U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: December 31, 2003
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _______________ to __________________
Commission file number 0-28879
WILMINGTON REXFORD, INC.
(Exact name of small business issuer as specified in its charter)
DELAWARE 98-0348508
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3753 HOWARD HUGHES PARKWAY, #200, LAS VEGAS, NEVADA 89109
(Address of principal executive offices)
(702) 784-5140
(Issuer's telephone number)
SEPTEMBER 30
(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 No X
--- ---
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the last practicable date:
15,196,035 SHARES OF COMMON STOCK, $0.0001 PAR VALUE, AS OF
DECEMBER 31, 2003
Transitional Small Business Disclosure Format (check one); Yes No X
---- ----
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements 3
Consolidated Balance Sheet as of December 31, 2003 (unaudited) 4
Consolidated Statements of Operations and Comprehensive Loss
for the three months ended December 31, 2003 and 2002
(unaudited) 5
Consolidated Statements of Cash Flows
for the three months ended December 31, 2003 and 2002
(unaudited) 6
Notes to consolidated financial statements (unaudited) 7 - 14
ITEM 2. Management's Discussion and Analysis or Plan of Operations 15
ITEM 3. Controls and Procedures 18
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings 19
ITEM 2. Change in Securities 19
ITEM 3. Defaults upon Senior Securities 19
ITEM 4. Submission of Matters to a Vote of Security Holders 19
ITEM 5. Other Information 19
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURE
2
WILMINGTON REXFORD, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
3
WILMINGTON REXFORD, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003 (UNAUDITED)
===============================================================================================
ASSETS
===============================================================================================
CURRENT ASSETS
Cash $ -
Accounts Receivable -
Inventory -
Prepaid and other Current Assets -
- -----------------------------------------------------------------------------------------------
Total Current Assets -
PROPERTY AND EQUIPMENT, net of accumulated depreciation of $239,824 103,250
ADVANCES DUE FROM RELATED PARTIES 77,007
INVESTMENTS 250
- -----------------------------------------------------------------------------------------------
TOTAL ASSETS $ 180,507
===============================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
===============================================================================================
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 122,674
Notes payable - stockholder 325,790
- -----------------------------------------------------------------------------------------------
Total current liabilities 448,464
- -----------------------------------------------------------------------------------------------
LEASE COMMITMENTS
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0001 per share, 1,000,000 shares
authorized, zero issued and outstanding -
Common stock, par value $0.0001 per share, 20,000,000 shares
authorized, 15,196,035 issued and outstanding 820,843
Additional paid-in capital 3,800,406
Deficit (4,889,206)
- -----------------------------------------------------------------------------------------------
Total stockholders' equity (267,957)
- -----------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 180,507
===============================================================================================
See accompanying notes - unaudited.
4
WILMINGTON REXFORD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTH PERIODS ENDED DECEMBER 31, 2003 AND 2002 (UNAUDITED)
=============================================================================================================
2003 2002
=============================================================================================================
SALES ($378,229 to related parties in 2002) $ - $ 635,055
COST OF SALES - 484,839
- -------------------------------------------------------------------------------------------------------------
GROSS MARGIN - 150,216
Operating expenses ($30,000 to a related party in 2003) 35,910 224,486
Depreciation and amortization 19,717 23,934
Loss of Sale of Fixed Asset (Gain) 28,020 6,483
- -------------------------------------------------------------------------------------------------------------
NET LOSS $ 83,647 $ 104,687
=============================================================================================================
OTHER COMPREHENSIVE (LOSS) INCOME
Unrealized gain on investment $ - $ -
Foreign currency translation adjustment ( -) ( 662)
- -------------------------------------------------------------------------------------------------------------
COMPREHENSIVE LOSS $ - $ 105,349
=============================================================================================================
Net loss per share, basic and diluted ($ 0.006) ($ 0.02)
=============================================================================================================
Weighted average common shares outstanding, basic and diluted 15,196,035 5,965,266
=============================================================================================================
See accompanying notes - unaudited.
5
WILMINGTON REXFORD, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS ENDED DECEMBER 31, 2003 AND 2002 (UNAUDITED)
=================================================================================================================
2003 2002
=================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 83,647) ( $ 104,687)
- -----------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 19,717 23,934
Loss on disposal of fixed assets 28,020 -
Cumulative translation adjustment ( 4,540)
(Increase) decrease in operating assets:
Accounts receivable 24,926 ( 173,190)
Due from related parties 51,103 -
(Decrease) increase in operating liabilities:
Inventory - 83,378
Prepaid expenses and other current assets - ( 66)
Accounts payable and accrued liabilities ( 125,202) 177,556
- -----------------------------------------------------------------------------------------------------------------
Total adjustments ( 5,976) 111,612
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities ( 89,623) 6,925
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investments ( 250)
Net repayments from related party - -
Loans to related parties ( -) ( 111,707)
Purchase of property and equipment ( -) ( 5,561)
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities ( 250) ( 117,268)
- -----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party 89,347 107,031
Net (repayments) borrowings on line of credit facility - -
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities - 107,031
- -----------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATES ON CASH ( -) ( 689)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH ( 526) ( 4,001)
CASH AT BEGINNING OF PERIOD 526 26,262
- -----------------------------------------------------------------------------------------------------------------
CASH AT END OF PERIOD $ - $ 22,261
=================================================================================================================
Supplemental Disclosures:
- -----------------------------------------------------------------------------------------------------------------
Interest paid $ - $ -
=================================================================================================================
Income taxes paid $ - $ -
=================================================================================================================
Supplemental Disclosures of Non-cash Investing and Financing Activities:
- -----------------------------------------------------------------------------------------------------------------
During the quarter ended December 31, 2002, the Company issued 10,000,000
shares of common stock in exchange for a $200,000 reduction to its note
payable-stockholder $ - $ 200,000
=================================================================================================================
See accompanying notes - unaudited.
6
WILMINGTON REXFORD, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
================================================================================
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted
in the United States of America for interim financial information and
with the instructions to Form 10-QSB for quarterly reports under
section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United
States of America for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair
presentation have been included and such adjustments are of a normal
recurring nature. Operating results for the three-month period ended
December 31, 2003 are not necessarily indicative of the results that
may be expected for a full year of operations.
The audited financial statements at September 30, 2003, which are
included in the Company's Annual Report on Form 10-KSB should be read
in conjunction with these consolidated financial statements.
CONSOLIDATION
The consolidated financial statements include the accounts of
Wilmington Rexford, Inc. (Parent) and its wholly owned subsidiary
E-Trend Networks, Inc. (E-Trend) and E-Trend's (collectively "the
Company"). All significant intercompany balances and transactions have
been eliminated in consolidation.
In October of 2003 after 4 years of substantial losses in its two
subsidiary operations the company's board of directors decided to
institute a plan of reorganization whereby E-Trend Networks would
reorganize its operation assets into minority equity stakes in much
larger funded companies. Agreements were completed that would exchange
its 100% ownership in Langara Entertainment, Inc. and EntertainMe.com
for a equity stakes in Langara Group, Inc. and Fly.com, Inc. both of
which could continue to finance the operating losses as well as
provide additional growth for these operations providing added value
over time to the company and its shareholders.
BUSINESS ACTIVITY
Wilmington Rexford, Inc. (WilRex) was incorporated on June 17, 1996
under the laws of the State of Colorado and changed its domicile in
February 2001 to the State of Delaware. WilRex targets investment
opportunities in industries with the potential to achieve significant
capital appreciation. E-Trend Networks, Inc (E-Trend) was incorporated
on April 29, 1999 under the laws of the State of Nevada and is an
online business software company.
7
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost. Expenditures for major
betterments and additions are charged to the asset accounts, while
replacements, maintenance and repairs, which do not extend the lives
of the respective assets are charged to expense currently.
Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows
is less than the carrying amount of the asset, a loss is recognized
for the difference between the fair value and carrying value of the
asset.
DEPRECIATION AND AMORTIZATION
Depreciation of property and equipment is computed using the
straight-line method over the estimated useful lives of the assets.
Amortization of leasehold improvements and property under capital
leases is computed on a straight-line basis over the shorter of the
estimated useful lives of the assets or the term of the lease. The
range of useful lives is between 3 and 10 years.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments" requires that the Company
disclose estimated fair values for its financial instruments. The
following methods and assumptions were used by the Company in
estimating the fair values of each class of financial instruments
disclosed herein:
CASH - The carrying amount approximates fair value because of the
short maturity of those instruments.
8
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
NOTES PAYABLE - The fair value of notes payable are estimated
using discounted cash flows analyses based on the Company's
incremental borrowing rates for similar types of borrowing
arrangements. At December 31, 2003, the fair value approximates
the carrying value.
ADVANCES DUE FROM RELATED PARTIES - The fair value of advances
due from related parties are determined by calculating the
present value of the instruments using a current market rate of
interest as compared to the stated rate of interest and giving
effect for the right to offset with the note payable to
stockholder in the event of non-performance. At December 31,
2003, the fair value approximates the carrying value.
INCOME TAXES
The Company accounts for income taxes according to Statement of
Financial Accounting Standards No. 109, which requires a liability
approach to calculating deferred income taxes. Under this method, the
Company records deferred taxes based on temporary differences between
the tax bases of the Company's assets and liabilities and their
financial reporting bases. A valuation allowance is established when
it is more likely than not that some or all of the deferred tax assets
will not be realized.
STOCK COMPENSATION
Options granted to employees under the Company's Stock Option Plan are
accounted for by using the intrinsic method under APB Opinion 25,
Accounting for Stock Issued to Employees (APB 25). In October 1995,
the Financial Accounting Standards Board issued Statement No. 123,
Accounting for Stock-Based Compensation (SFAS 123), which defines a
fair value based method of accounting for stock options. The
accounting standards prescribed by SFAS 123 are optional and the
Company has continued to account for stock options under the intrinsic
value method specified in APB 25.
9
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
NET LOSS PER SHARE
The Company applies Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (FAS 128) which requires dual presentation
of net earnings (loss) per share: Basic and Diluted. Basic earnings
(loss) per share is computed using the weighted average number of
common shares outstanding during the period. Diluted earnings per
share is computed using the weighted average number of common shares
outstanding during the period adjusted for the effect of dilutive
outstanding options and warrants. Outstanding stock options and
warrants were not considered in the calculation of diluted net loss
per share as their effect was anti-dilutive.
SEGMENT REPORTING
The Company applies Financial Accounting Standards Boards ("FASB")
statement No. 131, "Disclosure about Segments of an Enterprise and
Related Information." The Company has considered its operations and
has determined that it operates in three operating segments for
purposes of presenting financial information and evaluating
performance. The Parent targets investment opportunities, while
E-Trend is an online software development company. As such, the
accompanying financial statements present information in a format that
is consistent with the financial information used by management for
internal use.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the respective
reporting period. Actual results could differ from those estimates.
10
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NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 142, "Goodwill and
Other Intangible Assets" (SFAS 142), which is effective for fiscal
years beginning after December 15, 2002, except goodwill and
intangible assets acquired after June 30, 2002 are subject immediately
to the non-amortization and amortization provisions of this Statement.
Under the new rules, goodwill and intangible assets deemed to have
indefinite lives will no longer be amortized but will be subject to
annual impairment tests in accordance with the Statement. Other
intangible assets will continue to be amortized over their useful
lives. The Company has not yet determined what the effects of this
Statement will be on its financial position and results of operations.
A reconciliation of reported net loss adjusted to reflect the adoption
of SFAS 142 is provided below:
For The Three Months
Ended December 31,
---------------------------------
2003 2002
==================================================================================
Reported net loss ( $ 83,647) ( $ 104,687)
Add-back goodwill amortization, net of tax - -
----------------------------------------------------------------------------------
Adjusted net loss ( $ 83,647) ( $ 104,687)
==================================================================================
Reported basic net loss per share ( $ 0.006) ( $ 0.02)
Add-back goodwill amortization, net of tax - -
----------------------------------------------------------------------------------
Adjusted basic net loss per share ( $ 0.006) ( $ 0.02)
==================================================================================
In August 2001, the Financial Accounting Standards Board Issued
Statement of Financial Accounting Standards No. 143 "Accounting for
Asset Retirement Obligations", effective for fiscal years beginning
after June 15, 2002. This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated retirement costs. The adoption of
this Statement did not have a material impact on the financial
statements.
In October 2001, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 144 "Accounting for
the Impairment or Disposal of Long-lived Assets", effective for fiscal
years beginning after December 15, 2001. This statement addresses
financial accounting and reporting for the impairment or disposal of
long-lived assets. The adoption of this Statement did not have a
material impact on the financial statements.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections". This statement, among other things, eliminates
an inconsistency between required accounting for certain
sale-leaseback transactions and provides other technical corrections.
The adoption of this Statement did not have a material impact on the
financial statements.
11
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities". This statement addresses
accounting and reporting for costs associated with exit or disposal
activities and nullifies Emerging Issues Task Force Issue No. 94-3.
This statement is effective for exit or disposal costs initiated after
December 31, 2002, with early adoption encouraged. The Company has not
yet determined what the effects of this Statement will be on its
financial position and results of operations.
In November 2002, the Emerging Issues Task Force ("EITF") reached a
consensus on Issue No. 00-21, "Revenue Arrangements with Multiple
Deliverables." EITF Issue No. 00-21 provides guidance on how to
account for arrangements that involve the delivery or performance of
multiple products, services and/or rights to use assets. The
provisions of EITF Issue No. 00-21 will apply to revenue arrangements
entered into in fiscal periods beginning after June 15, 2003. The
Company has not yet determined what the effects of this Statement will
be on its financial position and results of operations.
In November 2002, the FASB issued FASB Interpretation No. 45
("FIN45"), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others."
FIN 45 requires that a liability be recorded in the guarantor's
balance sheet upon issuance of a guarantee. In addition, FIN 45
requires disclosures about the guarantees that an entity has issued,
including a reconciliation of changes in the entity's product warranty
liabilities. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002, irrespective of
the guarantor's fiscal year-end. The disclosure requirements of FIN 45
are effective for financial statements of interim or annual periods
ending after December 15, 2002. The adoption of this Statement did not
have a material impact on the financial statements.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation, Transition and Disclosure." SFAS No. 148
provides alternative methods of transition for a voluntary change to
the fair value based method of accounting for stock-based employee
compensation. SFAS No. 148 also requires that disclosures of the pro
forma effect of using the fair value method of accounting for
stock-based employee compensation be displayed more prominently and in
a tabular format. Additionally, SFAS No. 148 requires disclosure of
the pro forma effect in interim financial statements. The transition
and annual disclosure requirements of SFAS No. 148 are effective for
fiscal years ended after December 15, 2002. The interim disclosure
requirements are effective for interim periods beginning after
December 15, 2002. The Company has not yet determined what the effects
of this Statement will be on its financial position and results of
operations.
12
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
================================================================================
In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN
46"), "Consolidation of Variable Interest Entities, an Interpretation
of ARB No. 51." FIN 46 requires certain variable interest entities to
be consolidated by the primary beneficiary of the entity if the equity
investors in the entity do not have the characteristics of a
controlling financial interest or do not have sufficient equity at
risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 is effective
immediately for all new variable interest entities created or acquired
after January 31, 2003. For variable interest entities created or
acquired prior to February 1, 2003, the provisions of FIN 46 must be
applied for the first interim or annual period beginning after June
15, 2003. The Company has not yet determined what the effects of this
Statement will be on its financial position and results of operations.
================================================================================
NOTE 2. LIQUIDITY AND CAPITAL RESOURCES
================================================================================
The accompanying consolidated financial statements have been prepared
in conformity with accounting principles generally accepted in the
United States of America, which contemplates continuation of the
Company as a going concern. Going concern assumes that the Company
will continue in operations for the foreseeable future and will be
able to realize its assets and discharge its liabilities in the normal
course of operations.
The Company has incurred substantial operating losses and negative
cash flows from operations from inception through December 31, 2003.
Although has effectively completed a full restructure and a new
acquisition is currently being completed. The Company believes that
after this reorganization and acquisition it will become cash flow
positive from operations by the end of its new fiscal year ending
December 31, 2004, but there can be no assurance that this will occur.
In the absence of achieving positive cash flows from operations or
obtaining additional debt or equity financing, the Company may have
difficulty meeting obligations as they become due, and may be forced
to discontinue a business segment or overall operations.
Management believes that actions presently being taken, as described
in the preceding paragraph, provide the opportunity for the Company to
continue as a going concern, however, there is no assurance this will
occur.
13
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NOTE 3. RELATED PARTY TRANSACTIONS
================================================================================
NOTES PAYABLE STOCKHOLDER
At December 31, 2003, the Company has borrowed a total of $325,790
from eAngels. The notes bear no interest from October 1, 2003 and are
due on March 31, 2004. These notes are not required to be repaid to
the extent that the advances due from related parties discussed below
are not collected.
ADVANCES DUE FROM RELATED PARTIES
At December 31, 2003, the Company has advanced a total of $77,007 to
an entity controlled by the majority shareholder of the Company. These
advances bear no interest.
MANAGEMENT FEE
During the quarter ended December 31, 2003, the Company incurred a
$30,000 management fee to eAngels. This amount was unpaid as of
December 31, 2003 and is included in notes payable stockholder.
14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Management Discussion and Analysis (MD&A) focuses on key statistics from
the consolidated financial statements of Wilmington Rexford, Inc. for the three
months ended December 31, 2003, and pertains to known risks and uncertainties
relating to its businesses. This MD&A should not be considered all-inclusive, as
it excludes changes that may occur in general economic, political, and
environmental conditions. This MD&A of the financial condition and results of
operations for the three months ended December 31, 2003, should be read in
conjunction with the consolidated financial statements and related notes of
Wilmington Rexford, Inc.
RECENT EVENTS
In the first and second quarters of fiscal 2004 (October 2003 to February 2004),
Wilmington Rexford has been undergoing some serious financial restructuring to
help stop the cash burn due to continued money losing operations. On February
13, 2004, Wilmington Rexford entered into a complete reorganization plan and
acquisition of a Chinese-based company. The terms of this new plan will provide
for full payment of all outstanding Wilmington Rexford debts and allow E-Trend
Networks, Inc. to spin off and continue as a separate public company.
In October of 2003 after 4 years of substantial losses in its two subsidiary
operations the company's board of directors decided to institute a plan of
reorganization whereby E-Trend Networks would reorganize its operation assets
into minority equity stakes in much larger funded companies. Agreements were
completed that would exchange its 100% ownership in Langara Entertainment, Inc.
and EntertainMe.com for a equity stakes in Langara Group, Inc. and Fly.com, Inc.
both of which could continue to finance the operating losses as well as provide
additional growth for these operations providing added value over time to the
company and its shareholders.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of our financial condition and results of operations
are based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States
of America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues, and expenses, and related disclosures of contingent assets and
liabilities. On an ongoing basis, we evaluate our estimates, including those
related to impairment of long-lived assets. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions; however, we believe that
our estimates, including those for the above-described items, are reasonable.
IMPAIRMENT OF LONG-LIVED ASSETS. Our long-lived assets include property,
equipment, and goodwill. We assess impairment of long-lived assets whenever
changes or events indicate that the carrying value may not be recoverable. In
performing our assessment, we must make assumptions regarding estimated future
cash flows and other factors to determine the fair value of the respective
assets. If these estimates change, in the future we may be required to record
impairment charges against these respective assets.
15
STOCK BASED COMPENSATION. Options granted to employees under the Company's Stock
Option Plan are accounted for by using the intrinsic method under APB Opinion
25, Accounting for Stock Issued to Employees (APB 25). In October 1995, the
Financial Accounting Standards Board issued Statement No. 123, Accounting for
Stock-Based Compensation (SFAS123), which defines a fair value based method of
accounting for stock options. The accounting standards prescribed by SFAS 123
are optional and the Company has continued to account for stock options under
the intrinsic value method specified in APB 25.
RESULTS OF OPERATIONS
NET SALES
Net sales were $nil and $635,055 for the three months ended December 31, 2003
and December 31, 2002, respectively, reflecting the disposition of E-Trend's two
money losing entities; EntertainMe.com and Langara Entertainment, Inc.
GROSS PROFIT
Gross profit was $nil and $150,216 for the three months ended December 31, 2003
and 2002, respectively.
OPERATING COSTS
Operating expenses consist of payroll and related expenses for executive,
finance and administrative personnel, recruiting, professional fees and other
general corporate expenses; payroll and related expenses for development,
editorial, systems and telecommunications operations personnel and consultants;
systems and telecommunications infrastructure. Operating expenses were $35,910
and $224,486 for the three months ended December 31, 2003 and 2002,
respectively. While the Company disposed of Langara and Entertainme.com, it
still incurred operating expenses for General Management and asset depreciation
of the company for the quarter. Additionally, $28,020 was expensed for the loss
on the sale of Langara Entertainment, Inc.
NET LOSS
Net loss for the quarter was $83,647 and $104,687 for the three months ended
December 31, 2003 and 2002, respectively, a decrease in net loss of 20%. The
improvement in net loss in comparison with the prior period was primarily due to
the disposition of Langara and Entertainme.com.
LIQUIDITY AND CAPITAL RESOURCES
On December 31, 2003, the Company had a working capital deficit of $448,464
compared to a working capital deficit of $651,745 on September 30, 2003. Our
cash balance was $nil as of December 31, 2003, as compared to $526 at September
30, 2003.
The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplates continuation of the Company as a going concern.
Going concern assumes that the Company will continue in operations for the
foreseeable future and will be able to realize its assets and discharge its
liabilities in the normal course of operations.
16
The Company has incurred substantial operating losses and negative cash flows
from operations from inception through September 30, 2003. Due to the serious
financial condition at September 30, 2003 negotiation immediately began to
provide Wilmington Rexford with the ability to pay down its debts and stop the
negative cash flow. The moves made in the first quarter and second quarter of
fiscal 2004 have positioned Wilmington Rexford and its shareholders for the
opportunity at a continued shareholding in and newly reorganized Wilmington
Rexford, Inc. as it becomes China Pharmaceuticals Corporation and completes its
pending acquisition and also an independent shareholding in a reorganized
independent E-Trend Networks as it spins out as part of the reorganization plan.
There is no assurance that this reorganization will be completed, but the
company and its officers and directors are moving aggressively toward a closing.
Our failure to complete this reorganization could result in delay or the
indefinite postponement of attaining profitability, and the possible loss of
your entire investment.
PLAN OF OPERATION
After years of unprofitable operations for both Langara Entertainment and
EntertainMe.com owned by our wholly owned subsidiary, E-Trend Networks, Inc. has
exchanged its operating assets for non-controlling equity stakes in two related
party operations (Langara Group, Inc. and Fly.com, Inc.), which have the
financial means necessary to continue the operations through profitability thus
resulting in a value for the company and its shareholders.
After these two agreements were completed, which released the financial pressure
of having to continue to finance the operating losses in difficult market
conditions; Wilmington Rexford continued its fiscal 2004 reorganization plan by
completing an agreement with China Merchants DiChain Investment Holdings Limited
in order to acquire one of their operating companies and bring in some
additional financing for this new acquisition.
On February 13th, 2004 Wilmington Rexford and its board of directors finalized
its financial restructuring plan by agreeing and executing a share exchange
agreement whereby the operations of Wilmington Rexford will be reorganized on a
go forward basis as follows:
1. E-Trend Networks, Inc., wholly owned subsidiary will be spun
out as a dividend to the shareholders on a 1 for 1 share basis. E-Trend
will continue its operations as a separate company with its own
independent management. The company will continue exploring future
additional eCommerce opportunities as well as added liquidity events
for its stakes in Langara Group, Inc. and Fly.com, Inc.
2. Wilmington Rexford, Inc., will acquire a controlling interest
in Zhejiang University Pharmaceutical, Co., Ltd ("Zheda Pharmacy") a
company incorporated in China. The reorganized company, China
Pharmaceuticals Corporation., will be positioned to become a leader in
China's fast growing pharmaceutical industry.
There is no assurance that this deal will close which could result in delay or
the indefinite postponement of attaining profitability, and the possible loss of
your entire investment.
17
FORWARD-LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-QSB, as well as
statements made by the company in periodic press releases, oral statements made
by the company's officials to analysts and shareholders in the course of
presentations about the company, constitute "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the company to be materially different from any future results, performance or
achievements expressed or implied by the forward looking statements. Such
factors include, among other things, (1) general economic and business
conditions; (2) interest rate changes; (3) the relative stability of the debt
and equity markets; (4) competition; (5) demographic changes; (6) government
regulations particularly those related to Internet commerce; (7) required
accounting changes; (8) equipment failures, power outages, or other events that
may interrupt Internet communications; (9) disputes or claims regarding the
company's proprietary rights to its software and intellectual property; and (10)
other factors over which the company has little or no control.
ITEM 3. CONTROLS AND PROCEDURES
Our chief executive officer and chief financial officer, based on their
evaluation of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934) as of December 31, 2003, have
concluded that our disclosure controls and procedures are adequate and effective
to ensure that material information relating to the registrant is recorded,
processed, summarized and reported within the time periods specified by the
SEC's rules and forms, particularly during the period in which this quarterly
report has been prepared.
Our chief executive officer and chief financial officer have concluded that
there were no significant changes in our internal controls or in other factors
that could significantly affect these controls subsequent to December 31, 2003,
the date of their most recent evaluation of such controls, and that there was no
significant deficiencies or material weaknesses in our internal controls.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
ITEM 2. CHANGES IN SECURITIES
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
Not Applicable.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) EXHIBITS
- --------------------------------------------------------------------------------
REGULATION
S-B NUMBER EXHIBIT
- --------------------------------------------------------------------------------
2.1 Agreement and Plan of Share Exchange (1)
- --------------------------------------------------------------------------------
3.1 Certificate of Incorporation, as amended (2)
- --------------------------------------------------------------------------------
3.2 Bylaws (2)
- --------------------------------------------------------------------------------
10.1 Debentures issued to eAngels EquiDebt Partners V, LLC (3)
- --------------------------------------------------------------------------------
10.2 Promissory Note from WorldVest Holding Corporation (3)
- --------------------------------------------------------------------------------
10.3 Promissory Note from FutureVest Corporation (3)
- --------------------------------------------------------------------------------
10.4 Promissory Note from South Beach Partners, LLC/South Beach
Entertainment (3)
- --------------------------------------------------------------------------------
10.5 Promissory Note from WSY Limited, Inc. (3)
- --------------------------------------------------------------------------------
10.6 Promissory Note from TransJet.com/Wild Toyz (3)
- --------------------------------------------------------------------------------
10.7 Promissory Note from GEMS Canada, Inc. to E-Trend Networks,
Inc. (8)
- --------------------------------------------------------------------------------
10.8 Share Exchange Agreement with Langara Group, Inc. (8)
- --------------------------------------------------------------------------------
10.9 Share Exchange Agreement with Fly.com, Inc. for
EntertainMe.com e-Commerce portal (8)
- --------------------------------------------------------------------------------
10.10 Share Exchange Agreement with China Merchants DiChain
Investment Holdings Limited (8)
- --------------------------------------------------------------------------------
16.1 Letter from KMPG LLP (4)
- --------------------------------------------------------------------------------
16.2 Letter from Kaufman, Rossin & Co., P.A. (5)
- --------------------------------------------------------------------------------
16.3 Letter from Beckstead and Watts, LLP (6)
- --------------------------------------------------------------------------------
16.4 Letter from De Joya & Company (7)
- --------------------------------------------------------------------------------
21 Subsidiaries of the registrant (2)
- --------------------------------------------------------------------------------
31.1 Rule 13a-14(a) Certification of Chief Executive Officer
- --------------------------------------------------------------------------------
31.2 Rule 13a-14(a) Certification of Chief Financial Officer
- --------------------------------------------------------------------------------
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- --------------------------------------------------------------------------------
32.2 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the exhibits to the registrant's definitive
proxy statement filed January 2, 2001.
20
(2) Incorporated by reference to the exhibits to the registrant's registration
statement on Form SB-2, file number 333-70184.
(3) Incorporated by reference to the exhibits to the registrant's annual report
on Form 10-KSB for the fiscal year ended September 30, 2002, file number
0-28879.
(4) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated May 1, 2002, filed May 7, 2002, file number
0-28879.
(5) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated August 28, 2003, filed September 24, 2003, file
number 0-28879.
(6) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated October 30, 2003, filed November 5, 2003, file
number 0-28879.
(7) Incorporated by reference to the exhibits to the registrant's current
report on Form 8-K dated December 5, 2003, filed February 12, 2004, file
number 0-28879.
(8) Incorporated by reference to the exhibits to the registrant's annual report
on Form 10-KSB for the fiscal year ended September 30, 2003, file number
0-28879.
Reports on Form 8-K: A Form 8-K for October 30, 2003 was filed November 5, 2003
and amended November 6, 2003, disclosing under Item 4 the change in the
registrant's certifying accountant. No financial statements were required to be
filed. A Form 8-K for December 5, 2003 was filed February 12, 2004, disclosing
under Item 4 the change in the registrant's certifying accountant. No financial
statements were required to be filed.
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.
WILMINGTON REXFORD, INC.
Date: March 7, 2004 By: /s/ AARON ZHU
------------------- ------------------------------------
Aaron Zhu, President
Date: March 5, 2004 By: /s/ GARRETT KRAUSE
-------------------- ------------------------------------
Garrett Krause
Interim Chief Financial Officer
21