10Q Mar-31-2000
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] 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: 0-22965
E-Rex, Inc
------------------------------------------------------
(Exact Name of registrant as specified in its charter)
Nevada
--------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2101 West SR 434, Suite 221
Longwood, FL 32779
----------------------------------------
(Address of principal executive offices)
(Zip Code)
407-949-9300
--------------------------------------------------
Registrants telephone number, including area code)
--------------------
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during
the preceding 12 months(or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing for the past 90
days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 31, 2000: 15,485,548.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 Financial Statements
Item 2. 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 chief executive officer and from a limited offering
of common stock.
The Company received proceeds from the sale of Common Stock of $250,000 for the
three months ended March 31, 2000 resulting in net cash provided by financing
activities of $159,000 compared to $10,666 for the three months ended March 31,
1999 resulting in net cash provided by financing activities of $10,666.
The Company had no investing activities for the three months ended March 31,
2000.
Results of Operations.
Since inception, the Company has not received any revenues from operations. For
the three months ended March 31, 2000, the Company had a net loss of $175,084.
The Company had no depreciation expense and issued common stock valued at
$127,175 for services for the three month period ended March 31, 2000. The
Company had no change in deposits with vendors, no change in notes receivable,
no change in interest receivable, an increase in loan payable of $409,000, a
decrease in accounts payable and accruals of $8,896, and an increase in
management fees payable of $20,000.
General and administrative expenses were $175,084 and consisted primarily of
accounting and audit fees, rent, and miscellaneous expenses. There were no
Research and development expenses for the three months ended March 31, 2000.
For the three months ended March 31, 1999, the Company had a net loss of
$229,835 consisting entirely of General and administrative expenses.
Plan of Operation.
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 anticipated offerings of its securities.
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
<PAGE>
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 3. Quantitative and Qualitative Disclosure About Market Risk.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
There are no legal proceedings required to be reported.
Item 2. Changes in Securities and Use of Proceeds.
During the quarter ended March 31, 2000, the Company sold in a series
of private placements approximately 4,000,000 shares of restricted common stock
at a price of $.10 per share, for gross proceeds of approximately $400,000.
Item 3. Default upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the quarter.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits.
27 Financial Data Schedule
B. Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the undersigned have duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
E-REX, Inc.
Dated: June 21, 2000 By: /s/ Carl Dilley
-----------------------------
Carl Dilley,
Chief Executive Officer and
Chief Accounting officer
<PAGE>
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(See Independent Accountant's 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, 2999
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>
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
for the period from inception (August 26, 1986) to March 31, 2000. This factor,
among 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 endeavors.
3. Income Taxes:
The Company records its income 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 income
taxes.
Since the Company has not generated cumulative taxable income since inception,
no provision for income taxes has been provided. At March 31, 2000, the Company
did not have significant tax net operating loss carry forwards (tax benefits
resulting from losses for tax purposes have been fully reserved due to the
uncertainty of a going concern). At March 31, 2000 the Company did not have any
significant deferred tax liabilities or deferred tax assets.
<PAGE>
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(See Independent Accountant's Report
4. Development Stage Company:
A development stage company is one for which principal operations have not
commenced or principal 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 March 31, 2000, 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.
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 was recorded. Plantech's
results of operations are included in the Company's statement of operations from
the date of merger, February 20, 2999, 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)
<PAGE>
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(See Independent Accountant's Reports)
6. Litigation:
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.
6. Related Party Transactions:
The Company assumed a promissory note payable to Valcom Ltd, a West Vancouver,
British Columbia company, dated March 15, 1997 in the amount of $6,450 with no
interest stated. This note was assumed by the Company from the merger as
described in footnote 5. The Company has also entered into an agreement for
design and integration work with Valcom Ltd, an entity controlled by a
shareholder of the Company that was a director of the Company at the time the
agreement was entered into.
The Company entered into an agreement on January 21, 2000 with international
Investment Banking, Inc. ("IIBI") whereby IIBI will serve as senior management
of the Company for an initial term of two years unless further extended by
mutual agreement of the parties. The Chief Executive Officer, Donald A.
Mitchell, of the Company also controls IIBI. Pursuant to the agreement, IIBI
receives $10,000 per month and reimbursement of normal business expenses that it
incurs on behalf of the Company and certain expenses of individual consultants
that IIBI assigns to carry out the duties and responsibilities of IIBI.
Thereafter the annual compensation shall increase at a rate of 20% per year.
<PAGE>
E-REX, INC.
NOTES TO THE FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
(See Independent Accountant's Report)
Note 7. continued:
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 was granted 2,000,000 shares of
common stock representing 1,000,000 common shares for each year of IIBI's
engagement. As an addendum of this agreement, IIBI was directed on the Company's
behalf the following: Purchase 8,237,616 shares of stock from two of the
Company's former directors for $250,000; issue 6,000,000 shares of stock to
Stockholder Presentations, Inc. per an investor relations contract; and issue
IIBI 1,000,000 shares of restricted common stock.
The Company also was loaned $409,000 from IIBI in the form of a provisory note
to cover the Company's short-term cash flow needs. The Company expects to fund
this note with an issuance of stock within the near future.
8. Stockholders' Equity:
During the period ending March 31, 2000 the Company had a change in ownership
whereby the former directors of the Company sold 8,237,616 shares back to the
Company as treasury stock for an amount of $250,000. During the same period,
8,060,000 additional shares were then issued for services to the new directors
of the Company and the Company's attorney. The shares issued were valued at the
fair market value as traded on the date that the shares were declared for
issuance.
9. Required Cash Flow Disclosure:
The Company had no interest and income taxes paid for the year. The Company
entered into a management agreement, as noted in footnote 7, in which the
Company issued for common stock for services. The Company has issued shares of
common stock for services in prior years.
<PAGE>
E-REX, INC.
BALANCE SHEET
As of March 31, 2000 and December 31, 1999
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
CURRENT ASSETS 2000 1999
--------------
<S> <C> <C>
Cash $ 92,701 $ 22,006
Prepaid expense 7,438,425 --
Receivable - related party 51,500 --
----------- -----------
Total Current Assets 7,582,626 22,006
OTHER ASSETS
Furniture and equipment 4,937 4,937
Less: accumulated depreciation (2,896) (2,896)
----------- -----------
Total Other Assets 2,041 2,041
----------- -----------
TOTAL ASSETS $ 7,584,667 $ 24,047
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
-------------------
Accounts payable $ 73,179 $ 82,075
Accrued management fee 20,000 --
Loan payable 409,000 --
Demand note payable 6,450 6,450
----------- -----------
Total current liabilities 508,629 88,525
----------- -----------
TOTAL LIABILITIES 508,629 88,525
STOCKHOLDERS' EQUITY
STOCKHOLDERS' EQUITY (DEFICIT)
------------------------------
Common stock, $.001 par value, 100,000,000 authorized
and 15,485,548 shares issued and outstanding 23,599 15,539
Additional paid in capital 8,266,502 708,962
Retained earnings (964,063) (788,979)
Less treasury stock (250,000) --
----------- -----------
Total stockholders' equity 7,076,038 (64,478)
----------- -----------
TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 7,584,667 $ 24,047
=========== ===========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
E-REX, INC.
STATEMENT OF OPERATIONS
For the Three Months ending March 31, 2000 and 1999,
The Twelve Months Ending December 31,1999 and
From Inception (August 26, 1986) to March 31, 2000
<TABLE>
<CAPTION>
March 31, March 31, December 31, From
2000 1999 1999 Inception
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUE $ -- $ -- $ -- $ --
-------
EXPENSES
--------
General and administrative 175,084 229,835 464,436 1,086,228
------------ ------------ ------------ ------------
LOSS FROM OPERATIONS (175,084) (229,835) (464,436) (1,086,228)
--------------------
OTHER INCOME
------------
Interest income 1,439
Recovery from lawsuit 120,726
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (175,084) (229,835) (464,436) (964,063)
---------------------------------
Income Taxes -- -- -- --
------------ ------------ ------------ ------------
NET INCOME (LOSS)
-----------------
$ (175,084) $ (229,835) $ (464,436) $ (964,063)
============ ============ ============ ============
Weighted average
Number of shares 13,276,859 7,695,421 13,439,674
Basic EPS $ (0.01) $ (0.03) $ (0.04)
</TABLE>
See accompanying notes to the financial statements
<PAGE>
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception (August 26, 1986) to March 31, 2000
<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>
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception (August 26, 1986) to March 31, 2000
<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>
E-REX, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period from Inception (August 26, 1986) to March 31, 2000
<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)
Common shares issued
for services 8,060,000 8,060 7,557,540 7,565,600
Common share purchased
as treasury stock (8,237,616) (250,000)
Net loss for the period (175,084)
----------- ----------- ----------- ----------- -----------
Balance, March 31, 2000 15,485,548 $ 23,599 $ 8,266,502 $ (964,063) $ 7,251,122
=========== =========== =========== =========== ===========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
E-REX, INC.
STATEMENT OF CASH FLOWS
STATEMENT OF OPERATIONS
For the Three Months ending March 31, 2000 and 1999,
The Twelve Months Ending December 31,1999 and
From Inception (August 26, 1986) to March 31, 2000
<TABLE>
<CAPTION>
CASH FLOWS FROM (FOR) March 31, March 31, December 31, From
OPERATING ACTIVITIES 2000 1999 1999 Inception
-------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net income $(175,084) $(229,835) $(464,436) $(964,063)
---------- ---------- ---------- ----------
Adjustments to reconcile net income to
to net cash provided by (used in)
operating activities:
Receivable - related party (51,500) (51,500)
Stock issued for services 127,175 2,528 128,608 317,851
Accounts payable (8,896) 86,549 71,940 73,179
Other 20,000 (12,801) 29,014 32,547
---------- ---------- ---------- ----------
Total adjustments to net income 86,779 76,276 229,562 372,077
Net cash provided by (used in)
operating activities (88,305) (153,559) (234,874) (591,986)
CASH FLOWS FROM (FOR)
INVESTING ACTIVITIES
--------------------
None
---------- ---------- ---------- ----------
Net cash flows provided by (used in)
investing activities -- -- -- --
CASH FLOWS FROM (FOR)
FINANCING ACTIVITIES
--------------------
Purchase of treasury stock (250,000) (250,000)
Proceeds from loan 409,000 409,000
Proceeds from issuance of stock 10,666 80,833 633,714
Offering costs (108,027)
---------- ---------- ---------- ----------
Net cash provided by (used in) financing 159,000 10,666 80,833 684,687
CASH RECONCILIATION
-------------------
Net increase (decrease) in cash 70,695 (142,893) (154,041) 92,701
Cash at beginning of year 22,006 176,047 176,047 --
---------- ---------- ---------- ----------
CASH BALANCE AT END OF YEAR $ 92,701 $ 33,154 $ 22,006 $ 92,701
--------------------------- ========== ========== ========== ==========
</TABLE>
See accompanying notes to the financial statements
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
27 Financial Data Schedule
