U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
Commission File Number: 0-21241
ENTER TECH CORPORATION
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1349553
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
430 East 6th Street, Loveland, Colorado 80537
----------------------------------------------------------
(Address of principal executive offices including zip code)
(970) 669-5292
--------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 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___
As of June 30, 2000, 21,908,000 shares of common stock, $.0001 par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes__ No X
<PAGE>
ENTER TECH CORPORATION
INDEX
Page
Number
------
Part I. Financial Information
Item I. Financial Statements
Review Report of Independent Certified
Public Accountant 3
Consolidated Balance Sheets as of
June 30, 2000 and December 31, 1999 4
Consolidated Statements of Operations,
Three Months Ended June 30, 2000 and
June 30, 1999 5
Consolidated Statements of Operations,
Six Months Ended June 30, 2000 and
June 30, 1999 6
Consolidated Statements of Cash Flows,
Six Months Ended June 30, 2000 and
June 30, 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of
Financial Conditions and Results of
Operations 10
Part II. Other Information 11
Item 1. Legal Proceedings.
Item 2. Changes in Securities.
Item 3. Defaults upon Senior Securities.
Item 4. Submission of Matters to a Vote of Security Holders.
Item 5. Other Information.
Item 6. Exhibits and Reports on Form 8-K.
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<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
Enter Tech Corporation
Loveland, Colorado
We have reviewed the accompanying balance sheet of Enter Tech Corporation as of
June 30, 2000, and the related statements of operations and cash flows for the
three months and six months then ended, in accordance with Statements on
Standards for Accounting and Review Services issued by the American Institute of
Certified Public Accountants. All information included in these financial
statements is the representation of the management of Enter Tech Corporation
A review of interim financial statements consists principally of inquiries of
Company personnel responsible for financial matters and analytical procedures
applied to financial data. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
/S/ Schumacher & Associates, Inc.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211
August 11, 2000
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<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
June 30 December 31
2000 1999
----------- -----------
Current Assets
Cash $ 92,526 $ 14
----------- ----------
Total Current Assets 92,526 14
Note receivable, related party 4,173 -
Equipment, net of accumulated
depreciation of $4,979 98,536 7,373
Deferred offering costs 100,000 -
Other 4,979 -
----------- ----------
Total Assets $ 300,214 $ 7,387
=========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 82,008 $ 35,512
Stock compensation payable 201,825 1,103,574
Customer deposits 60,000 60,000
Related party payables 354,151 322,009
Notes payable, other 250,000 15,806
----------- ----------
Total Current Liabilities 947,984 1,536,901
----------- ----------
Commitments and contingencies
(Notes 2,3,4,5,6,7,8,9,10 and 11) - -
Stockholders' (Deficit):
Preferred Stock, $.0001 par value,
5,000,000 shares authorized
1,000,000 issued and outstanding 100 -
Common Stock, $.0001 par value,
100,000,000 shares authorized
21,908,000 shares issued and
outstanding 2,191 385
Additional paid-in capital 17,028,059 381,618
Stock subscriptions receivable,
cash (9,400,000) -
Stock subscriptions receivable,
services (5,100,064) -
Accumulated deficit (3,178,056) (1,911,517)
----------- ----------
Total Stockholders' (Deficit) (647,770) (1,529,514)
----------- ----------
Total Liabilities and
Stockholders' (Deficit) $ 300,214 $ 7,387
=========== ==========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
June 30, June 30,
2000 1999
------------ ------------
Revenues $ - $ -
----------- -----------
Operating Expenses:
Salaries 129,943 -
Depreciation 3,750 -
Professional fees 208,627 40,150
Rent 28,632 4,350
Stock issued for services 608,998 -
Travel 64,944 11,412
Telephone 10,559 1,508
Sales promotion - 20,500
Other 114,744 5,062
----------- -----------
Total Operating Expenses 1,170,197 82,982
----------- -----------
Net Loss to Common Shareholders $(1,170,197) $ (82,982)
=========== ===========
Net Loss Per Common Share $ (.08) $ (.02)
=========== ===========
Weighted Average Number
of Shares Outstanding 15,346,333 3,650,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
----------- -----------
Revenues $ - $ -
----------- -----------
Operating Expenses:
Salaries 129,943 -
Depreciation 4,160 -
Professional fees 285,789 79,350
Rent 33,132 7,050
Stock issued for services 617,998 -
Travel 67,516 13,666
Telephone 11,422 3,517
Sales promotion - 20,500
Other 116,579 7,662
----------- -----------
Total Operating Expenses 1,266,539 131,745
----------- -----------
Net Loss to Common Stockholders $(1,266,539) $ (131,745)
=========== ===========
Net Loss Per Common Share $ (.09) $ (.04)
=========== ===========
Weighted Average Number
of Shares Outstanding 14,435,333 3,650,000
=========== ===========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
2000 1999
---------- ----------
Cash Flows Operating Activities:
Net (loss) $(1,266,539) $ (131,745)
Adjustment to reconcile net
(loss) to net cash provided
by operating activities:
Depreciation 4,160 -
Stock for services 617,998 -
(Increase) in note receivable
related party (4,173) -
Increase in accounts payable
and accrued expenses 46,496 2,375
Other (12,239) -
----------- ----------
Net Cash (Used in) Operating
Activities (614,297) (129,370)
----------- ----------
Cash Flows from Investing
Activities
(Investment) in equipment (59,527) (5,092)
Deferred offering costs (100,000) -
----------- ----------
Net Cash (Used in) Investing
Activities (159,527) (5,092)
----------- ----------
Cash Flows from Financing
Activities:
Common stock issued and
additional paid-in capital 600,000 -
Increase in notes payable 234,194 -
Increase in payable, related
parties 32,142 134,462
---------- ----------
Net Cash Provided by Financing
Activities 866,336 134,462
---------- ----------
Increase in Cash 92,512 -
---------- ----------
Cash, Beginning of Period $ 14 $ -
========== ==========
Cash, End of Period $ 92,526 $ -
========== ==========
Interest Paid $ 62 $ -
========== ==========
Income Taxes Paid $ - $ -
========== ==========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(1) Condensed Financial Statements
------------------------------
The financial statements included herein have been prepared by Enter Tech
Corporation without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in the financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted as
allowed by such rules and regulations, and Enter Tech Corporation believes that
the disclosures are adequate to make the information presented not misleading.
It is suggested that these financial statements be read in conjunction with the
December 31, 1999 audited financial statements and the accompanying notes
thereto.
While management believes the procedures followed in preparing these financial
statements are reasonable, the accuracy of the amounts are in some respect's
dependent upon the facts that will exist, and procedures that will be
accomplished by Enter Tech Corporation later in the year.
The management of Enter Tech Corporation believes that the accompanying
unaudited condensed financial statements contain all adjustments (including
normal recurring adjustments) necessary to present fairly the operations and
cash flows for the periods presented.
(2) Business Combinations
---------------------
On January 7, 2000, the Company entered into an agreement with Shopping Mall
Online, Inc. and an individual whereby the Company acquired 80% of the
outstanding common stock of Shopping Mall Online. The consideration for the
acquisition was 2,400,000 shares of the Company's common stock. The agreement
also provides that if for any reason the Company's common stock is not trading
above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock
certificate for the 2,400,000 shares of the Company's common stock is removed,
the Company will issue additional shares of its common stock to the individual.
The value of the additional shares to be issued will be equal to the difference
between $2.4 million and the value of the 2,400,000 shares of common stock
issued under the agreement based on the then existing bid price. The business
combination has been accounted for as a purchase. No goodwill has been recorded
in the transaction because the former owner of Shopping Mall Online, Inc. now
owns 31% of the Company. The 2,400,000 shares of common stock have been recorded
at predecessor cost of Shopping Mall Online, Inc. All costs related to
development of Shopping Mall Online, Inc. have been expensed.
The agreement also provides the voting rights with respect to the common stock
of Shopping Mall Online will remain with the individual until the restrictive
legend on the 2,400,000 shares of the Company's common stock is removed. If for
any reason the Company is declared insolvent or files for bankruptcy protection
after the date of the agreement until the restrictive legend on the Company's
common stock is removed, Shopping Mall Online will have the right to rescind the
agreement. Shopping Mall Online has the right under the agreement to appoint one
person nominated by the individual to the board of directors of the Company.
-8-
<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(2) Business Combinations, continued
--------------------------------
Prior to the foregoing transaction, Shopping Mall Online was owned solely by
this individual. This individual is also the principal owner of Integrity
Capital, Inc. Integrity Capital provides investor relations services for the
Company.
On April 19, 2000, the Company acquired 80% of the outstanding shares of common
stock of WavePower, Inc., a development stage company, in exchange for 5,000,000
restricted shares of the Company's common stock under an Acquisition Agreement.
In addition, the Company agreed to reserve 3,000,000 shares of its 5,000,000
authorized shares of preferred stock for issuance as further payment for the
acquisition to the former sole shareholder of WavePower, Inc. These shares would
be issued upon exercise of an option to be granted to the shareholder. The
option would provide:
(a) For a three year term ending April 30, 2003;
(b) For an exercise price of $.001 per share;
(c) For the exercise of up to 1,000,000 shares during each of the
following periods during the term of the employment agreement with the
option holder: 12th and 13th months, 24th and 25th months, and 35th
and 36th months. The option further provides that its exercise of the
stated amounts during the respective periods is further conditioned
upon WavePower, Inc. meeting stated amounts of net pre tax profits.
The acquisition agreement also provides that The remaining 2,000,000
authorized shares of the Company's preferred stock may be issued to
the existing member of the Company's management and significant
consultants.
The 5,000,000 shares of restricted common stock that were issued to WavePower,
Inc. increased the Company's outstanding shares of common stock to 12,783,000.
The transaction was recorded at predecessor cost since the 5,000,000 shares were
approximately 39% of the Company's total issued and outstanding shares of common
stock.
(3) Marketing and Administration of Sales Agreement
-----------------------------------------------
The Company has entered into an agreement with a previous director of the
Company for the marketing and administration of sales through certain identified
locations and the division of profits after the director has recovered related
costs. The Company currently has orders for the purchase of thirty kiosk
software vending units at $50,000 per unit from a previous director. The Company
received $60,000 of deposits related to these orders. The Company is uncertain
whether it will be able to deliver the units and it is not determinable at this
time whether a refund will be required. A contingency exists with respect to
this matter, the ultimate resolution of which cannot presently be determined.
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<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(4) Basis of Presentation - Going Concern
-------------------------------------
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained operating losses
since its inception and has a net capital deficiency. Management is attempting
to raise additional capital.
In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its future
operations.
Management is in the process of attempting to raise additional capital and
reduce operating expenses. Management believes that its ability to raise
additional capital and reduce operating expenses provide an opportunity for the
Company to continue as a going concern.
(5) Preferred Stock
---------------
On April 10, 2000, the board of directors of the Company agreed to establish two
voting trusts in which the Company would place 5,000,000 shares of the Company's
preferred stock. The first trust will contain 3,000,000 preferred shares being
held in reserve for the acquisition of WavePower, Inc. as outlined in the
definitive agreement. The second trust will contain 2,000,000 preferred shares
of Company stock that will be used for the benefit and distribution to the
officers, directors and significant consultants to the Company with the option
of a distribution of up to 1,000,000 of these preferred shares for additional
compensation as they may, from time to time, come available to the Company. As
of June 30, 2000, these 1,000,000 preferred shares were issued to two directors
and a consultant of the Company. The president of the Company will retain sole
voting rights for both trusts.
The 5,000,000 shares of preferred stock has the following rights, privileges and
limitations:
(a) It has a liquidation preference to receive any distributions in
liquidation of the Company up to the amount of $0.10 per share, but
does not participate in any additional distributions,
(b) It has the right to vote five votes per share on all issues considered
by the shareholders,
(c) It is convertible into two shares of common stock for each share of
preferred, and
(d) It is callable by the Company upon 30 days written notice at $.001 per
share, provided that the holder may convert the preferred into common
stock during the 30-day period.
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<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(6) Equity Financing Agreement
--------------------------
On March 15, 2000, the Company entered into a stock purchase and subscription
agreement with the Reserve Foundation Trust, whereby the trust is to purchase
6,000,000 restricted shares of the Company's common stock in exchange for
$10,000,000. When the agreement was signed the trust provided the Company with
$50,000 in interim debt financing. That amount was subsequently increased to a
total of $250,000. The interim financing the trust provided the Company in the
amount of $250,000 is to be repaid in full as per the terms of the Stock
Purchase and Subscription agreement on or before May 15, 2000. As of June 30,
2000, the Company has not paid this debt.
On May 4, 2000, the Trust indicated that all conditions to the stock purchase
had been satisfied and that it would go forward with providing the $10,000,000
in funds to the Company. As of June 12, 2000, $600,000 of the subscribed funds
had been received. On July 19, 2000, the Board of Directors of the Company met
to discuss banking/funding problems with the Reserve Foundation Trust. As of
August 1, 2000, the Company instructed corporate counsel to prepare to take
whatever action it deemed is appropriate and in the best interest of the
Company. As of August 11, 2000, counsel had not yet taken action on the matter.
The Company has issued stock certificates for the 6,000,000 shares of common
stock to be purchased by the Trust. These stock certificates are being held for
delivery until the Trust funds the entire stock purchase amount of $10,000,000.
The Company has recorded remaining $9,400,000 to be collected as subscriptions
receivable-cash at June 30, 2000.
(7) Litigation
----------
Litigation against the Company has been threatened during May, 2000 by a
corporation which alleges that the Company has not fulfilled an agreement to
issue 1,000,000 shares of the Company's common stock in consideration of the
waiver of any rights by the corporation or affiliated entities to acquire
WavePower, Inc., which the Company acquired on April 19, 2000. The Company is of
the view that the conditions precedent to the issuance of such stock were not
fulfilled and that the agreement was repudiated. The Company filed an answer to
the complaint on June 29, 2000. Due to the preliminary stage of the matter, the
ultimate resolution of this contingency cannot presently be determined.
(8) Litigation- Former Officer
--------------------------
During February, 2000 the Company commenced litigation against a former officer
of the Company alleging failure of the former officer to meet certain
performance standards. The Company is seeking cancellation of the agreement to
issue 750,000 shares of Company common stock and the payment of $500 per month
compensation to the former officer and the return of 500,000 shares of stock
previously issued. A contingency exists with respect to this matter, the
ultimate resolution of which cannot presently be determined.
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<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(9) Employment/Consulting Contracts
-------------------------------
On April 15, 2000. the Company renewed a consulting agreement with a director of
the Company, whereby the director will receive $10,000 and various executive
benefits per month for a period of three years.
Also on April 15, 2000, the Company renewed a consulting agreement with an
individual, whereby the individual will receive $10,000 and various executive
benefits per month for a period of three years.
Also on April 15, 2000, the Company entered into an agreement with a financial
management company, whereby the entity will manage all of its funds. The Company
has applied to this entity for a private placement not to exceed the principal
sum of $10,000,000. Under the agreement, the Company shall pay $30,000 as a
refundable deposit plus 10% of the amount of capital raised or interest earned
for the Company. As of June 30, 2000, the Company has paid $100,000 in fees to
this entity and has accounted for this amount as deferred offering costs.
Deferred offering costs will be charged against the proceeds of the offering if
successful. The offering costs will be expensed if the offering is not
successful.
On April 19, 2000, the Company entered into an employment agreement with the
president of WavePower, whereby the president will receive $104,000 and various
executive benefits per year for a period of three years.
In May 2000, the Company's subsidiary WavePower entered into an employment
agreement with its vice president, whereby the vice president will receive
$98,000 and various executive benefits per year for a period of three years.
On May 22, 2000, the Company entered into an employment agreement with an
individual engaged as President of the Company, whereby the President will
receive $9,000 and various executive benefits per month for a period of three
years.
Also on May 22, 2000, the Company entered into an employment agreement with an
individual to be director of business development, whereby this individual will
receive 25,000 restricted shares of the Company and monthly compensation as
follows:
March - May 2000 $5,000
June - August 2000 6,000
September - November 2000 7,000
December 2000 - February 2003 8,000
(10) Marketing and Other Services Agreements
---------------------------------------
On June 6, 2000, the Company entered into agreements with various companies to
provide various marketing and other services. The Company issued 3,125,000
shares of restricted common stock in exchange for their promise to perform these
services during the 12-18 month period following the execution of the
agreements. The Company has recorded 90% of the market value of these shares at
the time of issuance totaling $5,273,437 as stock subscriptions
receivable-services, and has charged $173,373 to an expense representing the
services performed as of June 30, 2000.
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<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
June 30, 2000
(Unaudited)
(11) Subsequent Event
----------------
On July 1, 2000, the Company entered into a lease agreement to pay $3,000 per
month for new office space. The agreement is for a term of five years and
commences in September 2000.
During July 2000, Enter Tech was not able to meet payroll and payroll taxes
due to the Funding problems reported by the Reserve Foundation Trust. The
Company's employees in general have agreed to an option of being paid minimum
wage in cash and the remainder of their salaries being issued in S-8 stock. The
Company intends to issue S-8 stock once counsel has given its opinion on the
matter and a Registration Statement on Form S-8 is filed.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
--------------------------------------------------------------------------------
The following discussion of our plan of operation should be read together
with the financial statements and the related notes in Item 1 of Part I above.
As discussed in the notes to the financial statements, there are circumstances
that indicate that Enter Tech may be unable to continue as a going concern. We
cannot assure you that our plans in that regard will be successful and that we
will be able to continue as a going concern.
OVERVIEW
Enter Tech is a development stage company formed in July 1996 and we have
not yet generated revenues from our planned principle operations. Since Enter
Tech's acquisition in June 1998 of Links Ltd., also a development stage company,
we have focused on attempting to develop a prototype kiosk, or vending machine,
through which Links had previously planned to market computer software, music
and possibly digital video products stored on disks or computer hard drives.
Enter Tech has not yet been successful in developing a commercially feasible
prototype of the proposed kiosk and the company has continued to evaluate the
alternative of acquiring or creating a strategic relationship with a company
which has already developed a similar kiosk concept. We have identified a
potential strategic partnership with a company that has developed a similar
kiosk and are in the process of defining the terms of a joint venture or
licensing agreement. We continue to focus on a strategy of acquiring or creating
strategic relationships with other companies with proprietary technology that
will help the company meet its goal of providing the highest-level, best-quality
delivery of information, entertainment, goods and services in a digital
environment and will also compliment the kiosk concepts and e-commerce
technologies of the company.
RECENT SIGNIFICANT EVENTS
WavePower Acquisition
On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of
common stock of WavePower, Inc., a development stage company, in exchange for
the issuance of 5,000,000 restricted shares of Enter Tech common stock under an
"Acquisition Agreement". In addition, Enter Tech agreed to reserve 3,000,000
shares of its 5,000,000 authorized shares of preferred stock for issuance as
further payment for the acquisition to the former sole shareholder of WavePower.
These shares would be issued upon exercise of an option to be granted to the
shareholder. The option would provide:
(i) For a three year term ending April 30, 2003;
(ii) For and exercise price of $.001 per share;
(iii) For the exercise of up to 1,000,000 shares during each of the
following periods during the term of the employment agreement with the
optionholder; 12th and 13th months, 24th and 25th months, and 35th and
36th months. The option further provides that its exercise of the
stated amounts during the respective periods is further conditioned
upon WavePower, Inc. meeting stated amounts of net pre-tax profits.
The Acquisition Agreement also provides that the remaining 2,000,000
authorized shares of Enter Tech preferred stock may be issued to the
existing members of Enter Tech management and significant consultants.
Preferred Stock
The 5,000,000 shares of Preferred Stock has the following rights,
privileges and limitations:
(i) It has a liquidation preference to receive any distributions in
liquidation of Enter Tech up to the amount of $0.10 per share, but
does not participate in any additional distributions;
(ii) It has the right to vote five votes per share on all issues considered
by the shareholders;
(iii) It is convertible into two shares of common stock for each share of
preferred, and
(iv) It is callable by Enter Tech upon 30 days written notice at $.001 per
share; provided that the holder may convert the preferred into common
stock during the 30-day period.
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<PAGE>
WavePower plans to become an application service provider and is in the
process of developing a network that moves traditional computer applications out
of the conventional personal computer and onto a central network. WavePower
intends that users will then be able to freely access all of the power,
applications and connectivity of a series of networked computers from their own
individual terminal. WavePower has finalized their Plan of Operation and are
beginning to implement certain strategies.
Agreement for $10 Million Equity Financing
On March 15, 2000, Enter Tech entered into a stock purchase and
subscription agreement with the Reserve Foundation Trust under which the trust
is to purchase 6,000,000 restricted shares of Enter Tech common stock in
exchange for cash of $10 million. When the agreement was signed, the Trust
provided Enter Tech with $50,000 in interim debt financing. That amount was
subsequently increased to a total of $250,000. On May 4, 2000, the Trust
indicated that all conditions to the stock purchase had been satisfied and that
it would go forward with providing the $10 million in funds to Enter Tech. As of
June 12, 2000, $600,000 of the subscribed funds had been received. On July 19,
2000, the Board of Directors of Enter Tech met to discuss banking/funding
problems with the Reserve Foundation Trust. As of August 1, 2000, Enter Tech
instructed corporate counsel to prepare to take whatever action it deemed is
appropriate and in the best interest of the Officers, Directors, Management,
Employees and Shareholders of Enter Tech. As of August 11, 2000 counsel had not
yet taken action on the matter. Enter Tech has issued stock certificates for the
6,000,000 shares of common stock to be purchased by the Trust. These stock
certificates are being held for delivery until the Trust funds the entire stock
purchase amount of $10 million.
Marketing Agreements
On June 6, 2000, Enter Tech entered in agreements with a consortium of
companies to facilitate development of markets and revenue sources, strategic
development partners, business intelligence, investor relations and public
relations efforts on a global basis. The company issued shares of restricted
stock to the following in exchange for their promise to perform services of the
described natures during the 12-18 month period following the execution of the
agreements:
<TABLE>
<CAPTION>
Party Number of Shares Nature of Services
----- ---------------- ------------------
<S> <C> <C>
The Challenge Limited 900,000 shares Development of Latin American
markets, strategic partners and
affiliations
Profile Venture, Ltd. 800,000 shares Development of Pacific Rim
Markets, strategic partners and
Affiliations
Skyline Marketing Associates, Ltd. 825,000 shares Developments of European
Union markets, strategic
Partners and affiliations
Wall Street Relations Group 300,000 shares Investor and Public Relations
Services
California Business Intelligence, Inc. 300,000 shares Business Information and
Intelligence services
</TABLE>
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<PAGE>
Lease of New Facilities
On July 1, 2000 Enter Tech entered into a lease agreement to pay $3,000 per
month for approximately 2,637 square feet of office space located at 1031 N.
Lincoln Avenue, Loveland, Colorado for a term of 5 years. The company does not
plan to occupy the space until September because of remodeling and
infrastructure upgrades currently taking place.
On July 21, 2000, Enter Tech was not able to meet payroll because of the
Funding problems reported by the Reserve Foundation Trust. The Company began
aggressively seeking other sources of funding to continue its operations while
the issue with the Reserve Foundation Trust was solved or other substantial
funding sources were found. As of August 11, 2000, Enter Tech had missed 2
payroll periods. In order to continue operations, the Company approached the
employees with an option to be paid minimum wage in cash with the remainder of
their salaries being issued in S-8 stock. Employees in general have agreed to
this method of payment, pending counsel's review of its legality. The Company
intends to issue S-8 stock once counsel has given its opinion in the matter and
a Registration Statement on Form S-8 has been filed with the Securities and
Exchange Commission.
DESCRIPTION OF OUR CURRENT PLAN OF OPERATION
Our current plan of operation for the next 12 months primarily involves the
development of our kiosk technology, pursuit of Shopping Mall Online's (SMO)
web-hosting and interactive kiosk placement in shopping malls and other retail
outlets, and continued development of WavePower's application service provider
network.
Shopping Mall Online has defined the terms of an agreement for the
placement of several kiosks in properties owned by a particular developer as
part of a beta-test before portfolio-wide deployment. Additionally, this
agreement outlines the terms for SMO to design and manage a developer-specific
web site within the Shopping Mall Online web site for the portfolio properties.
As of August 11, 2000, this agreement had not yet been finalized. SMO is also
actively pursuing relationships with several other mall developers, consumer
brands and retailers at this time. There is no certainty that any additional
developers, retailers or consumer brands will enter into agreements with the SMO
at this time.
SMO has entered into agreement with Solo Search, Inc. to provide a software
solution that will interface with the SMO website to facilitate on-line searches
for sales information. The anticipated launch date for the new SMO web site is
expected in the third quarter, 2000.
In addition, SMO is pursuing potential strategic relationships with several
companies that have created a kiosk concept suitable for the SMO marketing
model. Some of those companies already have several mall developers under
contract at this time. As of August 11, 2000, SMO has not finalized an agreement
with any of these companies. The company cannot guarantee that an agreement will
be reached nor can it rely on previous contracts and commitments made to that
company. If no agreement is reached with these companies, SMO has already priced
the anticipated design and building of several prototypes through a third-party
vendor. If necessary, this vendor can complete the prototype, test it and
finalize a commercial unit based on the SMO concept in approximately 90 days
WavePower finalized their Plan of Operation as of June 26, 2000. Based
on that plan, the company has begun final development of its software and
services. WavePower has defined their initial target market as the hotel
industry and are active in creating relationships at this time. They have also
identified several strategic relationships that may expedite their time to
market and have begun conversations about a mutually advantageous working
agreement.
Enter Tech Corporation has continued to develop our plan of a kiosk through
which to market computer software, music and possibly digital video products. We
have identified a company that has created a kiosk concept acceptable to the
company and are negotiating terms for both a national and international joint
marketing license. If such a license is completed, the company believes it may
be able to bring a commercially viable kiosk to market within 12 months. In the
event the license agreement does not transpire, the company may continue its
efforts to develop a prototype However, we cannot assure you that we will ever
be able to develop a commercially successful kiosk, nor can we assure you that
any kiosk concept licensed from another company will be a commercially viable
product.
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We plan to identify and investigate merger and acquisition candidates that
may be brought to our attention through our present associations. We plan to
evaluate the candidates using broad criteria. We expect that negotiations with a
target company will focus on the percentage of our common stock, as computed
following a merger or acquisition, that the target company's stockholders would
receive for their share holdings in the target company. Depending upon, among
other things, the target company's assets and liabilities, our stockholders will
in all likelihood experience dilution in their interest in us following any
merger or acquisition.
We have not established a specific level of revenues, earnings or assets
below which we would not consider a potential target company for an acquisition
or alliance. Moreover, we may identify an attractive target company that may
currently be generating losses but which we believe has a promising business
plan. Although we plan to proceed with what we believe is an appropriate level
of due diligence in implementing this strategy, we cannot assure you that any
acquisition or alliance will be successful or that we will achieve the expected
benefits from the transaction.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, Enter Tech had $92,526 in cash, and current
liabilities of $947,984. This represented a working capital deficit of $855,458.
As of June 30, 2000, Enter Tech had no material commitments for capital
expenditures and no plans to pay dividends to its shareholders.
If completed, the Reserve Foundation Trust private placement financing is
expected to provide Enter Tech with funds to continue the process of developing
the kiosk concept, launching Shopping Mall Online and WavePower within the next
12 months. If the Trust private placement is not completed, or another source of
substantial funding is not found, Enter Tech anticipates that it may not be able
to maintain a development schedule that may still move the projects forward and
Enter Tech will be dependent upon the acquisition of additional capital to fund
its operations over the next 12-month period.
Enter Tech is also continuing to evaluate the option of acquiring a "kiosk
company" which has already developed some or all of the concepts conceived by
Enter Tech. Such a company has been identified, but as mentioned previously, the
company is more focused on creating an initial licensing agreement rather than
acquisition at this time. As this strategy proceeds, Enter Tech is anticipating
the possibility of licensing this technology in foreign countries. We cannot
assure you that any commercially favorable relationships with prospective
licensees will be established. If the kiosk concept can be developed, additional
employees will be needed based upon the development schedule of the kiosk. If a
"kiosk company" is acquired, Enter Tech will be required to evaluate the need of
any current or potential employees of the "kiosk company." If a strategic
relationship such as a licensing agreement is reached, the company will likely
need minimal employee changes through the development of the project.
If the kiosk concept is developed by Enter Tech as conceived, Enter Tech
currently plans to have the product manufactured on a contract basis with a
third party manufacturer. Therefore, Enter Tech does not plan to acquire
significant additional plant and equipment for the purpose of manufacturing the
kiosk. No assurances can be made as to if the kiosk concept will ever be fully
developed or if a "kiosk company" can be acquired. There is no assurance that
the kiosks will function as planned if Enter Tech is able to develop the kiosks,
or acquire a "kiosk company", or be manufactured at a unit cost commercially
favorable to Enter Tech. We cannot assure you that Enter Tech will be able to
generate any revenues from sales or that any sales will be made of kiosks or
from kiosk vending operations.
Provided that the pending private placement financing is completed, it is
anticipated that the funds should also be able to finance the operations of
Shopping Mall Online, Inc. for the next 12 months. As of Aug 11, 2000 Shopping
Mall Online has 9 personnel. Additional operational personnel will be required
within each department. Enter Tech and its subsidiaries currently have 19
employees, and plan to hire an additional 10 employees by December 31, 2000.
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Shopping Mall Online has entered into a lease for approximately 4700 square
feet of office space located at 914 Citadel Drive #B1, Everson, Washington for a
period of two years commencing on June 1, 2000 in the amount of $2,700 per
month. The space is anticipated to be sufficient to house server computers and
the communication backbone to host the web sites and provide adequate access to
the online mall. Shopping Mall Online is investigating a license agreement for
an established e-commerce application software package from a reputable third
party, but this does not preclude the possibility that modifications and
independent research or development could be needed. In addition, Shopping Mall
Online has licensed software from Solo Search, Inc., which is used to provide
sales information and search capabilities for the Shoppingmallonline.com web
site. There is no assurance that Shopping Mall Online will become a viable
business or generate any revenues from the activities it plans to undertake.
Online shopping is crowded with many vendors and there is nothing to prevent any
other person or company from pursuing this potential line of business. It is
possible that the WavePower acquisition could provide a compatible synergy to
the efforts of Shopping Mall Online, Inc. and any kiosk development by Enter
Tech or a "kiosk company" Enter Tech may contemplate acquiring or licensing due
to the technology developed by WavePower.
WavePower's technology could enhance the kiosk operational design. The
acquisition of WavePower may enhance the effectiveness of Shopping Mall Online's
commerce activity and vice versa. Additional employees will be required to
continue the development process of WavePower, most of whom are expected to be
technical professionals.
Enter Tech anticipates that with the pending private placement funds, we
will be able to finance WavePower to continue operations and develop the
infrastructure needed to generate revenue, however it is the intention of Enter
Tech to aggressively identify other sources of capital for development of Enter
Tech and all of its subsidiaries as is necessary for continued operation and to
generate revenues. IF the Reserve Foundation Trust funding is not completed in a
timely manner, it is the opinion of management that Enter Tech will have to
acquire additional capital to fund its operations during the next 12-month
period.
We are currently evaluating the projected capital needs for the development
of the kiosk and for the operation of Shopping Mall Online and WavePower.
Although we believe that the pending equity financing, if completed, will be
sufficient for our cash requirements for the next 12 months, we cannot assure
you that we will not need additional funds to fully and successfully implement
our strategy.
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements that involve risks and
uncertainties. All statements included in this report, other than statements of
historical facts, that address activities, events or developments that we
expect, believe or anticipate will or may occur in the future, are
forward-looking statements. These forward-looking statements include statements
about:
The future anticipated direction of the high technology and e-commerce
industries,
The pending $10 million equity financing from the Reserve Foundation Trust,
Planned licensing agreements with operating companies
Planned acquisitions of operating companies,
Plans for development, expansion and integration of companies which have
been acquired,
Planned capital and operating expenditures,
Future funding sources,
Anticipated revenues and sales growth, and
Overall business strategies.
These forward-looking statements are subject to a number of assumptions,
risks and uncertainties, including such factors as:
Technological developments and consumer preferences in the high technology
and e-commerce industries,
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The risk that the pending $10 million equity financing from the Reserve
Foundation Trust may not be completed,
Expected benefits from development, expansion and integration of acquired
companies,
Competition in the markets for our planned businesses,
The availability of adequate financing,
Dependence on existing management, and
Changes in laws or regulations affecting our plan of operation.
We caution you that our forward-looking statements are not guarantees of
future performance and that actual results or developments may differ materially
from those expressed or implied by the forward-looking statements.
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PART II -- OTHER INFORMATION
----------------------------
ITEM 1. LEGAL PROCEEDINGS.
---------------------------
Except as set forth herein the Company is not a party to any material
pending legal proceedings; nor are any such proceedings involving the Company
contemplated by a governmental authority to the knowledge of the Company.
On February 24, 2000, the Company initiated a civil action by it against
Jerry Stiles, a/k/a Gerald C. Stiles, a former officer of and consultant to the
Company, in the District Court of Douglas County, Colorado and Stiles answered
with a counterclaim as described in the 10QSB filing for the period ending March
31, 2000. As of August 11, 2000, there has been no material change in the status
of this suit.
On May 25, 2000, claimant David M. Matus in District Court of Larimar
County, Colorado named Enter Tech as a party in a suit along with 7 other
defendants. The Claim against Enter Tech centers around payment with common
stock for alleged services rendered to the company. The suit also collectively
claims Fraud by Deceit, Breach of Contract, Promissory Estoppel, Wage claims,
Breach of Contract with Respect to a Promissory Note, Securities Fraud in
Violation of the Colorado Securities Act and Extreme Conduct Causing Emotional
Distress. Matus is seeking actual damages, exemplary damages pursuant to C.R.S.
13-21-102, Special Damages, Interest, and reasonable attorneys' fees. Counsel
representing the collective parties filed an answer to the complaint on June 29,
2000. The collective parties do not believe there is any factual basis to the
claims for relief. As there has been no discovery to date and the case is its
early stages, we cannot predict the outcome of this litigation at this time.
ITEM 2. CHANGES IN SECURITIES.
-------------------------------
RECENT SALES OF UNREGISTERED SECURITIES
For the period April 1, 2000 through August 18, 2000, Enter Tech issued the
following securities without registration under the Securities Act of 1933.
1. On April 19, 2000, Enter Tech issued 5,000,000 shares of common stock
and an option to purchase 3,000,000 shares of preferred stock to
Vernon Kendrick in exchange for 80% of the outstanding shares of
common stock of WavePower, Inc. Enter Tech also agreed to issue to Mr.
Kendrick an option to purchase up to 3,000,000 shares of preferred
stock exercisable at $.001 per share if certain future economic
performance standards are met by WavePower, Inc. See Item 2. of PART I
above. No person acted as an underwriter with respect to this issuance
and no underwriting discounts or commissions were paid therefore.
These securities were sold in reliance upon the exemption from the
registration requirements of Section 5 of the Securities Act as a
transaction no involving a public offering under Section 4(2) of the
Securities Act. The securities were: (I) acquired for investment; (ii)
issued to a consultant of the Company familiar with the Company; and
(iii) issued as "restricted securities" as defined under the
Securities Act. The Certificates issued to represent these securities
contain a restrictive legend denoting their status as restricted
securities. Mr. Kendrick had full access to information on Enter Tech
Corp. and its securities.
2. On June 6, 2000, Enter Tech entered in agreements with a consortium of
companies o facilitate development of markets and revenue sources,
strategic development partners, business intelligence, investor
relations and public relations efforts on a global basis. The company
issued shares of restricted stock to the following in return for the
promise of services to be rendered over the next 12-18 month period:
The Challenge Limited - 900,000 shares
Wall Street Relations Group - 300,000 shares
California Business Intelligence, Inc.- 300,000 shares
Profile Venture, Ltd. - 800,000 shares
Skyline Marketing Associates, Ltd. - 825,000 shares
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These shares were issued to the five organizations for promises to perform
for services rendered to the Company. No person acted as an underwriter with
respect to this issuance and no underwriting discounts or commissions were paid
therefore. These securities were sold in reliance upon the exemption from the
registration requirements of Section 5 of the Securities Act as a transaction no
involving a public offering under Section 4(2) of the Securities Act. The
securities were acquired for investment and issued as "restricted securities" as
defined under the Securities Act. The five organizations had full access to
information about the company and its securities.
ITEM 3. DEFAULTS IN SENIOR SECURITIES.
---------------------------------------
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITES HOLDERS.
--------------------------------------------------------------
Not Applicable
ITEM 5. OTHER INFORMATION.
---------------------------
Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
(a) Exhibits. The following Exhibits are furnished as part of this
report:
Exhibit 10.9 Voting Trust Agreement
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
1. A Report on Form 8-K dated July 17, 2000 was filed for the
Company on July 18, 2000 containing information in Item 2 on
the acquisition of 80% of the outstanding stock of
WavePower, Inc. Financial Statements filed with the Report
were:
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(a) Audited Financial Statements of 2M Systems, Inc. as of
December 31, 1999:
Report of Independent Public Accountants Balance Sheet
Statement of Operations
Statement of Changes in Stockholders (Deficit)
Statement of Cash Flows
Notes of Financial Statements
(b) Audited Financial Statements of WavePower, Inc. as of
December 31, 1999:
Report of Independent Public Accountants Balance Sheet
Statement of Operations
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes of Financial Statements
(c) Unaudited Financial Statements of WavePower, Inc. as of
March 31, 2000:
Balance Sheet
Statement of Operations
Statement of Changes in Stockholders Equity
Statement of Cash Flows
Notes of Financial Statements
(d) Pro Forma Financial Statements of WavePower, Inc., (WP)
Enter Tech Corp. and Consolidated Subsidiary (ETC)
Pro Forma Balance Sheet
Pro Forma Statements of Operations [WavePower Inc.
(WP) - Enter Tech Corp. and
Consolidated Subsidiary (ETC)]
Pro Forma Statements of Operations [WavePower Inc.
(WP) - Enter Tech Corp. and
Consolidated Subsidiary (ETC)]
Notes to Pro Forma Financial Statements
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SIGNATURES
----------
In accordance with the Exchange Act, the registrant caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ENTER TECH CORP.
Dated: August 18, 2000 By: /s/ Sam Lindsey
------------------------------------
Sam Lindsey, Chairman and Chief
Financial Officer
INDEX TO EXHIBITS
Page Number
Exhibit No. Description or Reference
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10.9 Voting Trust Agreement --
27 Financial Data Schedule --
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