U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] Quarterly Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1997
[ ] Transition Report Under Section 13 or 15(d) of
the Exchange Act
For the transition period from ____________ to ____________.
Commission file number 1-12350
REGENESIS HOLDINGS, INC.
--------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 65-0611607
-------------------------------- ----------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7777 Glades Road, Suite 211
Boca Raton, Florida 33434
---------------------------------------------
(Address of Principal Executive Office)
(561) 470-6005
--------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [x] No [ ]
The number of shares outstanding of the issuer's common stock, par value
$.01 per share as of November 5, 1997 was 588,643, after giving effect to a 1
for 20 reverse split which was declared on August 8, 1997 and a 1 for 3 reverse
split which was declared on September 17, 1997.
Transitional Small Business Disclosure Format:
Yes [ ] No [x]
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
(Unaudited)
PART I. FINANCIAL INFORMATION Page
- ------------------------------ ----
ITEM. 1 Financial Statements
Condensed Consolidated Balance Sheets
as of September 30, 1997 and December
31, 1996 2 - 3
Condensed Consolidated Statements of
Operations for the Three and Nine
Months Ended September 30, 1997 and
1996 4
Condensed Consolidated Statement of
Shareholders' Equity for the Nine
Months Ended September 30, 1997 5
Condensed Consolidated Statements of
Cash Flows for the Nine Months Ended
September 30, 1997 and 1996 6 - 7
Notes to Condensed Consolidated
Financial Statements 8 - 13
ITEM. 2 Management's Discussion and Analysis
or Plan of Operation 14 - 17
PART II. OTHER INFORMATION
- ---------------------------
SIGNATURES
1
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
------
September 30, December 31,
1997 1996
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents $ 7,524 $ 138,731
Restricted cash -- 300,000
Note receivable from Lator, Inc 300,000 --
Notes and accounts receivable
from sale of QPQ Medical 214,542 --
Receivables -- 171,972
Inventory -- 57,718
Accrued interest receivable 2,416 28,889
Due from affiliates -- 149,382
Prepaid expenses 27,000 230,368
---------- ----------
Total current assets 551,482 1,077,060
---------- ----------
Furniture, equipment & leasehold
improvements, net 86,302 1,988,251
Deferred charges, net of accumulated
amortization of $ 1,250 and $11,301
respectively 250 124,030
Domino's development rights, net
of accumulated amortization of
$106,208 at December 31, 1996 -- 204,646
---------- ----------
$ 638,034 $3,393,987
========== ==========
(Continued)
2
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS, Continued
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
1997 1996
------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 29,983 $ 479,895
Accrued expenses -- 92,489
Due to affiliate -- 243,983
Bank credit facilities payable -- 21,718
------------ ------------
Total current liabilities 29,983 838,085
------------ ------------
BANK CREDIT FACILITIES PAYABLE -- 300,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred Stock, $.01 par value,
1,000,000 shares authorized;
no shares issued -- --
Common Stock, $.01 par value,
1,666,667 shares authorized;
237,643 and 122,557 shares
issued and outstanding,
respectively 2,376 1,275
Additional paid-in capital 10,844,050 9,276,942
Accumulated deficit (10,238,375) (7,090,852)
Accumulated translation adjustment -- 68,537
------------ ------------
Total shareholders' equity 608,051 2,255,902
------------ ------------
$ 638,034 $ 3,393,987
============ ============
See Accompanying Notes
3
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
GENERAL & ADMINISTRATIVE
EXPENSES $ 164,526 $ 219,173 $ 968,322 $ 488,658
OTHER INCOME (EXPENSES):
Interest and other income 503 270 21,698 9,454
Interest expense (4,503) (708) (31,375) (708)
Underwriter warrant
settlement -- -- (201,000) --
----------- ----------- ----------- -----------
Total other income
(expense), net (4,000) (438) (210,677) 8,746
----------- ----------- ----------- -----------
LOSS FROM CONTINUING
OPERATIONS (168,526) (219,611) (1,178,999) (479,912)
DISCONTINUED OPERATIONS:
Loss from operations (87,119) (723,233) (1,371,183) (1,619,392)
Loss on disposal of
discontinued operations (295,630) -- (597,341) --
----------- ----------- ----------- -----------
LOSS FROM DISCONTINUED
OPERATIONS (382,749) (723,233) (1,968,524) (1,619,392)
----------- ----------- ----------- -----------
NET LOSS $ (551,275) $ (942,844) $(3,147,523) $(2,099,304)
=========== =========== =========== ===========
NET LOSS PER COMMON
SHARE:
Continuing operations $ (.70) $ (1.81) $ (6.77) $ (4.35)
Discontinued operations (1.60) (5.97) (11.28) (14.69)
----------- ----------- ----------- -----------
Net loss $ (2.30) $ (7.78) $ (18.05) $ (19.04)
=========== =========== =========== ===========
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING 239,908 121,188 174,419 110,254
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
For the Nine Months Ended September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional Accumulated
------------------------- Paid In Translation Accumulated
Shares Amount Capital Adjustment Deficit Total
---------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances,
December 31,
1996 127,557 $ 1,275 $ 9,276,942 $ 68,537 $( 7,090,852) $ 2,255,902
Issuance of Common Stock
in exchange for 8%
Convertible Debentures,
net of unamortized debenture
issue costs of $165,927 64,000 640 1,136,071 - - 1,136,711
Issuance of Common Stock
in satisfaction of liabilities
and payment of legal and
professional expenses 31,667 317 346,627 - - 346,944
Issuance of Common Stock
in payment of officer
compensation 6,086 61 34,493 - - 34,554
Issuance of Common Stock
in private placement,
net of expenses of $15,018 8,333 83 49,917 - - 50,000
Translation
adjustments - - - ( 68,537) - ( 68,537)
Net loss for
the period - - - - ( 3,147,523) ( 3,147,523)
---------- ----------- ----------- ----------- ------------ ------------
Balances,
September 30, 1997 237,643 $ 2,376 $10,844,050 $ - $(10,238,375) $ 608,051
========== =========== =========== =========== ============ ============
</TABLE>
See Accompanying Notes
5
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net Loss $(3,147,523) $(2,099,304)
Adjustment to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 54,905 27,952
Loss on sale of discontinued
operations 851,883 --
Expenses paid by issuance of
common stock 404,136 --
Changes in operating assets and
liabilities:
Accrued interest receivable 26,473 --
Prepaid expenses (27,000) --
Accounts payable and
accrued expenses (49,354) 5,183
Discontinued operations -
noncash charges and
working capital changes 448,112 460,587
----------- -----------
Net cash used in operating
activities (1,438,368) (1,605,582)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of
discontinued operations 585,000 --
Proceeds from sale of equipment 73,350 --
Note receivable (300,000) --
Discontinued operations 300,000 (861,102)
Payments for furniture, equipment
and leasehold improvements (13,000) (79,403)
----------- -----------
Net cash provided by(used in)
investing activities 645,350 (940,505)
----------- -----------
(Continued)
6
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued
(Unaudited)
Nine Months Ended September 30,
-------------------------------
1997 1996
----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Net proceeds from issuance of
common stock 50,000 1,997,932
Payment for option -- (10,000)
Net proceeds from issuance of
8% convertible debentures 1,066,667 --
Proceeds from exercise of
stock options 30,000 --
Discontinued operations (321,718) 53,072
Payments from(to) affiliates, net (94,601) 8,235
----------- -----------
Net cash provided by financing
activities 730,348 2,049,239
----------- -----------
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT (68,537) (56,511)
DECREASE IN CASH AND CASH
EQUIVALENTS (131,207) (553,359)
BEGINNING CASH AND CASH EQUIVALENTS 138,731 1,052,831
----------- -----------
ENDING CASH AND CASH EQUIVALENTS $ 7,524 $ 499,472
=========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest:
Continuing operations $ 31,375 $ 708
=========== ===========
Discontinued operations $ 17,475 $ 28,090
=========== ===========
SUPPLEMENTAL SCHEDULE OF NON
CASH INVESTING & FINANCING
ACTIVITIES:
NINE MONTHS ENDED SEPTEMBER 30, 1997:
Issuance of 64,000 shares of Common Stock in satisfaction of $1,280,000
principal amount of 8% Convertible Debentures and $22,638 of accrued
interest.
Issuance of 31,667 shares of Common Stock in satisfaction of liabilities
and payment of legal and professional expenses.
Issuance of 6,086 shares of Common Stock in payment of officer
compensation.
See Accompanying Notes
7
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION:
On November 4, 1997, the Company changed its name to Regenesis Holdings,
Inc. ( the "Company/Regenesis"). The Company formerly known as QPQ Corporation,
was originally organized for the purpose of developing and operating franchised
Domino's Pizza stores in the Republic of Poland ("Poland"). From August 9, 1995,
through September 3, 1997, the Company's wholly-owned subsidiary, QPQ Medical
Centers, Inc. ("QPQ Medical") was in the business of developing and or operating
medical centers which offered primary care medical services and medically
supervised weight loss programs. On June 27, 1997, the Company sold its
wholly-owned Polish subsidiary Pizza King Polska, Sp z.o.o. ("PK Polska") to an
unrelated party, in exchange for $500,000 cash, relinquishment of certain PK
Polska related assets owned by the Company and assumption of all liabilities of
PK Polska by the purchaser. On September 3, 1997, the Company sold its
wholly-owned subsidiary QPQ Medical Centers, Inc. to an unrelated party, in
exchange for $60,000 of cash, a $150,000 note receivable and the assumption of
all liabilities of QPQ Medical by the purchaser. See Note 5 for additional
details regarding the disposition of PK Polska and QPQ Medical.
On October 8, 1997, the Company acquired 100% of the issued and
outstanding common stock of Lator International, Inc. ("Lator") from unrelated
parties in exchange for 300,000 shares of the Company's Series A Preferred
Stock. Lator was formed for the purpose of marketing Canadian Sphagnum peat moss
and has entered into an agreement to purchase a Canadian Company which leases
certain peat moss bogs in Canada and harvests and sells the peat moss primarily
in the Southeastern United States.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation - The accompanying condensed consolidated financial
statements at September 30, 1997 include the accounts of the Company. The
results of operations and cash flows for PK Polska and QPQ Medical for all
periods presented are included in Discontinued Operations.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
The accompanying unaudited condensed consolidated financial statements,
which are for interim periods, do not include all disclosures provided in the
annual consolidated financial statements. These unaudited condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and the footnotes thereto contained in the Annual Report on
Form 10-KSB for the year ended December 31, 1996 as filed with the Securities
and Exchange Commission. The December 31, 1996 consolidated balance sheet was
derived from audited consolidated financial statements, but does not include all
disclosures required by generally accepted accounting principles.
8
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (which are of a normal
recurring nature) necessary for a fair presentation of the financial statements.
The results of operations for the nine months ended September 30, 1997 are not
necessarily indicative of the results to be expected for the full year.
Going Concern - The report of the Company's independent accountants on
their audit of the Company's December 31, 1996 consolidated financial statements
contained uncertainties relating to the Company's ability to continue as a going
concern. The Company has incurred a substantial loss in the nine months ended
September 30, 1997 and uncertainties exist with regard to the Company's ability
to generate sufficient cash flows from operations or other sources to meet
existing obligations, which gives rise to doubts about the Company's ability to
continue as a going concern. These financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Net Loss Per Common Share - The computation of net loss per common share
in the accompanying statements of operations is based upon the weighted average
number of shares outstanding during the period adjusted for the reverse splits
described in Note 4. The net loss per common share does not include the assumed
exercise of any common stock options or warrants since their inclusion would be
anti-dilutive.
Reclassification - Certain amounts in the 1996 financial statements have
been reclassified to conform to the 1997 presentation.
3. 8 % CONVERTIBLE DEBENTURES:
In March 1997, the Company entered into Securities Subscription Agreements
(the "Agreements") for the sale of $1,280,000 of 8% Convertible Debentures (the
"Debentures") with a maturity date of March 31, 1998, for which the Company
received net proceeds of $1,066,667. Interest on the debentures was payable
quarterly.
The Debentures were originally convertible into shares of common stock at
a conversion price per share equal to the lower of (a) 75% of the average
closing bid price of the common stock for five business days immediately
preceding the conversion date or (b) 75% of the average of the closing bid price
of the common stock for the business day immediately preceding the date of the
individual Subscription Agreement.
Pursuant to a settlement entered into with all holders of the Debentures
the holders agreed to accept three shares of Common Stock in exchange for each
$1 of principal amount of each Debenture. In addition, all accrued interest on
the debentures was satisfied by issuance of the Common Stock. On June 4, 1997,
the Company issued 64,000 shares of Common Stock in exchange for all of the
outstanding Debentures.
9
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The $165,927 of unamortized costs associated with issuance of the
debentures has been charged against additional paid in capital in the
accompanying condensed consolidated financial statements at September 30, 1997.
The Debentures were originally issued in reliance upon the exemption from
registration afforded by Regulation S as promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
4. SHAREHOLDERS' EQUITY:
On August 8, 1997, the Company declared a 1-for-20 reverse stock split,
payable to stockholders of record on August 22, 1997, and on September 17, 1997,
the Company declared a 1 for 3 reverse stock split, payable to stockholders of
record on October 8, 1997. All information relating to outstanding shares of
common stock in the accompanying financial statements for all periods presented
has been restated to reflect the reverse splits.
The Company's Stock Option Plan (the "Plan") and Directors Stock Option
Plan (the "Directors Plan") (collectively the "Plans"), authorized the issuance
of 16,667 and 833 shares of common stock options, respectively.
As of September 30, 1997, all options issued under the Plans had expired
and the Company intends to terminate the Plans.
On October 3, 1997, the Company established its 1997 Stock Option Plan
("1997 Plan") which authorizes the issuance of options to purchase a maximum
of 1,000,000 shares of Common Stock. All shares to be issued under the 1997 Plan
have been registered pursuant to a Form S-8 Registration Statement, which was
filed and became effective on October 3, 1997.
As of September 30, 1997, the Company has outstanding options to purchase
16,903 shares of the Company's common stock at an exercise price of $3.60 per
share of common stock, none of which were granted pursuant to the aforementioned
1997 Plan. Subsequent to September 30, 1997, the Company granted options to
purchase 351,000 shares of Common Stock.
During the three months ended September 30, 1997, the Company issued 8,333
shares of common stock in a private offering and received net proceeds of
$50,000. During the same period, the Company also issued 10,000 shares of common
stock in payment of $18,000 of legal fees and 872 shares of common stock in
payment of employee compensation.
5. DISCONTINUED OPERATIONS:
Effective June 23, 1997, the Company sold three of its four operating
medical centers to an unrelated party in exchange for cash of $25,000, which was
10
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
received on July 1, 1997 and notes receivable of $57,000. The Company recorded a
loss on disposition of assets of $228,088 in its condensed consolidated
financial statements for the nine month period ended September 30, 1997. After
completion of this sale it was the Company's intention to continue to operate
the remaining medical center. Subsequently, during the quarter ended September
30, 1997, management of the Company determined that it would be in the best
interest of the Company to dispose of the remainder of its medical center
operation in order to eliminate the continuing losses associated with such
operation and the potential contingent liabilities related to the weight loss
business.
On September 3, 1997 the Company sold its 100% interest in QPQ Medical to
an unrelated party in exchange for $60,000 of cash, a $150,000 note receivable,
and the assumption of all liabilities of QPQ Medical by the purchaser. In
addition, QPQ Medical transferred computer equipment with a net book value of
$74,789 to the Company as additional consideration. The note bears interest at
10% per annum, is payable in monthly principal installments of $5,000 commencing
October 1, 1997, with a balloon payment of $90,000 payable on September 30,
1998. Interest is payable at maturity. The note is secured by a first lien on
all assets of QPQ Medical and certain other assets owned by the purchaser.
On June 27, 1997, the Company sold its wholly-owned Polish subsidiary PK
Polska for $500,000, plus a release from all other obligations of the Company
relative to PK Polska, including bank guarantees. The Company also relinquished
its $300,000 certificate of deposit (which was used as collateral for a $300,000
bank loan to PK Polska) and transferred the unamortized cost of its Domino's
Development rights to the purchaser. Following is a computation of the loss
incurred on the sale of QPQ Medical and PK Polska:
Q P Q P K
Medical Polska Total
---------- ---------- ----------
Net assets at date of sale $ 580,418 $ 312,068 $ 893,026
Certificate of deposit relinquished -- 300,000 300,000
Transfer of net book value of
Domino's development rights -- 189,103 189,103
---------- ---------- ----------
Total 580,418 801,711 1,382,129
Less proceeds received 284,788 500,000 784,788
---------- ---------- ----------
Loss on sale $ 295,630 $ 301,711 $ 597,341
========== ========== ==========
11
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Following is a condensed summary of the results of operations of QPQ
Medical and PK Polska for all periods presented in the accompanying consolidated
financial statements:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1997 1996 1997 1996
----------- ---------- ----------- -----------
Restaurant Sales $ 133,545 $ 655,169 $ 1,260,707 $ 1,610,897
Net Loss $( 87,119) $( 723,233) $(1,371,183) $(1,619,392)
6. COMMITMENTS:
On April 18, 1997, the Company entered into a two year consulting
agreement with an unrelated individual to provide advice and consult with the
company concerning identifying, evaluating, structuring, negotiating and closing
business acquisitions, including asset purchases, consolidations, mergers, joint
ventures and strategic alliances with companies located in Russia and the former
Soviet Republic. The company issued 5,000 shares of common stock as initial
compensation and further agreed to issue 10,000 shares of common stock upon the
successful completion of an acquisition or merger introduced to the Company by
the consultant. If any such acquisition or merger is not completed due to the
fault of the Company the 10,000 shares will be issued to the consultant as a
breakup fee.
On May 9, 1997, the Company entered into a five year employment agreement
with its President providing for annual salary of $120,000 with annual increases
equal to the greater of the annual increase in CPI or 6% of the previous year's
base salary. The President received a signing bonus in the form of 6,086 shares
of common stock and received options to purchase an aggregate of 15,236 shares
of common stock at an amended exercise price of $3.60 per share. The options
vested immediately and expire ten years from the date of the employment
agreement.
As of September 30, 1997, pursuant to the anti-dilution provisions
contained in the employment agreement, the President was entitled to receive
17,229 additional shares of common stock and 43,061 options to purchase common
stock at an exercise price of $3.60 per share.
7. SUBSEQUENT EVENTS:
On October 7, 1997, the Board of Directors of the Company designated
300,000 shares of authorized Preferred Stock as Series A Preferred Stock with a
par value of $.01 per share. The Series A Preferred Stock has equal voting
rights with the Company's Common Stock; is convertible, at the option of the
holder, into five shares of Common Stock for each share of Series A Preferred
Stock; is redeemable at any time at the sole option of the Company at a
redemption price to be negotiated by the parties; entitled to dividends from
time to time as determined in the sole discretion of the Company out of funds
legally available for the payment of dividends; and is entitled to a liquidation
preference of $.01 per share upon voluntary or involuntary dissolution or
winding up of the Company.
12
<PAGE>
REGENESIS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
On October 8, 1997, the Company acquired 100% of the issued and
outstanding common stock of Lator International, Inc. ("Lator") from unrelated
parties in exchange for 300,000 shares of the Company's Series A Preferred
Stock. Lator was formed for the purpose of marketing Canadian Sphagnum peat moss
and has entered into an agreement to purchase a Canadian company which leases
certain peat moss bogs in Canada and harvests and sells the peat moss primarily
in the Southeastern United States.
Currently, there are not sufficient shares of Common Stock authorized by
the Company for the full conversion of the Series A Preferred Stock and the
Company is preparing proxy material to request that shareholders authorize
additional shares of Common Stock for the purpose of the conversion and other
corporate needs.
13
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
---------------------------------------------------------
GENERAL
Managements Discussion and Analysis or Plan of Operation contains various
"forward looking statements" within the meaning of the Securities Act of 1993
and the Securities And Exchange Act of 1934, which represents the Company's
expectations or beliefs concerning future events including without limitation
the following; ability of the Company to obtain financing on terms and
conditions that are favorable: ability of the Company to achieve profitability
and sufficiency of cash provided by operations, investing and financing
activities.
The Company cautions that these statements are further qualified by
important factors that would cause actual results to differ materially from
those contained in the forward looking statements, including without
limitations, the demand for the Company's products and services, changes in the
level of operating expense and the present and future level of competition.
Results actually achieved may differ materially from expected results included
in these statements.
On November 4, 1997, the Company changed its name to Regenesis Holdings,
Inc. (the "Company/Regenesis").
At September 30, 1997, Regenesis did not have any operating subsidiaries.
During the quarter ended September 30, 1997, management of the Company
determined that it would be in the best interest of the Company to dispose of
the remainder of its medical center operation in order to eliminate the
continuing losses associated with such operation and the potential contingent
liabilities related to the weight loss business.
On May 12, 1997, C. Lawrence Rutstein was appointed CEO and President of
the Company. When the existing Board of Directors resigned, Robert Hausman was
added to the Board of Directors with Mr. Rutstein.
After new management reviewed the financial status of the Company and the
continuing serious operating losses, the following action was taken
1. Effective June 23, 1997, the Company sold three of its four weight loss
centers operated by QPQ Medical Weight Loss Centers, Inc. ("QPQ Medical") a
wholly-owned subsidiary which was organized on August 25, 1995 to offer
supervised weight loss programs using a protocol which integrates systems and
routines of nutrition management, exercise and prescribed medication. The
centers continued to have substantial operating losses and combined with the
negative publicity on weight loss medications management believed it was prudent
to sell the centers. The Company incurred a loss of $228,088 on such sale.
2. On June 27, 1997, the Company sold its wholly-owned Polish subsidiary PK
Polska ("PKP) which operated Domino's Pizza franchises in Poland for $500,000 of
cash. In addition to the continuing operating losses, the Company was in default
of its franchise agreement with Domino's and the Company did not have adequate
resources to cure the default. The Company incurred a loss of $301,711 on such
sale.
14
<PAGE>
3. On September 3, 1997 the Company sold its 100% interest in QPQ Medical to
an unrelated party in exchange for $60,000 of cash, a $150,000 note receivable,
and the assumption of all liabilities of QPQ Medical by the purchaser. In
addition, QPQ Medical transferred computer equipment with a net book value of
$74,789 to the Company as additional consideration. The Company incurred a loss
of $295,630 on such sale.
4. On October 7, 1997, the Board of Directors of the Company designated
300,000 shares of authorized Preferred Stock as Series A Preferred Stock with a
par value of $.01 per share. The Series A Preferred Stock has equal voting
rights with the Company's Common Stock; is convertible, at the option of the
holder, into five shares of Common Stock for each share of Series A Preferred
Stock; is redeemable at any time at the sole option of the Company at a
redemption price to be negotiated by the parties; entitled to dividends from
time to time as determined in the sole discretion of the Company out of funds
legally available for the payment of dividends; and is entitled to a liquidation
preference of $.01 per share upon voluntary or involuntary dissolution or
winding up of the Company.
5. On October 8, 1997, the Company acquired 100% of the issued and
outstanding common stock of Lator International, Inc. ("Lator") from unrelated
parties in exchange for 300,000 shares of the Company's Series A Preferred
Stock. Lator was formed for the purpose of marketing Canadian Sphagnum peat moss
and has entered into an agreement to purchase a Canadian company which leases
certain peat moss bogs in Canada and harvests and sells the peat moss primarily
in the Southeastern United States. The Company has made an aggregate of $400,000
of secured demand loans to Lator, $300,000 of which were outstanding as of
September 30, 1997
The Company is presently involved in negotiations with the shareholders of
Replogle Enterprises, LLC ("Replogle") to acquire 100% of the assets of
Replogle. Replogle is in the business of producing hardwood lumber and other
wood products for the furniture and other industries.
With the cash on hand and the cash available from the demand note
receivable the company has the ability to fund its corporate operations for the
next twelve months. However, in order to fund the operations of Lator, proceed
with the acquisition of the assets of Replogle and acquire any additional
businesses, it will be necessary for the Company to raise additional debt or
equity financing in order to fund such transactions. There can be no assurance
that the Company will be able to obtain additional financing or that additional
financing will be available on acceptable terms to fund future commitments.
On October 27, 1997, the Company's Common Stock was delisted from the
NASDAQ SmallCap Market and has traded on the over the counter market (Electronic
Bulletin Board) since that date.
NINE MONTHS ENDED SEPTEMBER 30, 1997 VS NINE MONTHS ENDED SEPTEMBER 30, 1996:
RESULTS OF OPERATIONS
During the nine months ended September 30, 1997, the Company generated
revenues from QPQ Medical and PK Polska of $1,260,707 and $1,610,897,
respectively and incurred losses from such operations in the amounts of
$(1,371,183) and $(1,619,392), respectively.
15
<PAGE>
Effective June 23, 1997 the Company sold three of its operating Medical
Centers to an unrelated party in exchange for cash of $25,000, which was
received on July 1, 1997 and notes receivable of $57,000 and incurred a loss on
such sale of $228,088, which is included in loss from discontinued operations in
the accompanying condensed consolidated financial statements.
On June 27, 1997, the Company sold its wholly-owned Polish subsidiary PK
Polska for $500,000, plus a release from all other obligations of the Company
relative to PK Polska, including bank guarantees. The Company also relinquished
its $300,000 certificate of deposit (which was used as collateral for a $300,000
bank loan to PK Polska) and transferred the unamortized cost of its Domino's
Development rights to the purchaser. Following is a computation of the loss
incurred on the sale of QPQ Medical and PK Polska:
Q P Q P K
Medical Polska Total
---------- ---------- ----------
Net assets at date of sale $ 580,418 $ 312,068 $ 893,026
Certificate of deposit relinquished -- 300,000 300,000
Transfer of net book value of
Domino's development rights -- 189,103 189,103
---------- ---------- ----------
Total 580,418 801,711 1,382,129
Less proceeds received 284,788 500,000 784,788
---------- ---------- ----------
Loss on sale $ 295,630 $ 301,711 $ 597,341
========== ========== ==========
General and Administrative Expenses for the nine months ended September 30,
1997 and September 30, 1996, totalled $968,322 and $488,658, respectively. For
the nine months ended September 30, 1997, General and Administrative Expenses
were comprised of executive and office staff salaries and benefits of $199,118,
legal and professional fees, office rent, travel, telephone and other corporate
expenses of $687,645, and depreciation and amortization of $81,559. For the nine
months ended September 30, 1996, General and Administrative Expenses were
comprised of executive and office staff salaries of $129,554, legal and
professional fees, office rent, travel, telephone and other general corporate
expenses of $307,838 and depreciation and amortization of $51,266.
Interest and other income for the nine months ended June 1997 and 1996 was
$21,698 and $9,454. The $21,698 is primarily attributable to interest earned on
invested funds during the 1997 period ,as well as, miscellaneous income relating
to the disposal of assets
Interest expense for the nine months ended September 30, 1997 was
$(31,375)and relates primarily to interest incurred on the 8% Convertible
Debentures prior to their conversion into Common Stock in June 1997.
16
<PAGE>
Following is a condensed summary of the results of operations of QPQ Medical
and PK Polska for all periods presented in the accompanying condensed
consolidated financial statements:
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ -------------------------
1997 1996 1997 1996
----------- ---------- ----------- -----------
Restaurant Sales $ 133,545 $ 655,169 $ 1,260,707 $ 1,610,897
Net Loss $( 87,119) $( 723,233) $(1,371,183) $(1,619,392)
LIQUIDITY AND CAPITAL RESOURCES
On August 8, 1997, the Company declared a 1 for 20 reverse stock split,
payable to stockholders of record on August 22, 1997 and on September 17, 1997,
the Company declared a 1 for 3 reverse stock split, payable to stockholders of
record on October 8, 1997. All information relating to o utstanding shares of
common stock in the following paragraphs has been restated to reflect the
reverse splits.
As of September 30, 1997, the Company had working capital of $521,499 and
cash and cash equivalents of $7,524.
In March 1997, the Company entered into Securities Subscription Agreements
(the "Agreements") for the sale of $1,280,000 of 8% Convertible Debentures (the
"Debentures") with a maturity date of March 31, 1998, for which the Company
received net proceeds of $1,066,667. Interest was payable quarterly. The
Debentures originally were convertible into shares of common stock at a
conversion price per share equal to the lower of (a) 75% of the average closing
bid price of the common stock for five business days immediately preceding the
conversion date or (b) 75% of the average of the closing bid price of the common
stock for the business day immediately preceding the date of the individual
Subscription Agreement.
Pursuant to a settlement entered into with all holders of the Debentures
the holders agreed to accept three shares of Common Stock in exchange for each
$1 of principal amount of each Debenture. In addition, all accrued interest on
the debentures was satisfied by issuance of the Common Stock. On June 4, 1997,
the Company issued 64,000 shares of Common Stock in exchange for all of the
outstanding Debentures.
The $165,927 of unamortized costs associated with issuance of the
debentures has been charged against additional paid in capital in the
accompanying condensed consolidated financial statements at September 30, 1997.
The Debentures were issued in reliance upon the exemption from
registration afforded by Regulation S as promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended.
17
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On October 28, 1997, pursuant to the written consent of the Board of
Directors and the holders of a majority of the issued and outstanding voting
securities, QPQ Corporation, a Florida corporation (the "Company") approved the
filing of Articles of Amendment to the Articles of Incorporation changing the
name of the Company to Regenesis Holdings, Inc. to be effective on October 29,
1997.
Concurrent therewith, the ticker symbol for the Company's Common Stock
which is traded on the OTC Electronic Bulletin Board has been changed from
"QPQQ" to "RGNS" and the new CUSIP number for the Company's Common Stock is
75886B106.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
No. Description
--- -----------
3(i) Articles of Amendment to the Articles of Incorporation
of QPQ Corporation changing the name of the corporation
to Regenesis Holdings, Inc.
27 Financial Data Schedule (Electronic filing only).
(b) Reports on Form 8-K
(i) On July 22, 1997, the Company filed a Form 8-K in
connection with the sale of its 100% interest in Pizza King Polska Sp. z.o.o.
(ii) On August 8, 1997, the Company filed a Form 8-K in
connection with the 1 for 3 reverse stock split which was payable to
shareholders of record as of August 22, 1997.
(iii) On September 18, 1997 the Company filed a Form 8-K in
connection with the sale of its 100% interest in QPQ Medical Centers, Inc.
(iv) On October 22, 1997, the Company filed a Form 8-K in
connection with the acquisition of 100% of the issued and outstanding stock of
Lator International, Inc.
(v) On October 28, 1997, the Company filed a Form 8-K in
connection with the 1 for 3 reverse stock split which was payable to
shareholders of record on October 9, 1997, and the delisting of its Common Stock
from the NASDAQ SmallCap Market on October 27, 1997.
18
<PAGE>
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of
1934, Regensis has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
REGENESIS HOLDING, INC.
DATE: November 13, 1997 By: /s/ C. Lawrence Rutstein
-----------------------------------------
C. Lawrence Rutstein, Chairman of the Board,
Chief Executive Officer and President
(Principal Executive Officer)
19
EXHIBIT 3(i)
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
QPQ CORPORATION
The undersigned, being a natural person competent to contract, does hereby
make, subscribe and file the Articles of Amendment to the Articles of
Incorporation of QPQ Corporation, a Florida corporation (the "Company"),
pursuant to Sections 607.1003 and 607.0704 of the Florida Business Corporation
Act:
1. The name of the Company is QPQ Corporation.
2. The text of the amendment adopted by the Board of Directors
and a majority of the holders of the outstanding voting securities of the
Company on October 28, 1997, which such votes cast for the amendment by the
shareholders was sufficient for approval, is as follows:
RESOLVED, that the name of the Company be and hereby is changed to
Regenesis holdings, Inc.; and be it
FURTHER RESOLVED, that the President of the Company be and hereby is
authorized and directed to execute and file Articles of Amendment reflecting the
foregoing action and to take such other acts or actions as he deems necessary
and appropriate to effect the foregoing.
3. The foregoing amendment was duly adopted by unanimous written
consent of the Board of Directors on October 28, 1997 and by written consent of
the holders of a majority of the issued and outstanding voting securities of the
Company.
IN WITNESS WHEREOF, this Articles of Amendment to the Articles of
Incorporation has been executed on the 28th day of October, 1997.
QPQ CORPORATION
By: /s/ C. Lawrence Rutstein
--------------------------
C. Lawrence Rutstein,
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF REGENESIS HOLDINGS, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,524
<SECURITIES> 0
<RECEIVABLES> 514,542
<ALLOWANCES> 0
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<CURRENT-ASSETS> 551,482
<PP&E> 131,934
<DEPRECIATION> 45,632
<TOTAL-ASSETS> 638,034
<CURRENT-LIABILITIES> 29,983
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<COMMON> 2,376
<OTHER-SE> 605,675
<TOTAL-LIABILITY-AND-EQUITY> 638,034
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<OTHER-EXPENSES> 946,624
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<INCOME-PRETAX> (1,178,999)
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