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 March 31,2000
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to ________________
Commission file number 000-30468
CELEXX CORPORATION
(Exact name of small business issuer as specified in its charter)
Nevada 65-0728991
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
7251 West Palmetto Park Road,
Suite 208
Boca Raton, Florida
(Address of principal executive offices)
561-395-1920
(Issuer's telephone number)
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 |_|
The number of shares outstanding of each of the issuer's classes of common
equity as of March 31, 2000:
Common Stock, $.01 Par Value - 12,412,613 shares
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
<PAGE>
PART I Financial Information
ITEM 1 Financial Statements
CELEXX CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 84,481
Accounts receivable 154,954
Advances to employees 12,745
-------------------
TOTAL CURRENT ASSETS 252,180
FURNITURE AND EQUIPMENT, net 65,756
GOODWILL, net 91,667
INTANGIBLES ASSETS, net 982,517
OTHER ASSETS 92,850
===================
$ 1,484,970
===================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 250,448
Note payable related party 100,000
Advances from shareholder 127,013
Deferred revenue 169,882
-------------------
TOTAL CURRENT LIABILITIES 647,343
-------------------
LINE OF CREDIT - long term portion 253,133
-------------------
COMMITMENTS -
STOCKHOLDERS' EQUITY:
Preferred stock, $001 par value, 1,000,000 share authorized;
none issued -
Common stock, $.001 par value, 20,000,000 shares authorized;
12,412,613 shares issued and outstanding 12,413
Additional paid-in capital 4,902,686
Deferred financing costs (510,400)
Accumulated Deficit (3,820,205)
-------------------
TOTAL STOCKHOLDERS' EQUITY 584,494
-------------------
===================
$ 1,484,970
===================
See notes to consolidated financial statements.
2
<PAGE>
CELEXX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
2000 1999
(unaudited) (unaudited)
------------------- ------------------
<S> <C> <C>
REVENUE $ 361,858 $ -
COST OF REVENUE 162,081 -
------------------- -------------------
GROSS PROFIT 199,777 -
OPERATING EXPENSES 1,791,505 261,585
------------------- -------------------
LOSS FROM OPERATIONS (1,591,728) (261,585)
INTEREST EXPENSE 5,959 -
------------------- -------------------
NET LOSS $ (1,597,687) $ (261,585)
=================== ===================
NET LOSS PER COMMON SHARE - basic and diluted $ (0.13) $ (0.04)
=================== ===================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - basic and diluted 11,848,910 7,073,725
=================== ===================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
CELEXX CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended March 31,
-----------------------------------------
2000 1999
(unaudited) (unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (1,597,687) $ (261,585)
Adjustments to reconcile net loss to net cash ---------------- ----------------
used in operations:
Amortization and depreciation 40,740 -
Common stock issued for services 1,426,866 -
Changes in assets and liabilities net of effects from acquisition:
Marketable securities - (51,000)
Accounts receivable (78,031) (12,474)
Advances 400 (87,170)
Other assets - (62,075)
Accounts payable and accrued expenses (19,552) (94,174)
Deferred revenue 82,498 -
---------------- ----------------
1,452,921 (306,893)
---------------- ----------------
NET CASH USED IN OPERATING ACTIVITIES (144,766) (568,478)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26,526) (13,800)
---------------- ----------------
NET CASH USED IN INVESTING ACTIVIES (26,526) (13,800)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of common stock - 890,250
Decrease in line of credit (5,409) -
Borrowings from related parties 118,000 348,640
Increase (decrease) in due to related parties 5,500 -
---------------- ----------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 118,091 1,238,890
---------------- ----------------
NET (DECREASE) INCREASE IN CASH (53,201) 656,612
CASH - beginning of period 137,682 -
---------------- ----------------
CASH - end of period $ 84,481 $ 656,612
================= ================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
CeleXx Corporation and Subsidiaries
Notes to Unaudited Consolidated Financial Statements
1. Basis of Presentation
The accompanying unaudited consolidated financial statements of CeleXx
Corporation (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-QSB and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. These
unaudited condensed consolidated financial statements should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Company's Form 10-KSB for the year ended December 31, 1999.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation have been included. The
results for the three months ended March 31, 2000, and 1999, are not necessarily
indicative of financial information for the full year. For further information,
refer to the consolidated financial statements and footnotes included in the
Company's Form 10-KSB as filed with the Securities and Exchange Commission for
the year ended December 31, 1999.
2. Stockholders' Equity
During the three months ended March 31, 2000, the Company issued 1,505,555
shares of common stock to various individuals and consultants for services
rendered. The Company has recorded non-cash compensation of $1,426,866 relating
to the issuance of 1,085,555 of the aforementioned shares. In addition 420,000
shares of the Company's common stock were issued pursuant to the Company's
issuance of 350 shares of convertible preferred stock in April 2000 and has been
recorded as deferred financing costs.
3. Pro-forma Information
On May 25, 1999 the Company signed a merger agreement and took effective control
of Pinnacle East, Inc. ("Pinneast"). The following unaudited pro-forma condensed
statement of operations for the three months ended March 31, 1999 reflects the
combined results of CeleXx and Pinneast as if the acquisition had occurred on
January 1, 1999.
REVENUES $178,000
--------
GROSS PROFIT 97,000
--------
OPERATING EXPENSES 395,000
--------
NET LOSS $298,000
--------
NET LOSS PER SHARE $( 0.04)
--------
5
<PAGE>
Part I Financial Information
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations for the Three Months Ended March 31, 2000, and 1999
THIS QUARTERLY REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS THAT
HAVE BEEN MADE PURSUANT TO THE PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT'S
CURRENT EXPECTATIONS, ESTIMATES AND PROJECTIONS, BELIEFS AND ASSUMPTIONS. WORDS
SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES," "SEEKS,"
"ESTIMATES," VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE STATEMENTS ARE NOT GUARANTEES OF
FUTURE PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND
ASSUMPTIONS THAT ARE DIFFICULT TO PREDICT; THEREFORE, ACTUAL RESULTS MAY DIFFER
MATERIALLY FROM THOSE EXPRESSED OR FORECASTED IN ANY SUCH FORWARD-LOOKING
STATEMENTS. THESE RISKS AND UNCERTAINTIES INCLUDE THOSE DISCUSSED IN "PART I -
ITEM 1 DESCRIPTION OF BUSINESS - RISK FACTORS" AND "PART II - ITEM 6 -
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" CONTAINED IN THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED
MARCH 31, 1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. UNLESS
REQUIRED BY LAW, THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE. INVESTORS SHOULD REVIEW THIS QUARTERLY REPORT IN
COMBINATION WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB IN ORDER TO HAVE A
MORE COMPLETE UNDERSTANDING OF THE PRINCIPAL RISKS ASSOCIATED WITH AN INVESTMENT
IN THE COMPANY'S STOCK.
Overview
CeleXx Corporation is an Information Technology company that provides
organizations with support services and integrated computer and
telecommunications based systems that improve individual performance. Celexx's
strategy in providing these services has been accomplished through the
acquisition and consolidation of Information Technology (IT)businesses. In
general, these businesses provide services such as engineering design and layout
for the installation of network systems, Web site development, computer hardware
and software integration, and training and ongoing technical support to client
companies. In certain situations, however, computer hardware and software may be
sold as part of the overall service solution.
Results of Operations
The Company's total revenue was $361,858 for the quarter ended March 31, 2000
compared to $0 for the same quarter last year. The increase in revenue is a
result of its first acquisition, Pinnacle East, Inc. in May 1999.
Gross profit was 55% for the quarter ended March 31, 2000, which is a result of
the aforementioned acquisition.
Operating expenses increased by $1,535,879 or 587% for the quarter ended March
31, 2000, compared to the same period in 1999. As a percentage of sales,
operating expenses were 497% of total sales in the quarter ended March 31, 2000.
The increase in operating expenses for the quarter ended March 31, 2000 is
primarily due to the recognition of $1,426,866 in non-recurring, non-cash
compensation expense for the issuance of stock for services rendered, in
addition to increases in salaries, professional expenses and transaction costs
associated with on-going acquisitions and capital raising efforts.
6
<PAGE>
Liquidity and Capital Resources
The Company has satisfied its cash requirements primarily through cash flow from
borrowings from its majority shareholder and principal officer. At March 31,
2000, the Company had $84,481 in cash.
During the three months ended March 31, 2000, cash provided by financing
activities of $118,091 was derived from related party borrowings. Such amounts
were exceeded by cash used in operating and investing activities of $171,292,
resulting in a $53,201 decrease in cash.
On April 7, 2000, the Company completed a financing agreement with Birch Circle
LLC ("Birch"), a private investment banking firm, and raised $3,500,000 for the
Company through the sale of shares of the Company's Series A Convertible
Preferred Stock ("Preferred Shares"). Approximately $1.6 million of the net
proceeds (including accounting and attorneys fees) had been earmarked for the
acquisition of Computer Marketplace, Inc..
The Company believes that it will require additional cash infusions to meet the
Company's projected working capital and other cash requirements in its current
fiscal year ending December 31, 2000.
<PAGE>
Part II Other Information
Item 2. Changes in Securities and Use of Proceeds
NONE
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) The Company did not file any reports on Form 8-K during the three
months ended March 31, 2000.
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 in the city of Boca Raton, state of
Florida, on the 19th day of May, 2000:
Celexx Corporation
By: /s/ Doug H. Forde May 19, 2000
---------------------------------------------------
Doug H. Forde
President, Chairman of the Board,
and Chief Executive Officer
[principal executive officer]
By: /s/ David C. Langle May 19, 2000
---------------------------------------------------
David C. Langle
Vice President Finance
And Chief Financial Officer
{principal accounting officer]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 84,481
<SECURITIES> 0
<RECEIVABLES> 154,954
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 252,180
<PP&E> 161,278
<DEPRECIATION> (95,522)
<TOTAL-ASSETS> 1,484,970
<CURRENT-LIABILITIES> 647,343
<BONDS> 0
0
0
<COMMON> 12,413
<OTHER-SE> 572,081
<TOTAL-LIABILITY-AND-EQUITY> 1,484,970
<SALES> 361,858
<TOTAL-REVENUES> 361,858
<CGS> 162,081
<TOTAL-COSTS> 162,081
<OTHER-EXPENSES> 1,791,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,959
<INCOME-PRETAX> (1,597,687)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,597,687)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
