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UNITED STATES
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 March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from _____________ to _____________
Commission file number: 0-21275
ENTER TECH CORP.
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(Exact name of small business issuer as specified in its charter)
Nevada 84-1349553
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
430 East 6th Street, Loveland, Colorado 80537
---------------------------------------------
(Address of principal executive offices)
970-669-4918 *
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(Issuer's telephone number)
* This is a new number
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 12, 2000, the issuer had
12,783,000 shares of common stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
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ENTER TECH CORP.
Form 10-QSB
For the Quarter Ended March 31, 2000
TABLE OF CONTENTS
PART I-FINANCIAL INFORMATION.............................................................................1
Item 1. Financial Statements.........................................................................1
Review Report of Independent Certified Public Accountant........................................1
Consolidated Balance Sheets as of March 31, 2000 and
December 31, 1999......................................................................2
Consolidated Statements of Operations, Three Months Ended
March 31, 2000 and March 31, 1999......................................................3
Consolidated Statements of Cash Flows, Three Months Ended
March 31, 2000 and March 31, 1999......................................................4
Notes to Consolidated Financial Statements......................................................5
Item 2. Plan of Operation............................................................................8
PART II-OTHER INFORMATION...............................................................................14
Item 1. Legal Proceedings...........................................................................14
Item 2. Changes in Securities.......................................................................14
Item 5. Other Information...........................................................................15
Item 6. Exhibits and Reports on Form 8-K............................................................16
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PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
REVIEW REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
The Board of Directors
Enter Tech Corporation
Loveland, Colorado
We have reviewed the accompanying balance sheet of Enter Tech Corp. as of March
31, 2000, and the related statements of operations and cash flows for the three
months then ended, in accordance with Statements on Standards for Accounting and
Review Services issued by the American Institute of Certified Public
Accountants. All information included in these financial statements is the
representation of the management of Enter Tech Corp.
A review of interim financial statements consists principally of inquiries of
Company personnel responsible for financial matters and analytical procedures
applied to financial data. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.
As discussed in the notes to the financial statements, certain conditions
indicate that the Company may be unable to continue as a going concern. The
accompanying financial statements do not include any adjustments to the
financial statements that might be necessary should the Company be unable to
continue as a going concern.
/s/ SCHUMACHER & ASSOCIATES, INC.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, Colorado 80211
May 10, 2000
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ENTER TECH CORP.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
March 31 December 31
2000 1999
Current Assets
Cash $ 42,011 $ 14
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Total Current Assets 42,011 14
Receivable, Wave Power 23,515 --
Equipment, net of accumulated
depreciation of $1,229 6,963 7,373
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Total Assets $ 72,489 $ 7,387
=========== =============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities:
Accounts payable $ 52,171 $ 35,512
Stock compensation payable 23,700 1,103,574
Customer deposits 60,000 60,000
Related party payables 357,794 322,009
Notes payable, other 115,806 15,806
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Total Current Liabilities 609,471 1,536,901
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Stockholders' (Deficit):
Preferred Stock, $.0001 par value,
5,000,000 shares authorized
none issued and outstanding -- --
Common Stock, $.0001 par value,
100,000,000 shares authorized
7,783,000 shares issued and
outstanding 778 385
Additional paid-in capital 1,470,099 381,618
Accumulated deficit (2,007,859) (1,911,517)
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Total Stockholders' (Deficit) (536,982) (1,529,514)
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Total Liabilities and
Stockholders' (Deficit) $ 72,489 $ 7,387
=========== =============
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
Revenues $ -- $ --
------------ ------------
Operating Expenses:
Depreciation 410 --
Supplies -- 496
Professional fees 77,162 39,200
Rent 4,500 2,700
Stock issued for services 9,000 --
Travel 2,572 2,255
Telephone 863 2,009
Other 1,835 2,103
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Total Operating Expenses 96,342 48,763
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Net Loss $ (96,342) $ (48,763)
============ ============
Per Share $ (.01) $ (.01)
============ ============
Weighted Average Number
of Shares Outstanding 7,783,000 3,650,000
============ ============
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Three Months
Ended Ended
March 31, March 31,
2000 1999
Cash Flows Operating Activities:
Net (loss) $ (96,342) $ (48,763)
Adjustment to reconcile net
(loss) to net cash provided
by operating activities:
Depreciation 410 --
Stock for services 9,000 --
Increase in receivable,
Wave Power (23,515) --
Increase in accounts payable
and accrued expenses 16,659 1,575
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Net Cash (Used in) Operating
Activities (93,788) (47,188)
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Cash Flows from Investing
Activities -- --
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Cash Flows from Financing
Activities:
Common stock issued and
additional paid-in capital -- --
Increase in notes payable 100,000 --
Increase in payable, related
parties 35,785 47,188
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135,785 47,188
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Increase in Cash 41,997 --
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Cash, Beginning of Period 14 --
============ ============
Cash, End of Period $ 42,011 $ --
============ ============
Interest Paid $ -- $ --
============ ============
Income Taxes Paid $ -- $ --
============ ============
The accompanying notes are an integral part of the financial statements.
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(1) Condensed Financial Statements
The financial statements included herein have been prepared by Enter Tech Corp.
without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted as allowed by such
rules and regulations, and Enter Tech Corp. believes that the disclosures are
adequate to make the information presented not misleading. It is suggested that
these financial statements be read in conjunction with the December 31, 1999
audited financial statements and the accompanying notes thereto.
While management believes the procedures followed in preparing these financial
statements are reasonable, the accuracy of the amounts are in some respect's
dependent upon the facts that will exist, and procedures that will be
accomplished by Enter Tech Corp. later in the year.
The management of Enter Tech Corp. believes that the accompanying unaudited
condensed financial statements contain all adjustments (including normal
recurring adjustments) necessary to present fairly the operations and cash flows
for the periods presented.
(2) Business Combination
On January 7, 2000, the Company entered into an agreement with Shopping Mall
Online, Inc. and an individual whereby the Company acquired 80% of the
outstanding common stock of Shopping Mall Online. The consideration for the
acquisition was 2,400,000 shares of the Company's common stock. The agreement
also provides that if for any reason the Company's common stock is not trading
above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock
certificate for the 2,400,000 shares of the Company's common stock is removed,
the Company will issue additional shares of its common stock to the individual.
The value of the additional shares to be issued will be equal to the difference
between $2.4 million and the value of the 2,400,000 shares of common stock
issued under the agreement based on the then existing bid price. The business
combination has been accounted for as a purchase. No goodwill has been recorded
in the transaction because the former owner of Shopping Mall Online, Inc. now
owns 31% of the Company. The 2,400,000 shares of common stock have been recorded
at predecessor cost of Shopping Mall Online, Inc. All costs related to
development of Shopping Mall Online, Inc. have been expensed.
The agreement also provides the voting rights with respect to the common stock
of Shopping Mall Online will remain with the individual until the restrictive
legend on the 2,400,000 shares of the Company's common stock is removed. If for
any reason the Company is declared insolvent or files for bankruptcy protection
after the date of the agreement until the restrictive legend on the Company's
common stock is removed, Shopping Mall Online will have the right to rescind the
agreement. Shopping Mall Online has the right under the agreement to appoint one
person nominated by the individual to the board of directors of the
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(2) Business Combination, Continued
Company. Prior to the foregoing transaction, Shopping Mall Online was owned
solely by this individual. This individual is also the principal owner of
Integrity Capital, Inc. Integrity Capital provides investor relations services
for the Company.
(3) Marketing and Administration of Sales Agreement
The Company has entered into an agreement with a previous director of the
Company for the marketing and administration of sales through certain identified
locations and the division of profits after the director has recovered related
costs. The Company currently has orders for the purchase of thirty kiosk
software vending units at $50,000 per unit from a previous director. The Company
received $60,000 of deposits related to these orders. The Company is uncertain
whether it will be able to deliver the units and it is not determinable at this
time whether a refund will be required. A contingency exists with respect to
this matter, the ultimate resolution of which cannot presently be determined.
(4) Stock Purchase and Subscription Agreement
On March 15, 2000, the Company signed a Stock Purchase and Subscription
Agreement whereby the Reserve Foundation Trust ("trust") will purchase 6,000,000
restricted shares of the Company's common stock for $10,000,000 through a
private placement, providing that all terms to the purchase agreement are
fulfilled. According to the terms of the Stock Purchase and Subscription
Agreement, the full transfer of funds would take place on May 1, 2000, provided
that the Company must file its annual Form 10-K or 10-KSB for the year ending
December 31, 1999, and complete the acquisition of WavePower, Inc. by May 1,
2000. Demand registration rights after January 2001 and piggyback registration
rights are to be granted to the trust if the transaction closes. Upon signing
the Stock Purchase and Subscription Agreement, the trust provided the Company
with $50,000 in interim financing, which was subsequently increased to $100,000
at March 31, 2000. The debt is to be repaid from the final funding of the
private placement.
(5) Litigation
During February, 2000 the Company commenced litigation against a former officer
of the Company alleging failure of the former officer to meet certain
performance standards. The Company is seeking cancellation of the agreement to
issue 750,000 shares of Company common stock and the payment of $500 per month
compensation to the former officer and the return of 500,000 shares of stock
previously issued. (See Note 6) A contingency exists with respect to this
matter, the ultimate resolution of which cannot presently be determined.
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ENTER TECH CORP.
NOTES TO FINANCIAL CONSOLIDATED STATEMENTS
March 31, 2000
(6) Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. However, the Company has sustained operating losses
since its inception and has a net capital deficiency. Management is attempting
to raise additional capital.
In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its future
operations.
Management is in the process of attempting to raise additional capital and
reduce operating expenses. Management believes that its ability to raise
additional capital and reduce operating expenses provide an opportunity for the
Company to continue as a going concern.
(7) Subsequent Events
The Company completed the acquisition of WavePower, Inc. on April 19, 2000. The
Company issued certificates for the 5,000,000 shares of restricted common stock
as described in the Plan of Reorganization and Acquisition of WavePower, Inc.
The shares of restricted common stock that were issued to WavePower, Inc.
increased the Company's outstanding shares of common stock to 12,783,000.
On April 10, 2000, the board of directors of the Company agreed to establish two
voting trusts in which the Company would place 5,000,000 shares of the Company's
preferred stock. The first trust will contain 3,000,000 preferred shares being
held in reserve for the acquisition of WavePower, Inc. as outlined in the
definitive agreement. The second trust will contain 2,000,000 preferred shares
of Company stock that will be used for the benefit and distribution to the
officers, directors and significant consultants to the Company with the option
of a distribution of up to 1,000,000 of these preferred shares for additional
compensation as they may, from time to time, come available to the Company. The
president of the Company will retain sole voting rights for both trusts.
On May 4, 2000, the Reserve Foundation Trust indicated that they would go
forward with the dispersal of funds as described in the Stock Purchase and
Subscription Agreement. The Company has issued certificates for the 6,000,000
shares of restricted common stock in preparation for delivery once the funding
is completed. The shares of restricted common stock issued to the Trust and to
WavePower, Inc. bring the Company's issued common stock to 18,783,000. The
interim financing the trust provided the Company in the amount of $250,000 is to
be repaid in full as per the terms of the Stock Purchase and Subscription
agreement on or before May 22, 2000.
Litigation against the Company has been threatened during May, 2000 by a
corporation which alleges that the Company has not fulfilled an agreement to
issue 1,000,000 shares of the Company's common stock in consideration of the
waiver of any rights by the corporation or affiliated entities to acquire
WavePower, Inc., which the Company acquired on April 19, 2000. The Company is of
the view that the conditions precedent to the issuance of such stock were not
fulfilled and that the agreement was repudiated. The Company intends to contest
any claims. Due to the preliminary stage of the matter, the ultimate resolution
of this contingency cannot presently be determined.
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ITEM 2. PLAN OF OPERATION.
The following discussion of our plan of operation should be read
together with the financial statements and the related notes in Item 1 of Part I
above. As discussed in the notes to the financial statements, there are
circumstances which indicate that Enter Tech may be unable to continue as a
going concern. We cannot assure you that our plans in that regard will be
successful and that we will be able to continue as a going concern.
OVERVIEW
Enter Tech is a development stage company formed in July 1996 and we
have not yet generated revenues from our planned principle operations. Since
Enter Tech's acquisition in June 1998 of Links Ltd., also a development stage
company, we have focused on attempting to develop a prototype kiosk, or vending
machine, through which Links had previously planned to market computer software,
music and possibly digital video products stored on disks or computer hard
drives. Enter Tech has not yet been successful in developing on its own a
commercially feasible prototype of the proposed kiosk and we have continued to
evaluate the alternative of acquiring a company which has already developed a
similar kiosk concept. We have also recently focused on a strategy of acquiring
other companies with proprietary technology or strategic relationships which
would complement the kiosk concept, including e-commerce companies which could
ultimately lead to the kiosk products being available through internet access.
RECENT SIGNIFICANT EVENTS
Shopping Mall Online Acquisition
On January 7, 2000, Enter Tech acquired 80% of the outstanding common
stock of Shopping Mall Online, Inc., a development stage company, in exchange
for the issuance of 2,400,000 restricted shares of Enter Tech common stock.
Under the acquisition agreement, if Enter Tech's common stock is not publicly
trading at a bid price above $1 per share when the stock transfer restrictions
are removed for the initial 2,400,000 shares pursuant to Rule 144 under the
Securities Act of 1933, Enter Tech must issue additional shares of its common
stock. The number of additional shares that may be issued are to be based on a
value of those shares equal to the difference between $2,400,000 and the value
of the original 2,400,000 shares of common stock at the time the stock transfer
restrictions are removed. If at any time while the stock transfer restrictions
under Rule 144 are in effect for the shares Enter Tech is declared insolvent or
files for bankruptcy protection, Shopping Mall Online has the right to rescind
the acquisition agreement.
Shopping Mall Online intends to provide web-hosting services and
provide exposure to businesses for both consumer and business-to-business
e-commerce activity. Shopping Mall Online also plans to act as an aggregate site
for advertising, promotional and co-branding activities in connection with the
placement of interactive kiosks in venues that support heavy traffic and
exposure. We anticipate these venues will include
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regional shopping centers, community retail centers, airports, and other large
retail outlets. We anticipate Shopping Mall Online will generate revenues from
hosting, banner advertisements and a percentage of sales from customers.
WavePower Acquisition
On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of
common stock of WavePower, Inc., a development stage company, in exchange for
the issuance of 5,000,000 restricted shares of Enter Tech common stock. In
addition, Enter Tech agreed to reserve 3,000,000 shares of its 5,000,000
authorized shares of preferred stock for issuance as further payment for the
acquisition to the former sole shareholder of WavePower in the event that
certain performance objectives related to future gross income and net pre-tax
profit of WavePower are met. The additional 3,000,000 shares of preferred stock
would be issued through exercise of an option to purchase the preferred stock,
contingent on meeting the performance objectives, and would be convertible into
shares of Enter Tech common stock at the rate of 2 shares of common stock for
each share of preferred stock. The agreement also contemplates that the
remaining 2,000,000 authorized shares of Enter Tech preferred stock may be
issued to the existing members of Enter Tech management and a significant
consultant.
WavePower plans to become an application service provider and is in the
process of developing a network which moves traditional computer applications
out of the conventional personal computer and onto a central network. WavePower
intends that users will then be able to freely access all of the power,
applications and connectivity of a series of networked computers from their own
individual terminal.
Agreement for $10 Million Equity Financing
On March 15, 2000, Enter Tech entered into a stock purchase and
subscription agreement with the Reserve Foundation Trust under which the trust
is to purchase 6,000,000 restricted shares of Enter Tech common stock in
exchange for cash of $10 million. When the agreement was signed, the trust
provided Enter Tech with $50,000 in interim debt financing. That amount was
subsequently increased to a total of $250,000. On May 4, 2000, the trust
indicated that all conditions to the stock purchase had been satisfied and that
it would go forward with providing the $10 million in funds to Enter Tech. These
funds had not yet been received by Enter Tech as of May 15, 2000. Although Enter
Tech has issued stock certificates for the 6,000,000 shares of common stock to
be purchased by the trust, these stock certificates are being held for delivery
until the trust funds the stock purchase amount of $10 million. Enter Tech
currently believes that the $10 million equity funding will occur on or about
May 22, 2000, at which time the interim debt financing is to be repaid. However,
we cannot assure you that the financing will be completed.
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DESCRIPTION OF OUR CURRENT PLAN OF OPERATION
Our current plan of operation for the next 12 months primarily involves
the development of our kiosk technology, pursuit of Shopping Mall Online's
web-hosting and interactive kiosk placement in shopping malls and other retail
outlets, and continued development of WavePower's application service provider
network. We plan to devote substantial time and resources to integrating these
various business models.
In addition, we intend to pursue potential acquisitions or other
strategic alliances with suitable kiosk concept or e-commerce companies. We have
not established a specific level of revenues, earnings or assets below which we
would not consider a potential target company for an acquisition or alliance.
Moreover, we may identify an attractive target company which may currently be
generating losses but which we believe has a promising business plan. Although
we plan to proceed with what we believe is an appropriate level of due diligence
in implementing this strategy, we cannot assure you that any acquisition or
alliance will be successful or that we will achieve the expected benefits from
the transaction.
For us to continue to attempt to develop our plan of a kiosk through
which to market computer software, music and possibly digital video products, we
will need to construct a new prototype kiosk and have that prototype tested
before we are able to begin marketing and production of these kiosks. We have in
the past used software and hardware developed by third parties to construct
prototypes of kiosks and we anticipate any future prototypes will also be
developed by third parties. We anticipate that we will develop a prototype kiosk
and begin construction of units during the next 12 to 18 months. However, we
cannot assure you that we will ever be able to develop a commercially successful
kiosk.
We are currently involved in negotiations with several major mall
developers and retailers who have expressed an interest in the branding and
marketing strategies of Shopping Mall Online and the deployment of the kiosk
technology and concept. One such group has expressed interest in a beta-test of
the kiosk in combination with Shopping Mall Online in a currently undetermined
number of malls in the U.S. and Canada. However, we cannot assure you that any
such partnerships or relationships with mall developers or retailers will be
established.
We plan to identify any number of merger candidates that may be brought
to our attention through our present associations. We plan to evaluate the
candidates using broad criteria. We expect that negotiations with a target
company will focus on the percentage of our common stock, as computed following
a merger or acquisition, that the target company's stockholders would receive
for their share holdings in the target company. Depending upon, among other
things, the target company's assets and liabilities, our stockholders will in
all likelihood experience dilution in their interest in us following any merger
or acquisition.
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LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2000, Enter Tech had $42,011 in cash, including cash
supplied from the interim debt financing by Reserve Foundation Trust discussed
above, and current liabilities of $609,471. This represented a working capital
deficit of $(567,460).
As of March 31, 2000, Enter Tech had no material commitments for
capital expenditures and no plans to pay dividends to its shareholders.
If completed, the Reserve Foundation Trust private placement financing
is expected to provide Enter Tech with funds to continue the process of
developing the prototype kiosk machine concept within the next 12 months.
However, Enter Tech will be required to completely reconstruct an entirely new
prototype of the kiosk based upon its concept of the kiosk. Some engineering
work has been done to design plans for the components and software to be used in
the kiosks, but it is likely that a portion or all of the engineering done to
date will need to be completely updated or redone.
Enter Tech is also continuing to evaluate the option of acquiring a
"kiosk company" which has already developed some or all of the concepts
conceived by Enter Tech. As this development or acquisition strategy proceeds,
Enter Tech is anticipating the possibility of licensing this technology in
foreign countries. We cannot assure you that any commercially favorable
relationships with prospective licensees will be established. If the kiosk
concept can be developed, additional employees will be needed based upon the
development schedule of the kiosk. If a "kiosk company" is acquired Enter Tech
will be required to evaluate the need of any current or potential employees of
the "kiosk company."
If the kiosk concept is developed by Enter Tech as conceived, Enter
Tech currently plans to have the product manufactured on a contract basis with a
third party manufacturer. Therefore, Enter Tech does not plan to acquire
significant additional plant and equipment for the purpose of manufacturing the
kiosk. No assurances can be made as to if the kiosk concept will ever be fully
developed or if a "kiosk company" can be acquired. There is no assurance that
the kiosks will function as planned if Enter Tech is able to develop the kiosks,
or acquire a "kiosk company", or be manufactured at a unit cost commercially
favorable to Enter Tech. We cannot assure you that Enter Tech will be able to
generate any revenues from sales or that any sales will be made of kiosks or
from kiosk vending operations.
Provided the private placement funding is completed, it is anticipated
that the funds should also be able to finance the operations of Shopping Mall
Online, Inc. for the next 12 months. Shopping Mall Online is anticipated to
provide web hosting services and e-commerce activity. It is expected that
Shopping Mall Online is to combine their branding and marketing strategies with
the kiosk concept and potentially market to major mall developers and retailers.
It is anticipated that Shopping Mall Online will require additional employees to
develop the systems and has committed to hire two full time people, one as
President and the other as Director of Operations. Additional employees
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will be required as Managers of Business Development, Technology and Systems
Administration and Sales. Additional operational personnel will be required
within each department. Enter Tech currently has 11 employees, and plans to hire
an additional 4 employees by June 30, 2000 and an additional 10 employees by
December 31, 2000.
Approximately 2,600 square feet of office space is expected to be
needed this year as is significant server computers and communication backbone
to host the web sites and provide adequate access to the online mall. It is
anticipated that Shopping Mall Online will license an established e-commerce
application software package from a reputable third party, but this does not
preclude the possibility that modifications and independent research or
development could be needed. There is no assurance that Shopping Mall Online
will become a viable business or generate any revenues from the activities it
plans to undertake. Online shopping is crowded with many vendors and there is
nothing to prevent any other person or company from pursuing this potential line
of business. It is possible that the WavePower acquisition could provide a
compatible synergy to the efforts of Shopping Mall Online, Inc. and any kiosk
development by Enter Tech or "kiosk company" Enter Tech may contemplate
acquiring due to the technology developed by WavePower.
WavePower's technology could enhance the kiosk operational design. The
acquisition of Wave Power may enhance the effectiveness of Shopping Mall
Online's commerce activity and vice versa. Additional employees will be required
to continue the development process of WavePower, most of whom are expected to
be technical professionals.
Enter Tech anticipates that with the private placement funds, we will
be able to finance WavePower to continue operations and develop the
infrastructure needed to generate revenue, however it is the intention of Enter
Tech to aggressively identify other sources of capital for development of Enter
Tech and all of its subsidiaries as is necessary for continued operation and to
generate revenues.
We are currently evaluating the projected capital needs for the
development of the kiosk and for the operation of Shopping Mall Online and
WavePower. Although we believe that the recent $10 million equity financing, if
it is completed, will be sufficient for our cash requirements for the next 12
months, we cannot assure you that we will not need additional funds to fully and
successfully implement our strategy.
CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS
This discussion contains forward-looking statements that involve risks
and uncertainties. All statements included in this report, other than statements
of historical facts, that address activities, events or developments that we
expect, believe or anticipate will or may occur in the future, are
forward-looking statements. These forward-looking statements include statements
about:
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o The future anticipated direction of the high technology and
e-commerce industries,
o The pending $10 million equity financing from the Reserve Foundation
Trust,
o Planned acquisitions of operating companies,
o Plans for development, expansion and integration of companies which
have been acquired,
o Planned capital and operating expenditures,
o Future funding sources,
o Anticipated revenues and sales growth, and
o Overall business strategies.
These forward-looking statements are subject to a number of
assumptions, risks and uncertainties, including such factors as:
o Technological developments and consumer preferences in the high
technology and e-commerce industries,
o The risk that the pending $10 million equity financing from the
Reserve Foundation Trust may not be completed,
o Expected benefits from development, expansion and integration of
acquired companies,
o Competition in the markets for our planned businesses,
o The availability of adequate financing,
o Dependence on existing management, and
o Changes in laws or regulations affecting our plan of operation.
We caution you that our forward-looking statements are not guarantees
of future performance and that actual results or developments may differ
materially from those expressed or implied by the forward-looking statements.
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PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Except as set forth herein the Company is not a party to any material
pending legal proceedings; nor are any such proceedings involving the Company
contemplated by a governmental authority to the knowledge of the Company.
On February 24, 2000, the Company initiated a civil action by it
against Jerry Stiles, a/k/a Gerald C. Stiles, a former officer of and consultant
to the Company, in the District Court of Douglas County, Colorado. The Company
requests that: 1) the Court rescinds the contract; and 2) awards the Company
damages to be determined at trial. On April 4, 2000, Mr. Stiles filed an
answer/counterclaim against the Company that claimed: 1) breach of contract on
the Company's part; 2) unpaid compensation; 3) damages for unpaid compensation;
4) damages under the Colorado Securities Act; and 5) fraudulent
misrepresentation and non-disclosure to be proven at trial.
ITEM 2. CHANGES IN SECURITIES.
RECENT SALES OF UNREGISTERED SECURITIES
For the period January 1, 2000 through May 11, 2000, Enter Tech issued
the following securities without registration under the Securities Act of 1933.
1. On January 7, 2000, Enter Tech issued 2,400,000 shares of common
stock to Robert J. Pratt to acquire Shopping Mall Online, Inc. These shares were
issued in reliance on the exemption from registration provided by Section 4(2)
of the Securities Act of 1933.
2. On March 20, 2000, Enter Tech issued 10,000 shares of common stock
to Mark A. Thomas, as compensation for Mr. Thomas acting as an Enter Tech
director. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
3. On April 19, 2000, Enter Tech issued 5,000,000 shares of common
stock and an option to purchase 3,000,000 shares of preferred stock to Vernon
Kendrick in exchange for 80% of the outstanding shares of common stock of
WavePower, Inc. These shares were issued in reliance on the exemption from
registration provided by Section 4(2) of the Securities Act of 1933.
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The facts relied on to make the exemption from registration provided by
Section 4(2) of the Securities Act of 1933 available for the sales of securities
discussed in paragraphs 1 through 3 above were:
o the limited number of purchasers,
o the sophistication or accreditation of the purchasers,
o their access to material information about Enter Tech,
o the information furnished to them by Enter Tech,
o the absence of any general solicitation or advertising, and
o restrictions on transfer of the securities issued to them as
indicated by a legend on the certificates representing such
securities.
ITEM 5. OTHER INFORMATION.
Enter Tech is providing the following information in lieu of filing a
separate current report on Form 8-K for information required by Items 2 and 7
thereunder.
On April 19, 2000, Enter Tech acquired 80% of the outstanding shares of
common stock of WavePower, Inc., a development stage company, in exchange for
the issuance to Vernon C. Kendrick of 5,000,000 restricted shares of Enter Tech
common stock. In addition, Enter Tech agreed to reserve 3,000,000 shares of its
5,000,000 authorized shares of preferred stock for issuance as further payment
for the acquisition to the former sole shareholder of WavePower in the event
that certain performance objectives related to future gross income and net
pre-tax profit of WavePower are met. The additional 3,000,000 shares of
preferred stock would be issued through exercise of an option to purchase the
preferred stock, contingent on meeting the performance objectives, and would be
convertible into shares of Enter Tech common stock at the rate of 2 shares of
common stock for each share of preferred stock. The agreement also contemplates
that the remaining 2,000,000 authorized shares of Enter Tech preferred stock may
be issued to the existing members of Enter Tech management and a significant
consultant.
The financial statements of WavePower and pro forma financial
information giving effect to the acquisition of WavePower called for by Item 7
of the Form 8-K are not included in this report. Enter Tech plans to file those
financial statements and pro
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forma financial information by an amendment to this report within 60 days after
the date that the original report on Form 8-K was due.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits. The following Exhibits are furnished as part of this
report:
Exhibit 2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech
Corporation, WavePower, Inc. and Vernon C. Kendrick.*
Exhibit 10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech
Corporation and WavePower, Inc.*
Exhibit 27.1 Financial Data Schedule.*
* Filed herewith.
(a) Reports on Form 8-K.
We filed one current report on Form 8-K during the quarter ended March
31, 2000. We filed a Form 8-K reporting under Item 2 the acquisition of Shopping
Mall Online, Inc. on January 7, 2000. The financial statements related to our
acquisition of Shopping Mall Online were filed with our amended current report
on Form 8-K/A on March 29, 2000, which also reported under item 5 the signing of
a conditional subscription agreement for the private placement of 6,000,000
shares of common stock for $10,000,000.
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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.
Dated: May 15, 2000 ENTER TECH CORP.
By: /s/ SAM LINDSEY
----------------------------
Sam Lindsey, President and
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------------ -----------
2.1 Reorganization Agreement dated April 19, 2000 among Enter Tech
Corporation, WavePower, Inc. and Vernon C. Kendrick.*
10.1 Employment Agreement among Vernon C. Kendrick, Enter Tech
Corporation and WavePower, Inc.*
27.1 Financial Data Schedule.*
* Filed herewith.