U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission file number 1-12350
Regenesis Holdings, Inc.
------------------------
(Name of Small Business Issuer in its Charter)
Florida 65-0827283
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
2701 W. Oakland Park Blvd., Suite 220, Ft Lauderdale, Florida 33139
-----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(305) 695-4400
-------------------------
(Issuer's Telephone Number)
Common Stock, par value $.01 per share
--------------------------------------
(Title of Class)
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 [ ] No [X ]
The number of shares outstanding of the issuer's common stock, par value $.01
per share as of September 22, 2000 was 8,383,948
<PAGE>
REGENESIS HOLDINGS, INC.
PART I FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
INDEX TO CONDENSED FINANCIAL STATEMENTS
---------------------------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Condensed Balance Sheets at June 30, 2000 and December 31, 1999 3
Condensed Statements of Operations for the Three and Six Months ended June 30, 2000 and 1999 4
Condensed Statement of Changes in Stockholders' Equity for Six Months ended 5
June 30, 2000
Condensed Statements of Cash Flows for the Six Months ended June 30, 2000 and 1999 6 - 7
Notes to Condensed Financial Statements 8 - 18
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OR PLAN OF OPERATION 19-23
PART II OTHER INFORMATION 24-26
--------------------------
SIGNATURES 27
</TABLE>
<PAGE>
REGENESIS HOLDINGS, INC.
CONDENSED BALANCE SHEETS
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
------------ ------------
2000 1999
------------ ------------
CURRENT ASSETS
<S> <C> <C>
Cash $ 651 $ 101,835
------------ ------------
Total Current Assets 651 101,835
Furniture, equipment & leashold inprovements, net
depreciation of $7,887 and $3,670 respectively 28,912 23,028
Other assets net of accumulated amortization
of $8,417 and $-0- 117,378 18,922
Advances toward proposed acquisition -- 155,492
Excess of cost over fair value of net assets acquired,
net of accumulation amortization of $137 and
$74, respectively 493 556
------------ ------------
Total Assets $ 147,434 $ 299,833
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Bank overdraft $ 33,810 $ --
Accounts payable 87,066 81,495
Accrued payroll 641,781 402,168
Due to officers and stockholders 442,440 175,835
Other current liabilities 256,432 109,693
Loans Payable 130,000 150,000
Convertible demand loan 100,000 100,000
------------ ------------
Total Current Liabilities 1,691,529 1,019,191
------------ ------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIENCY:
Preferred Stock, $.01 par value, 10,000,000 shares
authorized; none issued and outstanding -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized; 8,103,948 and 6,388,974 shares issued
and outstanding, respectively 81,040 63,890
Additional paid-in capital 13,882,428 13,369,831
Accumulated deficit (15,507,563) (14,153,079)
------------ ------------
Total Stockholders' Deficiency (1,544,095) (719,358)
------------ ------------
Total Liabilities and Stockholders' Deficiency $ 147,434 $ 299,833
============ ============
</TABLE>
See Accompanying Notes
3
<PAGE>
REGENESIS HOLDINGS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ -----------------------------
2000 1999 2000 1999
------------------------------ ----------------------------
<S> <C> <C> <C> <C>
Revenue $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Operating expenses:
Salaries and wages including related taxes 161,876 163,441 356,494 278,599
Consulting fees 111,500 60,290 185,000 122,575
Legal and professional 67,996 72,700 130,452 76,750
Travel 22,510 10,817 64,207 26,934
Rent 20,099 12,350 49,042 21,150
Office expense 15,894 10,768 34,213 12,519
Depreciation and amortization 7,122 437 12,697 1,532
Marketing and promotion 10,698 10,642 13,573 107,642
Other general and administrative expenses 42,246 54,990 68,721 65,298
Provision for advances toward proposed acquisition 424,648 -- 424,648 --
----------- ----------- ----------- -----------
Total operating expenses 884,589 396,435 1,339,047 712,999
----------- ----------- ----------- -----------
Operating Loss (884,589) (396,435) (1,339,047) (712,999)
Other Income (Expense):
Other income -- 6,000 -- 6,000
Interest expense (7,062) -- (15,437) --
----------- ----------- ----------- -----------
Total other income (expense), net (7,062) 6,000 (15,437) 6,000
----------- ----------- ----------- -----------
Net Loss $ (891,651) $ (390,435) $(1,354,484) $ (706,999)
=========== =========== =========== ===========
Basic and Diluted Net Loss per Common Share $ (0.11) $ (0.09) $ (0.18) $ (0.23)
=========== =========== =========== ===========
Weighted Average Common Shares Outstanding 7,917,806 4,210,425 7,669,105 3,123,706
=========== =========== =========== ===========
</TABLE>
See Accompanying Notes
4
<PAGE>
REGENESIS HOLDINGS, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
SIX MONTHS ENDED JUNE 30, 2000
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock
----------------- ------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balances, December 31, 1999 -- -- 6,388,974 $ 63,890
Issuance of common shares in private placement transactions -- -- 300,000 3,000
Issuance of common shares to officer pursuant to the
amendment of an employment agreement -- -- 50,000 500
Issuance of common shares in payment of deferred consulting fees -- -- 1,050,000 10,500
Issuance of common shares to acquire Internet Domain name -- -- 250,000 2,500
Issuance of warrants to purchase common stock -- -- -- --
Issuance of common shares in payment of expenses -- -- 64,974 650
Net Loss -- -- -- --
--- --- ------------ ------------
Balances, June 30, 2000 - $-- 8,103,948 $ 81,040
=== ==== ========= ============
</TABLE>
[RESTUBBED]
<TABLE>
<CAPTION>
Additional
Paid-In
Capital Deficit Total
------- ------- -----
<S> <C> <C> <C>
Balances, December 31, 1999 $ 13,369,831 $(14,153,079) $ (719,358)
Issuance of common shares in private placement transactions 447,000 -- 450,000
Issuance of common shares to officer pursuant to the
amendment of an employment agreement 2,000 -- 2,500
Issuance of common shares in payment of deferred consulting fees 42,000 -- 52,500
Issuance of common shares to acquire Internet Domain name 10,000 -- 12,500
Issuance of warrants to purchase common stock 8,999 -- 8,999
Issuance of common shares in payment of expenses 2,598 -- 3,248
Net Loss -- (1,354,484) (1,354,484)
------------ ------------ ------------
Balances, June 30, 2000 $ 13,882,428 $(15,507,563) $ (1,544,095)
============ ============ ============
</TABLE>
See Accompanying Notes
5
<PAGE>
REGENESIS HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss $(1,354,484) $ (706,999)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 12,697 1,532
Provision for advances toward proposed acquisition 424,648 --
Expenses paid by issuance of common stock, options and warrants 11,462 170,050
Changes in operating assets and liabilities:
Deposits and other assets (38,585) (24,439)
Accounts payable, accrued expenses, and
other current liabilities 425,733 273,017
----------- -----------
Net cash used in operating activities (518,529) (286,839)
----------- -----------
Cash Flows from Investing Activities:
Advances toward pending acquisition (269,156) --
Purchase of equipment (10,101) (15,322)
----------- -----------
Net cash used in investing activities (279,257) (15,322)
----------- -----------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock 450,000 266,230
Repayment of loans payable (20,000) --
Proceeds of loans from officers and stockholders 364,650 26,025
Repayment of loans to officers and stockholders (98,048) (2,800)
----------- -----------
Net cash provided by financing activities 696,602 289,455
----------- -----------
Net Decrease in Cash (101,184) (12,706)
Cash, Beginning of Period 101,835 20,748
----------- -----------
Cash, End of Period $ 651 $ 8,042
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest: $ -- $ --
=========== ===========
Supplemental Schedule of Non Cash Investing and Financing Activities:
Six Months Ended June 30, 2000:
Issuance of 250,000 shares of common stock to acquire the URL
address Music 411.com, valued at $12,500
Issuance of an aggregate of 1,050,000 shares of common stock in connection
with three consulting agreements, valued at $52,500
</TABLE>
See Accompanying Notes
6
<PAGE>
REGENESIS HOLDINGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS, Continued
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
(Unaudited)
Issuance of an aggregate of 50,000 shares of common stock in in connection
with the amendment of an employment agreement with.
an officer, valued at $2,500.
Six Months Ended June 30, 1999:
Issuance of 10,000 shares of common stock to acquire the assets
of NetDisc, Inc., valued at $630.
Issuance of 48,000 shares of Series C Preferred Stock valued at $57,180.
Issuance of 1,000,000 shares of common stock to an officers and directors
in connection with their employment agreements, valued at $63,000.
Excess of estimated fair market value of 950,000 shares of common stock
over the aggregate selling price of $9,500.
See Accompanying Notes
7
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 2000
(Unaudited)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
In 1997, Regenesis Holdings, Inc. ("the Company") sold all of its
existing operations, which consisted of Domino's Pizza franchises
in Poland and Medical Centers located in Southeast Florida, and
became a holding company, with no operating subsidiaries. In 1999,
the Company acquired the assets of NetDisc, Inc. ("NetDisc") for
the purpose of pursuing internet advertising opportunities,
although to date, the Company has generated no revenues from such
activities.
The presentation 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 financial statements, which
are for interim periods, do not include all disclosures provided in
the annual financial statements. These unaudited condensed
financial statements should be read in conjunction with the
financial statements and the footnotes thereto contained in the
Annual Report on Form 10-KSB for the year ended December 31, 1999,
of Regenesis Holdings, Inc. ("the Company"), as filed with the
Securities and Exchange Commission. The December 31, 1999 condensed
balance sheet was derived from audited financial statements, but
does not include all disclosures required by generally accepted
accounting principles.
In the opinion of the Company, the accompanying unaudited condensed
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 three
months ended June 30, 2000, are not necessarily indicative of the
results to be expected for the full year.
Going Concern
The report of the Company's independent certified public
accountants on their audit of the Company's December 31, 1999
financial statements contained uncertainties relating to the
Company's ability to continue as a going concern. As shown in the
accompanying financial statements, the Company incurred a loss of
$1,354,484 for the six months ended June 30, 2000, and had a
working capital deficiency and a stockholders' deficiency of
$1,690,878 and $1,544,095, respectively, at June 30, 2000. These
factors, among others, raise substantial doubt about the company's
ability to continue as a going concern for a reasonable period of
time. The accompanying financial statements do not include any
adjustments relating to the outcome of this uncertainty.
8
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
Liquidity and Plan of Operations
As of June 30, 2000, the Company had cash of $651 and a working
capital deficiency of $1,690,878.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on
a timely basis. The Company's primary source of liquidity has been
from the cash generated through the private placement of equity
and/or debt securities and from advances from its officers and
directors. The Company is presently pursuing the completion of the
transaction with Triad Petroleum LLC (see Note 9) in order to
eventually achieve profitable operations. However, there can be no
assurance that the Company will be successful in achieving
profitable operations or acquiring additional capital or that such
capital, if available, will be on terms and conditions acceptable
to the Company.
Reclassifications
Certain reclassifications have been made in the 1999 financial
statements to conform to the 2000 presentation.
Restatement of June 30, 1999
Results of operations for the six months ended June 30, 1999, have
been restated to include the adjustments as outlined below:
Net loss as originally reported $ (648,942)
Accrual of unpaid salaries and wages including
related taxes ( 58,057)
----------
Net loss as restated $ (706,999)
=========
Other Assets
Deferred consulting fees included in other assets are being
amortized over the three year term of the related consulting
agreements commencing on January 1, 2000.
9
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
NOTE 2. ADVANCES TOWARD PROPOSED ACQUISITION
The Company entered into a preliminary letter of intent (the
"Preliminary LOI") to acquire all of the assets and assume certain
liabilities of the entity formerly known as Red Ant Entertainment
("Red Ant").
In accordance with the terms of the Preliminary LOI both the
Company and the seller each loaned $75,000 to MCCC Acquisition, LLC
("MCCC") the owner of the assets and such funds were simultaneously
advanced to Management West International, Inc. ("Management West")
which is the entity that was managing the assets until completion
of the acquisition by the Company. In addition, through June 30,
2000, the Company advanced $349,648 to Management West to cover a
portion of their operating expenses.
Pursuant to the terms of the Preliminary LOI, the purchase price
was to be comprised of $300,000 of cash, 300,000 shares of
restricted common stock of the Company, a three year warrant to
purchase 100,000 shares of common stock of the Company at an
exercise price of $3.00 per share, plus the liabilities assumed.
The Company's $75,000 loan to MCCC was to be forgiven. All
operating advances made by the Company through the date of closing
of the purchase were to be considered as part of the purchase price
for financial reporting purposes. Accordingly, such advances were
capitalized as advances toward proposed acquisition in the
accompanying financial statements. Subsequent to June 30, 2000, the
Board of Directors of the Company determined that completion of the
proposed acquisition would not be in the best interests of the
Company. Accordingly, the $424,648 balance of advances toward
proposed acquisition were charged to operations during the quarter
ended June 30, 2000.
NOTE 3. OTHER ASSETS
A summary of other assets at June 30, 2000, is as follows:
Deposits (See Note 8) $ 55,007
Internet Domain 12,500
Deferred consulting fees 58,288
---------
Less - accumulated amortization (8,417)
---------
$ 117,378
=========
NOTE 4. LOANS PAYABLE
On August 12, 1999 and December 30, 1999, the Company borrowed an
aggregate of $100,000 from a third party, a principal of whom is
also a shareholder of the Company. The loan was payable in full on
or before July 1, 2000 and bears interest at 2% above the base rate
of the Bank of England, compounded daily and all interest is
payable at maturity. As of
10
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
September 20, 2000, the Company has not received any notice of
default pursuant to the terms of the note.
On October 31, 1999, the Company borrowed $75,000 from a third
party. The loan was payable in full on its extended due date of
April 14, 2000. The unpaid principal balance on the loan as of June
30, 2000, was $30,000. The loan bears interest at 12% per annum and
all interest is payable at maturity. In accordance with the terms
of the loan agreement, the Company granted the lender an aggregate
of 19,000 shares of the Company's common stock and further agreed
to issue the lender an additional 2,500 shares of the Company's
common stock for each seven day period beginning on December 16,
1999 through the date of final payment of all principal and accrued
interest. For the six months ended June 30, 2000, the Company
issued and aggregate of 64,974 shares of common stock to the lender
in accordance with the terms of the loan agreement, which were
valued at $3,248. The value of the shares issued is included in
interest expense in the accompanying financial statements. At
September 20, 2000, the unpaid principal balance on the loan was
$30,000. As of September 20, 2000, the Company has not received any
notice of default pursuant to the terms of the note.
NOTE 5. CONVERTIBLE DEMAND LOAN
On September 8, 1999, the Company borrowed $100,000 from a third
party. The loan bears interest at the rate of 12% per annum and all
interest is payable at maturity. The loan is payable in full within
60 days after receiving a notice of demand from the lender. At the
option of the lender the loan is convertible into 75,000 shares of
the Company's common stock at a per share price of $1.33. In
connection with the loan, the Company issued to the lender a two
year warrant to purchase 20,000 shares of the Company's common
stock at an exercise price of $2.50 per share and a one year option
to purchase an additional 100,000 shares of the Company's common
stock at a price to be determined by negotiation between the
parties. The warrant and the option were valued at an aggregate of
$2,333.
NOTE 6. RELATED PARTY TRANSACTIONS
At June 30 2000, the Company was indebted to officers and
stockholders for an aggregate of $442,400 which represent non
interest bearing advances with no specific repayment terms. During
the six months ended June 30, 2000, the Company received an
aggregate of $364,650 of advances from such individuals and made
payments to such individuals aggregating $98,048.
For the period from July 1, 2000 through September 20, 2000, the
Company received an aggregate of $75,000 of additional advances
from such individuals (See Notes 8 and 9).
11
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
NOTE 7. STOCKHOLDERS' EQUITY
During the six months ended June 30, 2000, the Company issued
300,000 shares of common stock (which includes the 200,000 shares
discussed in the following paragraph) at prices ranging from $1.00
to $3.00 per share and received an aggregate of $450,000 of cash.
On January 20, 2000, the Company entered into an agreement to
sell 200,000 shares of common stock at a price of $1.00 per share
in a private placement transaction. The purchaser of the shares
deposited the $200,000 purchase price with the Company's counsel
for the benefit of the Company until completion of the proposed
acquisition described in Note 2. On June 15, 2000, counsel for
the Company released the funds to the Company and $145,000 of
such funds were advanced in connection with the proposed
acquisition and $55,000 of such funds were utilized for general
working capital purposes. As of June 30, 2000, the 200,000 shares
are reflected as outstanding in the accompanying condensed
financial statements.
In January 2000, the Company purchased the URL address Music
411.com from the father of the Chairman of the Board of Directors
in exchange for 250,000 restricted shares of the Company's common
stock which was valued at $ 12,500.
On January 5, 2000, the Company granted options to three officers
to purchase up to an aggregate of 800,000 shares of common stock at
an exercise price of $.25 per share.
On January 5, 2000 the Company granted 50,000 shares of Common
Stock to its Executive Vice President of Entertainment / Music
Development in connection with a one year extension of his
employment agreement. The shares were recorded at their established
fair market value of $2,500.
In January 2000, the Company entered into three consulting
agreements which provide for an aggregate of $20,000 per month in
consulting fees and the issuance of an aggregate of 1,050,000
shares of common stock valued at $.05 per share. Based upon quoted
prices between dealers the $.05 per share was considered to be
equivalent to the estimated fair market value per share of the
Company's common stock on the date of the transaction. The
agreements are for a period of three years. The $52,500 value
associated with the common stock was recorded as deferred
consulting fees and is being amortized over a period of three years
commencing February 1, 2000.
At June 30, 2000, the Company had reserved 4,636,000 shares of
common stock for issuance pursuant to the terms of its stock option
plan and other outstanding options and warrants.
The Company's Stock Option Plan (the "Plan") provides for the
issuance of options to purchase a maximum of 4,000,000 shares of
common stock.
12
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
A summary of the status of all options outstanding under the Plan
as of June 30, 2000, and changes during the six months ended June
30, 2000, are presented below (See Notes 5, 8 and 9):
<TABLE>
<CAPTION>
Weighted
Option Market Average
Price Price Remaining
at Date at Date Term
Shares of Grant of Grant in Years
------ -------- -------- --------
<S> <C> <C> <C> <C>
Balance at
Beginning
of Period 50,000 $1.00 $.07 1.8
Options
Granted 800,000 $.25 $.05 3.4
Options
Exercised - - - -
Options
Forfeited - - - -
Balance at
End of
Period 850,000 $.25-$1.00 $.05 3.3
Options
Exercisable
At End of
Period 850,000 $.25-$1.00 $.05 3.3
</TABLE>
NOTE 8 . COMMITMENTS AND CONTINGENCIES
Litigation
In December, 1998 the Company filed a Complaint in the Circuit
Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida entitled Shulman & Associates, Inc., Manny J.
Shulman, Franklyn B. Weichselbaum, Mitchell Rubinson and
Regenesis Holdings, Inc. v. Elizabeth Shwiff, Fincross, Ltd.,
Elpoint Corporation, Elpoint Co., L.L.C., Russian Securities Co.,
Gennady Yakovlev, Oleg Pavlioutchouk and Maxim Shishlyannikov for
defamation and liable in connection with certain information
released about the Company. On August 21, 2000, Regenesis
dismissed the action without prejudice as to all defendants.
13
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
In a collateral action, the Company was named in a lawsuit
involving several of the same parties in the United States District
Court for the Northern District of California in the matter
entitled Elpoint Co., L.L.C., et al. v. Mitchell Rubinson, et al.
Although the Company was named as a indispensable party, the
allegations were in the nature of a shareholder derivative claim
and no relief was sought against the Company by the plaintiffs.
On May 19, 1999, a majority of the parties named in the
aforementioned lawsuits, including another California state court
action entitled Elpoint, L.L.C., et al. v. Mitchell Rubinson, et
al. filed in the Superior Court, attended mediation which resulted
in a settlement which required, among other things, the dismissal
of all three lawsuits and the payment of $450,000 to the
plaintiffs. The Company was not a named party in the California
state court action. Additionally, the Company is not obligated to
contribute financially to the settlement. Although, the Company did
not attend the mediation, the Company was an intended beneficiary
of the settlement. Mitchell Rubinson and Larry Rutstein, former
officers of the Company, alleged certain indemnification rights
against the Company as part of the settlement and notified the
Company of such a reservation subsequent to their execution of the
settlement agreement. The Company cannot opine upon the validity of
such claims as no action has been filed against the Company in that
regard. However, the Company believes the probability that Messrs.
Rubinson and Rutstein could sustain a claim against the Company
based upon the settlement agreement is remote, accordingly, no
provision for any potential claims associated with these matters
has been recorded in the accompanying financial statements. The
Company would vigorously defend any such claims in the event they
are filed. Mitchell Rubinson has notified the Company of alleged
indemnification rights as to any funds paid for settlement and any
attorney's fees incurred in the above mentioned actions.
On December 16, 1999, the Judge presiding over the Superior Court
of California state court action entered an order granting the
plaintiff's motion to enforce the settlement under California Code
of Civil Procedure ss. 664.6.
Operating Leases
The Company leases office space in Miami, Florida and New York City
pursuant to the terms of a sublease agreement expiring by its
original terms in May 2001 and a lease agreement expiring in
October 2005.
On June 16, 2000, the Company entered into an office lease in New
York City for a period of five years and three months which
provided for rental payments aggregating approximately $448,000.
The lease required a security deposit of $45,585, which is included
in other assets in the accompanying condensed balance sheet at June
30, 2000. On September 11, 2000, the Company, with the consent of
the lessor, assigned all of its rights and interests in the lease
to its former president who assumed all of the Company's
obligations under the lease. The $45,585 security deposit under the
lease will be applied against amounts due to the former president
at the date of his resignation on August 28, 2000.
At June 30, 2000, the Company's minimum payment requirements under
the office sublease and all non-cancelable operating leases,
excluding the assigned lease, were as follows:
14
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
Twelve Months Ending June 30,
2001 $ 62,281
2002 59,406
---------
Total $ 121,687
=========
In August 2000, the Company relocated its office from Miami Beach,
Florida to Ft. Lauderdale, Florida.
Employment Agreements
As of June 30, 2000, the Company had employment agreements with its
four executive officers all of which, including amendments thereto,
were entered into during the year ended December 31, 1999. The
agreements expire from April 2001 through February 2004. The
agreements also provide for various fringe benefits and for
compensation associated with raising equity or debt financing for
the Company, as well as participation in the Stock Option Plan.
At June 30, 2000, annual salary requirements under these contracts
were as follows:
Twelve Months Ending June 30,
2001 $ 567,150
2002 256,400
2003 93,600
-----------
Total $ 917,150
===========
In August 2000, three employment agreements with aggregate future
payments from June 30, 2000, of $441,150 were cancelled. The two
remaining employment agreements with aggregate future payments from
June 30, 2000 of $475,650 will be cancelled upon completion of the
transaction with Triad Petroleum LLC as more fully described in
(See Note 9).
Other
In November 1999, the Company entered into an agreement with JW
Genesis Capital Markets, Inc. ("JW Genesis"), whereby JW Genesis
will act as a financial advisor to the Company and as its exclusive
placement agent in connection with any proposed offering or private
placement by the Company of any equity or debt securities. Pursuant
to the terms of the agreement, JW Genesis will be paid a
nonrefundable fee of $6,250 upon execution of the agreement and a
monthly fee of $6,250 for each month following the date of
execution of the agreement for a minimum period of three months. In
addition, the Company issued to JW Genesis a five year warrant to
purchase 250,000 shares of the Company's common stock at an
exercise price of $2.50 per share. JW Genesis will be paid an
investment banking fee and will be fully reimbursed for all
out-of-pocket expenses in connection with the completion of any
securities offerings contemplated by the agreement. The warrant was
recorded at its estimated fair market valued of $11,558.
15
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
As of June 30, 2000, other current liabilities in the accompanying
condensed balance sheet include $25,000 due to JW Genesis pursuant
to the agreement.
On March 7, 2000, the Company entered into a three year consulting
agreement which provides for a monthly fee of $3,000, $5,000 and
$7,000 in years one through three, respectively. In addition, the
agreement provides for the issuance of three Common Stock Purchase
Warrants to purchase an aggregate of 216,000 shares of common
stock. Each warrant is exercisable for a period of five years and a
warrant to purchase 72,000 shares is immediately exercisable at an
exercise price of $2.50 per share; a warrant to purchase 72,000
shares is exercisable in one year at an exercise price of $5.00 per
share; and a warrant to purchase 72,000 shares is exercisable in
two years at an exercise price of $7.50 per share. The agreement
may be terminated by either party on the first or second
anniversary date of the contract and warrants not exercisable as of
the termination date are forfeited. The warrants were recorded at
their estimated fair market value of $8,999. At June 30, 2000,
other current liabilities in the accompanying condensed balance
sheet include $9,000 due to the consultant pursuant to this
agreement.
At June 30, 2000, the Company was party to a total of five
consulting agreements all of which are for terms of three years.
One of the agreements is with the father of the Chairman of the
Board and an entity controlled by such individual (the
"Consultant") to provide general business services to the Company
in exchange for an annual consulting fee of $75,000 payable in
equal monthly installments of $6,250 plus a car allowance of $750
per month. The agreement further provides that the Company will
provide the Consultant with a private office and office support
services and will reimburse the Consultant for all expenses
incurred in connection with his activities on behalf of the
Company.
At June 30, 2000, the Company's future minimum payment requirements
under these agreements were as follows:
Twelve Months Ending June 30,
2001 $ 357,000
2002 381,000
2003 279,250
----------
Total $ 1,017,250
===========
In July 2000, one contract with aggregate future payments from June
30, 2000, of $640,000 was cancelled. One additional contract with
aggregate future payments from June 30, 2000, of $ 206,250 will be
cancelled upon completion of the transaction with Triad Petroleum
LLC (See Note 9).
NOTE 9 . SUBSEQUENT EVENTS
Subsequent to June 30, 2000, the Company's President and Chief
Executive Officer, who was also a Director of the Company, as well
as its Executive Vice President of Entertainment/Music Development
and another Director of the Company resigned from their
16
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
respective positions with the Company. In connection with such
resignations, each of the individuals waived all of their rights
and interests to all amounts due from the Company consisting of
accrued payroll and loans and advances made to the Company. In
addition, each of the individuals waived all of their rights and
interests to certain shares of common stock and unexercised common
stock options granted to them through June 30, 2000.
As of June 30, 2000, the following amounts were recorded in the
accompanying condensed financial statements or disclosed in the
related footnotes with regard to the amounts that will be waived by
these individuals:
Accrued payroll cancelled $365,713
Due to officers and stockholders cancelled $385,766
Shares of common stock cancelled 470,000
Options to purchase common stock cancelled 350,000
Subsequent to June 30, 2000, 1,000,000 shares of common stock
issued in connection with two terminated consulting agreements were
cancelled.
Pursuant to a Share Sale and Contribution Agreement ("the
Agreement") dated as of September 14, 2000, Triad Petroleum LLC
("Triad") will acquire 96% of the voting equity of the Company
through the issuance of a combination of common and convertible
preferred shares. In consideration thereof, Triad will assign its
exclusive 50 year license and distribution rights under a
Technology License and Marketing Agreement with E-Mation LLC (an
affiliate of Triad) which provides for the exclusive rights to
make, market and sell products and services using E-Mation's
proprietary technology which integrates all aspects of the business
operations for both wholesale distribution and retail sale of fuel.
There is no significant operating history with respect to this
asset.
This Agreement is subject to certain closing conditions, including
but not limited to, the Company's reduction or elimination of
certain liabilities, the conversion of certain indebtedness to
equity and termination of certain outstanding contracts of the
Company.
In connection with the closing of the transaction the Company will
issue to Triad a combination of common stock and a newly designated
series of convertible preferred stock. Each share of new
convertible preferred stock will be convertible in to ten shares of
common stock and will participate in all voting and dividend rights
of the common shareholders on an as converted basis. The total
number of shares to be issued on a common stock equivalent basis,
will approximate 141,000,000 shares.
Promptly following the consummation of the transaction, the Company
intends to seek the consent of its shareholders to authorize an
amendment to the Company's Articles of Incorporation increasing the
Company's authorized shares of common stock from 100,000,000 to
300,000,000 and to increase the Company's authorized shares of
preferred stock from 10,000,000 to 50,000,000.
If the transaction does not close for any reason, Triad will have
the right to exercise certain warrants to purchase 750,000 shares
of the Company's common stock, at $.10 per share as compensation
for any amounts Triad expended on behalf of the Company in
connection with the proposed transaction.
In connection with the completion of the Triad transaction, the
Company's current Chairman of the Board of Directors, Chief
Executive Officer and President and its Chief Financial Officer,
both of whom are Directors of the Company, have agreed to resign
their respective positions as officers of the Company and to waive
all of their rights and interests to all amounts due from the
Company (such amounts consisting of accrued payroll and loans and
advances made
17
<PAGE>
REGENESIS HOLDINGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS, Continued
JUNE 30, 2000
(Unaudited)
to the Company). In addition, each individual has agreed to waive
all of their rights and interests to certain shares of common stock
and certain unexercised stock options granted to them through June
30, 2000.
As of June 30, 2000, the following amounts were recorded in the
accompanying condensed financial statements or disclosed in the
related footnotes with regard to the amounts that will be waived by
these individuals:
Accrued payroll $195,155
Due to officers and stockholders $ 73,674
Shares of common stock 500,000
Options to purchase common stock 500,000
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for certain forward-looking statements. The
forward-looking statements contained in this Report are subject to
certain risks and uncertainties. Actual results could differ
materially from current expectations. Among the factors that could
affect the Company's actual results and could cause results to
differ from those contained in the forward-looking statements
contained herein is the Company's ability to implement its business
strategy successfully, which will depend on business, financial,
and other factors beyond the Company's control, including, among
others, prevailing changes in customer preferences. There can be no
assurance that the Company will be successful in implementing its
business strategy. Other factors could also cause actual results to
vary materially from the future results covered in such
forward-looking statements. Words used in this Report such as
"expects," "believes," "estimates" and "anticipates" and variations
of such words and similar expressions are intended to identify such
forward-looking statements.
The following should be read in conjunction with the Financial
Statements of the Company and the notes thereto included elsewhere
in this report on Form 10-QSB, as well as the information contained
in the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1999, as filed with the Securities and Exchange
Commission on June 23, 2000.
General
The report of the Company's independent certified public
accountants on their audit of the Company's December 31, 1999
financial statements contained uncertainties relating to the
Company's ability to continue as a going concern. As shown in the
accompanying financial statements the Company incurred a loss of
$1,354,484 for the six months ended June 30, 2000, and had a
working capital deficiency and a stockholders' deficiency of
$1,690,878 and $1,544,095, respectively, at June 30, 2000. These
factors among others raise substantial doubt about the company's
ability to continue as a going concern for a reasonable period of
time. The accompanying financial statements do not include any
adjustments relating to the outcome of this uncertainty.
As of June 30, 2000, the Company had cash of $651 and a working
capital deficiency of $1,690,878.
The Company's continuation as a going concern is dependent upon its
ability to generate sufficient cash flow to meet its obligations on
a timely basis. The Company's primary source of liquidity has been
from the cash generated through the private placement of equity
and/or debt securities and from advances from its officers and
directors. The Company is presently pursuing the completion of the
transaction with Tread Petroleum LLC (see "Managements Discussion
and Analysis or Plan of Operations - General") in order to
eventually achieve profitable operations. However, there can be no
assurance that the Company will be successful in achieving
profitable operations or acquiring additional capital or that such
capital, if available, will be on terms and conditions acceptable
to the Company.
19
<PAGE>
In 1999, the Company acquired the assets of NetDisc, Inc.
("NetDisc") for the purpose of pursuing Internet advertising
opportunities, although to date, the Company has generated no
revenues from such activities. In addition, during 1999, the
Company entered into a preliminary letter of intent (the
"Preliminary LOI") to acquire all of the assets and assume certain
liabilities of the entity formerly known as Red Ant Entertainment
("Red Ant"). In accordance with the terms of the Preliminary LOI
both the Company and the seller each loaned $75,000 to MCCC
Acquisition, LLC ("MCCC") the owner of the assets and such funds
were simultaneously advanced to Management West International, Inc.
("Management West") which is the entity that was managing the
assets until completion of the acquisition by the Company. In
addition, through June 30, 2000, the Company advanced $349,648 to
Management West to cover a portion of their operating expenses.
Pursuant to the terms of the Preliminary LOI, the purchase price
was to be comprised of $300,000 of cash, 300,000 shares of
restricted common stock of the Company, a three year warrant to
purchase 100,000 shares of common stock of the Company at an
exercise price of $3.00 per share, plus the liabilities assumed.
The Company's $75,000 loan to MCCC was to be forgiven. All
operating advances made by the Company through the date of closing
of the purchase were to be considered as part of the purchase price
for financial reporting purposes, accordingly, such advances were
capitalized as advances toward pending acquisition in the
accompanying financial statements. Subsequent to June 30, 2000, the
Board of Directors of the Company determined that completion of the
acquisition would not be in the best interests of the Company.
Accordingly, the $424,648 balance of advances toward pending
acquisition was charged to operations during the quarter ended June
30, 2000.
On December 15, 1998, the Company's common stock was delisted from
the OTC Bulletin Board for failure to comply with Rule 15c-211. On
June 30, 2000, the common stock resumed trading on the OTC Bulletin
Board.
Pursuant to a Share Sale and Contribution Agreement ("the
Agreement") dated as of September 14, 2000, Triad Petroleum LLC
("Triad") will acquire 96% of the voting equity of the Company
through the issuance of a combination of common and convertible
preferred shares. In consideration thereof, Triad will assign its
exclusive 50 year license and distribution rights under a
Technology License and Marketing Agreement with E-Mation LLC (an
affiliate of Triad) which provides for the exclusive rights to
make, market and sell products and services using E-Mation's
proprietary technology which integrates all aspects of the business
operations for both wholesale distribution and retail sale of fuel.
There is no significant operating history with respect to this
asset.
This Agreement is subject to certain closing conditions, including
but not limited to, the Company's reduction or elimination of
certain liabilities, the conversion of certain indebtedness to
equity and termination of certain outstanding contracts of the
Company.
In connection with the closing of the transaction the Company will
issue to Triad a combination of common stock and a newly designated
series of convertible preferred stock. Each share of new
convertible preferred stock will be convertible in to ten shares of
common stock and will participate in all voting and dividend rights
of the common shareholders on an as converted basis. The total
number of shares to be issued on a common stock equivalent basis,
will approximate 141,000,000 shares.
Promptly following the consummation of the transaction, the Company
intends to seek the consent of its shareholders to authorize an
amendment to the Company's Articles of Incorporation increasing the
Company's authorized shares of common stock from 100,000,000 to
300,000,000 and to increase the Company's authorized shares of
preferred stock from 10,000,000 to 50,000,000.
20
<PAGE>
If the transaction does not close for any reason, Triad will have
the right to exercise certain warrants to purchase 750,000 shares
of the Company's common stock, at $.10 per share as compensation
for any amounts Triad expended on behalf of the Company in
connection with the proposed transaction.
The foregoing description of the transaction is a summary, and as
such is qualified in its entirety by reference to the Agreement and
a related side letter thereto which are filed herewith as Exhibit
10.19.
Results of Operations
For the six months ended June 30, 2000 and 1999 the Company
generated no revenues, and incurred net losses of $1,354,484 and
$706,999, respectively.
Operating expenses for the six months ended June 30, 2000 and 1999
aggregated $1,339,047 and $712,999, respectively and were comprised
as follows:
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Salaries and wages including related taxes $ 356,494 $ 278,599
Legal and professional 130,452 76,750
Marketing and promotion 13,573 107,642
Travel 64,207 26,934
Consulting fees 185,000 122,575
Rent 49,042 21,150
Office expense 34,213 12,519
Depreciation and amortization 12,697 1,532
Other general and administrative 68,721 65,298
Write-off of advances toward pending
acquisition 424,648 -
----------- ---------
Total $ 1,339,047 $ 712,999
=========== ========
</TABLE>
Salaries and wages including related taxes increased $77,895 in the
six months ended June 30, 2000, as a result of employment of five
executive officers, as well as employment of administrative and
support staff, some of which were not employed by the Company
during the six months ended June 30, 1999.
Legal and professional fees increased $53,702 in 2000 when compared
to 1999 as a result of a decrease in legal fees of $4,062 and an
increase in accounting fees of $57,764. The increase in accounting
fees is primarily due to the expenses associated with the
engagement of outside professionals to assist the Company in
preparing its financial statements.
The $107,642 of marketing and promotion costs in 1999, relates to
the initial marketing launch of the Company's NetDisc products,
including the cost of producing the CD Rom discs. The $13,573 of
marketing and promotion costs in 2000 relates to continued efforts
to market the NetDisc products.
Travel expense increased by $37,273 in 2000 as a result of the
travel costs associated with the raising of capital, as well as the
pursuit of potential acquisitions, and the continuing marketing and
promotion of the NetDisc CD Rom product.
21
<PAGE>
Consulting fees of $185,000 in 2000 consist of $138,000 related to
the pending acquisition, $47,000 of investment banking and public
relations expenses relating to pursuit of additional capital for
the Company. Consulting fees of $122,575 in 1999 consist of
$107,050 of compensation expense associated with the issuance of
common stock to various individuals in exchange for services
performed, as well as $15,525 of consulting fees paid in connection
with general corporate matters.
Rent expense in 2000 aggregated $49,042 and related to the opening
of corporate offices in Miami, Florida and New York City in late
1999. The $21,150 in 1999 related to sub lease costs for temporary
office space.
Office expenses increased by $21,694 as a result of the opening of
corporate offices in Miami, Florida and New York City and the
overall increase in administrative activity in 2000 as compared to
1999.
Depreciation and amortization aggregated $12,697 in 2000, due to
the acquisition of a total of approximately $27,000 of furniture
and equipment for the year ended December 31, 1999, and $10,101 of
assets purchased during the six months ended June 30, 2000, as well
as the amortization of the excess of costs over the fair value of
net assets acquired associated with NetDisc and the amortization of
deferred consulting fees incurred in late 1999 and the six months
ended June 30, 2000.
Interest expense in 2000 aggregated $15,437 resulting from $275,000
of borrowings during the second half of 1999. There were no
borrowings during the six months ended June 30, 1999.
Subsequent to June 30, 2000, the Board of Directors of the Company
determined that completion of the pending acquisition of the entity
formally known as Red Ant Entertainment would not be in the best
interests of the Company. Accordingly, the $424,648 balance of
advances toward pending acquisition were charged to operations
during the quarter ended June 30, 2000.
Liquidity and Capital Resources
For the six months ended June 30, 2000 and 1999, net cash used in
operating activities was $518,529 and $286,839, respectively. The
increase of $231,690 was primarily attributable to additional
expenses relating to the employment of executive officers and
support staff, as well as the opening of corporate offices in
Miami, Florida and New York City.
Net cash used in investing activities for the six months ended June
30, 2000 was $279,257, which was attributable to $269,156 of
advances in connection with a pending acquisition along with an
aggregate $10,101 relating to payments for furniture and equipment.
In 1999, net cash used in investing activities of $15,322, was
attributable to payments for furniture and equipment.
Net cash provided by financing activities for the six months ended
June 30, 2000 was $696,602 which was comprised of an aggregate of
$450,000 relating to the sale of common stock in private placements
and $364,650 of loans from officers and stockholders. During the
six months ended June 30, 2000, the Company made principal payments
of $20,000 on outstanding loans payable and repaid $98,048 of
advances to officers and stockholders. Net cash provided by
financing activities for 1999 was $289,455, which was primarily
attributable to proceeds received from the sale of common stock of
$266,230, and $23,225 of net advances from officers and
stockholders.
22
<PAGE>
For the period from July 1, 2000 through September 15, 2000, the
Company received an aggregate of $ 75,000 of additional advances
from officers and stockholders.
As of June 30, 2000, the Company had cash of $651 and a working
capital deficiency of $1,690,878.
The Company's ability to meet its future obligations in relation to
the orderly payment of its recurring obligations on a current basis
is totally dependent on its ability to complete the transaction
with Triad Petroleum LCC and attain a profitable level of
operations. Since the Company has no current source of liquidity,
the Company is unable to predict how long it may be able to survive
without a significant infusion of capital from outside sources and
it is further unable to predict whether such capital infusion, if
available, will be on terms and conditions favorable to the
Company.
Subsequent to June 30, 2000, the Company's President and Chief
Executive Officer, who was also a Director of the Company, as well
as its Executive Vice President of Entertainment/Music Development
and another Director of the Company resigned from their respective
positions with the Company. In connection with such resignations
each of the individuals waived all of their rights and interests to
all amounts due from the Company consisting of accrued payroll and
loans and advances made to the Company. In addition, each of the
individuals waived all of their rights and interests to certain
shares of common stock and unexercised common stock options granted
to them through June 30, 2000.
As of June 30, 2000, the following amounts were recorded in the
accompanying condensed financial statements or disclosed in the
related footnotes with regard to the amounts that will be waived by
these individuals:
Accrued payroll cancelled $365,713
Due to officers and stockholders cancelled $385,766
Shares of common stock cancelled 470,000
Options to purchase common stock cancelled 350,000
Subsequent to June 30, 2000, 1,000,000 shares of common stock
issued in connection with two terminated consulting agreements were
cancelled.
In connection with the completion of the Triad transaction, the
Company's current Chairman of the Board of Directors, Chief
Executive Officer and President and its Chief Financial Officer,
both of whom are Directors of the Company, have agreed to resign
their respective positions as officers of the Company and to waive
all of their rights and interests to all amounts due from the
Company consisting of accrued payroll and loans and advances made
to the Company. In addition, each individual has agreed to waive
all of their rights and interests to certain shares of common stock
and certain unexercised stock options granted to them through June
30, 2000.
As of June 30, 2000, the following amounts were recorded in the
accompanying condensed financial statements or disclosed in the
related footnotes with regard to the amounts that will be waived by
these individuals:
Accrued payroll $195,155
Due to officers and stockholders 73,674
Shares of common stock 500,000
Options to purchase common stock 500,000
23
<PAGE>
PART II OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS
In December, 1998 the Company filed a Complaint in the Circuit
Court of the Fifteenth Judicial Circuit in and for Palm Beach
County, Florida entitled Shulman & Associates, Inc., Manny J.
Shulman, Franklyn B. Weichselbaum, Mitchell Rubinson and Regenesis
Holdings, Inc. v. Elizabeth Shwiff, Fincross, Ltd., Elpoint
Corporation, Elpoint Co., L.L.C., Russian Securities Co., Gennady
Yakovlev, Oleg Pavlioutchouk and Maxim Shishlyannikov, Case No. CL
98-11409 AD, for defamation and liable in connection with certain
information released about the Company. On August 21, 2000,
Regenesis dismissed the action without prejudice as to all
defendants.
In a collateral action, the Company was named in a lawsuit
involving several of the same parties in the United States District
Court for the Northern District of California in the matter
entitled Elpoint Co., L.L.C., et al. v. Mitchell Rubinson, et al.,
Case No. 99-1107 CRB. Although the Company was named as a
indispensable party, the allegations were in the nature of a
shareholder derivative claim and no relief was sought against the
Company by the plaintiffs.
On May 19, 1999, a majority of the parties named in the
aforementioned lawsuits, including another California state court
action entitled Elpoint, L.L.C., et al. v. Mitchell Rubinson, et
al., Case No. 301428, filed in the Superior Court, attended
mediation which resulted in a settlement which required, among
other things, the dismissal of all three lawsuits. The Company was
not a named party in the California state court action.
Additionally, the Company is not obligated to contribute
financially to the settlement. Although, the Company did not attend
the mediation, the Company was an intended beneficiary of the
settlement. Mitchell Rubinson and Larry Rutstein, former officers
of the Company, alleged certain indemnification rights against the
Company as part of the settlement and notified the Company of such
a reservation subsequent to their execution of the settlement
agreement. The Company cannot opine upon the validity of such
claims as no action has been filed against the Company in that
regard. However, the Company would vigorously defend any such
claims in the event they are filed. Mitchell Rubinson has notified
the Company of alleged indemnification rights as to any funds paid
for settlement and any attorney's fees incurred in the above
mentioned actions.
On December 16, 1999, the Judge presiding over the Superior Court
of California state court action entered an order granting the
plaintiff's motion to enforce the settlement under California Code
of Civil Procedure ss. 664.6.
ITEM 2. CHANGES IN SECURITIES
On January 5, 2000, the Company granted options to three officers
to purchase an aggregate of 800,000 shares of common stock at an
exercise price of $0.25 per share. Inasmuch as the purchasers were
officers of the Company and had access to relevant information
concerning the Company, including financial information, the
issuance of such securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) of such Act and the rules and regulations
thereunder.
24
<PAGE>
On January 5, 2000, the Company issued 50,000 shares of common
stock to Gustavo Rodriquez (Vice President of Entertainment/Music
Development) in connection with a one year extension of his
employment agreement. Inasmuch as the purchaser was an officer and
had access to relevant information concerning the Company,
including financial information, the issuance of such securities
was exempt from the registration requirements of the Securities Act
pursuant to the exemption set forth in Section 4(2) of such Act and
the rules and regulations thereunder.
On January 20, 2000, the Company agreed to sell 200,000 shares of
common stock for a purchase price of $200,000 to Edward McCabe. The
purchaser deposited the $200,000 purchase price with the Company's
counsel for the benefit of Company until completion of the
acquisition of the assets of the entity formally known as Red Ant
Entertainment. On June 15, 2000, counsel for the Company released
the funds to the Company and $145,000 of such funds were advanced
in connection with the proposed acquisition and $55,000 of such
funds were utilized for general working capital purposes. As of
June 30, 2000, the Company has reflected the 200,000 shares as
outstanding in its financial statements. Inasmuch as the purchaser
was an accredited investor and had access to relevant information
concerning the Company, including financial information, the
issuance of such securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) of such Act and the rules and regulations
thereunder.
On January 25, 2000, the Company issued 250,000 shares of common
stock to Mel Adler, the father of the Chairman of the Board of
Directors, in connection with the purchase of the URL address Music
411.com. Inasmuch as the purchaser was an accredited investor and
had access to relevant information concerning the Company,
including financial information, the issuance of such securities
was exempt from the registration requirements of the Securities Act
pursuant to the exemption set forth in Section 4(2) of such Act and
the rules and regulations thereunder.
On January 28, 2000, the Company issued 500,000 shares of common
stock to Les Garland in connection with the terms of his three year
consulting agreement. Inasmuch as the purchaser was an accredited
investor and had access to relevant information concerning the
Company, including financial information, the issuance of such
securities was exempt from the registration requirements of the
Securities Act pursuant to the exemption set forth in Section 4(2)
of such Act and the rules and regulations thereunder.
On January 28, 2000, the Company issued 500,000 shares of common
stock to Brandon Phillips in connection with the terms of his three
year consulting agreement. Inasmuch as the purchaser was an
accredited investor and had access to relevant information
concerning the Company, including financial information, the
issuance of such securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) of such Act and the rules and regulations
thereunder.
On January 28, 2000, the Company issued 50,000 shares of common
stock to Edwin Ruh in connection with the terms of his three year
consulting agreement. Inasmuch as the purchaser was an accredited
investor and had access to relevant information concerning the
Company, including financial information, the issuance of such
securities was exempt from the registration requirements of the
Securities Act pursuant to the exemption set forth in Section 4(2)
of such Act and the rules and regulations thereunder.
25
<PAGE>
On January 31, 2000, the Company consummated the sale of 50,000
shares of its common stock for a purchase price of $100,000, or
$2.00 per share, to an institutional investor. Inasmuch as the
purchaser was an accredited investor and had access to relevant
information concerning the Company, including financial
information, the issuance of such securities was exempt from the
registration requirements of the Securities Act pursuant to the
exemption set forth in Section 4(2) of such Act and the rules and
regulations thereunder.
On March 2, 2000, the Company consummated the sale of 50,000 shares
of its common stock for a purchase price of $150,000, or $3.00 per
share, to an institutional investor. Inasmuch as the purchaser was
an accredited investor and had access to relevant information
concerning the Company, including financial information, the
issuance of such securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) of such Act and the rules and regulations
thereunder.
On March 7, 2000, the Company issued three Common Stock Purchase
Warrants to The Equity Group, Inc., in connection with their three
year consulting agreement. The warrants entitled the purchaser to
purchase an aggregate of 216,000 shares of the Company's common
stock, 72,000 shares at an exercise price of $2.50 per share;
72,000 shares at an exercise price of $5.00 per share and 72,000
shares at an exercise price of $7.50 per share. Warrants for 72,000
shares are exercisable immediately; warrants for 72,000 shares are
exercisable in one year and warrants for 72,000 shares are
exercisable in two years. Inasmuch as the purchaser was an
accredited investor and had access to relevant information
concerning the Company, including financial information, the
issuance of such securities was exempt from the registration
requirements of the Securities Act pursuant to the exemption set
forth in Section 4(2) of such Act and the rules and regulations
thereunder.
No underwriters were involved in any of the transactions described
above, and no commissions were paid in connection therewith.
In connection with the closing of the transaction with Triad
Petroleum LLC, certain of the issuances described above, as well as
issuances in prior periods, will be cancelled. See "Management
Discussions and Analyses or Plan of Operations - General".
ITEM 3. DEFAULTS UPON SENIOR SECURITITES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON 8-K
(a.) Index to Exhibits
4.1 Warrant Issued to Triad LLC
10.19 Share, Sale and Contribution Agreement dated as of
September 14, 2000 and related side letter thereto,
by and among Regenesis Holdings, Inc., Russell Adler For
Himself and his Nominees and Triad Petroleum LLC
27 Financial Data Schedule
26
<PAGE>
(b.) Reports on Form 8-K.
(i) On August 28, 2000, the Company filed a current report
on Form 8-K and reported the resignation of Lawrence
Gallo, its President and Chief Executive Officer, who
was also a Director of the Company; the resignation of
Mitchell Sandler as a Director of the Company; the
appointment of Joel Brownstein and Edwin Ruh as
Directors of the Company and the termination of two
consulting agreements.
SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities
Exchange Act of 1934, Regenesis Holdings, Inc. has caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
REGENESIS HOLDINGS, INC.
DATE: September 22, 2000 By: /s/ Russell Adler
------------------ --------------------------------
Russell Adler
Chairman of the Board
Chief Executive Officer and President
(Principal Executive Officer)
DATE: September 22, 2000 By: /s/ Joel Brownstein
------------------ --------------------------------
Joel Brownstein
Chief Financial Officer
(Principal Financial Officer)
27
