<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transaction period from ________________ to __________________
Commission File No. 0-28117
Eco-Rx, Inc.
------------
(Exact name of Small Business Issuer as Specified in its charter)
Florida 65-0569329
------- ----------
(State or other jurisdiction or (IRS employer Identification No)
organization)
2051 Northeast 191 Drive
North Miami Beach, FL 33179
---------------------------
(Address of Principal Executive Offices)
(305) 937 1862
---------------
(Registrant's Telephone Number)
Not applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock,$0.001 par value At August 1, 2000 5,842,939
Preferred Stock, $0.001 par value At August 1, 2000 None
Transitional Small Business Disclosure Format: Yes [_] No [x]
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
2
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND 1999
(UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>
June 30,
2000 1999
---- ----
<S> <C> <C>
CURRENT ASSETS
Cash $ 767 $ 2,532
Inventory - 5,307
----------- -----------
TOTAL CURRENT ASSETS 767 7,839
FURNITURE AND EQUIPMENT, NET 10,784 9,385
OTHER ASSETS 13,687 2,755
----------- -----------
TOTAL ASSETS $ 25,238 $ 19,979
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of lease obligation $ 13,888 $ 10,416
Accounts payable and accrued expenses 389,226 204,262
Notes payable to stockholders 506,600 350,000
----------- -----------
TOTAL CURRENT LIABILITIES 909,714 564,678
LEASE OBLIGATION 6,090 18,958
----------- -----------
TOTAL LIABILITIES 915,804 583,636
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - $.001 par value, 5,000,000 shares
authorized; none issued and outstanding
Common stock - $.001 par value, 10,000,000 shares
authorized; 5,842,939 shares issued
and outstanding 5,843 5,836
Additional paid-in capital 1,247,376 1,217,334
Deficit accumulated during the development stage (2,143,785) (1,786,827)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (890,566) (563,657)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 25,238 $ 19,979
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
JUNE 30, 2000 AND 1999
================================================================================
(UNAUDITED)
<TABLE>
<CAPTION>
For the Period
February 27, 199
(Inception)
Quarter Ended Quarter Ended thru June
June 30, June 30, 30, 2000
2000 1999 (Unaudited)
-------------- ------------ ------------
<S> <C> <C> <C>
REVENUES $ - $ - $ -
------------- ----------- -----------
COSTS AND EXPENSES
General and administrative 166,100 56,246 1,521,698
Depreciation and amortization 4,160 4,542 59,374
Interest 38,349 20,581 166,271
Research and development 3,855 4,441 68,710
Abandonment of property - - 384,917
------------- ----------- -----------
TOTAL EXPENSES (212,464) (85,810) (2,200,970)
INTEREST INCOME - - 8,227
OTHER INCOME - 50,000
------------- ----------- -----------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (212,464) (85,810) (2,142,743)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - (1,042)
------------- ----------- -----------
NET LOSS $ (212,464) $ (85,810) $(2,143,785)
============= =========== ===========
BASIC AND DILUTED NET LOSS PER
SHARE OF COMMON STOCK:
Loss before cumulative effect of change in
accounting principle $ (.04) $ (.01) $ (,37)
Cumulative effect of change in accounting
principle - - -
------------- ----------- -----------
BASIC AND DILUTED NET LOSS PER SHARE $ (0.04) $ (0.01) $ (0.37)
============= =========== ===========
SHARES USED IN THE CALCULATION
OF BASIC AND DILUTED NET LOSS PER SHARE 5,842,939 5,836,439 5,842,939
============= =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
JUNE 30, 2000 AND 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Accumulated
Additional During the
Common Stock paid-in Development
-------------------
Shares Par Value Capital Stage Total
------------ ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balances at February 27, 1995
(inception) (unaudited) - $ - $ - $ - $ -
Common stock issued for cash
(unaudited) 3,700,497 3,700 89,015 - 92,715
---------- ---------- ------------ ----------- ----------
Balances at December 31, 1995
(unaudited) 3,700,497 3,700 89,015 - 92,715
Common stock issued for cash
(unaudited) 94,228 94 59,906 - 60,000
Net loss (unaudited) - - - (168,096) (168,096)
---------- ---------- ------------ ----------- ----------
Balances at December 31, 1996
(unaudited) 3,794,725 3,794 148,921 (168,096) (15,381)
Common stock issued for cash 946,727 947 758,803 - 759,750
Less: Cost of services related
To registration (60,595) (60,595)
Common stock issued in
connection with loan payable 10,000 10 (10) - -
Net loss - - - (801,109) (801,109)
---------- ---------- ------------ ----------- ----------
Balances at December 31,
1997 4,751,452 4,751 847,119 (969,205) (117,335)
</TABLE>
5
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
Deficit
Common Stock Accumulated
-----------------
Additional During the
paid-in Development
Shares Par Value Capital Stage Total
------ --------- ----------- ----------- -----
<S> <C> <C> <C> <C> <C>
Common stock issued for cash
and stock subscription
receivable 112,000 112 213,888 - 214,000
Conversion of loan payable to
common stock 75,000 75 149,925 - 150,000
Common stock issued
for services 897,987 898 85,632 - 86,530
Less: Cost of services (paid
with common stock
above) related to issuing
common stock - - (70,480) - (70,480)
Net loss - - - (731,814) (731,814)
--------- --------- -------------- ------------ ----------
Balances at December 31, 1998 5,836,439 5,836 1,226,084 (1,701,019) (469,099)
Common stock issued for cash 6,500 7 32,493 32,500
Less: Cost of services related
to registration (11,201) (11,201)
Net Loss - - - (230,302) (230,302)
--------- --------- -------------- ------------ ----------
Balances at December 31, 1999 5,842,939 $ 5,843 $ 1,247,376 $ (1,931,321) $ (678,102)
Net Loss for the Six Month
Period ending June 30, 2000 - - - (212,464) (212,464)
--------- --------- -------------- ------------ ----------
Balances at June 30, 2000 5,842,939 $ 5,843 $ 1,247,376 $ (2,143,785) $ (890,566)
--------- --------- -------------- ------------ ----------
</TABLE>
6
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, 2000 AND 1999
(UNAUDITED)
================================================================================
<TABLE>
<CAPTION>
For the Period
February 27, 1995
(Inception)
Six Months Six Months thru
Ended Ended June 30,
June 30, June 30, 2000
2000 1999 (Unaudited)
--------- --------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(212,464) $ (85,810) $(2,143,785)
--------- --------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 4,160 4,542 59,374
Abandonment of property - - 384,917
Adjustment to inventory for impairment 35,384
Services received in exchange for stock - 16,050
Consulting fee paid by reclassifying
advances to stockholders - 205,587
Cumulative effect of change in
accounting principle - 1,042
Changes in operating assets and liabilities:
Inventory - - (120,791)
Advances to stockholders - - (205,587)
Other assets (10,912) (88,490)
Accounts payable and accrued expenses 114,759 (29,670) 389,226
--------- --------- -----------
TOTAL ADJUSTMENTS 108,007 (25,128) 676,712
--------- --------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (104,457) (110,938) (1,467,073)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets - 16,000
Capital expenditures (6,169) (3,617) (259,799)
--------- --------- -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (6,169) (3,617) (243,799)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loans 139,300 110,000 723,400
Proceeds from issuance of common stock 6,292 1,098,370
Expense related to registration - (11,201)
Repayment of stockholder loan (50,000) - (66,800)
Payment of lease obligation (4,648) (3,617) (32,110)
--------- --------- -----------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 84,652 116,251 1,711,659
--------- --------- -----------
</TABLE>
7
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
JUNE 30, 2000 AND 1999
(UNAUDITED)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------
For the Period
February 27, 1995
(Inception)
Six Months Six Months through
Ended Ended June 30,
June 30, June 30, 2000
2000 1999 (Unaudited)
---------- ---------- -------------
<S> <C> <C> <C>
NET INCREASE (DECREASE) IN CASH 25,974 1,696 767
CASH AT BEGINNING OF YEAR 26,761 836 -
---------- ---------- -------------
CASH AT END OF PERIOD $ 767 $2,532 $ 767
========== ========== =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $23,404 $ - $ 56,994
========== ========== =============
Cash paid for income taxes $ - $ - $ -
========== ========== =============
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
Leased equipment $ - $ - $ 52,088
========== ========== =============
75,000 shares of common stock issued in
exchange for settlement of outstanding
note to a stockholder $ - $ - $150,000
========== ========== =============
897,987 shares of common stock issued
in exchange for services received (net of
$70,480 charged to additional-paid-in
capital as expenses of placing common
stock) $ - $ - $ 16,050
========== ========== =============
</TABLE>
8
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 1 - NATURE OF BUSINESS
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. has been in the development
stage since its incorporation in the State of Florida on February 27,
1995. The Company's mission is to pioneer the technology, design and
manufacturing of air purification equipment for the destruction of
pathogens and for the efficient and effective removal of odors,
allergy and asthma causing agents, pollutants and certain gases from
indoor air environments.
The consolidated financial statements include the accounts of ECO-Rx,
Inc. f/k/a Eco-Aire Company, Inc. and its wholly owned subsidiary,
Eco-Aire Marketing, Inc., collectively referred to as the "Company".
Eco-Aire Marketing, Inc. is inactive and ECO-Rx, Inc. f/k/a Eco-Aire
Company, Inc.'s investment in said company has been eliminated in
consolidation.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist primarily of metal, bulbs, ballasts,
machines in process and miscellaneous supplies. In the third
quarter of 1999, the Company wrote off $5,307 of items previously
included in inventory, as they believed that these items may not
have any value in future operations.
(B) FURNITURE AND EQUIPMENT
The Company's furniture and equipment is stated at cost.
Depreciation is computed on the straight line method over the
estimated useful lives of the assets, which range from 3 to 5
years.
(C) ASSET IMPAIRMENT
Assets are considered impaired when, based upon current
information and events, it is probable that the Company will not
realize an economic benefit on the recorded assets. Impairment is
measured on an asset specific basis based upon the fair value of
the assets or the discounted expected future cash flows. During
1998, the Company wrote-off approximately $40,000 due to
impairment, relating to patents and prepaid royalties.
9
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(D) ORGANIZATIONAL COSTS
Organizational costs have been expensed in accordance with
Statement of Position 98-5, "Reporting on the Costs of Start-up
Activities" ("SOP 98-5"). SOP 98-5 provides guidance on the
financial reporting of start-up costs and organization costs. It
requires costs of start-up activities and organization costs to
be expensed as incurred. During 1998, the Company expensed $1,042
of organization costs, as a result of SOP 98-5, which is
reflected as a cumulative effect of change in accounting
principle in the consolidated statement of operations
(E) INCOME TAX
Effective January 1, 1996, the Company, with the consent of its
stockholders, elected to be treated as an "S" Corporation for
income tax purposes. Under this election, federal and state
income taxes are payable by the individual stockholders rather
than the Company. Accordingly, no provision or liability for
income taxes had been included in the consolidated financial
statements through December 31, 1997.
On September 30, 1998, the Company terminated its election to be
treated as an S Corporation. The Company now accounts for income
taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or
tax returns. Deferred tax liabilities and assets are determined
based on temporary differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to
reverse. The effect on deferred tax liabilities and assets of a
change in tax rates is recognized in income in the period that
includes the enactment date.
(F) EARNINGS PER SHARE
Earnings per share is determined in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"). It replaces the presentation of
primary EPS with a presentation of basic EPS. This statement
requires restatement of all prior-period EPS data presented.
10
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The net loss per share is computed by dividing the net loss for the
period by the weighted average number of shares outstanding (as
adjusted retroactively for the dilutive effect of common stock
options) for the period plus the dilutive effect of outstanding common
stock options and warrants considered to be common stock equivalents.
Stock options and other common stock equivalents are excluded from the
calculations as their effect would be anti-dilutive. Common stock
issued for nominal consideration is deemed outstanding for all
historical periods.
Basic and diluted earnings per share amounts are equal because the
Company has a net loss and consideration of the outstanding options,
warrants and their equivalents would result in anti-dilutive effects
to earnings per share.
The number of shares used to compute EPS was 5,842,939 and 5,836,439
for the period ended June 30, 2000 and 1999, respectively.
(G) 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 reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates made in preparation of the financial statements.
(H) CONCENTRATIONS OF CREDIT RISK
A major portion of the Company's business is expected to be
conducted using its patented technology. Consequently, the
Company's profitability may be subjected to changes in technology
and its use in commerce, as well as, the enforceability of its
patent.
(I) READINESS FOR YEAR 2000
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. As a result, those computer programs having
time-sensitive software would recognize a date using "00" as the
year 1900 rather than the year 2000. The Company is in its
development stage and does not have sophisticated computer
equipment that may cause the Year 2000 issue to adversely affect
its operations.
11
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(J) NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for the period ending December 31, 1998. SFAS No.
130 requires companies to report by major components and in
total, the change of its net assets during the period from non-
owner sources. The adoption of SFAS No. 130 did not have a
significant effect on the Company's financial position, results
of operations, or cash flow, since the Company does not have any
components of comprehensive income, other than net income/(loss)
from operations.
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No.
131 establishes standards for the way companies report
information about operating segments in annual financial
statements and establishes standards for related disclosures
about products and services, geographic areas and major
customers. The Company's air purification business is currently
the only segment reportable under SFAS No. 131.
(K) PATENTS
The Company has applied for several patents in connection with
its technology. There are no assurances that the patents will be
granted.
(L) OTHER INCOME
The Company received $50,000 as part of a letter of intent to
enter into an agreement with a third-party to produce air
purification machines to be sold by the third-party. The letter
of intent expired in 90 days, without the consummation of the
contract. The $50,000 is reflected as other income in the
cumulative column in the consolidated statement of operations.
NOTE 3 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
Since formation, the Company's operations have been devoted primarily
to:
. Raising capital
. Developing its product
. Obtaining financing
. Developing its marketing plan
Accordingly, the Company is considered to be in the development stage,
as its planned production and sales have not yet commenced.
12
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 3 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN (CONTINUED)
Management's plans include the following:
. Commencement of production and development of new products
. Implementation of sales and leasing of commercial units
. Pursuing licensing agreements for the technology
The Company has made progress expanding the patent coverage and
marketing strategy. The Company has adopted a plan to implement
certain courses of action for raising capital and marketing. The
Company has also held presentations for major companies to license the
technology and sell or distribute its products.
The Company has been in the development stage since its inception on
February 27, 1995. These statements are presented on the basis that
the Company will continue as a going concern. This contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. As shown
in the accompanying consolidated financial statements, the Company has
incurred net losses since its inception and no revenues. As of
December 31, 1999, current liabilities exceeded current assets by
approximately $678,000.
These factors, as well as the Company's ability to obtain additional
long-term financing, adequate stockholder capital contributions,
future equity funding and achieve and maintain profitable operations,
raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include
any adjustments that might result from the outcome of these
uncertainties.
NOTE 4 - FURNITURE AND EQUIPMENT, NET
These accounts consist of the following as of June 30, 2000:
Furniture and equipment $ 43,703
Less accumulated depreciation 32,919
--------
$ 10,784
========
Depreciation expense for the six months ended June 30, 2000 and 1999
was $4,160 and $4,542, respectively.
13
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
These accounts consist of the following as of June 30, 2000:
Accounts payable $ 296,698
Accrued interest 92,528
---------
$ 389,226
=========
NOTE 6 - NOTES PAYABLE TO STOCKHOLDERS
The notes payable to stockholders as of June 30, 2000 is comprised of
the following:
Note accruing interest at 10%; all unpaid interest and
principal became due June, 1998, and is personally
guaranteed by three of the Company's stockholders. As
of December 31, 1999 this note was payable on demand
and was accruing interest at the default rate of 18%. $ 100,000
Note accruing interest at 12%; maturing the earlier of:
(a) the infusing of gross proceeds of $300,000 in
additional debt or equity capital, (b) the closing of an
initial public offering or "reverse merger" of the
Company into a publicly traded entity, or (c) December
31, 1999. Subsequent to December 31, 1999 the Company
repaid $50,000 of this note. The balance is due on demand
and is accruing interest at the default rate of 18%. 50,000
Unsecured loan, interest accruing at 8.75% payable
annually commencing December, 1996. Loan matured December,
1998 at which time all principal and unpaid interest
was due. As of December 31, 1999 this note was payable
on demand and was accruing interest at the default rate
of 18%. 80,000
Various unsecured loans, interest accruing at 15%, with
original maturity dates ranging from January, 1999 to
March, 1999. These notes were renewed and now have
maturity dates in the year 2000. 194,300
Various unsecured loans, interest accruing at 12%, with
maturities through August 2000. 82,300
---------
$ 506,600
=========
The Company has committed to issue certain shares of common stock to
certain lenders. The amounts and ratios of shares are to be
determined.
14
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
GOVERNMENTAL REGULATIONS
The Company's operations may be subject to supervision and regulation
by governmental regulatory agencies, which could impact and have a
material adverse effect on the Company's business, financial condition
or results of operations.
LITIGATION
The Company, from time to time, is a defendant in legal actions
arising from normal business activities. Management does not believe
any potential or pending litigation currently exists.
LEASE OBLIGATION
In March, 1997, the Company entered into a noncancelable equipment
lease totaling $52,088. The factory in which this equipment was
located was abandoned during 1997. The Company, however, could not
cancel this lease and therefore, continues to make monthly payments.
Future minimum lease payments under this lease as of June 30, 2000
consisted of the following:
Twelve months ending June 30,
2001 $ 13,888
2002 6,090
--------
$ 19,978
========
Rental expense for all operating leases amounted to approximately
$4,700 during the first six months of 2000. There was no rental
expense during 1999.
In April, 2000, the Company executed a five year lease for space in
Hollywood, Florida to house the administrative office, product
assembly and shipping operations. The lease also contains an option to
renew for an additional five years.
15
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
Future minimum lease payments under this lease consisted of the
following:
Twelve months ending June 30,
2000 $ 31,038
2001 53,208
2002 54,279
2003 55,863
2004 57,764
Thereafter 24,460
---------
$ 276,612
=========
DESIGN AND CONSULTING AGREEMENT
During 1997, the Company entered into a design and consulting service
agreement with a third party in which it shall pay a royalty of $1 for
each unit sold for a period of five years, commencing on the date of
first sale. The Company will pay the same $1 royalty for an additional
45 years with respect to sales of the original product made by the
Company to customers introduced to the Company by this firm.
FINANCIAL CONSULTING SERVICES AGREEMENT
During 1999, the Company entered into a financial consulting services
agreement with a third party in which the third party consultant will
receive 50,000 shares of the Company's common stock in exchange for
services. The consultant has not performed the services as of December
31, 1999 and therefore, the shares have not been issued.
16
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 8 - STOCKHOLDERS' DEFICIT
LOSS PER SHARE
Loss per share is computed by dividing net loss by the number of
outstanding shares of common stock. Net loss per share for the periods
presented does not include the effects of stock options and warrants
because their effects would be anti-dilutive.
The following table sets forth the computation of net loss per share:
<TABLE>
<CAPTION>
For the Period
February 27,
1995
(inception)
Ended Ended through
June 30, June 30, June 30,
2000 1999 2000
---------- ----------- ------------
<S> <C> <C> <C>
Net loss $ (212,464) $ (85,810) $ (2,143,785)
========== =========== ============
Weighted average common shares
outstanding used in computing basic
net loss per share 5,842,939 5,838,939 5,842,939
========== =========== ============
Net loss per share of common stock $ (0.04) $ (0.01) $ (0.37)
========== =========== ============
</TABLE>
During 1997, the Company amended its articles of incorporation and
changed the capital structure from common stock authorized of 1,000
shares with a par value of $1, to 10,000,000 shares of common stock
authorized with a par value of $.001 and authorized preferred stock of
5,000,000 shares with a par value of $.001. During 1997, the Company
also effectuated two stock splits, a 2,000 for 1 stock split and a
3.60266 for 1 stock split, for its common stock. The statement of
stockholder's deficit reflects the effect of these stock splits and
change in par value retroactively.
During 1995, the Company issued 3,700,497 shares of common stock for
$92,715.
17
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
NOTE 8 - STOCKHOLDERS' DEFICIT (CONTINUED)
During 1996, the Company issued 94,228 shares of common stock for
$60,000. An additional 46,727 shares of common stock was issued during
1997 for $759,750. The Company incurred $60,595 of expenses related to
this issuance. Also during 1997, 10,000 shares of common stock were
issued to an individual who loaned money to the Company.
During 1998, the Company issued 112,000 shares of common stock for a
stock subscription receivable of $15,000 and $199,000 in cash. Also in
1998, the Company issued 75,000 shares of common stock in repayment of
a previously outstanding $150,000 loan.
During 1998, 897,987 shares of common stock were issued in exchange
for services provided to the Company. These shares were issued and
recorded at $86,530, the market value of the services received. This
amount includes 737,487 shares issued for services related to costs of
fees for placing the common stock. The market value of the placement
fees totaled $70,480 and are reflected as a direct reduction of
additional paid-in capital in the consolidated statements of
stockholders' deficit.
During 1999, the Company issued 6,500 shares of common stock for
$32,500. Costs related to the registration of the Company were charged
against additional paid-in-capital in the amount of $11,201.
None of these shares were sold through the National Association of
Securities Dealers, Inc. (NASD) Broker/Dealers, nor were any
commissions paid for these shares. None of the shares issued for
services have been issued for future sales of stock.
NOTE 9 - FAIR VALUE
The Company has estimated the fair value of its financial instruments as of
December 31, 1999, as required by Statement of Financial Accounting Standards
No. 107, "Disclosure
18
<PAGE>
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000
(UNAUDITED)
about Fair Value of Financial Instruments." The carrying values of cash,
accounts payable and accrued expenses, lease obligations and debt are
reasonable estimates of their fair values.
NOTE 10 - INCOME TAXES
The Company has federal and state net operating loss carryforwards as
follows:
Period Ending Federal State Years of Expiration
-------------------- ----------- --------- -------------------
December 31, 1999 $737,845 $737,845 2018-2019
======== ======== =========
June 30, 2000 $212,464 $212,464 2020
The deferred tax asset arises from the net operating loss reflected
above.
The Company's total deferred tax liabilities, deferred tax assets and
deferred tax asset valuation allowances at June 30, 2000 are as
follows:
Total Deferred Tax Asset $333,290
Less Valuation Allowance 333,290
-------
Net Deferred Tax Asset $ -0-
The Company provides a 100 percent valuation allowance for any
deferred tax asset which is attributable to unused net operating loss
carryforwards. Generally accepted accounting principles require a
valuation reserve only if it is more likely than not that some portion
or all of a deferred tax asset will not be realized.
19
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
unaudited Condensed Financial Statements and Notes thereto appearing elsewhere
in this report.
(a) Eco-Rx's plan of operation for the next twelve months
. Complete the process of filing a Form 10-SB with the Securities And
Exchange Commission.
. Complete the design of five air purification units; two room units, as
well as three for medium and larger rooms, and have them tested at an
independent laboratory to insure that they meet the Company's
requirements;
. Have the production molds for manufacturing the units designed and
built;
. Commence the work necessary to submit the finished unit for a 510-K
medical device rating from the Food and Drug Administration;
. Ascertain that the Company's patent applications comply with the final
design criteria;
. Finalize the list of suppliers;
. Acquire and inventory the component parts that the Company does not
intend to manufacture;
. Design and print sales materials and packaging materials;
. Sell and ship finished products;
. Fill in product line with additional air purification products;
. Begin development and design of new products; and
Pursue licensing agreements for the Company's technology.
b) Product Research and Development for the Next 12 Months
Over the next 12 months, the Company anticipates its product research and
development will be for (a) air purification products for automobiles and
trucks and home central air conditioning systems, and (b) water
purification applications utilizing the technology.
20
<PAGE>
Expenditures for the Next 12 Months
The Company anticipates that its cash requirements over the next 12 months
will total approximately $ 3,500,000, including the cost of production of
plastic injection molds for the products, the return of loans and the
payment of the old accounts payable.
(d) The Company will hire a new chief executive officer and a new chief
financial officer, a secretary/receptionist, and others to supervise the
assembly of the machines.
21
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
The Company is in default on three notes payable. In February 2000, the Company
paid $5,000 in interest to extend two of the notes, one for $100,000 and one for
$80,000. They are now due on demand, accruing interest at the default rate of
18%. The third note for $100,000 was due at the end of 1999. It has been reduced
to $50,000. The note holder has demanded rapid payment.
Item 4. Submission of matters to a Vote of Security Holders
None
Item 5. Other Information
During the quarter ended June 30, 2000, the Company (a) on June 30, 2000 filed a
Form 10-KSB for the year ended December 31, 2000, and will be filing an amended
Form 10-KSB for such period on or about August 18, 2000; and (b) on May 15, 2000
filed a Form 10-QSB for the quarter ended March 31, 2000, and will be filing an
amended Form 10-QSB for such period on or about August 18, 2000.
Item 6. Exhibits and Reports on Form 8-K.
(a) See the Index to Exhibits on page 24 hereof.
(b) Reports were filed on Form 8-K on May 5, 2000 and May 10, 2000. The Form
8-K filed on May 5, 2000 reported the dismissal on May 1, 2000 of
Morrison, Brown, Argiz & Company as the Company's certifying accountant.
The form 8-K filed on May 10, 2000 reported the Company's engagement on
May 3, 2000 of Perez-Abreu, Aguerrebere, Sueiro LLC as the Company's
principal accountant to audit the Company's financial statements.
22
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ECO-Rx, Inc.
(Registrant)
By: /s/ Joseph M. Peiken
----------------------------
Joseph M. Peiken
Vice President and Chief Financial
Officer
Date: August 15, 2000
23
<PAGE>
PART III
Item 1. Index to Exhibits
Exhibit No. Description Page No.
----------- ----------- --------
3.1 Articles of Incorporation of Registrant,
as originally filed and amended (1)
3.2 Bylaws of Registrant (1)
4.1 Form of Common Stock Certificate (1)
10.1 Consulting Agreement with Fitch,
Inc. dated January 17, 1997 (1)
10.2 Office Lease (2)
16 Copy of Letter dated May 5, 2000
from Morrison, Brown, Argiz &
Company on change in certifying
Accountant (3)
21.1 Subsidiary of Registrant (3)
23.1 Consent of Perez-Abreu, Aguerrebere,
Sueiro LLC (1)
27 Financial Data Schedule
(1) Previously filed as an Exhibit to Registrant's Form 10-SB (file 0-
28117) and incorporated herein by this reference.
(2) Previously filed as an Exhibit to Registrant's Form 10-KSB for the
year ended December 31, 1999, and incorporated herein by this
reference.
(3) Previously filed as an Exhibit to Registrant's Form 8-K filed by the
Registrant on May 10, 2000 and incorporated herein by this reference.
Item 2. Description of Exhibits
None
24
