U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For year ended December 31, 1997 Commission File No. 0-25022
C E R X V E N T U R E C O R P O R A T I O N
(Exact name of registrant as specified in its charter)
NEVADA 72-1148906
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
90 Madison Street, Suite 707
Denver, Colorado 80206 (303) 355-3350
(Address of Principal's Executive Offices) (Registrant's Telephone No.
incl. area code)
Securities registered pursuant to
Section 12(b) of the Act: NONE
Securities registered pursuant to
Section 12(g) of the Act: Common stock, $.001 par value
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 requirements for at least the past 90 days.
Yes X No
Indicate by check mark if no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is contained in this form, and
no disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference
in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.
Yes X No
The registrant's revenues for its most recent year were nil.
The aggregate market value of the 1,812,985 shares of common
stock of the registrant held by non-affiliates on December 31, 1997
was not determinable.
At March 31, 1998, a total of 5,002,838 shares of common stock
were outstanding.
TABLE OF CONTENTS
PART I
Item 1. Description of Business............................ 2
Item 2. Description of Property............................ 8
Item 3. Legal Proceedings.................................. 8
Item 4. Submission of Matters to a Vote of Security Holders 8
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters .............................. 8
Item 6. Management's Discussion and Analysis or Plan of
Operation......................................... 9
Item 7. Financial Statements............................... 11
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure........... 11
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act....................................... 11
Item 10. Executive Compensation.............................. 12
Item 11. Security Ownership of Certain Beneficial Owners and
Management ........................................ 13
Item 12. Certain Relationships and Related Transactions...... 13
PART IV
Item 13. Exhibits and Reports on Form 8-K.................... 14
Index to Financial Statements....................... 16
Financial Statements................................ F-1
PART I
Item 1. DESCRIPTION OF BUSINESS.
Background
Cerx Venture Corporation ("Cerx" or the "Company") was
incorporated in the State of Nevada on April 4, 1989, under the name
Chelsea Atwater, Inc. On March 19, 1997, the Company changed its
name to Cerx Entertainment Corporation, and on March 23, 1998,
changed its name again to Cerx Venture Corporation. Until the fourth
quarter of 1996, when it unsuccessfully attempted to acquire a foreign
casino management company for stock and cash, Cerx had extremely
limited operations. During the last quarter of 1996 and through 1997,
Cerx's efforts were concentrated upon raising capital to execute a now-
discontinued business plan to become the premier operator of
entertainment networks on the Internet, including networks for kids,
news, sports, gaming and general entertainment.
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 the Company 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 the Company or its management,
are intended to identify forward-looking statements. These statements
reflect management's current view of the Company with respect to
future events and are subject to certain risks and uncertainties. In
particular, should the Company fail to raise funding to originate a
business, or should any such business originated fail, or should the
Company fail in the alternative to acquire an operating company which
ultimately is successful, it is unlikely that the Company's stock will
have any value or that any benefits will flow from ownership of the
Company's stock. The common stock of the Company should be
viewed at this time as a high risk investment, and no person should
invest in the Company's stock unless able to comfortably afford the
loss of the entire sum invested. The Company does not intend to update
these forward-looking statements.
Current Business
The Company has no significant assets or liabilities and is in the
development stage. The Company intends to either raise funds to
originate a business or, alternatively, enter into a business combination
with one or more as yet unidentified privately held businesses.
Management believes that the Company will be attractive to privately
held companies interested in becoming publicly traded by means of a
business combination with the Company, without offering their own
securities to the public. The Company intends to pursue negotiations
with qualified candidates.
The Company will not be restricted in its search for business
combination candidates to any particular geographical area, industry
or industry segment, and may enter into a combination with a private
business engaged in any line of business. Management's discretion is,
as a practical matter, unlimited in the selection of a combination
candidate. The Company's search generally will be directed toward
small to medium-sized companies. The Company has not entered into
any agreement or understanding of any kind with any person regarding
a business combination.
PRE-COMBINATION ACTIVITIES. The Company's common
stock is publicly quoted on the OTC Bulletin Board, and it has
insignificant assets and liabilities. With these characteristics,
management believes that the Company will be attractive to privately
held companies interested in becoming publicly traded by means of a
business combination with the Company, without offering their own
securities to the public. The Company intends to pursue negotiations
with qualified candidates after effectiveness of this Registration
Statement.
The term "business combination" (or "combination") means the
result of (i) a statutory merger or consolidation involving the Company
and a privately held business, (ii) the exchange of securities of the
Company for the assets or outstanding equity securities of a privately
held business, (iii) the merger or consolidation of a privately held
business into or with a wholly owned subsidiary of the Company
formed for that purpose, (iv) the sale of securities of the Company for
cash or other value to a business entity or individual, and similar
transactions.
A combination may be structured as a merger, consolidation,
exchange of the Company's Common Stock for assets or the
outstanding stock of the business acquired, sale of Common Stock for
cash, or any other form which will result in the combined entity being
a publicly held corporation. A sale of Common Stock for cash or an
exchange of Common Stock for assets or stock may be made to an
individual or a business entity. It is not likely that any proposed
combination will be subject to the approval of the Company's
shareholders. Pending negotiation and consummation of a combination,
the Company anticipates that it will have no business activities or
sources of revenues and will incur no significant expenses or liabilities
other than expenses related to this Registration Statement or to the
negotiation of a combination.
The Company will not be restricted in its search for business
combination candidates to any particular geographical area, industry
or industry segment, and may enter into a combination with a private
business engaged in any line of business, including service, finance,
mining, manufacturing, real estate, oil and gas, distribution,
transportation, medical, communications, high technology,
biotechnology or any other. Management's discretion is, as a practical
matter, unlimited in the selection of a combination candidate. The
Company's search generally will be directed toward small to medium-sized
companies. Management of the Company will seek combination
candidates in the United States and other countries, as available time
permits, through existing associations and by word of mouth. The
Company also may employ the services of business brokers or other
intermediaries.
The Company has not entered into any agreement or understanding
of any kind with any person regarding a business combination. There
can be no assurance that the Company will be successful in locating a
suitable combination candidate or in concluding a business combination
on terms acceptable to the Company. The Company's Board of
Directors has not estabished a time limitation by which it must
consummate a suitable combination; however, if the Company is
unable to consummate a suitable combination within a reasonable
period, such period to be determined at the discretion of the
Company's Board of Directors, the Board of Directors will probably
recommend its liquidation and dissolution.
The Company will participate in a business combination only after
the negotiation and execution of a written agreement. Although the
terms of any such agreement cannot be predicted, such agreements
generally provide for representations and warranties by the various
parties thereto, conditions of closing, post-closing covenants and
restrictions, reciprocal indemnities, remedies upon default and other
terms. As a general matter, management anticipates that the Company
will enter into a letter of intent with the management, principals or
owners of a prospective combination candidate. Such a letter of intent
will set forth the terms of the proposed acquisition but will not bind the
Company to consummate it. Execution of a letter of intent will by no
means indicate that consummation of a combination is probable. The
Company will not be bound unless and until it executes a definitive
agreement concerning the combination, as described in this paragraph,
and then only if the Company has no contractual right to terminate the
agreement on specified grounds.
COMBINATION SUITABILITY STANDARDS. The Company
will generally seek to avoid companies whose business appears to be
fad-oriented or otherwise incapable of sustained long-term growth. In
seeking combination candidates, management anticipates that the most
desirable combination candidates will possess the following attributes:
1. Strong operating revenues, or in the process of launching a
business where contracts, purchase orders or other existing
relationships are expected to generate strong revenues.
2. Experienced management in place or ready to joint the
management team.
Management also may consider any or all of the following factors,
among other possible factors, no one of which will be determinative:
3. If the candidate is an operating company, its financial track
record.
4. The candidate's economic prospects, such as potential for
significant growth in revenues and earnings, proprietary
technology and rights, strength of marketing concept and size
of potential market.
5. The candidate's capital requirements in light of its access to
expansion capital.
6. Special risks associated with the candidate and its industry or
industry segment.
7. Perceived desirability of the candidate (or its industry or
industry segment) or its product(s) to investors and investment
bankers in the public capital markets.
8. Current and potential future competition.
Prior to consummation of any combination (other than a mere sale
by the Company of controlling interest in its outstanding stock) the
Company will require that the business to be combined provide the
Company at the least with an audited balance sheet as of the most
recent fiscal year end and statements of operations, cash flows and
changes in stockholders' equity for the two most recent fiscal years,
audited by certified public accountants acceptable to the Company's
management. Such financial statements must be adequate to satisfy the
Company's reporting obligations under Section 15(d) or 13 of the
Exchange Act. Following consummation of a combination, the
Company will file a current report on Form 8-K with the Commission
which discloses among other things the date and manner of the
combination, the assets and consideration involved, the identity of the
person or persons from whom the assets or other property was
acquired, changes in management and biographies of the new officers
and directors, principal shareholders following the combination, and
will provide, if required, the financial statements referenced above.
POST-COMBINATION ACTIVITIES. Following consummation
of a combination, the Company anticipates that control of the Company
will change as a result of the issuance of additional Common Stock to
the shareholders of the business(es) acquired in the combination. Once
such control has been assumed, it is likely that the new controlling
shareholders will call a meeting for the purpose of replacing the
incumbent directors of the Company with candidates of their own, and
that the new directors will then replace the incumbent officers with
their own nominees. Current management will not object to such
replacements when duly made.
POTENTIAL INSIDER SALES OF STOCK. No officer, director
or affiliate of the Company currently has any intention of selling shares
owned by them in the Company to any person in connection with any
business opportunity acquired by the Company. However, no law, rule
or regulation, and no bylaw or charter provision prevents any such
persons from thus actively negotiating or consummating such a sale of
their shares. Company shareholders will not be afforded any
opportunity to review or approve any buyout of shares held by an
officer, director or other affiliate, should such a buyout occur, and
shareholders generally will not be afforded a similar opportunity to sell
shares in connection with such a transaction.
USE OF CONSULTANTS. The Company has had no discussions,
and has entered into no agreements or understandings, with any
consultant. The Company's officers and directors have not in the past
used any particular consultant(s) on a regular basis and have no plan
to recommend that any particular consultant(s) be engaged by the
Company on any basis. No particular criteria regarding experience,
services, term of service, or the like has been considered or developed
regarding the engagement of consultant(s). While the Company
currently has no plan to hire or engage consultant(s) and management
believes that a desirable business opportunity can be located and
acquired by management, it is possible that management will find it
necessary to hire or pay consultants on some basis in relation to an
acquisition, as discussed in the following paragraph.
ACQUISITION-RELATED COMPENSATION. It is possible that
compensation in the form of common stock, options, warrants or other
securities of the Company, cash or any combination thereof, may be
paid to various persons in connection with an acquisition by the
Company. Such persons may include officers, directors and promoters
of the Company and any of their respective affiliates, finders,
consultants or other persons. Any payments of cash would be made by
the business acquired or persons affiliated or associated with it, since
the Company has no cash. It is possible that the payment of such
compensation may become a factor in any negotiations for the
Company's acquisition of a business opportunity. Any such
negotiations and compensation may present conflicts of interest
between the interests of persons seeking compensation and those of the
Company's shareholders, and there is no assurance that any such
conflicts will be resolved in favor of the Company's shareholders.
Possible Origination of a Business
The Board of Directors has left open the possibility that, instead of
seeking a business combination, the Company may instead raise
funding in order to originate an operating business, which may be in
any industry or line of business, and could involve the Company's
origination of a start-up business, purchase and development of a
business already originated by third parties, joint venture of a new or
existing business, or take any other lawful form. The Company
remains convinced of the commercial potential of the Internet for those
willing and able to exploit the unique properties of the Internet as a
new communcations medium and commercial forum. While
management remains open to opportunities that appear for the
Company to inexpensively enter Internet commerce, other areas of
business will be given fair consideration as well. It is also possible that
the Company may engage in one or more combinations, as discussed
above, and originate a business in addition. Potential shareholders
should consider that management has the widest possible discretion in
choosing a business direction for the Company.
Any funds needed to originate and develop a business would almost
certainly be raised from the sale of the Company's securities, since the
Company lacks the creditworthiness to obtain a loan. Management
does not believe that the principal shareholders, directors or executive
officers of the Company would be willing to guarantee any debt taken
on, and obtaining a loan without personal guarantees is unlikely.
Capital could possibly be raised from the sale of debt instruments
convertible into common stock upon the occurrence of certain defined
events, but no such funding has been offered. The Company has no
current plans to offer or sell its securities, but would be agreeable do
so if a worthy business opportunity presents itself and adequate funding
then appears to be available.
State Securities Law Considerations
Section 18 of the Securities Act of 1933, as amended in 1996,
provides that no law, rule, regulation, order or administrative action
of any state may require registration or qualification of securities or
securities transactions with respect to a "covered security." The term
"covered security" is defined in Section 18 to include, among other
things, transactions which are exempt from registration under the
Securities Act of 1933 pursuant to Section 4(1), which exempts
transactions by "any person not an issuer, underwriter or dealer," (that
is, secondary resales, such as market trades) provided the issuer of the
security files reports with the Commission pursuant to Section 13 or
15(d) of the Exchange Act. In other words, Section 18 defines a
covered security to include market trades and other secondary
transactions by shareholders in outstanding securities, even if the issuer
is a "blank check" company, provided the issuer is a reporting
company.
While subparagraph (c) of Section 18 as amended preserves the
authority of the states to require certain limited notice filings and to
collect fees as to certain categories of covered securities (including
Section 4(1) secondary transactions in the securities of reporting
companies), a state may not "directly or indirectly prohibit, limit, or
impose conditions based on the merits of such offering or issuer, upon
the offer or sale of any (covered) security." This provision prohibits
state registration or qualification requirements, other than requiring
certain limited notice filings, of trading in the securities of blank check
companies which are SEC reporting companies. The Company will
comply with any such state limited notice filings, but is currently not
aware of any such filing requirements for secondary trading of
outstanding securities.
No Investment Company Act Regulation
Prior to completing a combination, the Company will not engage
in the business of investing or reinvesting in, or owning, holding or
trading in securities, or otherwise engaging in activities which would
cause it to be classified as an "investment company" under the 1940
Act. To avoid becoming an investment company, not more than 40%
of the value of the Company's assets (excluding government securities
and cash and cash equivalents) may consist of "investment securities,"
which is defined to include all securities other than U.S. government
securities and securities of majority-owned subsidiaries. Because the
Company will not own less than a majority of any assets or business
acquired, it will not be regulated as an investment company. The
Company will not pursue any combination unless it will result in the
Company owning at least a majority interest in the business acquired.
Competition
The Company will be in direct competition with many entities in its
efforts to locate suitable business opportunities. Included in the
competition will be business development companies, venture capital
partnerships and corporations, small business investment companies,
venture capital affiliates of industrial and financial companies, broker-
dealers and investment bankers, management and management
consultant firms and private individual investors. Most of these entities
will possess greater financial resources and will be able to assume
greater risks than those which the Company, with its limited capital,
could consider. Many of these competing entities will also possess
significantly greater experience and contacts than the Company's
management. Moreover, the Company also will be competing with
numerous small public shell companies for such opportunities.
Risk Factors
At this time the shares of the Company are speculative and involve
a high degree of risk, for the reasons following. The Company is in the
development stage with no operations or revenues, thus there are no
financial results upon which anyone may base an assessment of its
potential. No combination candidate has been identified for acquisition
by management, nor has any determination been made as to any
business for the Company to enter, and shareholders will have no
meaningful voice in any such determinations. There is no assurance
that the Company will be successful in completing a combination or
originating a business, nor that the Company will be successful or that
its shares will have any value even if a combination is completed or a
business originated.
The Company's officers and directors, who serve only on a part-time basis,
have had limited experience in the business activities
contemplated by the Company, yet the Company will be solely
dependent on them. The Company lacks the funds or other incentive
to hire full-time experienced management. Each of the Company's
management members has other employment or business interests to
which he devotes his primary attention and will continue to do so,
devoting time to the Company only on an as-needed basis. Moreover,
members of management are involved in other companies also seeking
to engage in a combination, and conflicts of interest could arise in the
event they come across a desirable combination candidate. No
assurance exists that all or any such conflicts will be resolved in favor
of the Company.
After completion of a combination, the current shareholders of the
Company may experience severe dilution of their ownership due to the
issuance of shares in the combination. Any combination effected by the
Company almost certainly will require its existing management and
board members to resign, thus shareholders have no way of knowing
what persons ultimately will direct the Company and may not have an
effective voice in their selection.
Employees
The only employees of the Company currently are its officers, none
of which provide full time services to the Company. It is not expected
that the Company will have or need additional employees except as a
result of completing a combination or originating a business which
requires the hiring of employees.
Conflicts of Interest
Certain officers and directors of the Company are affiliated with
other companies having a similar business plan to that of the Company
("affiliated companies") which may compete directly or indirectly with
the Company for combination candidates. The Company has not
identified a specific business area, industry or industry segment in
which it will seek combination candidates. The Company has made a
determination that it will not concentrate its search for combination
candidates in any particular business, industry or industry segment,
since any such concentration is potentially limiting and confers no
advantage to the Company. Certain specific conflicts of interest may
include those discussed below.
1. The interests of any affiliated companies from time to time
may be inconsistent in some respects with the interests of the
Company. The nature of these conflicts of interest may vary. There
may be circumstances in which an affiliated company may take
advantage of an opportunity that might be suitable for the Company.
Although there can be no assurance that conflicts of interest will not
arise or that resolutions of any such conflicts will be made in a manner
most favorable to the Company and its shareholders, the officers and
directors of the Company have a fiduciary responsibility to the
Company and its shareholders and, therefore, must adhere to a
standard of good faith and integrity in their dealings with and for the
Company and its shareholders.
2. The officers and directors of the Company serve as officers
and/or directors of one or more affiliated companies and may serve as
officers and directors of other affiliated companies in the future. The
Company's officers and directors are required to devote only so much
of their time to the Company's affairs as they deem appropriate, in
their discretion. As a result, the Company's officers and directors may
have conflicts of interest in allocating their management time, services,
and functions among the Company and any current and future affiliated
companies which they may serve, as well as any other business
ventures in which they are or may become involved.
3. The affiliated companies may compete directly or indirectly
with that of the Company for the acquisition of available, desirable
combination candidates. Such conflicts are not expected to be resolved
through arm's-length negotiation, but rather in the discretion of
management members. While any such resolution will be made with
due regard to the fiduciary duty owed to the Company and its
shareholders, there can be no assurance that all potential conflicts can
be resolved in a manner most favorable to the Company as if no
conflicts existed. Members of the Company's management who also
are members of management of another affiliated company will also
owe the same fiduciary duty to the shareholders of each such affiliated
company. Absent factors unique to the Company or an affiliated
company which make it more or less desirable to a potential
combination candidate (such as age, name, capitalization, state of
domicile, etc.), management expects that in the event of a direct
conflict, any combination candidate will be presented to the Company
and any applicable affiliated companies in the order they were
organized.
As a practical matter, such potential conflicts could be alleviated
only if each previously or contemporaneously formed affiliated
company either is not seeking a combination candidate, has already
identified a combination candidate, is seeking a combination candidate
in a specifically identified business area, or is seeking a combination
candidate that would not otherwise meet the Company's selection
criteria. In general, the Company will be given priority over
subsequently formed affiliated companies with regard to its initial
acquisition of a combination candidate, assuming that it meets the
investment criteria of the Company. It is likely, however, that the
combination criteria of the Company and any affiliated companies are
virtually identical as a practical matter and that this will remain true.
In the final analysis, the Company and its shareholders ultimately must
rely on the fiduciary responsibility owed to them by the Company's
officers and directors.
Item 2. DESCRIPTION OF PROPERTY.
Cerx neither owns nor leases any real estate or other properties.
Cerx's offices currently are located at 90 Madison Street, Suite 707,
Denver, Colorado 80206, and are provided at no charge by its
President. This arrangement will continue until Cerx raises funding to
originate a business or completes an acquisition of an operating
business, in which latter event the offices of the Company undoubtedly
will be the same as those of the acquired company.
Item 3. LEGAL PROCEEDINGS.
Cerx is not involved in any threatened or pending legal proceeding.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted by management to a vote of Cerx
security holders during the year ended December 31, 1997. However,
on March 18, 1997, shareholders holding in the aggregate more than
a majority of the issued and outstanding shares entitled to vote, took
action by written consent in lieu of a meeting, as permitted by Section
78.320 of the Nevada General Corporation Law. By means of that
written consent, the shareholders approved a change of the Company's
name to Cerx Entertainment Corporation.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS.
Market Information
Commencing in the fourth quarter of the year ended December 31,
1995, Cerx's common shares were quoted "name only" (meaning no
price quotation shown) by a single market maker on the OTC Bulletin
Board maintained by the National Association of Securities Dealers,
Inc. Prior to that quarter, the common shares were not quoted in any
medium. To Cerx's knowledge, no market transactions have taken
place in the common shares since initial name-only quotation, and
there currently is no market for the common shares. At this time, the
common stock is quoted $.01 bid, no offer, on the OTC Bulletin Board
under symbol CERX, with two market makers.
Holders
Cerx had 554 shareholders of record as of March 31, 1998.
Dividends
Cerx does not expect to pay a cash dividend upon its capital stock
in the near future. Payment of dividends in the future will depend on
Cerx's earnings (if any) and its cash requirements at that time.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Liquidity and Capital Resources
Cerx has funded its operations to date exclusively through cash
loans and advances provided by shareholders and from an advance of
funds against a securities placement never completed. Cerx did not
realize any cash from equity financing activities in 1997 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 it should originate or
participate in a business. Assets and cash available to Cerx from its
management and current shareholders are not sufficient for Cerx to
originate or participate in a business, although there is no impediment
to engaging in a combination. President and CEO John D. Brasher Jr.
has indicated to the Board of Directors that he will make cash available
sufficient for the Company to pay expenses related to making required
filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended ("Exchange Act").
As of December 31, 1997, Cerx had accumulated a deficit (net
loss) of $401,854, and had $4,609 in cash but no other significant
assets. Cerx was indebted to its principal shareholder and President,
John D. Brasher Jr., at December 31, 1997, for cash loans, accrued
interest and expenses advanced. At year end, Cerx owed Mr. Brasher
an aggregate of $97,522 in principal and $8,217 in interest. Cerx has
no long-term liabilities. Prior to year end, Brasher & Company, the
Company's law firm owned by President John D. Brasher Jr., forgave
$53,343 owed for expenses advanced and legal fees, which the
Company treated as a capital contribution in that amount.
In 1997, the Company attempted to raise capital through the sale
of its securities to non-U.S. residents in an offering pursuant to
Regulation S under the Securities Act of 1933, as amended ("Act").
Cerx received from the group designated to act as distributor in the
offering $74,590 as an advance against the offering to assist Cerx in
ramping up to conduct the offering and launch an Internet-based
business. It became clear in late 1997 that the anticipated overseas
offering of stock would not be made, which prevented the Company
from entering into any active business of the sort described in the Form
10-KSB for year ended December 31, 1996. Subsequent to December
31, 1997, the advance was paid down by Cerx to $44,590. This
amount must be repaid at some point or be converted into shares of
Cerx common stock.
Results of Operations - 1997
During the year ended December 31, 1997, Cerx incurred a net
loss of $134,352. Expenses in 1997 related primarily to miscellaneous
operating costs, professional fees, expenditures made preparing for an
offering of securities never completed, amounts spent attempting to
launch a planned Internet-based business now discontinued, and
expenses related to the business acquisitions attempted in 1996 but
never completed. Cerx paid no salaries or rent during 1997 and
incurred $40,585 in general and administrative costs. Cerx incurred
$38,885 in legal fees owed to Brasher & Company, a law firm owned
by Cerx's President, John D. Brasher Jr.
Results of Operations - 1996
During the year ended December 31, 1996, Cerx incurred a net
loss of $233,902. Expenses in 1996 related primarily to miscellaneous
operating costs, professional fees, and losses incurred in the third and
fourth quarters associated with Cerx's attempt to consummate the
purchase of a company engaged in casino gaming operations in St.
Vincent and the Grenadines. In January 1996, the Company issued
123,260 shares of its common stock (after giving effect to a 5-for-1
forward stock split) to its principal shareholder and President, John D.
Brasher Jr., in reimbursement of expenses advanced by him on Cerx's
behalf in 1995. Cerx paid no salaries or rent during 1996 and incurred
$79,002 in general and administrative costs. Cerx incurred $136,860
in legal fees and $15,256 in company expenses advanced by Brasher
& Company, a law firm owned by Cerx's President, Mr. Brasher. In
December 1996, Cerx issued 1,839,593 shares of common stock to
Mr. Brasher in payment of $147,167 in legal fees and expenses owed
to Brasher & Company.
Cerx on July 12, 1996, entered into an Asset Purchase Agreement
("PLC Purchase Agreement") with Casino Casino PLC, a company
organized in the Island of Nevis (British West Indies) under Section
4(6) of the Nevis Business Corporation Ordinance 1984, as amended
("Casino PLC"). Pursuant to the Purchase Agreement, Casino PLC
assigned to Cerx certain rights which Casino PLC held under an
Option to Purchase and that certain Management Agreement, both
dated June 26, 1996, between Casino PLC and E.V.A. LIMITED, a
limited liability company organized in St. Vincent and the Grenadines
(British West Indies) under the provisions of the Companies Act,
Chapter 219 ("EVA"). The PLC Purchase Agreement called for the
issuance and delivery to the shareholders of Casino PLC an aggregate
of 1,195,035 shares of Cerx common stock, $.001 par value per share
(the "PLC Shares"), and options (the "PLC Options") to purchase an
aggregate of 4,500,000 shares of Cerx common stock (the "PLC
Option Shares"), all such amounts giving effect to the 5:1 forward split
of Cerx common stock effective in July 1996. Cerx and Casino PLC
executed an Assignment and Reservation of Rights which purported to
assign to Cerx all Casino PLC rights, except for Casino PLC's
reservation of a revenue interest. The PLC Shares were issued and
delivered to Casino PLC, but the PLC Options never were issued or
delivered. Cerx reported in a report on Form 8-K dated July 12, 1996,
that it had consummated the PLC Purchase Agreement, but Cerx
believes for several reasons that such agreement in fact never was
consummated. Certain deliveries required of Casino PLC were not
made, and the PLC Options never were issued or delivered by Cerx,
among other things. Cerx cancelled the PLC Purchase Agreement and
all related transactions and cancelled all of the PLC Shares on its stock
transfer books for breaches of that agreement by Casino PLC. This
acquisition was not consummated and management has treated all
related expenses as having been incurred in connection with its attempt
to complete the acquisition of Casino PLC.
Cerx executed an Exchange Agreement, later amended, among
Cerx, E.V.A. Limited, a St. Vincent and the Grenadines company
("EVA"), and the shareholders or members of EVA, pursuant to which
Cerx agreed among other things and subject to certain terms and
conditions to purchase all of the issued and outstanding common shares
of EVA. In exchange, the agreement called for Cerx to pay and issue
to the EVA shareholders an aggregate of $200,000 in cash represented
by promissory notes, 500,000 shares of Cerx common stock, and
warrants for the purchase of an additional 500,000 shares of Cerx
common stock at a price of $2.75 per share, all subject to adjustment.
In the course of attempting to consummate the purchase, Cerx incurred
significant expense, including paying past due bills and taxes of
E.V.A. Limited, before determining in late December 1996 to
discontinue any attempt to complete the purchase and to write off
related expenses. Cerx terminated the Exchange Agreement due to
numerous breaches thereof by EVA and the EVA shareholders and
breaches and failures of representations and warranties contained in the
agreement, and due to the termination by the casino owner of the
casino lease under which EVA claimed to operate the casino and the
owner's re-entry, which ended any purported casino operations by
EVA. This acquisition was not consummated and management has
treated all related expenses as having been incurred in connection with
its attempt to complete the acquisition of EVA.
In connection with its attempts to acquire Casino PLC and EVA,
the Company charged an aggregate of $37,593 and $154,427 in cash
advances, legal fees and travel costs to operations, respectively, during
the years ended December 31, 1997 and 1996.
Plan of Operation
Cerx's plan of operation for the next twelve months is set forth
above under Item 1 (Description of Business).
Item 7. FINANCIAL STATEMENTS.
See index to financial statements at page 16. The financial
statements begin following that index. No supplementary financial data
is required.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
Not applicable.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
Directors are elected for one-year terms or until the next annual
meeting of shareholders and until their successors are duly elected and
qualified. Officers continue in office at the pleasure of the Board of
Directors. The following table sets forth the name, age, position held
and tenure of each director and executive officer:
Name Age Position Held and Tenure
John D. Brasher Jr. 46 President, Chief Executive
Officer, Director, Chairman
of the Board, Secretary, since
April 4, 1989
Johnny D. Brasher 71 Senior Vice-President,
Director since April 10, 1989.
Johnny D. Brasher is the father of John D. Brasher Jr. Otherwise
there are no family relationships among the officers and directors.
There is no arrangement or understanding between the Company (or
any of its directors or officers) and any other person pursuant to which
such person was or is to be selected as a director or officer. The
directors and officers are expected to devote their time to the Com-
pany's affairs on an "as needed" basis, but are not required to make
any specific portion of their time available to the Company.
Biographical Information
JOHN D. BRASHER JR. Mr. Brasher is an attorney engaged
since February 1988 in the practice of law in Denver, Colorado, as
proprietor of Brasher & Company and concentrates in the fields of
corporate and securities law. From February 1987 to February 1988
he practiced law as a profit-sharing partner in the firm of Pred and
Miller, Denver, Colorado, concentrating in corporate and securities
law. From August 1982 until February 1987, Mr. Brasher practiced
corporate and securities law as an associate and later as a partner of
Broadhurst, Brook, Mangham and Hardy, of Lafayette, Louisiana.
Mr. Brasher received a B.A. degree in English in 1979, and in 1982
received a law degree (J.D.), both from Louisiana State University.
He is admitted to practice in the States of Colorado and Louisiana and
is a member of the bar of the United States Supreme Court. Mr.
Brasher also is a director of Renegade Venture (Nev.) Corporation, a
Nevada corporation, and director and chief executive officer of
Cadillac Capital, Inc., a Nevada corporation, Champion Ventures,
Inc., a Nevada corporation, and Rising Sun Capital Ltd., a Colorado
corporation, all companies with a business plan similar to that of the
Company.
JOHNNY D. BRASHER. From 1962 to late 1988, Mr. Brasher
owned and operated Central Construction Company, a sole
proprietorship located in Ferriday, Louisiana, which engaged in the
business of supplying services and equipment to the oil drilling
industry. Since early 1989 he has been semi-retired, engaging in
farming and other business activities in Louisiana.
General Conflicts of Interest
Certain conflicts of interest now exist and will continue to exist
between Cerx and its officers and directors due to the fact that each has
other employment or business interests to which he devotes his
attention. Each officer and director is expected to continue to do so.
See Item 1 (Description of Business) under the caption "Conflicts of
Interest." The officers and directors are accountable to Cerx as
fiduciaries, which means that they are legally obligated to exercise
good faith and integrity in handling Cerx's affairs. Failure by them to
conduct Cerx's business in its best interests may result in liability to
them.
Compliance with Section 16(a)
Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires the Company's executive officers, directors
and persons who beneficially own more than 10% of a class of the
Company's equity securities registered under the Exchange Act to file
reports of ownership and changes in ownership with the Securities and
Exchange Commission. Based solely on a review of the forms it has
received and on representations from certain reporting persons, the
Company believes to the best of its knowledge that, during the year
ended December 31, 1997, all Section 16(a) filing requirements
applicable to its officers, directors and 10% beneficial owners were
complied with by such persons.
Significant Employees
None, other than officers of Cerx listed above.
Item 10. EXECUTIVE COMPENSATION.
Cash Compensation
For the year ended December 31, 1997, no executive officer
received cash compensation.
Compensation Pursuant to Plans
For the year ended December 31, 1997, no executive officer
received compensation pursuant to any plan.
Other Compensation
None.
Compensation of Directors.
No compensation currently is paid or has been paid to any person
for serving as a director of the Company.
Employee Stock Compensation Plan
The Company has adopted the 1994 Employee Stock Compensation
Plan for employees, officers, directors of the Company and advisors
to the Company (the "ESC Plan"). The Company has reserved a
maximum of 5,000,000 Common Shares to be issued upon the grant
of awards under the ESC Plan. Employees will recognize taxable
income upon the grant of Common Stock equal to the fair market value
of the Common Stock on the date of the grant and the Company will
recognize a compensating deduction at such time. The ESC Plan will
be administered by the Board of Directors. An aggregate of 2,012,853
common shares have been awarded under the ESC Plan.
Compensatory Stock Option Plan
The Company has adopted the Compensatory Stock Option Plan for
officers, employees, directors and advisors (the "CSO Plan"). The
Company has reserved a maximum of 5,000,000 Common Shares to
be issued upon the exercise of options granted under the CSO Plan.
The CSO Plan will not qualify as an "incentive stock option" plan
under Section 422 of the Internal Revenue Code of 1986, as amended.
Options will be granted under the CSO Plan at exercise prices to be
determined by the Board of Directors or other CSO Plan administrator.
With respect to options granted pursuant to the CSO Plan, optionees
will not recognize taxable income upon the grant of options granted at
or in excess of fair market value. The Company will be entitled to a
compensating deduction (which it must expense) in an amount equal to
any taxable income realized by an optionee as a result of exercising the
option. The CSO Plan will be administered by the Board of Directors
or a committee of directors.
Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth, as of March 31, 1998, the stock
ownership of each officer and director of the Company, of all officers
and directors of the Company as a group, and of each person known
by the Company to be a beneficial owner of 5% or more of its
Common Stock, $.001 par value per share. Except as otherwise noted,
each person listed below is the sole beneficial owner of the shares and
has sole investment and voting power as such shares. No person listed
below has any option, warrant or other right to acquire additional
securities of the Company, except as may be otherwise noted. The
Company had 5,002,838 common shares issued and outstanding as of
March 31, 1998.
Amount
Name and Address of Common Stock Owned Percent of Common
of Beneficial Owner Beneficially Stock Outstanding
*John D. Brasher, Jr.............. 2,929,853 (1) 57.9%
90 Madison Street
Suite 707
Denver, Colorado 80206
*Johnny D. Brasher................ 250,000 4.9%
P.O. Box 1686
Ferriday, Louisiana 71334
*All directors and executive
executive officers (2 persons)... 3,179,853 62.9%
(1) Mr. Brasher disclaims beneficial ownership as to 85,000
shares held in the name of the Lisa K. Brasher Children's
Trust, of which his wife, Lisa K. Brasher, is the trustee.
Changes in Control
Management of the Company does not anticipate any change of
control in the management of the Company except as may occur in
connection with completing a combination or originating a business.
Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Cerx was indebted to its principal shareholder and President, John
D. Brasher Jr., at December 31, 1997, for cash loans, accrued interest
and expenses advanced. At year end, Cerx owed Mr. Brasher an
aggregate of $97,522 in principal and $8,217 in interest (at 8% simple
interest per annum). Also in 1997, Cerx incurred $38,885 in legal fees
owed to Brasher & Company, a law firm owned by Cerx's President,
John D. Brasher Jr. Prior to year end, Brasher & Company, forgave
$53,343 owed for expenses and legal fees, which the Company treated
as a capital contribution in that amount.
Otherwise, there were no transactions, or series of transactions, for
the year ended December 31, 1997, nor are there any currently
proposed transactions, or series of transactions, to which Cerx is a
party, in which the amount exceeds $60,000, and in which to the
knowledge of Cerx, any director, executive officer, nominee, five
percent or greater shareholder, or any member of the immediate family
of any of the foregoing persons, have or will have any direct or
indirect material interest.
PART IV
Item 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
The following exhibits are either filed with this report or have
previously been filed with the Securities and Exchange Commission
and are incorporated by reference to another report, registration
statement or form. As to any shareholder of record requesting a copy
of this report, the Company will furnish any exhibit indicated in the list
below as filed with this report upon payment to the Company of its
expenses in furnishing the information. References to the "Company"
mean Cerx Venture Corporation.
3.1 Certificate of Incorporation of the Company, as filed
with the Nevada Secretary of State on April 4, 1989,
incorporated by reference to Exhibit 3.1 to
registration statement on Form 10-SB, file
no. 0-25022................................................ 1
3.2 Certificate of Amendment of the Company, as filed with
the Nevada Secretary of State of the State of Nevada
on November 8, 1990, incorporated by reference
to Exhibit 3.2 to registration statement on Form
10-SB, file no. 0-25022 ................................. 1
3.3 Certificate of Amendment of the Company, as filed with
the Nevada Secretary of State on October 26, 1994,
incorporated by reference to Exhibit 3.3 to
registration statement on Form 10-SB, file
no. 0-25022................................................. 1
3.4 Bylaws of the Company as adopted on March 22, 1989,
incorporated by reference to Exhibit 3.4 to
registration statement on Form 10-SB, file
no. 0-25022 ............................................. 1
3.5 Certificate of Increase in Number of Authorized Shares of
Common Stock of the Company, as filed with the Nevada
Secretary of State on July 15, 1996, incorporated by
reference to Exhibit 3.5 to report on Form 8-K dated
July 12, 1996............................................... 1
3.6 Certificate of Amendment of the Company (changing
name to Cerex Entertainment Corporation) as filed with
the Nevada Secretary of State on January 27, 1997,
incorporated by reference to Exhibit 3.1 to report on
Form 8-K dated January 27, 1997.......................... 1
3.7 Certificate of Amendment of the Company (amending
certificate of incorporation in its entirety) as filed
with the Nevada Secretary of State on February 28, 1997,
incorporated by reference to Exhibit 3.2 to report on
Form 8-K dated January 27, 1997.......................... 1
3.8 Certificate of Amendment of the Company (establishing
and designating the Series A, 6.75% Non-Voting
Convertible Preferred Stock of the Company) as filed
with the Nevada Secretary of State on March 12, 1997,
incorporated by reference to Exhibit 3.3 to report on
Form 8-K dated January 27, 1997 ............................ 1
3.9 Certificate of Amendment of the Company (changing
name to Cerx Entertainment Corporation) as filed with
the Nevada Secretary of State on March 19, 1997,
incorporated by reference to Exhibit 3.4 to report on
Form 8-K dated January 27, 1997.......................... 1
3.10 Bylaws of the Company adopted February 20, 1997,
incorporated by reference to Exhibit 3.5 to report on
Form 8-K dated January 27, 1997............................ 1
3.11 Certificate of Amendment of the Company (changing name to
Cerx Venture Corporation) as filed with the Nevada
Secretary of State on March 23, 1998 .................... 2
3.12 Certificate of Amendment of the Company (withdrawing
authorization creating and designating the Series A,
6.75% Nonvoting Convertible Preferred Stock, as filed
with the Nevada Secretary of State on March 23, 1998...... 2
4.1 Specimen common stock certificate of the Company,
incorporated by reference to Exhibit 4.1 to registration
statement on Form 10-SB, file No. 0-25022 ................... 1
10.1 1994 Compensatory Stock Option Plan, incorporated by
reference to Exhibit 10.1 to registration statement of
Form 10-SB, file No. 0-25022 ................................ 1
10.2 1994 Employee Stock Compensation Plan, incorporated by
reference to Exhibit 10.2 to registration statement of
Form 10-SB, file No. 0-25022 ................................ 1
10.3 Amendment to 1994 Compensatory Stock Option Plan of
the Company, incorporated by reference to Exhibit 10.1
to report on Form 8-K dated January 27, 1997 ................ 1
10.4 Option to Purchase granted by E.V.A. Limited in favor of
Casino Casino PLC dated June 26, 1996, incorporated by
reference to Exhibit 10.5 to report on Form 8-K dated
July 12, 1996.............................................. 1
10.5 Management Agreement between E.V.A. Limited and
Casino Casino PLC dated June 26, 1996, incorporated by
reference to Exhibit 10.6 to report on Form 8-K dated
July 12, 1996................................................ 1
10.6 Asset Purchase Agreement between Casino Casino PLC
as seller and the Company as purchaser dated July 12,
1996, incorporated by reference to Exhibit 10.7 to report
on Form 8-K dated July 12, 1996 ............................ 1
10.7 Assignment and Reservation of Rights between Casino
Casino PLC and the Company dated July 12, 1996,
incorporated by reference to Exhibit 10.8 to report on
Form 8-K dated July 12, 1996 ............................ 1
1 - Incorporated by reference to another registration
statement, report or document.
2 - Filed herewith as an exhibit.
(b) Reports on Form 8-K.
None were filed by the Company during the fourth quarter ended
December 31, 1997.
(c) Financial statements and supplementary data.
INDEX TO FINANCIAL STATEMENTS
Independent Auditor's Report....................................... F-1
Balance Sheet as of December 31, 1997................................. F-3
Statements of Operations for years ended
December 31, 1997 and 1996 and for the period
April 4, 1989 (inception) through December 31, 1997................. F-4
Statements of Stockholders' Deficit
for the period April 4, 1989 (inception) through
December 31, 1997................................................ F-5
Statements of Cash Flows for years ended
December 31, 1997 and 1996 and for the period
April 4, 1989 (inception) through December 31, 1997.................. F-7
Notes to Financial Statements..................................... F-8
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Cerx Venture Corporation
Denver, Colorado
I have audited the accompanying balance sheet of Cerx Venture Corporation
(a development stage company) as of December 31, 1997, and the related
statements of operations, changes in stockholders' deficit, and cash flows for
the two years then ended and the 1997 and 1996 amounts included in the
cumulative amounts from April 4, 1989 (inception) through December 31,
1997. These financial statements are the responsibility of the management of
Cerx Venture Corporation. My responsibility is to express an opinion on these
financial statements based on my audit. The financial statements of Cerx
Venture Corporation (a development stage company) for the period from April
4, 1989 (inception) to December 31, 1995, were audited by other auditors
whose opinion, dated February 29, 1996, on those financial statements was
unqualified.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit 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. I believe that my audit provides a reasonable basis
for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cerx Venture Corporation (a
development stage company) as of December 31, 1997, and the results of its
operations and cash flows for the two years then ended and the 1997 and 1996
amounts included in the cumulative amounts from April 4, 1989 (inception) to
December 31, 1997, in conformity with generally accepted accounting
principles.
To the Board of Directors
Cerx Venture Corporation
Page Two
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company's recurring losses and stockholders' deficit
raise substantial doubt about the Company's ability to continue as a going
concern unless the Company obtains future profitable operations and/or
additional financing. Management's plans in regard to these matters are
discussed in Note A. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Stephen M. Siedow,
P.C.
April 6, 1998
Aurora, Colorado
CERX VENTURE CORPORATION
(A Development Stage Company)
Balance Sheet
December 31, 1997
ASSETS
Current assets:
Cash $ 4,609
---------
$ 4,609
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities: (Notes A and F)
Accounts payable $ 139
Advances 74,590
Accrued interest 8,217
Promissory notes to an officer/stockholder 97,522
----------
180,468
Stockholders' deficit: (Notes B, F and G)
Preferred stock; $.001 par value; Series A,
6.75% non-voting convertible preferred;
authorized - 4,000,000 shares; issued - none --
Preferred stock; $.001 par value; authorized -
11,000,000 shares; issued - none --
Common stock; $.001 par value; authorized -
50,000,000 shares; issued and outstanding -
5,002,838 shares 5,003
Additional paid-in capital 220,992
Deficit accumulated during the development stage (401,854)
----------
Total stockholders' deficit (175,859)
----------
$ 4,609
----------
CERX VENTURE CORPORATION
(A Development Stage Company)
Statements of Operations
April 4, 1989
Year Ended December 31, (inception) to
December 31,
1997 1996 1997
----------- ----------- -------------
Costs and expenses: (Notes C, D,
E and F)
Costs related to attempted
business acquisitions $ 37,593 $ 154,427 $ 192,020
General and administrative 40,585 79,002 135,153
Interest 7,744 473 8,217
Offering costs 48,430 -- 66,464
----------- ----------- ------------
Net loss $ (134,352) $ (233,902) $ (401,854)
----------- ------------ ------------
Loss per common share $ (.027) $ (.047)
----------- ------------
Weighted average common shares
outstanding 4,985,440 4,952,838
----------- ------------
CERX VENTURE CORPORATION
(A Development Stage Company)
Statements of Changes in Stockholders' Deficit for the Period
April 4, 1989 (Inception) to December 31, 1997
Deficit
Additional Accumulated
Common Stock Paid-in from
Shares Amount Capital Inception
Balances, April 4, 1989 (inception) -- $ -- $ -- $ --
Common stock issued for cash,
March 29, 1989, at $.006 per share 405,000 405 1,845 --
Common stock issued for cash,
March 29, 1989, at $.012 per share 911,010 911 9,839 --
Common stock issued for cash,
April 3, 1989, at $.012 per share 211,860 212 2,288 --
Common stock issued for cash,
April 7, 1989, at $.006 per share 90,000 90 410 --
Common stock issued for cash,
April 7, 1989, at $.012 per share 127,115 127 1,373 --
Common stock issued for cash,
May 23, 1989, at $.002 per share 175,000 175 175 --
Common stock issued for cash,
May 23, 1989, at $.004 per share 310,000 310 840 --
Common stock issued for cash,
May 31, 1989, at $.002 per share 20,000 20 20 --
Net loss (825)
---------- ------- -------- ---------
Balances, December 31, 1989 2,249,985 2,250 16,790 (825)
Net loss (18,014)
---------- ------- -------- ---------
Balances, December 31, 1990 2,249,985 2,250 16,790 (18,839)
Net loss (59)
---------- ------- -------- ---------
Balances, December 31, 1991 2,249,985 2,250 16,790 (18,898)
Net loss (142)
---------- ------- -------- ---------
Balances, December 31, 1992 2,249,985 2,250 16,790 (19,040)
Net loss --
---------- ------- -------- ---------
Balances, December 31, 1993 2,249,985 $2,250 $16,790 $(19,040)
CERX VENTURE CORPORATION
(A Development Stage Company)
Statements of Changes in Stockholders' Deficit for the Period
April 4, 1989 (Inception) to December 31, 1997 - continued
Deficit
Additional Accumulated
Common Stock Paid-in from
Shares Amount Capital Inception
--------- ------- ---------- ------------
Balances, Forward 2,249,985 $ 2,250 $ 16,790 $ (19,040)
Common stock issued for
out of pocket expenses
incurred, valued at
$.002 per share 740,000 740 740 --
Net loss (1,787)
--------- -------- ---------- -----------
Balances, December 31, 1994 2,989,985 2,990 17,530 (20,827)
Net loss (12,773)
--------- -------- ---------- -----------
Balances, December 31, 1995 2,989,985 2,990 17,530 (33,600)
Common stock issued for out
of pocket expenses incurred,
valued at $.02 per share 123,260 123 2,342 --
Common stock issued pursuant
to an asset purchase
agreement, valued at $.001
per share 1,195,035 1,195 -- --
Recission of common stock
issued pursuant to an asset
purchase agreement, valued
at $.001 per share (1,195,035) (1,195) -- --
Common stock issued for out
of pocket expenses and
legal fees incurred,
valued at $.10 per share 1,839,593 1,840 145,327 --
Net loss (233,902)
---------- -------- --------- ------------
Balances, December 31, 1996 4,952,838 4,953 165,199 (267,502)
Common stock issued for cash,
May 8, 1997, at $.05 per
share 50,000 50 2,450 --
Capital contribution 53,343 --
Net loss (134,352)
---------- -------- ---------- -----------
Balances, December 31, 1997 5,002,838 $ 5,003 $ 220,992 $ (401,854)
CERX VENTURE CORPORATION
(A Development Stage Company)
Statements of Cash Flows
April 4, 1989
Year ended December 31, (inception) to
December 31,
1997 1996 1997
------------ ---------- ------------
Cash flows from operating activities:
Net loss $ (134,352) $ (233,902) $ (401,854)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Capital contribution by an officer/
stockholder 53,343 -- 53,343
Common stock issued for costs
advanced and services -- 149,632 151,112
Changes in assets and liabilities:
Accounts payable 139 -- 139
Accrued interest 7,744 473 8,217
Advances 74,590 -- 74,590
Increase (decrease) in amounts
due to an officer/stockholder (16,164) 3,084 --
---------- ----------- ----------
Net cash used in operating
activities (14,700) (80,713) (114,453)
---------- ----------- ----------
Cash flows from financing activities:
Proceeds from promissory notes 14,500 83,022 97,522
Proceeds from sale of common stock 2,500 -- 21,540
---------- ----------- ----------
Net cash provided by financing
activities 17,000 83,022 119,062
---------- ----------- ---------
Net increase (decrease) in cash 2,300 2,309 4,609
Cash at beginning of year 2,309 -- --
---------- ----------- ---------
Cash at end of year $ 4,609 $ 2,309 $ 4,609
---------- ----------- ---------
Supplemental disclosure of noncash
investing and financing activities:
Capital contribution by an officer/
stockholder $ 53,343 $ -- $ 53,343
--------- ---------- ---------
Common stock issued for services and
costs advanced $ -- $ 149,632 $151,112
--------- ---------- ---------
Interest paid $ -- $ -- $ --
--------- ---------- ---------
Income taxes paid $ -- $ -- $ --
--------- ---------- ---------
Note A - Summary of Significant Accounting Policies
Description of Business
The financial statements presented are those of Cerx Venture Corporation, a
development stage company (the "Company"). The Company was
incorporated on April 4, 1989 under the laws of the State of Nevada. A
majority of the Company's shareholders have approved a change in the
Company's name from Chelsea Atwater, Inc. to Cerex Entertainment
Corporation to Cerx Entertainment Corporation to Cerx Venture Corporation.
The Company's activities to date, have been directed towards the raising of
capital and two attempted business acquisitions (Note C).
As shown in the financial statements, as of December 31, 1997, the Company
had incurred an accumulated deficit of $401,854 and has limited cash. The
Company's continued existence is dependent on its ability to generate
sufficient cash flow to meet its obligations on a timely basis. Accordingly,
the financial statements do not include any adjustments that might be
necessary should the Company be unable to continue in existence. The Company
has been exploring sources to obtain additional equity or debt financing. The
Company has also indicated its intention to participate in one or more as yet
unidentified business ventures, which management will select after reviewing
the business opportunities for their profit or growth potential.
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 reporting 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 period. Actual
results could differ from those estimates.
Fair Value of Financial Instruments
The fair value of the Company's payables, accrued interest and promissory
notes due to an officer/stockholder is not practicable to estimate due to the
related party nature of the underlying transactions and the indefinite payment
terms.
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to reverse. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
statement of operations in the period that includes the enactment date.
Loss Per Common Share
Loss per common share is computed by dividing the net loss by the weighted
average shares outstanding during the period.
Note B - Stockholders' Deficit
Common Stock Transactions
In 1989, the Company sold 2,249,985 shares of common stock to fifteen
persons for the aggregate sum of $19,040. Of these shares, 805,000 common
shares were sold to officers and directors of the Company for $3,900.
On September 21, 1994, the Company issued 740,000 shares of common stock
to John D. Brasher Jr., the Company's principal shareholder and president for
out of pocket expenses paid on behalf of the Company. These shares were
valued at $.002 per share or $1,480.
On January 25, 1996, the Company issued 123,260 shares of common stock
to John D. Brasher Jr., for out of pocket expenses paid on behalf of the
Company. These shares were valued at $.02 per share or $2,465.
On July 12, 1996, the Company's Board of Directors approved a 5 for 1
forward stock split of the Company?s $.001 par value common stock. All
shares and per share amounts have been restated to reflect this forward stock
split.
On December 28, 1996, a majority of the Company's shareholders approved
a restructuring of the Company's authorized capital including (1) a reduction
in the authorized common shares from 250,000,000 to 50,000,000, (2) an
increase in the authorized preferred shares from 5,000,000 to 15,000,000, and
(3) a change in par value to $.001 for both the common and preferred stock.
All shares and per share amounts have been restated to reflect this
restructuring of the Company.
On December 31, 1996, the Company issued 1,839,593 shares of common
stock to John D. Brasher Jr., for Company expenses advanced and legal
services provided by Brasher & Company. These shares were valued at $.08
per share or $147,167.
On May 8, 1997, the Company sold 50,000 shares of common stock to a
corporation for cash. These shares were valued at $.05 per share or $2,500.
On December 30, 1997, Brasher & Company, of which John D. Brasher Jr. is
the sole owner, forgave $53,343 of accrued legal fees and expenses advanced
on behalf of the Company. The Company has recorded this debt forgiveness
as a capital contribution.
Dividends may be paid on outstanding shares as declared by the Board of
Directors. Each share of common stock is entitled to one vote.
Preferred Stock
On February 10, 1997, the Company's Board of Directors designated
4,000,000 shares of the Company's authorized 15,000,000 shares, $.001 par
value, preferred stock as a Series A, 6.75% Non-Voting Convertible Preferred
Stock. The Series A preferred shares are convertible into 5,500,000 common
shares of the Company under certain circumstances. As of December 31,
1997, no shares of the Company's Series A, 6.75% Non-Voting Convertible
Preferred Stock have been issued or are outstanding.
The Company has an additional 11,000,000 preferred shares, $.001 par value,
authorized but undesignated. Dividends, voting rights and other terms, rights
and preferences of these preferred shares have not been designated but may be
designated by the Board of Directors from time to time. As of December 31,
1997, no undesignated preferred shares have been issued or are outstanding.
1994 Compensatory Stock Option Plan
The Company has adopted a compensatory stock option plan (the "CSO
Plan") which allows for the issuance of options to purchase up to 5,000,000
shares of stock to employees, officers, directors and consultants of the
Company. The CSO Plan is not intended to qualify as an "incentive stock
option plan" under Section 422 of the Internal Revenue Code. Options will
be granted under the CSO Plan at exercise prices to be determined by the
Board of Directors or other CSO Plan administrator. The Company will incur
compensation expense to the extent that the market value of the stock at date
of grant exceeds the amount the grantee is required to pay for the options. No
options have been granted under the CSO Plan to date.
1994 Employee Stock Compensation Plan
The Company has adopted an employee stock compensation plan (the ?ESC
Plan?) which allows for the issuance of up to 5,000,000 shares of stock to
employees, officers, directors and consultants of the Company. The Company
will incur compensation expense to the extent the market value of the stock at
date of grant exceeds the amount the employee is required to pay for the stock
(if any). The ESC Plan will be administered by the Board of Directors or a
committee of directors. As of December 31, 1997, the Company has awarded
2,012,853 shares of common stock under the ESC Plan.
Note C - Attempted Business Acquisitions
The Company on July 12, 1996, entered into an Asset Purchase Agreement
("PLC Purchase Agreement") with Casino Casino PLC, a company organized
in the Island of Nevis (British West Indies) under Section 4(6) of the Nevis
Business Corporation Ordinance 1984, as amended ("Casino PLC"). Pursuant
to the Purchase Agreement, Casino PLC assigned to the Company certain
rights which Casino PLC held under an Option to Purchase and that certain
Management Agreement, both dated June 26, 1996, between Casino PLC and
E. V. A. LIMITED, a limited liability company organized in St. Vincent and
the Grenadines (British West Indies) under the provisions of the Companies
Act, Chapter 219 ("EVA"). The PLC Purchase Agreement called for the
issuance and delivery to the shareholders of Casino PLC an aggregate of
1,195,035 shares of the Company's common stock, $.001 par value per share
(the "PLC Shares") and options ("the PLC Options") to purchase an
aggregate of 4,500,000 shares of the Company's stock (the "PLC Option
Shares"). The Company and Casino PLC executed an Assignment and
Reservation of Rights which purported to assign to the Company all Casino
PLC rights, except for Casino PLC's reservation of a revenue interest. The
PLC Shares were issued and delivered to Casino PLC, but the PLC Options
never were issued or delivered. The Company reported in a report on Form 8-K
dated July 12, 1996, that it had consummated the PLC Purchase Agreement,
but the Company believes for several reasons that such agreement in fact never
was consummated. Certain deliveries required of Casino PLC were not made,
and the PLC Options never were issued or delivered by the Company, among
other things. The Company cancelled the PLC Purchase Agreement and all
related transactions and cancelled all of the PLC Shares on its stock transfer
books for breaches of that agreement by Casino PLC.
The Company executed an Exchange Agreement dated September 30, 1996,
later amended, among the Company, E. V. A. LIMITED, a St. Vincent and the
Grenadines company ("EVA"), and the shareholders or members of EVA,
pursuant to which the Company agreed among other things and subject to
certain terms and conditions to purchase all of the issued and outstanding
common shares of EVA. The agreement called for the Company to pay and
issue to the EVA shareholders in exchange an aggregate of $200,000 in cash
represented by promissory notes payable over several years, 500,000 shares of
the Company's stock and warrants for the purchase of an additional 500,000
shares of the Company's stock at a price of $2.75 per share, all subject to
adjustment. The Company terminated the Exchange Agreement in December,
1996 due to numerous violations of that agreement and breaches or failures of
representations and warranties contained in the agreement, and due to the
termination by the casino owner of the casino lease under which EVA claimed
to operate the casino due to numerous alleged breaches of that lease. Neither
the promissory notes, stock or warrants called for in the Exchange Agreement
were issued or delivered.
The Company was unsuccessful in these attempted business acquisitions and,
therefore, cash advances, legal fees and travel costs in the amounts of
$37,593 and $154,427 were charged to operations during the years ended
December 31, 1997 and 1996.
Note D - Private Offering
The Company was unsuccessful in making a private offering of its Series A,
6.75% Non-Voting Convertible Preferred Stock and, therefore, offering costs
in the amount of $48,430 were charged to operations during the year ended
December 31, 1997.
Note E - Income Taxes
There is no provision for income taxes since the Company has incurred net
operating losses.
Income taxes at the federal statutory rate is reconciled to the Company's
actual income taxes as follows:
December 31,
1997 1996
---------- -----------
Federal income tax benefit at statutory rate $ (35,647) $ (74,472)
State income tax benefit net of federal tax effect -- --
Non deductible expenses 7,086 39,125
Other 1,018 12,061
Deferred income tax valuation allowance 27,543 23,286
---------- -----------
$ -- $ --
---------- -----------
The Company's deferred tax assets are as follows:
Accrued expenses $ 2,512 $ 4,124
Net operating loss carryforward 58,301 25,095
Valuation allowance (60,813) (29,219)
---------- -----------
$ -- $ --
---------- -----------
At December 31, 1997, the Company has net operating loss carryforwards of
$190,662 which may be available to offset future taxable income through
2012.
Note F - Related Party Transactions
On January 25, 1996, the Company issued 123,260 shares of common stock
to John D. Brasher Jr., the Company's principal shareholder and president for
out of pocket expenses paid on behalf of the Company. These shares were
valued at $.02 per share or $2,465.
On December 31, 1996, the Company issued 1,839,593 shares of common
stock to John D. Brasher Jr., for Company expenses advanced and legal
services provided by Brasher & Company. These shares were valued at $.08
per share or $147,167.
On December 31, 1997, the Company owed John D. Brasher Jr. an aggregate
of $97,522 in demand promissory notes and $8,217 of accrued interest (8%
simple interest per annum) for cash loans and expenses advanced on behalf of
the Company.
The law firm of Brasher & Company has provided legal services and advanced
expenses on behalf of the Company in the amounts of $38,885 and $151,808
for the years ended December 31, 1997 and 1996.
On December 30, 1997, Brasher & Company forgave $53,343 of accrued legal
fees and expenses advanced on behalf of the Company. The Company has
recorded this debt forgiveness as a capital contribution.
The Company utilized office space provided by Brasher & Company at no
charge during the years ended December 31, 1997 and 1996.
Note G - Subsequent Events
On March 13, 1998, John D. Brasher Jr., the Company's president and major
shareholder, advanced $30,000 to the Company and these funds were
subsequently used to partially repay the $74,590 of advances.
On March 20, 1998, a majority of the Company's shareholder's approved a
change in the name of the Company from Cerx Entertainment Corporation to
Cerx Venture Corporation.
On March 31, 1998, the Company's Board of Directors approved the
withdrawal of the Company's designation of 4,000,000 shares of preferred
stock as Series A, 6.75% Non-Voting Convertible Preferred Stock, returning
such shares to the status of undesignated preferred shares.
SIGNATURES
In accordance with section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant caused this Report on Form 10-KSB to be signed on
its behalf by the undersigned, thereto duly authorized individual.
Date: April 10, 1998
CERX VENTURE CORPORATION
/s/ John D. Brasher Jr.
By..........................................
John D. Brasher Jr., President and
Chief Executive Officer
In accordance with the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Title Date
/s/ John D. Brasher Jr.
.................................. President, Chief Executive 04/10/98
John D. Brasher Jr. Officer, Chief Financial
Officer, Director
/s/ Johnny D. Brasher
.................................. Vice President, Director 04/10/98
Johnny D. Brasher
Exhibit 3.11 to Form 10-KSB of Cerx Venture Corporation for YE 12/31/97
CERTIFICATE OF AMENDMENT
to
CERTIFICATE OF INCORPORATION
of
CERX ENTERTAINMENT CORPORATION
(A Nevada Corporation)
CERX ENTERTAINMENT CORPORATION, a corporation
organized and existing under and by virtue of the General Corporation
Law of Nevada, DOES HEREBY CERTIFY THAT:
A. The Board of Directors of this corporation by the
unanimous written consent of its members, filed with the minutes of the
Board, duly adopted a resolution setting forth a proposed amendment to
the Certificate of Incorporation of the corporation to change the name of
the corporation from CERX ENTERTAINMENT CORPORATION to
CERX VENTURE CORPORATION, declaring such amendment to be
advisable and directing that the proposal be placed before the
shareholders of the corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that Article I (Name and Duration) of the
Certificate of Incorporation of this corporation be amended to provide as
follows:
"FIRST. The name of this corporation is CERX
VENTURE CORPORATION."
B. Other than the change of the corporation's name, there
are no amendments to the Certificate of Incorporation.
C. Pursuant to resolution of the corporation's Board of
Directors, the foregoing Certificate of Amendment was duly approved
by affirmative vote of the holders of a majority of the Corporation's
5,052,838 shares of capital stock outstanding and entitled to vote on the
proposed amendment, and therefore sufficient for approval, all in
accordance with the General Corporation Law of Nevada and the existing
Certificate of Incorporation and bylaws of the Corporation.
D. This amendment was duly adopted in accordance with
the provisions of Section 78.390 of the General Corporation Law of
Nevada.
IN WITNESS WHEREOF, CERX ENTERTAINMENT
CORPORATION has caused this Certificate of Amendment to be signed
by its President, and attested by its Assistant Secretary, as of the date
below.
DATED: March 20, 1998 CERX ENTERTAINMENT CORPORATION
/s/ John D. Brasher Jr.
By..........................................
John D. Brasher Jr.,
President, Chief Exec. Officer
/s/ Elisabeth M. Crosse
By..............................................
Elisabeth M. Crosse, Assistant Secretary
ACKNOWLEDGMENTS
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I HEREBY CERTIFY that before me, a Notary Public duly
commissioned and qualified in and for the above jurisdiction, personally
came and appeared John D. Brasher Jr., the President and Chief
Executive Officer of CERX ENTERTAINMENT CORPORATION, who
after being duly sworn declared that he executed the foregoing Certificate
of Amendment as his free act and deed and that the statements therein set
forth are true and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and
seal on March 20, 1998.
/s/ Jennifer S. Myers
................................ My
NOTARY PUBLIC Commission October 22, 2001
Expires___________________________
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I HEREBY CERTIFY that before me, a Notary Public duly
commissioned and qualified in and for the above jurisdiction, personally
came and appeared ELISABETH M. CROSSE, the Assistant Secretary
of CERX ENTERTAINMENT CORPORATION, who after being duly
sworn declared that he executed the foregoing Certificate of Amendment
as his free act and deed and that the statements therein set forth are true
and correct.
IN WITNESS WHEREOF, I have hereunto set my hand and
seal on March 20, 1998.
/s/ Jennifer S. Myers
.................................... My
NOTARY PUBLIC Commission October 22, 2001
Expires___________________________
Exhibit 3.12 to Form 10-KSB of Cerx Venture Corporation for YE 12/31/97
C E R X V E N T U R E C O R P O R A T I O N
CERTIFICATE OF AMENDMENT
to
ARTICLES OF INCORPORATION
of
CERX VENTURE CORPORATION
CERX VENTURE CORPORATION, a corporation organized
on April 4, 1989, and existing under and by virtue of the Nevada
General Corporation Law, does hereby certify that:
A. The name of the corporation is CERX VENTURE
CORPORATION.
B. Under authority of Section 78.195 of the Nevada
General Corporation Law, Article FIFTH, Part I of the Certificate
of Amendment to the Corporation's Certificate of Incorporation
expressly vests authority in the Board of Directors to prescribe the
series, number of each series, voting powers, designations,
preferences, limitations, restrictions and relative rights of the
Corporation's preferred shares, without shareholder approval.
C. The Board of Directors of the Corporation, by the
unanimous written consent of its members taken on February 20,
1997, pursuant to Section 78.315 of the Nevada General Corporation
Law, duly adopted a resolution setting forth an amendment to the
Certificate of Incorporation of the Corporation designating and
establishing a series of preferred stock consisting of 4,000,000
preferred shares known as the "SERIES A, 6.75% NON-VOTING
CONVERTIBLE PREFERRED STOCK".
D. The Corporation on March 12, 1997, filed with the
Nevada Secretary of State a Certificate of Amendment to its
Certificate of Incorporation for the purpose of establishing and
designating such series of preferred stock, as required by Section
78.1955 of the Nevada General Corporation Law.
E. No shares of the Series A, 6.75% Non-Voting
Convertible Preferred Stock have been issued or sold or committed
for issuance on any basis, nor is it intended by the Corporation that
any shares of such series will be sold or issued. Accordingly, the
Board of Directors has the power to withdraw its designation of
4,000,000 shares of preferred stock as the Series A, 6.75% Non-Voting
Convertible Preferred Stock, returning such shares to the
status of undesignated preferred shares.
F. A copy of the "Resolution of the Board of Directors
Withdrawing Designation of a Series of Shares of Preferred Stock of
CERX VENTURE CORPORATION" dated as of March 31, 1998,
withdrawing the February 20, 1997, designation of 4,000,000 shares
of preferred stock as the Series A, 6.75% Non-Voting Convertible
Preferred Stock and returning such 4,000,000 shares to the status of
undesignated preferred shares, is attached hereto as EXHIBIT A and
is incorporated by reference in this document as if fully set forth
herein.
G. No approval of the corporation's shareholders is
necessary in regard to this amendment or its filing with the Nevada
Secretary of State.
IN WITNESS WHEREOF, the undersigned President and
Assistant Secretary of the Corporation have executed this Certificate
of Amendment as of the date below.
DATED: March 31, 1998
CERX VENTURE CORPORATION
/s/ John D. Brasher Jr.
(SEAL) By.................................
John D. Brasher Jr.,
President
ATTEST:
/s/ Elisabeth M. Crosse
X..........................................
Elisabeth M. Crosse, Asst. Secretary
ACKNOWLEDGEMENT
STATE OF COLORADO )
) ss.
COUNTY OF DENVER )
I HEREBY CERTIFY that before me, the undersigned Notary Public,
duly qualified and commissioned in and for the above jurisdiction,
personally came and appeared John D. Brasher Jr., President of CERX
VENTURE CORPORATION, a Nevada corporation, who acknowledged that he
signed the foregoing document and that the statements therein
contained are true and correct.
SWORN TO AND SUBSCRIBED before me on March 31, 1998.
/s/ Jennifer S. Myers
X................................ My Commission Expires: October 22, 2001
Notary Public
<TABLE> <S> <C>
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-KSB FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-KSB.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
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<CURRENT-ASSETS> 4,609
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