SEC Filing - Evolution Petroleum Corporation

1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 Commission file number: 0-27862 REALITY INTERACTIVE, INC. (Exact name of registrant as specified in its charter) MINNESOTA 41-1781991 --------------------------------- ---------------------------------- State or other jurisdiction of I.R.S. Employer Identification No. incorporation of organization SUITE 121 7885 FULLER ROAD EDEN PRAIRIE, MINNESOTA 55345 (612) 253-4713 - --------------------------------------- ---------------------------------- Address of principal executive offices Registrant's telephone number Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 ------ ------ At October 31, 2000, 4,677,407 shares of registrant's $.01 par value Common Stock were outstanding. Transitional Small Business Issuer Format Yes No X ------ ------

2 FORM 10-QSB INDEX PART I - FINANCIAL INFORMATION Item 1. Financial Statements.................................................3 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................................7 Item 4. Submission of Matters to a Vote of Security Holders..................9 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K....................................10 SIGNATURES...................................................................11 EXHIBIT INDEX................................................................12 SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This Quarterly Report on Form 10-QSB contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve risks and uncertainties that may cause the Company's actual results to differ materially from the results discussed in the forward-looking statements. On April 30, 1999, the Company ceased business operations. Management of the Company believes this action was necessary in light of the Company's current liquidity needs and lack of short-term revenue opportunities. Since April 30, 1999, the Company has been exploring potential uses of its public shell. While the Company seeks potential uses for the public shell, the primary factor that might cause such difference in results is the Company's inability to find a suitable acquisition or merger candidate or other use for its public shell in the near future. 2

3 PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS REALITY INTERACTIVE, INC. BALANCE SHEET September 30, December 31, 2000 1999 ------------- ------------ ASSETS (Unaudited) (Audited) Cash and cash equivalents...................... $ 12,415 $ 40,986 Prepaid expenses and other current assets...... 895 2,921 ----------- ----------- Total assets........................... $ 13,310 $ 43,907 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable........................... $ 8,460 $ 9,688 Accrued liabilities........................ 7,953 7,953 ----------- ----------- Total current liabilities.............. 16,413 17,641 ----------- ----------- Stockholders' equity: Common stock, $.01 par value, 25,000,000 shares authorized; 4,677,407 shares outstanding at both dates................ 46,774 46,774 Additional paid-in capital................. 15,386,692 15,386,692 Accumulated deficit........................ (15,436,569) (15,407,200) ----------- ----------- Total stockholders' equity............. (3,103) 26,266 ----------- ----------- Total liabilities and stockholders' $ 13,310 $ 43,907 equity............................... =========== =========== See accompanying notes to the financial statements. 3

4 REALITY INTERACTIVE, INC. STATEMENT OF OPERATIONS (UNAUDITED) Three months ended Nine months ended September 30, September 30, ----------------------- --------------------- 2000 1999 2000 1999 ---------- ----------- ---------- ---------- Product revenues.............. $ 0 $ 21,914 $ 0 $ 112,033 Service revenues.............. 0 6,121 0 142,166 -------- ---------- ---------- ---------- Total revenues.......... 0 28,035 0 254,199 -------- ---------- --------- ---------- Cost of product revenues...... 0 3,065 0 21,750 Cost of service revenues...... 0 0 0 108,024 -------- ---------- --------- ---------- Total cost of revenues.. 0 3,065 0 129,774 -------- ---------- --------- ---------- Gross profit.................. 0 24,970 0 124,425 -------- ---------- --------- ---------- Operating expenses: Sales and marketing....... 0 0 0 99,284 Research and development.. 0 0 0 103,456 General and administrative 10,691 131,470 42,991 539,625 -------- ---------- --------- ---------- Total operating expenses 10,691 131,470 42,991 742,365 -------- ---------- --------- ---------- Operating loss................ (10,691) (106,500) (42,991) (617,940) Gain on sale of domain name................... 0 0 13,105 0 Gain on sale of intellectual property... 0 85,000 0 85,000 Interest income........... 141 1,250 517 6,369 ---------- ---------- --------- ----------- Net loss.............. $ (10,550) $ (20,250) $ (29,369) $ (526,571) Basic and diluted earnings (loss) per share............ $ (0.00) $ (0.00) $ (0.01) $ (0.11) ========== ========== ========= ========== Weighted average common shares outstanding................. 4,677,407 4,677,407 4,677,407 4,677,407 ========== ========== ========== ========== See accompanying notes to the financial statements. 4

5 REALITY INTERACTIVE, INC. STATEMENT OF CASH FLOWS (UNAUDITED) Nine months ended September 30, --------------------------- 2000 1999 ------------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net loss................................. $ (29,369) $ (526,571) Reconciliation of net loss to net cash used by operating activities: Depreciation and amortization........ 0 30,000 Changes in assets and liabilities: Accounts receivable.................. 0 227,327 Prepaid expenses and other assets.... 2,026 44,865 Accounts payable..................... (1,228) (22,224) Accrued liabilities.................. 0 (23,985) Deferred revenue..................... 0 (49,495) Other current liabilities............ 0 (1,572) ------------ ----------- Net cash used by operating activities.................... (28,571) (321,655) ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of fixed assets....... 0 28,814 Cash restricted for operating leases..... 0 111,000 ------------ ----------- Net cash provided (used) by investing activities.......... 0 139,814 ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from bridge notes payable....... 0 86,335 Forgiveness of bridge notes payable...... 0 (86,335) ------------ ----------- Net cash provided (used) by financing activities.......... 0 0 ------------ ----------- Net cash provided (used) during period....... (28,571) (181,841) CASH AND CASH EQUIVALENTS: Beginning of period...................... 40,986 291,697 ------------ ----------- End of period............................ $ 12,415 109,856 ============ =========== See accompanying notes to the financial statements. 5

6 REALITY INTERACTIVE, INC. NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2000 (UNAUDITED) NOTE 1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization and Business Reality Interactive, Inc. (the "Company") was incorporated on May 24, 1994 for the purpose of developing technology-based knowledge solutions for the corporate marketplace. On April 30, 1999, the Company ceased business operations and terminated all remaining employees. This action was necessary in light of the Company's liquidity needs and lack of revenue opportunities. Since the Company ceased its business operations, it has sold a majority of its physical assets and intellectual property. Currently, the Company is exploring potential uses of its public shell. While the Company pursues such opportunities, it intends to comply with all future SEC reporting requirements in order to maintain its status as a public company. Basis of Presentation The accompanying unaudited financial statements of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. The preparation of financial statements in accordance with generally accepted accounting principles require management to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, including the disclosure of contingent assets and liabilities at the date of the accompanying interim financial statements, and the reported amounts of revenue and expenses during the reporting period. In the opinion of management, the interim financial statements include all adjustments necessary for a fair presentation of the results of operations for the interim periods presented. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the operating results to be expected for the year ending December 31, 2000. Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted. The statements should be read in conjunction with the Company's Annual Report on Form 10-KSB for the year ended December 31, 1999. 6

7 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION The following presentation of management's discussion and analysis of the Company's financial condition and results of operation should be read in conjunction with the Company's financial statements and notes contained herein for the three and nine months ended September 30, 2000 and 1999. RESULTS OF OPERATIONS REVENUES. Revenues were $0 for the third quarter of 2000 compared to $28,035 for the third quarter of 1999. For the nine-month period ended September 30, 2000, revenues were $0 compared to $254,199 for the comparable period of 1999. This decrease was due to the Company's decision to cease its business operations effective April 30, 1999. COST OF REVENUES. Cost of revenues were $0 for the third quarter of 2000 compared to $3,065 for the third quarter of 1999. For the nine-month period ended September 30, 2000, cost of revenues were $0 compared to $129,774 for the comparable period of 1999. This decrease was due to the Company's decision to cease its business operations effective April 30, 1999. OPERATING EXPENSES. Operating expenses were $10,691 for the third quarter of 2000 compared to $131,470 for the third quarter of 1999. For the nine-month period ended September 30, 2000, operating expenses were $42,991 compared to $742,365 for the comparable period of 1999. Expenses incurred during the three and nine months ended September 30, 2000 were entirely for general and administrative purposes, including rent for a small office, professional fees and miscellaneous office expenses. The Company expects that it will continue to incur general and administrative expenses for the remainder of 2000 as it continues to maintain a small administrative office, pursues opportunities for its public shell and maintains its status as a fully reporting company with the Securities and Exchange Commission. GAIN ON SALE OF DOMAIN NAME. During the second quarter of 2000, the Company received a final payment of $7,130 in connection with the sale of one of its Internet domain names. Including the initial payment of $5,975 received during the first quarter of 2000, the Company has received total proceeds of $13,105. INTEREST INCOME. Interest income was $141 for the third quarter of 2000 compared to interest income of $1,250 for the third quarter of 1999. For the nine-month period ended September 30, 2000, interest income was $517, compared to interest income of $6,369 for the same period of 1999. The decrease between periods is attributed to declining cash reserves. NET LOSS. Net loss was $10,550 for the third quarter of 2000 compared to a net loss of $20,250 for the third quarter of 1999. For the nine-month period ended September 30, 2000, net loss was $29,369 compared to a net loss of $526,571 for the same period of 1999. Since the Company has ceased business operations, it does not expect to incur additional substantial losses in 2000, except for expenses relating to the operation of a small office, pursuing opportunities for its public shell and SEC public filing requirements. 7

8 LIQUIDITY AND CAPITAL RESOURCES The Company's cash and cash equivalents were $12,415 as of September 30, 2000, compared to $40,986 as of December 31, 1999. This decrease in cash and cash equivalents was due primarily to the net loss from operations for the nine-months ended September 30, 2000. The Company expects that its current cash balance will allow it to meet its operating expenditures through December 31, 2000. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits EXHIBIT NO. DESCRIPTION 27.1 Financial Data Schedules 99.1 Cautionary Statement (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 2000 8

9 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REALITY INTERACTIVE, INC. Dated: November 14, 2000 By /s/ Paul J. Wendorff --------------------------- Paul J. Wendorff Its Chief Executive Officer 9

10 EXHIBIT INDEX Exhibit No. Description - ------ ------------------------------------------------------------ 99.1 Cautionary Statement 10

5 9-MOS DEC-31-2000 SEP-30-2000 12,415 0 0 0 0 13,310 0 0 13,310 16,413 0 0 0 46,774 (49,877) 13,310 0 13,622 0 0 42,991 0 0 (29,369) 0 (29,369) 0 0 0 (29,369) (.01) (.01)

1 EXHIBIT 99.1 CAUTIONARY STATEMENT Reality Interactive, Inc. (the "Company"), or persons acting on behalf of the Company, or outside reviewers retained by the Company making statements on behalf of the Company, or underwriters, from time to time make, in writing or orally, "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. When used in conjunction with an identified forward-looking statement, this Cautionary Statement is for the purpose of qualifying for the "safe harbor" provisions of such sections and is intended to be a readily available written document that contains factors which could cause results to differ materially from such forward-looking statements. These factors are in addition to any other cautionary statements, written or oral, which may be made or referred to in connection with any such forward-looking statement. The following matter, among others, may have a material adverse effect on the business, financial condition, liquidity, results of operations or prospects, financial or otherwise, of the Company. Reference to this Cautionary Statement in the context of a forward-looking statement or statements shall be deemed to be a statement that may cause actual results to differ materially from those in such forward-looking statement or statements: DISCONTINUATION OF CURRENT OPERATIONS. The Company ceased its business operations effective April 30, 1999. Management of the Company believes this action was necessary in light of the Company's current liquidity needs and lack of short-term revenue opportunities. The Company is currently exploring potential uses for the Company in its current form as an inoperative public company. In the meantime, the Company intends to comply with all SEC filing requirements in order to maintain the Company's good standing under the Securities Exchange Act of 1934, as amended. In the event the Company is unable to find a suitable acquisition or merger candidate or other suitable use for the Company in the near future, the Company will be liquidated and its remaining assets will be distributed to its creditors in satisfaction of its then-current obligations and, if any assets remain thereafter, to its shareholders. There can be no assurance that any such candidate or other suitable use for the Company or its assets will be found.