UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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(Mark one)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
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[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number 000-27371
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RENT USA, INC.
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(Exact name of small business issuer as specified in its charter)
Nevada 33-5695839
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
PO Box 10
San Dimas, CA 91773-0010
(Address of principal executive offices)
(909) 287-1500
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(Issuer's telephone number)
State the number of shares outstanding of each of the issuer's classes of common
equity as of March 31, 2000: Common stock 6,098,289 shares
Transitional Small Business Disclosure Format
(Check one): Yes [ ] No [x]
TABLE OF CONTENTS
PART 1- FINANCIAL INFORMATION
PAGE
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Item 1. Financial Statements..................................... F-1/9
Item 2. Plan of Operation........................................ 10
PART 11- OTHER INFORMATION
Item 1. Legal Proceedings........................................ 12
Item 2. Changes in Securities.................................... 12
Item 3. Defaults Upon Senior Securities.......................... 12
Item 4. Submission of Matters to a Vote of Security Holders...... 12
Item 5. Other Information........................................ 12
Item 6. Exhibits and Reports on Form 8-K......................... 12
SIGNATURES....................................................... 13
PART 1 - FINANCIAL INFORMATION
Item 1 - Financial Statements.
Unaudited Balance sheet at March 31, 2000
Unaudited Statements of Operations for the three month and six month
periods ended March 31, 2000.
Unaudited Statements of Cash Flows for the six and nine month period
ended March 31, 2000.
Notes to the financial statements.
FINANCIAL STATEMENTS
RENT USA, INC.
(Unaudited)
March 31, 2000
CONTENTS
Consolidated Balance Sheets F - 2
Consolidated Statements of Income and Expense F - 4
Consolidated Statements of Cash Flows F - 5
Notes to the Financial Statements F - 6
F - 1
RENT USA, INC.
BALANCE SHEET
MARCH 31, 2000
ASSETS
Current Assets
Cash $ 78,221
Accounts Receivable 9,199
Employee Advance 400
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Total Current Assets 87,820
Property and Equipment
Furniture and Office Equipment 73,313
Heavy Construction Equipment 5,036,376
Attachments and Parts 1,476,068
Shop Equipment and Tools 803,744
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7,389,531
Less; Accumulated Depreciation (237,761)
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Total Property and Equipment 7,150,770
TOTAL ASSETS $7,239,590
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F - 2
RENT USA, INC.
BALANCE SHEET
MARCH 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short-Term Notes Payable $1,720,689
Current Portion of Long-Term Debt 73,699
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Total Current Liabilities 1,794,388
Long-Term Liabilities 124,080
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Total Liabilities $1,918,468
Stockholders' Equity
Common Stock, $.001 par value, 20,000,000
Shares authorized; 6,098,289 issued and
Outstanding as of March 31, 2000 6,098
Preferred Stock, $.001 par value, 5,000,000
Shares authorized; none issued -0-
Paid-in Capital 5,497,847
Retained Earnings (182,823)
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Total Stockholders' Equity 5,321,122
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $7,239,590
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F - 3
RENT USA, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
March 31, 2000 March 31, 1999
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Income $ 100,812 $ 0
Cost of Goods Sold 174,545 0
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Gross Profit (Deficit) (73,733) 0
Operating Expenses 60,602 5,000
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Income (Loss) from Operations (134,335) (5,000)
Provision for Income Taxes 0 0
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Net Income (Loss) (134,335) (5,000)
Earnings Per Share - Basic (0.02) (0.003)
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Weighted Average Number of Shares 6,089,289 1,666,667
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F - 4
RENT USA, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
March 31, 2000 March 31, 1999
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Cash Flow from Operating Activities:
Net Income $ (134,335) $ (5,000)
Adjustments to reconcile net income to
net cash used in operating activities:
Depreciation 195,183 0
(Increase) Decrease in:
Accounts Receivable (9,199) 0
Employee Advance (400) 0
Increase (Decrease) in:
Accounts Payable (910) 0
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Net Cash provided (used) from Operating
Activities 50,399 5,000
Cash Flow from Investing Activities:
Purchase of Property and Equipment (25,723) 0
Net Cash (used) from Investing Activities (25,723) 0
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Cash Flow from Financing Activities:
Proceeds from Issuance of Stock 0 5,000
Net Proceeds from Notes Payable 53,605 0
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Net Cash provided from Financing Activities 53,605 5,000
Net Increase (Decrease) in Cash 78,221 0
Cash Balance at Beginning of Period 0 0
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Cash Balance at End of Period 78,211 0
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SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period for:
Interest 0 0
Income Tax 0 0
Schedule of Noncash Investing and Financing Activities:
In 2000
Notes Payable incurred for purchase of property
and equipment $ 203,142
Paid-in Capital incurred for acquiring of property and
equipment $ 7,500
F - 5
RENT USA, INC.
NOTES TO FIANNCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Presentation of Interim Information
In the Opinion of the management of Rent USA, Inc.(the Company), the
accompanying unaudited financial statements include all normal adjustments
considered necessary to present fairly the financial position as of March 31,
2000, and the results of operations and cash flows for the three months ended
March 31, 2000 and 1999. Interim results are not necessarily indicative of
results for a full year.
The financial statements and notes are presented as permitted by Form 10-QSB,
and do not contain certain information included in the Company's audited
financial statements and notes for the fiscal year ended December 31, 1999.
Former Development Stage Company
Effective this year, the Company begins its planned operations and generates
significant revenues and is no longer in the development stage as defined under
Financial Accounting Standards Board Statement No. 7.
Use of estimates
The preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions that directly affect the results of reported assets,
liabilities, revenue, and expenses. Actual results may differ from these
estimates.
Cash Equivalents
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with an original maturity of three months or less to be
cash equivalents.
Revenue Recognition
Revenues are recognized as earned as time passes from rights to use assets
(rentals) which extend continuously over time based on contractual prices
established in advance.
F - 6
RENT USA, INC.
NOTES TO FIANNCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounts Receivable
Management of the Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required. If amounts become
uncollectible, they will be charged to operations when that determination is
made. There was no bad debt expense either for 2000 or 1999.
Property and Equipment
Property and Equipment are valued at cost. Maintenance and repair costs are
charged to expenses as incurred. Depreciation is computed on the straight-line
method based on the estimated useful lives of the assets. Depreciation expense
was $195,183 and $0 for 2000 and 1999, respectively.
Income Taxes
The Company accounts income taxes in accordance with Financial Accounting
standards Board Statement No. 109 "Accounting For Income Taxes" (SFAS No. 109).
SFAS No. 109 requires a company to recognize deferred tax liabilities and assets
for the expected future income tax consequences of events that have been
recognized in the Company's financial statements. Under this method, deferred
tax assets and liabilities are determined based on temporary differences between
the financial carrying amounts and the tax bases of assets and liabilities using
the enacted tax rates in effect in the years in which the temporary differences
are expected to reverse.
NOTE 2 - SHORT-TERM NOTES PAYABLE
a.)Note Payable to an Officer; no interest
accrued; due on demand $ 20,000
b.)Note Payable to an Officer; no interest
accrued: due on demand 33,605
c.)Note Payable to related party; interest
at 8.5%; due June 3, 2000 1,661,721
d.)Note Payable to Airgas, due on demand;
secured by equipment 5,363
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$1,720,689
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F - 7
RENT USA, INC.
NOTES TO FIANNCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 3 - LONG-TERM LIABILITIES
a.) 10.75% Note Payable to Anchor due in monthly
installment of $743.43 including principal
and interest, maturing March 24, 2004;
collateralized by equipment $ 28,900
b.) 9.65% Note Payable to bank due in monthly
installment of $2,645.49 including
principal and interest, maturing April 28,
2003; collateralized by equipment 82,405
c.)12% Note Payable to Johnson due in monthly
installment of $6,174.52 including principal
and interest, maturing April 2001 86,474
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197,779
Less Current Portion 73,699
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$ 120,080
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Long-term liabilities maturities during the years ending December 31:
2000 $ 73,699
2001 69,080
2002 36,799
2003 16,099
2004 2,102
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$197,779
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NOTE 4 - PROVISION FOR INCOME TAX
There was no provision for income tax for three months ended March 31, 2000 and
1999. Due to net operating losses and the uncertainty of realization, no tax
benefit has been recognized for operating losses.
At December 31, 1999, net federal operating losses of approximately $48,488 are
available for carryforward against future years' taxable income and expire in
2020. The Company's ability to utilize its federal net operating loss
carryforwards is uncertain and thus a valuation reserve has been provided
against the Company's net deferred tax assets.
NOTE 5 - NET LOSS PER SHARE
Net loss per share is computed based on the weighted average number of shares of
common stock outstanding during the period. Basic net loss per share for three
months ended March 31, 2000 and 1999 is $0.02 and $0.003, respectively.
F - 8
RENT USA, INC.
NOTES TO FIANNCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
NOTE 6 - CAPITAL CONTRIBUTION
A shareholder contributed an equipment with a fair value of $7,500 to the
Company.
NOTE 7 - LEASE COMMITMENTS
The Company leases its office facilities for $3,250 per month. The lease expires
February 28, 2003. Rent expense totaled $6,300 and $0 for 2000 and 1999,
respectively.
As of March 31, 2000, the minimum commitments under the lease are as follows:
December 31, Amount
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2000 $ 29,250
2001 39,000
2002 39,000
2003 6,500
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$113,750
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NOTE 8 - GOING CONCERN
The accompanying financial statements are presented on the basis that the
Company is a going concern. Going concern contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business over a
reasonable length of time. As shown in the accompanying financial statements,
the Company incurred a net loss of $134,335 and $5,000 for three months ended
March 31, 2000 and 1999, respectively, and as of March 31, 2000, the Company has
a working capital deficiency of $1,706,568.
Management is currently involved in active negotiations to obtain additional
financing and actively increasing marketing efforts to increase revenues. The
Company's continued existence depends on its ability to meet its financing
requirements and the success of its future operations. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
F - 9
Item 2. Plan of Operation
The Company was originally organized under the laws of the State of Delaware in
1998, as RENT USA, INC, Delaware Company. On November 17, 1999 the Company
changed its domicile to the State of Nevada and is now doing business as a
Nevada Corporation.(See Part III, Articles of Incorporation and Agreement and
Plan of Merger, which is the document vehicle required by the state of Nevada to
change the company to Nevada).
Rent USA is in the business of selling and renting construction and multipurpose
equipment to construction firms, contractors, and other users of commercial
machinery.
On November 17, 1999, the Company purchased heavy duty construction equipment
valued at $7,110,588.00 from an unaffiliated and unrelated company, Pacific
Standard Financial Group, Inc. ["PSFG"] that specializes in the sale of
equipment, in exchange for common stock in the Company and assumption of
$1,661,721.00 in debt owed to the various persons from whom PSFG had purchased
the equipment for resale to the Registrant. Bill Williamson was owed a total of
$1,571,409.60 of the total debt amount. The balance was owed to various other
persons and companies. On December 10, 1999, the Company issued 1,098,289 shares
of common stock and assumed four promissory notes which PSFG owed to Bill
Williamson as noted above. The common stock issued to PSFG was issued pursuant
to Section 4(2) of the Securities & Exchange Act of 1933, as amended, which
allows the issuance of unregistered securities in exchange for assets. These
securities contain a legend condition which restricts their sale to the general
public for a period of one year from the date of issuance and then allows the
stock to be registered and sold pursuant to Regulation 230.144 by the filing of
a Form 144 with the Commission.
The Company also entered into a Marketing Agreement with Northland Supply
Company ["Northland"], a sole proprietorship owned by Denzel Harvey, a disabled
veteran and brother of Al Harvey, the Chief Executive Officer of the Company.
Under the terms of this agreement Rent USA, Inc. will provide Northland with
rental equipment and supplies which Northland will, in turn, rent to the
construction industry. Northland is certified by the State of California as a
Disabled Veterans Business Enterprise (DVBE) provider under the state of DVBE
California program.
Customer Profile-General
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The Company intends to provide services in four categories:
1. Equipment Rentals - the principal service, consists of renting equipment to
small and large contractors, and construction companies.
2. Equipment Sales - The sale of new and used equipment to small and large
contractors and construction companies. The Company is presently negotiating an
agreement whereby it will become a dealer for New Holland, a manufacturer of
heavy construction equipment.
3. Re-Rentals - this means re-renting equipment which the Company must rent from
others and does not own, then re-renting that equipment to an end user at an
anticipated 20% markup over the amount which the Company must pay the owner of
the equipment.
4. Trade Rentals - this means renting equipment on a long term basis to other
rental yards, which they, in turn, will mark up and re-rent to the general
public at a markup, generally 20%.
10
Presently, the Company has no agreements other than with Northland for
re-rentals or trade rentals. Also, presently, the Company has no agreements with
anyone for equipment sales. As a result, at the beginning, the only source of
income will be from the rental of equipment which the Company owns to
contractors and to Northland.
Geographic Service Area
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The proposed geographic marketing area for the company at present will be
limited to the southwest United States and will only include Southern
California, Nevada, Utah and Arizona.
Industry Analysis
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According to the American Rental Association, the trade group for the equipment
rental business, construction and development in the United States has
continually increased over the last twenty years. Due to this gradual increase
of activity, demand for rental construction equipment and machinery has been
sustained at a relatively high level. The Association states that it has seen
gradual movement in the business from small, family owned, single facility
rental yards to large corporations with multiple facilities. As detailed in
"1999 Rental Year in Review" during the past year, there were changes that were
"unprecedented in the world of tool rentals. "These changes represented mergers,
hostile takeovers and consolidations." As a result, the Company believes that in
a time of large corporations without the local service which small business
owners formerly gave their customers, there is an opportunity for Rent USA to
take advantage of this consolidation to build a business limited to heavy
construction machinery and equipment by providing superior customer service
through a strategy of being in close proximity to the customer, by being able to
respond to customer needs in a timely and appropriate manner.
The equipment rental market as a whole has been growing at a rapid rate in
excess of 20% annually based on revenues reported to the American Rental
Association by its 7200 member organizations throughout the United States. The
market for these products amounted to $3 billion in 1996, increased to 3.5
billion in 1997 and continued to rise by a similar increase in 1998, according
to Rental Equipment Register, the trade publication of the American Rental
Association.
These trends which have been noticed by the American Rental Association have not
been broken down into regions and for that reason, the Company has no definitive
evidence that these trends exist in the Southwestern United States where the
Company intends to build its business. However, there is, likewise, no evidence
to the contrary and management believes that the national trends apply to the
Southwestern United States as well as to other areas.
It is management's opinion that one of the areas of greatest growth in the
equipment rental market is in the area of rentals to contractors fulfilling
state and federal contracts. This is the area where Northland will have an
advantage because of its DVBE certification. There are only 600 DVBE registered
businesses in the California and only one in the heavy construction field
according to the Disabled Veterans Alliance. The alliance between the Company
and Northland should have a positive impact on the ability of the Company to
obtain business. The reason for this is due to the fact that Northland has an
advantage over other non DVBE companies when bidding on federally mandated
construction projects. The most recent version of the law passed by Congress and
by the California State Legislature requires that at least 3% of all contracts
let in State and federally mandated projects be to DVBE owned companies. It
should be noted that Rent USA, Inc. is not a DVBE registered company nor does it
intend to obtain such a registration. However, the Company's alliance with
Northland, will, in management's opinion, have a positive and beneficial affect.
11
Currently, the entire equipment rental market is shared by approximately 7,000
equipment rental yards across the United States, with United Rental Corporation
positioned as the market leader.
Through acquisitions, United Rental has amassed over $1.7 billion in rental
revenues for fiscal 1998. United Rental began its acquisition strategies upon
its inception in 1997.
The service area for Rent USA, Inc. is a twelve-month construction Area. The
Southwestern United States does not experience any disruption in construction
due to weather or other seasonal issues which should also be advantageous to
assuring regular cash flow.
Because the company has no operating history, it is impossible at this time to
state the utilization rate for the Company's equipment, that is, the percentage
of time which the equipment will be rented to customers as opposed to the time
that it sits in the yard unrented and not generating income. The Company
believes that its utilization rate will be comparable to those in the industry,
averaging approximately 55%.
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
The Corporation advises that James Slayton, C.P.A. has resigned as the company
auditors, which resignation was accepted by the Company on January 1, 2000
effective from December 31, 1999. The reason for the resignation was at the
request of the Registrant due to the fact that Mr. Slayton is not a member of
the SEC Practice Section of the AICPA which the Company deemed to be of extreme
importance for purposes of its relationships with the stock market community and
with the Securities & Exchange Commission.
The decision to change accountants was recommended and approved by the Board of
Directors.
During the Registrant's two most recent fiscal years and any subsequent interim
period preceding the date of the dismissal, there were no disagreements with the
former accountant on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure.
The accountant's report on the financial statements for the past two years did
not contain an adverse opinion or a disclaimer of opinion and was not qualified
or modified as to uncertainty, audit scope or accounting principles other than
as stated in the Registration Statement, Amendment No. 4, wherein the
Accountant's Report states as follows:
"The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 3 to the financial
statements, the Company has had limited operations and has not generated
significant revenues from planned principal operations. This raises substantial
doubt about its ability to continue as a going concern. Management's plan in
regard to these matters is also described in Note 3. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty."
The Accountant in Note 3 makes the following statement:
"The Company's financial statements are prepared using the generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company has not generated significant revenues from its
planned principal operations. Without realization of additional capital, it
would be unlikely for the Company to continue as a going concern."
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John Spurgeon, CPA, JD whose address is PO Box 1171, Glendora, CA 91740,
telephone number (626) 914-9449 has agreed to replace James Slayton as auditor.
Mr. Spurgeon is a member of the SEC Practice Section of the AICPA as is his
reviewing auditors, Corbin & Wertz of Irvine, California.
Item 6. Exhibits and Reports on Form 8-K.
The following 8-K Reports were filed by the Company which relate to
the first and second quarter of 2000:
An 8-K Report filed concurrently herewith regarding changes in the
Company auditor. The 8-K Report also relates to a change in officers and
directors which did not occur until after the second quarter of 2000.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Rent USA, Inc.
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Date: September 5, 2000 /s/ Al Harvey
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Al Harvey
Chief Executive Officer
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