UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 2001
Commission File Number: 0-27862
REALITY INTERACTIVE, INC.
NEVADA 80-0028196
- ------------------------ -------------------------------------
State of Incorporation I.R.S. Employer Identification Number
2200 Phoenix Tower
3200 Southwest Freeway
Houston, TX 77027
713-521-0221
Securities registered under Section 12(g) of the Exchange Act: COMMON STOCK,
$.01 PAR VALUE
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulations S-B contained herein, and no disclosure will be contained, to the
best of registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]
The Company's revenues for the Fiscal Year Ended December 31, 2000 totaled $0.
As of May 1, 2002, the Company had 27,124,927 shares of Common Stock
outstanding. The aggregate market value of the 2,114,927 shares of Common Stock
held by non-affiliates of the Company was $169,194 based on the closing bid
price of $.08 on May 6, 2002 on the Over The Counter Bulletin Board.
Transitional small business disclosure format: Yes [ ] No [X]
FORM 10-KSB INDEX
PART I
------
PART I
Item 1. Description of Business............................................ 4
Item 2. Description of Property............................................ 4
Item 3. Legal Proceedings.................................................. 4
Item 4. Submission of Matters to a Vote of Security Holders................ 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.......... 5
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operation.... .......................................... 5
Item 7. Financial Statements Index......................................... 7
Item 8. Changes and Disagreements with Accountants on Accounting
and Financial Disclosure........................................... 7
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act; Audit Committee
Report; Audit Fees; Financial Information Systems Design and
Implementation Fees; All Other Fees............................... 8
Item 10. Executive Compensation............................................ 9
Item 11. Security Ownership of Certain Beneficial Owners and
Management........................................................ 9
Item 12. Certain Relationships and Related Transactions.................... 10
Item 13. Exhibits and Reports on Form 8-K.................................. 10
SIGNATURES .............................................................. 13
EXHIBIT INDEX...............................................................
FINANCIAL STATEMENTS........................................................ F-1
2
This Annual Report on Form 10-KSB 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 27, 1999, the Company announced that it would cease current
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.
Since April 30, 1999, the Company had been exploring potential uses of
its public shell. On December 31, 2001, the Company executed a subscription
agreement and letter of Investment Intent with International Venture Capital and
Advisory, Inc. which purchased 66,667 post reverse split shares of the Company=s
common stock at a price of $3.00 per share. The Company used these proceeds of
this share sale to pay its outstanding liabilities and accrued expenses.
On January 23, 2002, Reality Interactive, Inc. was incorporated in
the State of Nevada as a wholly-owned subsidiary of the Company. On January 23,
2002, the Company was merged into Reality Interactive, Inc. a Nevada corporation
(the ASurviving Company@). Prior to the merger, there were 12,491,574 shares
outstanding of the Company. Upon completion of the merger, shareholders of the
Company were entitled to exchange one share of the Company for one share of the
Surviving Company. On January 24, 2002, the Surviving Company effected a 1:100
reverse stock split and re-authorized 100,000,000 shares of common stock having
a par value of $.001 per share and 5,000,000 shares of preferred stock having a
par value of $.001 per share. On February 1, 2002, acquired all of the issued
and outstanding shares of Bright Europe Tech, Inc. (Bright), a British Columbia
Canada corporation in exchange for 12,500,000 shares of its common stock and
acquired all of the issued and outstanding shares of Faster Cash ATM, Inc. (ATM)
also a British Columbia Canada corporation in exchange for 12,500,000 shares of
its common stock. Bright will operate gaming and lottery concessions while ATM
will operate automatic teller machines in Eastern Europe. As of February 1,
2002, the Surviving Company=s new trading symbol is RLTI. Accordingly, all
references to the number of shares of common stock and to per share information
in the financial statements have been adjusted to reflect the reverse stock
split on a retroactive basis.
On February 15, 2002, the Surviving Company filed an S-8
Registration Statement with the Securities and Exchange Commission to register
5,000,000 shares of common stock, $.001 par value. The Common Stock will be
issued by the Surviving Company pursuant to its Stock Incentive Plan, which has
been approved by the Board of Directors of the Surviving Company. The Stock
Incentive Plan is hoped to provide a method whereby current employees and
officers and non employee directors and consultants may be stimulated and allow
the Surviving Company to secure and retain highly qualified employees, officers,
directors and non-employee directors and consultants, thereby advancing the
interests of the Surviving Company, and all of its shareholders.
3
PART I
ITEM 1. DESCRIPTION OF BUSINESS
GENERAL
Reality Interactive, Inc. (the "Company") was incorporated on May
24, 1994 for the purpose of developing technology-based knowledge solutions for
the industrial marketplace. On April 30, 1999, the Company ceased business
operations, sold substantially all of its assets and terminated all of its
employees. Management of the Company believes this action was necessary in light
of the Company's liquidity needs and lack of short-term revenue opportunities.
Since April 30, 1999, the Company has been exploring potential uses
of its public shell. Until a suitable acquisition candidate can be found for the
public shell, the Company intends to comply with all SEC reporting requirements
in order to maintain its status as a public company. On February 1, 2002, the
Company acquired all of the issued and outstanding shares of Bright Europe Tech,
Inc. and Faster Cash ATM, Inc. The future business of the Company will be from
operating gaming and lottery concession and from operating automated teller
machines in Eastern Europe.
The Company has incurred operating losses in each period since
inception, and has an accumulated deficit of $15,740,617.
The Company's Common Stock is currently traded on the Over the
Counter Bulletin Board under the symbol "RLTI". The Company is not required to
deliver an annual report to its shareholders and will not deliver an annual
report to the shareholders.
You may read and copy any materials filed with the Securities and
Exchange Commission ("SEC") by the Company at the SEC's Public Reference Room
located at 450 Fifth Street N.W., Washington, D.C. 20549, or by logging on to
the SEC's website (http://www.sec.gov), which contains reports, proxy and
information statements and other information regarding the Company filed
electronically. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330.
ITEM 2. DESCRIPTION OF PROPERTY
The Company's executive office is located at the law offices of
Sullins Johnson Rohrback & Magers in Houston, TX which provides such facilities
at no charge to the Company.
ITEM 3. LEGAL PROCEEDINGS
NONE.
4
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
A. MARKET PRICE OF COMMON STOCK
The Company's common stock trades on the Over the Counter Bulletin
Board (OTC BB) under the symbol RLTI. Shares of the Company's Common Stock are
held by approximately 95 shareholders of record. The following table sets forth
the high and low prices of the Company's Common Stock for each calendar quarter
for the past two years.
Year Ended December 31, 2000 Year Ended December 31, 2001
Quarter High Low Quarter High Low
------- ------ ----- -------- ----- -----
First $ 0.31 .09 First .24 .06
Second $ 0.15 .03 Second .12 .06
Third $ .013 .06 Third .09 .05
Fourth $ 013 .03 Fourth .06 .03
The Company has never paid cash dividends on its common stock and
does not anticipate paying cash dividends in the foreseeable future.
B. CHANGES IN SECURITIES
On January 24, 2002, the Company effected a 1:100 reverse split of its
shares and re-authorized the par value of $.001, per share.
ITEM 6. 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 years ended December 31, 2001 and 2000.
5
RESULTS OF OPERATIONS
REVENUES. Revenues were $0 for both the years ended December 31, 2000 and
December 31, 2001. This resulted because of 1999 the Company's decision to cease
its business operations effective April 30, 1999.
COST OF REVENUES. Cost of revenues were $0 for both the years ended December 31,
2000 and December 31, 2001. This resulted because of the Company's decision to
cease business operations effective April 30, 1999.
OPERATING EXPENSES. The Company's operating expenses for the year ended December
31, 2001 were $294,705, compared to operating expenses of $52,413 for 2000.
Operating expenses for 2000 relate primarily to costs incurred to maintain a
small administrative office in addition to the costs related to maintaining a
fully reporting status with the Securities and Exchange Commission. Operating
expenses for the year ended December 31, 2001 relate to consulting services,
costs incurred to maintain a small administration office, costs related to
maintaining company and costs associated with resolving certain outstanding
corporate issues.
The Company expects that it will continue to incur general and
administrative expenses for the year 2001 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 INTELLECTUAL PROPERTY. During 2000, the Company received $13,105
in connection with the sale of one of its Internet domain names. There was no
gain on the sale of intellectual property or any other similar gain for the year
ended December 31, 2001.
INTEREST INCOME. The Company's interest income was $578 for the year ended
December 31, 2000 compared to interest income of $15 for the year ended December
31, 2001. For each year, interest income consisted entirely of interest earned
on short-term investments, with the decrease between years being attributed to
declining cash reserves.
NET LOSS. Net loss for the year ended December 31, 2001 was $294,687, compared
to a net loss of $38,730 for 2000. Since the Company has ceased business
operations, it does not expect to incur additional substantial losses in 2001,
except for expenses relating to the operation of a small office, pursuing
opportunities for its public shell and SEC public filing requirements.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $266 as of December 31,
2001, compared to $7,620 as of December 31, 2001 which was partially offset by
the sale of stock and the payment of stock for certain consulting services. This
decrease in cash was due primarily to the net loss from operations for the year
ended December 31, 2000.
6
The Company has sufficient cash balances to allow it to meet its
minimal operating expenditures for the current year. Therefore, the Company's
ability to fund future operations is dependent on the Company's identifying a
suitable acquisition candidate or receive proceeds from shareholder loans or the
sale of its common stock. Without the foregoing, the Company will be unable to
continue as a going concern.
INDEX TO FINANCIAL STATEMENTS
Page
REALITY INTERACTIVE, INC.
Report of Independent Accountants............... F-2
Balance Sheets.................................. F-3
Statements of Operations........................ F-4
Statements of Stockholders' Equity (Deficit).... F-5
Statements of Cash Flows........................ F-6
Notes to Financial Statements...................F-7 to F-11
BRIGHT EUROPE TECH INC.
Auditor's Report ............................ F-12
Balance Sheet
- As at May 31, 2002 .................. F-13
Statement of Deficit
- For the period ended May 31, 2002 ... F-14
Statement of Operations
- For the period ended May 31, 2002 ... F-15
Statement of Cash Flows
- For the period ended May 31, 2002 ... F-16
Notes to Financial Statements ...............F-17 to F-18
FASTER CASH ATM INC.
Auditor's Report ............................ F-19
Balance Sheet
- As at May 31, 2002 .................. F-20
Statement of Deficit
- For the period ended May 31, 2002 ... F-21
Statement of Operations
- For the period ended May 31, 2002 ... F-22
Statement of Cash Flows
- For the period ended May 31, 2002 ... F-23
Notes to Financial Statements ...............F-24 to F-25
ITEM 8. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
Virchow, Krause & Company LLP is a successor entity to the Company's
accountants formerly named Lund Koehler Cox and Arkema LLP.
7
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.
DIRECTORS AND EXECUTIVE OFFICERS
Information regarding the Directors of the Company is set forth below:
Name Age Offices
Brian Koehn 53 Chairman of the Board, President and
Chief Executive Officer
Brian Koehn. Mr. Koehn became the Chief Executive Officer of the Company in
January 2002. Since 1990, he has been a director of International Sales and
Marketing of PSI Services, Inc. a company which assists small and medium sized
companies with international sales and marketing. Over the past 12 months he has
also worked with a group of Vancouver, British Columbia funeral homes developing
markets for prepaid funerals, insurance and annuity programs.
MEETINGS OF THE BOARD OF DIRECTORS
During the fiscal year ended December 31, 2001, there were no Board
of Directors meetings. The Board of Directors and its committees also act from
time to time by written consent in lieu of meetings. The Company currently does
not have an audit, compensation or nominating committee.
See the biographical information for Mr. Koehn under the section ADirectors@.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
executive officers and directors and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the Company with copies
of all Section 16(a) forms they file.
Based solely on a review of the copies of such Section 16(a) reports
filed by the Company's directors, executive officers and greater than 10%
shareholders and written representations from such reporting persons that no
other reports were required to be filed, the Company believes that all Section
16(a) filing requirements were met in a timely manner for the fiscal year ending
December 31, 2001.
AUDIT COMMITTEE REPORT
The Company currently does not have a standing audit committee.
8
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth the compensation awarded to or earned
in fiscal years 1999, 2000 and 2001 by the Company's Chief Executive Officer. No
other executive officer of the Company earned salary and bonus in excess of
$100,000 during 2000.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name Fiscal Year Salary (1) Bonus
Paul J. Wendorf 2001 $ 0 $ 0
Former President
and Chief Executive Officer 2000 0 0
1999 48,442 0
None of the new officers or directors received compensation of any.
(1) The compensation to Mr. Wendorff for fiscal year 1999 represents payments
made through April 30, 1999, the effective date of the Company's cessation
of business operations.
(2) All options granted to Mr. Wendorff for the years indicated presented have
expired.
OPTION GRANTS IN LAST FISCAL YEAR
No options were granted to the executive officer named in the Summary
Compensation Table above during fiscal year 2000.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END VALUES
No options were exercised by the executive officer named in the Summary
Compensation Table above during fiscal year 2001. The executive officer named in
the Summary Compensation Table does not hold any options to purchase shares of
the Company's Common Stock.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information with respect to beneficial
ownership of the Company's Common Stock as of May 1, 2002 by: (i) each director
of the Company, (ii) each executive officer of the Company named in the Summary
Compensation Table, (iii) all directors and executive officers of the Company as
a group and (iv) each person or entity known by the Company to own beneficially
more than 5% of the Company's Common Stock. Unless noted below, the address of
each of the following shareholders is the same as the Company.
9
Beneficial Owner
Name and Address of Beneficial Owner Shares Percentage
- ------------------------------------ ---------- ----------
Bright Europe Tech, Inc. 12,500,000 46.08%
Faster Cash ATM, Inc. 12,500,000 46.08%
Brian Koehn 10,000 .037%
All directors and executive officers as a group
(1 person) 10,000 .037%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Index of Exhibits
Exhibit
Number Description
------ ----------------------------------------------------------
3.1(1) Articles of Incorporation of the Company
3.2(1) Amended and Restated Articles of Incorporation of the Company
3.3(1) Bylaws of the Company
3.4(1) Amended Bylaws of the Company
4.1(1) Specimen form of the Company's Common Stock Certificate
4.2(1) Warrant Agreement (including Form of Redeemable Warrant)
4.3(1) Form of Bridge Loan Agreement, dated January 19, 1996,
between the Company and various investors (including form
of Bridge Note and Bridge Warrant)
4.4(1) Canceled Promissory Note in favor of Brightstone Fund VI in
the amount of $200,000
4.5(1) Canceled Promissory Note in favor of Wyncrest Capital,
Inc. in the amount of $120,000
4.6(1) Warrant in favor of Brightstone Fund VI for 43,109 shares
4.7(1) Warrant in favor of Wyncrest Capital, Inc. for 25,188
shares
10.1(1) ISO 9000 Content Agreement between Reality Interactive,
Inc. and Process Management International, dated August 4,
1994
10.2(1) Joint Marketing and Distribution Agreement between Reality
Interactive, Inc. and American Society for Quality
Control, Inc., dated May 10, 1995
10.3(1) Agreement for Consulting Services between Reality
Interactive, Inc. and Steven W. McClernon, dated January
15, 1996
10.4(1) Sublease Agreement between Reality Interactive, Inc. and
Collopy Saunders Real Estate, Inc., dated December 15,
1994
10.5(1) Subject Matter Expert Agreement between Reality
Interactive, Inc. and The Third Generation, Inc., dated
January 6, 1996
10.6(1) Subject Matter Expert Agreement between Reality
Interactive, Inc. and WRITAR, dated February 1, 1996
10
10.7(1) Reality Systems, Inc. 1994 Stock Incentive Plan, as
amended (including form of Stock Option Agreement)
10.8(1) Form of Non-Statutory Directors' Option Agreement (issued to
certain non-employee directors or affiliates of non-employee
directors in 1994 and 1995)
10.9(1) Reality Interactive, Inc. 1996 Directors Stock Option Plan
(including form of Directors Stock Option Agreement)
10.10(1) Form of Shrink-Wrap License Agreement
10.11(1) Form of Enterprise License Agreement
10.12(1) Form of Volume Discount Agreement
10.13(1) ISO 9000/QS-9000 Addendum, dated March 13, 1996, between the
Company and Process Management Institute, Inc., amending the
agreement dated August 4, 1994
10.14(1) Form of Lock-Up Agreement
10.15(1) Independent Software Vendor Agreement between the Company
and Hewlett Packard
10.16(1) Master Equipment Lease Agreement, dated June 15, 1995, and
Amendment No. 1 to Master Equipment Lease Agreement, dated
July 1995, each between the Company and Carlton Financial
Corporation
10.17(1) Lease Agreement, dated January 30, 1996, between the
Company and Lease Finance Group, Inc.
10.18(1) Irrevocable Letters of Credit, dated June 20, 1995 and August
1, 1995, from BankWindsor in favor of Carlton Financial Corp.
and Irrevocable Letter of Credit, dated December 27, 1995, in
favor of Lease Finance Group, Inc.
10.19(2) First Amendment to Joint Marketing and Distribution
Agreement between Reality Interactive, Inc. and American
Society for Quality Control, Inc., dated May 1, 1996
10.20(2) Joint Marketing and Distribution Agreement between Reality
Interactive, Inc. and American Society for Quality
Control, Inc., dated May 17, 1996
10.21(3) Equipment Lease between Reality Interactive, Inc. and
Dexxon Capital Corporation Dated June 3, 1996
10.22(4) Copyright License Agreement between Reality Interactive,
Inc. and the American National Standards Institute dated
August 30, 1996, including Modifying Agreement
10.23(4) ISO 14000 Marketing and Promotion Agreement between
Reality Interactive, Inc. and the American National
Standards Institute dated September 20, 1996
10.24(4) ISO 14000 Marketing and Promotion Agreement between
Reality Interactive, Inc. and the Global Environment and
Technology Foundation dated September 6, 1996
10.25(4) Distribution Agreement between Reality Interactive, Inc.
and Futuremedia PLC dated July 12, 1996
10.26(5) Sublease Agreement between Reality Interactive, Inc. and
IVI Publishing, Inc., dated September 17, 1996
10.27(5) Distribution Agreement between Reality Interactive, Inc.
and Lasermedia (Deutschland) GMBH, dated October 9, 1996
10.28(5) Amendment No. 2, dated December 9, 1996, to Master
Equipment Lease Agreement, dated July 1995, each between
the Reality Interactive, Inc. and Carlton Financial
Corporation
11
10.29(5) Irrevocable Letter of Credit, dated December 9, 1996, from
BankWindsor in favor of Carlton Financial Corp.
10.30(6) Master Distribution Agreement between Reality Interactive,
Inc. and Interactive Media Communications, dated February
24, 1997
10.31(6) Multinational Copyright Exploitation Agreement between
Reality Interactive, Inc. and the International
Organization for Standardization, dated February 17, 1997
10.32(6) Multinational Copyright Exploitation Agreement between
Reality Interactive, Inc. and the International
Organization for Standardization, dated February 17, 1997
10.33(7) Asset Purchase Agreement between Reality Interactive, Inc.
and VirtualFund.com, Inc., dated June 18, 1999
10.34(7) Credit Agreement between Reality Interactive, Inc. and
VirtualFund.com, Inc., dated May 28, 1999
10.35(7) Form of Demand Note between Reality Interactive, Inc. and
VirtualFund, Inc., dated May 28, 1999
10.36(7) Security Agreement between Reality Interactive, Inc. and
VirtualFund, Inc., dated May 28, 1999
23.1 Consent of Virchow, Krause & Company, LLP
99.1 Cautionary Statement
(1) Incorporated by reference to Amendment No. 2 to the Company's
Registration Statement on Form SB-2 (File No. 333-01508C), as filed
with the Securities and Exchange Commission on April 9, 1996.
(2) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended March 31, 1996.
(3) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended June 30, 1996.
(4) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended September 30, 1996.
(5) Incorporated by reference to the Company's Form 10-KSB for the year
ended December 31, 1996.
(6) Incorporated by reference to the Company's Form 10-QSB for the quarter
ended March 31, 1997.
(7) Incorporated by reference to the Company's Preliminary Proxy Statement
filed June 28, 1999.
(b) Reports on Form 8-K
NONE.
12
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this amended report to be signed on its behalf by
the undersigned, thereunto duly authorized.
REALITY INTERACTIVE, INC.
Amendment No. 1
Dated: June 5, 2002 By /s/ Brian Koehn
--------------------------------
Brian Koehn
Chief Executive Officer and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Name Title Date
------ -------- -------
/s/ Brian Koehn Chief Executive Officer,
- --------------- President, Secretary / Treasurer June 5, 2002
Brian Koehn and Director
13
ITEM 7. FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
Page
REALITY INTERACTIVE, INC.
Report of Independent Accountants................... F-2
Balance Sheets...................................... F-3
Statements of Operations............................ F-4
Statements of Stockholders' Equity (Deficit)........ F-5
Statements of Cash Flows............................ F-6
Notes to Financial Statements...................F-7 to F-11
BRIGHT EUROPE TECH INC.
Auditor's Report ............................
Balance Sheet
- As at May 31, 2002 ..................
Statement of Deficit
- For the period ended May 31, 2002 ...
Statement of Operations
- For the period ended May 31, 2002 ...
Statement of Cash Flows
- For the period ended May 31, 2002 ...
Notes to Financial Statements ...............
FASTER CASH ATM INC.
Auditor's Report ............................
Balance Sheet
- As at May 31, 2002 ..................
Statement of Deficit
- For the period ended May 31, 2002 ...
Statement of Operations
- For the period ended May 31, 2002 ...
Statement of Cash Flows
- For the period ended May 31, 2002 ...
Notes to Financial Statements ...............
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Reality Interactive, Inc.:
We have audited the accompanying balance sheets of Reality Interactive, Inc. as
of December 31, 2001 and 2000, and the related statements of operations,
stockholders' deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Reality Interactive, Inc. as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.
The accompanying financial statements have been prepared assuming that Reality
Interactive, Inc. will continue as a going concern. As discussed in Note 1 to
the financial statements, Reality Interactive, Inc. has suffered recurring
losses from operations and has a significant accumulated deficit that raises
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The 2001
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
VIRCHOW, KRAUSE & COMPANY, LLP
Minneapolis, Minnesota
March 14, 2002
F-2
DECEMBER 31, 2001 AND 2000
2001 2000
------ ------
ASSETS
Current assets:
Cash $ 266 $ 7,620
Other current assets 0 895
Total current assets 266 8,515
$ 266 $ 8,515
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 8,867 $ 13,026
Accrued liabilities 0 7,953
Total current liabilities 8,867 20,979
Stockholders' deficit:
Common stock, $.001 par value, 100,000,000 shares authorized,
124,916 and 46,774 shares issued and outstanding 125 47
Additional paid-in capital 15,731,891 15,433,419
Accumulated deficit (15,740,617)(15,445,930)
Total stockholders' deficit (8,601) (12,464)
$ 266 $ 8,515
============ ============
See accompanying notes to financial statements.
F-3
REALITY INTERACTIVE, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
------ ------
Revenues $ 0 $ 0
Cost of revenues 0 0
--------- --------
Gross profit 0 0
--------- --------
Operating expenses:
General and administrative 294,705 52,413
--------- --------
Total operating expenses 294,705 52,413
--------- --------
Loss from operations (294,705) (52,413)
--------- --------
Gain on sale of intellectual property 0 13,105
Interest income 18 578
--------- --------
Total other income (expense) 18 13,683
--------- --------
Net loss $(294,687) $(38,730)
========= ========
Basic and diluted loss per share $ (5.36) $ (0.83)
========= ========
Weighted average common shares outstanding 54,974 46,774
========= ========
See accompanying notes to financial statements.
F-4
REALITY INTERACTIVE, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
Additional
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- -------- ------------ ------------- -------
Balance - December 31, 1999 46,774 $ 47 $15,433,419 $ (15,407,200) $ 26,266
Net loss -- -- -- (38,730) (38,730)
Balance - December 31, 2000 46,774 47 15,433,419 (15,445,930) (12,464)
Common stock issued for consulting services 11,475 11 98,539 98,550
Common stock sold in a private placement 66,667 67 199,933 200,000
Net loss -- -- -- (294,687) (294,687)
Balance - December 31, 2001 124,916 $ 125 $15,731,891 $ (15,740,617) $ (8,601)
========= ========== ============= ============= ===========
See accompanying notes to financial statements.
F-5
REALITY INTERACTIVE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000
2001 2000
------ -------
Cash flows from operating activities:
Net loss $ (294,687) $ (38,730)
Adjustments to reconcile net loss to cash flows from
operating activities:
Common stock issued for consulting services 98,550 0
Gain on disposal of intellectual property 0 (13,105)
Changes in operating assets and liabilities:
Other current assets 895 2,026
Accounts payable (4,159) 3,338
Accrued liabilities (7,953) 0
Cash flows from operating activities (207,354) (46,471)
Cash flows from investing activities:
Proceeds from sale of intellectual property 0 13,105
Cash flows from investing activities 0 13,105
Cash flows from financing activities:
Proceeds from sale of common stock 200,000 0
Cash flows from financing activities 200,000 0
Decrease in cash (7,354) (33,366)
Cash, beginning of year 7,620 40,986
Cash, end of year $ 266 $ 7,620
========== =========
See accompanying notes to financial statements.
F-6
REALITY INTERACTIVE, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2001 AND 2000
1. Organization and Status
Reality Interactive, Inc. (the "Company") was incorporated in Minnesota 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.
On December 31, 2001, the Company executed a Subscription Agreement and
Letter of Investment Intent (the "Investment") with International Venture
Capital and Advisory, Inc. (the "Investor"), whereby the Investor agreed to
purchase 66,667 shares of the Company's common stock at a price of $3.00
per share. As a result of the Investment, the Investor owns 53.37% of the
Company's issued and outstanding common stock. The Company used the
proceeds of the Investment to pay its outstanding liabilities and accrued
expenses. Currently, the Investor is exploring potential uses of the public
shell. As the controlling shareholder of the Company, the Investor intends
to comply with all future SEC reporting requirements in order to maintain
the Company's status as a public company.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual results
could differ from those estimates.
Cash
The Company maintains its cash in bank deposit accounts at a financial
institution with high credit quality. The balances, at times, may exceed
federally insured limits.
Income Taxes
The Company utilizes the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the expected future
tax consequences attributable to temporary differences between the
financial statement and income tax reporting bases of assets and
liabilities.
F-7
Net Loss Per Share
The Company accounts for loss per share as required under Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No.
128). SFAS No. 128 requires dual presentation of basic and diluted loss per
share for entities with complex capital structures. Basic loss per share
includes no dilution and is computed by dividing net loss available to
common stockholders by the weighted average number of common shares
outstanding for the period. Diluted loss per share reflects the potential
dilution of securities that could share in the earnings of an entity and is
similar to the former fully diluted loss per share calculation. For the
years ended December 31, 2001 and 2000, basic and diluted loss per share
for the Company is the same because the Company has no outstanding stock
options and warrants.
Fair Value of Financial Instruments
The carrying amounts for all financial instruments approximate fair value.
The carrying amounts for cash and cash equivalents, accounts payable and
accrued liabilities approximate fair value because of the short maturity of
these instruments.
New accounting pronouncements
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended, is effective for years beginning after June 15,
2000. SFAS No. 133 establishes accounting and reporting standards requiring
that every derivative instrument, including certain derivative instruments
embedded in other contracts, be recorded in the balance sheet as either an
asset or liability measured at its fair value. SFAS No. 133 requires that
changes in the derivative's fair value be recognized currently in earnings
unless specific hedge criteria are met. Special accounting for qualifying
hedges allows a derivative's gains or losses to offset related results on
the hedged item in the statement of operations and requires that a company
must formally document, designate and assess the effectiveness of
transactions that receive hedge accounting. The adoption of SFAS No. 133
did not have a material effect on the Company's financial position or
results of operations.
In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 141 "Business Combinations." SFAS No. 141 eliminates the
pooling-of-interests method of accounting for business combinations except
for qualifying business combinations that were initiated prior to July 1,
2001. In addition, SFAS No. 141 further clarifies the criteria to recognize
intangible assets separately from goodwill. The requirements of SFAS No.
141 are effective for any business combination accounted for by the
purchase method that is completed after June 30, 2001. The Company is
evaluating the impact of this new accounting standard.
In June 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets." SFAS No. 142 discontinues the amortization of recorded goodwill
for fiscal years beginning after December 15, 2001. In the future, goodwill
will be reduced based upon an impairment analysis of the amount recorded on
the Company's books. To the extent it has been determined that the carrying
value of goodwill is not recoverable and is in excess of fair value, an
impairment loss will be recognized. Impairment will be reviewed on a
periodic basis based on its fair value. Currently the adoption of SFAS No.
142 will not have an impact of the Company's financial position or results
of operations.
F-8
In June 2001, the FASB issued SFAS No. 143. "Accounting for Asset
Retirement Obligations." SFAS No. 143 is effective for fiscal years
beginning after June 15, 2002. The Company believes the adoption of SFAS
No. 143 will not have a material effect on the Company's financial position
or results of operations.
In October 2001, the FASB issued SFAS No. 144 "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS
No. 121. SFAS 144 primarily addresses significant issues relating to the
implementation of SFAS 121 and develops a single accounting model for
long-lived assets to be disposed of, whether primarily held, used or newly
acquired. The provisions of SFAS 144 will be effective for fiscal years
beginning after December 15, 2001. The provisions of SFAS No. 144 generally
are to be applied prospectively. The Company believes the adoption of SFAS
No. 144 will not have a material effect on the Company's financial position
or results of operations.
3. Income Taxes
Significant components of the Company's deferred tax assets are as follows:
December 31,
2001 2000
---- ----
Deferred tax assets:
Net operating loss carryforwards $ 6,300,000 $ 6,150,000
Other - 50,000
------------ -------------
Total deferred tax assets 6,300,000 6,200,000
Less valuation allowance (6,300,000) (6,200,000)
------------ -------------
Net deferred tax assets $ - $ -
============ ==============
At December 31, 2001, the Company had net operating loss carryforwards of
approximately $15,650,000 for income tax purposes. The net operating loss
carryforwards expire in 2009 through 2021 if not previously utilized.
The Company has determined, based on the weight of available evidence at
December 31, 2001, that it is more likely than not the Company's deferred
tax assets will not be realized. Accordingly, a valuation allowance has
been established for the tax benefits of these items. Future utilization of
the available net operating loss carryforwards may be limited due to past
changes in ownership under Internal Revenue Code Section 382 and future
significant changes in ownership.
4. Commitment
Leases
During 2001, the Company leased office space and equipment under short-term
operating lease agreements. At December 31, 2001, the Company's operating
lease agreements had expired.
Rent expense was approximately $10,446 and $13,419 for the years ended
December 31, 2001 and 2000, respectively.
F-9
5. Stockholders' Equity
Common Stock Issued
The holders of Common Stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of Common Stock have
no preemptive, subscription or conversion rights and there are no
redemption or sinking fund provisions applicable thereto. The outstanding
shares of Common Stock are fully paid and nonassessable.
On April 24, 2001, the Company issued 10,305 shares of common stock to
Knowledge Integrators, Inc. as payment for consulting services provided to
the Company. Knowledge Integrators, Inc. is 100% owned by Paul J. Wendorff,
who is also the Company's Chief Executive Officer and a Director. In
addition, on April 24, 2001, the Company issued 1,170 shares of common
stock to Wesley W. Winnekins as payment for consulting services provided to
the Company. Wesley W. Winnekins is currently a Director of the Company.
The value of the services provided by Knowledge Integrators, Inc. and
Wesley W. Winnekins was $98,550 based on the fair value of the common stock
issued.
On December 31, 2001, the Company issued 66,667 shares of common stock at a
price of $3.00 per share in connection with the execution of a Subscription
Agreement and Letter of Investment Intent. As a result of this Investment,
the Investor owns 53.37% of the Company's issued and outstanding common
stock.
Warrants
A summary of the Company's warrant activity is as follows:
Exercise
Number Price Expiration
-------- --------- ----------
Outstanding at December 31, 1999 27,983 $240-$800 2000-2001
Expired (27,983) $240-$800 4/10/00
-----------
Outstanding at December 31, 2000 0
===========
Outstanding at December 31, 2001 0
==========
The Company issued such warrants in connection with various financing
transactions. The holders of these warrants are not entitled to vote,
receive dividends or exercise any other rights until such warrants have
been duly exercised and payment of the purchase price has been made. All
warrants were expired as of December 31, 2000.
F-10
Stock Options
At December 31, 2001, the Company had 7,000 shares of common stock
reserved under its 1994 Stock Incentive Plan. The plan provides for
grants of incentive and nonqualified stock options to officers, employees
and independent contractors. Furthermore, the Company may grant
nonqualified options outside of this plan. These stock options generally
vest evenly over a three to four year period and are exercisable over
periods up to five years from date of grant. In addition, the Company had
4,000 shares of common stock reserved under its 1996 Directors' Stock
Option Plan. This plan provides for annual grants of options to purchase
100 shares of Common Stock per director per year and vests six months
from the date of grant.
The Board of Directors establishes all terms and conditions of each
grant. Stock options are granted at or above fair market value as
determined by the Board of Directors at each grant date.
For the years ended December 31, 2001 and 2000, there were no options
granted or outstanding under the plans. As a result, the Company has not
recognized any compensation expense for the periods presented as
prescribed by SFAS No. 123, "Accounting for Stock-Based Compensation."
6. Subsequent Events
On January 23, 2002, Reality Interactive, Inc. was incorporated in the
State of Nevada as a wholly-owned subsidiary of the Company. On January
23, 2002, the Company was merged into Reality Interactive, Inc., a Nevada
corporation (the "Surviving Company"). Prior to the merger, there were
12,491,574 shares outstanding of the Company. Upon completion of the
merger, shareholders of the Company were entitled to exchange one share
of the Company for one share of the Surviving Company. On January 24,
2002, the Surviving Company effected a 1:100 reverse stock split and
re-authorized 100,000,000 shares of common stock having a par value of
$.001 per share and 5,000,000 shares of preferred stock having a par
value of $.001 per share. As of February 1, 2002, the Surviving Company's
new trading symbol is RLTI. Accordingly, all references to the number of
shares of common stock and to per share information in the financial
statements have been adjusted to reflect the reverse stock split on a
retroactive basis.
On February 15, 2002, the Surviving Company filed an S-8 Registration
Statement with the Securities and Exchange Commission to register
5,000,000 shares of common stock, $.001 par value. The Common Stock will
be issued by the Surviving Company pursuant to its Stock Incentive Plan,
which has been approved by the Board of Directors of the Surviving
Company. The Stock Incentive Plan is hoped to provide a method whereby
current employees and officers and non employee directors and consultants
may be stimulated and allow the Surviving Company to secure and retain
highly qualified employees, officers, directors and non employee
directors and consultants, thereby advancing the interests of the
Surviving Company, and all of its shareholders.
F-11
AUDITOR'S REPORT
To the shareholders of Bright Europe Tech Inc.
We have audited the balance sheet of Bright Europe Tech Inc. as at May 31, 2002
and the statements of operations, deficit, and cash flows for the periods then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at May 31, 2002 the results
of its operations and its cash flows for the years then ended in accordance with
generally accepted accounting principles. As required by the Company Act of
British Columbia, we report that in our opinion, these principles have been
applied on a basis consistent with that of the preceding years.
COQUITLAM, B.C. PEACH GODDARD
JUNE 04, 2002 CHARTERED ACCOUNTANTS
F-12
BRIGHT EUROPE TECH INC.
BALANCE SHEET
AS AT MAY 31, 2002
(Audited)
Canadian Funds
ASSETS
2002
--------------
CURRENT
Cash $ 100
Account Receivable
42
INCORPORATION COSTS 1,000
--------------
$ 1,142
==============
LIABILITIES
CURRENT
Accounts Payable $ 642
--------------
DUE TO SHAREHOLDERS (Note 3) 1,000
--------------
1,642
SHAREHOLDER EQUITY (DEFICIENCY)
SHARE CAPITAL (Note 4) 100
DEFICIT 600
--------------
500
--------------
$ 1,142
==============
On behalf of the Board:
, Director
, Director
See Accompanying Notes
F-13
BRIGHT EUROPE TECH INC.
STATEMENT OF DEFICIT
FOR THE PERIOD ENDED MAY 31, 2002
(Audited)
Canadian Funds
2002
--------------
NET LOSS AND DEFICIT, END OF PERIOD $ 600
==============
See Accompanying Notes
F-14
BRIGHT EUROPE TECH INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 2002
(Audited)
Canadian Funds
2002
--------------
REVENUE $ -
--------------
EXPENSES
Legal & Accounting 642
LOSS FOR THE PERIOD 642
LOSS PER SHARE - BASIC $ (0.00)
==============
See Accompanying Notes
F-15
BRIGHT EUROPE TECH INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MAY 31, 2002
(Audited)
Canadian Funds
2002
--------------
CASH RESOURCES PROVIDED BY (USED IN):
OPERATIONS
Cash flow provided by operations before the undernoted $ (600)
Non-cash working capital 600
--------------
-
--------------
INVESTING
Incorporation Costs 1,000
--------------
FINANCING
Issue of Share Capital 100
Shareholder's loans 1,000
--------------
1,100
--------------
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD 100
==============
CASH POSITION CONSISTS OF:
Cash 100
==============
See Accompanying Notes
F-16
BRIGHT EUROPE TECH INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2002
(Audited)
Canadian Funds
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared on the historical cost basis in
accordance with accounting principles generally accepted in Canada.
a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. These estimates are based
on management's best knowledge of current events and actions that the
company may undertake in the future.
b) Foreign currency transactions
The financial statements of the company are reflected in Canadian
dollars. The company uses the temporal method of accounting for foreign
currency translations, whereby monetary items are translated at the
rate of exchange in effect at the balance sheet date, non-monetary
items are translated at historical rates and revenue and expense items
are translated at the rate of exchange on the dates they occur.
c) Revenue recognition
All revenue is recorded and related cost transferred to cost of sales
at the time the product is shipped or the service provided.
d) Loss per Share
Basic loss per share computations is based on the weighted average
number of shares outstanding during the year. Fully diluted earnings
per shares have not been disclosed, as it is anti-dilutive.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments consist of accounts receivable,
cash and accounts payable. Unless otherwise noted, it is management's
opinion that the company is not exposed to significant interest,
currency or credit risks arising from the financial instruments. The
fair value of these financial instruments approximates their carrying
value due to their short-term maturity or capacity of prompt
liquidation.
F-17
BRIGHT EUROPE TECH. INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2002
(Audited)
Canadian Funds
3. DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing and have no
specific terms of repayment. The shareholders have indicated that these
amounts need not be repaid within the next fiscal period and
consequently these have been classified as long term.
4. SHARE CAPITAL
Authorized
The authorized capital of the company consists of 20,000,000 Common
Shares without par value.
Issued and Outstanding
Number Amount
------ ----------
Balance, May 31, 2002 1,000 $ 100
5. INCOME TAX LOSSES
The company has non-capital income tax losses of $600, which may be
carried forward to reduce future year's taxable income, these losses
expire as follows:
2009 $ 600
=============
The potential future tax benefit of these expenditures and tax losses
have not been recognized in the accounts of the company.
6. DATE OF INCORPORATION
The company was incorporated on May 29, 2002 under the laws of British
Columbia. The period of reporting is for the three days ended May 31,
2002.
Although incorporated on this date, the Corporation had previously
done business under the belief that it was fully incorporated under
the laws of British Columbia as of January 1, 2002. The Board of
Directors and shareholders, upon incorporation, ratified all actions
taken by officers, director, shareholders and agents acting for and on
behalf of the Corporation.
F-18
AUDITOR'S REPORT
To the shareholders of Faster Cash ATM Inc.
We have audited the balance sheet of Faster Cash ATM Inc. as at May 31, 2002 and
the statements of operations, deficit, and cash flows for the periods then
ended. These financial statements are the responsibility of the company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the company as at May 31, 2002 the results
of its operations and its cash flows for the years then ended in accordance with
generally accepted accounting principles. As required by the Company Act of
British Columbia, we report that in our opinion, these principles have been
applied on a basis consistent with that of the preceding years.
COQUITLAM, B.C. PEACH GODDARD
JUNE 04, 2002 CHARTERED ACCOUNTANTS
F-19
FASTER CASH ATM INC.
BALANCE SHEET
AS AT MAY 31, 2002
(Audited)
Canadian Funds
ASSETS
2002
--------------
CURRENT
Cash $ 100
Account Receivable
42
INCORPORATION COSTS 1,000
--------------
$ 1,142
==============
LIABILITIES
CURRENT
Accounts Payable $ 642
--------------
DUE TO SHAREHOLDERS (Note 3) 1,000
--------------
1,642
SHAREHOLDER EQUITY (DEFICIENCY)
SHARE CAPITAL (Note 4) 100
DEFICIT 600
--------------
500
--------------
$ 1,142
==============
On behalf of the Board:
, Director
, Director
See Accompanying Notes
F-20
FASTER CASH ATM INC.
STATEMENT OF DEFICIT
FOR THE PERIOD ENDED MAY 31, 2002
(Audited)
Canadian Funds
2002
--------------
NET LOSS AND DEFICIT, END OF PERIOD $ 600
==============
See Accompanying Notes
F-21
FASTER CASH ATM INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED MAY 31, 2002
(Audited)
Canadian Funds
2002
--------------
REVENUE $ -
--------------
EXPENSES
Legal & Accounting 642
LOSS FOR THE PERIOD 642
LOSS PER SHARE - BASIC $ (0.00)
==============
See Accompanying Notes
F-22
FASTER CASH ATM INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED MAY 31,2002
(Audited)
Canadian Funds
2002
--------------
CASH RESOURCES PROVIDED BY (USED IN):
OPERATIONS
Cash flow provided by operations before the undernoted $ (600)
Non-cash working capital 600
--------------
-
--------------
INVESTING
Incorporation Costs 1,000
--------------
FINANCING
Issue of Share Capital 100
Shareholder's loans 1,000
--------------
1,100
--------------
NET INCREASE (DECREASE) IN CASH FOR THE PERIOD 100
==============
CASH POSITION CONSISTS OF:
Cash 100
==============
See Accompanying Notes
F-23
FASTER CASH ATM INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2002
(Audited)
Canadian Funds
1. SIGNIFICANT ACCOUNTING POLICIES
The financial statements are prepared on the historical cost basis in
accordance with accounting principles generally accepted in Canada.
a) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. These estimates are based
on management's best knowledge of current events and actions that the
company may undertake in the future.
b) Foreign currency transactions
The financial statements of the company are reflected in Canadian
dollars. The company uses the temporal method of accounting for foreign
currency translations, whereby monetary items are translated at the
rate of exchange in effect at the balance sheet date, non-monetary
items are translated at historical rates and revenue and expense items
are translated at the rate of exchange on the dates they occur.
c) Revenue recognition
All revenue is recorded and related cost transferred to cost of sales
at the time the product is shipped or the service provided.
d) Loss per Share
Basic loss per share computations is based on the weighted average
number of shares outstanding during the year. Fully diluted earnings
per shares have not been disclosed, as it is anti-dilutive.
2. FAIR VALUE OF FINANCIAL INSTRUMENTS
The company's financial instruments consist of accounts receivable,
cash and accounts payable. Unless otherwise noted, it is management's
opinion that the company is not exposed to significant interest,
currency or credit risks arising from the financial instruments. The
fair value of these financial instruments approximates their carrying
value due to their short-term maturity or capacity of prompt
liquidation.
F-24
FASTER CASH ATM INC.
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2002
(Audited)
Canadian Funds
3. DUE TO SHAREHOLDERS
Amounts due to shareholders are non-interest bearing and have no
specific terms of repayment. The shareholders have indicated that these
amounts need not be repaid within the next fiscal period and
consequently these have been classified as long term.
4. SHARE CAPITAL
Authorized
The authorized capital of the company consists of 20,000,000 Common
Shares without par value.
Issued and Outstanding
Number Amount
------ ----------
Balance, May 31, 2002 1,000 $ 100
5. INCOME TAX LOSSES
The company has non-capital income tax losses of $600, which may be
carried forward to reduce future year's taxable income, these losses
expire as follows:
2009 $ 600
=============
The potential future tax benefit of these expenditures and tax losses
have not been recognized in the accounts of the company.
6. DATE OF INCORPORATION
The company was incorporated on May 29, 2002 under the laws of British
Columbia. The period of reporting is for the three days ended May 31,
2002.
Although incorporated on this date, the Corporation had previously
done business under the belief that it was fully incorporated under
the laws of British Columbia as of January 1, 2002. The Board of
Directors and shareholders, upon incorporation, ratified all actions
taken by officers, director, shareholders and agents acting for and on
behalf of the Corporation.
F-25