SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ______________________
Commission File No. 0-28117
Eco-Rx, Inc.
------------
(Exact name of Small Business Issuer as Specified in its charter)
Florida 65-0569329
------- ----------
(State or other jurisdiction of incorporation or (IRS employer Identification
organization) No)
2051 Northeast 191 Drive
North Miami Beach, FL 33179
---------------------------
(Address of Principal Executive Offices)
(305) 937 1862
--------------
(Registrant's Telephone Number)
Not applicable
--------------
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 ____
---
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.
Common Stock, $0.001 par value At May 1, 2000 5,842,939
Preferred Stock, $0.001 par value At May 1, 2000 None
Transitional Small Business Disclosure Format: Yes [_] No [x]
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
-2-
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31,
2000 1999
----------- -----------
CURRENT ASSETS
Cash $ 21,291 $ 2,704
Inventory 0 5,307
----------- -----------
TOTAL CURRENT ASSETS 21,291 8,011
FURNITURE AND EQUIPMENT, NET 12,864 11,656
OTHER ASSETS, NET 2,586 2,755
----------- -----------
TOTAL ASSETS $ 36,741 $ 22,422
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Current portion of lease obligation $ 10,418 $ 10,418
Accounts payable and accrued expenses 305,793 199,033
Notes payable to stockholders 470,300 330,000
----------- -----------
TOTAL CURRENT LIABILITIES 786,511 539,451
LEASE OBLIGATION 9,559 21,705
----------- -----------
TOTAL LIABILITIES 796,070 561,156
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' DEFICIT
Preferred stock - $.001 par value, 5,000,000 shares
authorized; none issued and outstanding
Common stock - $.001 par value, 10,000,000 shares
authorized; 5,842,939 and 5,836,439 shares issued
and outstanding at March 31, 2000 and 1999
respectively 5,843 5,836
Additional paid-in capital 1,247,376 1,222,334
Deficit accumulated during the development stage (2,012,548) (1,766,904)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (759,329) (538,734)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 36,741 $ 22,422
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
3
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Period
February 27, 1995
(Inception)
Quarter Ended Quarter Ended through
March 31, March 31, March 31,
2000 1999 2000
------------ ------------ ------------
COSTS AND EXPENSES
General and administrative $ 59,052 $ 42,130 $ 1,414,650
Depreciation 2,080 2,271 57,294
Interest 16,895 17,043 144,817
Research and development 3,200 4,441 68,055
Abandonment of property - - 384,917
------------ ------------ ------------
TOTAL EXPENSES 81,227 65,885 2,069,733
INTEREST INCOME - 8,227
OTHER INCOME - - 50,000
------------ ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (81,227) (65,885) (2,011,506)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE - - (1,042)
------------ ------------ ------------
NET LOSS $ (81,227) $ (65,885) $ (2,012,548)
============ ============ ============
NET LOSS PER SHARE OF COMMON STOCK:
Loss before cumulative effect of change in
accounting principle $ (0.01) $ (0.01) $ (0.34)
Cumulative effect of change in accounting
principle - - -
------------ ------------ ------------
NET LOSS $ (0.01) $ (0.01) $ (0.34)
============ ============ ============
SHARES USED IN THE CALCULATION OF
NET LOSS PER SHARE 5,842,939 5,836,439 5,842,939
============ ============ ============
The accompanying notes are an integral part of thes consolidated financial
statements.
4
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
-------------------------
Shares Par Value Capital Stage Total
----------- ----------- ----------- ----------- -----------
Balances at February 27, 1995
(inception) (unaudited) - $ - $ - $ - $ -
Common stock issued for cash
(unaudited) 3,700,497 3,700 89,015 - 92,715
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1995
(unaudited) 3,700,497 3,700 89,015 - 92,715
Common stock issued for cash
(unaudited) 94,228 94 59,906 - 60,000
Net loss (unaudited) - - - (168,096) (168,096)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1996
(unaudited) 3,794,725 3,794 148,921 (168,096) (15,381)
Common stock issued for cash 946,727 947 758,803 - 759,750
Less: Cost of services related
to registration - - (60,595) - (60,595)
Common stock issued in
connection with loan payable 10,000 10 (10) - -
Net loss - - - (801,109) (801,109)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1997 4,751,452 4,751 847,119 (969,205) (117,335)
Common stock issued for cash
and stock subscription receivable 112,000 112 213,888 - 214,000
Conversion of loan payable to
common stock 75,000 75 149,925 - 150,000
Common stock issued
for services 897,987 898 85,632 - 86,530
The accompanying notes are an integral part of these consolidated financial
statements.
5
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(UNAUDITED)
Deficit
Accumulated
Additional During the
Common Stock paid-in Development
-------------------------
Shares Par Value Capital Stage Total
----------- ----------- ----------- ----------- -----------
Less: Cost of services (paid
with common stock above)
related to issuing common
stock - - (70,480) - (70,480)
Net loss - - - (731,814) (731,814)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1998 5,836,439 $ 5,836 $ 1,226,084 $(1,701,019) $ (469,099)
Common stock issued for cash 6,500 7 32,493 32,500
Less: Cost of services related
to registration (11,201) (11,201)
Net Loss (230,302) (230,302)
----------- ----------- ----------- ----------- -----------
Balances at December 31, 1999 5,842,939 5,843 1,247,376 (1,931,321) (678,102)
Net Loss (81,227) (81,227)
----------- ----------- ----------- ----------- -----------
Balances at March 31, 2000 5,842,939 5,843 1,247,376 (2,012,548) (759,329)
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
6
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period
February 27, 1995
(Inception)
Quarter Ended Quarter Ended through
March31, March 31, March 31,
2000 1999 2000
- --------------------------------------------------------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (81,227) $ (65,885) $(2,012,548)
----------- ----------- -----------
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 2,080 2,271 57,294
Abandonment of property - 384,917
Adjustment to inventory for impairment - 35,384
Services received in exchange for stock 16,050
Consulting fee paid by reclassifying
advances to stockholders - - 205,587
Cumulative effect of change in
accounting principle - 1,042
Changes in operating assets and liabilities:
Inventory - (120,791)
Accounts receivable - 15,000 -
Advances to stockholders - (205,587)
Other assets 169 (77,409)
Accounts payable and accrued expenses 31,325 34,900 305,792
----------- ----------- -----------
TOTAL ADJUSTMENTS 33,574 (17,630) 602,279
----------- ----------- -----------
NET CASH USED IN OPERATING
ACTIVITIES (47,653) (83,515) (1,410,269)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets - - 16,000
Capital expenditures (6,167) - (259,797)
----------- ----------- -----------
NET CASH USED IN INVESTING
ACTIVITIES (6,167) (83,515) (243,797)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from stockholder loans (net) 103,000 90,000 687,100
Proceeds from issuance of common stock - 1,098,370
Expense related to registration - (3,750) 11,201
Repayment of stockholder and other loan (50,000) - (66,800)
Payment of lease obligation (4,650) (867) (32,112)
----------- ----------- -----------
The accompanying notes are an integral part of these consolidated financial
statements.
7
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Period
February 27, 1995
(Inception)
Quarter Ended Quarter Ended through
March31, March 31, March 31,
2000 1999 2000
- --------------------------------------------------------------- ------------- -------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 48,350 85,383 1,675,357
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH (5,470) 1,868 (4,646)
CASH AT BEGINNING OF YEAR 26,761 836 25,925
------------- ------------- -------------
CASH AT END OF PERIOD $ 21,291 $ 2,704 $ 21,291
============= ============= =============
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid for interest $ - $ - $ 33,590
============= ============= =============
SUPPLEMENTAL SCHEDULE OF
NON-CASH ACTIVITY:
Leased equipment $ - $ $ 52,088
============= ============= =============
The accompanying notes are an integral part of these consolidated financial
statements.
8
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 and 1999
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. has been in the
development stage since its incorporation in the State of Florida
on February 27, 1995. The Company's mission is to pioneer the
technology, design and manufacturing of air purification
equipment for the destruction of pathogens and for the efficient
and effective removal of odors, allergy and asthma causing
agents, pollutants and certain gases from indoor air
environments.
The consolidated financial statements include the accounts of
ECO-Rx, Inc. f/k/a Eco-Aire Company, Inc. and its wholly owned
subsidiary, Eco-Aire Marketing, Inc., collectively referred to as
the "Company". Eco-Aire Marketing, Inc. is inactive and ECO-Rx,
Inc. f/k/a Eco-Aire Company, Inc.'s investment in said company
has been eliminated in consolidation.
(B) INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out)
or market and consist primarily of metal, bulbs, ballasts,
machines in process and miscellaneous supplies.
(C) READINESS FOR YEAR 2000
The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the
applicable year. As a result, those computer programs having
time-sensitive software would recognize a date using "00" as the
year 1900 rather than the year 2000. The Company is in its
development stage and does not have sophisticated computer
equipment that may cause the Year 2000 issue to adversely affect
its operations.
(D) ASSET IMPAIRMENT
Assets are considered impaired when, based upon current
information and events, it is probable that the Corporation will
not realize an economic benefit on the recorded assets.
Impairment is measured on an asset specific basis based upon the
fair value of the assets or the discounted expected future cash
flows.
The accompanying notes are an integral part of these consolidated financial
statements.
9
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(E) INTANGIBLE ASSETS
In April, 1998, the AICPA issued Statement of Position 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"). SOP
98-5 provides guidance for the financial reporting of start-up
costs and organization costs. It requires costs of start-up
activities and organization costs to be expensed as incurred. The
Company has adopted SOP 98-5 as of December 31, 1998.
(F) INCOME TAX
Effective January 1, 1996, the Company, with the consent of its
stockholders, elected to be treated as an "S" Corporation for
income tax purposes, under which election federal and state
income taxes are payable by the individual stockholders rather
than the Company. Accordingly, no provision or liability for
income taxes has been included in the consolidated financial
statements for the year ended December 31, 1997.
On September 30, 1998, the Company terminated its election to be
treated as an S Corporation. The Company now accounts for income
taxes in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). SFAS No. 109 requires recognition of deferred tax
liabilities and assets for the expected future tax consequences
of events that have been included in the financial statements or
tax returns. Deferred tax liabilities and assets are determined
based on temporary differences between the financial statement
and tax bases of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to
reverse. The effect on deferred tax liabilities and assets of a
change in tax rates is recognized in income in the period that
includes the enactment date.
(G) EARNINGS PER SHARE
Earnings per share is determined in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share".
This statement establishes standards for computing and presenting
earnings per share ("EPS"). It replaces the presentation of
primary EPS with a presentation of basic EPS. This statement
requires restatement of all prior-period EPS data presented.
The accompanying notes are an integral part of these consolidated financial
statements.
10
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(G) EARNINGS PER SHARE (CONTINUED)
The net loss per share is computed by dividing the net loss for
the period by the weighted average number of shares outstanding
(as adjusted retroactively for the dilutive effect of common
stock options) for the period plus the dilutive effect of
outstanding common stock options and warrants considered to be
common stock equivalents. Stock options and other common stock
equivalents are excluded from the calculations as their effect
would be anti-dilutive. Common stock issued for nominal
consideration is deemed outstanding for all historical periods.
Basic and diluted earnings per share amounts are equal because
the Company has a net loss and consideration of the outstanding
options, warrants and their equivalents would result in anti-
dilutive effects to earnings per share.
The number of shares used to compute EPS was 5,842,939 and
5,836,439 for the quarters ended March 31, 2000 and 1999,
respectively.
(H) USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets
and liabilities at the date of the financial statements and the
related reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates made in preparation of the financial statements.
(I) FURNITURE AND EQUIPMENT
The Company's furniture and equipment is stated at cost.
Depreciation is computed on the straight-line method over the
estimated useful lives of the assets, which range from 3 to 5
years.
(J) CONCENTRATIONS OF CREDIT RISK
A major portion of the Company's business is expected to be
conducted using its patented technology. Consequently, the
Company's profitability may be subjected to changes in technology
and its use in commerce.
The accompanying notes are an integral part of these consolidated financial
statements.
11
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(K) NEW ACCOUNTING PRONOUNCEMENTS
The Company has adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No.
130") effective for the period ending December 31, 1998. SFAS No.
130 requires companies to report by major components and in
total, the change of its net assets during the period from non-
owner sources. The adoption of SFAS No. 130 did not have a
significant effect on the Company's financial position, results
of operations, or cash flow, since the Company does not have any
components of comprehensive income, other than net income from
operations.
During 1998, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" ("SFAS No. 131"). SFAS No.
131 establishes standards for the way companies report
information about operating segments in annual financial
statements and establishes standards for related disclosures
about products and services, geographic areas and major
customers. The Company's air purification business is currently
the only segment reportable under SFAS No. 131.
(L) PATENTS
The Company has applied for several patents in connection with
its technology; however, the Company has elected to expense all
costs associated with obtaining these patents for the quarter
ending March 31, 2000. During the first quarter, the total patent
costs charged to expense was $ 5,148.
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN
Since formation, the Company's operations have been devoted primarily
to:
. Raising capital
. Developing its product
. Obtaining financing
. Developing its marketing plan
The accompanying notes are an integral part of these consolidated financial
statements.
12
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 2 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN (CONTINUED)
Accordingly, the Company is considered to be in the development stage,
as its planned production and sales have not yet commenced.
Management's plans include the following:
. Commencement of production and development of new products
. Implementation of sales and leasing of commercial units
. Pursuing licensing agreements for the technology
The Company has made progress expanding the patent coverage and
marketing strategy. The Company has adopted a plan to implement
certain courses of action for raising capital and marketing. The
Company has also held presentations for major companies, to license
the technology, sell or distribute its products.
The Company has been in the development stage since its inception on
February 27, 1995. These statements are presented on the basis that
the Company will continue as a going concern. This contemplates the
realization of assets and the satisfaction of liabilities in the
normal course of business over a reasonable length of time. As shown
in the accompanying consolidated financial statements, the Company has
incurred net losses during the Quarters ended March 31, 2000 and 1999
of $81,226 and $65,885 respectively. As of March 31, 2000, current
liabilities exceeded current assets by $765,220.
These factors, as well as the Company's ability to obtain additional
long-term financing, adequate stockholder capital contributions and
future equity funding, raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of
these uncertainties.
NOTE 3 - RELATED PARTIES
General and administrative expenses include $8,000 and $8,700 in the
quarter ended March 31, 2000 and 1999 relating to consulting services
by shareholders charged to operations.
The accompanying notes are an integral part of these consolidated financial
statements.
13
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 4 - FURNITURE AND EQUIPMENT
2000 1999
---------- ----------
Furniture and equipment $ 43,703 $ 37,534
Less accumulated depreciation 30,839 25,878
---------- ----------
$ 12,864 $ 11,656
========== ==========
Depreciation expense for the quarters ended March 31, 2000 and 1999
was $2,080 and $2,271, respectively.
NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
These accounts consist of the following:
2000 1999
---------- ----------
Accounts payable $ 234,479 $ 180,194
Accrued interest 71,313 18,839
---------- ----------
$ 305,792 $ 199,033
========== ==========
NOTE 6 - NOTES PAYABLE TO STOCKHOLDERS
The notes payable to stockholders at March 31, 2000 and 1999 is
comprised of the following:
2000 1999
---------- ----------
Note accruing interest at 10%; all unpaid
interest and principal became due June,
1998, and is personally guaranteed by three
of the Company's stockholders. As of
December 31, 1998 this note was payable on
demand and was accruing interest at the
default rate of 18%. $ 100,000 $ 100,000
Note accruing interest at 12%; maturing the
earlier of: (a) the infusing of gross
proceeds of
The accompanying notes are an integral part of these consolidated financial
statements.
14
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 6 - NOTES PAYABLE TO STOCKHOLDERS (CONTINUED)
The notes payable to stockholders at March 31, 2000 and 1999 is
comprised of the following:
2000 1999
--------------- ---------------
$300,000 in additional debt or equity capital, (b)
the closing of an initial public offering or
"reverse merger" of the Company into a publically
traded entity or (c) December 31, 1999. 50,000 100,000
Unsecured loan, interest accruing at 8.75% payable
annually commencing December, 1996. Loan matured
December, 1998 at which time all principal and
unpaid interest was due. As of December 31, 1998
this note was payable on demand and was accruing
interest at the default rate of 18%. 80,000 80,000
Various unsecured loans, interest accruing at 15%,
with maturity dates ranging from January, 1999 to
March, 1999. These notes were renewed and now have
maturity dates ranging from June - July 2000. 163,000 50,000
Various unsecured loans, interest accruing at 12%,
with maturity dates ranging through April 2000.
These notes were renewed and now have maturity
dates ranging from, 1999 to December 1999. 77,300 -
------------ ------------
$ 470,300 $ 330,000
============ ============
The accompanying notes are an integral part of these consolidated financial
statements.
15
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 7 - COMMITMENTS AND CONTINGENCIES
LITIGATION
The Company, from time to time, is a defendant in legal actions
arising from normal business activities. Management has reviewed
pending litigation with legal counsel and believes that those actions
are without merit or that the ultimate liability, if any, resulting
from them will not materially affect the Company's financial position.
LEASE OBLIGATION
In March 1997, the Company entered into a noncancelable equipment
lease totaling $52,088. The factory in which this equipment was
located was abandoned during 1997. The Company, however, could not
cancel this lease and therefore, continues to make monthly payments.
Future minimum lease payments under this lease consisted of the
following at March 31, 2000.
Years ending March 31,
2001 10,418
2002 9,559
--------
$ 19,977
========
DESIGN AND CONSULTING AGREEMENT
During 1997, the Company entered into a design and consulting service
agreement with a third party in which it shall pay a royalty of $1 for
each unit sold for a period of five years, commencing on the date of
first sale. The Company will pay the same $1 royalty for an additional
45 years with respect to sales of the original product made by the
Company to customers introduced to the Company by this firm.
The accompanying notes are an integral part of these consolidated financial
statements.
16
NOTE 8 - STOCKHOLDERS' DEFICIT
LOSS PER SHARE
Loss per share is computed by dividing net loss by the number of
outstanding shares of common stock. Net loss per share for the periods
presented does not include the effects of stock options and warrants
because their effects would be anti-dilutive.
The accompanying notes are an integral part of these consolidated financial
statements.
17
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 8 - STOCKHOLDERS' DEFICIT (CONTINUED)
The following table sets forth the computation of net loss per share:
For the Period
February 27,
1995
Quarter Quarter (Inception)
Ended Ended through
March 31, March 31, March 31,
2000 1999 2000
---------- ---------- ----------
Net loss $ (81,227) $ (65,885) $ (2,012,548)
========== ========== ==========
Weighted average common shares
outstanding used in computing basic
net loss per share 5,842,939 5,836,439 5,842,939
========== ========== ==========
Net loss per share of common stock $ (0.01) $ (0.01) $ (0.34)
========== ========== ==========
During 1997, the Company amended its articles of incorporation and
changed the capital structure from common stock authorized of 1,000
shares with a par value of $1, to 10,000,000 shares of common stock
authorized with a par value of $.001 and authorized preferred stock of
5,000,000 shares with a par value of $.001. During 1997, the Company
also effectuated two stock splits, a 2,000 for 1 stock split and a
3.60266 for 1 stock split, for its common stock. The statement of
stockholder's deficit reflects the effect of these stock splits and
change in par value retroactively.
During 1995, the Company issued 3,700,497 shares of common stock for
$92,715.
During 1996, the Company issued 94,228 shares of common stock for
$60,000. An additional 946,727 shares of common stock were issued
during 1997 for $759,750. The Company incurred $60,595 of expenses
related to this issuance. Also during 1997, 10,000 shares of common
stock were issued to an individual who loaned money to the Company.
The accompanying notes are an integral part of these consolidated financial
statements.
18
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 8 - STOCKHOLDERS' DEFICIT (CONTINUED)
During 1998, the Company issued 112,000 shares of common stock for a
stock subscription receivable of $15,000 and $199,000 in cash. Also in
1998, the Company issued 75,000 shares of common stock in repayment
of a previously outstanding $150,000 loan.
During 1998, 897,987 shares of common stock were issued in exchange
for services provided to the Company. These shares were issued and
recorded at $86,530, the market value of the services received. This
amount includes 737,487 shares issued for services related to costs of
fees for placing the common stock. The market value of the placement
fees totaled $70,480 and are reflected as a direct reduction of
additional paid-in capital in the consolidated statements of
stockholders' deficit.
During 1999, the Company issued 6,500 shares of common stock for
$32,500. Costs related to the registration of the Company were
charged against Additional paid-in-capital in the amount of $11,208.
None of these shares were sold through National Association of
Securities Dealers, Inc. (NASD) Broker/Dealers, nor were any
commissions paid for these shares. None of the shares issued for
services have been issued for future sales of stock.
NOTE 9 - FAIR VALUE
The Company has estimated the fair value of its financial instruments
at March 31, 2000 and 1999, as required by Statement of Financial
Accounting Standards No. 107, "Disclosure about Fair Value of
Financial Instruments." The carrying values of cash, accounts
receivable, stock subscription receivable, accounts payable and
accrued expenses and debt are reasonable estimates of their fair
values.
The accompanying notes are an integral part of these consolidated financial
statements.
19
ECO-RX, INC. F/K/A ECO-AIRE COMPANY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTER ENDED MARCH 31, 2000 AND 1999
(UNAUDITED)
NOTE 10 - INCOME TAXES
The Company has federal and state net operating loss carryforwards as
follows:
Period Ending Federal State Year of Expiration
---------------------- ----------- ----------- ------------------
December 31, 1998 $ 507,543 $ 507,543 2018
=========== ===========
December 31, 1999 $ 230,302 $ 230,302 2019
=========== ===========
March 31, 2000 $ 81,227 $ 81,227 2020
=========== ===========
The deferred tax asset arises from the net operating loss reflected
above.
The Company's total deferred tax liabilities, deferred tax assets and
deferred tax asset valuation allowances at March 31, 2000 are as
follows:
Total Deferred Tax Asset $ 294,865
Less Valuation Allowance 294,865
----------
Net Deferred Tax Asset $ -0-
==========
The Company provides a 100 percent valuation allowance for any
deferred tax asset which is attributable to unused net operating loss
carryforwards. Generally accepted accounting principles require a
valuation reserve only if it is more likely than not that some portion
or all of a deferred tax asset will not be realized.
NOTE 11 - SUBSEQUENT EVENTS
In April, 2000, the Company executed a five year lease for space in
Hollywood, Florida to house the administrative office, product
assembly and shipping operations.
The accompanying notes are an integral part of these consolidated financial
statements.
20
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion and analysis should be read in conjunction with the
unaudited Condensed Financial Statements and Notes thereto appearing elsewhere
in this report.
(a) Eco-Rx's plan of operation for the next twelve months
. Complete the process of filing a Form 10 with the Securities And
Exchange Commission. Upon acceptance of the filing, Eco-Rx will apply
to be traded on the NASD BB;
. Complete the design of four air purification units; two small room
units, as well as one each for medium and larger rooms, and have them
tested at an independent laboratory to insure that they meet the
Company's requirements;
. Have the production molds for manufacturing the units designed and
built;
. Commence the work necessary to submit the finished unit for a 510-K
medical device rating from the Food and Drug Administration;
. Ascertain that the Company's patent applications comply with the final
design criteria;
. Finalize the list of suppliers;
. Acquire and inventory the component parts that the Company does not
intend to manufacture;
. Design and print sales materials and packaging materials;
. Lease a property to serve as the Company's administrative offices,
machine assembly and shipping facility. There will be no need for
significant equipment for the assembly process. A lease was signed in
Hollywood, Florida in April.
. Sell and ship finished products;
. Fill in product line with additional air purification products;
. Begin development and design of new products; and
Pursue licensing agreements for the Company's technology.
21
(b) Product Research and Development for the Next 12 Months
Over the next 12 months, the Company anticipates its product research and
development will be for (a) air purification products for automobiles and
trucks and home central air conditioning systems, and (b) water
purification applications utilizing the technology.
(c) Expenditures for the Next 12 Months
The Company anticipates that its cash requirements over the next 12 months
will total approximately $ 2,000,000, including the cost of production of
plastic injection molds for the products. The Company intends to raise
approximately $2,000,000 in a nonpublic offering.
(d) The Company will hire a new chief executive officer and a new chief
financial officer, a secretary/receptionist, a plant manager and plant
assembly and shipping workers depending upon need.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is not a party to any material pending legal proceedings and, to the
best of its knowledge, no such action by or against the Company has been
threatened.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
The Company is in default on three notes payable. In February 2000, the Company
paid $5,000 in interest to extend two of the notes, one for $100,000 and one for
$80,000. They are now due on demand, accruing interest at the default rate of
18%. The third note for $100,000 was due at the end of 1999. It has been
reduced to $50,000. The note holder has asked for payment but is waiting for
payment.
Item 4. Submission of matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
(a) See exhibits
(b) No reports on Form 8-k were filed during the quarterly period ended
March 31, 2000.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ECO-Rx, Inc.
---------------------------------
(Registrant)
Date August 21,2000 By: /s/ Joseph M. Peiken, CFO
--------------------- -----------------------------
(Signature)
23
PART III
Item 1. Index to Exhibits
Exhibit No. Description Page No.
- ----------- ----------- --------
3.1 Articles of Incorporation of Registrant,
as originally filed and amended (1)
3.2 Bylaws of Registrant (1)
4.1 Form of Common Stock Certificate (1)
10.1 Consulting Agreement with Fitch,
Inc. dated January 17, 1997 (1)
10.2 Office Lease (2)
27 Financial Data Schedule
(1) Previously filed as an Exhibit to Registrant's Form 10-SB (file 0-28117)
and incorporated herein by this reference.
(2) Previously filed as an Exhibit to Registrant's Form 10-KSB for the year
ended December 31, 1999, and incorporated herein by this reference.
Item 2. Description of Exhibits
None
24