reported amounts of assets and liabilities as at
the date of the financial statements and revenues and expenses for the period
reported. Actual results may differ from these estimates.
11. The Company's Statement of Cash Flows is reported utilizing
cash(currency on hand and demand deposits) and cash equivalents( short-term,
highly liquid investments). The Company's Statement of Cash Flows is reported
utilizing the indirect method of reporting cash flows.
NOTE 3 - GOING CONCERN
The Company's financial statements are prepared using the 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. However, the Company has not generated significant revenues from its
planned principal operations. Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern.
F-8
<PAGE>
Rent USA, Inc.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 4 - RELATED PARTY TRANSACTION
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
Minor out of pocket expenses for office supplies for such things as fax
costs and paper costs during the calendar year ended 1999 are not reflected in
these financial statements and were provided without charge by Al Harvey, Chief
Executive Officer and Director. Such costs are immaterial to the financial
statements and, accordingly, have not been reflected therein.
NOTE 5 - WARRANTS AND OPTIONS
There are no warrants or options outstanding to acquire any additional
shares of common stock.
NOTE 6 - YEAR 2000 ISSUE
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in systems
which use certain dates in 1999 to represent something other than a date. The
effects of the Year 2000 issue may be experienced before on, or after January 1,
2000 and if not addressed, the impact on operations and financial reporting may
range from minor errors to significant systems failure which could affect an
entity's ability to conduct normal business operations. It is not possible to be
certain that all aspects of the Year 2000 issue affecting the entity, including
those related to the efforts of customers, suppliers, or other third parties
will be fully resolved.
NOTE 7 - LONG TERM COMMITMENTS
The Company has agreed to lease a 2 acre yard and office space in Chino,
California. The lease term expires on February 28, 2003. The base rent is $3,250
per month. The Company only purchased its equipment in December, 1999 and rent
on the space in Chino had already been paid by Al Harvey for the month of
December, 1999. The Company did not actually commence business operations until
the year 2000 when the Company will commence paying rent.
From November 17, 1999 when the Company obtained title to the equipment,
through the end of the year on December 31, 1999, there were no repairs,
maintenance costs, costs for corporate offices or payroll.
The officers and directors of the Company are involved in other business
activities and may, in the future, become involved in other business
opportunities. If a specific business opportunity becomes available, such
persons may face a conflict in selecting between the Company and their other
business interests. The Company has not formulated a policy for the resolution
of such conflicts.
The Company gave a note as part of the asset purchase agreement in the
amount of $1,661,721. The note is due 180 days after the closing of the asset
purchase agreement and has an interest rate of 8.5% annually.
F-9
<PAGE>
Item 2. Changes in and Disagreements With Accountant on Accounting and
Financial Disclosure
An 8-K Report was filed on September 8, 2000 which states that the Company
changed auditors and has engaged John H. Spurgeon, CPA, JD as its auditor whose
address is 1787 E. Alosta Ave., Glendora, CA 91740 and whose telephone number is
(626) 914-9449. He replaced James Slayton effective on January 15, 2000.
John H. Spurgeon is a member of the SEC Practice Section of the AICPA and his
reviewing auditor is Kendall G. Merkley, CPA of the firm of Corbin & Wertz, 2503
Main Street, Suite 600, Irvine, CA 92614.
The decision to change accountants was recommended and approved by the Board of
Directors.
During the Registrant's two most recent fiscal years and any subsequent interim
period preceding the date of the dismissal, there were no disagreements with the
former accountant on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
The accountant's report on the financial statements for the past two years did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles other than
as stated in the Registration Statement, Amendment No. 4, wherein the
Accountant's Report states as follows:
"The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has had limited operations and has not generated
significant revenues from planned principal operations. This raises substantial
doubt about its ability to continue as a going concern. Management's plan in
regard to these matters is also described in Note 3. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty."
The Accountant in Note 3 makes the following statement:
"The Company's financial statements are prepared using the 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. However, the Company has not generated significant revenues from its
planned principal operations. Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern."
Part III
Item 1. Index to Exhibits
Exhibit
Number Title
-------- ------
2.1 Cash Flow Forecast for January 1 through December 31, 2000**
3.1 Nevada Article of Incorporation*
3.2 Nevada By Laws*
10.1 Employment Contract between Rent USA, Inc. and Mr. Al Harvey*
10.2 Marketing Agreement between Big Iron Rental and Northland Supply
Company*
10.3 Agreement and Plan of Merger*
* Previously filed as an exhibit to the Company's Form 10-SB.
** Previously filed as an exhibit to the Company's Form 10-SB, Amendment No. 3
Additionally, the following filings are incorporated herein by reference and
should be read in connection with this Registration Statement, Amendment No. 5:
8-K Report filed on September 8, 2000 noting changes in the Company auditor,
officers and directors.
10-QSB Quarterly Report for the 1st Quarter of 2000, filed on September 8, 2000.
10-QSB Quarterly Report for the 2nd Quarter of 2000, filed on September 8, 2000.
10-QSB Quarterly Report for the 3rd Quarter of 2000, filed on November 13, 2000.
37
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this amendment to the registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
Rent USA, Inc.
(Registrant)
Date: November 20, 2000 By: /s/ Charles Hooper
-----------------------
Charles Hooper
President
38
