UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year endedDecember 31, 2008
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No.333-130937
EWRX INTERNET SYSTEMS, INC.
(Name of small business issuer in its charter)
| NEVADA | 98-0117139 |
| (State or other jurisdiction of | (IRS Employer Identification No.) |
| incorporation or organization) | |
| 4950 Yonge St. Suite 910, Toronto, | M2N 6K1 |
| Ontario, Canada | |
| (Address of principal executive offices) | (Zip Code) |
(416) 298-9606
(Registrant’s telephone number, including area code)
Securities registered under Section 12(b) of the Exchange Act:
| Title of each class registered: | Name of each exchange on which registered: |
| None | None |
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, 100,000,000, par value $0.001
Preferred Stock, 500,000, par value $0.01
(Title of class)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes [ ] No [X]
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information
statements incorporated by reference Part III of this Form 10-K or any amendment to this Form 10-K. [X]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act.
| Large accelerated filer [ ] | Accelerated filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting company [X] |
| (Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
As of March 27, 2009, the registrant had 100,000,000 shares of its common stock outstanding.
Documents Incorporated by Reference: None.
TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
a) Business Development
EWRX Internet Systems Inc. (the “Company,” “Registrant” or “ EWRX”) was incorporated in the State of Nevada on June 25, 1997. The Common Stock of the Company traded on the OTC Bulletin Board (“OTCBB”) under the trading symbol “EWRX” until October 18, 1999 when they traded under the symbol “EWRXE.” The “E” was added by the National Association of Securities Dealers Inc. (“NASD”) to reflect the Company’s inability to meet NASD requirements for listing on the OTCBB. OnNovember 17, 1999, the Company’s stock began trading on the “pink sheets” under the symbol “EWRX.” Prior to 1999, the Company’s sole business was in the Resource Sector. The Company was known as Europa Resources Inc and was held in a joint venture with a private Ukraine company whose primary business purpose was the development and production of industrial garnets for abrasive applications (the “Joint Venture”).
In the fourth quarter of 1998, the Company elected to abandon the Joint Venture which represented substantially all of the Company’s assets at the time. EWRX was able to recover 2,000,000 shares it used as part of the purchase arrangement for the Joint Venture and subsequently wrote off and closed all of its’ subsidiary operations.
Effective January 27, 2000, the Company re-listed its common stock on the OTCBB, following clearance of its form 10-SB by the SEC (see Exhibit 15 websitelink). This listing was revoked by the SEC by an Administrative Order dated August 28, 2006.
EWRX now wishes to re-list its Company and has commissioned an audit of the Company’s books and records. This audit is effective through December 31, 2008. EWRX is in compliance with the requirements of registration in the State of Nevada. The Corporate Number (EWRX) in Nevada is; C13672-97, EWRX has arranged for local representation through an approved agent by the name of; “Corporate Trust Company of Nevada”, 6100 Neil Road (STE500), Reno, NV 89511.
The current management acquired EWRX through EWRX’s interest in acquisition of software owned by Navitex Canada Inc. (“Navitex”). In the latter part of April 2002, the principles of EWRX suggested that Navitex Canada Inc. became the majority shareholders of EWRX through the issuance of shares for consideration of debt owed to Navitex under an agreement to purchase software called Instant Recall and owned by Navitex. As a result of this agreement, the current management took over the controlling interest of EWRX.
The Company had accumulated a very large outstanding debt and had no tangible assets, other than the software it had acquired from Navitex. The new management focused the majority of its efforts on reducing the Company’s outstanding debt which contributed to a delay in bringing the software to market and the Company’s records up to date. By the Spring of 2005, the Company was finally stabilized and in a position to move ahead with its plans to market it’s software and begin bringing its financial statements up to date and preparing for anticipated demand for its software.
As a result of development in the marketplace it became necessary for the Company to spend a very considerable amount of time bringing its software to the next stage of development. The SATA mother boards were becoming a market consideration and to remain abreast of the competition we were required to develop our software to meet this demand. This of course took time away from other considerations and delayed our market penetration.
In the early part of 2006, the Company was able to bring its operations into a current state and commission an audit of its affairs. The result of these audits was the filings the Company made on December 5, 2006. This filing was later withdrawn as it was filed in form 10SB-12(b) instead of 10SB-12(g). Several other deficiencies in this filing were noted as well, which required correction. The Company re-filed its 10SB-12(g) on May 11, 2007. The SEC reviewed the Form 10SB-12(g) and, pursuant to comments, we filed three subsequent amendments. After our third Amendment to the Form 10SB-12(g) filed on February 8, 2008, the SEC had no additional comments.
In April 2006, without the Company’s knowledge, iMusic contacted our transfer agent and registered new directors, officers and a transfer agent for EWRX. iMusic is a company that fraudulently attempted to steal our identity. They were unsuccessful and when the management of EWRX became aware of iMusic actions the SEC was notified and advised that these actions were without the Company’s knowledge or approval. While investigating this matter, EWRX’s transfer agent was contacted. It was discovered that the agent knew of the iMusic action but did not advise anyone at the Company. The State of Nevada was contacted as well. It was at this time that management discovered that iMusic perpetrated this fraud.
On July 26, 2006 the Commission announced the temporary suspension of the Companies Securities. This notice was sent to the Company by the Commission. The Company never received this notice. By the time the Company became aware of this action, the Commission had issued on August 28, 2006 an order revoking EWRX Internet Systems Inc. registration.
EWRX has not been involved in any bankruptcy, receivership or similar proceeding. In addition, other than the transactions discussed above, EWRX has not had any material reclassification, merger, consolidation, or purchase or sale of a significant amount of assets not in the ordinary course of business.
(b) Business of Issuer
EWRX is a development stage company in the software development and marketing industry. The Company has been in negotiations with Navitex Canada Inc. (“Navitex”) to acquire the software developed under the trade name “Flashback.” In November 2001, EWRX began negotiations with Navitex to acquire the software developed by Navitex for recovery and restoration of lost and or corrupted files on computers with Windows operating systems. These negotiations culminated in a contract for the purchase being signed on November 08, 2001 (see Exhibit 5). The financial terms of the agreement could not be met by EWRX and as a result there were several revisions and changes to the original agreement. On or about April 15, 2002, the then-Board of Directors proposed that to settle the Navitex debt and avoid any legal action by Navitex that an accommodation be made giving Navitex shareholders control of EWRX in settlement of any responsibility to Navitex.
The offer was accepted by the shareholders of Navitex, who took over the operational control of the Company. Navitex negotiated another contract with EWRX for software formerly called Flashback but now called “Instant Recall.” This software will help EWRX establish a sales and marketing team in the industry. EWRX is also negotiating for proven software in the educational resource sector. If successful, this would be a very desirable development for the Company as well. While EWRX is a relative newcomer to this industry, management believes that with the right product and the support of an experienced group in the distribution and sales fields, the Company will be able to penetrate the marketplace. The industry is receptive to “proven” new products and where the product has unique features, it has an interest in testing the product to prove the potential.
The limited business operations of the Company, currently involve its development of the software market for the product Instant Recall and the further opportunities that may present themselves in this business sector. The only other activity to be conducted by the Company is to maintain its good standing in the State of Nevada and to seek out and investigate the acquisition of any viable business opportunity by purchase and exchange for securities of the Company or pursuant to a reorganization or merger through which securities of the Company will be issued or exchanged.
(1). Principle Products and Services
The Company holds the rights to “Instant Recall” a software product designed for security of the operating system of computers. The major features of the product are the ability to recover data that may have been lost or corrupted and the speed at which it can do so. It is designed to operate on Windows operating systems from Windows 95 to and including Windows XP. The product has been in a constant state of development and innovation since it was acquired by the Company. The most recent is the refinement for the SATA drives that have become so popular in the OEM markets. “Instant Recall” is a unique and essential piece of software for the OEM manufacturers. It uses a very limited amount of space on the hard drive, is fast and it protects the computer from “crashing.”
Instant Recall is a Windows® -based operating system recovery and restore program that allows the user to restore the computer to the position before a problem was encountered. It does not require a second hard disk or external backup device. It does not consume extra space on the same hard drive. Instant Recall protects against crashes, mistakes and virus attacks by restoring the operating system, all application programs, critical files and data. This is done in less than a minute. It offers a much different approach to fix a computer’s problems. Even when the operating system is down and not bootable, Instant Recall can still run and restore. Instant Recall does not require a second hard disk or external backup device and also does not consume extra space on the same hard drive and it minimizes the impact of the hard disk when hit by viruses and also restores the hard disk to the previous stage prior to the virus attack (provided that the save copy is virus free). Any infection or non-physical damage to the hard disk is reversed by Instant Recall.
Instant Recall is great for publicly used computers such as schools, libraries and internet cafes. It is also suitable for government agencies and small to large corporate users where all users use their PCs as workstations that run from a network and store data on servers.
For example, in a library or a school, if one or more users corrupted the system, it is difficult to clean up and restore to a perfectly running status. But with Instant Recall, it will only take a few seconds to retrieve the systems and the data back to a clean system.
Another example would be in a business environment; if a PC is down (an almost daily occurrence), it would usually take an IT person hours to repair. As a result, this downtime can end up being very costly to the company. With Instant Recall, the staff or the IT person can fix it within seconds.
The market for “Instant Recall” is primarily the OEM and related industries. Although a substantial after market exists, it is more costly to penetrate and less structured. The Company, however, believes that it may be worthwhile to enter either or both of the retail and consumer market places.
(2). Distribution methods of the products or services
In the OEM markets, the Company’s product is distributed by courier service or overland freight. The product is not subject to any weather or other related concerns, is light and very durable once packed in a bulk container or shipping box. Orders are processed at the point of manufacture and are shipped direct to the end user.
(3). Status of any publicly announced new product or services
The Company has not announced any new product of service.
(4). Competitive business conditions and the small business issuer’s competitive position in the industry and methods of competition
While the software industry is a very large and well developed industry and dominated by multi-national players, the niche markets are still very much open to new players. Software that meets specific requirements and has certain unique features is sought after by manufacturers and others looking for a competitive advantage. “Instant Recall” can fill that requirement and remain competitive in the retail marketplace. The Company is continuing to monitor the competition and its overall position therein, with an eye to capitalizing on any available opportunity.
(5). Sources of availability of raw materials and the names of principal suppliers
The Company does not have and its business does not rely on raw materials. The Company does not have any sources or contacts that provide raw materials.
(6). Dependence on one or a few major customers
The Company has not established a customer base at this time except for the contacts available to it from the continuance of business developed by Navitex Canada Inc. These contacts will need to be nurtured and established by personal contact and sales by EWRX personnel. The Company will be dependent upon the goodwill currently developed by Navitex and the skill and determination of it’s sales staff for its entry into the market and no assurance can be asserted that EWRX will be successful in the development of that business.
(7). Patents, Trademarks, licenses, franchises, concession, royalty agreements or labor contract, including duration
The company intends to apply for patents on its software product “ Instant Recall” in the near future.
8). Need for any governmental approval of principal products or services
There is no need for any governmental approval of the Company’s products or services.
(9). Effect of existing or probable governmental regulations on the business
There are currently no governmental regulations on the business.
(10). Estimate of the amount spent during each of the last two fiscal years on research and development activities, and if applicable the extent to which the cost of such activities are borne directly by customers
While most of the cost of research for “Instant Recall” was expended in previous years by Navitex, the Company has continued to support the requirement to remain in a competitive position. These expenditures were supported by one of the principles and as such were not reported as research and development. These expenditures amounted to approximately $25,000.00 per annum.
(11). Costs and effects of compliance with environmental laws (federal, state and local)
The Company has not incurred any costs associated with compliance with environmental laws and does not expect to have any costs related to environmental laws. The product carries no risk to the public and has no environmental consequences. Management does not therefore anticipate any interference with its activities from this standpoint.
(12). Number of total employees and number of full time employees
The Company does not have any paid employees at this time.
We do not need government approval for our principal products or services.
The Company has no property or business. Its principal executive office address is the business office address of its accountant and Venture Strategists. This address is provided to the Company at no cost. Because the Company has no business, its activities have been limited to maintaining it’s standing in the State of Nevada and, recently, with preparing this Registration Statement and the accompanying financial statements. These activities have consumed the majority of management’s time. Accordingly, the costs in providing the use of its office have been minimal.
Once EWRX has sufficient cash flow to justify hiring full or part time staff, it will seek a permanent office location to conduct its business activities.
ITEM 1A. RISK FACTORS
Not applicable because we are a smaller reporting company.
ITEM 2. PROPERTIES
The Company has no property or business. Its principal executive office address is the business office address of its accountant and Venture Strategists. This address is provided to the Company at no cost. Because the Company has no business, its activities have been limited to maintaining it’s standing in the State of Nevada and, recently, with preparing this Registration Statement and the accompanying financial statements. These activities have consumed the majority of management’s time. Accordingly, the costs in providing the use of its office have been minimal.
Once EWRX has sufficient cash flow to justify hiring full or part time staff, it will seek a permanent office location to conduct its business activities
ITEM 3. LEGAL PROCEEDINGS
There are no pending legal proceedings to which the Company is a party or in which any director, officer or affiliate of the Company, any owner of record or beneficially of more than 5% of any class of voting securities of the Company, or security holder is a party adverse to the Company or has a material interest adverse to the Company. The Company’s property is not the subject of any pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Public Market for Common Stock
During the year ended December 31, 2008, there was no trading market for our Common Stock.
The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
Holders
As of December 31, 2008, 100,000,000 shares of common stock are issued and outstanding. There are approximately 134 shareholders of our common stock and each shareholder of our common stock is entitled to one vote for each share on all matters submitted to a stockholder vote.
Holders of common stock do not have cumulative voting rights.
Therefore, holders of a majority of the shares of common stock voting for the election of directors can elect all of the directors. Holders of our common stock representing a majority of the voting power of our capital stock issued and outstanding and entitled to vote, represented in person or by proxy, are necessary to constitute a quorum at any meeting of our stockholders. A vote by the holders of a majority of our outstanding shares is required to effectuate certain fundamental corporate changes such as liquidation, merger or an amendment to our Articles of Incorporation.
Although there are no provisions in our charter or by-laws that may delay, defer or prevent a change in control, we are authorized, without shareholder approval, to issue shares of preferred stock that may contain rights or restrictions that could have this effect.
Holders of common stock are entitled to share in all dividends that the board of directors, in its discretion, declares from legally available funds. In the event of liquidation, dissolution or winding up, each outstanding share entitles its holder to participate pro rata in all assets that remain after payment of liabilities and after providing for each class of stock, if any, having preference over the common stock. Holders of our common stock have no pre-emptive rights, no conversion rights and there are no redemption provisions applicable to our common stock.
Dividends
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock, when issued pursuant to this offering. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future.
Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
Recent Sales of Unregistered Securities
None
Equity Compensation Plan Information
The following table sets forth certain information as of March 27, 2009, with respect to compensation plans under which our equity securities are authorized for issuance:
| (a) | (b) | (c) | |||||||
| Number of securities to be | Weighted-average exercise | Number of securities remaining | |||||||
| issued upon exercise of | price of outstanding options, | available for future issuance | |||||||
| under | |||||||||
| outstanding options, warrants | warrants and rights | equity compensation plans | |||||||
| and rights | (excluding securities reflected in | ||||||||
| column (a)) | |||||||||
| Equity compensation Plans approved by Security holders | None | ||||||||
| Equity compensation Plans not approved By security holders Total | None |
ITEM 6. SELECTED FIANANCIAL DATA
Not applicable because we are a smaller reporting company.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this Form 10-K. The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.
(a) Plan of Operation
Over the next 12 to 15 months, the Company plans to develop the marketing of their software “Instant Recall” to the OEM markets in North America. The Company has developed significant interest in its product to date and intends to capitalize on that interest, while exploring new and expanded opportunities. The Company has also developed substantial business contacts and relationships in China. Several complimentary products and opportunities exist in this market that would be of interest to EWRX in its pursuit of developing an expanded line of software products to round out its product line.
Although, the Company will be in need of financing to carry out its plan of operation, it intends to raise the capital needed to accomplish its business plan from interested parties, management and existing shareholders. While raising capital is always subject to many uncertainties, we believe that, with the demand anticipated for our product, financing will be available to meet our requirements. It is not anticipated that we will have to invest any further significant funds, or support any substantial funding on research or development for Instant Recall. The Company operations do not require manufacturing of any kind and therefore we do not anticipate any need to purchase equipment of any significance.
Our need for any change in staffing is not anticipated for the immediate future. We will however require some paid and full time staff as the marketing and sales efforts begin to take shape. It is expected that clerical and office personnel will be required after the first quarter of 2009. We will, as required, employ a senior sales person to respond to clients requirements for service. Other sales and marketing personnel will be acquired as the sales dictate.
(b) Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The Company has been in a state of reorganization and development over the past two years. We believe that this period was important to the business operations because it provided time for consolidation and integration into the market. The Company continues to experience financial deficiencies that have been a source of constant concern over this and previous periods in its operations. As a result the Company has been unable to reach some of the goals that had been set for its development.
The Company believes it is now in a position to begin to capitalize on its previous experience. We are looking forward to a very productive and stimulating period of development. Not only do we have great expectations for our product Instant Recall, but also for the prospects of additional software and other business developments from our contacts in Hong Kong and China. These relationships will also help the Company address its financial goals and objectives, both from an earnings standpoint as well as from an investment standpoint.
The Company has over the last several months, successfully established relationships as anticipated above) with Chinese Business leaders in major corporations. These contacts have product and technology of interest to EWRX. In addition, they may also have the financial ability to assist EWRX in its requirements. It is anticipated that we will be in a position to determine the extent to which these developments will affect EWRX by the early part of 2009.
We are looking forward to these discussions and the business relationships that they represent, both from a financial as well as a technological standpoint.
The marketplace is in a state of flux, and, continues to require constant evaluation in terms of opportunity and reward because needs change and competition for the opportunity is always present. Over the last two years, the Company has been consolidating its business operations, developing its software and preparing for the opportunities that it believes are now present. The global markets are expanding at an unprecedented pace and the Company believes that it is in the right place at the right time to take advantage of these conditions. Of course there are always uncertainties and unexpected developments to contend with, and there can be no assurance that the Company will be able to overcome all of the circumstances confronting it. The Company will, however, do everything possible to meet these challenges and realize its goals. EWRX financial requirements over the next fiscal year are dependent, to a major extent, on the speed at which development occurs in the emerging markets. We will continue to monitor this situation closely. As our situation matures, the requirements will become clearer.
REASON FOR MANAGEMENT PROCEEDING WITH ITS EFFORTS TO REGISTER UNDER THE EXCHANGE ACT AND ESTIMATE OF COST OF COMPLIANCE
The Management and Board of Directors of EWRX desires to register EWRX under the Exchange act because they intend to use this status to attract certain business enterprises and for potential investment and capital raising purposes. Unfortunately, EWRX has been hampered in its attempt to become compliant due to the circumstances that the Company has found itself in over the past 18 months.
EWRX estimates that it will incur approximately $35,000 to $50,000 per annum to remain compliant. Most recently, these costs have been borne by the principles and Management will continue to do so until such time as the Company is in a position to carry that responsibility through sales of its products and services or funding from investment.
Liquidity and Capital Resources
Our primary source of liquidity as of December 31, 2008 is our cash on hand. Our cash on hand as of December 31, 2008 was $2,700. Our current assets totaled $2,700 on December 31, 2008. Our current liabilities were $284,575 on December 31, 2008.
We will continue to evaluate alternative sources of capital to meet our requirements, including other asset or debt financing, issuing equity securities and entering into financing arrangements. There can be no assurance, however, that any of the contemplated financing arrangements described herein will be available and, if available, can be obtained on terms favorable to us.
We currently do not have enough cash to satisfy our minimum cash requirements for the next twelve months. We are going to rely on loans from our officers and directors to meet the short term cash requirements. However, the present state of our liquidity and capital resources raises substantial doubt about our ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.
Critical Accounting Policies
Our significant accounting policies are summarized in Note 1 of our financial statements included in this annual report on Form 10-K for the year ended December 31, 2008. Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and
underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.
Recent Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board (FASB) issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment of ARB No. 51”. This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require; the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent’s ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No. 160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133” (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced disclosures of an entity’s derivative instruments and hedging activities and their effects on the entity’s financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, “Accounting for Derivative Instruments and Hedging Activities” (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement.
In April 2008, the FASB issued FASB Staff Position (“FSP”) SFAS No. 142-3, “Determination of the Useful Life of Intangible Assets”. This FSP amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142,“Goodwill and Other Intangible Assets”(“SFAS 142”). The intent of this FSP is to improve the consistency between the useful life of a recognized intangible asset under SFAS 142 and the period of expected cash flows used to measure the fair value of the asset under SFAS 141R, and other GAAP. This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company is currently evaluating the impact of SFAS FSP 142-3, but does not expect the adoption of this pronouncement will have a material impact on its financial position, results of operations or cash flows.
In May 2008, the FASB issued SFAS No. 162,“The Hierarchy of Generally Accepted Accounting Principles” (SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. This statement shall be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board’s amendments to AU section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The Company is currently evaluating the impact of SFAS 162, but does not expect the adoption of this pronouncement will have a material impact on its financial position, results of operations or cash flows.
In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60.” Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. The adoption of FASB 163 is not expected to have a material impact on the Company’s financial position.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).
ITEM 7A. QUANTITIATIVE AND QUALITATIVE DISCLOUSURES ABOUT MARKET RISK
Not applicable because we are a smaller reporting company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
EWRX INTERNET SYSTEMS, INC.
(A Development Stage Company)
FINANCIAL STATEMENTS
DECEMBER 31, 2008 AND 2007
EWRX INTERNET SYSTEMS, INC.
(A Development Stage Company)
CONTENTS
1
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Balance Sheets |
| December 31, 2008 and 2007 |
| 2008 | 2007 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 2,700 | $ | 3,268 | ||
| Prepaid expenses and other current assets | - | 2,710 | ||||
| Total Current Assets | 2,700 | 5,978 | ||||
| Total Assets | $ | 2,700 | $ | 5,978 | ||
| LIABILITIES STOCKHOLDERS' DEFICIENCY | ||||||
| Current Liabilities | ||||||
| Accounts payable and accruals | $ | 98,954 | $ | 99,158 | ||
| Accrued liabilities | 20,318 | 18,079 | ||||
| Loans from related parties | 8,170 | 13,048 | ||||
| Advances from director | 157,133 | 122,147 | ||||
| Total Current Liabilities | 284,575 | 252,432 | ||||
| Commitments and Contingencies | ||||||
| Stockholders' Deficiency | ||||||
| Preferred stock, $0.01 par value per share, 500,000 shares | ||||||
| authorized, none issued and outstanding | ||||||
| Common stock, $0.001 par value; 100,000,000 shares | ||||||
| authorized, shares issued and outstanding | 100,000 | 100,000 | ||||
| Additional paid - in capital | 7,375,017 | 7,278,900 | ||||
| Accumulative deficit | (8,496,144 | ) | (8,496,144 | ) | ||
| Earnings accumulated during the development stage | 739,252 | 870,790 | ||||
| Total Stockholders' Deficiency | (281,875 | ) | (246,454 | ) | ||
| Total Liabilities and Stockholders' Deficiency | $ | 2,700 | $ | 5,978 | ||
2
(The accompanying notes are an integral part of these financial statements)
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Statements of Operations |
| Years Ended December 31, 2008 and 2007, and the |
| Period from Re-entering the Development Stage |
| (January 1, 2002) Through to December 31, 2008 |
| For the Period | |||||||||
| from | |||||||||
| January 1, 2002 | |||||||||
| (Re-entering the | |||||||||
| Development | |||||||||
| For the Years | Stage) | ||||||||
| Ended December 31 | to December 31 | ||||||||
| 2008 | 2007 | 2008 | |||||||
| Operating Expenses | |||||||||
| Entertainment | $ | 1,600 | $ | - | $ | 1,849 | |||
| In kind contribution - | |||||||||
| services | 72,000 | 72,000 | 144,000 | ||||||
| Management fees | - | - | 15,000 | ||||||
| Office and General | 4,254 | 5,112 | 33,003 | ||||||
| Professional fees | 27,415 | 13,014 | 188,640 | ||||||
| Salary and Wages | - | - | 28,000 | ||||||
| Telephone | 455 | - | 902 | ||||||
| Travel | 1,540 | - | 1,540 | ||||||
| Total Operating | |||||||||
| Expenses | 107,264 | 90,126 | 412,934 | ||||||
| Net Loss from | |||||||||
| operations | (107,264 | ) | (90,126 | ) | (412,934 | ) | |||
| Other (Expenses) Income | |||||||||
| Foreign Exchange (loss)/gain | (75 | ) | (2,914 | ) | (7,957 | ) | |||
| Interest expense | (24,199 | ) | (19,184 | ) | (79,413 | ) | |||
| Forgiveness of debt | - | - | 1,239,556 | ||||||
| Total Other (Expenses) | |||||||||
| Income | (24,274 | ) | (22,098 | ) | 1,152,186 | ||||
| Net (loss) income | $ | (131,538 | ) | $ | (112,224 | ) $ | 739,252 | ||
| Net (loss) income per | |||||||||
Share - Basic and | |||||||||
| Diluted | $ | - | $ | - | |||||
| Weighted Average Number of Common Stock | |||||||||
| during the period - Basic and | |||||||||
| Diluted | 100,000,000 | 100,000,000 | |||||||
3
(The accompanying notes are an integral part of these financial statements)
| EWRX INTERNET SYSTEMS INC. |
| (A Development Stage Company) |
| Statement of Stockholders' Deficiency |
| for the period January 1, 2002 Re-entering the Development |
| Stage Through to December 31, 2008 |
| Earnings | ||||||||||||||||||
| Accumulated | ||||||||||||||||||
| Additional | During the | Total | ||||||||||||||||
| Number of | Capital | Paid-in | Accumulated | Development | Stockholders' | |||||||||||||
| Shares | Stock | Capital | Deficit | Stage | Deficiency | |||||||||||||
| Balance, December 31, 2001 | 20,704,140 | $ | 20,704 | $ | 6,967,848 | $ | (8,496,144 | ) | $ | - | $ | (1,507,592 | ) | |||||
| Stock issued on | ||||||||||||||||||
| settlement of debt | 1,276,227 | 1,276 | 197,872 | - | - | 199,148 | ||||||||||||
| Stock issued on | - | |||||||||||||||||
Flashback purchase | 3,700,000 | 3,700 | - | - | - | 3,700 | ||||||||||||
| Stock issued on | - | |||||||||||||||||
| private placement | 445,900 | 446 | 44,144 | - | - | 44,590 | ||||||||||||
| Finance fee | - | - | (9,590 | - | - | (9,590 | ) | |||||||||||
| Net loss | - | - | - | - | (71,799 | ) | (71,799 | ) | ||||||||||
| Balance, December 31, 2002 | 26,126,267 | 26,126 | 7,200,274 | (8,496,144 | ) | (71,799 | ) | (1,341,543 | ) | |||||||||
| Stock issued on | - | |||||||||||||||||
| settlement of debt | 40,000,000 | 40,000 | - | - | - | 40,000 | ||||||||||||
| Net loss | - | - | - | - | (19,342 | ) | (19,342 | ) | ||||||||||
| Balance, December 31, 2003 | 66,126,267 | 66,126 | 7,200,274 | (8,496,144 | ) | (91,141 | ) | (1,320,885 | ) | |||||||||
| Stock issued on | - | |||||||||||||||||
| settlement of debt | 33,873,733 | 33,874 | (12,558 | - | - | 21,316 | ||||||||||||
| Net income | - | - | - | - | 1,030,812 | 1,030,812 | ||||||||||||
| Balance, December 31, 2004 | 100,000,000 | 100,000 | 7,187,716 | (8,496,144 | ) | 939,671 | (268,757 | ) | ||||||||||
| Net loss | - | - | - | - | (19,163 | ) | (19,163 | ) | ||||||||||
| Balance, December 31, 2005 | 100,000,000 | 100,000 | 7,187,716 | (8,496,144 | ) | 920,508 | (287,920 | ) | ||||||||||
| Net income | - | - | - | - | 62,506 | 62,506 | ||||||||||||
| Balance, December 31, 2006 | 100,000,000 | 100,000 | 7,187,716 | (8,496,144 | ) | 983,014 | (225,414 | ) | ||||||||||
| In kind contribution - interest | - | - | 19,184 | - | - | 19,184 | ||||||||||||
| In kind contribution - services | - | - | 72,000 | - | - | 72,000 | ||||||||||||
| Net loss | - | - | - | - | (112,224 | ) | (112,224 | ) | ||||||||||
| Balance, December 31, 2007 | 100,000,000 | 100,000 | 7,278,900 | (8,496,144 | ) | 870,790 | (246,454 | ) | ||||||||||
| Net loss | (131,538 | ) | (131,538 | ) | ||||||||||||||
| In kind contribution - interest | - | - | 24,117 | - | - | 24,117 | ||||||||||||
| In kind contribution - services | - | - | 72,000 | - | - | 72,000 | ||||||||||||
| Balance,December 31, 2008 | 100,000,000 | $ | 100,000 | $ | 7,375,017 | $ | (8,496,144 | ) | $ | 739,252 | $ | (281,875 | ) |
4
(See accompanying notes to condensed financial statements)
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Statements of Cash Flows |
| Years Ended December 31, 2008 and 2007 |
| Period from | |||||||||
| January 1, 2002 | |||||||||
| (Re-entering the | |||||||||
| Development | |||||||||
| For the Years | Stage) | ||||||||
| Ended December 31 | to December 31 | ||||||||
| 2008 | 2007 | 2008 | |||||||
| Cash Flows from Operating Activities | |||||||||
| Net Income (Loss) | $ | (131,538 | ) | $ | (112,224 | ) | $ | 739,252 | |
| Adjustments to reconcile net income/(loss) | |||||||||
| to net cash used in operations | |||||||||
| - Non-cash item - expenses recovered | - | - | (1,142,152 | ) | |||||
| -In kind contribution services | 72,000 | 72,000 | 144,000 | ||||||
| -Imputed interest on loans | 24,117 | 19,184 | 43,301 | ||||||
| -Accumulated other comprehensive gain | 1,800 | - | 1,800 | ||||||
| Changes in operating assets and liabilities | |||||||||
| Increase/(Decrease) in prepaid expenses | 2,710 | (2,710 | ) | - | |||||
| Increase/(Decrease) in accounts payable | (204 | ) | (5,107 | ) | 9,315 | ||||
| Increase/(Decrease) in accrued liabilities | 2,239 | (8,327 | ) | 20,318 | |||||
| Net Cash Used in Operating Activities | (28,876 | ) | (37,184 | ) | (184,166 | ) | |||
| Cash Flows from Financing Activities | |||||||||
| Proceeds from issuance of common stock | - | - | 38,700 | ||||||
| Loans from related parties | - | - | 66,462 | ||||||
| Repayment of loans from directors | (780 | ) | - | (780 | ) | ||||
| Repayment of loans from related parties | (6,678 | ) | (53,414 | ) | (60,092 | ) | |||
| Advances from director | 35,766 | 93,596 | 142,576 | ||||||
| Net Cash Provided by Financing Activities | 28,308 | 40,182 | 186,866 | ||||||
| Net (decrease) increase in cash | (568 | ) | 2,998 | 2,700 | |||||
| Cash,beginning of period/year | 3,268 | 270 | - | ||||||
| Cash, end of period/year | $ | 2,700 | $ | 3,268 | $ | 2,700 | |||
Supplemental Information: | |||||||||
Cash paid for interest | $ | - | $ | 3,912 | $ | 36,476 | |||
| Cash paid for taxes | $ | - | $ | - | $ | - | |||
5
(The accompanying notes are an integral part of these financial statements)
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Financial Statements |
| As of December 31, 2008 and 2007 |
| 1. | Summary of Significant Accounting Policies and Organization | |
| (A) | Basis of Presentation and Organization | |
EWRX Internet Systems, Inc. (the Company) was incorporated on June 25, 1997 in the State of Nevada. The Company re-entered the development stage on January 1, 2002. The company intends to be in the business of development and marketing of computer software. | ||
Activities since re-entering the development stage have been comprised mainly of administrative matters. | ||
| (B) | Cash and Cash Equivalents | |
For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents. | ||
| (C) | Use of Estimates | |
In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and expenses during the reported period. Actual results could differ from those estimates. | ||
| (D) | Revenue Recognition | |
Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectablility is assured. The company had no revenue for the years ended December 31, 2008 and 2007. | ||
| (E) | Fair Value of Financial Instruments | |
The carrying amounts of the company's financial instruments including accounts payable, accrued expenses and note payable - related party approximate their fair value due to the relatively short period to maturity for these instruments. | ||
6
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Financial Statements |
| As of December 31, 2008 and 2007 |
| 1. | Summary of Significant Accounting Policies and Organization (continued) | |
| (F) | Income/(Loss) Per Share | |
Basic and diluted net loss per common share is computed based upon the weighted average common shares outstanding as defined by Financial Accounting Standards No.128, "Earnings per Share." As of December 31, 2008 and 2007, respectively, there were no common share equivalents outstanding. | ||
| (G) | Income Taxes | |
The Company accounts for income taxes under the Statement of Financial Accounting Standards No.109, "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, 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 be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. | ||
| (H) | Business Segments | |
The Company operates in one segment and therefore segment information is not presented. | ||
| (I) | Recent Accounting Pronouncements | |
In December 2007, the FASB issued SFAS No.160, "Noncontrolling Interests in Consolidated Financial Statements - an amendment of ARB No.51." This statement improves the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require the ownership interests in subsidiaries held by parties other than the parent and the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income, changes in a parent's ownership interest while the parent retains its controlling financial interest in its subsidiary be accounted for consistently, when a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be initially measured at fair value, entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. SFAS No.160 affects those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that deconsolidate a subsidiary. SFAS No.160 is effective for fiscal years and interim periods within those fiscal years, beginning on or after December 15, 2008. Early adoption is prohibited. The adoption of this statement is not expected to have a material effect on the Company's financial statements. | ||
In March 2008, the FASB issued SFAS No.161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No.133" (SFAS 161). This statement is intended to improve transparency in financial reporting by requiring enhanced | ||
7
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Condensed Financial Statements |
| As of December 31, 2008 and 2007 |
| 1. | Summary of Significant Accounting Policies and Organization (continued) | |
| (I) | Recent Accounting Pronouncements (continued) disclosures of an entity's derivative instruments and hedging activities and their effects on the entity's financial position, financial performance, and cash flows. SFAS 161 applies to all derivative instruments within the scope of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated derivatives, and nonderivative instruments that are designated and qualify as hedging instruments. Entities with instruments subject to SFAS 161 must provide more robust qualitative disclosures and expanded quantitative disclosures. SFAS 161 is effective prospectively for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application permitted. We are currently evaluating the disclosure implications of this statement. | |
In May 2008, the FASB issued SFAS No.162, "The Hierarchy of Generally Accepted Accounting Principles." SFAS No.162 identifies the sources of accounting principles and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. SFAS 162 is effective 60 days following the SEC's approval of PCAOB Auditing Standard No.6, Evaluating Consistency of Financial Statements (AS/6). The adoption of FASB 162 is not expected to have a material impact on the Company's financial position. | ||
In May 2008, the FASB issued SFAS No.163, "Accounting for Financial Guarantee Insurance Contracts - an interpretation of FASB Statement No.60." Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No.60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The adoption of FASB 163 is not expected to have a material impact on the Company's financial position. | ||
8
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Condensed Financial Statements |
| As of December 31, 2008 and 2007 |
| 1. | Summary of Significant Accounting Policies and Organization (continued) | |
| (J) | Reclassification | |
Certain amounts from prior periods have been reclassified to conform to the current year presentation. | ||
| 2. | Going Concern |
As reflected in the accompanying audited financial statements, the Company is in the development stage with no operations, a net loss of $131,538 for the year ended December 31, 2008, a stockholder's deficiency and a working capital deficiency of $281,875, and cash used in operations from re-entering the development stage of $184,166. This raises substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern has been, and remains, dependent on advances from its stockholders and the Company's ability to raise additional capital. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. | |
3. Related Party Transactions | |
Advances from director represent an advance granted by Jessica Q. Wang. Ms. Wang pays for certain administrative expenses on behalf of the Company. These advances have no fixed terms or repayment, are unsecured, and bear no interest. During the year 2008, Ms.Wang has advanced the company $35,766 for purposes of paying operating expenses on behalf of the Company. In the year 2008, the company repaid $780 to Ms. Wang. During 2008 and 2007, the company imputed interest on the advance from director of $22,939 and $12,558, respectively. As of December 31, 2008, the Company has loans from Ms. Wang with an outstanding balance of $157,133. | |
As of December 31, 2008, the Company has loans from Navitax Technology, Inc., a company which is controlled by one of the stockholders of the Company, with an outstanding balance of $8,170. These loans have no fixed terms or repayment, are unsecured, and bear no interest. During the year 2008 and 2007, the company imputed interest on the note payable - related party of $1,178 and $1,220, respectively. | |
On the above two transactions, the Company imputed interest at a rate of 16.67% which is comparable to past borrowings. |
9
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Condensed Financial Statements |
| As of December 31, 2008 and 2007 |
| 4. | Stockholders' Deficiency | |
Stockholders' Deficiency | ||
| (A) | Common Stock Issued for Purchase of Software | |
During 2002, the Company issued 3,700,000 shares of common stock in association with the purchase of computer software. In association with the purchase of the software, the Company has agreed to pay the seller a royalty fee of 7% of gross sales. As of December 31, 2008, the Company has not made any sales of the software that would result in the payment of a royalty fee. | ||
| (B) | Common Stock Issued for Debt | |
During 2002, the Company issued 1,276,227 shares of common stock in order to settle debt amounting to $199,148. ($0.1560 per share) | ||
During 2003, the Company issued 40,000,000 shares of common stock in order to settle debt amounting to $40,000. ($0.0010 per share) | ||
During 2004, the Company issued 33,873,733 shares of common stock in order to settle debt amounting to $21,316. ($0.0006 per share) | ||
| (C) | Common Stock Issued for Cash | |
During 2002, the company issued 445,900 shares of common stock for $44,590 in conjunction with a private placement offer less a finance fee of $9,590 for a net cash value of $35,000. ($0.0785 per share) | ||
| (D) | In-kind Contribution | |
During 2007, the Company recorded additional paid-in capital of $72,000 for the fair value of services provided to the Company by its president. | ||
During 2007, the Company recorded additional paid-in capital of $19,184 for the imputed interest on loans. | ||
During 2008, the Company recorded additional paid-in capital of $72,000 for the fair value of services provided to the Company by its president. | ||
During 2008, the Company recorded additional paid-in capital of $24,117 for the imputed interest on loans. | ||
| (E) | Amendment to Articles of Incorporation | |
During 1999, the Company amended its Articles of Incorporation to change the name of the corporation and provide for an increase in its authorized share capital. The name of the Company was changed from Europa Resources, Inc. to EWRX Internet Systems, Inc. The authorized capital stock increased to 100,000,000 common shares at a par value of $0.001 per share. | ||
10
| EWRX INTERNET SYSTEMS, INC. |
| (A Development Stage Company) |
| Notes to Financial Statements |
| As of December 31, 2008 and 2007 |
| 5. | Income Taxes | |
| The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes". SFAS No.109 prescribes the use of the liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates. The effects of future changes in tax laws or rates are not anticipated. | ||
| Under SFAS No.109 income taxes are recognized for the following: a) amount of tax payable for the current year, and b) deferred tax liabilities and assets for future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. The provision for income taxes has been computed as follows: | ||
| 2008 | 2007 | ||||||
| Expected income tax recovery (expense) at the statutory rate of 34% | $ | 44,723 | $ | 38,156 | |||
| Tax effect of expenses that are not deductible for income tax purposes (net of other amounts deductible for tax purposes) | (32,952 | ) | (42 | ) | |||
| Tax effect of differences in the timing of deductibility of items for income tax purposes: | - | - | |||||
| Utilization of non-capital tax losses to offset current taxable income | - | - | |||||
| Change in valuation allowance | (11,771 | ) | (38,114 | ) | |||
| Provision for income taxes | $ | - | $ | - | |||
| The components of deferred income taxes are as follows: | |||||||
2008 | 2007 | ||||||
| Deferred income tax asset: | |||||||
| Net operating loss carryforwards | $ | 2,374,829 | $ | 2,363,058 | |||
| Valuation allowance | (2,374,829 | ) | (2,363,058 | ) | |||
| Deferred income taxes | $ | - | $ | - |
| The Company has tax losses available to be applied against future taxable income through 2028 and 2027, respectively. The net change in the valuation allowance for the period ended December 31, 2008 and 2007 was an increase of $11,771 and $38,114 respectively. Due to the losses incurred in the current year and expected future operating results, management determined that it is more likely than not that the deferred tax asset resulting from the tax losses available for carryforward will not be realized through the reduction of future income tax payments. Accordingly, a 100% valuation allowance has been recorded for deferred income tax asset. | ||
11
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
We do not presently intend to change accountant. At no time have there been any disagreements with such accountants regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A(T). CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Management's Annual Report on Internal Control Over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Our internal control system was designed to, in general, provide reasonable assurance to the Company’s management and board regarding the preparation and fair presentation of published financial statements, but because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. The framework used by management in making that assessment was the criteria set forth in the document entitled “ Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that assessment, our management has determined that as of December 31, 2008, the Company’s internal control over financial reporting was effective for the purposes for which it is intended.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.
Changes in Internal Control over Financial Reporting
Our accountant is Webb & Company, P.A., independent certified public accountants No change in our system of internal control over financial reporting occurred during the period covered by this report, fourth quarter of the fiscal year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The following chart lists all of the Directors of the Company and their respective ages, position and term of service.
| Name | Age | Position | Term |
| Jessica Q. Wang | 45 | Director | Nov 2001 – Present |
| Elwin Cathcart | 82 | Director | Aug 2007 – Present |
| Liming Wang | 47 | Director | Feb 2003 - Present |
The following chart lists all of the Officers of the Company and their respective ages, position and term of service.
| Name | Age | Position | Term |
| Jessica Q. Wang | 45 | President and CEO | Nov 2001 – Present |
| Elwin Cathcart | 82 | Secretary | Nov 2001 – Present |
| Liming Wang | 47 | Treasurer | Feb 2003 – Present |
Ms. Jessica Q. Wang - Director, President and CEO
Ms. Wang has served as the CEO & President of EWRX since November 2001. She has been the Chairman of the Board of Navitex Technology Inc. since 2002 and is the founder and owner of Navitex Canada Inc. since 1999. From 1993 until 2001, Ms. Wang was the Chairman of the Board of Hong Kong Dongling Holding Co.
Over the last ten years, Ms. Wang has applied her specialization of investment evaluation, technical analysis and international management to attain investments and guide several technology, marketing and real estate companies from conception to successful financial operation. Ms. Wang also facilitated access of North American M&A companies to prominent resources in China and promoted the introduction of successful Chinese companies to the North American stock and financial markets. Ms. Wang has been the Honoured Director of Chinese Talented Women’s Association, an association chaired by the former first lady of China. Through this relationship she has developed close connection with a vast network of outstanding Chinese entrepreneurs, and prominent political and academic leaders.
Mr. Elwin Cathcart – Director and Secretary
Mr. Cathcart is the President and owner of Groupmark Canada Limited which was founded in September 1971. He has also served as the CEO of several other public companies. He continues to be involved in several private business enterprises as well as performing consultation services to individuals and companies. Mr. Cathcart was the principle shareholder and CEO of VHSN, a public company, specializing in sales of personal products. He also developed “SMARTCARD,”™ a chip based plastic card for the recording and protection of information, including securing data such as money, account information, etc. This technology was licensed and marketed by several companies and individuals. In the last two decades, Mr. Cathcart developed a number of hotel and resort properties in the North American market. He also developed consumer markets for a variety of products sold by a direct sales network. While still active in several areas of business and consulting, he has retired from his business development activities and entrepreneurial enterprises.
Mr. Liming Wang – Director and Treasurer
Mr. Liming Wang has been a Director and the Treasurer since February 2003. In addition, Mr. Wang was the President of Easy Comfort OP, Inc. from 2001 to 2005. Mr. Wang , a medical doctor and surgeon by profession, is the founder and President of Easy Comfort OP, Inc. which has been actively engaged in the importing and distribution of medical equipment, pharmaceuticals and prosthetic devices throughout China. He provides consultation services to the medical profession and business community.
There are no family relationships between the directors and/or executive officers.
None of the directors or executive officers has been involved in: (a) bankruptcy; (b) criminal proceeding; or (c) any other legal proceeding.
Term of Office
Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors’ fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
Board of Directors
Our sole director holds office until the annual meeting of stockholders of the Company following the election or until her successors are duly elected and qualified. Officers are appointed by the Board of Directors and serve at its discretion.
Significant Employees
None.
Family Relationships
No family relationships exist among our directors, executive officers, or persons nominated or chosen by us to become directors or executive officers.
Involvement in Certain Legal Proceedings
To our knowledge, during the past five (5) years, none of our directors, executive officers, promoters, control persons, or nominees has been:
| • | the subject of any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| • | convicted in a criminal proceeding or is subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| • | subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
| • | found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law. |
Auditors; Code of Ethics; Financial Expert
We do not have an audit committee financial expert. We do not have an audit committee financial expert because we believe the cost related to retaining a financial expert at this time is prohibitive. Furthermore, because we are only beginning our commercial operations, at the present time, we believe the services of a financial expert are not warranted.
Potential Conflicts of Interest
We are not aware of any current or potential conflicts of interest with any of our executives or directors.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the fiscal years ended December 31, 2008 and 2007 in all capacities for the accounts of our executives, including the Chief Executive Officer (CEO) and Chief Financial Officer (CFO):
SUMMARY COMPENSATION TABLE
| Non-Qualified | |||||||||
| Non-Equity | Deferred | All Other | |||||||
| Name and | Stock | Option | Incentive Plan | Compensation | Compensation | Totals | |||
| Principal | Salary | Bonus | Awards | Awards | Compensation | Earnings | |||
| Position | Year | ($) | ($) | ($) | ($) | ($) | ($) | ($) | ($) |
| Jessica Wang, | 2008 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
| President and | |||||||||
| CEO | 2007 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
| Elwin | 2008 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
| Cathcart, | |||||||||
| Secretary | 2007 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
| Liming | 2008 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
| Wang, | |||||||||
| Treasurer | 2007 | $ 0 | 0 | 0 | 0 | 0 | 0 | 0 | $ 0 |
Option Grants Table.There were no individual grants of stock options to purchase our common stock made to the executive officer named in the Summary Compensation Table through March 27, 2009.
Aggregated Option Exercises and Fiscal Year-End Option Value Table.There were no stock options exercised during period ending March 27, 2009 by the executive officer named in the Summary Compensation Table.
Long-Term Incentive Plan (“LTIP”) Awards Table.There were no awards made to a named executive officer in the last completed fiscal year under any LTIP
Compensation of Directors
Directors are permitted to receive fixed fees and other compensation for their services as directors. The Board of Directors has the authority to fix the compensation of directors. No amounts have been paid to, or accrued to, directors in such capacity.
Employment Agreements
We do not have any employment agreements with our officers or directors currently.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership of our capital stock, as of March 27, 2009, for: (i) each director; (ii) each person who is known to us to be the beneficial owner of more than 5%of our outstanding common stock; (iii) each of our executive officers named in the Summary Compensation Table; and (iv) all of our current executive officers and directors of as a group. Except as otherwise indicated in the footnotes, all information with respect to share ownership and voting and investment power has been furnished to us by the persons listed. Except as otherwise indicated in the footnotes, each person listed has sole voting power with respect to the shares shown as beneficially owned.
| Name and Address of | Amount of | Percentage |
| Beneficial Owner | Beneficial Ownership | of Class |
| Navitex Canada Inc*. | 73,873,733 | 73.873733% |
| Jessica Q.Wang | 2,050,000 | 2.05% |
| Elwin Cathcart | 1,650,000 | 1.65% |
| Liming Wang | 0 | 0 |
| All Executive Officers | 3,700,000 | 3.7% |
| and Directors as a Group (3 people) |
*Navitex Canada Inc. is beneficially owned by Mrs. Jessica Q. Wang, an Officer and Director of EWRX Internet Systems Inc. There are no agreements in place or contemplated that would cause Navitex to engage in any activity that would affect the conduct of the day to day business of, or change control, of EWRX.
Securities authorized for issuance under equity compensation plans.
We have no equity compensation plans
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Ms. Jessica Q. Wang, one of our directors, pays for certain administrative expenses and is reimbursed by the Company. These advances have no fixed terms or repayment, are unsecured, and bear no interest. During 2008, Ms. Wang has advanced the company $35,766 for purposes of paying operating expenses on behalf of the Company. In the year 2008, the company repaid $780 to Ms. Wang. During 2008 and 2007, the company imputed interedt on the advance from director of $22,939 and $12,558, respectively. As of December 31, 2008, the Company has loans from Ms. Wang with an outstanding balance of $157,133.
As of December 31, 2008, the Company has loans from Navitex Technology, Inc., a company which is controlled by one of the stockholders of the Company, with an outstanding balance of $8,170. These loans have no fixed terms or repayment, are unsecured, and bear no interest. During the year 2008 and 2007, the company imputed interest on the note payable-related party of $1,178 and $1,220, respectively.
On the above two transactions, the Company imputed interest at a rate of 16.67% which is comparable to past borrowings.
Indebtedness of Management
There were no material transactions, or series of similar transactions, since the beginning of our last fiscal year, or any currently proposed transactions, or series of similar transactions, to which we were or are a party, in which the amount involved exceeds $60,000 and in which any director or executive officer, or any security holder who is known to us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest.
Transactions with Promoters
There were no material transactions between us and our promoters or founders. .
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended December 31, 2008 and December 31, 2007, we were billed approximately $12,979 and $11,788 for professional services rendered for the audit and reviews of our financial statements.
Audit Related Fees
The Company did not incur any audit related fees, other than the fees discussed in Audit Fees, above, for services related to our audit for the fiscal years ended December 31, 2008 and December 31, 2007.
Tax Fees
For the Company’s fiscal years ended December 31, 2008 and December 31, 2007, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2008 and December 31, 2007.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us to render any auditing or permitted non-audit related service, the engagement be:
| - | approved by our audit committee; or |
| |
| - | entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management. |
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a) Documents filed as part of this Annual Report
| 1. | Financial Statements |
| 2. | Financial Statement Schedules |
| 3. | Exhibits |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
EWRX Internet Systems, Inc.
| By: | /s/ Jessica Q. Wang | |
| Chief Executive Officer and Principal | ||
| Accounting Officer | ||
| Dated: | March 30, 2009 |
Pursuant to the requirements of 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/ Jessica Q. Wang | Chief Executive Officer and Principal | March 30, 2009 | |
| Jessica Q. Wang | Accounting Officer |
