SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended 11/30/97
Commission file number 0-21210
NELX, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Kansas 84-0922335
- -------------------------------- ------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Rt. #1, Box 4-J, Bridgeport, WV 26330
-------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(304) 622-9599
-------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to the filing
requirements for at least the past 90 days.
Yes X No
----- -----
As of November 30, 1997, there were 46,352,042 outstanding shares of common
stock, par value $.0001.
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
NELX, INC. AND SUBSIDIARY
Consolidated Balance Sheet
(Unaudited)
ASSETS November 30, 1997 May 31, 1997
- --------------------------------------------------------------------------------
Current Assets:
Cash on Hand $ 35 0
Bank Accounts 25,731 0
C.S. Inc. Acct 294 0
----------- -----------
Total Current Assets 26,060 0
Fixed Assets
Equipment 6,000 6,000
Shale Processing 100,000 100,000
Equipment
Land 951,000 950,000
Buildings 31,000 31,000
----------- -----------
1,088,000 1,087,000
Accumulated Depreciation (106,154) (106,154)
----------- -----------
Total Fixed Assets 981,846 980,846
Other Assets
Boat & Motor 3,825 3,825
Crystal Mountain 51,000 51,000
Misc. Equipment 2,654 2,654
Deposits 0 3,950
Investments 0 10,000
----------- -----------
Total Other Assets 57,579 71,429
Total Assets $ 1,065,385 $ 1,052,275
=========== ===========
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
November 30, 1997 May 31, 1997
---------------------------------
Current Liabilities
Bank Overdraft $ 0 $ 8,533
Accounts Payable - Trade 362,722 489,424
Accrued Interest Payable 374,149 374,149
Current Portion of Long- 904,406 812,252
Term Debt
Notes Payable 0
----------- -----------
Total Current Liabilities 1,641,277 1,684,358
Long-Term Liabilities
Notes Payable 0 30,617
----------- -----------
Total Long-Term Liabilities 0 30,617
Total Liabilities $ 1,641,277 $ 1,714,975
Stockholders' Equity
Common Stock, $.0001 par 4,635 2,548
value 500,000,000 shares
authorized, 46,352,042 and
25,477,042 issued and
outstanding at November 30,
1997 and May 31, 1997,
respectively
Additional Paid-In Capital 7,465,975 7,441,162
Retained Earnings (Deficit) (8,046,502) (8,106,410)
----------- -----------
Total Stockholders' Equity (575,892) (662,700)
----------- -----------
Total Liabilities & Capital $ 1,065,385 $ 1,052,275
=========== ===========
The accompanying notes are considered an integral
part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
NELX, INC. AND SUBSIDIARY
Consolidated Statement of Income and Expense
(Unaudited)
3 Months Ended 6 Months Ended
November 30 November 30
1996 1997 1996 1997
---------------------------------------------------------------------
OPERATING
REVENUES
<S> <C> <C> <C> <C>
Oil & Gas Sales 0 0 0 0
Consulting Fees 0 0 0 0
Discounts Negotiated 0 0 0 11,000
Misc. Income 0 72,723 0 95,779
-------- -------- -------- --------
Total Revenues 0 72,723 0 106,779
OPERATING
EXPENSES
Rent 0 560 0 560
Bank Charge 0 28 0 28
Office 11,437 1,496 26,321 4,527
Commissions & Fees 0 2,300 0 2,300
Travel 0 0 0 0
Consulting Fees 0 (1,000) 0 22,700
Lease Expenses 0 2,049 0 2,049
Dues & Subscriptions 0 491 0 491
Professional Fees 55,030 0 111,342 0
Insurance 0 (1,375) 0 (1,375)
Telephone & Utilities 2,014 4,795 7,293 4,596
Postage 0 636 0 636
Miscellaneous 0 0 0 0
Taxes & Licenses 0 170 0 170
Other Expenses 0 189 0 189
Oil & Gas Operating 50,000 0 51,800 0
Wages 0 0 0 0
Interest expense 0 0 0 0
-------- -------- -------- --------
Total Operating Expenses 118,481 10,339 196,756 36,871
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OTHER REVENUE & 3 Months 3 Months 6 Months 6 Months
(EXPENSES) ended ended ended ended
November November November November
30, 1996 30, 1997 30, 1996 30, 1997
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rental & Miscellaneous 0 0 0 0
Interest Income 2,000 0 (2,000) 0
Depreciation 12,425 0 (24,850) 0
Sale of Assets 0 0 0 0
Sale of Lease interests 0 0 0 0
Rental Expenses 7,598 0 (15,756) 0
--------- --------- --------- ---------
Total Revenues & 22,023 0 (42,606) 0
Expenses
NET INCOME (LOSS) $(140,504) 62,384 $(239,362) $ 69,908
========= ========= ========= =========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NELX, Inc. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended Six Months Ended
November 30 November 30
1996 1997 1996 1997
-------------------------------------------------------------------------
Cash Flows From
Operating Activities:
<S> <C> <C> <C> <C>
Net Profit (Loss) (140,504) 62,384 (239,363) 69,908
Depreciation 12,424 0 24,850 0
Stock issued for services 104,005 0 155,440 0
(Increase) decrease in Accts 0 0 0 0
Receivable
(Increase) decrease in Prepaids 0 0 0 0
(Increase) decrease in Deposits 0 3,950 0 3,950
(Decrease) increase in Accrued 0 0 0 0
Expenses
(Decrease) increase in Accts 0 (34,548) (1,000) (34,548)
Payable
(Decrease) increase in Accts 0 0 0 0
Payable Related Parties
(Decrease) increase in advance 0 0 0 0
payable
-------- -------- -------- --------
Net Cash Flows Used for (24,075) 31,786 (60,073) 39,310
Operating Activities
Cash Flows from investing
activities
(Purchase) sale of Fixed Assets 6,997 (1,000) 1,521 (1,000)
(Purchase) sale of Note 0 0 0 0
Receivable
(Purchase) Sale of Investment 0 0 0 0
(Purchase) sale of Lease 0 0 0 0
Interests
-------- -------- -------- --------
Total cash used for investing 6,997 (1,000) 1,521 (1,000)
<PAGE>
Cash flows from financing
activities
Increase (Decrease) in Note 11,719 (33,117) 23,823 (30,617)
Payable
Sale of Common Stock 7,464 26,900 27,037 26,900
-------- -------- -------- --------
Total cash from financing 19,183 (6,217) 50,860 (3,717)
activities
Increase (Decrease) in cash 2,103 24,569 (7,692) 34,593
-------- -------- -------- --------
Cash and cash equivalents - 1,094 1,491 8,701 (8,533)
beginning of period -------- -------- -------- --------
Cash and cash equivalents - $ 1,009 26,060 $ 1,009 26,060
end of period ======== ======= ======== ========
</TABLE>
<PAGE>
NELX, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
The following is a summary of NELX, Inc.'s (Company) significant
accounting policies:
Organization
------------
The Company was incorporated March 25, 1983 under the laws of Kansas
for the purpose of acquiring, dealing in and, if warranted, developing
oil and gas properties. The Company may also engage in other
businesses or activities unrelated to natural resources which
management believes hold potential for profit. On October 25, 1983,
the Company amended its Articles of Incorporation increasing its
authorized shares of 0.0001 par value common stock from 200,000,000 to
500,000,000 shares.
On October 30, 1993, a special meeting of Shareholders was held.
Stockholders approved a name change of the Company from Nelson
Exploration, Inc., to NELX, Inc.
On November 30, 1993 the Board approved a "reverse split" of the
issued and outstanding shares of common stock based upon issuance of
one (1) new common share in exchange for each 30 shares of (old)
common stock issued and outstanding effective as of December 31, 1993.
Cash and Cash Equivalents:
--------------------------
For purposes of the statement of cash flows, cash and cash equivalents
include cash in banks and money market accounts.
Fixed Assets and Depreciation/Depletion:
----------------------------------------
The useful lives of property, plant, equipment, and operating leases,
for purposes of computing depreciation/depletion are:
Buildings 31.5 - 39.5 years
Machinery & 6.0 years
equipment
Plant 27.5 years
In 1997 and 1996, respectfully, depreciation and depletion expense of
$19,103 and $75,207 was charged to operations.
<PAGE>
NELX, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CON'T:
--------------------------------------------------
Income taxes:
-------------
The Financial Accounting Standards Board (FASB) has issued Statement
of Financial Accounting Standards Number 109 ("SFAS 109"), "Accounting
for Income Taxes", which requires a change from the deferred method to
the asset and liability method of accounting for income taxes. Under
the asset and liability method, deferred income taxes are recognized
for the tax consequences of "temporary differences" by applying
enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax basis of
existing assets and liabilities.
At May 31, 1997, the Company had net operating loss carryforwards of
approximately $8,091,780 for federal income tax purposes. These
carryforwards, if not utilized to offset taxable income will expire at
the end of the indicated years:
2001 $ 20,180
2002 -
2003 19,735
2004 22,537
2005 2,401
2006 6,447
2007 2,487
2008 67,274
2009 -
2010 964,067
2011 2,903,569
2011 4,083,083
---------
$8,091,780
==========
There was no provision or benefit for income taxes in fiscal 1997.
Reclassifications:
------------------
Certain amounts in the 1996 financial statements have been
reclassified to conform to the 1997 presentation.
Use of Estimates in the Preparation of Financial Statements:
------------------------------------------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amount of assets and
liabilities and disclosures 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 from those estimates.
<PAGE>
NELX, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - LONG-TERM DEBT:
Following is a summary of long-term debt at November 30, 1997
1997
----
7.6% Note payable to CNETCO,
Inc., payable at $359 per
month, due 10/05, secured by 31,875
4th mortgage on property
8% Note payable to Meheen
Engineering Corp. Profit
Sharing Plan Trust, due 09/98,
secured by first deed of trust on 500,000
land in Brighton, Colorado
14% Note payable to DBL Mortgage
Corp., payable at $2,800 per
month secured by first deed of 240,000
trust on land in Weld County,
Colorado. Note is in default,
interest escalates to 38% on
unpaid balance.
Various Unsecured notes payable to
% others, due on various dates
through 1998 at interest rates 70,994
from 8% - 10%
NOTE 3 - GOING CONCERN:
--------------
The Company incurred a net loss of $4,083,083 for fiscal year 1997 and
has retained earnings (losses) of ($8,046,502) at November 30, 1997.
At November 30, 1997, current liabilities exceed current assets by
$575,892. These factors indicate that the Company has substantial
doubt about its ability to continue in existence. The financial
statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts
and classification of liabilities that might be necessary in the event
the company cannot continue in existence.
NOTE 4 - ASSET DISSOLUTION:
------------------
In November of 1992 the company issued 7,400,000 shares of the
company's common stock for a 3 unit apartment building, subject to a
promissory note of $57,000 to Chrysler First Financial Services
Corporation. During the 1997 fiscal year the company was in default on
this note and the property was foreclosed.
<PAGE>
NELX, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - ASSET DISSOLUTION CON'T:
------------------------
In November 1993 the company exchanged 37,600,000 shares of common
stock and acquired an industrial building and office facility in
Provo, Utah subject to a promissory note and trust deed for $420,000.
During the 1997 fiscal year the company was in default on this note
and the trust deed was foreclosed on the property and the note
satisfied.
In November 1993 the company issued 20,000,000 shares of common stock
for two separate five acreage parcels of land subject to a $400,000
note and trust deed. During the 1997 fiscal year the company was in
default on this note and the properties were relinquished and the debt
was extinguished via a deed in lieu of foreclosure.
NOTE 5 - ASSET REVALUATION:
------------------
In November of 1992 the company issued 60,000,000 shares of stock for
240 acres of land upon which the company borrowed $240,000 via a note
and deed of trust. The company is in default on this mortgage and it
has been foreclosed. The company believes it has reached an agreement
to settle a lawsuit surrounding this property. At year end the company
has written the property down to $450,000, the amount of the
outstanding mortgage accrued interest and penalties.
In October of 1993, the company issued 6,200,000 shares of common
stock in exchange for 320 acres of land subject to a promissory note
and deed of trust in the amount of $500,000. The company was in
default on this mortgage at year end and subsequently gave the deed in
lieu of foreclosure to the note holder.
In September of 1995 the company exchanged 350,000 shares of common
stock for a mini mall located in Kansas subject to a note for $31,875.
The company is in default on this note and the company has revalued
this property down to the amount of the outstanding mortgage of
$31,000.
In 1996 and 1997, the company wrote off certain costs associated with
contracts to purchase land because the company could not perform upon
the purchase contracts within the time requirements of the contracts.
The purchase contracts were for land in Central City, Colorado and
Elbert County, Colorado.
NOTE 6 - CHANGE OF CONTROL - ISSUANCE OF STOCK
--------------------------------------
On October 9, 1997, the Board of Directors accepted an offer from
Charles Stout to acquire 20 million shares of common stock of NELX,
Inc., in consideration for his agreement to contribute $20,000 in
immediate cash and to contribute such additional funding up to
$250,000 to settle accounts payable and commitments. Subsequently, on
October 17, 1997, the initial cash contribution of $20,000 was made.
The 20 million shares represents 46% of the outstanding stock of NELX,
Inc. Mr. Charles Stout was appointed President on October 9, 1997.
<PAGE>
ITEM 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Results of Operations for six month period ended November 30, 1997 compared to
same period in 1996.
- --------------------------------------------------------------------------------
The Company has experienced continuing operating expenses for the six month
period of $36,871 compared to $196,756 in the same period in 1996. The revenues
for the period totaled $0 from oil and gas operations compared with $0 for same
period in 1996. Miscellaneous revenues from discounts and liquidations totalled
$106,779 in the period in 1997. The Company recorded net income of $69,908 for
the period as compared to a ($239,362) loss for the same period in fiscal year
1996. Other Revenues and Expenses (Real Estate Rental) showed a net loss for the
period of ($0) as compared to ($42,606) net loss for same period in 1996. The
Company losses on operations will continue until income from oil and gas
operations and real estate sales and development can be achieved. While the
Company is seeking capital sources for investment in oil and gas wells and real
estate development, there is no assurance that sources can be found. The Company
has no real estate revenues and has no other income, except income attributable
to discounts and liquidation.
Results of Operations for the three month period ended November 30, 1997
compared to same period in 1996.
- --------------------------------------------------------------------------------
The Company has experienced continuing operating expenses for the three
month period of $10,339 compared to $118,481 in the same period in 1996. The
revenues for the period totaled $0 from oil and gas operations compared with $0
for same period in 1996. In the three month period in 1997, the Company had
miscellaneous income of $72,723 from liquidation and no miscellaneous income in
1996. The Company recorded a net income of $62,384 for the period as compared to
a ($69,908) loss for the same period in fiscal year 1996. Other Revenues and
Expenses (Real Estate Rental) showed a net income (loss) for the period of ($0)
as compared to $22,023 net loss for same period in 1996. The Company losses on
operations will continue until income from any operations or real estate sales
can be achieved. While the Company is seeking capital sources for investment,
there is no assurance that sources can be found. The Company has no real estate
revenues and has no other income.
Liquidity and Capital Resources
- -------------------------------
The Company had inadequate cash capital at the end of the period. The
Company will be forced to either borrow against or sell assets or make private
placements of stock in order to fund operations continuance. No assurance exists
as to the ability to achieve sales of assets or loans against the assets, or
make private placements of stock.
<PAGE>
Analysis of Financial Condition
- -------------------------------
At November 30, 1997, there were trade accounts payable in excess of
$362,722. The Company was also in default on all notes payable and had no source
of income. The current portion of the long term debt was in excess of $904,406.
The Company had, at period end, $26,060 in current assets, and the deficit in
current assets to current debts and liabilities was ($1,240,618).
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal proceedings -
NELX, Inc. has been named as a Defendant in a case captioned:
Allan E. Pezoldt and the Allan E. Pezoldt Revocable Living Trust vs.
NELX, Inc., f/k/a Nelson Exploration, Inc., a Kansas corporation,
Goodnight/Lowery, Inc., a Colorado corporation, Enviro Research Group,
Inc., a Colorado corporation, William L. Goodnight, Individually, and
Dennis H. Skelton, Individually.
The case involves 240 acres of land owned by NELX, Inc. in Weld
County, Colorado. A Lis Pendens has been filed against the property.
Claims against NELX, Inc. include breach of contract, interference
with contractual relations, misrepresentation/fraud, and claims are
made for rescission and restitution. NELX, Inc. has filed a
counterclaim against the Plaintiffs for slander of title. NELX, Inc.
believes it has valid defenses to the claims in this case, and is
having settlement discussions with the Plaintiff. A trial date has
been set for June 1998. Although NELX, Inc. believes it has valid
defenses, in the event a judgment were rendered against the Company,
it could result in loss of an asset on its books of up to $1,200,000,
a very material loss. Outcome of the litigation cannot be predicted.
Settlement negotiations are being conducted.
Item 2. Changes in securities - None.
Item 3. Defaults upon senior securities - None.
Item 4. Submission of matters to a vote of security holders - None.
Item 5. Other information -
On October 9, 1997, Charles Stout purchased 20,000,000 shares of
Restricted Stock for $20,000.00 cash and an agreement to negotiate the
settlement of up to $250,000.00 of the payables.
Immediately after October 9, 1997, funds were deposited and
negotiations were commenced to decrease the trade accounts payable. As
of November 30, 1997, trade accounts payable has been decreased about
$126,000.00 and discounts negotiated are in excess of $95,000.00.
<PAGE>
Item 6. Exhibits and reports on Form 8-K
(a) The following are filed as Exhibits to this Quarterly Report. The
numbers refer to the Exhibit Table of Item 601 of Regulation S-K:
None.
(b) Reports on Form 8-K filed during the three months ended November
30, 1997: (incorporated by reference)
September 26, 1997
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NELX, Inc.
(Registrant)
Date: May 7, 1998 /s/ Charles L. Stout
------------------------------------
Charles L. Stout, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> NOV-30-1997
<CASH> 26,060
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 26,060
<PP&E> 1,145,579
<DEPRECIATION> (106,154)
<TOTAL-ASSETS> 1,065,385
<CURRENT-LIABILITIES> 1,641,277
<BONDS> 0
0
0
<COMMON> 7,465,975
<OTHER-SE> (8,046,502)
<TOTAL-LIABILITY-AND-EQUITY> (575,892)
<SALES> 0
<TOTAL-REVENUES> 106,779
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 36,871
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 69,908
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 69,908
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
