UNITED STATES
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, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ------ to ---------------
Commission File Number 33-3358-NY
CENTRAXX, INC.
-------------------------
(Name of small business issuer in its charter)
Nevada 88-0224219
------------------------ ------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Argentia Road, Suite #1000
Mississauga, Ontario Canada L5N 5V4
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (905) 826-9988
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 Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes [x] No [ ] (2) Yes [x] No [ ]
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
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 No
--- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of outstanding shares of each of the Issuer's classes of
common equity, as of the latest practicable date:
November 15, 2000
common - 18,033,177 shares
Transitional Small Business Disclosure Format (Check One) : Yes [x] No [ ]
Item 1. Financial Statements
The consolidated financial statements of the Company required to be filed
with this Form 10-QSB Quarterly Report were prepared by management and
reviewed by the Company's Independent Auditor and commence on the following
page, together with related Notes. In the opinion of management, these
Consolidated Financial Statements fairly present the financial condition of
the Company.
Centraxx, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
[CAPTION]
<TABLE>
Three Months Ending September 30 2000 1999
<S> <C> <C>
Sales $ - $ -
Cost of sales - -
Gross margin - -
Expenses
Marketing and public relations 43,522 21,160
Management fees 30,196 45,563
Professional fees 119,308 7,744
Salaries and other administration 214,229 176,488
Research and development costs 836,380 205,492
Depreciation and amortization 27,302 18,176
Interest 39,756 -
Foreign exchange loss 44,885 -
1,355,578 474,622
Net loss $ 1,355,578 $ 474,622
Net loss per share, basic and
diluted (Note 1) $ ($0.08) $ ($0.03)
Weighted average shares, basic
and diluted 18,010,062 16,775,408
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
[CAPTION]
<TABLE>
Centraxx, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Operations
(Expressed in U.S. Dollars)
(Unaudited)
Aug.8, 1997 to
September 30, 2000
Nine Months Ending September 30 2000 1999 Cumulative
<S> <C> <C> <C>
Sales $ - $ - $ -
Cost of sales - - -
Gross margin - - -
Expenses
Marketing and public relations 143,677 88,488 572,908
Management fees 151,970 135,527 447,155
Professional fees 325,151 39,471 596,471
Salaries and other administration 605,520 447,509 1,611,049
Research and development costs 1,908,777 593,959 3,413,874
Depreciation and amortization 67,269 51,804 222,966
Interest 109,103 - 117,906
Foreign exchange (gain) loss 53,510 - 60,144
3,364,977 1,356,757 7,042,473
Net loss $(3,364,977) $(1,356,757) $ (7,042,473)
Net loss per share, basic and
diluted (Note 1) $ ($0.19) $ ($0.08)
Weighted average shares, basic
and diluted 17,962,800 16,775,408
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
Centraxx, Inc.
(A Development Stage Company)
Condensed Consolidated Balance Sheets
(Expressed in U.S. Dollars)
(Unaudited)
[CAPTION]
<TABLE>
September 30, December 31,
2000 1999
<S> <C> <C>
Assets
Current
Cash $ 56,715 $ 234
Prepaid expenses 72 42,231
56,787 42,465
Capital assets 316,513 191,413
Other assets 18,766 16,671
$ 392,066 $ 250,549
Liabilities
Current
Accounts payable and
accrued liabilities $1,678,410 $ 508,724
Short Term Loan 981,563
Long term convertible debentures 2,000,000 906,319
4,659,973 1,415,043
Shareholders' Deficiency
Capital stock 18,183 17,946
Contributed surplus 2,735,682 2,498,958
Accumulated other comprehensive loss 20,701 (3,903)
Deficit (7,042,473) (3,677,495)
(4,267,907) (1,164,494)
$ 392,066 $ 250,549
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
Centraxx, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
[CAPTION]
<TABLE>
Nine Months Ending September 30 2000 1999
<S> <C> <C>
Cash flows from (applied to)
Operating
Net loss $ (3,364,977) $ (1,356,757)
Depreciation and amortization 67,269 51,804
(3,297,708) (1,304,953)
Changes in
Prepaid expenses 42,159 15,160
Accounts payable and accrued liabilities 1,371,647 395,821
(1,883,901) (893,972)
Financing
Issue of shares 35,000 655,826
Issue of convertible debenture 1,093,681 251,482
Issue of short term loans 981,563 -
2,110,244 907,308
Investing
Purchase of capital assets (192,369) (12,471)
Additions to Other assets (2,095) (1,333)
(194,464) (13,804)
F/X Related Adjustments 24,603 -
Net increase in cash during the year 56,481 (468)
Cash, beginning of period 234 142
Cash, end of period $ 56,715 $ (326)
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
Centraxx, Inc.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
September 30, 2000
1. General
The unaudited condensed consolidated financial statements have been prepared
on the same basis as the audited consolidated financial statements and, in the
opinion of management, reflect all adjustments (consisting of normal recurring
adjustments) necessary for a fair presentation for each of the periods
presented. The results of operations for interim periods are not necessarily
indicative of results to be achieved for full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under Rule
10-01 of Regulation S-X, the accompanying consolidated financial statements
and related footnotes have been condensed and do not contain certain
information that will be included in the Company's annual consolidated
financial statements and footnotes thereto. For further information, refer to
the consolidated financial statements and related footnotes for the year ended
December 31, 1999 included in the Company=s Annual Report on Form 10-KSB.
Basis of presentation
The condensed consolidated financial statements include the accounts of
Centraxx, Inc. and its wholly owned subsidiary, Centraxx Corp.
On May 18, 1999, Centraxx, Inc. acquired 100% of the outstanding common stock
of Centraxx Corp. from various shareholders (the Acquisition). The Acquisition
resulted in the owners and management of Centraxx Corp. having effective
control of the combined entity.
Under reverse takeover accounting, the post reverse-acquisition comparative
historical financial statements of the "legal acquirer" (Centraxx, Inc.), are
those of the "legal acquiree" (Centraxx Corp.) (i.e. the accounting acquirer).
Income taxes
Income taxes for the interim periods were computed using the effective tax
rate estimated to be applicable for the full fiscal year, which is subject to
ongoing review and evaluation by management.
Loss per share
The Company reports earnings per share in accordance with the provisions of
SFAS No. 128, Earnings Per Share. SFAS No. 128 requires presentation of basic
and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings per
share excludes dilution and is computed by dividing income available to common
shares by the weighted average common shares outstanding during the period.
Diluted earnings per share takes into account the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised and converted into common stock.
<PAGE>
Centraxx, Inc.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
September 30, 2000
1. General (continued)
There were stock options outstanding at September 30, 2000, to purchase
3,425,990 shares of common stock which were not included in the computation of
diluted earnings per share because to do so would be antidilutive.
2. Capital Stock
Authorized:
200,000,000 Common Shares with a par value of $0.001
Issued:
18,033,177 Common Shares
Centraxx Inc.
i) The following shares were issued during Q3 2000 to discharge
outstanding accounts payables. Market value of the shares equalled the
payable amount.
Number issued Price per share Market Value
a) 10,000 3.00 30,000.00
b) 7,268 3.97 28,853.96
c) 7,650 3.98 30,447.00
d) 4,108 6.50 26,702.00
e) 2,420 7.00 16,940.00
f) 4,820 13.95 67,239.00
ii) In July 2000, 430 shares were issued to an employee of the company,
at an issues price of $4.03 per share. These shares were recorded at a
total consideration of $1,732.90. The shares were issued as a settlement
of benefits owed to this employee for 1999 fiscal year.
iii) In August 2000, 50,000 shares were issued to a former employee of
the company at an issue price of $0.70 per share. The total
consideration received had a value of $35,000.00. These shares were
issued as part of an option agreement between the company and the former
employee.
<PAGE>
Centraxx, Inc.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
September 30, 2000
3. Subsequent Event
In November 2000, the company renewed its financing arrangements with a non-
related party. The new arrangement provides for $1,500,000 US to be advanced
as follows:
November 2000 $350,000
December 2000 $350,000
January 2001 $350,000
February 2001 $450,000
Interest of 15% per annum will be charged on the outstanding balance. This
loan will be required to be repaid at the earlier of March 31, 2001 or when
alternative sources of financing are arranged. The lender has the option, on
or before the maturity date, to convert all or part of the due amount,
including interest into equity share capital of Centraxx Inc. at $2.00 per
share. In addition, repayment of the initial loan agreement completed May
2000 for $1,000,000 has been extended to December 31, 2000 from September 30,
2000. This extension bears an interest of 15% per annum.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan or Operation.
Plan of Operation
-----------------
Centraxx is a company that is developing two-way wireless data communications,
with a specialization in location technologies. The Company is the first in
the industry to have developed a low cost, tracking, locating and monitoring
system utilizing revolutionary UNI-POINT (TM) technology with numerous
network-based and stand-alone applications. The UNI-POINT technology is
proprietary patents are pending. There can be no assurances that any patents
will issue or that, if issued, that the Registrant will have sufficient
resources to protect its intellectual property rights.
The Centraxx System utilizes radio frequency in a unique configuration of
data and radar communication to track, locate, contain or monitor vehicles,
cargo, and equipment. The hardware consists of a receiver or Base Station and
an Electronic Location Tag ("Tag"). The object to be secured is tagged and
the Base Station monitors the relative position of the Tag. A network of Base
Stations enables the Centraxx System to monitor the location of the tagged
object over the network coverage area. This process occurs on a real-time
basis utilizing UNI-POINT tracking. UNI-POINT or single-point tracking
represents a breakthrough in the industry, as it is more reliable and
substantially more cost effective than alternative conventional triangulation
systems such as Global Positioning Satellite Systems. Market research
indicates that the Centraxx product is significantly less expensive than its
nearest competitor in the industry while offering a more reliable and accurate
system.
The Centraxx product is able to track and locate a tagged vehicle to within 10
meters. The system is self-arming so that a theft is detected while still in
progress and will automatically prompt action by a monitoring center and
relevant authorities. The Centraxx product will be offered with an optional
PLUS service in order to further differentiate the Centraxx product from its
competitors. Market research indicates that this combination of vehicle
tracking and Roadside/Emergency Notification will provide product acceptance
by a security conscious consumer market.
In future the Company plans to leverage its technology advantages and network
capacity to become a highly diversified wireless communications company by
introducing new products and services such as LifeLink, fleet management,
personal security and asset tracking; all of which take advantage of the
Centraxx flexible platform technology.
The Company's focus is on research and development of its UNI-POINT
technology, the engineering sample of which was successfully demonstrated on
December 9, 1999. The enhancement, miniaturization to commercialize the
technology is under development. A regional network rollout consisting of
multiple base stations will be commencing within next six months to eight
months at that time revenue is expected to commence. The technology can be
deployed to provide effective solutions for safety, security, and two-way
wireless data communication and location information. The Company has not yet
generated any revenues except some deposits from potential joint venture
partners.
Results of Operations
---------------------
For three months ended September 30,2000 compared to September 30, 1999
--------------------------------------------------------------
The Company generated a gross loss of $ 1,355,578 during the third quarter
compared to the corresponding 1999 third quarter loss of $ 474,622.
Total general and administrative expenses were $407,255 for the quarter ended
September 30, compared to $250,955 for the third quarter of 1999. Expenses
related to professional fees demonstrated the most significant increase over
the third quarter 1999, principally due to legal and personnel recruitment
related activities.
The Company's research and product development costs increased by $630,888
during the third quarter of fiscal year 2000 to $836,380 from $205,492 for the
three months ending September 30,1999. This increase was primarily related
to the addition of full time engineering and technical employees, along with
the enhanced use of R&D related consulting services.
The Company accrued interest expenses of $ 39,756 during the quarter, which
were related to the debenture and term loans. Amortization incurred was not
materially changed between the respective periods.
For nine months ending September 30, 2000 compared to September 30 1999
------------------------------------------------------------------------
The current nine month gross loss was $3,364,977 compared to a gross loss of
$1,356,757 for the corresponding 1999 period.
General and administrative costs increased by $515,323 over the corresponding
period in 1999 and totaled $1,226,318 for the nine month period ending
September 30, 2000. This increase was primarily due to significant growth in
professional fees and salary/other administrative expenses.
The company's research and development costs increased by $1,314,818 during
the nine month period ending September 30, 2000 compared to the same period in
1999. The principal factors contributing to this increase were salary
expenses related to increases in R&D personnel and consulting fees
related to software development. The Company's total investment in research
and development since inception has been $3,413,874, which represents
approximately 50% of the companies operating cash activities.
The company accrued interest expenses of $109,103 over the nine month period
ending September 30, 2000. Depreciation and amortization expenses were not
materially changed between the respective periods.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
During November 2000 the Company extended an existing financing arrangement
with a non-related party. Firstly, the arrangement facilitates ongoing monthly
funding, until February 2001 to a total of $1.5 million. The monthly amounts
are to be advanced in the form of a short-term loan bearing an interest rate
of 15%. Centraxx Corp has guaranteed and provides a general security
agreement to comply with their obligation of repayment. Pursuant to the terms
of the loan, interest is deferred till the maturity. The principal and
interest is due and payable on March 31, 2001 or when alternative sources of
financing are arranged whichever is earlier. The lender has the option, on or
before the maturity date, to convert all or part of the due amount, including
interest into equity share capital of Centraxx, Inc. at $2.00 per shares.
Secondly, the existing loan agreement for $1.0 million has been extended to
mature in December 31, 2000, from September 30, 2000. This loan extension
will also be subject to interest of 15%. The Company expects to utilize the
funds received from such financing for the continuation of the development of
its UNI-POINT technology and for general operating purposes.
The Company is in the process of searching for a President. In the interim,
Mr. Michael Ivezic, the Managing Director of Frankopan & Co., Inc, is
providing overall management of the Company.
RISKS AND UNCERTANTIES
----------------------
As of the date of this Report, the Company anticipates that its technology
will not be available for sale or distribution for at least the next three
quarters. The company has no established source of revenues and is dependent
on its ability to raise further funding. There can be no assurance that the
Company will be successful in obtaining any funding at reasonable terms.
There can be no assurance that the Company will be able to complete the
commercial development of its technology as of that time, or at any time, or
that the Company will be able to sell or distribute its UNI-POINT technology
to generate profitable operations at that time or in the foreseeable future.
There can be no assurance that the technology will be successfully released to
the market or that the Company will profit therefrom.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None, not applicable.
Item 2. Changes in Securities.
None, not applicable.
Item 3. Defaults Upon Senior Securities.
None, not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None, not applicable.
Item 5. Other Information.
None, not applicable.
Item 6. Exhibits and Other Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule
Annual Report on Form 10-KSB for the calendar year ended December
31, 1999, incorporated herein by reference.
(b) Reports on Form 8-K.
None, not applicable.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTRAXX, INC.
Date: Nov. 15, 2000 /s/Frank Gerlach
-------------- -----------------------------
Frank Gerlach, V. P. Engineering and
Director
Pursuant to the requirements of the Securities and 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:
CENTRAXX, INC.
Date: Nov. 15, 2000 /s/Frank Gerlach
-------------- -----------------------------
Frank Gerlach, V. P. Engineering and
Director
