U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL
BUSINESS ISSUERS
UNDER SECTION 12(B) OR (G) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 33-6505D
MORLEX, INC.
formerly known as America Online, Inc
---------------------------------------------
(Name of Small Business Issuer in its charter)
Colorado 84-1028977
- --------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
P.O. Box 3755, Englewood, CO 80155
- --------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (303) 699-8784
Securities to be registered under Section 12(b) of the Act:
Title of each class Name of Exchange on which
to be so registered each class is to be registered
Common Stock, $.0001 par value N/A
- ------------------------------ -------------------------------
Securities to be registered under Section 12(g) of the Exchange Act:
None
-----------------------
(Title of Class)
<PAGE>
ITEM 1. DESCRIPTION OF BUSINESS
(a) Business Development
Morlex, Inc. (the "Company", "Morlex" or the "Registrant") was
incorporated in the State of Colorado on April 23, 1986. In January 1987,
Morlex, in a stock-for-stock exchange (the "Stock Exchange"), acquired America
OnLine, Inc. ("AOL#1"), a then wholly owned subsidiary of InfoSource Information
Service, Inc. ("InfoSource"). The Company changed its name from Morlex to
America Online, Inc. on July 17, 1987 (the "Name Change").
Prior to incorporation, the Company had no prior operating history and
was formed as what is commonly known as a blind pool. Since the termination of
the business of the former AOL#1, the Company has been seeking the acquisition
of, or merger with, an existing company. The Company's business history since
its incorporation is as follows:
On September 10, 1986, the Company filed with the Securities and
Exchange Commission (the "Commission") a Registration Statement on Form S-18
under the Securities Act of 1933, as amended (the "Securities Act"), relating to
an offering of up to 5,000,000 Units. In December 1986, the Company consummated
the offering, having received net offering proceeds aggregating $248,400.00.
In January 1987, the Company acquired AOL#1 in the Stock Exchange, as a
result of which AOL#1 became a wholly owned subsidiary of the Company in
exchange for 85,000,000 shares of Company stock which were issued to InfoSource
for all the shares of AOL#1.
On July 17, 1987, a special meeting of stockholders of the Company was
held to change the name of Morlex to America Online, Inc. The proposal to change
the name was approved and the Company's name was thereupon changed.
On March 1, 1988, the Board of Directors approved the cancellation of a
$30,000.00 debt to InfoSource by issuing 30,000,000 shares of the Company to
InfoSource. All 115,000,000 shares previously issued to InfoSource (including
such 30,000,000 shares and the 85,000,000 shares granted to InfoSource pursuant
to the Stock Exchange) were returned to the Company's treasury as issued but no
longer outstanding shares.
On December 28, 1992, the Company terminated the business of AOL#1 and
a Certificate of Dissolution of AOL#1 was filed with the Secretary of State of
the State of Colorado. Since that time, the Company has had no active business.
On April 24, 1998, the Board of Directors, by unanimous written consent
in lieu of a special meeting, resolved to amend the Company's Articles of
Incorporation to change the name of the Company back to Morlex, Inc. in order to
remove any confusion between the Company and the Internet company of the same
name.
<PAGE>
On May 15, 1998, the shareholders of the Company, by majority vote,
approved the amendment and name change at a meeting called for that purpose. The
amendment was filed with the Secretary of State of Colorado on June 2, 1998,
upon which the name of the Company became Morlex, Inc.
(b) Business of Issuer
The analysis of new business opportunities has and will be undertaken
by or under the supervision of the officers and directors of the Registrant. The
Registrant has considered potential acquisition transactions with several
companies, but as of this date has not entered into any definitive agreement
with any party. The Registrant has unrestricted flexibility in seeking,
analyzing and participating in Potential Business Opportunities. In its efforts
to analyze potential acquisition targets, the Registrant will consider the
following kinds of factors:
(a) Potential for growth, indicated by new technology, anticipated
market expansion or new products;
(b) Competitive position as compared to other firms of similar
size and experience within the industry segment as well as
within the industry as a whole;
(c) Strength and diversity of management, either in place or
scheduled for recruitment;
(d) Capital requirements and anticipated availability of required
funds, to be provided by the Registrant or from operations,
through the sale of additional securities, through joint
ventures or similar arrangements or from other sources;
(e) The cost of participation by the Registrant as compared to the
perceived tangible and intangible values and potentials;
(f) The extent to which the business opportunity can be advanced;
(g) The accessibility of required management expertise, personnel,
raw materials, services, professional assistance and other
required items; and
(h) Other relevant factors.
In applying the foregoing criteria, no one of which will be
controlling, management will attempt to analyze all factors and circumstances
and make a determination based upon reasonable investigative measures and
available data. Potentially available business opportunities may occur in many
different industries and at various stages of development, all of which will
make the task of comparative investigation and analysis of such business
opportunities extremely difficult and complex. Due to the Registrant's limited
capital available for investigation and management's
<PAGE>
limited experience in business analysis, the Registrant may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.
FORM OF ACQUISITION
The manner in which the Registrant participates in an opportunity will
depend upon the nature of the opportunity, the respective needs and desires of
the Registrant and the promoters of the opportunity, and the relative
negotiating strength of the Registrant and such promoters.
It is likely that the Registrant will acquire its participation in a
business opportunity through the issuance of common stock or other securities of
the Registrant. Although the terms of any such transaction cannot be predicted,
it should be noted that in certain circumstances the criteria for determining
whether or not an acquisition is a so-called "tax free" reorganization under
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"),
depends upon the issuance to the shareholders of the acquired company of at
least 80 percent of the common stock of the combined entities immediately
following the reorganization. If a transaction were structured to take advantage
of these provisions rather than other "tax free" provisions provided under the
Code, all prior shareholders would in such circumstances retain 20% or less of
the total issued and outstanding shares. Under other circumstances, depending
upon the relative negotiating strength of the parties, prior shareholders may
retain substantially less than 20% of the total issued and outstanding shares.
This could result in substantial additional dilution to the equity of those who
were shareholders of the Registrant prior to such reorganization.
The present shareholders of the Registrant will likely not have control
of a majority of the voting shares of the Registrant following a reorganization
transaction. As part of such a transaction, all or a majority of the
Registrant's directors may resign and new directors may be appointed without any
vote by shareholders.
In the case of an acquisition, the transaction may be accomplished upon
the sole determination of management without any vote or approval by
shareholders. In the case of a statutory merger or consolidation involving the
Company, it will likely be necessary to call a shareholders' meeting and obtain
the approval of the holders of a majority of the outstanding shares. The
necessity to obtain such shareholder approval may result in delay and additional
expense in the consummation of any proposed transaction and will also give rise
to certain appraisal rights to dissenting shareholders. Most likely, management
will seek to structure any such transaction so as not to require shareholder
approval.
It is anticipated that the investigation of specific business
opportunities and the negotiation, drafting and execution of relevant
agreements, disclosure documents and other instruments will require substantial
management time and attention and substantial cost for accountants, attorneys
and others. If a decision is made not to participate in a specific business
opportunity, the costs theretofore incurred in the related investigation would
not be recoverable. Furthermore, even if an
<PAGE>
agreement is reached for the participation in a specific business opportunity,
the failure to consummate that transaction may result in the loss to the
Registrant of the related costs incurred.
(c) Reports to security holders.
(1) The Company is not required to deliver an annual report to security
holders and at this time does not anticipate the distribution of such a report.
(2) The Company will file reports with the SEC. The Company will be a
reporting company and will comply with the requirements of the Securities
Exchange Act of 1934, as amended.
(3) The public may read and copy any materials the Company files with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. Additionally,
the SEC maintains an Internet site that contains reports, proxy and information
statements, and other information regarding issuers that file electronically
with the SEC, which can be found at http://www.sec.gov.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The Registrant was formed on April 23, 1986 for the purpose of
investing in any and all types of assets, properties and businesses. On
September 10, 1986, the Commission granted effectiveness to a Registration
Statement on Form S-18, filed by the Registrant in the Colorado Regional Office.
The Plan of Operation of the Registrant is briefly described below.
As of December 31, 1998, the Registrant had cash of $3,664 and no other
assets. As of December 31, 1998, the Registrant had total liabilities of $3,664
and total stockholders equity of $3,188. As of December 31, 1997, the Registrant
had cash of $0 and no other assets. As of December 31, 1997, the Registrant had
total liabilities of $0 and total stockholders equity of $0.
As of March 31, 1999, the Registrant had cash of $0 and no other
assets. As of March 31, 1999, the Registrant had total liabilities of $2,061 and
total stockholders equity of $1,102. As of March 31, 1998, the Registrant had
cash of $0 and no other assets. Prior to the consummation of a potential
business acquisition, management does not expect that the Registrant will have
any significant capital requirements or will purchase any significant equipment
or that there will be significant changes in the number of Registrant's
employees.
The Registrant has not commenced any active operations as of the date
hereof except for the registration and sale of its securities. The Registrant's
assets consist of a limited amount of cash. No revenue has been generated by the
Registrant since the termination of the business of AOL#1.
The Registrant will not have significant operations until, if ever,
such time as it effects an acquisition.
<PAGE>
ITEM 3. DESCRIPTION OF PROPERTY.
The Company neither rents nor owns any properties. The Company
currently has no policy with respect to investments or interests in real estate,
real estate mortgages or securities of, or interests in, persons primarily
engaged in real estate activities.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security ownership of certain beneficial owners.
The following persons are known to the Registrant to be officers,
directors and beneficial owners of more than five percent of the Registrant's
common stock as of June 1, 1999:
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class
- ------------------- -------------------------- ----------------
Charles T. Gould 94,260,000 30%
4562 S. Ouray Way
Aurora, CO 80015
Lawrence E. Kaplan 94,260,000 30%
150 Vanderbilt Motor
Parkway, Suite 311
Hauppauge, New York 11788
Steven J. Goodman 94,260,000 30%
24843 Del Prado #536
Dana Point, CA 92629
- -------------------------
ALL OFFICERS AND
DIRECTORS AS A
GROUP (3 Individuals) 282,780,000 90%
- -------------------------
(1) Unless otherwise indicated herein and subject to applicable community
property laws, each stockholder has sole voting and investment power with
respect to all shares of Common Stock beneficially owned by such stockholder and
directly owns all such shares in such stockholder's sole name. Within sixty (60)
days of the date of this filing, none of the above persons has the right to
acquire any further shares of the Registrant's common stock from options,
warrants, rights, conversion privileges or other similar arrangement.
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(a) Identification of Directors and Executive Officers.
A. Identification of Directors and Executive Officers. The current officers and
directors will serve for one year or until their respective successors are
elected and qualified. They are:
NAME AGE DATE OF POSITION
ELECTION
Charles T. Gould 47 4/5/91 Chairman of the Board of
4562 S. Ouray Way Directors
Aurora, CO 80015
Lawrence E. Kaplan 55 7/29/98 President, Treasurer and
150 Vanderbilt Motor Director
Parkway, Suite 311
Hauppauge, New York 11788
Steven J. Goodman 59 7/29/98 Secretary and Director
24843 Del Prado #536
Dana Point, CA 92629
Charles T. Gould. Mr. Gould has been a director of the Company since
April 1991. He is presently a Stock Broker and Trader with Charles Schwab in
Denver, Colorado. Prior to Mr. Gould's employment with Charles Schwab & Co., he
served as an Environmental Production Worker with Interel Environmental in
Englewood, Colorado.
Lawrence E. Kaplan. Mr. Kaplan has served as President, Treasurer and a
director of the Company since July, 1998. Mr. Kaplan has served as a director of
IDF International, Inc. since August 1996. Mr. Kaplan is a registered
representative, officer, director and sole stockholder of G-V Capital Corp., an
NASD-registered broker/dealer. He is also a director of Playorena, Inc., a blank
check company which is seeking merger opportunities. He is also an officer and a
director of Osteoimplant Technology, a manufacturer of orthopedic devices and
total joint implants.
Steven J. Goodman. Mr. Goodman has served as Secretary and a director
of the Company since July, 1998. Mr. Goodman is a consultant for Tessa Financial
Group, Inc. From 1991 through March, 1995, Mr. Goodman was West Coast Managing
Director of Creative Business Strategies, a financial corporate consulting firm.
Mr. Goodman currently serves as a director of Javelin Systems, Inc., a public
company listed on NASDAQ.
B. Significant Employees. None.
C. Family Relationships. Charles T. Gould is the husband of Lanne
Lancaster and the brother of Kaylene Veron. Ms. Lancaster served as the Vice
President and Secretary of the Company from March, 1989 until July, 1998.
Presently, she is the record owner of 790,000 shares of Common Stock of the
Company. Ms. Veron served as a director of the Company from March, 1989 until
July, 1998. Presently, Ms. Veron owns no shares of the Company.
<PAGE>
D. Involvement in Certain Legal Proceedings. There have been no events
under any bankruptcy act, no criminal proceedings and no judgments, injunctions,
orders or decrees material to the evaluation of the ability and integrity of any
director, executive officer, promoter or control person of Registrant during the
past five years.
ITEM 6. EXECUTIVE COMPENSATION.
No compensation has been paid or accrued to any officer or director of
the Registrant since 1994. Except as otherwise indicated in Item 7, the current
officers and directors are not being compensated by the Registrant. The
Registrant has no current intent to issue shares of its common stock to
management in connection with an acquisition. However, the Registrant may
subsequently deem the issuance of shares to management for services rendered in
connection with an acquisition to be fair and reasonable to the Registrant and
its public shareholders in light of the services rendered. In the event any
shares are issued for services rendered by management they shall be issued in
such an amount as the Board of Directors deems fair and reasonable to the
Registrant and its public shareholders and in compliance with management's
fiduciary duties under state law. Officers and directors will be reimbursed for
actual out-of-pocket expenses incurred on behalf of the Registrant as approved
by the Board of Directors.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The Company completed two private placements of its Common Stock, par
value $.0001 per share, in December 1997 and July 1998. In December 1997,
Charles T. Gould, a director, purchased 35,970,000 shares of Common Stock in
exchange for the cancellation of $49,191.00 of indebtedness of the Company to
Mr. Gould. In July 1998, Steven J. Goodman, a director and Secretary of the
Company, and Lawrence E. Kaplan, a director and President of the Company, each
purchased 94,260,000 shares of Common Stock in exchange for $3,000.00 each in
cash and $6,246.00 each in previous services rendered, or an aggregate of
188,520,000 shares of Common Stock with an aggregate purchase price of $6,000.00
in cash and $12,852.00 in previous services rendered. The Company currently has
virtually no cash or other assets. As a result, Messrs. Kaplan, Goodman and
Gould now own an aggregate of 90% of the Company's outstanding Common Stock.
Charles T. Gould, director, is the husband of Lanne Lancaster and the
brother of Kaylene Veron. Ms. Lancaster served as the Vice President and
Secretary of the Company from March, 1989 until July, 1998. Presently, she is
the record owner of 790,000 shares of Common Stock of the Company. Ms. Veron
served as a director of the Company from March, 1989 until July, 1998.
Presently, Ms. Veron owns no shares of the Company.
<PAGE>
ITEM 8. DESCRIPTION OF SECURITIES.
(a) Common or Preferred Stock.
The Company is authorized by its Certificate of Incorporation to issue
an aggregate of 1,000,000,000 shares of capital stock, of which 1,000,000,000
are shares of Common Stock, par value $.0001 per share (the "Common Stock"). As
of April 15, 1999, 314,200,000 shares of Common Stock were issued and
outstanding. Other than the Common Stock, the Company is not authorized to issue
any other class of capital stock.
All outstanding shares of Common Stock are of the same class and have
equal rights and attributes. The holders of Common Stock are entitled to one
vote per share on all matters submitted to a vote of shareholders of the
Company. All shareholders are entitled to share equally in dividends, if any, as
may be declared from time to time by the Board of Directors (the "Board") out of
funds legally available. In the event of liquidation, the holders of Common
Stock are entitled to share ratably in all assets remaining after payment of all
liabilities. The shareholders do not have cumulative or preemptive rights.
The description of certain matters relating to the securities of the
Company is a summary and is qualified in its entirety by the provisions of the
Company's Certificate of Incorporation and By-Laws, copies of which have been
filed as exhibits to this Form 10-SB.
(b) Debt Securities. None.
(c) Other Securities To Be Registered. None.
PART II
ITEM 1. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information. The Company's common stock may be traded in the
over-the-counter market. The Company is not aware of any market activity in its
stock during the fiscal year ended December 31, 1998 or during the current
fiscal year.
(b) Holders. As of April 15, 1999, there were approximately 276 record
holders of 314,200,000 shares of the Company's common stock.
(c) Dividends. The Registrant has not paid any cash dividends to date and
does not anticipate or contemplate paying dividends in the foreseeable future.
It is the present intention of management to utilize all available funds for the
development of the Registrant's business.
<PAGE>
ITEM 2. LEGAL PROCEEDINGS.
There are not presently any material pending legal proceedings to which
the Registrant is a party or as to which any of its property is subject, and no
such proceedings are known to the Registrant to be threatened or contemplated
against it.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There are not and have not been any disagreements between the
Registrant and its accountants on any matter of accounting principles, practices
or financial statement disclosure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
The Company completed two private placements of its Common Stock, par
value $.0001 per share, in December 1997 and July 1998. In December 1997,
Charles T. Gould, a director, purchased 35,970,000 shares of Common Stock in
exchange for the cancellation of $49,191.00 of indebtedness of the Company to
Mr. Gould. In July 1998, Steven J. Goodman, a director and Secretary of the
Company, and Lawrence E. Kaplan, a director and President of the Company, each
purchased 94,260,000 shares of Common Stock in exchange for $3,000.00 each in
cash and $6,246.00 each in previous services rendered, or an aggregate of
188,520,000 shares of Common Stock with an aggregate purchase price of $6,000.00
in cash and $12,852.00 in previous services rendered. The Company currently has
virtually no cash or other assets. As a result, Messrs. Kaplan, Goodman and
Gould now own an aggregate of 90% of the Company's outstanding Common Stock.
These transactions were exempt from registration pursuant to Section 4(2) of the
Securities Act of 1933, as amended, since the shares were offered and sold only
to officers or members of the Board of Directors of the Company.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Colorado law includes an indemnification provision that indemnifies to
the maximum extent permitted by law, any person who is or was a director,
officer, agent, fiduciary or employee of the corporation against any claim,
liability or expense arising, because of a person serving, at the Company's
request, in any of the roles described above. The Company may purchase, to the
maximum extent permitted by law, indemnification insurance. No directors of the
Company will have any personal liability for monetary damages to the Company or
its shareholders for breach of his or her fiduciary duty as a director except
if: the director breaches his or her loyalty, does not act in good faith, does
not follow the law, or derives an improper personal benefit.
<PAGE>
PART III
ITEM 1. INDEX TO FINANCIAL STATEMENTS AND EXHIBITS.
(a) Index to Financial Statements.
Independent Accountants' Report
Year ended December 31, 1998
Balance Sheets
Years ended December 31, 1998 and 1997
Statement of Operations
Years ended December 31, 1998 and 1997
Statement of Changes in Shareholders' Equity
Years ended December 31, 1998 and 1997
Statement of Cash Flows
Year ended December 31, 1998 and 1997
Notes to Financial Statements
Years ended December 31, 1998
Balance Sheets
Three Months ended March 31, 1999 and as at December 31, 1998
Statement of Changes in Shareholders' Equity
Three Months ended March 31, 1999 and as at December 31, 1998
Statement of Operations
Three Months ended March 31, 1999 and 1998
Statement of Cash Flows
Three Months ended March 31, 1999 and 1998
Notes to Financial Statements
Three Months ended March 31, 1999
(b) Exhibits.
3.1 Certificate of Incorporation - incorporated by reference to Exhibit 3.1 to
Registration Statement on Form S-18.
3.2 Bylaws - incorporated by reference to Exhibit 3.2 to Registration Statement
on Form S-18.
3.3 Certificate of Amendment of Certificate of Incorporation
23 Consent of Independent Auditors
27 Financial Data Schedule
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
MORLEX, INC.,
By: /s/ Lawrence E. Kaplan
---------------------------
Lawrence E. Kaplan
President and Treasurer
Date: June ___, 1999
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
FISCAL QUARTER ENDED MARCH 31, 1999
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Morlex, Inc. (formerly America OnLine, Inc.)
We have audited the accompanying balance sheets of Morlex, Inc. (formerly
America OnLine, Inc.) as of December 31, 1998 and 1997 and the statements of
operations, changes in shareholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Morlex, Inc. (formerly America
OnLine, Inc.), at December 31, 1998 and 1997, and the results of its operations
and its cash flows, for the years then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has accumulated a deficit that raise substantial doubt about its ability to
continue as a going concern. Management's plans in regard to this matter are
also described in Note 1. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
SPICER, JEFFRIES & CO.
Denver, Colorado
March 30, 1999
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
--------- ---------
ASSETS
<S> <C> <C>
CASH $ 3 664 $ -
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
ACCOUNTS PAYABLE $ 476 $ -
========= =========
SHAREHOLDERS' EQUITY:
Common stock, $.0001 par value - shares authorized, 1,000,000,000; shares
issued and outstanding, 314,200,000 and 125,680,000, respectively 31 420 12 568
Additional paid-in capital 298 728 291 728
Deficit (326 960) (304 296)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 3 188 -
--------- ---------
$ 3 644 $ -
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
REVENUES $ - $ -
------------ ------------
EXPENSES:
Consulting 12 852 3 300
Professional fees 9 113 -
General and administrative 699 2 052
------------ ------------
TOTAL EXPENSES 22 664 5 352
------------ ------------
NET LOSS $ (22 664) (5 352)
============ ============
NET LOSS PER COMMON SHARE $ NIL $ NIL
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 219 940 000 92 476 923
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID IN
SHARES AMOUNT CAPITAL (DEFICIT)
---------------- ---------------- ---------------- --------------
<S> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1996 89 710 000 $ 8 971 $ 246 134 $ (298 944)
Issuance of common stock 35 970 000 3 597 45 594 -
Net loss - - - (5 352)
---------------- ---------------- ---------------- --------------
BALANCES, DECEMBER 31, 1997 125 680 000 12 568 291 728 (304 296)
Issuance of common stock 188 520 000 18 852 - -
Capital contributed - - 7 000 -
Net loss - - - (22 664)
---------------- ---------------- ---------------- --------------
BALANCES, DECEMBER 31, 1998 314 200 000 $ 31 420 $ 298 728 $ (326 960)
================ ================ ================ ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
-6-
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (22 664) $ (5 352)
Adjustments to reconcile net loss to net cash used in
operating activities:
Increase in accounts payable 476 -
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (22 188) (5 352)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Shareholder advances - 5 352
Issuance of common stock 18 852 -
Capital contributed 7 000 -
---------- ----------
NET CASH PROVIDED BY INVESTING ACTIVITIES 25 852 5 352
---------- ----------
NET INCREASE IN CASH 3 664 -
CASH, beginning of year - -
---------- ----------
CASH, end of year $ 3 664 $ -
========== ==========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
FINANCING ACTIVITIES:
Issuance of common stock for debt $ - $ 49 191
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
-7-
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BUSINESS
The Company was incorporated under the laws of the State of Colorado on April
23, 1986. The primary activity of the Company was to seek merger or acquisition
candidates.
As shown in the financial statements, the Company incurred net losses for the
last several years and has accumulated a deficit of $326,960; it is management's
assertion that these circumstances may hinder the Company's ability to continue
as a going concern. As of the date of this report, management has not developed
a formal plan to raise funds for neither the Company's short or long term needs.
The Company successfully completed a public stock offering in December 1986.
Proceeds to the Company, net of direct registration and underwriting fees,
amounted to $248,400. It has had minimal operations over the last several years.
NET LOSS PER SHARE
Net loss per share of common stock is based on the weighted average number of
shares of common stock outstanding.
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ form those estimates.
INCOME TAXES
The Company has a remaining net operating loss carryforward of approximately
$300,000 expiring principally in 2002 and 2003. However, the Company's ability
to utilize such losses to offset future taxable income is subject to various
limitations imposed by the rules and regulations of the Internal Revenue
Service. A portion of the Company's net operating losses are limited each year
to offset future taxable income, if any, due to the change of ownership in the
Company's outstanding shares of common stock.
NOTE 2 - RELATED PARTY TRANSACTIONS
The Company had accrued certain amounts due to one of its major shareholders for
payment of consulting fees, rent and other administrative expenses. In December,
1997, these amounts ($49,191) were converted to 35,970,000 shares of common
stock.
-8-
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
BALANCE SHEET
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 3,163 $ 3,664
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accrued expenses $ 2,061 $ 476
------- ---------
TOTAL LIABILITIES 2,061 476
------- ---------
STOCKHOLDERS' EQUITY
Common stock, $.0001 par value
1,000,000,000 shares authorized; 314,200,000
shares issued and outstanding 31,420 31,420
Additional paid-in capital 299,728 298,728
Deficit (330,046) (326,960)
-------- -------
TOTAL STOCKHOLDERS' EQUITY 1,102 3,188
--------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 3,163 $ 3,664
======== ========
</TABLE>
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Total
Common Stock Paid in Stockholders'
Shares Amount Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 125,680,000 $ 12,568 $ 291,728 $( 304,296) $ 0
Issuance of common stock 188,520,000 18,852 0 0 18,852
Capital contributed 0 0 7,000 0 7,000
Net loss for the year
ended December 31, 1998 0 0 0 ( 22,664) ( 22,664)
------------ ------------ ------------ -------- -------
Balance, December 31, 1998 314,200,000 31,420 298,728 (326,960) 3,188
Capital contributed 0 0 1,000 0 1,000
Net loss for the three months
ended March 31, 1999 (unaudited) 0 0 0 ( 3,086) ( 3,086)
----------- ----------- ----------- -------- -------
Balance, March 31, 1999 (unaudited) 314,200,000 $ 31,420 $ 299,728 $(330,046) $ 1,102
=========== ======= ======= ======= =======
</TABLE>
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three
Months Ended
March 31,
1999 1998
REVENUE NONE NONE
---- ----
<S> <C> <C>
EXPENSES
Professional $ 1,223 $ 0
Consulting 0 6,426
General and administrative 95 312
Filing and transfer fees 1,768 0
------- -------
TOTAL 3,086 6,738
------- -------
NET LOSS $( 3,086) $( 6,738)
======= =======
LOSS PER SHARE:
Net loss per share $ NIL $ NIL
======== ========
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES OUTSTANDING 314,200,000 125,680,000
=========== ===========
</TABLE>
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For The Three
Months Ended
March 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $( 3,086) $( 6,738)
Increase in accrued expenses 1,585 0
------ ---------
NET CASH USED BY OPERATING ACTIVITIES ( 1,501) ( 6,738)
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributed 1,000 0
Shareholder advances 0 6,738
------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,000 6,738
------- --------
NET INCREASE (DECREASE) IN CASH ( 501) 0
BEGINNING CASH BALANCE 3,664 0
------ --------
ENDING CASH BALANCE $ 3,163 $ 0
======= ========
</TABLE>
<PAGE>
MORLEX, INC.
(FORMERLY AMERICA ONLINE, INC.)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
(UNAUDITED)
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and pursuant to
the rules and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal accruals)
considered necessary for fair presentation have been included. The unaudited
financial statements should be read in conjunction with the financial statements
and footnotes thereto included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1998.
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We hereby consent to the use in the Morlex, Inc. registration
statement on Form 10-SB of our report dated March 30, 1999
accompanying the financial statements of Morlex, Inc. for the years
ended December 31, 1998 and 1997 which is part of the registration
statement.
SPICER, JEFFRIES & CO.
June 8, 1999
EXHIBIT 3.3
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Act, the
undersigned corporation adopts the following Articles of Amendment to its
Articles of Incorporation:
FIRST: The name of the corporation is America Online, Inc.
SECOND: The following amendments were adopted on May 15, 1998, in the
manner prescribed by the Colorado Corporation Code, in the manner marked with an
"X" below:
------- Such amendment was adopted by the Board of Directors
where no shares have been issued.
X
------- Such amendment was adopted by a vote of the
shareholders. The number of shares voted for the
amendment was sufficient for approval.
Article I of the Corporation's Articles of Incorporation was amended to
read as follows:
ARTICLE I
Name
The name of this Corporation shall be Morlex, Inc.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in the
amendment shall be effected, is as follows:
Not Applicable.
FOURTH: The manner in which such amendment effects a change in the
amount of stated capital, and the amount of stated capital as changed by such
amendment, is as follows:
Not Applicable.
AMERICA ONLINE, INC.
By: /s/ Charles T. Gould
---------------------------
Charles T. Gould, President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Morlex, Inc.
financial statements for the three months ended March 31, 1999 and is qualified
in its entirety be reference to such financial statements.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-START> JAN-01-1999 JAN-01-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 3163 3664
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3163 0
<PP&E> 0 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 3163 3664
<CURRENT-LIABILITIES> 2061 476
<BONDS> 0 0
<COMMON> 31420 0
0 0
0 31420
<OTHER-SE> (30318) (28232)
<TOTAL-LIABILITY-AND-EQUITY> 3163 3664
<SALES> 0 0
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 0 0
<OTHER-EXPENSES> 3086 22664
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (3086) (22664)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (3086) (22664)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (3086) (22664)
<EPS-BASIC> 0 0
<EPS-DILUTED> 0 0
</TABLE>
