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SECURITIES AND 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 Quarter Ended September 30, 1997 Commission File No. 0-25022
CERX ENTERTAINMENT CORPORATION
(Exact name of Registrant as specified in its charter)
NEVADA 72-1148906
(State or other jurisdiction of (I.R.S. Empl. Ident. No.)
incorporation or organization)
90 Madison Street, Suite 707
Denver, Colorado 80206
(Address of Principal Executive Offices) (Zip Code)
(303) 355-3350
(Registrant's Telephone Number, including Area Code)
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 such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing to such filing requirements for at least the past 90 days.
Yes X No
The number of shares outstanding of each of the Registrant's classes of
common equity, as of September 30, 1997 are as follows:
Class of Securities Shares Outstanding
------------------- ------------------
Common Stock, $.001 par value 5,002,838
INDEX
Page of
Report
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Balance Sheets:
As of September 30, 1997 (Unaudited) and December 31, 1996..... 3
Statement of Operations (Unaudited):
For the nine months ended September 30, 1997 and 1996 and
Cumulative from inception (April 4, 1989) through September 30,
1997........................................................... 4
Statements of Cash Flows (Unaudited):
For the nine months ended September 30, 1997 and 1996 and
Cumulative from inception (April 4, 1989) through September 30,
1997........................................................... 5
Notes to Financial Statements (Unaudited)...................... 6
Item 2. Management's Discussion and Analysis or Plan of Operation...... 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 11
Signatures.................................................... 11
CERX ENTERTAINMENT CORPORATION
(A Development Stage Company)
Balance Sheets
(Unaudited)
Sept. 30, Dec. 31,
1997 1996
--------- --------
ASSETS
------
CURRENT ASSETS
Cash 10,268 2,309
Note receivable - -
--------- --------
Total Current Assets 10,268 2,309
--------- --------
Total Assets 10,268 2,309
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES
Accounts payable 1,501 -
Due to officer 61,117 16,637
Promissory notes to officer 97,522 83,022
Short term loan 74,590 -
--------- ---------
Total Current Liabilities 234,730 99,659
--------- ---------
STOCKHOLDERS' DEFICIT
Preferred stock, $.001 par value;
15,000,000 shares authorized;
5,000,000 shares designated as Series
A, 6.75% Non-Voting Convertible
Preferred Stock; none issued - -
Common stock, $.001 par value; 50,000,000
shares authorized, 5,002,838 shares
issued and outstanding 5,003 4,953
Additional paid-in capital 167,649 165,199
Deficit accumulated during the
development stage (397,114) (267,502)
--------- ---------
Total Stockholders' Deficit (224,462) (97,350)
TOTAL LIABILITIES AND --------- ---------
STOCKHOLDERS' DEFICIT 10,268 2,309
========= =========
See accompanying notes to financial statements.
CERX ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statement of Operations
(Unaudited)
Cumulative from
For The Nine Months Ended, inception to
Sept. 30, Sept. 30, Sept. 30,
1997 1996 1997
------------ ------------- --------------
Revenues:
Interest 74 - 74
------------ ------------- --------------
Total revenues 74 - 74
Costs and Expenses:
Costs related to attempted
business acquisition 13,090 - 167,517
General and administrative 110,813 10,695 205,381
Interest 5,783 - 6,256
Offering costs - - 18,034
------------ ------------- --------------
Total cost and expenses 129,686 10,695 397,188
------------ ------------- --------------
Net loss (129,612) (10,695) (397,114)
============ ============= ==============
Net loss per common share (0.03) (Nil)
============ =============
Weighted average shares
outstanding 4,986,171 3,113,245
============ =============
See accompanying notes to financial statements.
CERX ENTERTAINMENT CORPORATION
(A Development Stage Company)
Statements of Cash Flows
(Unaudited)
For the Nine Months Ended, Cumulative from
Sept. 30, inception to
1997 1996 Sept. 30, 1997
---------- ---------- --------------
Cash flows from operating
activities:
Net loss (129,612) (10,695) (397,114)
Adjustments to reconcile
net loss to net cash used
by operating activities:
Note receivable - - -
Accounts payable 1,501 - 1,501
Common stock issued for
costs advanced and
services - 7,395 151,112
Increase in amounts due
to officer 44,480 3,300 61,117
---------- ---------- -------------
Net cash used in operating
activities (83,631) - (183,384)
Cash flows from financing
activities:
Proceeds from promissory
notes 14,500 - 97,522
Short term loan 74,590 - 74,590
Proceeds from sale of
common stock 2,500 - 21,540
----------- ----------- -------------
Net cash provided by
financing activities 91,590 - 193,652
------------ ------------ -------------
Net increase in cash 7,959 - 10,268
------------ ------------ -------------
Cash at beg. of period 2,309 - -
------------ ------------ -------------
Cash at end of period 10,268 - 10,268
============ ============ =============
See accompanying notes to financial statements.
CERX ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
Note 1.
Cerx Entertainment Corporation ("Company") was incorporated in the
State of Nevada on April 4, 1989, under the name Chelsea Atwater, Inc.
The Company's name was changed in January 1997 to Cerex
Entertainment Corporation and changed again due to potential name
conflicts in February 1997 to Cerx Entertainment Corporation. The
common stock of the Company is quoted on the OTC Electronic Bulletin
Board under symbol CERX but has not been actively traded.
The Company's former business was to find and acquire an unidentified
existing company or business in order to become operational and increase
shareholder value.
The audit report of the Company's independent accountants reporting on
the Company's financial statements for the year ended December 31, 1996,
expressed doubt regarding the Company's ability to continue as a going
concern in light of the Company's recurring losses and current liabilities,
unless the Company obtains future profitable operations or additional
financing. The financial statements do not include any adjustments that
might be necessary should the Company be unable to continue in
existence.
Note 2.
The accompanying unaudited financial statements of the Company have
been prepared on the accrual basis and in accordance with the instructions
to Form 10-QSB and do not include all of the information and footnotes
required by generally accepted accounting principle for complete financial
statements. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the year ended December
31, 1996.
Note 3.
At the end of the third quarter, the Company owed $97,522 in principal
and $6,526 in interest to John D. Brasher Jr., the Company's principal
shareholder and Chairman, President and Chief Executive Officer, for cash
loaned, evidenced by demand promissory notes bearing simple interest at
8% per annum. The Company also owed to its legal counsel, Brasher &
Company, which is owned by Mr. Brasher, $61,117 for corporate expenses
advanced and legal fees.
Note 4.
The Company is attempting to raise cash through the sale of its preferred
stock and hopes to raise not less than $3 million in the fourth
quarter of 1997. The offering of shares is anticipated to be made outside
the United States of America in reliance upon Regulation S under the
Securities Act of 1933, as amended. During the first quarter of 1997, the
Company received from a firm intending to act as distributor of shares
approximately US$75,000 as an advance against this anticipated
offering to assist the Company in ramping up to conduct the offering.
Although no loan documents have been executed, the Company has elected
to treat the advance as a loan. Should the offering be successful, the
advance will either be repaid or converted to the Company preferred stock
on the same terms as the preferred stock offering, as the distributor
elects. The Company has not yet executed a formal agreement with the
distributor, and the distributor is not under any legal or other obli-
gation to sell any shares of preferred stock. Thus there can be no
assurance that any such stock can be sold. The Company's failure to
raise such funds would mean its inability to launch its business plan.
CERX ENTERTAINMENT CORPORATION
(A Development Stage Company)
Notes to Financial Statements (Unaudited)
Note 5.
The Board of Directors, pursuant to statutory authority set forth in the
Nevada General Corporation Law and pursuant to authority contained in
the Company's articles of incorporation as amended to date, by resolution
established and designated a series of preferred stock consisting of
4,000,000 shares, designated as the SERIES A, 6.75% NON-VOTING
CONVERTIBLE PREFERRED STOCK. No shares of such series have
been issued.
Note 6.
Loss per common share is based on the weighted average number of
common shares outstanding during the period.
Note 7.
During the year ended December 31, 1996, the Company incurred a net
loss of $233,902 and as of that date had accumulated a deficit of $267,502.
During the third quarter covered by these statements, the Company
realized no revenues and incurred a loss for the quarter of $8,299. The
Company's operations during the quarter consisted primarily of
activities related to its attempt to raise capital for operations and
preliminary activities looking toward launch ofits operations once funding
is received.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.
Background Information
Cerx Entertainment Corporation, a Nevada corporation ("Cerx" or the
"Company"), is in the development stage in accordance with Financial Accounting
Standards Board Standard No. 7. Cerx's efforts at this time are concentrated
upon raising capital to execute its business plan to become the premier
operator of entertainment networks on the Internet, potentially including
networks for kids, news, sports, gaming and general entertainment. See "Plan
of Operation" below. Cerx's principal executive offices are located at 90
Madison Street, Suite 707, Denver, Colorado 80206. Its telephone number there
is (303) 355-3350, and its facsimile number is (303) 355-3063.
Forward-Looking Information
This report contains certain forward-looking statements and information
relating to Cerx that are based on the beliefs of its management as well as
assumptions made by and information currently available to its management.
When used in this report, the words "anticipate", "believe", "estimate",
"expect", "intend", "plan", and similar expressions, as they relate to Cerx
or its management, are intended to identify forward-looking statements.
These statements reflect management's current view of Cerx with respect to
future events and are subject to certain risks, uncertainties and assumptions.
Should any of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described in this report as anticipated, estimated or expected. Cerx's
realization of its business aims could be materially and adversely affected
by any technical or other problems in, or difficulties with, planned fundings
and technologies, third party technologies which render Cerx's technologies
obsolete, the unavailability of required third party technology licenses on
commercially reasonable terms, the loss of key research and development
personnel, the inability or failure to recruit and retain qualified research
and development personnel, or the adoption of technology standards which are
different from technologies around which Cerx's business ultimately is built.
Cerx does not intend to update these forward-looking statements.
Liquidity and Capital Resources
Cerx has funded its operations to date exclusively through cash loans and
cash advances provided by shareholders. Cerx did not realize any cash from
equity financing activities in 1996 and has no line of credit or similar
credit facility available to it. However, Cerx currently pays no salaries or
rent, has little in the way of general or administrative overhead expenses,
and has no material capital commitments and will have none unless and until
it is able to raise the equity capital to become operational. Assets and cash
available to Cerx from its management and current shareholders are not
sufficient for Cerx to carry out its business plan described in this report
without additional funding.
As of September 30, 1997, Cerx had accumulated a deficit (net loss) of
$397,114 since inception and had $10,268 in cash on hand but no other
significant assets. Cerx was indebted to John D. Brasher Jr., at September 30,
1997, for cash loans amounting to $97,522 in principal and $6,256 in interest.
In addition, at September 30, 1997, Cerx owed Mr. Brasher's law firm, Brasher
& Company, $61,117 for Cerx expenses advanced and legal fees. Cerx has no
long-term liabilities.
The most likely source of capital available to Cerx is through an offering
of its securities for cash. Cerx is taking steps to initiate the raising of
capital through the sale of its preferred stock and hopes to raise not less
than $3 million in the fourth quarter of 1997. The offering is anticipated
to be made outside the United States of America in reliance upon Regulation
S under the Securities Act of 1933, as amended. During the first quarter of
1997, Cerx received, from a group intending to act as distributor of Cerx
shares, approximately US$75,000 as an advance against this offering to
assist Cerx with expenses of ramping up to conduct the offering.
Although no formal loan documents have been executed, Cerx has elected to
treat the advance as a loan. Should the offering be successful, the advance
will either be repaid or converted to Cerx preferred stock on the same terms
as the preferred stock offering, as the distributor elects. Cerx has not yet
executed a formal agreement with the distributor, and the distributor is not
under any legal or other obligation to sell any shares of preferred stock,
and there can be no assurance that such sums can be raised. Cerx's failure to
raise such funds from another source would mean its inability to launch its
business plan described in this report.
If the required capital is not raised, Cerx will pursue a different busi-
ness plan and probably will seek an existing business to acquire for the
benefit of its shareholders. In such event, Cerx believes that existing cash
and cash equivalents and cash advances available from shareholders will be
sufficient to cover its expenses for the remainder of 1997.
Results of Operations - Third Quarter 1997
During the quarter ended September 30, 1997, the third quarter of the year,
Cerx incurred a net loss of $8,299. Expenses in the quarter related
primarily to miscellaneous operating costs and professional fees and interest
on promissory notes. Cerx paid no rent or salaries during the quarter.
Results of Operations - Third Quarter 1996
During the quarter ended September 30, 1996, Cerx had no revenues and
incurred a net loss of $10,695. Expenses in the third quarter of 1996
related primarily to miscellaneous operating costs and professional fees.
Operating costs primarily related to filing of reports with the Securities
and Exchange Commission and investigating business opportunities. Cerx paid
no salaries or rent during the third quarter of 1996 and incurred only
insignificant administrative or overhead costs. Operations for the quarter
consisted primarily of investigating potential acquisitions of other
businesses.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
NONE.
(b) Reports on Form 8-K.
NONE.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this Report on Form 10-QSB to be signed on its behalf by the undersigned,
thereunto duly authorized.
DATED: November 3, 1997
CERX ENTERTAINMENT CORPORATION
/s/ John D. Brasher Jr.
By...........................................................
John D. Brasher Jr.,
Chairman, Chief Exec. Officer,
President, Chief Financial Officer
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
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