UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[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 SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ------ to ---------------
Commission File Number 33-3358-NY
CENTRAXX, INC.
-------------------------
(Name of small business issuer in its charter)
Nevada 88-0224219
------------------------ ------------------
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2700 Argentia Road, Suite #1000
Mississauga, Ontario Canada L5N 5V4
-----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (905) 826-9988
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 Company was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
(1) Yes [x] No [ ] (2) Yes [x] No [ ]
(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
--- ---
(APPLICABLE ONLY TO CORPORATE ISSUERS)
State the number of outstanding shares of each of the Issuer's classes of
common equity, as of the latest practicable date:
March 31, 2000
common - 17,946,481 shares
Transitional Small Business Disclosure Format (Check One) : Yes [x] No [ ]
Item 1. Financial Statements
The consolidated financial statements of the Company required to be filed
with this Form 10-QSB Quarterly Report were prepared by management and
commence on the following page, together with related Notes. In the opinion
of management, these Consolidated Financial Statements faily present the
financial condition of the Company.
CENTRAXX, INC.
(A DEVELOPMENT STAGE COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in U.S. Dollars)
(Unaudited)
March 31, December 31,
2000 1999
Assets
Current
Cash 250,650 234
Prepaid expenses 34,019 42,231
284,669 42,465
Capital assets 220,267 191,413
Other assets 16,736 16,671
521,672 250,549
LIABILITIES
Current
Accounts payable and accrued
liabilities 351,890 508,724
Long Term Convertible Debenture 2,000,000 906,319
2,351,890 1,415,043
SHAREHOLDERS' DEFICIENCY
Capital Stock 17,946 17,946
Contributed Surplus 2,498,958 2,498,958
Accumulated other comprehensive loss (5,110) (3,903)
Deficit (4,342,012) (3,677,495)
(1,830,218) (1,164,494)
521,672 250,549
CENTRAXX, INC
(A Development Stage Company
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in U.S. Dollars)
(Unaudited)
Aug.8, 1997 to
Mar. 31, 2000
Three Months Ending March 31 2000 1999 Cumulative
Sales $ - $ - $ -
Cost of sales - - -
Gross margin - - -
Expenses
Marketing and public relations 55,859 25,048 485,090
Management fees 61,644 44,381 356,829
Professional fees 15,745 31,264 287,065
Salaries and other administration 162,925 141,684 1,168,454
Research and development costs 320,158 180,551 1,825,255
Depreciation and amortization 20,279 16,701 175,976
Interest on convertible debentures 27,776 - 36,580
Foreign exchange (gain) loss 130 - 6,763
664,516 439,629 4,342,012
Net loss $ 664,516 $ 439,629 $ 4,342,012
Net loss per share, basic and
diluted (Note 1) $ (0.04) $ (0.03)
Weighted average shares, basic
and diluted 17,946,481 15,080,330
Centraxx, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
(Expressed in U.S. Dollars)
(Unaudited)
Three Months Ending March 31 2000 1999
Cash flows from (applied to)
Operating
Net loss $(664,516) $(439,629)
Depreciation and amortization 20,279 16,701
(644,237) (422,928)
Changes in
Prepaid expenses 8,212 (10,270)
Accounts payable and accrued liabilities (156,834) (43,082)
(792,859) (476,280)
Financing
Issue of shares - 478,517
Issue of convertible debenture 1,093,681 -
1,093,681 478,517
Investing
Purchase of capital assets (49,647) -
Foreign currency effect on cash (759) -
Net increase in cash during the year 250,416 2,237
Cash, beginning of period 234 141
Cash, end of period $ 250,650 $ 2,378
Centraxx, Inc.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
March 31, 2000
1. General
The unaudited condensed consolidated financial statements have been
prepared on the same basis as the audited consolidated financial statements
and, in the opinion of management, reflect all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation for each of
the periods presented. The results of operations for interim periods are not
necessarily indicative of results to be achieved for full fiscal years.
As contemplated by the Securities and Exchange Commission (SEC) under
Rule 10-01 of Regulation S-X, the accompanying consolidated financial
statements and related footnotes have been condensed and do not contain
certain information that will be included in the Company's annual consolidated
financial statements and footnotes thereto. For further information, refer to
the consolidated financial statements and related footnotes for the year
ended December 31, 1999 included in the Company's Annual Report on Form
10-KSB.
Basis of presentation
The condensed consolidated financial statements include the accounts of
Centraxx, Inc. and its wholly owned subsidiary, Centraxx Corp.
On May 18, 1999, Centraxx, Inc. acquired 100% of the outstanding common
stock of Centraxx Corp. from various shareholders (the Acquisition). The
Acquisition resulted in the owners and management of Centraxx Corp. having
effective control of the combined entity.
Under reverse takeover accounting, the post reverse-acquisition
comparative historical financial statements of the "legal acquirer" (Centraxx,
Inc.), are those of the "legal acquiree" (Centraxx Corp.) (i.e. the accounting
acquirer).
Income taxes
Income taxes for the interim periods were computed using the effective
tax rate estimated to be applicable for the full fiscal year, which is
subject to ongoing review and evaluation by management.
Loss per share
The Company reports earnings per share in accordance with the provisions
of SFAS No. 128, Earnings Per Share. SFAS No. 128 requires presentation of
basic and diluted earnings per share in conjunction with the disclosure of the
methodology used in computing such earnings per share. Basic earnings
per share excludes dilution and is computed by dividing income available to
common shares by the weighted average common shares outstanding during the
period. Diluted earnings per share takes into account the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised and converted into common stock.
Centraxx, Inc.
(A Development Stage Company)
Notes to the Condensed Consolidated Financial Statements
(Expressed in U.S. Dollars)
(Unaudited)
March 31, 2000
1. General (continued)
There were stock options outstanding at March 31, 2000, to purchase
2,440,000 shares of common stock which were not included in the computation of
diluted earnings per share because to do so would be antidilutive.
Basic weighted average shares outstanding for the period were 17,946,481
(1999, 15,080,330).
2. Subsequent event
On May 9, 2000, the Company entered into a financing arrangement with a
non-related party. The arrangement provides for $1,000,000 to be advanced
as follows:
May 15, 2000 $ 100,000
May 31, 2000 $ 150,000
June 15, 2000 $ 250,000
July 15, 2000 $ 250,000
August 15, 2000 $ 250,000
Interest of 12% per annum will be charged on the outstanding balance.
The loan will be required to be repaid at the earlier of September 30, 2000,
or when alternative sources of financing are arranged.
Item 2. Management's Discussion and Analysis or Plan or Operation.
Plan of Operation
- -----------------
Centraxx is a company that is developing high-speed, two-way wireless data
communications, with a specialization in location technologies. The Company
is the first in the industry to have developed a low cost, tracking, locating
and monitoring system utilizing revolutionary UNI-POINT (TM) technology with
numerous network-based and stand-alone applications. The UNI-POINT technology
is proprietary and United States and Spain patents are pending. There can be
no assurances that any patents will issue or that, if issued, the Registrant
will have sufficient resources to protect its intellectual property rights.
The Centraxx System utilizes radio frequency in a unique configuration of
voice, data and radar communication to track, locate, contain or monitor
vehicles, cargo, and equipment. The hardware consists of a receiver or Base
Station and an Electronic Location Tag ("Tag"). The object to be secured is
tagged and the Base Station monitors the relative position of the Tag. A
network of Base Stations enables the Centraxx System to monitor the location
of the tagged object over the network coverage area. This process occurs on a
real-time basis utilizing UNI-POINT tracking. UNI-POINT or single-point
tracking represents a breakthrough in the industry, as it is more reliable and
substantially more cost effective than alternative conventional triangulation
systems such as Global Positioning Satellite Systems. Market research
indicates that the Centraxx product is significantly less expensive than its
nearest competitor in the industry while offering a more reliable and accurate
system.
The Centraxx product is able to track and locate a tagged vehicle to within 10
meters. The system is self-arming so that a theft is detected while still in
progress and will automatically prompt action by a monitoring center and
relevant authorities. The Centraxx product will be offered with an optional
PLUS service in order to further differentiate the Centraxx product from its
competitors. Market research indicates that this combination of vehicle
tracking and Roadside/Emergency Notification will provide product acceptance
by a security conscious consumer market.
Although management believes that there may be numerous potential applications
for Centraxx's technology, Centraxx intends initially to focus its efforts on
the stolen vehicle tracking and recovery industry by introducing a more
accurate, reliable and affordable product utilizing the UNI-POINT technology.
The Company has entered into a sales and market agreement with a major
insurance company and is currently in advanced negotiations with other major
insurance companies, auto clubs, and automobile distributors to form for this
market. The Company has entered into some geographic joint ventures and is
negotiating with other joint venture partners to form alliances to quickly
penetrate global market. There can be no assurances that any agreements will
be obtained or that if will provide material financial benefit to the company.
In future the Company plans to leverage its technology advantages and network
capacity to become a highly diversified wireless communications company by
introducing new products and services such as LifeLink, fleet management,
personal security and asset tracking; all of which take advantage of the
Centraxx flexible platform technology.
The Company's focus is on research and development of its UNI-POINT
technology, the engineering sample of which was successfully demonstrated on
December 9, 1999. The enhancement, miniaturization to commercialize the
technology is under development. A regional network rollout consisting of
multiple base stations will be commencing within the next six months at that
time tag sales are expected to commence. The technology can be deployed to
provide effective solutions for safety, security, and two-way wireless data
communication and location information. The Company has not yet generated any
revenues except some deposits from potential joint venture partners.
Results of Operations
- ---------------------
For three months ended March 31, 2000 compared to March 31, 1999:
The current period loss is $ 664,516 compared to $ 439,629 for the
corresponding three months ending of March 1999.
The Company's general and administrative costs increased $ 53,796 primarily as
a result of increased sales and marketing activities. The Company accrued $
27,776 debenture interest to a related party during the three months ended
March 31,2000.
The Company's research and product development costs increased $ 139,607
during the three months ended March 31,2000 as compared to the three months
ended on March 1999. The primary reasons are the increase in manpower
expenditures as the Company hired a significant number of additional personnel
to assist in the commercialization of the product development. The Company's
commitment to UNI-POINT technology is reflected by its total cumulative
investment in research and product development since inception in the amount
of $1,825,255 representing 42% of the Company's operating cash activities.
Amortization incurred was not materially changed between the respective
periods.
Liquidity and Capital Resources
- -------------------------------
During the second week of May the Company entered into a temporary financing
arrangement with a non-related party to facilitate ongoing monthly funding to
a total amount of $1 million. A schedule of the monthly amounts to be advanced
in the form of a short-term loan bearing 12% interest is included in note 2 of
the financial statements. Centraxx Corp has guaranteed and provides a General
Security Agreement to comply with their obligation of repayment. Pursuant to
the terms of the loan, interest payment is deferred till the maturity. The
principal and interest is due and payable on September 30, 2000 or when
alternative sources of financing are arranged whichever is earlier. The
Company expects to utilize the funds received from such financing for the
continuation of the development of its UNI-POINT technology and for general
operating purposes.
The Company anticipates that it will require further financing to implement
its business plan.
During the balance of the current fiscal year, the Company expects that its
operating capital requirements will be $ 6 million. The Company is negotiating
with some of the investors directly and has engaged Ernst and Young Corporate
Finance Inc. to assist it with a private equity placement of up to
$10,000,000. The planned use from such offering will be for the
implementation of the Company's UNI-POINT technology in the corporate markets
of Southern Ontario, Canada and Southern California as well as for the
Company's operating capital requirements. Thereafter, the Company expects
that it will need to seek additional capital through one or more public or
private offerings of debt or equity. There can be no assurance that the
Company will be successful in obtaining any such funds on terms acceptable to
it, if at all.
The Company is in the process of searching for a President and VP Finance and
expects they will be hired in the next quarter of the current fiscal year. In
the interim, Mr. Michael Ivezic, the Managing Director of Frankopan & Co.,
Inc, is providing overall management of the Company. Significant increases in
the number of employees, primarily in manufacturing and distribution, are
anticipated during Q2/ 2000.
Risks and Uncertanties
- ----------------------
As of the date of this Report, the Company anticipates that its technology
will not be available for sale or distribution for at least the next
twoquarters. The company has no established source of revenues and is
dependent
on its ability to raise further funding. There can be no assurance that the
Company will be successful in obtaining any funding at reasonable terms.
There can be no assurance that the Company will be able to complete the
commercial development of its technology as of that time, or at any time, or
that the Company will be able to sell or distribute its UNI-POINT technology
to generate profitable operations at that time or in the foreseeable future.
There can be no assurance that the technology will be successfully released to
the market or that the Company will profit therefrom.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
None, not applicable.
Item 2. Changes in Securities.
None, not applicable.
Item 3. Defaults Upon Senior Securities.
None, not applicable.
Item 4. Submission of Matters to a Vote of Security Holders.
None, not applicable.
Item 5. Other Information.
None, not applicable.
Item 6. Exhibits and Other Reports on Form 8-K.
(a) Exhibits.
27 Financial Data Schedule
Annual Report on Form 10-KSB for the calendar year ended December
31, 1999, incorporated herein by reference.
(b) Reports on Form 8-K.
None, not applicable.
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CENTRAXX, INC.
Date: /s/Mike Ivesic
-------------- -----------------------------
Mike Ivesic, President and Director
Pursuant to the requirements of the Securities and Exchange Act of 1934,
as amended, this Report has been signed below by the following persons on
behalf of the Company and in the capacities and on the dates indicated:
CENTRAXX, INC.
Date: /s/Mike Ivesic
-------------- -----------------------------
Mike Ivesic, President and Director