SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10QSB
Quarterly Report under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended Commission File Number
----------------- ----------------------
August 31, 2000 000-21210
NELX, INC.
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(Exact name of registrant as specified in its charter)
COLORADO 84-0922335
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(State of incorporation) (I.R.S. Employer
Identification No.)
10525 W. 23rd Place, Lakewood, CO 80215
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(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
----- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
45,802,042 common shares as of May 31, 2000
<PAGE>
I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
NELX, INC.
Consolidated Balance Sheet
(Unaudited)
<S> <C> <C>
August May
31, 2000 31, 2000
-------- --------
ASSETS
Current Assets
Cash & Cash Equivalents $ 206 $ 1,521
Property, Plant and Equipment
Plant and Plant Equipment 131,175 131,175
Equipment - -
Buildings - -
------------ -----------
131,175 131,175
Less Accumulated Depreciation 9,517 9,517
------ -----
Net Fixed Assets 121,658 121,658
TOTAL ASSETS $121,864 $123,179
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts Payable $ 24,255 $ 24,255
Accrued Expenses - -
Current Portion of Long-Term Debt 66,650 66,650
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Total Current Liabilities 90,905 90,905
Long Term Liabilities
Notes Payable - -
Total Liabilities 90,905 90,905
Stockholders' Equity
Common Stock. $0.0001 par value, 500,000,000 shares authorized
45,802,042 issued and outstanding at May 31, 2000 and August 31,
2000, respectively 4,580 4,580
Additional paid-in capital 7,718,330 7,718,330
Retained Deficit (7,691,951) (7,690,635)
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TOTAL STOCKHOLDERS' DEFICIT 30,959 32,274
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TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $121,864 $123,179
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NELX, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended August 31
(Unaudited)
<S> <C> <C>
2000 1999
---- ----
REVENUES
Oil & gas sales - -
Sale of ORRI
Misc Income
Cost of Sales
Gross Profit - -
EXPENSES
Interest - 500
Office Expense 766 1,773
Professional Fees - 2,650
Telephone & Utilities 549 44
---- --
Total Operating Expenses 1,315 4,967
NET INCOME (LOSS) $ (1,315) $ (4,967)
=============== ===============
Loss per Common Share (0.00) (0.00)
Weighted average number of shares outstanding 44,602,042 46,352,042
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NELX, INC.
Consolidated Statement of Cash Flows
(Unaudited)
<S> <C> <C>
Three Months
Ended August 31,
2000 1999
---- ----
Cash Flows from Operating Activities:
Net Profit (Loss) $ (1,315) $ (4,967)
Depreciation
(Decrease) Increase in Accounts Payable - (1,000)
(Decrease) Increase in Accrued Expenses
(Increase) Decrease in Accounts Receivable
--------------- -------------
Net Cash Flows Used for Operating Activities (1,315) (5,967)
Cash Flows from Investing Activities
(Purchase) Sale of Fixed Assets - -
(Purchase) Sale of Note Receivable
(Purchase) Sale of Investment
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Net Cash (Used by) From Investing Activities - -
Cash Flows from Financing Activities
Increase (Decrease) in Note Payable - 1,000
Sale of Common Stock - 7500
Sale of Treasury Stock - 0
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Total Cash from (Used by) Financing Activities - 8,500
Increase (Decrease) in Cash (1,315) 2,533
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Cash and Cash Equivalents - Beginning of Period 1,521 254
---
Cash and Cash Equivalents - end of Period 206 2,787
=============== =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NELX, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
Common Stock Additional
------------ Paid-In Accumulated
Shares Amount Capital Deficit
------------ ------------ ------------- --------------
<S> <C> <C> <C> <C>
Balances, May 31, 1998 46,352,042 $ 4,635 $ 7,465,975 $ (7,666,186)
Stock returned for re-issuance (6,000,000) (600) -
Issuance of stock for cash 4,000,000 400 158,000
Net (loss) - - - (5,110)
---------- ------- --------- -------------
Balances, May 31, 1999 44,352,042 4,435 7,623,975 (7,671,296)
Exercise of stock options 350,000 35 17,465 -
Issued to buyout overriding royalty interests 1,100,000 110 76,890 -
Net (loss) - - - (19,339)
----------- -------- ------------ -------------
Balances, May 31, 2000 45,802,042 $ 4,580 $ 7,718,330 $(7,690,635)
----------- -------- ------------ -------------
Net (loss) - - - (1,315)
----------- -------- ------------ -------------
Balance August 31, 2000 45,802,042 $ 4,580 $ 7,718,330 $(7,691,950)
=========== ======== ============ =============
</TABLE>
<PAGE>
NELX, INC.
Notes to Financial Statements
Note A - Organization and Business
Organization and Nature of Business
-----------------------------------
NELX, INC. (the "Company") was incorporated in Kansas on March 25,
1983. As of August 31, 2000, the Company had no business operations.
Its principal asset is a leasehold interest in undeveloped mineral
spring in Arkansas. On July 26, 2000 the Company acquired all of the
stock of a West Virginia corporation in the business of producing
dimensional lumber, crossties and landscaping timber (see Note H).
The accompanying consolidated financial statements have been presented
assuming that the Company will continue as a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company has incurred
significant recurring losses and has a substantial working capital
deficit as of August 31, 2000. In addition, at August 31, 2000, the
Company had no substantial product, service or properties and requires
significant additional financing to satisfy its outstanding obligations
and commence operations. Management's plans to address these matters
include acquisitions, private placements of stock and obtaining
short-term loans. Unless the Company successfully obtains suitable
significant additional financing there is substantial doubt about the
Company's ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible
future effect on the recoverability and classification of assets or the
amounts and classification of liabilities that may result from the
outcome of this uncertainty.
Note B - Summary of Significant Accounting Policies
Principles of Consolidation
---------------------------
The financial statements include the accounts of Crystal Mountain
Water, Inc., a wholly owned subsidiary. All inter-company transactions
and balances have been eliminated.
Use of Estimates
----------------
Preparation of financial statements in conformity with generally accept
-ed accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial
statements and accompanying notes. Significant areas requiring the use
of management estimates are valuation of stock issued for services and
property and valuation of deferred tax benefits. Actual results
inevitably will differ from those estimates, and such differences may
be material to the financial statements.
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements
Property
--------
Property, including the Company's investment in an undeveloped mineral
spring, is recorded at cost. Maintenance and repair costs are charged
to expense as incurred, and renewals and improvements that extend the
useful life of assets are capitalized. Amortization of the leasehold
cost of the mineral spring is computed using the straight-line method
over the remaining term of the lease (including options to extend,
which ends October 28, 2026).
Amortization expense of $5,106 and $4,411 was recorded in fiscal 2000
and 1999, respectively.
Income Taxes
------------
The Company uses the asset and liability approach of accounting for
income taxes. The asset and liability approach requires the recognition
of deferred tax assets and liabilities for the expected future
consequences of temporary differences between the financial reporting
basis and tax basis of assets and liabilities (see Note D).
Statement of Cash Flows
-----------------------
Cash and cash equivalents include cash and short-term investments with
original maturities of three months or less.
Basic Earnings (Loss) Per Share
-------------------------------
Basic earnings (loss) per share of common stock are computed using the
weighted average number of shares outstanding during each period.
Diluted earnings per share are computed on the basis of the average
number of common shares outstanding plus the dilutive effect of
convertible debt, stock options and warrants.
The basic and the dilutive earnings per share are the same in fiscal
2000 and 1999 since the Company had net losses and the inclusion of the
effect of stock options would be anti-dilutive.
Concentrations
--------------
The principal asset of the Company is a leasehold interest in an
Arkansas mineral spring.
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements
Note D - Advances from Stockholders
As of August 31, 2000, unsecured, non-interest bearing advances total-
ing $66,650 were due on demand to the Company's president.
Note D - Income Taxes
As of August 31, 2000, the accumulated net operating loss carryforward
that may be offset against future taxable income, if any, totals
approximately $6.4 million. The loss carryforward expires in varying
amounts from fiscal 2008 through fiscal 2020.
In addition, as of August 31, 2000, the Company had approximately $1.2
million of capital loss carryovers, which may be used only to offset
capital gains. The capital losses carryforward expires from fiscal 2001
through fiscal 2004.
A tax benefit has not been reported in the accompanying financial
statements for the operating and capital losses carried forward because
the Company is uncertain as to the likelihood of utilization.
Accordingly, the approximate tax benefit of $1.1 million of the amounts
carried forward has been offset by a valuation allowance of the same
amount, a decrease of approximately $3,000 in fiscal 2000.
Note E - Stockholders' Equity
Exercise of Stock Options
-------------------------
During fiscal 2000, options were exercised covering a total of 350,000
shares of common stock resulting in proceeds of $17,500.
Stock Issued to Liquidate Overriding Royalty Interest in Mineral Spring
-----------------------------------------------------------------------
On May 5, 2000, a total of 1.1 million shares of restricted common
stock, with an estimated value of $77,000 were issued to five
individuals to liquidate overriding royalty interests totaling $.016
per gallon in the Arkansas mineral spring.
Note F - Commitments and Contingencies
In fiscal 1998 an agreement was reached to settle a $24,524 loan. As
part of the agreement the creditor was also to transfer 550,000 to
third parties and return 166,667 shares to the Company (a total of
666,667 shares). As of August 31, 2000, the agreement has not been
executed.
<PAGE>
NELX, INC.
Notes to Consolidated Financial Statements
Note G - Fair Value of Financial Instruments
The carrying amounts for the settlement payable and advances from
stockholder approximates fair value because of the short-term
maturities of these instruments.
The determinations of fair value discussed above are subjective in
nature and involve uncertainties and significant matters of judgment
and do not include income tax considerations. Therefore, the results
cannot be determined with precision and cannot be substantiated by
comparison to independent market values and may not be realized in
actual sale or settlement of the instruments.
Note H - Events Subsequent to August 31, 2000 (Unaudited)
July 26, 2000, the Company acquired all of the voting stock of Square
Roots Incorporated, a West Virginia corporation for 1 million shares of
common stock.
<PAGE>
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of Operations
---------------------
The Company has experienced $1,315 expenses for the three month period in 2000
and $4,967 for the three month period in 1999. The Company had no revenues in
the three month period for either year. The Company will continue to have losses
until adequate income can be achieved to meet expenses. While the Company is
seeking capital sources for investment; there is no assurance that sources can
be found.
Liquidity and Capital Resources
-------------------------------
The Company had $206 in cash capital at the end of the period and current
liabilities exceeded current assets by $90,699. The Company will be forced to
either borrow or make private placements of stock in order to fund operations.
No assurance exists as to the ability to achieve loans or make private
placements of stock.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULT UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
The Company agreed to acquire 100% of the issued and
outstanding stock of Square Roots, Inc. for one million
shares of common stock. The transaction is being held in
abeyance pending receipt of audited financial statements of
Square Roots, Inc., which are in process.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Reports on Form 8-K were made for the period for which
this report is filed:
8-K August, 18, 2000
8-K August 28, 2000
8-K/A August 28, 2000
<PAGE>
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.
Date: November 14, 2000
NELX, INC.
/s/ Charles L. Stout
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Charles L. Stout, President
