Edgar Filing: MAREX COM INC

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________.

Commission file number: 000-25129

MAREX.COM, INC.
(Exact name of registrant as specified in its charter)

FLORIDA 65-0354269
------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

5835 BLUE LAGOON DRIVE, 4TH FLOOR
MIAMI, FLORIDA 33126
------------------------------------------ --------
(Address of principal executive offices) (Zip Code)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (305) 285-2003

Former address: 2701 South Bayshore Drive, 5th Floor, Miami, Florida 33133

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 (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 [ ]

The number of shares outstanding of the registrant's Common Stock as of April
30, 2001 was 7,343,980.

MAREX.COM, INC.

TABLE OF CONTENTS

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Condensed Consolidated Balance Sheets as of March 31, 2001 and
December 31, 2000 .................................................. 2

Condensed Consolidated Statements of Operations for the three months
ended March 31, 2001 and 2000 ...................................... 3

Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 2001 and 2000 ...................................... 4

Notes to Condensed Consolidated Financial Statements ............... 5

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations .............................................. 9

Item 3. Quantitative and Qualitative Disclosures About Market Risk ......... 15

PART II - OTHER INFORMATION

Item 1. Legal Proceedings .................................................. 15

Item 2. Changes in Securities and Use of Proceeds .......................... 15

Item 3. Defaults Upon Senior Securities .................................... 15

Item 4. Submission of Matters to a Vote of Security Holders ................ 15

Item 5. Other Information .................................................. 15

Item 6. Exhibits and Reports on Form 8-K ................................... 16

Signatures ......................................................... 17

MAREX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

MARCH 31, DECEMBER 31,
2001 2000
------------ ------------
(unaudited)

ASSETS

Current assets:
Cash and cash equivalents ........................................................ $ 13,149,061 $ 19,624,266
Accounts receivable, net ......................................................... 33,071 18,901
Prepaid expenses and other current assets ........................................ 369,985 714,350
Loan to related party ............................................................ 200,000 --
------------ ------------
Total current assets .......................................................... 13,752,117 20,357,517
------------ ------------
Property and equipment, net .......................................................... 1,895,275 2,004,853
------------ ------------

Other assets:
Trademark, net ................................................................... 2,708 6,771
Software development costs, net .................................................. 8,582,380 8,904,897
Deposits ......................................................................... 192,149 197,643
------------ ------------
Total other assets ............................................................ 8,777,237 9,109,311
------------ ------------
Total assets .............................................................. $ 24,424,629 $ 31,471,681
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Capital lease obligations ........................................................ $ 132,172 $ 130,481
Accounts payable and accrued expenses ............................................ 3,689,128 7,195,954
------------ ------------
Total current liabilities ..................................................... 3,821,300 7,326,435

Long-term liabilities:
Capital lease obligations, net of current portion ................................ 178,750 217,306
------------ ------------
Total liabilities ......................................................... 4,000,050 7,543,741
------------ ------------

Shareholders' equity:
Preferred Stock, par value $.01 per share, 1,000,000
shares authorized, 304,693 shares of Series
A1 Convertible Preferred Stock outstanding as of
March 31, 2001 and December 31, 2000 .......................................... 30,469,300 30,469,300
Common Stock, par value $.01 per share,
25,000,000 shares authorized, 7,343,980 and 7,339,780
shares issued and outstanding as of March 31, 2001 and
December 31, 2000, respectively ............................................... 73,440 73,398
Additional paid-in capital ....................................................... 42,840,249 42,721,486
Accumulated deficit .............................................................. (52,958,410) (49,336,244)
------------ ------------
Total shareholders' equity .................................................... 20,424,579 23,927,940
------------ ------------
Total liabilities and shareholders' equity ................................ $ 24,424,629 $ 31,471,681
============ ============

See Notes to Condensed Consolidated Financial Statements

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MAREX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

THREE MONTHS ENDED
MARCH 31,
-----------------------------
2001 2000
----------- -----------

Revenues .................................................... $ 48,668 $ 3,447
----------- -----------

Operating expenses:
Product support and development ......................... 1,972,534 737,684
Selling and marketing ................................... 1,088,521 929,565
General and administrative .............................. 698,326 1,043,860
Stock-based compensation ................................ 117,405 489,184
----------- -----------
Total operating expenses ............................. 3,876,786 3,200,293
----------- -----------
Loss from operations ........................................ (3,828,118) (3,196,846)
----------- -----------

Other income (expense):
Interest income ......................................... 222,513 90,671
Interest expense ........................................ (8,368) (905)
Other ................................................... (8,193) (1,484)
----------- -----------
Total other income ................................... 205,952 88,282
----------- -----------

Net loss .................................................... $(3,622,166) $(3,108,564)
=========== ===========

Net loss per share, basic and diluted........................ $ (0.49) $ (0.49)
=========== ===========

Weighted average shares of Common Stock
outstanding ............................................. 7,341,647 6,406,597
=========== ===========

See Notes to Condensed Consolidated Financial Statements

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MAREX.COM, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

THREE MONTHS
ENDED
MARCH 31,
-------------------------------
2001 2000
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................................ $ (3,622,166) $ (3,108,564)
Adjustments to reconcile net loss to
net cash used in operating activities
Provision for doubtful accounts ................................ 243 --
Depreciation ................................................... 192,623 59,395
Amortization ................................................... 609,825 8,634
Stock-based compensation ....................................... 117,405 489,184
Loss on disposal of property and equipment ..................... -- 1,484
Increase in accounts receivable ................................ (14,413) --
Decrease (increase) in prepaid expenses and other current assets 344,365 (679,242)
Decrease (increase) in deposits ................................ 5,494 (11,013)
(Decrease) increase in accounts payable and accrued expenses ... (3,506,826) 2,166,009
------------ ------------
Net cash used in operating activities ..................... (5,873,450) (1,074,113)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ................................. (83,045) (438,011)
Additions to software development costs ............................. (283,245) (2,105,869)
(Increase) decrease in loan to related party ........................ (200,000) 22,200
------------ ------------
Net cash used in investing activities ..................... (566,290) (2,521,680)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations ..................... (36,865) (8,459)
Proceeds from exercise of stock options and warrants ................ 1,400 49,410
Proceeds from issuance of Preferred Stock ........................... -- 20,449,715
------------ ------------
Net cash (used in) provided by financing activities ....... (35,465) 20,490,666
------------ ------------

Net (decrease) increase in cash and cash equivalents .................... (6,475,205) 16,894,873

CASH AND CASH EQUIVALENTS, beginning of period .......................... 19,624,266 3,434,036
------------ ------------
CASH AND CASH EQUIVALENTS, end of period ................................ $ 13,149,061 $ 20,328,909
============ ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Cash paid during each period for interest ......................... $ 8,368 $ 905
============ ============

SUPPLEMENTAL DISCLOSURES OF NON-CASH FLOW INFORMATION:

Acquisition of equipment under capital lease obligations .......... $ -- $ 64,012
============ ============

See Notes to Condensed Consolidated Financial Statements

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MAREX.COM, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

(1) BASIS OF FINANCIAL STATEMENT PRESENTATION

In management's opinion, the accompanying unaudited condensed consolidated
financial statements of Marex.com, Inc. and subsidiaries (the "Company") contain
all adjustments (consisting of only normal recurring adjustments) necessary to
present fairly the Company's financial position, results of operations and cash
flows for each period shown. The results of operations for the 2001 interim
period presented are not necessarily indicative of the results to be expected
for any subsequent quarter or for the entire year ending December 31, 2001.

The accompanying unaudited interim condensed consolidated financial statements
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission for reporting on Form 10-Q. Certain information and footnote
disclosures normally included in the financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted. The condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and the notes to
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2000.

The accounting policies followed for interim financial reporting are the same as
those disclosed in the notes to consolidated financial statements included in
the Company's Annual Report on Form 10-K for the year ended December 31, 2000.

(2) RECENT ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities" which requires us to recognize all
derivatives on the balance sheet at fair value. Derivatives that are not hedges
must be adjusted to fair value through income. As required, we adopted SFAS No.
133 in the first quarter of 2001. The adoption of this statement did not have an
effect on our consolidated results of operations and financial position as we
did not hold any derivative instruments during the three months ended March 31,
2001.

(3) NET LOSS PER SHARE

SFAS No. 128, "Earnings Per Share," requires two presentations of earnings per
share -- "basic" and "diluted." Basic earnings per share is computed by dividing
income available to common stockholders (the numerator) by the weighted average
number of common shares (the denominator) for the period. The computation of
diluted earnings per share is similar to basic earnings per share, except that
the denominator is increased to include the number of additional common shares
that would have been outstanding if the potentially dilutive common shares had
been issued.

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The following options and warrants to purchase shares of Common Stock were
outstanding at the end of each period, but were not included in the computation
of diluted earnings per share because the Company reported a net loss for each
of the quarters presented and, therefore, the effect would be antidilutive:

MARCH 31,
--------------------------------
2001 2000
------------- -------------
OPTIONS

Outstanding .................... 3,951,700 2,698,700
Weighted average exercise prices $ 4.95 $ 6.32

WARRANTS

Outstanding .................... 1,852,052 409,971
Weighted average exercise prices $ 3.57 $ 9.68

In addition, the Company had 304,693 shares of Preferred Stock outstanding as of
March 31, 2001 that were convertible into 2,343,792 shares of Common Stock.

(4) SOFTWARE DEVELOPMENT COSTS

The Company follows Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use," and EITF 00-02,
"Accounting for Web Site Development Costs," for the accounting of development
costs. During the three months ended March 31, 2001 and 2000, the Company
capitalized $283,000 and $2.1 million, respectively, of development costs
associated with development of its e-commerce solutions.

(5) ACCOUNTING FOR STOCK-BASED COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees," ("APB No. 25") and related Interpretations. Under
APB No. 25, compensation cost is measured as the excess, if any, of the quoted
market price of the Company's Common Stock at the date of grant over the
exercise price of the option granted. Compensation cost for stock options, if
any, is recognized ratably over the vesting period. In March 2000, the Company
granted options to a director at an exercise price below the quoted market price
which resulted in total non-cash compensation of $2.4 million. During the three
months ended March 31, 2001 and 2000, compensation expense related to the vested
portion of the stock options granted to the director totaled $117,000 and
$489,000, respectively, and is included in the unaudited condensed consolidated
statements of operations as "Stock-based compensation."

(6) INCOME TAXES

The Company did not record a benefit for income taxes due to the full valuation
allowance that has been recorded given the uncertainty of the realization of its
deferred income tax assets.

(7) PREFERRED STOCK

The Company has authorized 1,000,000 shares of Preferred Stock of $.01 par value
with preferences to be determined by the Board of Directors. On March 2, 2000,
the Board of Directors designated 430,000 shares as Series A1 Convertible
Preferred Stock ("Series A1 Preferred Stock").

In March 2000, the Company received net proceeds of $20.4 million in connection
with the sale of 210,000 shares of Series A1 Preferred Stock at $100 per share.
In May 2000, the Company completed the private placement through the sale of an
additional 210,000 shares of Series A1 Preferred Stock at $100 per share. Total
net proceeds from the private placement were $40.9 million.

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Each share of the Series A1 Preferred Stock is convertible into 7.69 shares of
Common Stock at the option of the holder at any time. In the event that the
Company issues or sells Common Stock or securities convertible or exchangeable
for Common Stock, subject to certain exclusions, at a price per share less than
the conversion price of the outstanding Series A1 Preferred Stock, the holders
of the Series A1 Preferred Stock shall have the right to amend the conversion
price of the Series A1 Preferred Stock outstanding to the price per share of the
issuance. Automatic conversion occurs upon either of the following: completion
by the Company of a public offering which raises gross proceeds of at least $50
million, at an effective price per share to the public of at least $26.00 as
adjusted for stock splits, stock dividends or other similar transactions; or,
upon the event that the market price per share of the Company's Common Stock
exceeds $26.00, subject to adjustments for stock splits, stock dividends, or
other similar transactions, for a consecutive twenty-day period following the
one-year anniversary of the effective date of a registration statement covering
the Common Stock underlying the Series A1 Preferred Stock.

The holders of the Series A1 Preferred Stock are entitled to the number of votes
equal to the number of shares of Common Stock into which such Preferred Stock is
convertible.

Upon declaration by the Board of Directors, holders of Series A1 Preferred Stock
shall be entitled to receive dividends ratably in an amount per share equal to
that which the holders would have been entitled had they converted their Series
A1 Preferred Stock into shares of Common Stock.

Upon any liquidation of the Company, holders of record of the Series A1
Preferred Stock shall be entitled to receive, out of the assets of the Company
and before any distribution or payment is made upon any class of security of
lesser rank, an amount per share equal to the lesser of $100 per share or the
assets of the Company available for distribution to its shareholders,
distributed ratably among holders of the outstanding Series A1 Preferred Stock.
After the distribution to the holders of Series A1 Preferred Stock has been
made, the remaining assets of the Company available for distribution to
shareholders shall be distributed pro rata solely among the holders of Common
Stock.

Holders may redeem shares of Series A1 Preferred Stock in the event that the
Company does not honor a conversion. In such a case, the redemption amount is
equal to, at the option of the holder, the market value of the Common Stock that
the shares of Series A1 Preferred Stock would otherwise have been convertible
into or $100 per share.

(8) RELATED PARTY TRANSACTIONS

In February 2001, the Company loaned its Chief Executive Officer, who is also a
Director and a shareholder, $200,000. The loan accrues interest at an annual
rate of 8.5% and matures on April 28, 2001.

In March 2000, the Company made a payment of $435,000 to a consultant, who is
also a shareholder of the Company, for strategic business consulting. Under the
arrangement, the consultant provided consulting services to the Company through
December 31, 2000. Consulting expense related to the agreement totaled $109,000
for the three months ended March 31, 2000 and is included in the accompanying
condensed consolidated statement of operations as a component of "General and
administrative" expenses.

(9) MAJOR CUSTOMER

For the three months ended March 31, 2001, revenues from one major customer
accounted for approximately 58% of total revenues.

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(10) SUBSEQUENT EVENT

On April 26, 2001, the Company issued to Genmar additional warrants to purchase
1,495,256 shares of Common Stock pursuant to the terms of the Warrant Agreement
entered into on April 26, 2000. In connection with this issuance, the Company
will record a non-cash expense of approximately $1.8 million in April 2001. As
of April 26, 2001, the Company had issued warrants to Genmar to purchase a total
of 2,937,337 shares of Common Stock. All such warrants are exercisable
immediately, subject to certain restrictions, and have an exercise price of
$1.83.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND THE NOTES TO THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS, WHICH ARE INCLUDED ELSEWHERE IN THIS FORM 10-Q. IT
CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH RELATE TO SUCH MATTERS AS
ANTICIPATED FINANCIAL PERFORMANCE, BUSINESS PROSPECTS, TECHNOLOGICAL
DEVELOPMENTS, AND SIMILAR MATTERS. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN
AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF MAREX TO BE MATERIALLY DIFFERENT FROM
THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. FACTORS INCLUDE,
BUT ARE NOT LIMITED TO, THOSE DISCUSSED ELSEWHERE IN THIS REPORT IN THE SECTION
ENTITLED "RISK FACTORS" AND THE RISKS DISCUSSED IN OUR OTHER SECURITIES AND
EXCHANGE COMMISSION FILINGS.

OVERVIEW

Marex is the leading business to business ("B2B") e-commerce company serving the
marine industry. Marex's mission is to improve the efficiency of marine industry
supply chains. We have developed procurement solutions for the automation of
business transactions for marine businesses.

Our objective is to expand our position as the leading B2B e-commerce solution
for the marine industry. We are focused on developing our business to provide
the most efficient tools possible for the procurement of marine goods.

In June 2000, we launched our main products, MarExpress! and MarexPO!.
MarExpress! provides boat builders and other marine industry buyers with an
e-procurement solution that enables them to buy new parts, supplies, components,
and equipment through a web-based transaction system. Buyers can obtain product
information, conduct e-procurement to support business workflows and controls,
track orders, and complete product returns through a single, automated, online
hub. MarexPO! is an e-commerce solution for marine industry suppliers and
distributors that provides worldwide exposure and enables them to sell new
parts, supplies, components and equipment to marine businesses through a
web-based transaction system. By utilizing a thorough outfitting process for
buyers and suppliers, the system recognizes the unique relationships between
each buyer and supplier and only provides the supplier's product information and
pricing that is appropriate for each specific buyer. Prior to the launch of our
main products, Marex's Internet based trading exchange, the Exchange, and its
successor, Classifieds and Auctions, were the only products offered to the
marine industry. In order to focus all of our resources on our main products, we
have suspended the Classifieds and Auctions product in the first quarter of
2001.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED MARCH 31, 2001 AND 2000

REVENUES

For the three months ended March 31, 2001, we recorded revenues of $49,000
compared to $3,000 during the same period in 2000. The increase was primarily
due to the launch of MarExpress! and MarexPO! in June 2000.

MarExpress! and MarexPO! generate revenues by charging a transaction fee which
is based on the gross transaction price of items purchased and sold through the
system. The transaction fee is recognized as revenue when our customers' right
to receive a refund for the transaction fee expires. For the three months ended
March 31, 2001, we recorded revenues of $49,000 generated from $2.8 million of
transactions. As of March 31, 2001, in process transactions totaled $1.7
million, which represent $29,000

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of revenues that may be recognized in future periods. MarExpress! and MarexPO!
were not launched until June 2000, therefore no revenue was recognized from
these products during the three months ended March 31, 2000.

In the future, we expect revenues from MarExpress! and MarexPO! to increase as a
result of the increase in the number of customers online and the increased use
of the system by our existing customers. As of March 31, 2001, we had entered
into agreements with 39 boat builders and 120 suppliers. Of these agreements, 15
boat builders and 50 suppliers were online. Due to the launch of Version 2.0 of
our e-commerce solutions in December 2000, we expect a significant increase in
the rate that customers will be signed and brought online.

The Exchange generated revenues by charging a transaction fee for completed
transactions. For the three months ended March 31, 2000, we recorded revenues of
$3,000 generated from $86,000 of completed transactions through the Exchange.
For the three months ended March 31, 2001, no revenue was recognized from this
product.

PRODUCT SUPPORT AND DEVELOPMENT

Product support and development expenses consist primarily of compensation for
product support and development personnel, cost of outside contractors,
amortization of software development costs, and other costs associated with the
operations and enhancements of the website. Product support and development
expenses increased to $2.0 million for the three months ended March 31, 2001,
compared to $738,000 for the same period in 2000. The change related primarily
to increases of $288,000 in personnel and personnel related costs and $590,000
in amortization of software development costs. The balance was comprised of
overhead and operating costs directly associated with the development, support
and maintenance of the web site and e-commerce products.

SELLING AND MARKETING

Selling and marketing expenses consist primarily of compensation for sales and
marketing personnel, cost of outside contractors and marketing costs. Selling
and marketing expenses increased to $1.1 million for the three months ended
March 31, 2001, compared to $930,000 for the same period in 2000. The change is
primarily due to an increase of $229,000 in personnel and personnel related
costs for salespeople and increases in operating costs associated with selling
activities, which were partially offset by a decrease of $333,000 in advertising
and marketing costs.

GENERAL AND ADMINISTRATIVE

General and administrative expenses consist primarily of compensation for
administrative personnel, facilities expenses, professional fees, and general
corporate expenses. General and administrative expenses decreased to $698,000
for the three months ended March 31, 2001, compared to $1.0 million for the same
period in 2000. The change related primarily to decreases of $270,000 in
personnel and personnel related costs and $109,000 in consulting expenses.

STOCK-BASED COMPENSATION

Stock-based compensation resulting from stock options granted to a director
decreased to $117,000 for the three months ended March 31, 2001, compared to
$489,000 for the same period in 2000. The decrease resulted from a larger
portion of the stock options vesting during the first quarter of 2000.

OTHER INCOME AND EXPENSE

We recognized $223,000 of interest income for the three months ended March 31,
2001, compared to $91,000 for the three months ended March 31, 2000. The
increase was a result of higher balances of marketable securities derived from
the net proceeds of our private placements. Interest expense for the

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three months ended March 31, 2001 was $8,000, compared to $1,000 for the three
months ended March 31, 2000. The increase was due to the increase in capital
lease obligations.

NET LOSS

Our net loss increased to $3.6 million for the three months ended March 31,
2001, from $3.1 million in the three months ended March 31, 2000. The change
resulted from the increase in costs, as described above.

LIQUIDITY AND CAPITAL RESOURCES

We have financed our operations primarily through the private sales of Common
Stock and Preferred Stock.

Net cash used in operating activities was $5.9 million for the three months
ended March 31, 2001, primarily as a result of a net loss of $3.6 million and
the decrease of $3.5 million in accounts payable and accrued expenses. The net
loss and decrease in accounts payable and accrued expenses were partially offset
by a decrease of $344,000 in prepaid expenses and other current assets, a
non-cash stock-based compensation charge of $117,000, depreciation expense of
$193,000 and amortization expense of $610,000.

Net cash used in investing activities was $566,000 for the three months ended
March 31, 2001, primarily due to $283,000 of software development costs related
to the development of our e-commerce solutions and a $200,000 loan to a related
party.

Net cash used in financing activities was $35,000 for the three months ended
March 31, 2001, primarily due to principal payments on capital lease
obligations.

As of March 31, 2001, cash and cash equivalents totaled $13.1 million, while our
working capital was $9.9 million. In comparison, as of December 31, 2000, cash
and cash equivalents totaled $19.6 million, while our working capital was $13.0
million. To date, our primary uses of cash have been in operating activities to
fund the development and promotion of our e-commerce solutions.

We anticipate that our operating expenses, as well as planned capital
expenditures, will constitute a material use of our cash resources. We believe
that our available funds will be sufficient to meet our working capital and
operating resources requirements for at least the next twelve months. In the
event that our working capital and operating resources requirements during the
next twelve months exceed our available funds, we may not be able to raise
additional capital on acceptable terms or at all.

RECENT ACCOUNTING PRONOUNCEMENT

RISK FACTORS

WE HAVE A LIMITED OPERATING HISTORY

Marex was founded in 1992 but did not launch its main products until June 2000.
Thus, we have a limited operating history on which to base an evaluation of our
e-commerce business and prospects. Our prospects must be considered in light of
the risks, uncertainties, expenses and difficulties frequently encountered by
companies in their early stages of development, particularly companies in new
and

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rapidly evolving markets such as B2B e-commerce. Many of these risks are
described in this "Risk Factors" section. There can be no assurance that we will
be able to address these risks.

WE HAVE A HISTORY OF LOSSES

We have incurred losses from operations in each period since our inception. We
expect to incur substantial operating losses and have continued negative cash
flows from operations for the foreseeable future. Moreover, we expect to incur
significant sales and marketing, product support and development, and general
and administrative expenses. In addition, we have no material revenues to date.
If our revenue does not increase substantially or if our expenses are more than
we expect, we may not become profitable.

OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND DIFFICULT TO PREDICT

Due to our limited operating history, we believe that period-to-period
comparisons of revenues and results of operations are not meaningful. The
fluctuations in our operating results may fall below the expectations of
investors and securities analysts. Our failure to meet these expectations will
likely cause a significant decline in the market price of our stock.

THE BUSINESS TO BUSINESS E-COMMERCE MODEL IS NOT PROVEN

Our B2B e-commerce model is new and not proven and depends upon our ability to,
among other things: sell purchasing solutions to marine industry participants;
achieve high rates of adoption by customers; and generate significant revenues
from the use of our Internet-based solutions. We cannot be certain that the
business model will be successful, that it can achieve or sustain revenue
growth, or that it can generate any profits. The success of this business model
will require, among other things, that we develop and market solutions with
broad market acceptance by users and strategic partners. We cannot be certain
that B2B e-commerce on the Internet, our e-commerce solution, or our services
and brand in particular, will achieve broad market acceptance.

IF WE FAIL TO ACHIEVE MARKET ACCEPTANCE, OUR BUSINESS WOULD BE ADVERSELY
AFFECTED

MarExpress! and MarexPO! were launched in June 2000. Accordingly, our core
e-commerce solutions have a limited market history. If MarExpress! and MarexPO!
do not achieve market acceptance, our business will be adversely affected.

WE FACE INTENSE COMPETITION

We perceive competition to be intense and we expect it to increase significantly
in the future. We face competition from other companies with e-commerce
offerings as well as traditional suppliers and distributors of marine products
and marine companies that have or may develop their own online solutions. In
addition, providers of online marketplaces and online auction services that
currently focus on other industries may expand their services to include marine
products. Our competitors and potential competitors may develop superior
Internet solutions that achieve greater market acceptance than the Marex
solution. In addition, substantially all of our prospective customers have
established long-standing relationships with some competitors and potential
competitors. We cannot be certain that we can compete successfully against
future competitors.

OUR SOLUTION AND SERVICES ARE NEW AND FACE RAPID TECHNOLOGICAL CHANGES

The Internet market for the Marex solution is characterized by rapid
technological advances, evolving standards in the Internet and software markets,
changes in customer requirements and frequent new product and service
introductions and enhancements. As a result, we believe that our future success
depends upon our ability to enhance current Internet-based solutions and
services, and where necessary, to integrate Internet-based solutions with
customers' systems. If we do not adequately respond to the

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need to enhance our solutions or services, then our business will be negatively
affected. Further, we may incur significant expense to integrate purchasing
solutions with customers' systems and to maintain this integration as customers'
systems evolve. Failure to provide this integration may delay or altogether
dissuade the marine market or a particular customer from adopting our
Internet-based solutions.

WE WILL NEED TO MANAGE OUR EXPANDING BUSINESS

Our growth has placed, and is expected to continue to place, a significant
demand on our sales, marketing, managerial, operational, information technology
and other resources. If we cannot manage our growth effectively, our business
will be adversely affected. Our current information systems, procedures and
controls may not support expanded operations and may hinder our ability to take
advantage of the market for e-commerce purchasing solutions to the marine
industry.

WE DEPEND ON A MAJOR CUSTOMER

We have an agreement with one of the largest manufacturers of powerboats in the
world for the utilization of our e-procurement solution. Our future growth is
greatly dependent upon the utilization of our system by this major customer. If
the agreement with this major customer is terminated, our business, results of
operations and financial condition will be adversely affected.

WE DEPEND ON KEY PERSONNEL

Our performance is substantially dependent on the performance of the executive
officers and other key employees. Failure to successfully manage personnel
requirements would have a negative effect on the business. We have experienced
difficulty from time to time in hiring the personnel necessary to support the
growth of our business, and we may experience similar difficulty in hiring and
retaining personnel in the future. Competition for senior management,
experienced sales and marketing personnel, software developers, and other
employees is intense, and we cannot be certain that we will be successful in
attracting and retaining personnel. The loss of the services of any executive
officers or key employees could have a negative effect on the business. Failure
to obtain or retain the services of necessary executive officers or key
employees may not support existing or expanded operations, and may hinder our
ability to take advantage of the market for e-commerce purchasing solutions to
the marine industry.

WE EXPECT THE PRICE OF OUR COMMON STOCK TO BE VOLATILE

The market price of our Common Stock may fluctuate significantly in response to
a number of factors, some which are beyond our control, including the following:
quarterly variations in operating results; changes in market valuation of
Internet commerce companies; announcements of significant contracts,
acquisitions, strategic partnerships, joint ventures or capital commitments;
loss of a major customer or strategic partner, or failure to complete a sale to
a significant customer; additions or departures of any key personnel; future
sales of our Common Stock; and stock market price and volume fluctuations, which
are particularly common among highly volatile securities of Internet companies.

SECURITY PROBLEMS MAY INHIBIT THE GROWTH OF INTERNET-BASED PURCHASING SOLUTIONS

A significant barrier to the adoption of e-commerce is the secure transmission
of confidential information over public networks. Users generally are concerned
with security and privacy on the Internet and any publicized security problems
could inhibit the growth of the Internet, and therefore inhibit the Marex
solution as a means of conducting transactions. If there is a breach in our
security system, we may be required to make significant expenditures to protect
against security breaches and to alleviate problems caused by such breaches.

SYSTEM FAILURE MAY CAUSE INTERRUPTION OF SERVICES

The performance of our server and networking hardware and software
infrastructure is critical to our business and reputation, and affects our
ability to process transactions, provide high quality customer

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service and attract and retain customers, suppliers, users and strategic
partners. Currently, the infrastructure and systems are located at one site in
Atlanta, Georgia. We are in the process of adding a back-up and recovery site at
our headquarters in Miami, Florida. Until then, we depend on single-site
infrastructure. Any disruption to this infrastructure resulting from a natural
disaster or other event could result in an interruption in service, fewer
transactions and, if sustained or repeated, could impair our reputation and the
attractiveness of the services.

WE MAY REQUIRE ADDITIONAL CAPITAL FOR OPERATIONS, WHICH COULD HAVE A NEGATIVE
EFFECT ON YOUR INVESTMENT

We currently anticipate that our available funds will be sufficient to meet
anticipated needs for working capital and capital expenditures for at least the
next twelve months. We may need to raise additional funds in the future in order
to fund rapid expansion, to develop new or enhanced solutions and services, to
respond to competitive pressures, to acquire complementary businesses, or for
other operating requirements.

If we raise additional funds through the issuance of equity or convertible
securities, the percentage ownership of our stockholders will be reduced and may
be additionally reduced if the right of the holders of the Series A1 Preferred
Stock to amend the conversion price is triggered by the issuance of the equity
or convertible securities. We cannot be certain that we will be able to raise
additional capital on acceptable terms or at all.

WE DEPEND ON INTELLECTUAL PROPERTY RIGHTS

Our intellectual property is important to us. We seek to protect intellectual
property through copyrights, trademarks, trade secrets, confidentiality
provisions in customer, supplier and strategic relationship agreements, and
nondisclosure agreements with third parties, employees and contractors. We
cannot assure that measures we take to protect intellectual property will be
successful or that third parties will not develop alternative purchasing
solutions that do not infringe upon our intellectual property. In addition, we
could be subject to intellectual property infringement claims by others. Failure
to protect against misappropriation of intellectual property, or claims that we
are infringing the intellectual property of third parties could have a negative
effect on our business.

REGULATION OR TAXATION OF THE INTERNET OR TRANSACTING BUSINESS OVER THE INTERNET

Due to the increasing popularity and use of e-commerce, it is possible that a
number of taxes, laws and regulations may be adopted in the U.S. and abroad with
particular applicability to the Internet and e-commerce transactions. It is
possible that governments will adopt taxes and enact legislation that may be
applicable in areas such as content, product distribution, network security,
encryption and the use of key escrow, data and privacy protection, electronic
authentication or "digital" signatures, illegal and harmful content, access
charges and re-transmission activities. Moreover, the applicability to the
Internet of existing laws governing issues such as property ownership, content,
taxation, defamation and personal privacy is uncertain. Taxes, laws or
regulations may limit the growth of the Internet, dampen e-commerce and reduce
the number of transactions, increase the cost of doing business or increase
legal exposure. Any of these factors could have a negative effect on our
business.

SEASONALITY

Our business is seasonal due to the impact of the buying and selling patterns of
the members that utilize our system. The recreational marine industry is highly
cyclical and is highly affected by several factors. Some of those factors are:
(i) economic conditions, (ii) consumer confidence levels, and (iii) weather
conditions.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not hold any market risk sensitive instruments. As a result, this item is
not applicable to our consolidated balance sheet as of March 31, 2001.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in, or aware of, any material litigation.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

Not applicable.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS

EXHIBITS DESCRIPTION OF DOCUMENT
-------- -----------------------

3.1 Amended and Restated Articles of Incorporation of the
Company (1)

3.2 Amended and Restated Bylaws of the Company (1)

3.3 Articles of Amendment to Amended and Restated Articles of
Incorporation of the Company (3)

4.1 Certificate of Designation for the Series A1 Convertible
Preferred Stock, par value $.01 (3)

4.2 Securities Purchase Agreement among Marex.com, Inc. and Certain
Purchasers, dated March 2, 2000 (3)

4.3 Registration Rights Agreement among Marex.com, Inc. and Certain
Purchasers, dated March 2, 2000 (3)

10.1 1996 Incentive Stock Option Plan, as amended (1)

10.2 Amended and Restated 1997 Stock Option Plan (2)

10.3 Company's Office Lease, 2701 South Bayshore Dr., Miami, FL, as
amended (4)

10.4 Company's Office Lease, 5835 Blue Lagoon Dr., Miami, FL, as
amended (5)

-----------------
(1) Previously filed as an exhibit to the Company's Form 10-SB and Amendment
No. 1 to Form 10-SB.
(2) Previously filed as part of the Company's Form DEFS14A filed on October 19,
1999.
(3) Previously filed as an exhibit to the Company's Form 8-K filed on March 8,
2000.
(4) Previously filed as an exhibit to the Company's Form 10-K filed on March
23, 2000.
(5) Previously filed as an exhibit to the Company's Form 10-K filed on March
23, 2001.

(b) REPORTS ON FORM 8-K.

No reports on Form 8-K were filed during the three months ended
March 31, 2001.

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SIGNATURES

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.

MAREX.COM, INC.

DATE: MAY 15, 2001 By: /s/ DAVID A. SCHWEDEL
----------------------------------------
David A. Schwedel
Chief Executive Officer

DATE: MAY 15, 2001 By: /s/ KENBIAN A. NG
----------------------------------------
Kenbian A. Ng
Chief Financial Officer
(Principal Financial and Accounting
Officer)