<PAGE>2
FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] 15,ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: 12/31/99
OR
[ ]15,TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number - 000-27319
E-REX, INC.
(Exact name of Small Business Issuer in its charter)
NEVADA 88-0292890
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1916 Pike Place, Suite 1405, Seattle, WA 98101
(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (206) 521-2090
Securities registered pursuant to
Section 12(b) of the Act: None
Securities registered pursuant to
Section 12(g) of the Act: Common Stock, $.001 par value
Warrants to purchase $.001 par
value Common Stock
Check whether the Company (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act during the
preceding 12 months (or such shorter period that the Company was
required to file such reports), and (2) has been subject to such
filing requirements for at least the past 90 days.
Yes __x__ No _____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of Company's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
[ x ]
The Company's revenues for its most recent fiscal year were $0. As
of December 31, 1999, the market value of the Company's voting $.00l
par value common stock held by non-affiliates of the Company was
$1,336,599.
The number of shares outstanding of Company's only class of common
stock, as of December 31,1999 was 15,663,164 shares of its $.0001 par
value common stock. Check whether the Issuer has 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 __x__ No _____
No documents are incorporated into the text by reference.
Transitional Small Business Disclosure Format (check one)
Yes No x
-------- --------
<PAGE> 3
PART I
ITEM 1. BUSINESS - General
A. E-Rex, Inc. (the "Company"), a Nevada corporation, was incorporated
on August 26, 1986 as P.R. Stocks, Inc. On February 26, 1992, the
Company changed its name to National Health & Safety Corporation. On
November 12, 1992, the Company changed its name to Medgain
International Corporation. On June 20, 1994 the Company changed its
name to E-Rex, Inc.
On February 20, 1999 the Company entered into a merger agreement with
Plantech Communications Systems, Inc. ("Plantech"), a privately held
British Columbia, Canada, Corporation. Plantech was a development
stage enterprise in the software, computer and internet area. From
its inception in 1992 Plantech had no revenues.
Under the terms of the merger agreement, Plantech shareholders
received one share of the Company's common stock for each outstanding
share of Plantech stock. The Company issued 8,137,616 shares of its
common stock in exchange for all the Plantech common shares
outstanding as of February 20, 1999.
Plantech's results of operations are included in the Company's
statement of operations from the date of merger, February 20, 1999,
forward. The following table sets forth certain results of operations
for the periods presented as if the Plantech business combination had
been consummated on the same terms at the Plantech inception in 1992.
Inception
Jan. 1, 1999 (8/26/86)
to Feb. 20, to Dec. 31,
1999 1998
Revenues $ - $ -
Net <loss> $ <230,954> $ <616,086>
Corporate Operations. The Company is a development stage enterprise
in the computer software, hardware and internet areas.
Product. The Company shall market the "Dragonfly," a portable,
multi-function color printer, copier, fax and scanner with internet
and e-mail. The unit features a touch screen and is designed to
operate with the ease and simplicity of a copy machine for all phases
of its operation. The Dragonfly incorporates Sun Microsystems Java
and Jini technology and represents the first generation of "smart"
products combining the internet with new technology, competitive
pricing and shorter production time. By building on the network
connectivity provided by Java, the product supports a diverse range of
connectivity options, ranging from satellite uplink to ordinary and
cellular modems and Ethernet networks.
Pricing of the Company's product has not yet been determined.
The Company is presently completing the initial prototypes of the
"Dragonfly" after two "Dragonfly" mock-up prototypes were successfully
demonstrated at the Java One conference at the Moscone Centre in San
Francisco sponsored by Sun MicroSystems. The Company is currently
negotiating a technology and licensing agreement with Sun
Microsystems.
The approximate time frame including testing of these prototypes will
be 2-3 months simultaneously negotiating with interested financial
parties to secure the necessary capital for commencement operations.
As soon as the initial prototypes are fully operational,
demonstrations with major OEM corporations will be arranged.
Marketing. The Company intends to market its products directly
through the internet and print media, as well as through other
avenues, during the second half of 1999.
Manufacturing. The Company does not intend to establish its own
manufacturing plant. The production plan entails coordination and
liaison with existing manufacturing facilities. The Company will
provide quality control personnel at these plants and will also
maintain research and development facilities in North America.
<PAGE>4
Research and Development. The Company utilized the subcontract's
fully equipped mechanical and electrical research and testing
facilities at British Columbia Institute of Technology.
Competition. There is significant competition in the computer
software, hardware and internet industries. The Company competes
with established companies and other entities (many of which possess
substantially greater resources than the Company). Almost all
of the companies with which the Company competes are substantially
larger, have more substantial histories, backgrounds, experience and
records of successful operations, greater financial, technical,
marketing and other resources, more employees and more extensive
facilities than the Company now has, or will have in the foreseeable
future. It is also likely that other competitors will emerge in the
near future. There is no assurance that the Company will compete
successfully with other established computer software and internet
companies. The Company shall compete on the basis of quality and
price. Inability to compete successfully might result in increased
costs, reduced yields and additional risks to the investors herein.
Dependence on One or a Few Major Customers. The Company does not
expect that any single customer will account for more than ten percent
of its business.
Employees. The Company currently employs no full time persons or part
time persons. The Company shall employ individuals as required.
The Company subcontracts as required
Seasonal Nature of Business Activities. The Company's business
activities are not seasonal.
ITEM 2. PROPERTIES.
The Company's executive and northern research facility is located in
downtown Squamish, a 45 minute drive from North Vancouver. Located
in the Mountain View Building, these facilities include 1,700 square
feet of space including several development stations, an extensive
1,200 book technical library and a hardware prototyping station. The
facilities also include general office space, a high speed internet
connection and a multi-platform network testbed. These facilities
are leased on an annual basis at the monthly lease rate of $700.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not involved in any legal proceedings at this date.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
During the fourth quarter of the fiscal year ended December 31, 1999,
no matters were submitted to a vote of the Company's security holders,
through the solicitation of proxies.
<PAGE>5
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company Common Stock is listed for trading under the symbol "EREX"
in the over-the-counter market on the OTC Bulletin Board maintained by
the NASD.
The following table sets forth the range of high and low bid
quotations for the Company's common stock for each quarter since the
Company commenced trading on June 17, 1998, as reported on the NASD
Bulletin Board, by Herzog, Pinson, Alexander, Frankel, Wein
Securities, Sharp, Acap, Hill Thompson, Meyerson, Knight, Andrew
Garrett and NAIB, the Company's market makers. The quotations
represent inter-dealer prices without retail markup, markdown or
commission, and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarter Ended High Bid Low Bid
<S> <C> <C>
6/30/98 .04 .04
9/30/98 .04 .04
12/30/98 .30 .04
3/31/99 .91 .25
6/30/99 1.50 .625
9/30/99 .968 .437
12/31/99 1.00 .140
</TABLE>
The Company has never paid any cash dividends nor does it intend, at
this time, to make any cash distributions to its shareholders as
dividends in the near future.
As of December 31, 1999, the number of holders of Company's common
stock was 48.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
Trends and Uncertainties. Demand for the Company's products and
services will be dependent on, among other things, market acceptance
of the Company's concept, its proposed operations and general economic
conditions that are cyclical in nature. Inasmuch as a major portion
of the Company's activities will be the receipt of revenues from the
sales of its products and services, the Company's business operations,
upon commencement, may be adversely affected by the Company's
inability to obtain the necessary financing, competitors and prolonged
recessionary periods.
Capital and Source of Liquidity. The Company requires substantial
capital in order to meet its ongoing corporate obligations and in
order to continue and expand its current and strategic business plans.
Initial working capital has been primarily obtained through advances
from the Company's prior chief executive officer, Dr. Bauer.
The Company does not anticipate receipt of any revenues from its
products and services in the short term.
The Company received proceeds from the sale of common stock of $80,833
for the year ended December 31, 1999 resulting in net cash provided by
financing activities of $80,833.
The Company received proceeds from the sale of common stock of
$153,950 for the year ended December 31, 1998 resulting in net cash
provided by financing activities of $153,950.
The Company had no investing activities for the year ended December
31, 1999.
The Company had no investing activities for the year ended December
31, 1998.
Results of Operations. Since inception, the Company has not received
any revenues from operations. For the year ended December 31, 1999,
the Company had a net loss of $464,436. The Company had a
depreciation expense of $487 and issued common stock valued at
$128,608 for services for the year ended December 31, 1999. The
<PAGE>6
Company had an increase in current liabilities of $78,390 and a
decrease in other assets of $16,467 resulting in net cash used in
operating activities of ($234,874).
For the year ended December 31, 1998, the Company had a net loss of
$26,493. The Company had general and administrative expenses of
$27,703 for the year ended December 31, 1998
Plan of Operation. The Company is not delinquent in any of its
obligations even though the Company has generated no operating
revenues. However, the Company continues its efforts to raise
capital. The Company does not currently have sufficient capital to
continue operations for the next twelve months and will have to raise
additional capital to meet its business objectives as well as 1934 Act
reporting requirements. The Company intends to pursue its business
plan and meet its reporting requirements utilizing cash made available
from advances by Dr. Bauer, its chief executive officer and the
private and future public sale of its securities. The Company's
management is of the opinion that revenues from the sales of its
securities will be sufficient to pay its expenses until its business
operations create revenue.
The Company is presently completing the initial prototypes of the
"Dragonfly" after two "Dragonfly" mock-up prototypes were successfully
demonstrated at the Java One conference at the Moscone Centre in San
Francisco sponsored by Sun MicroSystems.
The approximate time frame including testing of these prototypes will
be 2-3 months simultaneously negotiating with interested financial
parties to secure the necessary capital for operations.
As soon as the initial prototypes are fully operational,
demonstrations with major OEM corporations will be arranged.
The Company will not establish its own manufacturing plant, however,
it will provide quality control personnel at these plants and will
also maintain research and development facilities to secure
development of products presently in the planning stage. The Company
does not expect to purchase any significant plant or equipment within
the next twelve months.
Other than described above, the Company does not expect significant
changes in the number of employees during the next twelve months.
On a long-term basis, the Company's liquidity is dependent on
commencement of operations, revenue generation, additional infusions
of capital and potential debt financing. Company management believes
that additional capital and debt financing in the short term will
allow it to commence its business plan and thereafter result in
revenue and greater liquidity in the long term. However, there can be
no assurance that the Company will be able to obtain the needed
additional equity or debt financing in the future.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
The response to this item is being submitted as a separate section of
this report beginning on page 20.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have not been any changes in or disagreements with accountants
on accounting and financial disclosure.
<PAGE>7
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Identification of Directors and Executive Officers of the Company.
The names, addresses and positions of the present directors and
officers of the Company are set forth below:
<TABLE>
<CAPTION>
Name and Address Age Position
<S> <C> <C>
Donald A. Mitchell 67 Chief Executive Officer
Chairman of the Board
Ronald K. Gooding 62 Chief Financial Officer
Vice President/Director
Kenneth Blake 58 President/Director
</TABLE>
Resumes:
Donald Mitchell. Mr. Mitchell has been Chief Executive Officer and
Chairman of the Board of Directors of the Company since March 15,
2000. Since 1975, Mr. Mitchell has developed and managed a
financial consulting private practice and small business consulting
practice which specializes in organizing medium size and small
business and developing a proper financing strategy for sustained
growth. Mr. Mitchell graduated from Bridgewater College, Brigewater,
Virginia in 1957 and attended advanced studies-monitored programs at
New York University and Columbia University.
Ronald K. Gooding. Mr. Gooding has been Chief Financial Officer,
Vice President and Director of the Company since March 15, 2000.
From 1994-1996, Mr. Gooding was controller and chief financial officer
of A.J. Carpentry, Bee Custom Kitchens and Baths, and Subsidiaries.
From 1998 to present, Mr. Gooding works as a controller with multi-
state and global marketing companies. Mr. Gooding earned a Bachelor
of Arts degree in accounting and psychology from Furman University in
1960. He attended post graduate studies at the University of Alabama
during 1974. Mr. Gooding is a member of the American Institute of
CPA's, American Management Association and Association of Accountants.
Kenneth J. Blake. Mr. Blake has been President and Director of the
Company since March 15, 2000. From 1998 to present, Mr. Blake has
been the president of ThermaLock Products, Inc. responsible for
strategic planning and product positioning within various market
segments. ThermaLock Products, Inc. is in the business of
engineering research and development. Mr. Blake earned an Associates
of Science degree in 1962 from Corning Community College. At the
State University of New York at Buffalo, Mr. Blake earned an A.A.S.
degree in Industrial Administration in 1965, a Bachelor of Science
degree in Industrial Engineering with a minor in Industrial Psychology
in 1961 and a Master of Science degree in Computer Science in 1975.
All directors will serve on the Board of Directors until the next
annual meeting of the shareholders of Company, or until their
successors have been duly elected and qualified. Officers serve at
the discretion of the Board of Directors.
Directorships. No director or nominee for director holds a
directorship in any other company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of
1934 or subject to the requirements of Section 15(d) of such Act or
any company registered as an investment company under the Investment
Company Act of 1940.
ITEM 10. EXECUTIVE COMPENSATION
For the year ended December 31, 1999, none of the prior officers
and/or directors received any compensation for their services.
Subsequent to December 31, 1999, Mr. Mitchell is compensated pursuant
to a management engagement agreement dated January 21, 2000 between
the Company an International Investment Banking, Inc., a company
controlled by Mr. Mitchell. Pursuant to the agreement, IIBI receives
$10,000 per month. The annual compensation of IIBI shall increase at
a rate of 20% per year. In addition to monthly compensation, IIBI or
Mr. Mitchell may be entitled to receive an annual bonus as determined
by the Company's Board of Directors payable in common stock or cash.
Mr. Mitchell shall be granted common stock representing 1,000,000
<PAGE>8
common shares for each year of IIBI's engagement. The agreement has
an initial term of two years unless further extended by mutual
agreement of the parties.
All officers and directors are reimbursed for expenses incurred on
behalf of Company.
Board of Directors Compensation. Members of the Board of Directors
may receive an amount yet to be determined annually for their
participation and will be required to attend a minimum of four
meetings per fiscal year. All expenses for meeting attendance or out
of pocket expenses connected directly with their Board representation
will be reimbursed by the Corporation. Director liability insurance
may be provided to all members of the Board of Directors. No
differentiation is made in the compensation of "outside directors" and
those officers of the Corporation serving in that capacity.
There is no plan or arrangement with respect to compensation received
or that may be received by the executive officers in the event of
termination of employment or in the event of a change in
responsibilities following a change in control.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
As of December 31, 1999, there were 15,663,164 Common Shares
outstanding. As of March 31, 2000, there were 17,963,164 Common
Shares outstanding. The following tables list the current Company's
stockholders who, to the best of the Company's knowledge, own of
record or, to the Company's knowledge, beneficially, more than 5% of
the Company's outstanding Common Stock; the total number of shares of
the Company's Common Stock beneficially owned by each Director; and
the total number of shares of the Company's Common Stock beneficially
owned by the Directors and elected officers of the Company, as a
group.
<TABLE>
Percentage of
Number & Class Outstanding
Name and Address of Shares Common Shares
<S> <C> <C>
Donald A. Mitchell(1) 2,000,000 11.13%
2101 West S.R. 434
Suite 221
Longwood, FL 32779
Ronald K. Gooding(2) 100,000 .56%
13815 Fairway Island Drive
#1311
Orlando, Florida 32657
Kenneth J. Blake(3) 200,000 1.11%
400 Summit Ridge Place
Longwood, Florida 32779
Adolf (Adi) Bauer(4) 6,977,616 38.84%
Suite 102, 145 West 15th Street
North Vancouver, B.C. V7M 1R9
Steven E. Owlett(5) 1,260,000 7.01%
P.O. 1032
Wellsboro, PA 16901
Paul Daoust 1,000,000 5.57%
719 Princess Street
Suite 2404
Officers and Directors as a Group
(3 persons) 2,300,000 12.80%
</TABLE>
(1) Mr. Mitchell is CEO and Chairman of the Board of the Company.
(2) Mr. Gooding is CFO, Vice President and Director of the Company.
(3) Mr. Blake is President and Director of the Company.
(4) Dr. A.F. Bauer is the former CEO, President and a Director of
the Company.
(5) Steven E. Owlett is a former director of the Company.
<PAGE>9
(1)Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended, beneficial ownership of a security consists of sole or
shared voting power (including the power to vote or direct the voting)
and/or sole or shared investment power (including the power to dispose
or direct the disposition) with respect to a security whether through
a contract, arrangement, understanding, relationship or otherwise.
Unless otherwise indicated, each person indicated above has sole power
to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable unity property laws.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into an oral contract for design and integration
work with Valcom, Ltd., an entity controlled by Mr. MacPherson, a
former director of the Company. Valcom, Ltd. shall supply five
prototypes of the Dragonfly. The work is to be done on an ongoing
basis. To date, the Company has paid $50,000Canadian ($31,336US) on
account.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(A) FINANCIAL STATEMENTS AND SCHEDULES
The following financial statements and schedules are filed as part of
this report:
Report of Independent Public Auditors.
Balance Sheet
Statement of Operations.
Statement of Stockholder's Equity.
Statement of Comprehensive Loss
Statement of Cash Flows
Notes to Financial Statements.
Schedules Omitted: All schedules other than those shown have been
omitted because they are not applicable, not required, or the required
information is shown in the financial statements or notes thereto.
<PAGE>10
VARMA & ASSOCIATES
========================================================
Bob A. Varma, CPA 610 Crown Oak Centre Drive
James P. Gately, CPA Longwood, Florida 32750
Mark A. Haas, CPA Office (407) 834-7344 Fax (407)
834-7814
INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS
- ---------------------------------------------------------------
To the Board of Directors and Stockholders
E-Rex, Inc.
Orlando, FL
We have audited the accompanying balance sheet of E-Rex, Inc. (a
development stage company), as of December 31, 1999, and the related
statement of operations, stockholders' equity and cash flows for the
year ended December 31, 1999, the year ended December 31, 1998, the
year ended December 31, 1997 and for the period from inception (August
26, 1986) to December 31,1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of E-Rex,
Inc. (a development stage company) as of December 31, 1999, and the
results of its operations and its cash flows for the year ended
December 31, 1999, the year ended December 31, 1998, the year ended
December 31, 1997 and for the period from inception (August 26, 1986)
to December 31, 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2
to the financial statements, the Company has suffered recurring losses
from operations that raises substantial doubt about its ability to
continue as a going concern. Management's plans in regard to these
matters are also described in note 2. The Financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
Varma and Associates
Certified Public Accountants
Longwood, FL
March 30, 2000
<PAGE>11
E-REX, INC.
BALANCE SHEET
As of December 31, 1999
ASSETS
--------
<TABLE>
<CAPTION>
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash $ 22,006
--------------
Total Current Assets 22,006 $ 22,006
OTHER ASSETS
- ------------
Furniture and equipment 4,937
Less: accumulated depreciation (2,896)
-------------
Total Other Assets 2,041 2,041
------------
TOTAL ASSETS $ 24,047
=============
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES
- -------------------
Accounts payable $ 82,075
Demand note payable 6,450
--------------
Total current liabilities 88,525 $ 88,525
-------------
TOTAL LIABILITIES 88,525
STOCKHOLDERS' EQUITY
--------------------
STOCKHOLDERS' EQUITY (DEFICIT)
- -----------------------------
Common stock, $.0001 par value,
100,000,000 authorized
and 15,663,164 shares issued and outstanding. 15,539
Additional paid in capital 708,962
Retained earnings (788,979)
------------
Total stockholders' equity (64,478) (64,478)
------------
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 24,047
=============
</TABLE>
See accompanying notes to the financial statements
<PAGE>10
E-REX, INC.
STATEMENT OF OPERATIONS
For the Period from Inception
(August 26, 1986) to December 31, 1999
<TABLE>
<CAPTION>
From
1999 1998 1997 Inception
<S> <C> <C> <C> <C>
REVENUE $ - $ - $ - $ -
EXPENSES
General and
administrative 464,436 27,703 68,704 911,144
---------- ---------- ----------- -----------
LOSS FROM OPERATIONS (464,436) (27,703) (68,704) (911,144)
OTHER INCOME
Interest income 1,210 229 1,439
Recovery from lawsuit - - 120,726 120,726
--------- ---------- ----------- ----------
INCOME (LOSS) BEFORE
INCOME TAXES (464,436) (26,493) 52,251 (788,979)
Income Taxes - - - -
NET INCOME (LOSS) $ (464,436) $ (26,493) $ 52,251 $ (788,979)
============ ============ ============== ============
Weighted average
Number of shares 13,439,674 1,178,841 803,195
Basic EPS $ (0.04) $ (0.02) $ 0.06
</TABLE>
See accompanying notes to the financial statements
<PAGE>13
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception
(August 26, 1986) to December 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN INCOME
SHARES AMOUNT CAPITAL (LOSS) TOTAL
------- --------- ------------ --------- ------
<S> <C> <C> <C> <C> <C>
Issuance of shares of
common stock on Aug. 26,
1986, for $.044 per share 250,000 $ 250 $ 10,750 $ - $ 11,000
Net (loss) from inception
on Aug. 26, 1986, through
Dec. 31, 1986 (15,354) (15,354)
Balance, December 31, 1986 250,000 250 10,750 (15,354) (4,354)
Issuance of shares of
common stock to the public
for $1.00 per share 93,215 93 93,122 93,215
Deferred offering cost
offset against additional
paid-in capital (7,663) (7,663)
Net (loss) for the year
ended Dec. 31, 1987 (80,103) (80,103)
Balance, December 31, 1987 343,215 343 96,209 (95,457) 1,095
Net (loss) for the four
year period ended
Dec. 31, 1991 (4,072) (4,072)
Balance, December 31, 1991 343,215 343 96,209 (99,529) (2,977)
Issuance of shares of
stock on Feb. 4, 1992, for
$1.00 per share 166,716 167 166,549 166,716
Deferred offering cost
offset against additional
paid-in capital (26,125) (26,125)
Common stock issued
on Feb. 4, 1992 for services 136,785 137 27,220 27,357
Net (loss) for the year
ended Dec. 31, 1992 (179,027) (179,027)
Balance, December 31, 1992 646,716 647 263,853 (278,556) (14,056)
</TABLE>
See accompanying notes to the financial statements
<PAGE>14
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
continued
For the Period from Inception
(August 26, 1986) to December 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN INCOME
SHARES AMOUNT CAPITAL (LOSS) TOTAL
--------- --------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1992 646,716 647 263,853 (278,556) (14,056)
Issuance of shares of
common stock to the public
on Feb. 3, 1993 for $4.00
per share 32,000 32 127,968 128,000
Deferred offering cost
offset against additional
paid-in capital (74,239) (74,239)
Common stock issued for
legal services on April
29, 1993 110,000 110 21,890 22,000
Net (loss) for the year
ended Dec. 31, 1993 (39,703) (39,703)
Balance, December 31, 1993 788,716 789 339,472 (318,259) 22,002
Net (loss) for the year
ended Dec. 31, 1994 (8,357) (8,357)
Balance, December 31, 1994 788,716 789 339,472 (326,616) 13,645
Net (loss) for the year
ended Dec. 31, 1995 (19,185) (19,185)
Balance, December 31, 1995 788,716 789 339,472 (345,801) (5,540)
Net (loss) for the year
ended Dec. 31, 1996 (4,500) (4,500)
Balance, December 31, 1996 788,716 789 339,472 (350,301) (10,040)
Common stock issued for
services Sep., 1997 30,000 30 30
Net income for the year
ended Dec. 31, 1997 52,251 52,251
Balance, December 31, 1997 818,716 819 339,472 (298,050) 42,241
</TABLE>
See accompanying notes to the financial statements
<PAGE>15
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
continued
For the Period from Inception
(August 26, 1986) to December 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN INCOME
SHARES AMOUNT CAPITAL (LOSS) TOTAL
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 818,716 819 339,472 (298,050) 42,241
Common stock issued for
services Sep., 1998 1,682,000 1,682 1,000 2,682
Common shares issued
in Rule 504 offering
Nov. and Dec., 1998 1,539,500 1,539 152,410 153,949
Common stock issued for
services Dec., 1998 100,000 100 9,900 10,000
Net (loss) for the year
ended Dec. 31, 1998 (26,493) (26,493)
Balance December 31, 1998 4,140,216 $ 4,140 $ 502,782 $ (324,543) $ 182,379
Common shares issued 323,332 197 80,636 80,833
for cash
Common shares issued
for acquisition 8,137,616 8,138 8,138
Common shares issued
for directors' fees 1,332,000 1,332 74,700 76,032
Common shares issued
for services 1,730,000 1,732 50,844 52,576
Net loss for the period (464,436) (464,436)
Balance, December 31, 1999 15,663,164 $ 15,539 $ 708,962 $ (788,979) $ (64,478)
</TABLE>
See accompanying notes to the financial statements
<PAGE>16
E-REX, INC.
STATEMENT OF CASH FLOWS
For the Period from Inception (August 26, 1986)
to December 31, 1999
<TABLE>
<CAPTION>
CASH FLOWS FROM (FOR) From
OPERATING ACTIVITIES 1999 1998 1997 Inception
----------- ---------- --------- ------------
<S> <C> <C> <C> <C>
Net income $ (464,436) $ (26,493) $ 52,251 $ (788,979)
Adjustments to reconcile net income to
to net cash provided by (used in )
operating activities:
Stock issued for services 128,608 12,682 30 190,676
Accounts payable 71,940 (366) 460 82,075
Other 29,014 (16,467) 12,547
----------- ---------- ---------- ---------
Total adjustments to net income 229,562 (4,151) 490 285,298
Net cash provided by (used in)
operating activities (234,874) (30,644) 52,741 (503,681)
CASH FLOWS FROM (FOR)
INVESTING ACTIVITIES
None
--------- --------- -------- ---------
Net cash flows provided by (used in)
investing activities - - - -
CASH FLOWS FROM (FOR)
FINANCING ACTIVITIES
Proceeds from issuance of stock,
including paid-in capital 80,833 153,950 - 633,714
- - - (108,027)
--------- --------- ------- ---------
Net cash provided by (used in)
financing 80,833 153,950 - 525,687
CASH RECONCILIATION
Net increase (decrease) in cash (154,041) 123,306 52,741 22,006
Cash at beginning of year 176,047 52,741 - -
--------- --------- -------- ---------
CASH BALANCE AT END OF YEAR $ 22,006 $ 176,047 $ 52,741 $ 22,006
========= ========== ========== ==========
</TABLE>
See accompanying notes to the financial statements
<PAGE>17
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
(See Independent Auditors Report)
1. Summary of significant accounting policies:
Nature of Operations - E-Rex, Inc. (the "Company"), a Nevada
corporation, was incorporated on August 26, 1986 as P.R. Stocks, Inc.
On February 26, 1992, the Company changed its name to National Health
& Safety Corporation. On November 12, 1992, the Company changed its
name to Medgain International Corporation. On June 20, 1994 the
Company changed its name to E-Rex, Inc. On February 20, 1999 the
Company entered into a business combination (see Note 5). To date,
the Company has had no revenues. The Company is in the development
stage.
Cash Equivalents - The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash
equivalents.
Earnings (Loss) Per Share - Basic earnings per share ("EPS") is
computed by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding for the period as
required by the Financial Accounting Standards Board (FASB) under
Statement No. 128, 'Earnings per Shares". Diluted EPS reflects the
potential dilution of securities that could share in the earnings.
Basis of Accounting - The Company's financial statements are prepared
in accordance with generally accepted accounting principles.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Income Taxes - The Company records its income tax provision in
accordance with Statement of Financial Accounting Standard No. 109,
"Accounting for Income Taxes."
Functional Currency - All amounts in the Company's financial
statements and related footnotes are stated in US dollars. The
Company had no significant gain or losses from foreign currency
conversions.
<PAGE>18
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
(See Independent Auditors Report)
Property and Equipment - Depreciation and amortization is computed by
the straight line method with the following recovery periods:
Organization costs 5 Years
Office equipment and software 3-5 Years
Furniture 5-7 Years
Maintenance and repairs, as incurred, are charged to expense;
betterments and renewals are capitalized in plant and equipment
accounts. Cost and accumulated depreciation applicable to items
replaced or retired are eliminated from the related accounts; gain or
loss on the disposition thereof is included as income. No
depreciation is recorded on property and plant left idle.
2. Basis of Presentation as a Going Concern:
The Company's financial statements have been presented on the basis
that it is a going concern, which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of
business. The Company incurred a net loss of $812,952 for the period
from inception (August 26, 1986) to December 31, 1999. This factor,
amoung others, raises substantial doubt as to the Company's ability to
continue as a going concern.
The Company's management intends to raise additional operating funds
through equity and/or debt offerings. However, there can be no
assurance management will be successful in its endeavers.
3. Income Taxes:
The Company records its incoem tax provision in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" which requires the use of the liability method of
accounting for deferred incoem taxes.
Since the Company has not generated cumulative taxable income since
inception, no provision for income taxes has been provided. At
December 31, 1999, the Company did not have any significant tax net
operating loss carryforwards ( tax benefits resulting from losses for
tax purposes have been fully reserved due to the uncertainty of a
going concern). At December 31, 1999, the Company did not have any
significant deferred tax liabilities or deferred tax assets.
<PAGE>19
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
(See Independent Auditors Report)
4. Development Stage Company:
A development stage company is one for which principal operations have
not commenced or pricipal operations have generated an insignificant
amount of revenue. Management of a development stage company devotes
most of its activities to establishing a new business. Operating
losses have been incurred through December 31, 1999, and the company
continues to use, rather than provide, working capital in this
operation. Although management believes that it is pursuing a course
of action that will provide successful future operations, the outcome
of these matters is uncertain. Basic earnings per share ("EPS") is
computed by dividing earnings available to common shareholders by the
weighted-average number of common shares outstanding for the period as
required by the Financial Accounting Standards Board (FASB) under
Statement No. 128, 'Earnings per Shares". Diluted EPS reflects the
potential dilution of securities that could share in the earnings.
5. Business Combination:
On February 20, 1999 the Company entered into a merger agreement with
Plantech Communications Systems, Inc. ("Plantech"), a privately held
British Columbia, Canada, Corporation. Plantech is a development
stage enterprise in the software, computer and internet area. From
inception in 1992 to date Plantech has had no revenues.
Under the terms of the merger agreement, Plantech shareholders
received one share of the Company's common stock for each outstanding
share of Plantech stock. The Company issued 8,137,616 shares of its
common stock in exchange for all the plantech common shares
outstanding as of February 20, 1999.
The above business combination was accounted for under the purchase
method. There was no significant difference between the purchase cost
and the fair value of net assets/liabilities acquired, thus no
goodwill or negative goodwill was recorded.
<PAGE>20
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
(See Independent Auditors Report)
Plantech's results of operations are included in the Company's
statement of operations from the date of merger, February 20, 1999,
forward. The following table sets forth certain results of operations
for the periods presented as if the Plantech business combination had
been consumated on the same terms at the Plantech inception in 1992.
Inception
Jan. 1, 1999 (8/26/86)
to Feb. 20, to Dec. 31,
1999 1998
Revenues $ - $ -
Net (Loss) $ (230,954) $ (616,086)
6. Litigation and subsequent events:
In January, 2000 the Board of Directors resolved to settle a British
Columbia Supreme Court action brought against the Company for an unpaid
vendor bill for $25,000. The Company also accepted from the same
vendor a return of 50,000 shares of the Company stock that the vendor
held.
In 1993 the Company initiated legal action against a former merger
candidate, and several of its principals, primarily to the Company when
the merger was not consummated.
In October, 1997 a settlement agreement relating to the above action
was entered into. In November, 1997 the Company received, net of
attorney's fees, $120,726 to settle this matter.
7. Related Party Transactions:
The Company entered into a an agreement for design and integration
work with an entity controlled by one of the Company's
director/shareholders named Valcom Ltd., a West Vancouver, British
Columbia company.
8. Required Cash Flow Disclosure:
The Company had no interest and income taxes paid for the year. The
Company entered into a non-cash merger transaction as noted in
footnote 5.
<PAGE>21
(b) List of Exhibits
The following exhibits are filed with this report:
(3) Articles of Incorporation and Bylaws incorporated by reference to
Form 10SB.
(4) Specimen certificate for Common Stock incorporated by reference
to Form 10SB.
(27) Financial Data Schedule
(B) REPORTS ON FORM 8-K
None
<PAGE>22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this
Report to be signed on its behalf by the undersigned duly authorized
person.
Date: April 9, 2000 E-Rex, Inc.
/s/ Kenneth J. Blake
------------------------------------
By: Kenneth J. Blake, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, this report has been signed below by the following persons
on behalf of the Company and in the capacities and on the dates
indicated.
<TABLE>
<S> <C>
/s/ Kenneth J. Blake 4/9/00
- ------------------------------ Date:
Kenneth J. Blake
President and Director
/s/ Ronald K. Gooding 4/9/00
- ------------------------------ Date:
Ronald K. Gooding
Chief Financial Officer
Controller, Director
/s/ Donald Mitchell 4/9/00
- ------------------------------ Date:
Donald Mitchell
Chief Executive Office
Chairman of the Board of Director
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 22,006
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 22,006
<PP&E> 4,937
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,041
<CURRENT-LIABILITIES> 88,525
<BONDS> 0
<COMMON> 15,539
0
0
<OTHER-SE> (80,017)
<TOTAL-LIABILITY-AND-EQUITY> (64,478)
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 466,090
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (464,436)
<INCOME-TAX> 0
<INCOME-CONTINUING> (464,436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (464,436)
<EPS-BASIC> (.04)
<EPS-DILUTED> (.04)
</TABLE>
