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 02/28/98
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 February 28, 1998, 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 February 28, 1998 May 31, 1997
Current Assets:
Cash on Hand $35 0
Bank Accounts 6,672 0
C.S. Inc. Acct. 294 0
Total Current Assets 7,001 0
Fixed Assets
Equipment 6,000 6,000
Shale Processing 100,000 100,000
Equipment
Land 450,000 950,000
Buildings 31,000 31,000
587,000 1,087,000
Accumulated (106,154) (106,154)
Depreciation
Total Fixed Assets 480,845 980,846
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
Stock Subscribed 5,000 0
Total Other Assets 62,479 71,429
Total Assets $550,326 $1,052,275
<PAGE>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
February 28, 1998 May 31, 1997
Current Liabilities
Bank Overdraft $0 $8,533
Accounts Payable - 176,468 489,424
Trade
Accrued Interest 193,675 374,149
Payable
Current Portion of 0 812,252
Long-Term Debt
Notes Payable 463,132
Total Current 833,275 1,684,358
Liabilities
Long- Term
Liabilities
Notes Payable 0 30,617
Total Long-Term 0 30,617
Liabilities
Total Liabilities $833,275 $1,714,975
Stockholders' Equity
Common Stock, $.0001 4,635 2,548
par value 500,000,000
shares authorized,
46,352,042 and
25,477,042 issued and
outstanding at
February 28, 1998 and
May 31, 1997,
respectively
Additional Paid-In 7,465,975 7,441,162
Capital
Retained Earnings (7,753,559) (8,106,410)
(Deficit)
Total Stockholders' (282,949) (662,700)
Equity
Total Liabilities & $550,326 $1,052,275
Capital
The accompanying notes are considered an integral part of these
financial statements
<PAGE>
[CAPTION]
<TABLE>
NELX, INC. AND SUBSIDIARY
Consolidated Statement of Income and Expense
(Unaudited)
3 Months Ended 9 Months Ended
February 28 February 28
1997 1998 1997 1998
<S> <C> <C> <C> <C>
OPERATING REVENUES
Oil & Gas Sales 0 0 (50,000) 0
(net)
Real Estate Sales 0 176,474 0 176,474
Consulting Fees 0 0 0 11,000
Discounts 0 125,720 0 221,499
Negotiated
Misc. Income 0 0 0 0
Total Revenues 0 302,194 (50,000) 408,973
OPERATING EXPENSES
Rent 0 390 0 950
Bank Charge 0 99 0 28
Office 15,228 0 35,550 4,527
Commissions & Fees 0 0 0 2,300
Travel 0 2,208 0 2,208
Consulting Fees 0 0 0 22,700
Lease Expenses 0 0 0 2,049
Dues & 0 1,097 0 1,588
Subscriptions
Professional Fees 7,137 3,000 126,279 3,000
Insurance 0 0 0 (1,375)
Telephone & 6,027 1,035 13,320 5,631
Utilities
Postage 0 67 0 703
Miscellaneous 0 1,307 0 1,307
Taxes & Licenses 0 48 0 218
Other Expenses 0 0 0 189
Depreciation 11,790 0 36,640 0
Wages 0 0 0 0
Interest expense 22,858 0 22,858 0
Total Operating 63,040 9,251 234,647 46,122
Expenses
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
OTHER REVENUE & 3 Months 3 Months 9 Months 9 Months
(EXPENSES) ended ended ended ended
February February February February
28, 1997 28, 1998 28, 1997 28, 1998
<S> <C> <C> <C> <C>
Rental & 15,071 0 (685) 0
Miscellaneous
Interest Income 0 0 0 0
Depreciation 0 0 0 0
Sale of Assets (62,775) 0 (64,775) 0
Sale of Lease 0 0 0 0
interests
Rental Expenses 0 0 0 0
Total Revenues & (47,704) 0 (65,460) 0
Expenses
NET INCOME (LOSS) $(15,336) 292,943 (350,107) $362,851
Net Income (loss) $.006 $.009
per share
Weighted Average 46,352,042 37,677,042
Shares Outstanding
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
NELX, Inc. AND SUBSIDIARY
Consolidated Statement of Cash Flows
(Unaudited)
Three Months Ended Nine Months Ended
February 28 February 28
1997 1998 1997 1998
<S> <C> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) (110,748) 292,943 (350,107) 362,851
Depreciation 2,221 0 36,640 0
Stock issued for 0 0 155,440 0
services
(Increase) decrease in 0 (5,000) 0 (5,000)
Accts Receivable
(Increase) decrease in 0 0 0 0
Prepaids
(Increase) decrease in 0 0 0 3,950
Deposits
(Decrease) increase in 0 0 0 0
Accrued Expenses
(Decrease) increase in (1,000) (808,002) (9,433) (842,550)
Accts Payable
(Decrease) increase in 0 0 0 0
Accts Payable Related
Parties
(Decrease) increase in 0 0 0 0
advance payable
Net Cash Flows Used (109,527) (520,059) (167,460) (480,749)
for Operating
Activities
Cash Flows from
investing activities
(Purchase) sale of 101,999 501,000 (45,017) 500,000
Fixed Assets
(Purchase) sale of 1 0 (30,003) 0
Note Receivable
(Purchase) sale of 0 0 0 0
Lease Interests
Total cash used for 102,000 501,000 (75,020) 500,000
investing
</TABLE>
<PAGE>
[CAPTION]
<TABLE>
<S> <C> <C> <C> <C>
Cash flows from
financing activities
Increase (Decrease) in 19,912 0 8,643 (30,617)
Note Payable
Sale of Common Stock 27,033 0 264,654 26,900
Total cash from 46,945 0 273,297 (3,717)
financing activities
Increase (Decrease) in 39,418 (19,059) 30,817 15,534
cash
Cash and cash (4,221) 26,060 8,701 (8,533)
equivalents -
beginning of period
Cash and cash 35,197 7,001 39,518 7,001
equivalents -
end of period
</TABLE>
<PAGE>
NELX, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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
(Unaudited)
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
(Unaudited)
NOTE 2 - LONG-TERM DEBT:
Following is a summary of long-term debt at February 28, 1998
7.6% Note payable to
CNETCO, Inc., payable
at $359 per month, due $31,875
10/05, secured by 4th
mortgage on property
14% Note payable to DBL
Mortgage Corp.,
payable at $2,800 per $240,000
month secured by first
deed of 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 $70,994
through 1998 at
interest rates 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 ($7,753,559)
at February 28, 1998. At February 28, 1998, current
liabilities exceed current assets by $826,274. 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
(Unaudited)
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 nine month period ended February 28,
1998, compared to same period in 1997.
The Company has experienced continuing operating expenses
for the nine month period of $46,122 compared to $234,647 in the
same period in 1997. The revenues for the period totaled $0 from
oil and gas operations compared with $0 for same period in 1997.
Miscellaneous revenues from discounts and liquidations totalled
$408,973 in the period in 1998, due to which the Company recorded
net income of $362,851 for the period as compared to a ($350,107)
loss for the same period in fiscal year 1997. Other Revenues and
Expenses (Real Estate Rental) showed no net income for the period
as compared to ($65,460) net loss for same period in 1997. While
the Company is seeking capital sources for investment, there is
no assurance that sources can be found. The Company has no other
income, except income attributable to discounts and liquidation.
Results of Operations for the three month period ended February
28, 1998 compared to same period in 1997.
The Company has experienced continuing operating expenses
for the three month period of $9,251 compared to $63,040 in the
same period in 1997. The revenues for the period totaled $0 from
operations compared with $0 for same period in 1997. In the
three month period in 1998, the Company had real estate sales
income of $176,474 and miscellaneous income of $125,720 totalling
$302,194 from liquidation and no miscellaneous income in 1997.
The Company recorded a net income of $292,943 for the period as
compared to a ($15,336) loss for the same period in fiscal year
1997. Other Revenues and Expenses showed a net income (loss) for
the period of ($0) as compared to ($47,704) loss for same period
in 1997. 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 cash capital at the end of the period of
$6,672 which was insufficient to cover current liabilities. 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 February 28, 1998, there were trade accounts payable in
excess of $178,468. 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 $833,275. The Company had, at period end,
$7,001 in current assets, and the deficit in current assets to
current debts and liabilities was ($826,274).
<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 (a write-down was
taken in prior reporting to $450,000). 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 February 28, 1998, trade accounts payable have
been reduced by $313,000.00 and discounts negotiated of
$221,500.00.
<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
February 28, 1998: (incorporated by reference)
None
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 22, 1998 /s/Charles L. Stout
Charles L. Stout, President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> FEB-28-1998
<CASH> 7001
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 649,479
<DEPRECIATION> 106,154
<TOTAL-ASSETS> 550,326
<CURRENT-LIABILITIES> 833,275
<BONDS> 0
0
0
<COMMON> 7,465,975
<OTHER-SE> (7,753,559)
<TOTAL-LIABILITY-AND-EQUITY> (282,949)
<SALES> 176,474
<TOTAL-REVENUES> 408,973
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 46,122
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 362,851
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 362,851
<EPS-PRIMARY> .009
<EPS-DILUTED> .009
</TABLE>
