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 September 30, 2005
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _________________ to _________________
Commission file number 333-46828
Karver International, Inc.
(Exact name of small business issuer as specified in its charter)
New York 13-3526402
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
825 Third Avenue, 40th Floor, New York, New York, 10022
(Address of principal executive offices)
(212) 838-2585 (Issuer's telephone number)
Medeorex, Inc.
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days: Yes [X] No [ ].
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act.) Yes [ ] No [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes [ ] No [X]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of November 10, 2005: 13,641,461 shares of common stock, par
value $0.0001 per share
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
F-1
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
Karver International, Inc.
(f/k/a Medeorex, Inc.)
(Development Stage Company)
Consolidated Balance Sheets
---------------------------
September 30, December 31,
2005 2004
(Unaudited)
---------------------------
Assets
Current assets:
Cash $ 222 $ 378
Prepaid expenses and other current assets 10,000 --
---------------------------
Total current assets 10,222 378
Property and equipment, net 7,049 10,837
---------------------------
Total assets $ 17,271 $ 11,215
===========================
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable $ 147,203 $ 40,786
Accrued expenses and other current liabilities 20,265 32,248
Stockholder loans at 7% interest per annum, due on demand 193,663 84,158
---------------------------
Total current liabilities 361,131 157,192
---------------------------
Commitments and contingencies
Stockholders' deficit:
Preferred stock - $0.0001 par value, 10,000,000 shares
authorized -0- shares issued and outstanding -- --
Common stock - $0.0001 par value, 20,000,000 shares
authorized, 13,641,461 shares issued and outstanding as of
September 30, 2005 and 14,718,266 as of December 31, 2004 1,364 1,472
Additional paid-in capital 214,531 214,531
Accumulated deficit prior to development stage (66,003) (66,003)
Deficit accumulated during development stage (493,752) (295,977)
---------
Total stockholders' deficit (343,860) (145,977)
---------------------------
Total liabilities and stockholders' deficit $ 17,271 $ 11,215
===========================
The accompanying notes are an integral part of these
consolidated financial statements.
Karver International, Inc.
(f/k/a Medeorex, Inc.)
(Development Stage Company)
Consolidated Statements of Operations
------------------------------------------------------------------------------
Cumulative Period From
September 13, 2004
(Effective Date of
For the Nine Months For the Three Months Development Stage
Ended September 30, Ended September 30, Company) through
2005 2004 2005 2004 September 30, 2005
(Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------------------------------
Operating expenses:
Professional fees $ 142,295 $ -- $ 75,745 $ -- $ 292,670
Travel, promotion and related expenses 14,632 -- 4,084 -- 133,070
Rent and general office expenses 29,757 -- 10,041 -- 54,056
Depreciation 3,789 -- 1,263 -- 5,052
------------------------------------------------------------------------------
Total operating expenses 190,473 -- 91,133 -- 484,848
------------------------------------------------------------------------------
Loss from continuing operations before
interest and discontinued operations (190,473) -- (91,133) -- (484,848)
Interest expense 7,302 -- 3,383 -- 8,902
------------------------------------------------------------------------------
Loss from operations before discontinued operations (197,775) -- (94,516) -- (493,750)
Income (loss) from discontinued operations -- (31,952) -- 10,012 --
------------------------------------------------------------------------------
Net Income (loss) $ (197,775) $ (31,952) $ (94,516) $ 10,012 $ (493,750)
==============================================================================
Basic and fully diluted net earnings (loss)
per share
Loss before discontinued operations $ (0.01) $ -- $ (0.01) $ -- $ --
Income (loss) from discontinued operations,
net of income taxes -- -- -- -- --
------------------------------------------------------------------------------
$ (0.01) $ -- $ (0.01) $ -- $ --
==============================================================================
Weighted-average number of shares used in
computing basic and fully diluted net
earnings (loss) per share 14,238,813 10,228,000 13,641,461 10,228,000 --
The accompanying notes are an integral part of these
consolidated financial statements.
Karver International, Inc.
(f/k/a Medeorex, Inc.)
(Development Stage Company)
Consolidated Statements of Changes in Stockholders' Deficit
Accumulated Deficit
Common Stock Prior to During
------------------------- Additional Paid Development Development
Shares Amount -In Capital Stage Stage Total
------------------------------------------------------------------------------------
Balances at December 31, 2003 10,228,000 $ 1,023 $ 54,008 $ (37,056) $ -- $ 17,975
Stockholder debt foregiveness -- -- 10,972 -- -- 10,972
Shares issued for MDRX, Inc. on
September 13, 2004 4,490,266 449 149,551 -- -- 150,000
Net loss for the period from
January 1, 2004 to September 13, 2004 -- -- -- (28,947) -- (28,947)
------------------------------------------------------------------------------------
Balances at September 13, 2004 14,718,266 1,472 214,531 (66,003) -- 150,000
Net loss for the period September 13, 2004
(effective date of Development Stage
Company) through December 31, 2004 -- -- -- -- (295,977) (295,977)
------------------------------------------------------------------------------------
Balances at December 31, 2004 14,718,266 1,472 214,531 (66,003) (295,977) (145,977)
Net loss for the period -- -- -- -- (197,775) (197,775)
Shares returned to treasury and cancelled (1,076,805) (108) -- -- -- (108)
------------------------------------------------------------------------------------
Balances at September 30, 2005 13,641,461 $ 1,364 $ 214,531 $ (66,003) $ (493,752) $ (343,860)
====================================================================================
The accompanying notes are an integral part of these
consolidated financial statements.
Karver International, Inc.
(f/k/a Medeorex, Inc.)
(Development Stage Company)
Consolidated Statements of Cash Flow
------------------------------------------------------------------------------
Cumulative Period From
September 13, 2004
(Effective Date of
For the Nine Months For the Three Months Development Stage
Ended September 30, Ended September 30, Company) through
2005 2004 2005 2004 September 30, 2005
(Unaudited) (Unaudited) (Unaudited)
------------------------------------------------------------------------------
Cash flows from operating activities:
Net (loss) income for the period $(197,775) $ (31,952) $ (94,516) $ 10,012 $(493,750)
Add: loss (income) from discontinued operations -- 31,952 -- (10,012) --
---------------------------------------------------------------------------
Loss from continuing operations (197,775) -- (94,516) -- (493,750)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 3,788 -- 1,263 -- 5,052
Fundings provided by stockholder 109,505 -- 75,413 -- 193,660
Shares returned to treasury (108) -- -- -- (108)
Changes in assets and liabilities --
Prepaid expenses and other current assets (10,000) -- (230) -- (10,000)
Increase(decrease)in accounts payable and
accrued liabilities 94,434 -- 18,023 -- 167,468
---------------------------------------------------------------------------
Net cash used in continuing operations (156) -- (47) -- (137,678)
---------------------------------------------------------------------------
Cash flows from investing activities:
Purchase of property and equipment -- -- -- -- (12,100)
---------------------------------------------------------------------------
Net cash used in investing activities -- -- -- -- (12,100)
---------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from share issuance -- -- -- -- 150,000
---------------------------------------------------------------------------
Net cash provided by financing activities -- -- -- -- 150,000
---------------------------------------------------------------------------
Change in cash (156) -- (47) -- 222
Cash at beginning of period 378 -- 269 -- --
---------------------------------------------------------------------------
Cash at end of period $ 222 $ -- $ 222 $ -- $ 222
===========================================================================
Supplemental Disclosure of Cash Flow Information:
Cash interest paid during the year $ -- $ -- $ -- $ -- $ --
Cash taxes paid during the year -- -- -- -- --
Non-cash financing activities:
Fundings provided by stockholder $ 109,505 $ -- $ 75,413 $ -- $ 193,660
The accompanying notes are an integral part of these
consolidated financial statements.
Karver International, Inc.
(f/k/a Medeorex, Inc.)
(Development Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Business Description and Basis of Presentation
Karver International, Inc. (f/k/a Medeorex, Inc.) (the "Company" or
"Karver") was incorporated on April 18, 1989 in the State of New York and had
been engaged in the theater ticket business under the name of Clixtix, Inc.
("Clixtix"). On September 13, 2004, pursuant to a Share Exchange Agreement with
MDRX, Inc. (f/k/a Medeorex, Inc.), a privately held Delaware corporation
established with the intention of operating in the health and pharmaceutical
services industries, the Company issued the stockholders of MDRX an aggregate of
4,490,226 shares of the Company's stock in exchange for all of the issued and
outstanding shares of MDRX. Pursuant to that Share Exchange Agreement, MDRX
became a wholly owned subsidiary of the Company and Clixtix changed its name to
Medeorex, Inc. Immediately following the closing under the MDRX Share Exchange
Agreement, the Company transferred its theater ticket operations to Aisle Seats,
Inc. ("Aisle Seats"), a company controlled by the Company's former president and
former majority stockholder. As consideration, Aisle Seats assumed the net
liabilities of the Company's former theater ticket business operation.
Since September 13, 2004, the Company's activities principally consisted
of attempting to acquire or forming a business in the health and pharmaceutical
services industries. Accordingly, the Company is considered to be in the
development stage as defined by Statement of Financial Accounting Standards No.
7, "Accounting and Reporting by Development Stage Enterprises". The operating
activities prior to September 13, 2004 relating to the theater ticket business
have been reported as discontinued operations on the Company's consolidated
financial statements.
On April 15, 2005, the Company executed an agreement and general release
terminating its relationship with MedLink Central, Inc. and four other
stockholders (collectively, the "MedLink Parties") as originally documented in
the Asset Purchase Agreement dated August 2, 2004 due to irreconcilable
differences. Accordingly, the MedLink Parties surrendered 1,076,805 shares of
the Company's common stock owned by them. The common stock was returned to
treasury and cancelled on May 30, 2005. The Company no longer has any further
obligations to the "Medlink Parties"
On June 14, 2005, the Company amended its agreement with CardioGenics Inc.
("CGI"), a privately held Ontario-based biotechnology and medical devices
company, to acquire a minority interest (of approximately 15%)in CGI for $2
million. The Company continues due diligence and the contemplated transaction is
expected to close at the end of 2005, subject to various terms and conditions
being met by both parties. In order to complete such investment, the Company
will be required to raise capital for the contemplated transaction through a
combination of additional borrowings and the issuance of debt and equity
securities. At this time, no such financing transactions have been agreed to or
finalized.
Effective November 3, 2005, the Company amended its Certificate of
Incorporation to change its name from Medeorex, Inc. to Karver International,
Inc. This name change was approved by the Company's board of directors and with
majority shareholder consent.
Note 2: Going Concern
These financial statements have been prepared on a going concern basis.
Although there is substantial doubt about the Company's ability to continue as a
going concern, it has been assumed that the Company will be able to realize its
assets and discharge its liabilities in the normal course of business. The
Company has incurred substantial losses from operations for the period from
September 13, 2004 (effective date of development stage company) through
September 30, 2005 and has an accumulated deficit of approximately $494,000 at
September 30, 2005. The ability of the Company to continue as a going concern is
dependent upon the ongoing support of its stockholders, the attainment of
financing necessary to complete any potential acquisitions, and the achievement
of profitable operations. These financial statements do not include any
adjustments relating to the recoverability of assets and classification of
liabilities or any other adjustments that might be necessary should the Company
be unable to continue as a going concern.
Note 3: Summary of Significant Accounting Policies
The financial information presented herein should be read in conjunction
with our consolidated financial statements for the year ended December 31, 2004.
The accompanying consolidated financial statements as of September 30, 2005 and
for the three and nine months ended September 30, 2005 and 2004 are unaudited
but, in the opinion of management, include all necessary adjustments (consisting
of normal, recurring in nature) for a fair
presentation of the financial position, results of operations and cash flow for
the interim periods presented. Interim results are not necessarily indicative of
results for a full year. Therefore, the results of operations for the three and
nine months ended September 30, 2005 are not necessarily indicative of operating
results to be expected for the year.
Significant accounting policies are detailed in our annual report on Form
10-KSB for the year ended December 31, 2004.
All intercompany accounts and transactions have been eliminated in
consolidation.
Certain amounts from prior consolidated financial statements and related
notes have been reclassified to conform to the current period presentation.
Note 4: Property and Equipment, net
Property and equipment consist of the following:
-------------------------------
September 30, December 31,
2005 2004
(Unaudited)
-------------------------------
Computer hardware $ 5,985 $ 5,985
Computer software
6,115 6,115
-------------------------------
12,100 12,100
Less accumulated depreciation (5,051) (1,263)
-------------------------------
$ 7,049 $ 10,837
===============================
For the three and nine months ended September 30, 2005, depreciation
expense for property and equipment was approximately $1,300 and $3,800,
respectively. There was no similar expense for the comparative periods in 2004.
Note 5: Discontinued Operations
On September 13, 2004, the Company transferred its theater ticket
operations to Aisle Seats, Inc., a company controlled by the Company's former
president and former majority stockholder. As consideration, Aisle Seats assumed
all of the assets and liabilities of the theater ticket business operation. The
net liabilities assumed by Aisle Seats amounted to $10,972, representing assets
of $17,975 and liabilities of $28,947. The operating results of this business
have been classified as discontinued operations in the consolidated statement of
operations. Accordingly, the revenues from the theater ticket business are
unrelated to the Company's current business activities.
Note 6: Stockholders' Deficit
During the year ended December 31, 2004, the Company recorded additional
paid-in capital of $10,972 relating to the transfer of net liabilities as of
September 13, 2004 to an entity controlled by the former president and majority
stockholder.
On September 13, 2004, the Company issued 4,490,266 shares of common stock
to the stockholders of MDRX, Inc., a Delaware corporation. The consideration for
these shares consisted of all of the outstanding shares of MDRX, Inc.
On May 30, 2005, the Company returned 1,076,805 shares of the Company's
common stock, par value $0.0001 per share to treasury in conjunction with the
agreement and general release terminating its relationship with MedLink Central,
Inc. and four other stockholders as originally documented in the Asset Purchase
Agreement dated August 2, 2004 due to irreconcilable differences. These shares
were subsequently cancelled by the Company.
Note 7: Related Party Transactions
During the three and nine months ended September 30, 2005, the Company
accrued management fees and rent expense due to an affiliate for management
services and rental of a furnished office space amounting to $16,500 and
$34,500, respectively. This amount is included in the general and administrative
expenses of the Company's
consolidated statement of operations. The total amount due to this affiliate
amounted to $42,000 at September 30, 2005 and is included as accounts payable on
the consolidated balance sheet. The company expects to settle this amount by the
end of 2005.
Additionally, for the three and nine months ended September 30, 2005, the
Company accrued professional fees relating to accounting and administrative
support services provided by related parties amounting to $17,000 and $51,000,
respectively. This amount is included as professional fees on the Company's
consolidated statement of operations. The total amount due to related parties of
approximately $43,000 at September 30, 2005 is included in accounts payable on
the consolidated balance sheet.
The Company's Chairman and Chief Executive Officer provides funding on an
ongoing basis for working capital requirements. At September 30, 2005, the total
amount owing to the Chairman and Chief Executive Officer was approximately
$194,000 and is repayable on demand. The stockholder agreed not to seek
repayment of this loan for a minimum of 12 months from the date of this
financial statement. The Company accrues interest on the outstanding amount at
7% per annum.
Note 8: Commitments and Contingencies
The Company has a commitment under an operating lease agreement for office
space in New York City. In addition to rent, the Company and its subsidiary are
responsible for operating costs, real estate taxes and insurance. As of the date
of these financial statements, future minimum annual rental commitment under
this lease was $9,000. The rent expense for the three and nine months ended
September 30, 2005 was approximately $9,000 and $27,000, respectively. There was
no similar expense for the three and nine months ended September 30, 2004.
Item 2. Management's Discussion and Analysis or Plan of Operation
The financial information set forth in the following discussion should be
read in conjunction with, and qualified in its entirety by the Company's
consolidated financial statements and related notes appearing elsewhere in this
report.
CAUTION REGARDING FORWARD-LOOKING INFORMATION
Forward-Looking Statements
Statements that are not historical facts included in this report are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements involve risks and uncertainties
that could cause actual results to differ from projected results. Such
statements address activities, events or developments that the Company expects,
believes, projects, intends or anticipates will or may occur, including such
matters as future capital, business strategies, expansion and growth of the
Company's operations, cash flow, marketing of products and services, and
development of new products and services. Factors that could cause actual
results to differ materially include, among others: general economic conditions,
the markets for and market price of the Company's products and services, the
Company's ability to find, acquire, market, develop and produce new products and
services, the strength and financial resources of the Company's competitors, the
Company's ability to find and retain skilled personnel, labor relations,
availability and cost of material and equipment, the results of financing
efforts, and regulatory developments and compliance. All written and oral
forward-looking statements attributable to the Company are expressly qualified
in their entirety by these factors. The Company disclaims any obligation to
update or revise any forward-looking statement to reflect events or
circumstances occurring hereafter or to reflect the occurrence of anticipated or
unanticipated events.
General
We are a development stage health and pharmaceutical services company. The
Company is currently reviewing the feasibility of entering the immunoassay
diagnostic niche market, but to date we have not yet commenced such activities.
In addition, we are actively pursuing other pharmaceutical corporate and product
acquisitions in order to establish a competitive position in that industry.
We were originally incorporated under the name Phyllis Maxwell's Groups,
Inc. in the State of New York on April 18, 1989. On August 3, 2001, we changed
our name to Clixtix, Inc. During this time period, the Company provided services
for groups interested in attending New York's Broadway and Off-Broadway theater
productions.
On September 13, 2004, Phyllis Maxwell, our former president and
controlling stockholder, sold 5,086,600 shares of our common stock, representing
approximately 49% of the Company's then issued and outstanding shares, to First
Jemini Family Trust, a Canadian discretionary family trust which was not
affiliated with Ms. Maxwell. First Jemini Trust is a discretionary family trust
for the benefit of our Chairman and President, his spouse and family members.
Such beneficiaries possess no right to the trust and therefore have no direct
beneficial ownership of shares held by the Trustee.
Also, on September 13, 2004, pursuant to a Share Exchange Agreement with
MDRX, Inc. ("MDRX"), a privately held Delaware corporation, we issued to the
stockholders of MDRX an aggregate of 4,490,226 shares of our common stock,
representing approximately 31% of our issued and outstanding shares after the
issuance, in exchange for all of the issued and outstanding shares of MDRX. One
of controlling stockholders of MDRX is the spouse of our Chairman and
President. Although she is also a beneficiary of the First Jemini Trust, as
noted above, she does not possess any right to vote or dispose of the assets of
that trust. As a consequence, the transaction with MDRX was treated as a
purchase and not as a reverse merger. Subsequently, on April 15, 2005, our
Company executed an agreement and general release terminating its relationship
with MedLink Central, Inc. and four other stockholders (collectively, the
"MedLink Parties") as originally documented in the Asset Purchase Agreement
dated August 2, 2004 due to irreconcilable differences. Accordingly, the MedLink
Parties surrendered 1,076,805 shares of the Company's common stock owned by
them. The common stock was returned to treasury on May 30, 2005. The Company and
the Medlink Parties no longer have any further obligations to each other.
8
Pursuant to the Share Exchange Agreement, MDRX became our wholly owned
subsidiary. Immediately following the closing under the Share Exchange
Agreement, we discontinued our theater ticket business by selling that operation
and its assets to Aisle Seats, Inc. ("Aisle Seats"), a company controlled by our
former president and majority stockholder. As consideration, Aisle Seats assumed
all of the liabilities of the theater ticket business operation.
The revenues generated prior to September 13, 2004 are from the theater
ticket business and are unrelated to the Company's current activities.
Accordingly, the Company is considered to be in the development stage as defined
by Statement of Financial Accounting Standards No. 7, "Accounting and Reporting
by Development Stage Enterprises".
On June 14, 2005, the Company amended its agreement with CardioGenics
Inc. ("CGI"), a privately held Ontario-based biotechnology and medical devices
company, to acquire a minority interest in CGI for $2 million. We continue due
diligence and this transaction is expected to close at the end of 2005, subject
to various terms and conditions being met by both parties.
CRITICAL ACCOUNTING POLICIES
Our significant accounting policies are disclosed in Note 3 of the notes
to the consolidated financial statements in our Annual Report on Form 10-KSB for
the year ended December 31, 2004.
RESULTS OF OPERATIONS
Three and Nine Months Ended September 30, 2005 and 2004
The accompanying consolidated financial information includes the accounts
of Medeorex and its wholly owned subsidiary, MDRX, since September 13, 2004, the
date of the Share Exchange Agreement with that company and the transfer of the
theater ticket operation to Aisle Seats.
Operating Expenses
Operating expenses for the three months ended September 30, 2005 were
approximately $91,000, which included professional fees of $76,000, travel and
promotion expenses of approximately $4,000, rent and office expenses of $10,000
and depreciation of computer hardware and software of approximately $1,000.
There were no similar operating expenses for the three months ended September
30, 2004.
Operating expenses for the nine months ended September 30, 2005 were
approximately $190,000, which included professional fees of $142,000, travel and
promotion expenses of approximately $14,600, rent and office expenses of $30,000
and depreciation of computer hardware and software of approximately $4,000.
There were no similar operating expenses for the nine months ended September 30,
2004.
Loss from Continuing Operations before Interest Expense and Discontinued
Operations
Losses from continuing operations for the three and nine months ended
September 30, 2005 were approximately $91,000 and $190,000, respectively. There
was no similar loss for the three and nine months ended September 30, 2004. Our
operating losses are a result of general and administrative costs associated
with operating the business. We have not yet earned any revenues to offset these
costs.
Interest Expense
For the three and nine months ended September 30, 2005, interest expense
amounted to approximately $3,000 and $7,000, respectively. This interest expense
is related to the stockholder loans. There was no similar expense for the three
and nine months ended September 30, 2004.
Loss (income) from Discontinued Operations
9
For the three and nine months ended September 30, 2005, there was no loss
from discontinued operations. The Company had income from discontinued
operations for the three months ended September 30, 2004 amounting to
approximately $10,000 and a loss of approximately $32,000 for the nine months
ended September 30, 2004. The income for the three months and the loss for the
nine months ended September 30, 2004 represents the income earned and losses
incurred by the Company's former theater ticket business. On September 13, 2004
the Company transferred its theater ticket operations to Aisle Seats, Inc., an
entity controlled by the Company's former president and majority stockholder. As
consideration, Aisle Seats assumed all of the liabilities of the theater ticket
business operation. Net liabilities assumed amounted to approximately $11,000.
Net Income/Loss
Net loss for the three and nine months ended September 30, 2005 was
approximately $94,000 and $198,000, compared to a net income of $10,000 and a
net loss of $32,000 for the three and nine months ended September 30, 2004. The
losses for the three and nine months ended September 30, 2005 were the result of
general and administrative expenses of $91,000 and $190,000, respectively, and
interest expense of approximately $3,000 and $7,000, respectively. The income
and losses from discontinued operations of approximately $10,000 and $32,000,
respectively, related to the discontinued theater ticket business.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2005, we had cash of approximately $222.
Since the sale of the Company's theater ticket business, we have been
financing our operations primarily through capital contributions and short term
loans from our stockholders. As of September 30, 2005, such short-term loans
were approximately $194,000.
As we are a development stage company, we will require significant
additional financial resources for the expansion of our health and
pharmaceutical services business. At this time, it is not possible to quantify
what amount may actually be required and we will continue to depend on loans
from our stockholders. If required, we may seek to obtain additional financing
through public or private equity financings, although no specific plans exist
for conducting such financings at this time. If we are unable to obtain the
required financings to implement our business strategies, our ability to conduct
our business may be adversely affected.
We are also pursuing acquisitions that may require substantial capital
resources. For example to conclude the CGI minority interest investment, we may
be required to raise capital for the contemplated transaction through a
combination of additional borrowings and the issuance debt and equity
securities. At this time, no such financing transactions have been agreed to or
finalized.
Operating Activities
The net cash used in operating activities for the three months ended
September 30, 2005 amounted to approximately $75,000, which was primarily the
result of a net loss of approximately $95,000 from continuing operations
relating to general and administrative costs. This was adjusted by depreciation
expense of approximately $1,300, and an increase in prepaid expenses of $230 as
well as an increase in accounts payable amounting to approximately $18,000. In
comparison, for the three months ended September 30, 2004, all the activity
related to the discontinued operations of the theater ticket business and there
was no cash generated from operations.
The net cash used in operating activities for the nine months ended
September 30, 2005 amounted to approximately $110,000, which was primarily the
result of a net loss of approximately $197,000 from continuing operations
relating to general and administrative costs. This was adjusted by depreciation
expense of approximately $3,800, an increase in prepaid and other current assets
of $10,000 and an increase in accounts payable amounting to approximately
$94,000. In comparison, for the nine months ended September 30, 2004, all of the
activity related to the discontinued operations of the theater ticket business
and there was no cash generated from operations.
10
Investing Activities
There was no cash used for investing activities for the three and nine
months ended September 30, 2005 or 2004.
Financing Activities
The net cash provided from financing activities for the three and nine
months ended September 30, 2005 amounted to approximately $75,000 and $110,000,
respectively, which represented net loans made by the stockholders. In
comparison, for the three and nine months ended September 30, 2004, there was no
cash provided by financing activities.
Subsequent Events and Expectations
In addition to establishing a business within the healthcare sector, we
are pursuing corporate and product acquisitions within the pharmaceutical
industry in order to establish a competitive position in that market sector.
Effective November 3, 2005, the Company amended its Certificate of
Incorporation to change its name from "Medeorex, Inc." to "Karver International,
Inc." The amendment was approved by the Company's board of directors and with
majority shareholder consent.
Going Concern
As shown in the accompanying consolidated financial statements, we
incurred substantial net losses for the three and nine months ended September
30, 2005. There is no guarantee that we will be able to generate revenue and/or
raise capital to support those operations. This raises substantial doubt about
our ability to continue as a going concern.
Our future success is dependent upon our ability to achieve profitable
operations and generate cash from operating activities and upon additional
financing. There is no guarantee that we will be able to raise enough capital or
generate revenues to sustain our operations. Management believes the Company can
raise the appropriate funds need to support its business plan.
The consolidated financial statements do not include any adjustments
relating to the recoverability or classification of recorded assets and
liabilities that might result should we not be able to continue as a going
concern.
Item 3. Controls and Procedures
a) We maintain disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934, as amended, is recorded, processed, summarized and
reported within the specified time period.
Our Chief Executive Officer and Principal Financial Officer has evaluated
the effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of September 30, 2005, which is the end of the period
covered by this Quarterly Report on Form 10-QSB. Based on that evaluation, our
Chief Executive Officer and Principal Financial Officer has concluded that our
disclosure controls and procedures are effective.
b) There were no changes that occurred during the quarter ended September
30, 2005 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
11
PART II - OTHER INFORMATION
Item 6. Exhibits.
(1)3.1 Certificate of Amendment of the Certificate of Incorporation
31.1 Certification by the Chief Executive Officer and Principal
Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) under
the Securities Exchange Act of 1934, as amended.
32.1 Certification by the Chief Executive Officer and Principal
Financial Officer pursuant to 18 USC Section 1350, as adopted
by Section 906 of the Sarbanes-Oxley Act of 2002.
-----------------------------------
(1) Filed as an exhibit to Form 8k filed on November 9, 2005 and
incorporated herein by reference
12
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.
Date: November 10, 2005
KARVER INTERNATIONAL, INC.
By: /s/Dr. Jack Kachkar
-------------------
Dr. Jack Kachkar
Chief Executive Officer and
Principal
Financial Officer