UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 30549
FORM 10-QSB
(Mark One)
[ ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 2000
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
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Commission file number: 0-21275
Enter Tech Corp.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1349553
--------------------------------- -------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
430 East 6th Street, Loveland, Colorado 80537
---------------------------------------------
(Address of principal executive offices)
(970) 669-4918
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(Issuer's telephone number)
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(Former name, former address and former fiscal year
(if changed since last report)
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a Court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares outstanding of each of the issuer's classes of common
equity, as of November 14, 2000 was 24,153,004 shares of common stock.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
<PAGE>
INDEX
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Page
Number
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Part I. Financial Information
Item I. Financial Statements
Review Report of Independent Certified
Public Accountant 3
Consolidated Balance Sheets as of
September 30, 2000 and December 31, 1999 4
Consolidated Statements of Operations,
Three Months Ended September 30, 2000 and
September 30, 1999 5
Consolidated Statements of Operations,
Nine Months Ended September 30, 2000 and
September 30, 1999 6
Consolidated Statements of Cash Flows,
Nine Months Ended September 30, 2000 and
September 30, 1999 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 14
Part II. Other Information 19
Item 1. Legal Proceedings 19
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 20
Item 4. Submission of Matters to a Vote of Security Holders 20
Item 5. Other Information 20
Item 6. Exhibits and Reports on Form 8-K 20
Signatures 21
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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
September 30, 2000, and the related statements of operations and cash flows for
the three months and nine 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
November 17, 2000
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<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
September 30, December 31,
2000 1999
------------ ------------
Current Assets
Cash $ 12,045 $ 14
----------- ----------
Total Current Assets 12,045 14
Note receivable, related parties 7,002 -
Equipment, net of accumulated
depreciation of $8,803 103,457 7,373
Deferred offering costs 100,000 -
Other 13,911 -
----------- ----------
Total Assets $ 236,415 $ 7,387
=========== ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 167,196 $ 35,512
Stock compensation payable 66,825 1,103,574
Customer deposits 60,000 60,000
Related party payables 466,988 322,009
Notes payable, other 250,000 15,806
----------- ----------
Total Current Liabilities 1,011,009 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
22,581,098 shares issued and
outstanding 2,258 385
Additional paid-in capital 17,210,163 381,618
Stock subscriptions receivable, cash (9,400,000) -
Stock subscriptions receivable, services (4,449,914) -
Accumulated deficit (4,137,201) (1,911,517)
----------- ----------
Total Stockholders' (Deficit) (774,594) (1,529,514)
----------- ----------
Total Liabilities and
Stockholders' (Deficit) $ 236,415 $ 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
September 30, September 30,
2000 1999
------------- -------------
Revenues $ - $ -
------------ -----------
Operating Expenses:
Depreciation 3,824 -
Professional fees 208,766 59,906
Rent 136,688 1,850
Stock issued for services 515,150 -
Travel 50,254 1,216
Telephone 8,567 1,815
Sales promotion - -
Other 35,896 12,826
------------ -----------
Total Operating Expenses 959,145 77,613
------------ -----------
Net Loss to Common Shareholders $ (959,145) $ (77,613)
============ ===========
Net Loss Per Common Share $ (.04) $ (.03)
============ ===========
Weighted Average Number
of Shares Outstanding 22,319,549 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)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
Revenues $ - $ -
------------ -----------
Operating Expenses:
Salaries 129,943 -
Depreciation 7,984 -
Professional fees 494,555 139,256
Rent 169,820 8,900
Stock issued for services 1,133,148 -
Travel 117,770 14,882
Telephone 19,989 5,333
Sales promotion - 20,500
Other 152,475 20,488
------------ -----------
Total Operating Expenses 2,225,684 209,359
------------ -----------
Net Loss to Common Stockholders $ (2,225,684) $ (209,359)
============ ===========
Net Loss Per Common Share $ (.10) $ (.06)
============ ===========
Weighted Average Number
of Shares Outstanding 22,319,549 3,650,000
============ ===========
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
ENTER TECH CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Nine Months
Ended Ended
September 30, September 30,
2000 1999
------------- -------------
Cash Flows Operating Activities:
Net (loss) $(2,225,684) $ (209,359)
Adjustment to reconcile net
(loss) to net cash provided
by operating activities:
Depreciation 7,984 -
Stock for services 1,133,148 -
(Increase) in note receivable
related parties (7,002) -
Increase in accounts payable
and accrued expenses 131,684 15,905
Other 28,500 -
---------- ----------
Net Cash (Used in) Operating Activities (931,370) (193,454)
---------- ----------
Cash Flows from Investing Activities
(Investment) in equipment (68,272) (5,092)
Deferred offering costs (100,000) -
----------- ----------
Net Cash (Used in) Investing
Activities (168,272) (5,092)
----------- ----------
Cash Flows from Financing
Activities:
Common stock issued and
additional paid-in capital 732,500 -
Increase in notes payable 234,194 -
Increase in payable, related parties 144,979 198,546
----------- ----------
Net Cash Provided by Financing Activities 1,111,673 198,546
----------- ----------
(Decrease) in Cash 12,031 -
----------- ----------
Cash, Beginning of Period 14 -
=========== ==========
Cash, End of Period $ 12,045 $ -
=========== ==========
Interest Paid $ 125 $ -
=========== ==========
Income Taxes Paid $ - $ -
=========== ==========
The accompanying notes are an integral part of the financial statements.
-7-
<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
September 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
September 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.
On October 27, 2000, the Company agreed to sell the controlling interest in
Shopping Mall Online back to their management. See note 12.
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.
Effective September 26, 2000, the Company rescinded this Plan of Reorganization
and Acquisition. WavePower, Inc. has not agreed to return the Company's common
stock nor funds delivered to WavePower during the period from April 19, 2000
through the date of rescission.
(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
September 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. This fact raises
substantial doubt about the Company's ability to continue as a going concern.
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 would 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 would 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 September 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.
-10-
<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
September 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 September
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 September 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.
(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.
-11-
<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
September 30, 2000
(Unaudited)
(9) Employment/Consulting Contracts, continued
------------------------------------------
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 related
party who is a financial management company, whereby the related party 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 September 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. These two employment
agreements were rescinded along with the rescission of the purchase of
WavePower.
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 $823,523 to an expense representing the
services performed as of September 30, 2000. In November 2000, the Company
rescinded these agreements and requested the 3,125,000 shares be returned to the
Company. See note 12.
-12-
<PAGE>
ENTER TECH CORPORATION
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
September 30, 2000
(Unaudited)
(11) Common Stock
------------
During July 2000, the Company was unable to pay its payroll and payroll taxes.
The Company employees agreed to an option of being paid through the issuance of
S-8 stock. The Company issued 58,098 in S-8 stock as compensation for these
employees during the quarter ended September 30, 2000.
During August, 2000, the Company hired an entity to procure additional
short-term funding. As a result, the Company issued 2,000,000 shares of its
restricted common stock. The entity sold 370,000 shares of such stock to a third
party for $60,000. The Company has received $10,000, the entity received $15,000
in commissions, and the balance of $35,000 remains due and owing to the Company.
The remaining 1,630,000 shares were returned to the Company and canceled.
(12) Subsequent Events
-----------------
Effective October 12, 2000, the Company entered into a joint venture agreement
with an Internet service provider whereby the Company agreed to use this
provider as its exclusive telecommunications "last mile" solutions and Internet
service provider.
Effective October 27, 2000, the Company agreed to sell the controlling interest
in its subsidiary, Shopping Mall Online, Inc. back to management. The Company
would redeem 1,920,000 shares of the Company's common stock from the president
of Shopping Mall Online, Inc. in exchange for 1,440,000 shares of Shopping Mall
Online's common stock being held by the Company. The president of Shopping Mall
Online would retain 480,000 restricted shares of the Company's common stock, and
the Company would retain 480,000 shares of Shopping Mall Online's common stock.
Also effective October 27, 2000, the Company entered into a joint venture
agreement with an entity whereby the Company agreed to purchase 30 dual terminal
digital vending machines at a price of $125,000 plus expenses and 60 single
terminal digital vending machines at a purchase price not yet determined within
three months. The Company agreed to purchase an additional 30 dual terminal
digital vending machines at a price of $125,000 plus expenses and 60 single
terminal digital vending machines at a purchase price not yet determined within
nine months. The Company is also responsible to license this technology and to
promote, develop a market, sell and distribute custom music CD products created
by the digital vending machines. The term of this agreement shall become
effective on the date the manufacturer receives the first purchase order and
shall continue for five years, unless terminated in accordance with the terms of
the agreement.
During November 2000, the Company rescinded its agreements with various
companies to provide various marketing and other services. The Company had
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 believes that these companies' conduct was in
violation of federal securities laws, state securities and common law and has
threatened to file a complaint if the 3,125,000 shares are not returned by
November 22, 2000.
-13-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------- ---------------------------------------------------------
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 principal 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. On
October 27, 2000 Enter Tech entered into a licensing agreement with Hitdisc,com
Inc., a company which has developed a similar commercially viable kiosk. For
discussion of proposed operations under this agreement, see DESCRIPTION OF OUR
CURRENT PLAN OF OPERATION. We continue to focus on a strategy of 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
On August 2, 2000 Enter Tech entered in an agreement with Profile Venture,
Ltd to establish several possible investment groups or partners for immediate
funding needs of the company. The management of Profile agreed to enter into a
subscription agreements for a total of one million dollars in the next 10 days
for two million shares of Enter Tech restricted stock. Due to the urgency of the
financial situation and the relationship with Profile management, the board
concluded that sending stock prior to having an executed subscription agreement
was reasonable, as Profile management indicated that the stock would be held in
escrow until the funds were released. Management of Profile then presented a
subscription agreement to Enter Tech management that was immediately rejected.
Profile indicated that this was only a draft agreement, but as further due
diligence was completed, Enter Tech found that an agreement had already been
consummated and that funds for 100,000 shares at $0.60 per share had been
exchanged between Profile and a third party. The funds resulting from that
transaction were not delivered to Enter Tech. The company immediately demanded
delivery of the funds and all remaining stock. Profile management returned all
but 270,000 shares and the 100,000 shares that had been sold to the third party.
On further investigation Enter Tech found that these restricted shares were
committed as part of this contract as an escrow agreement held against
registration of the stock for public trading. The management and legal counsel
for Enter Tech are aggressively working towards a solution in this matter.
Default on 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 is deemed is
appropriate and in the best interest of the officers, directors, management,
employees and shareholders of Enter Tech. Counsel delivered an opinion letter to
the management of Enter Tech on this issue on August 17, 2000. After review, a
formal letter from Enter Tech counsel was forwarded to the known agents of the
Trust on September 4, 2000 notifying them of default and a demand to perform.
The Company has not received any response from the Trust and is considering
instituting further legal actions and possible collection proceedings.
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<PAGE>
Recision of 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. On September 12, 2000 Enter Tech Corporation notified management of
WavePower of the formal rescission of the Reorganization Agreement dated April
19, 2000, citing several material misrepresentations as to the intellectual
property owner by WavePower, the status of the development of Wavepower products
and services, the ability of WavePower to bring its products and services to
market and the overall originality and viability of the WavePower concept. The
letter also served as a demand for return of all stock and funds issued pursuant
to that agreement. The transfer agent has been notified that all shares involved
in this transaction are not to be transferred.
S-8 Stock Registration
----------------------
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. Qualified employees in general agreed to this method
of payment and signed agreements to authorize this method of payment on
September 1, 2000. The Company filed a Registration Statement on Form S-8 on
September 12, 2000 in the total aggregate amount of 58,098 shares. Those shares
were issued to employees as compensation for the period ending September 30,
2000.
New Board Member
----------------
On September 1, 2000 the Board of Directors of Enter Tech Corporation
appointed William H. Carpenter Jr. to the board. This appointment was based upon
the reorganization agreement with Shopping Mall Online, Inc. and their right to
appoint a member to the board of directors of Enter Tech. Mr. Carpenter was the
Shopping Mall Online, Inc. designated appointment. Mr. Carpenter resigned from
the Enter Tech board upon the buy-back of Shopping Mall Online by its management
as discussed
Termination of Marketing Agreements
-----------------------------------
On June 6, 2000, Enter Tech Corporation and 4 companies entered into
marketing and service agreements for various parts of the world. On September
13, 2000 Enter Tech formally notified each group that their contracts were
cancelled because of lack of performance and potential legal issues and all
3,100,000 restricted common stock issued for future services be returned to
Enter Tech immediately. Those companies are:
Profile Venture, Ltd,. 800,000 shares
The Challenge, Ltd, 900,000 shares
Skyline Marketing Associates, Ltd. 825,000 shares
Wall Street Relations Group 300,000 shares
The transfer agent has been notified that all shares involved in this
transaction are not to be transferred.
NCG Joint Venture Agreement
---------------------------
On October 13, 2000, Enter Tech Corporation entered into a joint venture
agreement with Northern Communications Group, Inc. (NCG) to provide "last mile"
communications solutions and management for connectivity of the HitDisc music
kiosks and other projects requiring communications expertise. NCG has also been
developing a high speed, wireless Internet Service Provider (ISP) system that
will be deployed as part of the last mile solutions, not only for the kiosk
projects, but for other business to business market segments.
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<PAGE>
Hitdisc.com, Inc. Licensing Agreement
-------------------------------------
On October 27, 2000, Enter Tech Corporation entered into a licensing
agreement with Hitdisc.com, Inc. whereas Enter Tech will capitalize the
production of the Hitdisc "ZapDisc" (TM) kiosk and assist in the placement of
the equipment. Hitdisc will provide all management of operational aspects of the
kiosk, including royalties, software programming, and daily information updates.
As part of the agreement, NCG will be responsible for communications for kiosks
purchased and deployed by Enter Tech as part of the licensing agreement.
Shopping Mall Online, Inc. Buys Back Company
--------------------------------------------
On October 27, 2000, Enter Tech Corporation agreed to sell the controlling
interest in its subsidiary, Shopping Mall Online, Inc. (SMO) back to their
management. The change of control will consist of SMO and its principal
shareholder, Robert Pratt Jr. returning the majority of Enter Tech stock in
exchange returning control of the company to management. SMO will retain 480,000
shares of Enter Tech restricted common stock. Enter Tech will retain a minority
stock position in Shopping Mall Online with 480,000 shares of SMO stock. In
addition, William H. Carpenter, Jr. recently appointed to the board of directors
of Enter Tech Corporation, will resign immediately and take a similar board
position with Shopping Mall Online, Inc.
The current number of shares issued and outstanding as of September 30 was
24,153,004 shares, which includes 303,098 shares of additional restricted common
stock issued for S-8 employees stock, and several subscription agreements prior
to September 30, 2000 as outlined in Item 2 of this document. However it should
be noted that 6,000,000 shares issued as part of the Reserve Foundation Trust
Subscription Agreement are being held by the Company and have not been reverted
back to treasury. In addition, 1,920,000 shares of Enter Tech restricted common
stock have been returned to the Company as part of the buy-back agreement with
management of Shopping Mall Online, Inc. These shares have not been reverted to
treasury. Profile Venture, Ltd. returned 1,630,000 shares of restricted common
stock that have not been reverted to treasury. Approximately 9,550,000 shares of
Enter Tech stock is ready as of the date of this filing to be returned to
treasury, bringing the total number of Enter Tech shares issued and outstanding
to 14,603,004. The 5,000,000 restricted shares of Enter Tech common stock issued
as part of the Wavepower, Inc acquisition will subsequently be returned to
treasury once the rescission of the acquisition is finalized. The 3,100,000
shares of stock issued to the marketing groups are described above will also be
reverted to treasury once received by the company. Pending unforeseen issues and
complications, the total number of shares of Enter Tech common stock will be
reduced by approximately 17,650,000 shares. The total amount of Enter Tech
Corporation shares issued and outstanding could potentially be reduced to
approximately 6,503,004 shares.
DESCRIPTION OF OUR CURRENT PLAN OF OPERATION
On October 27, 2000 Enter Tech entered into a licensing agreement with
Hitdisc.com, Inc., a manufacturer of a kiosk compatible with the concept and
design of the company. The agreement calls for Enter Tech to purchase and deploy
the Hitdisc kiosks and to provide the communications infrastructure for those
units in conjunction with NCG. Hitdisc.com, Inc. will provide management for the
entire kiosk system including management of royalties, software development and
all normal operational aspects. Northern Communications Group, Inc. entered into
a joint venture agreement with Enter Tech on October 13, 2000, whereas they will
be the exclusive provider of communications needs for Enter Tech projects
including all communications installation and management for the Hitdsic kiosk
purchased and deployed by Enter Tech. 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.
We have not established a specific level of revenues, earnings or assets
below which we would not consider a potential target company for an alliance.
Moreover, we may identify an attractive target company that may currently be
generating losses but which we believe has a promising business plan and viable
products. 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 alliance will be successful or that we will achieve the expected benefits
from the transaction.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2000, Enter Tech had $12,045 in cash, and current
liabilities of $1,011,009. This represented a working capital deficit of
$998,964.
As of September 30, 2000, Enter Tech had no material commitments for
capital expenditures and no plans to pay dividends to its shareholders.
Since the Company can only assume that the Reserve Foundation Trust private
placement will not completed, and that another source of substantial funding has
not yet been finalized, 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 has established a marketing strategy and licensing agreement in
conjunction with Hitdisc.com, Inc. to purchase and deploy their music kiosk in
various retail locations around the country. We cannot assure you that any
commercially favorable relationships with prospective licensees or placement of
their kiosks in retail outlets will be established. There is no assurance that
the kiosks will function as planned by Enter Tech and Hitdisc, or can 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.
NCG's technology is designed to enhance the kiosk operational design and
provide potential customers via wireless connectivity in the mall or retail
location in addition to the business to business market segment NCG has targeted
as part of their marketing plan.. The agreement with NCG may enhance the
effectiveness of the Hitdisc kiosk commerce activity and vice versa. Additional
employees will be required to continue the development process of the services
provided by NCG, most of who are expected to be technical professionals. However
it is anticipated that these individuals will be in the employ of NCG, not Enter
Tech.
We are currently evaluating the projected capital needs for the deployment
of the kiosk in conjunction with Hitdisc.com, Inc. and for operation of the
agreement with NCG.
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,
Planned licensing agreements with operating companies
Planned acquisitions of operating companies,
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:
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<PAGE>
Technological developments and consumer preferences in the high technology
and e-commerce industries,
The risk of potential litigation on the rescission of the WavePower
Reorganization Agreement,
Expected benefits from development, expansion and integration of alliance
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.
-18-
<PAGE>
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 Oct 13, 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 as described in the Second Quarter 10-QSB.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 July 1, 2000 through October 13, 2000, Enter Tech issued the
following securities without registration under the Securities Act of 1933.
On August 2, 2000 Enter Tech entered in an agreement with Profile Venture,
Ltd to establish several possible investment groups or partners for future
funding needs of the company. The management of Profile indicated that there
would be subscription agreements for a total of one million dollars in the next
10 days. Enter Tech arranged for stock to be issued with instructions to be held
in escrow until such a time as these fund and agreements were finalized.
Management of Profile then presented a subscription agreement to Enter Tech
management that was immediately rejected. Profile indicated that this was only a
draft agreement, but as further due diligence was completed, Enter Tech found
that the agreement had already been consummated and that funds had been
exchanged between Profile and a third party. Those funds resulting from that
transaction were not delivered to Enter Tech. The company immediately demanded
delivery of the funds and all remaining stock held in the escrow account.
Profile management returned all but 370,000 shares. On further investigation
Enter Tech found that these restricted shares were committed as part of this
illegal contract as an escrow agreement held against registration of the stock
for public trading.
On August 18, 2000 Enter Tech sold 25,000 shares of restricted common stock
to Larry G. and Donna J. Heinrich at $.50 per share for a total of $25,000 cash.
An additional 20,000 shares were sold to them on August 28, 20,000 at $.50 per
share for a total of $10,000. These securities were sold in reliance upon the
exemption from the registration requirements of Section 5 of the Securities Act
as a transaction not involving a public offering under Section 4(2) of the
Securities Act. Ms. Paula Kanervikkoaho acted as a finder in these transactions
for a fee of $2,250. These securities were sold pursuant to written Stock
Purchase and Subscription Agreements The material information on Enter Tech and
its securities was made available to the purchasers and Certificates were issued
as "restricted securities" as defined under the Securities Act. The Certificates
issued representing these securities contain a restrictive legend denoting their
status as restricted securities.
On August 22, 2000 Enter Tech entered a stock purchase and Subscription
Agreement with Arthur Hogan wherein 50,000 shares of restricted common stock
were exchanged for $25,000 cash. These securities were sold pursuant to written
Stock Purchase and Subscription Agreements The material information on Enter
Tech and its securities was made available to the purchasers and Certificates
were issued as "restricted securities" as defined under the Securities Act. The
Certificates issued representing these securities contain a restrictive legend
denoting their status as restricted securities.
-19-
<PAGE>
On August 28, 2000 Enter Tech entered a stock purchase and Subscription
Agreement with Sorosto Construction, Inc. and Barry Shefner wherein 50,000
shares of restricted common stock were exchanged for $25,000 cash. These
securities were sold pursuant to written Stock Purchase and Subscription
Agreements. The material information on Enter Tech and its securities was made
available to the purchasers and Certificates were issued as "restricted
securities" as defined under the Securities Act. The Certificates issued
representing these securities contain a restrictive legend denoting their status
as restricted securities.
On September 7, 2000 Enter Tech entered a stock purchase and Subscription
Agreement with Joe Pike wherein 100,000 shares of restricted common stock were
exchanged for $50,000 cash. These securities were sold pursuant to written Stock
Purchase and Subscription Agreements The material information on Enter Tech and
its securities was made available to the purchasers and Certificates were issued
as "restricted securities" as defined under the Securities Act. The Certificates
issued representing these securities contain a restrictive legend denoting their
status as restricted securities.
All of the above 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. No person acted as an underwriter with respect to the issuances of these
securities and no underwriting discounts or commissions were paid theron. The
securities were acquired for investment and issued as "restricted securities" as
defined under the Securities Act.
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 27.1 - Financial Data Schedule
(b) Reports on Form 8-K
A report on Form 8-K dated September 12, 2000 was filed for the
Company on October 3, 2000 containing information in Item 5 on the
rescission of Wavepower, Inc. transaction. No financial statements
were filed with the report.
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<PAGE>
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: November 17, 2000 By: /s/ Sam Lindsey
---------------------------------------
Sam Lindsey, Chairman and Chief
Financial Officer
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