UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 0R 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
INITIAL QUARTERLY REPORT FOLLOWING
EFFECTIVE DATE OF REGISTRATION
Commission File Number 0-29915
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FREFAX INC.
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(Exact name of small business issuer as specified in its charter)
FLORIDA 65-0786722
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or organization)
1255 University, Suite 1604, Montreal, H3B3X3
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(Address of principal executive offices)
(561) 368 - 1427
------------------
Issuer's Telephone
270 NW 3rd Court, Boca Raton. Florida 33432-3720
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(Former name, former address and former fiscal year,if changed from last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes _X_ No ___
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 _X_
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issu&s classes of
common equity, as of the latest practicable date:
19,446,000 - Common stock as of September 30, 2000
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Transitional Small Business Disclosure Format (Check One) Yes [ ] No [x]
<PAGE>
TABLE OF CONTENTS
PART I ............................................................... 1
ITEM 1. FINANCIAL STATEMENTS.................................. 1
ITEM 2. PLAN OF OPERATION..................................... 1
PART II............................................................... N/A
SIGNATURES............................................................ 2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
Attached unaudited financial statements for Frefax, Inc. (FC) and
subsidiary, for the period ending September 30th, 2000 are submitted in
compliance with item 310 (b) of Regulation SB.
ITEM 2. PLAN OF OPERATION
The plan of operation from the corporations' point of view is
summarized as follows:
1. FC has not received or generated revenues as of the end of this quarter
ending September 30th 2000.
2. FC has not purchased or sold any significant equipment or assets.
3. FC has no significant change of employees.
4. FC is in the process of diversifying its core business from developing
communication technology to a real estate development company, which
would also acquire and develop environmental technologies to be used in
numerous applications, such as soil decontamination and ground-water
decontamination.
5. Based upon the above mentioned corporate strategy to diversify from its
core business the corporation anticipates raising approximately three
million dollars in additional funds within the next 12 months.
1
<PAGE>
SIGNATURES
In accordance with the requirements of Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
FREFAX, INC.
(Registrant)
Date: November 13, 2000 By: /s/ Tony Papa
-------------------------
Tony Papa
President & Chief Executive Officer
2
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND
CUMULATIVE FROM
SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000
(UNAUDITED)
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Page
number
Consolidated balance sheet at September 30, 2000 (unaudited)
and June 30, 2000 F-1
Consolidated statements of operations and comprehensive
income (loss) (unaudited) for the three months ended
September 30, 2000 and 1999 and cumulative from
September 26, 1997 (date of inception) to September 30, 2000 F-2
Consolidated statement of stockholders' deficiency (unaudited)
for the period from September 26, 1997 (date of inception)
to September 30, 2000 F-3 - F-4
Consolidated statements of cash flows (unaudited) for the
three months ended September 30, 2000 and 1999 and cumulative from
September 26, 1997 (date of inception) to September 30, 2000 F-5
Notes to consolidated financial statements F-6 - F-9
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, 2000
2000 June 30,
(unaudited) 2000
----------------- -----------------
<S> <C> <C>
Current assets:
Cash $ 280 $ 280
Recoverable use tax 4,656 4,656
----------------- -----------------
Total current assets 4,936 4,936
Furniture, fixtures and equipment, net 80,611 80,611
----------------- -----------------
Total assets $ 85,547 $ 85,547
================= =================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accrued expenses - Related party $ 28,500 $ 28,500
Loans from related party 148,689 148,689
----------------- -----------------
Total current liabilities 177,189 177,189
----------------- -----------------
Commitments and contingencies (Note 4) - -
----------------- -----------------
Stockholders' deficiency:
Common stock - $.001 par value, 50,000,000 shares authorized,
19,446,000 shares issued and outstanding 19,446 19,446
Additional paid-in capital 180,864 180,864
Accumulated deficit during the development stage (87,973) (87,973)
Accumulated other comprehensive income (loss) (11,372) (11,372)
Stock subscriptions receivable (192,607)
------------------
(192,607)
Total stockholders' deficiency (91,642) (91,642)
----------------- ----------------
Total liabilities and stockholders' deficiency $ 85,547 $ 85,547
================= ================
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-1
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
from
For the three For the three September 26, 1997
months ended months ended (date of inception)
September 30, 2000 September 30, 1999 to September 30, 2000
----------- ----------- ------------
<S> <C> <C> <C>
Income $ -- $ -- $ --
----------- ----------- ------------
Expenses:
Selling, general and administrative expenses -- 3,231 83,863
Research and development -- 3,317 17,864
----------- ----------- ------------
Total expenses -- 6,548 101,727
Loss before other income
(expense) and provision for income taxes -- (6,548) (101,727)
----------- ----------- ------------
Other income (expense):
Gain on foreign currency transactions -- 3,625 8,638
Interest income -- 947 5,580
Interest expense -- (126) (464)
----------- ----------- ------------
Total other income (expense) -- 4,446 13,754
----------- ----------- ------------
Loss before provision for income taxes -- (2,102) (87,973)
Provision for income taxes -- -- --
----------- ----------- ------------
Net (loss) -- (2,102) (87,973)
Other items of comprehensive income (loss) -- (3,809) (11,372)
----------- ----------- ------------
Comprehensive net (loss) $ -- $ (5,911) $ (99,345)
=========== =========== ============
Basic:
Net (loss) $ -- $ NIL $ (.01)
=========== =========== ============
Weighted average number of
common shares outstanding 19,446,000 19,446,000 13,144,649
=========== =========== ============
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-2
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION)
TO SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
Accumulated Accumulated
Common Stock Additional Deficit Other Stock Total
----------------- Paid-in During the Comprehensive Subscriptions Stockholders'
Shares Amount Capital Development Stage Income (Loss) Receivable Deficiency
------ ------ ------- ----------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Issuance of common stock upon
capitalization of company 500,000 $ 500 $ 2,000 $ -- $ -- $ -- $ 2,500
Issuance of common stock in
connection with limited offerings 403,000 403 297 -- -- -- 700
Net loss from date of inception
(September 26, 1997) to June 30, 1998 -- -- -- (2,954) -- -- (2,954)
---------- ---------- ---------- ---------- -------- -------- ----------
Balances at June 30, 1998 903,000 903 2,297 (2,954) -- -- 246
Issuance of common stock in
connection with acquisition
of subsidiary 10,000,000 10,000 -- -- -- -- 10,000
Issuance of common
stock in connection with
limited offering
(November 1998) 6,001,000 6,001 54,009 -- -- (60,010) --
Issuance of common
stock in connection with
limited offering
(February 1999) 2,542,000 2,542 124,558 -- -- (127,100) --
Accrued interest on
subscriptions receivable -- -- -- -- -- (1,755) (1,755)
Foreign currency
translation adjustment -- -- -- -- (6,436) -- (6,436)
Net loss for the year ended
June 30, 1999 -- -- -- (49,719) -- -- (49,719)
---------- ---------- ---------- ---------- -------- -------- ----------
Balances at June 30, 1999 (forwarded) 19,446,000 19,446 180,864 (52,673) (6,436) (188,865) (47,664)
---------- ---------- ---------- ---------- -------- -------- ----------
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-3
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY
FOR THE PERIOD FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO
SEPTEMBER 30, 2000 (UNAUDITED) (cont'd)
<TABLE>
<CAPTION>
Accumulated Accumulated
Common Stock Additional Deficit Other Stock Total
----------------- Paid-in During the Comprehensive Subscriptions Stockholders'
Shares Amount Capital Development Stage Income (Loss) Receivable Deficiency
------ ------ ------- ----------------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at June 30, 1999
(from previous page) 19,446,000 $ 19,446 $ 180,864 $ (52,673) $ (6,436) $ (188,865) $ (47,664)
Accrued interest on
subscriptions receivable -- -- -- -- -- (3,742) (3,742)
Foreign currency
translation adjustment -- -- -- -- (4,936) -- (4,936)
Net loss for the year
ended June 30, 2000 -- -- -- (35,300) -- -- (35,300)
---------- ---------- ---------- ------------ ---------- ---------- ---------
Balances at June 30, 2000 19,446,000 19,446 180,864 (87,973) (11,372) (192,607) (91,642)
Net income (loss) for the quarter
ended September 30, 2000 -- -- -- -- -- -- --
---------- ---------- ---------- ------------ ---------- ---------- ---------
Balances at September 30, 2000 19,446,000 $ 19,446 $ 180,864 $ (87,973) $ (11,372) $ (192,607) $ (91,642)
========== ========== ========== ============ ========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-4
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
from
For the three For the three September 26, 1997
months ended months ended (date of inception)
September 30, 2000 September 30, 1999 to September 30, 2000
------------------ ------------------ ---------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ -- $ (2,102) $ (87,973)
Adjustments to reconcile net (loss) to net
cash used for operating activities:
Foreign currency translation -- (3,809) (11,372)
Depreciation -- 1,304 7,891
Interest income on subscriptions receivable -- (1,261) (5,497)
(Increase) decrease in:
Recoverable use tax -- (449) (4,656)
Security deposits -- (117) --
Increase (decrease) in:
Accounts payable and accrued expenses -- (11,482) 28,500
------- ----------- ---------
Net cash used for operating activities -- (17,916) (73,107)
------- ----------- ---------
Cash flows from investing activities:
Purchase of furniture, fixtures and equipment -- (139) (88,502)
------- ----------- ---------
Net cash used for investing activities -- (139) (88,502)
------- ----------- ---------
Cash flows from financing activities:
Proceeds from initial capitalization of
company and from sale of common
stock in connection with private placements -- -- 3,200
Loans from related parties -- 16,916 158,689
------- ----------- ---------
Net cash provided by financing activities -- 16,916 161,889
------- ----------- ---------
Net (decrease) increase in cash -- (1,139) 280
Cash, beginning of period 280 3,813 --
------- ----------- ---------
Cash, end of period $ 280 $ 2,674 $ 280
======= =========== =========
Supplemental disclosure of non-cash flow information:
Cash paid during the year for:
Interest $ -- $ -- $ --
======= =========== =========
Income taxes $ -- $ -- $ --
======= =========== =========
Schedule of non-cash investing activities:
Issuance of 8,543,000 shares of common stock
in exchange for subscription receivables $ -- $ -- $ 187,110
======= =========== =========
</TABLE>
See accompanying notes to consolidated financial statements (unaudited)
F-5
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
AND
CUMULATIVE FROM SEPTEMBER 26, 1997 (DATE OF INCEPTION) TO SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1 - ORGANIZATION
Frefax, Inc. (the "Company") was incorporated in the State of
Florida on September 26, 1997 as Central Group, Inc. The name of
the Company was changed on September 15, 1998 to its current name.
Pursuant to the stock purchase agreement dated July 30, 1998
between the Company and the shareholders of Frefax, Inc. (Canada),
("Frefax Canada"), a company incorporated in the province of
Ontario, Canada, the Company issued an aggregate of 10,000,000
shares of its $.001 par value common stock to the shareholders of
Frefax Canada in exchange for 100% of Frefax Canada's issued and
outstanding common stock. Accordingly, Frefax Canada became a
wholly owned subsidiary of the Company. Such transaction is
considered a capital transaction whereby Frefax Canada contributed
its stock for the net book value of the Company.
Frefax Canada was incorporated on September 5, 1996 for the
purpose of developing software to be utilized in reducing long
distance telephone fax charges.
As of September 30, 2000, the Company and Frefax Canada are
considered to be development stage companies (See Note 6).
For the quarter ended September 30, 2000, the Company had no
operations since its currently in the process of redirecting its
core business into the development of real estate.
The Company is in the process of diversifying its core business
from developing communication technology into a real estate
development company, which would also acquire environmental
technologies to be used in numerous applications.
In connection with diversifying its core business, on August 30,
2000, the Company entered into memorandum of agreements with four
Canadian individuals whereby the Company intends on buying their
ownership interest (by issuance of its common stock) in Zaveco
Development Corporation a newly formed Canadian corporation
("Zaveco"). Zaveco is in the process of acquiring land in Quebec,
Canada for $4,000,000 with the intent of developing into
approximately 265,000 square feet of retail space.
NOTE 2 - INTERIM RESULTS AND BASIS OF PRESENTATION
The unaudited consolidated financial statements as of September
30, 2000 and for the three month periods ended September 30, 2000
and 1999 have been prepared in accordance with generally accepted
accounting principles for interim financial information and with
the instructions to Form 10-QSB and Items 303 and 310(b) of
Regulation S-B.
F-6
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 2 - INTERIM RESULTS AND BASIS OF PRESENTATION (cont'd)
In the opinion of management, the unaudited consolidated financial
statements have been prepared on the same basis as the annual
financial statements and reflect all adjustments, which include
only normal recurring adjustments, necessary to present fairly the
financial position as of September 30, 2000 and the results of our
operations and cash flows for the three month periods ended
September 30, 2000 and 1999. The results for the three month
periods ended September 30, 2000 are not necessarily indicative of
the results to be expected for any subsequent quarter or the
entire fiscal year ending June 30, 2001. The balance sheet at June
30, 2000 has been derived from the audited consolidated financial
statements at that date.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission's rules and
regulations. It is suggested that these unaudited financial
statements be read in conjunction with our audited financial
statements and notes thereto for the year ended June 30, 2000 as
included in our report on Form 10-KSB filed on October 13, 2000.
NOTE 3 - STOCKHOLDERS' DEFICIENCY
Acquisition of Subsidiary
Pursuant to a stock purchase agreement dated July 30, 1998 between
the Company and the shareholders of Frefax Canada, the Company
issued an aggregate of 10,000,000 shares of its $.001 par value
common stock to the shareholders of Frefax Canada in exchange for
100% of Frefax Canada issued and outstanding common stock.
Accordingly, after such transaction, Frefax Canada became a wholly
owned subsidiary of the Company. Such transaction is considered a
capital transaction whereby Frefax Canada contributed its stock
for the net book value of the Company, and accordingly, no
goodwill is recorded.
F-7
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 4 - COMMITMENTS AND CONTINGENCIES
a) Rent
Frefax Canada leased office space under a one-year renewable lease
agreement, which expired November 30, 1999. Rent expense amounted
to $-0- and $992 for the three months ended September 30, 2000 and
1999, respectively and $4,045 cumulative from September 26, 1997
(date of inception) to September 30, 2000. During January 2000,
Frefax Canada moved its operations to a space owned by a
shareholder of the Company on a month to month basis, at no charge
until a permanent location is found.
The Company itself does not require any significant office space
and, accordingly it utilizes the mailing address of its outside
counsel on a month to month basis, at no charge.
b) Lack of Insurance
The Company does not maintain any property, product liability,
general liability or any other form of insurance. Although the
Company is not aware of any claims resulting from product
malfunctions, there is no assurance that none exists. In addition,
as a result of not maintaining any property insurance, the
Company's equipment is deemed to be at risk.
NOTE 5 - RELATED PARTY TRANSACTIONS
a) Loans From Related Parties
The Companies have been advanced funds from a Canadian
corporation, which owns approximately 1.1 % of the outstanding
common stock of the Company. The loans are non-interest bearing
and are due on demand. As of September 30, 2000, such loans
amounted to $148,689.
b) Rent Expense
During January 2000, Frefax Canada moved its equipment to a space
owned by one of the Company's shareholders on a month to month
basis, at no charge until a permanent location is found. The
Company itself does not require any significant office space and,
accordingly, it utilizes the mailing address of its outside
counsel on a month to month basis at no charge.
F-8
<PAGE>
FREFAX, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONT'D)
(UNAUDITED)
NOTE 5 - RELATED PARTY TRANSACTIONS (cont'd)
c) Equipment Purchases
Frefax Canada purchased equipment and services amounting to
approximately $90,000 from a corporation which is a 10.3%
shareholder of the Company. In addition, the President of Frefax
Canada beneficially owns an additional 20.6% of the Company.
d) ACCRUED EXPENSES - RELATED PARTY
Accrued expenses at September 30, 2000 of $28,500 consist of
professional fees which have been subsequently paid by the
Company's President.
F-9
