<PAGE>2
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT UNDER SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from: to:
Commission file number: 0-22965
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)
Issuer's Telephone number, including area code:
(206) 521-2090
Check mark whether the Issuer (1) has filed all reports required by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and
(2) has been subject to the filing requirements for at least the past 90
days. YES: X NO:
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PREVIOUS 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 the court. YES: NO:
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: 15,391,832
Transitional Small Business Disclosure Format. YES: NO: X
<PAGE>3
E-REX, Inc.
Balance Sheets
Quarter Ended September 30, 1999
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30
1999 1998
<S> <C> <C>
ASSETS
Current Assets
Cash on Hand and in Bank Accounts $ 5,257 -
Note Receivable from Stockholder at 7%
Accrued Interest on Note Receivable - -
--------- ------
Total Current Assets $ 5,257 -
Fixed Assets
Furniture & Equipment 4,937 -
<Less> Accumulated Depreciation (2,775) -
--------- -------
Total Fixed Assets 2,162 -
Other Assets
Deposit with Vendor 1,767 -
--------- -------
Total Other Assets 1,767 -
LIABILITIES
Current Liabilities
Loan Payable to Private Company-Valcom Ltd. $ 6,450 -
Trade Payables 75,461 -
Credit Card Payables - -
Accrued Expenses-Trade Payables - -
Management Fees Payable 24,652 -
Due to Director 1,423 -
Total Accounts Payable 107,986 -
Accrued Expenses - -
---------- -------
Total Current Liabilities 107,986 -
---------- -------
Total Liabilities 107,986 -
STOCKHOLDERS' EQUITY (DEFICIENCY)
Common Stock $0.001 par value
100,000,000 Shares Authorized
Number of Shares Issued and Outstanding 15,391,832
Share Capital 15,392 -
Additional Paid-in-Capital 638,268 -
Total Share Capital 653,660 -
<Deficit> Accumulated during Development Stage (324,544) -
Net Profit <Loss> from Operations During the Period (427,916) -
---------- -------
Total Stockholders' Deficiency (98,800) -
---------- -------
Total Liabilities & Stockholders' Deficiency 9,186 -
========== =======
</TABLE>
<PAGE>4
E-REX, Inc.
Statement of Operations
Quarter Ended September 30, 1999
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30
1999 1998
<S> <C> <C>
REVENUE - -
EXPENSES
Research & Development Expenses (Schedule) 268,396 -
General and Administrative Expenses 158,057 13,275
-------- --------
Total Expenses 426,453 13,275
-------- -------
Net Income (Loss) form Operations (426,453) (13,275)
Other Income (Expenses)
Interest Expense - -
-------- -------
Income (Loss) from Continuing Operations
Before Income Taxes (426,453) (13,275)
Provision for Income Taxes - -
-------- -------
Income (Loss) from Continuing Operations (426,453) (13,275)
-------- -------
Income (Loss) from Discontinued Operations - -
-------- -------
Net Income (Loss) for the Period $ (426,453) $ (13,275)
========== =========
Basic Earnings (Loss) Per Share
Income (Loss) from Continuing Operations $ (0.03) $ (0.02)
Income (Loss) from Discontinued Operations - -
---------- ---------
$ (0.03) $ (0.02)
========== =========
Weighted Average Shares Outstanding 15,331,832 818,716
Net Income (Loss) $(416,453) $(13,275)
Foreign Exchange Gains (Losses) - Net of
Income Taxes (1,463) -
---------- ---------
Comprehensive Income Loss $ (427,916) $(13,275)
========== =========
</TABLE>
<PAGE>5
E-REX, Inc.
Statement of Cash Flows
Quarter Ended September 30, 1999
<TABLE>
<CAPTION>
Nine Months Ended
Sept. 30, Sept. 30
1999 1998
(estimated)
<S> <C> <C>
Net Cash Provided by (used in) Operating Activities
From Continuing Operations:
Income (Loss) from Operations $ (427,916) $ (13,275)
Adjustments to reconcile Net Income (Loss)
To Net Cash provided by (used in) Operating Activities
Depreciation Expense 366 -
Stock issued for Services 25,072 -
Changes in "Operating Assets" and Liabilities - -
Decrease (Increase) in Deposits with Vendors (1,767) -
Decrease in Note Receivable 16,000 -
Decrease in Interest Receivable 467 -
Increase in Loan Payable to Private Company 6,450 -
Increase in Accounts Payable & Accruals 65,326 -
Increase (Decrease) in Amount Due to a Director 1,423 -
Increase in Management Fees Payable 24,652 -
Other (125) (13,275)
---------- --------
Net Cash provided by (used in Operating Activities $ (290,053) $ -
---------- --------
Cash Flows from (for) investing Activities
Purchase of Fixed Assets (2,403) -
---------- --------
Net Cash provided by (used in) Investing Activities $ (2,403) -
---------- --------
Cash Flows from (for) Financing Activities
Proceeds form Common Stock 121,666 -
---------- --------
Net Cash provided by (used in ) Financing Activities 121,666 -
---------- --------
Net Increase (Decrease) in Cash: (170,790) -
Cash and Cash Equivalents, Beginning of Period 176,047 -
---------- --------
Cash and Cash Equivalents, End of Period $ 5,257 -
========== ========
</TABLE>
<PAGE>6
E-REX, Inc
(A Development Stage Company)
Notes to Financial Statements
September 30, 1999
NOTE 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 and 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
Cash equivalents consist of funds invested in money market accounts
and in investments with a maturity of three months or less when
purchased.
Earnings <Loss> Per Share
The computation of earnings <Loss> per share of common stock is based
on the weighted average number of shares outstanding during the period
presented.
Issuance of Shares for Services
Valuation of shares for services is based on the fair market value of
services.
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 should differ from
those estimates.
Income Taxes
The Company records its income tax provision I accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes." (see Note 3).
Functional Currency
All amounts in the Company's financial statements and related
footnotes are stated in US dollars. The Company had no significant
gains or losses from foreign currency conversions.
Reclassification
Certain amounts in prior periods' financial statements have been
reclassified to conform to the current period presentation.
NOTE 2 Basis of presentation and considerations related to continued
existence (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 $324,544 for the period
from inception (August 26, 1986) to September 30, 1999. 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.
NOTE 3 - 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 September 30, 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.
<PAGE>7
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.
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
$121,666 for the nine months ended September 30, 1999 resulting in net
cash provided by financing activities of $121,666.
The Company conducted no financing activities for the nine months
ended September 30, 1998.
The Company purchased fixed assets of $2,403 for the nine months ended
September 30, 1999.
The Company had no investing activities for the nine months ended
September 30, 1998.
Results of Operations. Since inception, the Company has not received
any revenues from operations. For the nine months ended September
30, 1999, the Company had a net loss of $426,453. The Company had a
depreciation expense of $366 and issued common stock valued at $25,072
for services for the nine month period ended September 30, 1999. The
Company had an increase in deposits with vendors of $1,767, a decrease
in notes receivable of $16,000, a decrease in interest receivable in
$467, an increase in loan payable to private company or $6,450, an
increase in accounts payable and accruals of $65,326, an increase in
amount due to a director of $1,423, an increase in management fees
payable of $24,652 and other expenses of $125.
General and administrative expenses were $158,057 and consisted
primarily of accounting and audit fees of $23,349, written off-
business combination costs of $10,785, legal fees and disbursements of
$23,086, rent of $8,044, wages of $25,836, management fees of $26,297,
travel expenses of $7,388, trade shows and exhibitions of $36,040,
transfer agent fees of $2,749, office supplies of $1,963, adjustments
of ($13,939) and miscellaneous expenses of $6,459. Research and
development expenses were $268,396 for the nine months ended September
30, 1999.
For the nine months ended September 30, 1998, the Company had a net
loss of $13,275. General and administrative expenses were $13,275
and consisted primarily of accounting and audit fees of $2,250, legal
fees and disbursements of $2,250, telecommunications of $2,250, office
supplies of $450, automobile expenses of $750, business promotion and
entertainment of $750 and miscellaneous expenses of $2,475 for the
nine months ended September 30, 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 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.
<PAGE>8
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.
<PAGE>9
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Not applicable.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Not applicable.
(b) Not applicable.
<PAGE>10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
E-Rex, Inc.
(Registrant)
Dated: March 20, 2000
By: /s/ Donald Mitchell
----------------------------
Donald Mitchell, Chairman & CEO
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1999
<CASH> 5,257
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,257
<PP&E> 4,937
<DEPRECIATION> 2,775
<TOTAL-ASSETS> 9,186
<CURRENT-LIABILITIES> 107,986
<BONDS> 0
<COMMON> 15,392
0
0
<OTHER-SE> (98,800)
<TOTAL-LIABILITY-AND-EQUITY> 9,186
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 426,453
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (426,453)
<INCOME-TAX> 0
<INCOME-CONTINUING> (426,453))
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (426,453)
<EPS-BASIC> (.03)
<EPS-DILUTED> (.03)
</TABLE>
