-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BOewPCD3qhQQR1DDnKW4pzJP5gLy/i4y7Y7XZgOTz10dNdXJJsqw2Fd1EkJws0WC jWxot5Yo6c42S7W1p+TjlQ== 0001014909-00-000097.txt : 20000516 0001014909-00-000097.hdr.sgml : 20000516 ACCESSION NUMBER: 0001014909-00-000097 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EWRX INTERNET SYSTEMS INC CENTRAL INDEX KEY: 0001088949 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-BUSINESS SERVICES, NEC [7389] IRS NUMBER: 980117139 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27195 FILM NUMBER: 633657 BUSINESS ADDRESS: STREET 1: 301-543 GRANVILLE ST CITY: VANCOUVER BC CANADA STATE: A6 ZIP: V6C 1X8 BUSINESS PHONE: 3038202840 MAIL ADDRESS: STREET 1: 410 17TH STREET STREET 2: SUITE 1375 CITY: DENVER STATE: CO ZIP: 80202 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended March 31, 2000 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to -------- -------- Commission File No. 0-27195 EWRX Internet Systems, Inc. (Exact name of Registrant as specified in its charter) State of Nevada 98-0117139 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) #440-755 Burrard Street Vancouver, BC Canada V6Z 1X6 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code: (604) 669-6079 #301-543 Granville Street Vancouver, BC Canada V6C 1X8 (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares outstanding of the Registrant's common stock as of May 12, 2000 was 14,847,080 shares.
EWRX INTERNET SYSTEMS, INC. AND SUBSIDIARIES TABLE OF CONTENTS Page Number ------ PART I - FINANCIAL INFORMATION ------------------------------ Item 1 - Financial Statements - ----------------------------- Report of Independent Public Accountants..................................................................... 3 Consolidated Balance Sheets at March 31, 2000 (Unaudited) and December 31, 1999.............................. 4 Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 1999 (Unaudited)...................................................................... 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (Unaudited)...................................................................... 6 Notes to Consolidated Financial Statements................................................................... 7 Item 2 - Management's Discussion and Analysis or Plan of Operations............................................... 10 PART II - OTHER INFORMATION --------------------------- Item 1 - Legal Proceedings........................................................................................ 15 Item 2 - Changes in Securities.................................................................................... 15 Item 3 - Default Upon Senior Securities........................................................................... 15 Item 4 - Submission of Matters to Vote of Security Holders........................................................ 15 Item 5 - Other Information........................................................................................ 15 Item 6 - Exhibits and Reports on Form 8-K......................................................................... 15 Signatures........................................................................................................ 16
2 Item 1. Financial Statements - ----------------------------- REPORT OF INDEPENDENT ACCOUNTANTS Board of Directors EWRX Internet Systems Inc. and Subsidiaries We have reviewed the accompanying balance sheets of EWRX Internet Systems Inc. and Subsidiaries as of March 31, 2000 and the related statements of operations and cash flows for the period then ended. These financial statements are the responsibility of the Company's management. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of analytical procedures applied to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit 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. We have previously audited, in accordance with generally accepted auditing standards, the balance sheet of EWRX Internet Systems Inc. and Subsidiaries as of December 31, 1999 and the related statements of earnings and cash flows for the year then ended (not presented separately herein), and in our report dated March 27, 2000 we expressed an unqualified opinion on those financial statements. In our opinion, the information set forth in the accompanying balance sheet as of March 31, 2000 is fairly stated, in all material respects, in relation to the balance sheet from which it has been derived. /s/ Jackson & Rhodes, P.C. Jackson & Rhodes P.C. Dallas, Texas May 10, 2000 3
EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS March 31, December 31, 2000 1999 ------------- ------------- (Unaudited) (Audited) Current assets: Cash $ 295,974 $ 5,214 Receivables 25,671 37,422 Prepaids and other 5,461 2,636 ----------- ----------- Total current assets 327,106 45,272 ----------- ----------- Furniture and equipment: Furniture and equipment 176,011 74,374 Accumulated depreciation (35,108) (29,395) ----------- ----------- Net furniture and equipment 140,903 44,979 ----------- ----------- Other assets: Goodwill, net of amortization of $336,210 1,660,135 1,759,953 Website development costs 293,144 254,855 ----------- ----------- Total other assets 1,953,279 2,014,808 ----------- ----------- $ 2,421,288 $ 2,105,059 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 233,699 $ 342,286 Due to related parties 174,976 138,700 ----------- ----------- Total current liabilities 408,675 480,986 ----------- ----------- Commitments and contingencies - - Stockholders' equity (deficit): Preferred stock, $.01 par value, 500,000 shares authorized, none issued and outstanding - - Common stock, $.001 par value, 100,000,000 shares authorized, 14,847,080 and 13,551,980 shares issued and outstanding 14,793 13,552 Additional paid-in capital 5,730,327 4,555,614 Accumulated Deficit (3,718,947) (2,927,875) Accumulated other comprehensive income (loss) (14,847) (17,218) ----------- ----------- Total stockholders' equity 2,012,613 1,624,073 ----------- ----------- $ 2,421,288 $ 2,105,059 =========== =========== See accompanying notes to consolidated financial statements.
4
EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ---------- ---------- Revenue $ 28,147 $ - ---------- ---------- Expenses: Salaries and benefits 312,295 5,348 Consulting, management and professional fees 111,376 49,437 Marketing and promotion 87,974 28,734 Depreciation and amortization 105,531 710 General and administrative 202,043 35,364 ---------- ---------- Total expenses 819,219 119,593 ---------- ---------- Net loss $ (791,072) $ (119,593) ========== ========== Basic net loss per share $ (0.05) $ (0.01) ========== ========== Weighted average common shares outstanding 14,421,213 13,019,334 ========== ========== See accompanying notes to consolidated financial statements.
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CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended March 31, 2000 and 1999 (Unaudited) 2000 1999 ---------- ---------- Net loss $(791,072) $(119,593) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 105,531 710 Stock issued for domain name 17,500 - Changes in assets and liabilities: Receivables 11,751 (1,877) Prepaid expenses (2,825) (2,459) Accounts payable (108,587) (9,517) --------- --------- Net cash used in operating activities (767,703) (132,736) --------- --------- Cash flows from investing activities: Purchase of furniture and equipment (101,637) - Website development costs (38,289) - --------- --------- Net cash used in investing activities (139,926) - --------- --------- Cash flows from financing activities: Bank overdraft - (2,661) Advances from shareholders 36,276 14,119 Common stock sold for cash 1,158,508 321,250 --------- --------- Net cash provided by financing activities 1,194,784 332,708 --------- --------- Effect of exchange rate changes on cash 3,604 (3,710) --------- --------- Net increase (decrease) in cash 290,760 196,262 Cash at beginning of period 5,214 0 --------- --------- Cash at end of period $ 295,974 $ 196,262 ========= =========
Noncash activities: During the period ended March 31, 1999, the Company converted $199,202 of debt into 664,010 shares of common stock. During the period ended March 31, 1999, the Company reacquired a total of 3,600,000 shares of common stock and returned them to authorized and unissued common stock. During the period ended March 31, 2000, the Company issued 17,500 shares of common stock to purchase an internet domain name See accompanying notes to consolidated financial statements. 6 EWRX INTERNET SYSTEMS INC. AND SUBSIDIARIES Notes to Interim Consolidated Financial Statements 1. ORGANIZATION DESCRIPTION OF BUSINESS The Company was incorporated on June 25, 1997 in the State of Nevada. The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, EWRX Internet Systems (Canada), Inc., a company incorporated in British Columbia, Classic Car Source, Incorporated ("CCS") and North Fork Publishing Group, Inc. ("NFPG") (Note 3). Until its acquisition of CCS and NFPG in June 1999, the Company was in the development stage of its existence, devoting its efforts primarily to raising capital, developing an industrial mineral project in Ukraine, exploring investment opportunities, and administrative functions. CCS was established to create a source of on-line publishing of information and entertainment for classic vehicle collectors. NFPG was established to provide Internet marketing, design and internet database services on a contract basis to selected clients. UNAUDITED INTERIM FINANCIAL STATEMENTS The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB of Regulation S-B. They do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements for the year ended December 31, 1999 included in the Company's Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The interim unaudited financial statements should be read in conjunction with those financial statements included in the Form 10-KSB. In the opinion of Management, all adjustments considered necessary for a fair presentation, consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2000 are not necessarily indicative of the results that may be expected for the year ending December 31, 2000. GOING CONCERN The Company's financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company has reported cumulative net losses since inception of $3,718,947 as of March 31, 2000. The Company has had preliminary discussions with third parties to raise up to $5,000,000 using a combination of shares and warrants at the market price at the time of any subscription. Proceeds from the proposed sale of Common Stock will be used to 7 1. ORGANIZATION GOING CONCERN (Continued) pay offering costs and to expand the brand recognition of the Company's websites through advertising and marketing and to fund website redesign that will in turn enhance the commercial value of Websites as previously discussed. Proceeds will also be used for general working capital, and general and administrative purposes. The number of shares that are issued as part of any sale of Common Stock is dependent upon market prices. The Company has been and remains dependent upon its ability to raise capital by selling equity securities to finance its operations and development activities. During the quarter ended March 31,2000, $1,158,508 was raised by way of a private placement. The Company's monthly general and administrative costs (e.g. salaries, rent, corporate expenses) are approximately $200,000. The Company also expects to spend approximately $1.3 million during the next twelve months towards the continued development and enhancement of its Websites. The Company anticipates, subject to adequate financing, that by mid-2002, there will be sufficient revenue from the operations of its websites to pay for these costs and related sales and marketing costs. The Company is dependent upon the proceeds of its proposed offering of Common Stock or other securities to implement its business plan and to finance its working capital requirements. Should the Company's plans or its assumptions change or prove to be inaccurate or offering proceeds are insufficient to fund the Company's operations, the Company would be required to seek additional financing sooner than anticipated. The Company may determine, depending upon available opportunities, to seek debt or additional equity financing to fund the cost of continuing expansion or other acquisitions. To the extent that the Company incurs indebtedness or issues debt securities, it will be subject to risks associated with such indebtedness, including interest rate fluctuations, collateral arrangements and the possibility that cash flows may prove inadequate to repay such indebtedness. The Company has no current arrangements with respect to, or sources of, additional financing. There can be no assurances given that the Company will be successful in generating sufficient revenues from its planned activities or that it can raise sufficient capital to allow it to continue as going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These factors can affect the ability of the Company to implement its general business plan including specific plans to re-design websites, to develop an on-line Specialty Automotive Aftermarket equipment catalog, to implement a banner advertising sales program, to implement other sales programs and to implement a premium membership for its website visitors, the principal means of revenue generation for the Company's Internet markets. 8 2. CAPITAL STOCK As of February 29, 2000, the Company completed a private placement of 1,277,600 units, each unit consisting of one common share and one non-transferable warrant exercisable at $1.00 for two years from the date of the subscription. The Company realized cash proceeds, net of $64,400 of finders' fees, in the amount of $1,158,508 and was relieved from $25,000 of liabilities as a result of this private placement. Of the total units issued, 54,600 units were issued to various broker/dealers as payment for commissions payable in connection with this capital raise. The private placement increased the number of fully diluted common shares by 1,277,600 shares. 9 Item 2. Management's Discussion and Analysis or Plan of Operation - ------------------------------------------------------------------ PLAN OF OPERATIONS EWRX's primary business objective during the next twelve months is to develop and operate websites that facilitate commercial transactions in the Specialty Automotive Aftermarket. By using proprietary information management software and by using the Internet as an e-commerce marketplace, the Company believes that it can provide participants with enhanced selection and pricing for automotive products and services. In return, the Company plans to charge a fee, on a transaction-by-transaction basis for all business conducted by third parties using the Company's websites. The Company also expects to generate additional revenues from its websites by selling advertising to third parties. Further, the Company expects its wholly owned subsidiary, North Fork WebWrx, to earn increased service revenues by continuing to provide custom software and website design services, Internet database services and custom e-commerce software solutions to a variety of businesses that are seeking are to utilize the Internet for commercial purposes. Reference is also made to the Company's Annual Report on Form 10-KSB as of December 31, 1999. To achieve its primary objectives, over the next twelve months, EWRX anticipates that it will: 1) Raise up to $5 million through the private placement sale of common shares. Proceeds will be used for general corporate purposes and to fund planned website development activities as outlined below. Refer to the discussion under "Capital Resources" below. 2) Complete the re-development and re-programming of the Classicar.com and Classictruck.com websites. This work will be accomplished in conjunction with a contract with Xceed, Inc. who will provide the Company with certain developmental and programming services. Both websites will then be fully capable of conducting planned e-commerce operating activities. Through March 2000, the Company has completed a portion of this work and related costs have been capitalized as Website development costs. 3) Develop other related Internet sites that are focused on specific communities within the Specialty Automotive Aftermarket such as racing, hot rods, etc. The Company has registered the domain names "Speedwrx.com" and "Motorhood.com" for such purposes. 4) Develop the Company's MotorWrx.com website. MotorWrx.com provides a single gateway on the Internet to the EWRX group of websites and ultimately will provide links to other websites related to the Specialty Automotive Aftermarket. EWRX intends MotorWrx.com to be an important destination site for the Specialty Automotive Aftermarket on the Internet and it is planned to provide a single point entry for automotive enthusiasts. Included in this development will be creation of the Motorhood.com and Speedwrx.com websites. 5) Development of BigBadCatalog.com, an electronic catalog for the Specialty Automotive Aftermarket. Development of this new website will be undertaken in part under the contract with Xceed, Inc. referred to previously in (2) above. EWRX plans to integrate digitized standard printed catalogs for automobile parts manufacturers and distributors into BigBadCatalog.com. This will create a centralized point of sale on the Internet where auto enthusiasts can purchase automotive parts directly from participating manufacturers and distributors. 10 6) Increase brand awareness for the Motorwrx.com, ClassicCar.com, Classictruck.com, and related websites and brands. The Company has initiated a program to significantly increase overall brand awareness of the various EWRX websites through a national advertising program in conjunction with certain co-sponsors. 7) Expand services provided to third parties by North Fork WebWrx. North Fork Webwrx is an Internet solutions provider serving a variety of businesses by providing high-end website design services, Internet database programming, custom e-commerce applications and strategic Internet marketing consulting. With public acceptance of the Internet surging, and business-to-business commerce changing the traditional distribution systems, EWRX believes that North Fork WebWrx can expand its market share in the following areas: WEBSITE DEVELOPMENT. Design, development, and maintenance of a wide range of business-to-business commerce sites, Intranet (internal business communications) and large-scale consumer sites. ONLINE ADVERTISING. Banner ad development, banner placements and other online advertising projects for third parties. MARKET CONSULTING. Providing market-consulting services, such as Internet launch strategies, site development analysis and Internet marketing plans. WEBSITE HOSTING. North Fork WebWrx currently hosts over 70 websites for classic car and classic truck related businesses and organizations. SPECIAL PROJECTS. Developing proprietary software for resale. 8) As appropriate opportunities arise and provided that sufficient funding is available, complete additional acquisitions or form joint ventures and/or strategic alliances with other website-related companies servicing the Specialty Automotive Aftermarket. Subject to availability of financing (refer to "Capital Resources" below), the Company intends to complete the re-design of its current websites, increase banner advertising and other sales programs, and to develop its electronic catalog all during the first half of 2000. The on-going re-design of the Company's websites was initiated in July 1999, and when completed, a variety of e-commerce revenue streams will begin. These activities are expected to be the principal sources of future revenues for the Company. The Company believes that revenues to be earned during the next twelve months, together with planned sales of Common Shares as described below under "Capital Resources," will provide sufficient funding for operations during that twelve- month period. However, no assurance can be given that the types of revenues projected by the Company or that the financing contemplated by the Company will occur. Additional capital will be required for significant expansion of website capabilities and other planned Company activities such as development or acquisition of additional websites. In connection with its website developmental activities as set out above, and subject to availability of financing, the Company estimates that it will incur approximately $1.275 million for website development costs during the next twelve months. 11 REVENUES AND FINANCING Through March 31, 2000, the Company has realized minimal revenues from banner advertising and website consulting services, principally because the acquisition of Classic Car and North Fork was completed only in late June 1999. Subsequently, EWRX's efforts were primarily focused on development of existing and new web sites. EWRX intends to derive its future revenues from these same sources, from the electronic catalog, BigBadCatalog, and from other e-commerce programs on its websites. The Company anticipates that Internet and related e-commerce will continue to become more accessible and that the market opportunities for the Company will expand in North America and internationally. The Company intends to expand the content and to improve the services on its websites, and where appropriate, to add new websites that are compatible with its existing websites related to the Specialty Automotive Aftermarket. Additional capital, as described in CAPITAL RESOURCES below, will be required for significant expansion of Website capabilities and other Company activities such as additional Websites and related acquisitions. During the first quarter of 2000 and throughout 1999, the Company's principal source of funds has come from sales of Common Shares by way of private placement and from advances made by an officer/shareholder. Over this period, approximately $2.43 million ($1.4 million in 1999) has been raised from sales of Common Stock. At March 31, 2000 there were net advances from Shareholders amounting to $174,976 ($138,700 at December 31, 1999). Proceeds have primarily been used to acquire Classic Car and North Fork, initiate work for website re-design as discussed previously and for corporate administrative and sales costs. The Company is continuing to investigate and solicit funding primarily through private placements of its securities. CAPITAL RESOURCES As of February 29, 2000, the Company completed a private placement of 1,277,600 units, including issuance of 54,600 units for commissions, at $1.00 per unit. Each unit consisted of one common share and one non-transferable warrant exercisable at $1.00 for two years from the date of the subscription. Net proceeds of approximately $1.198 million was raised in cash and the Company was relieved of $25,000 of liabilities. The private placement increased the number of fully diluted common shares by 1,277,600 shares. This placement was not subject to an underwriting agreement. The Company has had preliminary discussions with third parties to raise up to $20,000,000 using a combination of shares and warrants at the market price at the time of any subscription. Proceeds from the proposed sale of Common Stock will be used to pay offering costs and to expand the brand recognition of the Company's websites through advertising and marketing and to fund website redesign that will in turn enhance the commercial value of Websites as previously discussed. Proceeds will also be used for general working capital, and general and administrative purposes. The Company's monthly general and administrative costs (e.g. salaries, rent, corporate expenses) are approximately $200,000. The Company anticipates, subject to adequate financing, that by mid-2002, there will be sufficient revenue from the operations of its websites from providing other Internet related services to pay for these costs and related sales and marketing costs. 12 The Company is dependent upon the proceeds of its proposed offering of Common Stock to implement its business plan and to finance its working capital requirements. Should the Company's plans or its assumptions change or prove to be inaccurate or offering proceeds are insufficient to fund the Company's operations, the Company would be required to seek additional financing sooner than anticipated. The Company may determine, depending upon available opportunities, to seek debt or additional equity financing to fund the cost of continuing expansion or other acquisitions. To the extent that the Company incurs indebtedness or issues debt securities, it will be subject to risks associated with such indebtedness, including interest rate fluctuations, collateral arrangements and the possibility that cash flows may prove inadequate to repay such indebtedness. The Company has no current arrangements with respect to additional financing. There can be no assurances given that the Company will be successful in generating sufficient revenues from its planned activities or that it can raise sufficient capital to allow it to continue as going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These factors can affect the ability of the Company to implement its general business plan including specific plans to re-design websites, to develop an on-line Specialty Automotive Aftermarket equipment catalog, to implement other sales programs for its website visitors, the principal means of revenue generation for the Company's Internet markets. On July 15, 1999, the Company entered into an agreement with Harmonic Research, Inc. (Harmonic), an investment fund management company, to sell by way of private placement units consisting of common shares and warrants on behalf of the Company. The initial term of the agreement was for 90 days and is extended in 90-day increments. To date, Harmonic has placed securities on behalf of the Company outside of the terms of this agreement. The Company did not extend the agreement in October 1999. Under the initial agreement terms, Harmonic provided financial advisory services and was paid $15,000. Upon signing the initial agreement, the Company also granted Harmonic a warrant to purchase 150,000 shares of the Company's common stock at $1.00 per share for three years. In addition, Harmonic is also entitled to receive certain fees should the Company enter into a merger, consolidation, reorganization, and business combination or acquire another company where Harmonic is the finder. No such transaction is under consideration by the Company at this time. FINANCIAL CONDITION AND RESULTS OF OPERATIONS Until recently, the Company was a development stage enterprise. Its principal assets today are its investments in Classic Car and North Fork. From inception to date, the Company has incurred significant operating losses resulting in its working capital deficit. From its formation in 1997 through the first half of 1999, the Company did not generate any significant operating revenues. Beginning in the third quarter of 1999 and upon completion of the purchase of Classic Car and North Fork discussed previously, the Company has entered the e-commerce marketplace. Revenues in 2000 were derived primarily from banner advertising on Company websites. Salaries and benefits increased in 2000 when compared to 1999 primarily as a result of increases in personnel in the second half of 1999 in connection with commencing e-commerce operating activities as a result of the acquisition of Classic Car Source and North Fork completed in June 1999. Consulting, management and professional fees are primarily accounting and legal expenses. Increases in these expenses in 2000 when compared to 1999 are a result of costs incurred relating to the acquisition of Classic Car Source and North Fork and completion of the Company's registration of securities under the Securities Exchange Act of 1934. 13 Marketing and promotion cost in 2000 pertain to creating broad awareness within the Internet community of the Company's websites and its related products and services. All such costs were incurred subsequent to the acquisition of Classic Car and North Fork. Overall during 2000, general and administrative expenses increased when compared to 1999 as a result of commencing operating activities subsequent to the acquisitions of Classic Car and North Fork. Higher costs resulted from increased staff, enlarging office facilities to include two locations, and other administrative expenses. Such increases occurred primarily in the third and fourth quarters of 1999 and are expected to be ongoing at the rate of approximately $200,000 per month. Increases in depreciation and amortization in 2000 when compared to 1999 relate primarily to amortization of goodwill recorded in connection with the acquisition of Classic Car and North Fork. Such amortization commenced in July 1999. Due to operating losses since inception, the Company has not incurred any liability related to income taxes. 14 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. None. ITEM 2. CHANGES IN SECURITIES. None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. ITEM 5. OTHER INFORMATION. None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits: 27.1 Financial Data Schedule (b) Reports on Form 8-K: Date of Filing Date of Event Item Reported -------------- ------------- ------------- February 14, 2000 February 1, 2000 Item 5 - Approval by the National Association of Securities Dealers, Inc. for trading on the OTC-BB effective January 28, 2000 March 7, 2000 February 29, 2000 Item 5 - Completion of private placement under Regulation D and Regulation S of the Securities Act of 1933, as amended 15 SIGNAURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. EWRX INTERNET SYSTEMS, INC. (Registrant) May 12, 2000 By /s/ Ronald C. Davis ------------------------------------- Ronald C. Davis President and Chief Executive Officer May 12, 2000 By /s/ Richard P. Ott ------------------------------------- Richard P. Ott Treasurer and Chief Accounting Officer 16 EX-27 2 EXHIBIT 27 - FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REGISTRANT'S FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FORM 10-QSB. 3-MOS DEC-31-2000 MAR-31-2000 295,974 0 25,671 0 0 327,106 176,011 (35,108) 2,421,288 408,675 0 0 0 5,745,174 (3,732,561) 2,421,288 28,147 28,147 0 0 819,219 0 0 (791,072) 0 (791,072) 0 0 0 (791,072) (.05) 0.00
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