<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
AUGUST 10,1999
CELERITY SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23279 52-2050585
- ------------ ---------------- ---------------
(State or Other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation)
1400 Centerpoint Boulevard
KNOXVILLE, TENNESSEE 37932
(Address of Principal Executive Offices)
Registrant's Telephone Number, including
area code: (423) 539-5300
-----------------------------------------------
(Former Address, if changed since last report)
<PAGE>
- -------------------------------------------------------------------------------
THIS FORM 8-K CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS INVOLVE
VARIOUS RISKS THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
EXPRESSED IN SUCH FORWARD LOOKING STATEMENTS. THESE RISKS AND UNCERTAINTIES
INCLUDE, BUT ARE NOT LIMITED TO: CELERITY SYSTEM INC.'S ("CELERITY") HISTORY OF
LOSSES AND NEED FOR FINANCING, MARKET DEMAND FOR CELERITY'S PRODUCTS, SUCCESSFUL
IMPLEMENTATION OF CELERITY'S PRODUCTS, COMPETITIVE FACTORS, THE ABILITY TO
MANAGE CELERITY'S GROWTH AND THE ABILITY TO RECRUIT ADDITIONAL PERSONNEL, RISKS
INVOLVING THE PROPOSED MERGER OF A SUBSIDIARY OF CELERITY WITH FUTURETRAK
INTERNATIONAL, INC. ("FUTURETRAK"), INCLUDING THAT THE MERGER WILL NOT BE
CONSUMMATED, AND OTHER RISKS DETAILED FROM TIME TO TIME IN CELERITY'S FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION"), INCLUDING BUT
NOT LIMITED TO, THOSE DESCRIBED UNDER THE CAPTION "DESCRIPTION OF BUSINESS -
RISK FACTORS" IN CELERITY'S ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998. CELERITY'S REGISTRATION STATEMENT ON FORM S-3
(REGISTRATION NO. 333-81099), CELERITY'S CURRENT REPORT ON FORM 8-K FILED WITH
THE COMMISSION ON SEPTEMBER 14, 1999 (THE "SEPTEMBER 14 8-K") AND THIS FORM 8-K.
Item 5: Other Events
------------
THE MERGER
As Celerity reported in the September 14 8-K, Celerity has entered into
an Agreement and Plan of Merger (the "Merger Agreement") with FutureTrak and
FutureTrak Merger Corp., a wholly owned subsidiary of the Celerity ("Merger
Sub"), dated as of August 10, 1999, pursuant to which, among other things , (a)
Merger Sub will be merged into FutureTrak, with the result that FutureTrak will
become a wholly owned subsidiary of the Celerity, (b) each share of common stock
of FutureTrak outstanding at the effective time of the merger (other than shares
held in FutureTrak's treasury) will be converted into one share of common stock
of the Company, and (c) the name of Celerity will be changed. Please see the
September 14 8-K for further information regarding the proposed merger.
Unless the context otherwise requires, all references to FutureTrak
include its wholly-owned subsidiaries.
FINANCIAL STATEMENTS FOR FUTURETRAK
Attached as Exhibit 99.1 are financial statements for FutureTrak. Such
financial statements include audited balance sheets as at December 31, 1996,
December 31, 1997 and December 31, 1998 and the related statements of
operations, stockholders' equity and statements of cash flows for the years then
ended, and an unaudited balance sheet for the six month period ending June 30,
1999 and the related unaudited statements of operations, stockholders' equity
and statements of cash flow for the period then ended.
EXPERTS
The financial statements for the years ended December 31, 1996 and
December 31, 1997 included in this Form 8-K and incorporated by reference in the
Company's Registration Statement
<PAGE>
on Form S-3 have been so incorporated in reliance on the report of Clancy and
Co., P.L.L.C., independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The financial statements for the year ended December 31, 1998 included
in this Form 8-K and incorporated by reference in the Company's Registration
Statement on Form S-3 have been so incorporated in reliance on the report of
Grant Thornton LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
<PAGE>
Item 7: EXHIBITS
(c) Exhibits
23.1 Consent of Clancy and Co., P.L.L.C.
23.2 Consent of Grant Thornton LLP.
99.1 Financial Statements for FutureTrak (audited
balance sheets as at December 31, 1996,
December 31, 1997 and December 31, 1998 and
the related statements of operations,
stockholders' equity and statements of cash
flows for the years then ended, and an
unaudited balance sheet for the six month
period ending June 30, 1999 and the related
unaudited statements of operations,
stockholders' equity and statements of cash
flow for the period then ended).
<PAGE>
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 hereunto duly authorized.
Dated: September 28, 1999
CELERITY SYSTEMS, INC.
By: /S/ Kenneth D. Van Meter
--------------------------
Kenneth D. Van Meter
President and Chief Executive Officer
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
-------------------------------
As independent auditors, we hereby consent to the inclusion in this Form 8-K and
the incorporation by reference in the registration statement on Form S-3 of
Celerity Systems, Inc. and any amendments to such forms, of our reports relating
to the financial statements of FutureTrak International, Inc., for the years
ended December 31, 1997 and 1996. We also consent to the reference to this firm
under the heading "Experts" in this statement.
/S/ Clancy and Co., P.L.L.C.
CLANCY AND CO., P.L.L.C.
Certified Public Accountants
September 24, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We have issued our report dated February 26, 1999, accompanying the
financial statements of FutureTrak International, Inc. for the year ended
December 31, 1998. We hereby consent to the incorporation by reference of said
report in the Registration Statement of Celerity Systems Inc. on Form S-3
(File No. 333-81099), and to the use of our name as it appears under the
caption "Experts."
/S/ Grant Thornton LLP
----------------------
Weston, Florida
September 27, 1999
<PAGE>
Exhibit 99.1
FUTURETRAK INTERNATIONAL, INC.
Pompano Beach, Florida
AUDIT REPORT
DECEMBER 31, 1997 AND 1996
<PAGE>
CONTENTS
<TABLE>
<S> <C>
Independent Auditors' Report .................................................................. 1
Balance Sheet at December 31, 1997 and 1996 ................................................... 2-3
Statement of Operations for the Years Ended December 31, 1997 and 1996 ........................ 4
Statement of Stockholders' Equity From Inception (January 24, 1996)
Through December 31, 1997 ................................................................ 5
Statement of Cash Flows for the Years Ended December 31, 1997 and 1996 ........................ 6-7
Notes to the Financial Statements ............................................................. 8-13
</TABLE>
All schedules are omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
FutureTrak International, Inc.
Pompano Beach, Florida 33064
We have audited the accompanying balance sheet of FutureTrak International, Inc.
(the Company), as of December 31, 1997 and 1996 and the related statements of
operations, stockholders' equity 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 audit of the financial statements provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly the
financial position of FutureTrak International, Inc. as of December 31, 1997 and
1996, in conformity with generally accepted accounting principles.
Clancy and Co., P.L.L.C.
Phoenix, Arizona
April 24, 1998
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current Assets
Cash $181,966 $ 9,943
Accounts Receivable 50,301 31,063
Note Receivable, Stockholders (Note 3) 100,000 0
Notes Receivable, Officers (Note 3) 0 20,365
Inventory (Note 4) 229,645 43,753
-------- --------
Total Current Assets 561,912 105,124
Property and Equipment, Net (Note 5) 90,365 11,565
Other Assets
Prepaid Expenses 20,130 0
Deposits 875 0
-------- --------
Total Other Assets 21,005 0
-------- --------
Total Assets $673,282 $116,689
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
BALANCE SHEET
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Current Liabilities
Notes Payable, Line of Credit (Note 6) $ 221,036 $ 221,921
Accounts Payable 42,207 52,877
Accrued Expenses 1,957 0
Capital Lease Obligation, Current Portion (Note 7) 10,449 8,182
----------- -----------
Total Current Liabilities 275,649 282,980
Long Term Liabilities
Capital Lease Obligation, Noncurrent Portion (Note 7) 8,490 14,575
Notes Payable, Stockholders (Note 3) 77,358 76,443
Advances from Parent Company (Note 3) 429,851 0
----------- -----------
Total Long Term Liabilities 515,699 91,018
----------- -----------
Total Liabilities 791,348 373,998
Stockholders' Equity
Preferred Stock $.001 Par Value, Authorized 5,000,000 Shares;
Issued and Outstanding, None, at December 31, 1997 and 1996 0 0
Common Stock $.001 Par Value, Authorized 50,000,000 Shares;
Issued and Outstanding, 11,030,000 and 1,000 Shares at
December 31, 1997 and 1996 11,030 500
Additional Paid In Capital 978,970 9,500
Accumulated Deficit (1,108,066) (267,309)
----------- -----------
Total Stockholders' Equity (118,066) (257,309)
----------- -----------
Total Liabilities and Stockholders' Equity $ 673,282 $ 116,689
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Sales $ 374,607 $ 215,828
Cost and Expenses 1,150,814 472,278
----------- -----------
Net Loss (776,207) (256,450)
Other Income (Expense)
Interest Income 2,661 0
Interest Expense (67,211) (10,859)
----------- -----------
Total Other Income (Expense) (64,550) 10,859
----------- -----------
Net Loss Available to Common Shareholders $ (840,757) $ (267,309)
----------- -----------
----------- -----------
Net Loss Per Weighted Share of Common Stock $ (.12) (267)
----------- -----------
----------- -----------
Weighted Average Number of Common Shares and
Common Share Equivalents Outstanding 7,086,167 1,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE PERIOD FROM INCEPTION (JANUARY 24, 1996)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
Additional
Common Stock Paid In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Issuance of $.50 Par Value
Common Stock For Cash
On January 24, 1996 1,000 $ 500 $ 9,500 $ $ 10,000
Net Loss, December 31, 1996 (267,309) (267,309)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1996 1,000 500 9,500 (267,309) (257,309)
On August 14, 1997, Forward
Split at 10,000:1 999,000 999 (999) 0
On August 14, 1997,
Adjustment in Par Value
From $.50 to $.001 (499) 499 0
On August 14, 1997,
Issuance of Common Stock
in Exchange for Financing
in Accordance with May 5,
1997 Agreement 9,000,000 9,000 (9,000) 0
Offering Costs (50,000) (50,000)
Issuance of Common Stock
for Cash for Completion of
Offering Memorandum
Dated August 25, 1997 1,000,000 1,000 999,000 1,000,000
Offering Costs In Connection
With Completed Offering
Memorandum Dated
August 25, 1997 (100,000) (100,000)
Notes Payable Converted to
Additional Paid in Capital
During 1997 100,000 100,000
December 19, 1997, Issuance
of Common Stock For
Services Performed During
1997 30,000 30 29,970 30,000
Net Loss, December 31, 1997 0 0 0 (840,757) (840,757)
----------- ----------- ----------- ----------- -----------
Balance, December 31, 1997 11,030,000 $ 11,030 $ 978,970 $(1,108,066) $ (118,066)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash Flows From Operating Activities
Net Loss $ (840,757) $ (267,309)
Adjustments to Reconcile Net Loss to Net Cash Used In
Operating Activities
Depreciation 14,331 4,707
Common Stock Issued for Services 30,000 0
Changes in Assets and Liabilities
(Increase) Decrease in Accounts Receivable (19,238) (31,063)
(Increase) Decrease in Inventory (185,892) (43,753)
(Increase) Decrease in Prepaid Expenses (20,130) 0
(Increase) Decrease in Security Deposits (875) 0
Increase (Decrease) in Accounts Payable (10,670) 52,877
Increase (Decrease) in Accrued Expenses 1,957 0
----------- -----------
Total Adjustments (190,517) (17,232)
----------- -----------
Net Cash Used In Operating Activities (1,031,274) (284,541)
Cash Flows From Investing Activities
Property and Equipment Purchases (93,131) (16,272)
----------- -----------
Net Cash Flows Used In Investing Activities (93,131) (16,272)
Cash Flows from Financing Activities
Proceeds from Sale of Common Stock 1,000,000 10,000
Offering Costs (150,000) 0
Net Borrowings (Repayments) on Line of Credit (885) 221,921
Net Borrowings (Repayments) on Capital Lease Obligation (3,818) 22,757
Net Loan Proceeds(Repayments) to Shareholders 121,280 76,443
Advances from Parent Company 429,851 0
Advances (Repayments) to Shareholders (100,000) (20,365)
----------- -----------
Net Cash Provided by Financing Activities 1,296,428 310,756
----------- -----------
Increase (Decrease) in Cash and Cash Equivalents 712,023 9,943
</TABLE>
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash and Cash Equivalents, Beginning of Year $ 9,943 0
-------- --------
Cash and Cash Equivalents, End of Year $181,966 9,943
-------- --------
-------- --------
Supplemental Information:
Cash paid for:
Interest $ 42,996 10,859
-------- --------
-------- --------
Income taxes $ 0 0
-------- --------
-------- --------
Supplement Information of Noncash Transactions:
Common Stock Issued for Services $ 30,000 0
-------- --------
-------- --------
Note Payable, Stockholder Converted to Additional
Paid In Capital $100,000 0
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
-7-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE I -- ORGANIZATION
FutureTrak International, Inc. (the Company) was incorporated under the
laws of the State of Florida on January 24, 1996, under the name
FutureVision, Incorporated with an authorized capital of 1,000 shares of
common stock with a par value of $0.50 per share. On June 16, 1997, the
Company amended its articles of incorporation and changed its name to
FutureTrak International, Inc. The amendment was filed on August 1, 1997.
The Company is engaged in assembling, distributing, marketing, selling and
promoting satellite communications equipment. On June 19, 1997, the
Company acquired rights to market, promote and distribute a new and
revolutionary Digital Broadcast Satellite receiver for the marine and
mobile markets.
The marine marketing rights are exclusive and cover the US and Canada and
essentially the balance of the Western Hemisphere. The mobile marketing
rights cover the same geographical area with exclusivity implementation on
a phase-in basis. The new technology is one which allows the antenna to
oscillate and "lock-on" to selected satellites more effectively.
Management of the Company is of the opinion that the market for this
product is very large due to the new technology.
On January 24, 1996, the Company issued 1,000 shares of common stock with
a par value of $0.50 per share, or $10,000.
On May 5, 1997, 90% of the outstanding common shares of the Company was
purchased from existing shareholders by World Vision Entertainment, Inc.,
Altamonte Springs, Florida.
On August 14, 1997, the Company amended its Articles of Incorporation
authorizing an increase in the issuance of the following shares of capital
stock as follows: COMMON STOCK - The aggregate number of shares of common
stock is increased from one thousand (1,000) shares to fifty million
(50,000,000) shares with a par value of $.001 per share. PREFERRED STOCK -
The aggregate number of shares of preferred stock is five million
(5,000,000) shares with a par value of $.001 per share.
On August 14, 1997, each share of common stock currently outstanding was
split into ten thousand (10,000) shares of common stock, or an increase of
nine hundred and ninety nine thousand (999,000) shares. Par value per
share was adjusted from $.50 to $.001 as a result of the forward split.
On August 14, 1997, the Company issued common stock in exchange for
financing, or nine million (9,000,000) shares in accordance with agreement
dated May 5, 1997. Offering costs associated with the financing totaled
$50,000.
The accompanying notes are an integral part of these financial statements.
-8-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE I - ORGANIZATION (CONTINUED)
Through December 31, 1997, the Company issued one million (1,000,000)
shares of common stock for cash in completion of an offering memorandum
dated August 25, 1997, at $1.00 per share, or $1,000,000, less offering
costs of $100,000, or a net of $900,000.
During 1997, Notes Payable, Stockholder for $ 100,000 was converted to
additional paid in capital.
On December 19, 1997, the Company issued thirty thousand (30,000) shares
of common stock for services performed at $1.00 per share, or $30,000.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
A. ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method
of accounting.
B. CASH AND CASH EQUIVALENTS
The Company considers all highly liquid debt instruments with a maturity
of three months or less to be cash and cash equivalents.
C. INVENTORIES
Inventories are stated at the lower of cost or market, using the first-in,
first out method.
D. DEPRECIATION
The cost of property, plant and equipment is depreciated over the useful
lives of the related assets. Depreciation is computed using the
straight-line method over the estimated useful lives of assets.
Estimated lives of assets are as follows:
Computer Equipment 3 to 5 years
Office Equipment 5 years
Furniture and Fixtures 7 years
E. REVENUE RECOGNITION
Revenues are primarily recognized as products are shipped and services are
rendered.
The accompanying notes are an integral part of these financial statements.
-9-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
F. USE OF ESTIMATES
Management uses estimates and assumptions in preparing financial
statements in accordance with generally accepted accounting principles.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities, and the
reported revenues and expenses. Actual results may vary from the estimates
that were assumed in preparing the financial statements.
G. FINANCIAL STATEMENT PRESENTATION
For comparison purposes, certain classifications may have changed in the
financial statement presentation.
H. PENDING ACCOUNTING PRONOUNCEMENTS
It is anticipated that current pending accounting pronouncements will not
have an adverse impact on the financial statements of the Company.
I. INCOME OR LOSS PER SHARE
The computations of income or loss per share of common stock are based on
the weighted average number of shares outstanding at the date of the
financial statements.
J. INCOME TAXES
The Company has available at December 31, 1997 and 1996, net operating
losses of approximately $840,757 and $267,309, which may be applied
against future taxable income. The net loss is available through the year
2012 and 2011, respectively. The Company is an 81.6% owned subsidiary of
World Vision Entertainment, Inc., and will file a consolidated United
States Corporate Income Tax Return, and where applicable, a state income
tax return with its parent. A deferred tax asset in the amount of
$327,938, which would be recognized in accordance with the provisions of
FASB 109 was reduced by a valuation allowance equal to the deferred tax
asset of $327,938.
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES
Notes Receivable, Stockholders at December 31, 1997, represents principal
in the original amount of $100,000, dated August 26, 1997, advanced to a
stockholder. The note is classified as current because the principal is
due within one year, August 26, 1998, and bears no interest.
The accompanying notes are an integral part of these financial statements.
-10-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 3 - TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
Notes Receivable, Officers at December 31, 1996, represents loans to a
former officer of the Company, Larry Wald, in the amount of $20,365
Notes Payable, Stockholders at December 31, 1997 and 1996 totaling $77,358
and $76,443 consists of various loans made to the Company from existing
stockholders, with no due date and zero interest rate.
The majority shareholder of the Company, World Vision Entertainment, Inc.,
has advanced to the Company, $429,851 at December 31, 1997.
NOTE 4 - INVENTORIES
Inventories consist of the following at December 31:
1997 1996
---- ----
Raw Materials $129,866 $24,502
Finished Goods 99,779 19,211
-------- -------
Total $229,645 $43,753
-------- -------
-------- -------
NOTE 5 - PROPERTY AND EQUIPMENT, NET
Property and Equipment consist of the following at December 31:
1997 1996
---- ----
Office and Computer Equipment $ 23,992 $ 19,950
Furniture and Fixtures 1,117 0
Show Displays and Equipment 81,880
Leasehold Improvements 2,415 0
--------- ---------
Total 109,404 19,950
Less Accumulated Depreciation (19,039) (4,707)
--------- ---------
Net Book Value $ 90,365 11,565
--------- ---------
--------- ---------
NOTE 6 - NOTES PAYABLE, LINE OF CREDIT
The following is a summary of Notes Payable at December 31, 1997 and 1996:
The accompanying notes are an integral part of these financial statements.
-11-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 6 - NOTES PAYABLE, LINE OF CREDIT (CONTINUED)
1997 1996
---- ----
Line of credit, Barnett Bank of Broward County,
NA, dated August 2, 1996, in the original amount
of $25,000, with interest payable monthly at the
rate of 2.5% over the bank's rate, secured by all
inventory, chattel paper, accounts, equipment and
general intangibles. This note is due on demand. $ 24,985 $ 25,000
Line of credit, First Capital Services, Inc.,
Boca Raton, Florida, dated September 11, 1996,
with interest payable monthly at the rate of 19%
per annum, secured by inventory, and due on
demand. 196,051 196,921
-------- --------
Total $221,036 $221,921
-------- --------
-------- --------
NOTE 7 - COMMITMENTS
Capital Leases - The Company leases certain office and computer equipment
which are included in Property and Equipment, under a capital lease in the
original amount of $24,993, with monthly payments of $859, including
interest at 14.38% per annum for thirty six (36) months. The lease is
secured by the office and computer equipment.
Future maturities of the present value of net minimum capital lease
payments are as follows for the year ending December 31:
1998 $15,461
1999 7,730
-------
Total Minimum Lease Payments 23,191
Less: Amount Representing Interest 4,252
-------
Present Value of Net Minimum Capital Lease Payments 18,939
Less: Current Portion 10,449
-------
Capital Lease Obligation, Noncurrent $ 8,490
-------
-------
Operating Leases - The Company occupies 2,300 square feet of office and
warehouse space in Pompano Beach, Florida under a noncancellable lease
which expires in January, 2000. Lease expense for the years ended December
31, 1997 and 1996, was $29,028 and $5,072, respectively.
The Company's future minimum operating lease commitments are as follows at
December 31:
The accompanying notes are an integral part of these financial statements.
-12-
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
NOTE 7 - COMMITMENTS (CONTINUED)
Year Ended Amount
---------- ------
1998 $27,487
1999 27,487
2000 3,324
-------
Total $58,298
-------
-------
Consulting Fees - On January 15, 1997, the Company entered into an
agreement with First Consolidated Financial Corporation for consulting
services in financial matters and dealings on behalf of the Company. The
Company has agreed to pay $3,000 per month beginning February 1, 1997,
$4,000 per month beginning February 1, 1998, and $5,000 per month
beginning February 1, 1999, for each of the next twelve months. Future
minimum commitments at December 31 are as follows:
1998 $47,000
1999 $59,000
The agreement is for a period of three years and shall be automatically
renewed for a similar term unless either party delivers to the other party
thirty (30) days notice prior to the termination date.
NOTE 8 - SUBSEQUENT EVENTS, (UNAUDITED)
During July 1998, of the 81.60 % interest or 9,000,000 shares held by
World Vision Entertainment, Inc., 63.47% interest or 7,000,000 shares have
been sold to private stockholders.
The accompanying notes are an integral part of these financial statements.
-13-
<PAGE>
FINANCIAL STATEMENTS AND
REPORT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
FUTURETRAK INTERNATIONAL, INC.
December 31, 1998 and 1997
<PAGE>
CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ........................ 1
FINANCIAL STATEMENTS
BALANCE SHEETS ..................................................... 2
STATEMENTS OF OPERATIONS ........................................... 3
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT) ........................ 4
STATEMENTS OF CASH FLOWS ........................................... 5-6
NOTES TO FINANCIAL STATEMENTS ...................................... 7-14
</TABLE>
<PAGE>
[LETTERHEAD OF GRANT THORNTON]
REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Futuretrak International, Inc.
We have audited the accompanying balance sheet of Futuretrak International, Inc.
(the "Company"), as of December 31, 1998, and the related statements of
operations, shareholders' equity and cash flows for the year then ended. The
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. The financial statements of Futuretrak International, Inc. as of and
for the year ended December 31, 1997, were audited by other auditors whose
report dated April 24, 1998, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with generally accepted auditing standards.
These 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 audit provides 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 Futuretrak International, Inc.
as of December 31, 1998 and the results of its operations and its cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company incurred a net loss of $1,904,362 for the year ended December 31,
1998, and as of this date, the company's liabilities exceed its assets by
$1,073,800. These factors raise substantial doubt about the Company' ability to
continue as a going concern. Managements' plans in regard to these matters are
also described in Note B. The financial statements do not include any
adjustments that might result from the outcome from this uncertainty.
Weston, Florida
February 26, 1999 (except for Note L, as to which the date is July 13, 1999)
<PAGE>
Futuretrak International, Inc.
BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Current assets
Cash $ 25,574 $ 181,966
Trade accounts receivable, net of allowance for
doubtful accounts of $19,162 and $-0- in 1998
and 1997, respectively 26,827 50,301
Inventory 61,466 229,645
Prepaid expenses and other current assets 6,423 --
----------- -----------
Total current assets 179,042 461,912
Property and equipment, net 77,163 90,365
Other assets 2,492 20,891
Notes receivable 9,645 100,000
----------- -----------
Total assets $ 209,590 $ 673,168
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable $ 295,865 $ 42,207
Accrued payroll - officers 261,132 --
Due to officers 140,100 --
Notes payable, current portion 105,424 221,036
Accrued expenses 23,293 1,957
Lease obligation -- 10,449
----------- -----------
Total current liabilities 825,814 275,649
Commitments
Long-term liabilities
Capital lease obligation -- 8,490
Notes payable, net of current portion 457,576 77,358
Advances from former Parent Company -- 429,851
----------- -----------
Total liabilities 1,283,390 791,348
----------- -----------
Shareholders' equity (deficit)
Preferred stock, $.001 par value, 5,000,000 shares
authorized none issued
Common stock, $.001 par value, 50,000,000 shares
authorized, 12,156,798 and 11,030,000 shares issued
and outstanding in 1998 and 1997, respectively 12,157 11,030
Additional paid in capital 1,926,585 978,970
Accumulated deficit (3,012,542) (1,108,180)
----------- -----------
Total shareholders' equity (deficit) (1,073,800) (118,180)
----------- -----------
Total liabilities and shareholders' equity $ 209,590 $ 673,168
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Futuretrak International, Inc
STATEMENTS OF OPERATIONS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Sales $ 442,349 $ 374,607
Cost of goods sold 463,416 277,027
------------ ------------
Gross margin (21,067) 97,580
Selling, general and administrative expenses 1,795,588 902,934
------------ ------------
Operating loss (1,816,655) (805,354)
Other income (expense)
Other income 1,227 2,661
Interest expense (88,934) (38,177)
------------ ------------
Total other expense (87,707) (35,516)
------------ ------------
Net loss $ (1,904,362) $ (840,870)
------------ ------------
------------ ------------
Net loss per share of common stock:
Basic $ (.17) $ (.12)
------------ ------------
------------ ------------
Weighted average shares outstanding:
Basic 11,238,400 7,086,167
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Futuretrak International, Inc.
STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)
For the Period from Inception Through December 31, 1998
<TABLE>
<CAPTION>
Common Stock Additional
------------ Paid-In Accumulated
Shares Amount Capital Deficit Total
------ ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 24, 1996 1,000 $ 500 $ 9,500 $ $ 10,000
Net loss -- -- -- (267,309) (267,309)
---------- ----------- ----------- ----------- -----------
Balance, December 31,
1996 1,000 500 9,500 (267,309) (257,309)
Net loss for 1997 -- -- -- (840,871) (840,871)
Stock split 999,000 999 (999) -- --
Adjustment in par
$.50 to $.001 -- (499) 499 -- --
Offering cost -- -- (100,000) -- (100,000)
Issuance of common
stock 10,030,000 10,030 969,970 -- 980,000
Conversion -- -- 100,000 -- 100,000
---------- ----------- ----------- ----------- -----------
Balance, December 31,
1997 11,030,000 11,030 978,970 (1,108,180) (118,180)
Net loss for 1998 -- -- -- (1,904,362) (1,904,362)
Issuance of common
stock 818,563 819 393,072 -- 393,891
Conversion of debentures 308,235 308 124,692 -- 125,000
Forgiveness of debt
by a related party -- -- 429,851 -- 429,851
Balance, December 31,
1998 12,156,798 $ 12,157 $ 1,926,585 $(3,012,542) $(1,073,800)
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
Futuretrak International, Inc.
STATEMENTS OF CASH FLOWS
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities $(1,904,362) $ (840,757)
Net loss
Adjustments to reconcile net loss to net cash
used in operating activities:
Inventory/reserve 25,850 --
Depreciation expense 37,440 14,331
Provision for bad debts 119,162 --
Common stock issued for services 139,650 30,000
(Increase) decrease in operating assets
Security Deposits -- (875)
Accounts/notes receivable (5,333) (19,238)
Inventory 142,328 (185,892)
Prepaid expenses and other current assets 11,977 (20,130)
Increase (decrease) in operating liabilities
Accounts payable 234,719 (10,670)
Accrued interest included in notes payable 23,024 --
Accrued expenses 282,468 1,957
----------- -----------
Total adjustments 1,011,285 (190,631)
----------- -----------
Net cash used in operating activities (893,077) (1,031,274)
Cash flows from investing activities
Purchases of property and equipment (24,237) (93,131)
----------- -----------
Net cash used in investing activities (24,237) (93,131)
----------- -----------
Cash flows from financing activities
Proceeds from notes payable 475,259 121,280
Proceeds from sale of debentures 125,000 --
Proceeds from sale of Common Stock 254,240 1,000,000
Net repayments on lease obligation -- (3,818)
Advances from parent company -- 429,851
Repayments to parent company -- (100,000)
Offering costs paid -- (150,000)
Gross payments on note payable (93,577) (885)
----------- -----------
Net cash provided by financing activities 760,922 1,296,428
----------- -----------
Net (decrease) increase in cash (156,392) 172,023
Cash, beginning of year 181,966 9,943
----------- -----------
Cash, end of year $ 25,574 $ 181,966
----------- -----------
----------- -----------
</TABLE>
(continued)
<PAGE>
Futuretrak International, Inc.
STATEMENTS OF CASH FLOWS - CONTINUED
For the Years Ended December 31,
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest $ 90,802 $ 42,996
----------- -----------
----------- -----------
Supplemental disclosure of non-cash transactions
Common stock issued for services $ 139,650 $ 30,000
----------- -----------
----------- -----------
Conversion of debentures $ 125,000 $ 100,000
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION ON NATURE OF BUSINESS
The Company is in the business of providing mobile satellite antennas to
the yachting industry, allowing the yachts to receive satellite
transmissions while at sea. Beginning in fiscal 1999, the Company will
also provide wiring infrastructure to multi housing communities, which
enables the tenants to obtain Direct TV and high speed internet access.
Futuretrak International, Inc. (the "Company"), was incorporated on
January 24, 1996, under the name Future Vision. On June 16, 1997, the
Company amended its articles of incorporation and changed its name to
Futuretrak International, Inc. On May 5, 1997, 90% or 9,000,000 shares of
the outstanding stock was purchased from the existing shareholders by
World Vision Entertainment, Inc. On July 15, 1998, Palm Bay Capital, Inc.
purchased 7,000,000 shares from World Vision Entertainment, See further
detail of this transaction at Note F.
INVENTORY
Inventory, consisting of Raw materials and Finished Goods, is stated at
the lower of cost (Average Cost basis) or market.
DEPRECIATION
Property and equipment are stated at cost, net of accumulated
depreciation. Depreciation for financial reporting purposes is computed by
using the straight-line method over the estimated useful life of the
related assets, which are as follows:
Years
-----
Computer equipment 3 - 5
Office equipment 5
Furniture and fixtures 7
(continued)
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
For income tax purposes, accelerated methods of depreciation are generally
used. Deferred income taxes are provided for the difference between
depreciation expense for tax and financial reporting purposes.
INCOME TAXES
The Company accounts for income taxes under the asset and liability
method. Deferred tax assets and liabilities are recorded based on the
difference between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes. In addition, the
current or deferred tax consequences of a transaction are measured by
applying the provisions of enacted tax laws to determine the amount of
taxes payable currently or in future years.
ESTIMATES
In preparing financial statements in accordance with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts and disclosures of assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1997 amounts to conform to
the 1998 presentation.
EARNINGS PER SHARE
The Company adopted Financial Accounting Standards No. 128 (FAS 128),
"Earnings Per Share" in 1997. FAS 128 requires dual presentation of basic
and diluted earnings per share on the face of the income statement as well
as the restatement of prior periods presented.
Basic net earnings per share equals net earnings divided by the weighted
average shares outstanding during the year. Dilutive EPS has not been
presented because common stock equivalents would be anti-dilutive in 1998.
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE B - GOING CONCERN
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplate
continuation of the Company as a going concern. However, the Company has
sustained substantial losses from operations since inception which has
resulted in a deterioration in the Company's financial position. In
addition, the Company is delinquent in paying its fourth quarter Federal
payroll taxes which amounts to approximately $23,000.
The recoverability of a major portion of the recorded asset amounts shown
in the accompanying balance sheet is dependent upon commencement of
successful operations of the Company, which in turn is dependent upon the
Company's ability to finance its future operations. The financial
statements do not include any adjustments. relating to the recoverability
and classification of recorded assets and liability amounts which might
result from the above uncertainties.
The Company has and will continue to take a number of steps to reduce its
operating losses. The Company will continue to increase its efforts in
marketing Direct TV, real time financial data, weather center information
and high speed internet and telephony solutions focused on its two niche
markets, yachts and RV's and multi housing communities.
Management believes that a result of the action stated above, the Company
can continue in existence for the next twelve months; however, there is no
assurance that such action will be consummated or will eliminate the
Company's need for additional capital.
NOTE C - INVENTORIES
Inventories consist of the following at December 31:
1998 1997
Raw materials $ 61,466 $129,866
Finished goods -- 99,779
Total $ 61,466 $229,645
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1998 and 1997 consist of the following:
1998 1997
-------- --------
Office and computer equipment $ 44,022 $ 23,992
Furniture and fixtures 3,207 1,117
Show displays and equipment 83,997 81,880
Leasehold improvements 2,415 2,415
133,641 109,404
Less: Accumulated depreciation (56,478) (19,039)
$ 77,163 $ 90,365
-------- --------
-------- --------
NOTE E - INCOME TAXES
The Company has available at December 31, 1998, net operating losses of
$3,000,000, which may be applied against future taxable income. The net
losses expire in 2011 - 2018. A deferred tax asset in the amount of
$988,000 and $327,938 in 1998 and 1997, respectively, which would be
recognized in accordance with the provisions of FASB 109, was reduced by a
valuation allowance equal to the deferred tax asset of $1,000,000 and
$328,000 in 1998 and 1997, respectively.
NOTE F - RELATED PARTY TRANSACTIONS
During 1998, World Vision Entertainment (WVE) sold 7,000,000 of the
9,000,000 shares of Futuretrak that they owned to Palm Bay Capital, Inc.,
which was funded by means of loans from Steve Remondini and William
Tessaro, President and Chief Technical Officer, respectively, and Larry
Schwartz, shareholder. Subsequent to the purchase, 6,000,000 of the shares
were distributed to the three individuals mentioned above. Palm Bay
Capital currently owns 1,000,000 shares.
As a result of the sale of shares from WVE to Palm Bay Capital, WVE
forgave a note in the amount of $429,851 from Futuretrak. Since WVE was a
major shareholder, this forgiveness of debt was recorded as additional
paid in capital.
Futuretrak owes $163,000 and $395,000, to two financial institutions which
are both owned by Larry Schwartz a shareholder of Futuretrak.
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE G - NOTES PAYABLE
The following is a summary of Notes Payable at December 31, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Unsecured note payable, to a financial
institution dated September 11, 1996 with
monthly payments of $10,402 including interest
at the rate of 12% per annum. Matures January
2003. $395,000 $196,051
Line of credit, Barnett Bank of Broward County,
NA, dated August 2, 1996, in the original
amount of $25,000, with interest payable
monthly at the rate of 2.5% over the bank's rate,
secured by all inventory, chattel paper, accounts
equipment and general intangibles. This note is
due on demand. -- 24,985
Unsecured note payable, to a financial
institution, dated June 12, 1998 with monthly
payments of $4,292 including interest at a rate
of 12%. Matures January 2003. 163,000 --
Noninterest bearing, unsecured note payable to
a former shareholder, due upon demand. 5,000 --
-------- --------
563,000 221,036
Less: current portion 105,424 221,036
-------- --------
$457,576 $ --
-------- --------
-------- --------
</TABLE>
NOTE H - DUE TO OFFICERS - STOCKHOLDERS
On August, 1, 1998, an officer of the Company loaned the Company $140,100.
The note is non-interest bearing and is due upon demand. The Company
intends to pay the note in full during 1999.
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE I - COMMITMENTS
LEASES
The Company occupies 2,300 square feet of office and warehouse space in
Pompano Beach, Florida under a noncancelable lease which expires in
January, 2000. Lease expense for the years ended December 31, 1998 and
1997 was $28,384 and $29,028, respectively.
On February 12, 1997, the Company entered into an operating lease with
American Business Credit Corp., which expires January 12, 2001. Also, on
February 16, 1998, the Company entered into an operating lease with
Hewlett Packard, which expires January, 1999. The lease expense combined,
for the years ended December 31, 1998 and 1997 was $13,906 and $1,864,
respectively.
The Company's future minimum operating lease commitments are as follows:
Amount
------
1999 $ 32,026
2000 5,634
2001 419
--------
Total $ 38,079
--------
--------
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with four of its
executive officers for an initial period of five years, and year to year
thereafter unless either party gives 180 days written notice not to renew
the agreement. The agreements provide that if the employee is terminated
after change in control of the Company, the employee is to receive the
larger of (1) three years base salary, or (2) the base salary due to
employee for the remaining term of the agreement, or (3) an amount equal
to two times the largest total of the bonuses previously paid in any one
year by the Company to the employee.
(continued)
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE I - COMMITMENTS - Continued
CONSULTING AGREEMENT
On January 15, 1997, the Company entered into an agreement with a
financial institution for consulting services in financial matters and
dealings on behalf of the Company. The Company agreed to pay $3,000 per
month beginning February 1, 1997, $4,000 per month beginning February 1,
1998, and $5,000 per month beginning February 1, 1999 for each of the
following 12 months. Future minimum commitments as of December 31, 1998
are as follows:
1999 $ 59,000
2000 $ 5,000
The agreement is for a period of three years and shall be automatically
renewed for a similar term unless either party delivers to the other party
(30) days notice prior to the termination date.
NOTE J - STOCKHOLDERS EQUITY
On August 14, 1997, each share of common stock currently outstanding was
split into ten thousand (10,000) shares of common stock, or an increase of
nine hundred and ninety nine thousand (999,000) shares. Par value per
share was adjusted from $.50 to $.001 as a result of the forward split.
On August 14, 1997, the Company issued 9,000,000 shares of common stock as
part of a shareholder purchase/merger agreement. Costs associated with the
issuance totaled $50,000.
In 1997, the Company issued one million (1,000,000) shares of common stock
for cash in completion of an offering memorandum dated August 25, 1997, at
$1.000 per share, or $1,000,000, less offering costs of $100,000, or a net
of $900,000.
During 1997, Notes Payable, Stockholders for $100,000 was converted to
additional paid in capital.
On December 19, 1997, the Company issued thirty thousand (30,000) shares
of common stock for services performed which was valued at $1.00 per
share, or $30,000.
During 1998, debentures in the amount of $125,000 were converted into
308,235 shares of common stock.
<PAGE>
Futuretrak International, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 1998 and 1997
NOTE K - SUBSEQUENT EVENTS
In January, 1999, Futuretrak entered into an agreement to purchase the
assets of Satellite Technology, Inc. (STI), a former distributor/dealer,
for Futuretrak. STI is a distributor of satellite space scanners and
antenna control units. The agreement included the issuance of 200,000
shares of Futuretrak common stock and promissory note in the amount of
$160,347 for the assets of STI. The note bears interest at a rate of prime
plus 2%, with monthly principal payments of $20,049 beginning no later
than May 5, 1999 (unless additional funding becomes available sooner to
the maker after the contemplated 504D, in which case the first payment
shall be due within 15 days of the date such funds become available). The
note shall mature, and any remaining principle and accrued but unpaid
interest shall be due and payable on January 5, 2000.
On January 11, 1999, the Company amended its Articles of Incorporation to
increase the authorized shares from 50,000,000 to 100,000,000 shares.
NOTE L - SUBSEQUENT EVENT - STOCK ISSUANCE
On March 15, 1999, the Company issued 22,607,000 shares of common stock to
four officers in exchange for promissory notes of $1,808,560. The notes
are collateralized by officers employment agreements.
NOTE M - YEAR 2000
The Year 2000 issue relates to limitations in computer systems and
applications that may prevent proper recognition of the Year 2000. The
potential effect of the Year 2000 issue on the Company its business
partners will not be fully determinable until the Year 2000 and
thereafter. If Year 2000 modifications are not properly completed either
by the Company or entities with which the Company conducts business, the
Company's revenues and financial condition could be adversely impacted.
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
BALANCE SHEET
JUNE 30, 1999
PREPARED BY MANAGEMENT
UNAUDITED
<TABLE>
<CAPTION>
June 30, 1999
-------------
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ (10,413)
Accounts Receivable - Net of Reserve ($19,162) 27,920
Inventory 63,427
Retainer - Legal 120
-----------
TOTAL CURRENT ASSETS 81,053
FIXED ASSETS
Furniture & Fixtures 16,571
Computer Equipment 46,056
Leasehold Improvement 2,415
Show Displays & Equipment 86,064
Research & Development 15,250
Accumulated Depreciation (56,478)
NET FIXED ASSETS 109,879
-----------
OTHER ASSETS
Note Receivable - Officers - Stock Purchase 1,808,560
Advances - Officers & Employees 52,133
Due from Subsidiaries & Celerity 25,406
Prepaid Expenses 1,991
Deposits 1,400
TOTAL OTHER ASSETS 1,889,490
-----------
TOTAL ASSETS $ 2,080,422
===========
LIABILITIES & STOCKHOLDERS EQUITY
CURRENT LIABILITIES
Accounts Payable $ 507,616
Accrued Expenses 63,024
-----------
TOTAL CURRENT LIABILITIES 570,640
LONG TERM LIABILITIES
Notes Payable - 1st Capital 374,199
Notes Payable - 1st Consolidated 163,000
Bridge Financing 92,475
Notes Payable - STI Asset Purchase 160,347
Notes Payable - Stockholders 179,600
Accrued Payroll 697,798
TOTAL LONG TERM LIABILITIES 1,667,419
-----------
STOCKHOLDERS EQUITY
Preferred Stock $0.001 Par Value, Authorized 5,000,000 Shares,
Issued and Outstanding, None, at June 30, 1999 0
Common Stock $0.001 Par Value, Authorized 50,000,000 Shares
Issued and Outstanding, 9,450,525 (post split) at June 30, 1999 9,451
Additional Paid in Capital 4,238,350
Accumulated Deficit (3,012,542)
Current Earnings (Loss) (1,392,896)
-----------
TOTAL STOCKHOLDERS EQUITY (157,637)
-----------
TOTAL LIABILITIES & STOCKHOLDERS EQUITY $ 2,080,422
===========
</TABLE>
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
FOR THE 6 MONTHS ENDED JUNE 30, 1999
PREPARED BY MANAGEMENT
UNAUDITED
<TABLE>
<CAPTION>
June 30, 1999
-------------
<S> <C>
Revenue:
Unit Sales $ 99,457
-----------
Total Revenue: 99,457
Cost of Sales:
Unit Production 177,867
-----------
Total Costs of Sales 177,867
Gross Profit (78,411)
-----------
Expenses
Marketing & Sales 67,586
Human Resources 675,587
General & Administrative 571,337
Reserve for Bad Debts 0
-----------
Total Expenses 1,314,510
-----------
Net Income before Extraordinary Items (1,392,921)
-----------
Other Income 25
Depreciation 0
Net Income (Loss) $(1,392,896)
-----------
</TABLE>
<PAGE>
FUTURETRAK INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
PREPARED BY MANAGEMENT
UNAUDITED
<TABLE>
<CAPTION>
June 30, 1999
-------------
<S> <C>
Cash Flows From Operating Activities
Net Loss $(1,392,896)
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities
Depreciation 0
Changes In Assets & Liabilities
(Increase)/Decrease In Accounts Receivable (1,093)
(Increase)/Decrease In Inventory (1,961)
(Increase)/Decrease In Other Current Assets 6,304
(Increase)/Decrease In Prepaid Expenses 0
(Increase)/Decrease in Deposits (900)
(Increase)/Decrease In Employee Advances (42,488)
Increase/(Decrease) In Accounts Payable 211,749
Increase/(Decrease) In Accrued Officers Payroll 436,666
Increase/(Decrease) In Accrued Expenses 39,731
-----------
Total Adjustments 648,009
-----------
Net Cash Used In Operating Activities (744,887)
Cash Flows From Investing Activities
Fixed Asset Purchases (32,715)
Due from Celerity & Subsidiaries (25,406)
Loan Rec. - Officers Stock Purchases (1,808,560)
-----------
Net Cash Used In Investing Activities (1,866,681)
Cash Flows From Financing Activities
Proceeds from Sale of Common Stock 2,309,059
Borrowing/(Repayments) on 1st Capital Loan Obligation (20,801)
Loan - STI Asset Purchase 160,347
Bridge Financing 92,475
Loan Proceeds from Officers 34,500
-----------
Net Cash Used In Financing Activities 2,575,580
-----------
Increase(Decrease) In Cash and Cash Equivalents (35,988)
Cash and Cash Equivalents, Beginning of Period 25,574
-----------
Cash and Cash Equivalents, End of Period (10,414)
===========
</TABLE>
