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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
Commission file number: 0-27862
REALITY INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1781991
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State or other jurisdiction of I.R.S. Employer Identification No.
incorporation of organization
SUITE 121
7885 FULLER ROAD
EDEN PRAIRIE, MINNESOTA 55345 (612) 253-4713
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Address of principal executive offices Registrant's telephone number
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes X No
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At October 31, 2000, 4,677,407 shares of registrant's $.01 par value Common
Stock were outstanding.
Transitional Small Business Issuer Format Yes No X
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FORM 10-QSB INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................7
Item 4. Submission of Matters to a Vote of Security Holders..................9
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K....................................10
SIGNATURES...................................................................11
EXHIBIT INDEX................................................................12
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties that may cause the
Company's actual results to differ materially from the results discussed in the
forward-looking statements.
On April 30, 1999, the Company ceased business operations. Management of
the Company believes this action was necessary in light of the Company's current
liquidity needs and lack of short-term revenue opportunities.
Since April 30, 1999, the Company has been exploring potential uses of its
public shell. While the Company seeks potential uses for the public shell, the
primary factor that might cause such difference in results is the Company's
inability to find a suitable acquisition or merger candidate or other use for
its public shell in the near future.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REALITY INTERACTIVE, INC.
BALANCE SHEET
September 30, December 31,
2000 1999
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ASSETS (Unaudited) (Audited)
Cash and cash equivalents...................... $ 12,415 $ 40,986
Prepaid expenses and other current assets...... 895 2,921
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Total assets........................... $ 13,310 $ 43,907
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................... $ 8,460 $ 9,688
Accrued liabilities........................ 7,953 7,953
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Total current liabilities.............. 16,413 17,641
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Stockholders' equity:
Common stock, $.01 par value, 25,000,000
shares authorized; 4,677,407 shares
outstanding at both dates................ 46,774 46,774
Additional paid-in capital................. 15,386,692 15,386,692
Accumulated deficit........................ (15,436,569) (15,407,200)
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Total stockholders' equity............. (3,103) 26,266
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Total liabilities and stockholders' $ 13,310 $ 43,907
equity............................... =========== ===========
See accompanying notes to the financial statements.
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REALITY INTERACTIVE, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Three months ended Nine months ended
September 30, September 30,
----------------------- ---------------------
2000 1999 2000 1999
---------- ----------- ---------- ----------
Product revenues.............. $ 0 $ 21,914 $ 0 $ 112,033
Service revenues.............. 0 6,121 0 142,166
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Total revenues.......... 0 28,035 0 254,199
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Cost of product revenues...... 0 3,065 0 21,750
Cost of service revenues...... 0 0 0 108,024
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Total cost of revenues.. 0 3,065 0 129,774
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Gross profit.................. 0 24,970 0 124,425
-------- ---------- --------- ----------
Operating expenses:
Sales and marketing....... 0 0 0 99,284
Research and development.. 0 0 0 103,456
General and administrative 10,691 131,470 42,991 539,625
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Total operating expenses 10,691 131,470 42,991 742,365
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Operating loss................ (10,691) (106,500) (42,991) (617,940)
Gain on sale of domain
name................... 0 0 13,105 0
Gain on sale of
intellectual property... 0 85,000 0 85,000
Interest income........... 141 1,250 517 6,369
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Net loss.............. $ (10,550) $ (20,250) $ (29,369) $ (526,571)
Basic and diluted earnings
(loss) per share............ $ (0.00) $ (0.00) $ (0.01) $ (0.11)
========== ========== ========= ==========
Weighted average common shares
outstanding................. 4,677,407 4,677,407 4,677,407 4,677,407
========== ========== ========== ==========
See accompanying notes to the financial statements.
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REALITY INTERACTIVE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine months ended
September 30,
---------------------------
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss................................. $ (29,369) $ (526,571)
Reconciliation of net loss to net cash
used by operating activities:
Depreciation and amortization........ 0 30,000
Changes in assets and liabilities:
Accounts receivable.................. 0 227,327
Prepaid expenses and other assets.... 2,026 44,865
Accounts payable..................... (1,228) (22,224)
Accrued liabilities.................. 0 (23,985)
Deferred revenue..................... 0 (49,495)
Other current liabilities............ 0 (1,572)
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Net cash used by operating
activities.................... (28,571) (321,655)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of fixed assets....... 0 28,814
Cash restricted for operating leases..... 0 111,000
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Net cash provided (used) by
investing activities.......... 0 139,814
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bridge notes payable....... 0 86,335
Forgiveness of bridge notes payable...... 0 (86,335)
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Net cash provided (used) by
financing activities.......... 0 0
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Net cash provided (used) during period....... (28,571) (181,841)
CASH AND CASH EQUIVALENTS:
Beginning of period...................... 40,986 291,697
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End of period............................ $ 12,415 109,856
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See accompanying notes to the financial statements.
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REALITY INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
NOTE 1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Business
Reality Interactive, Inc. (the "Company") was incorporated on May 24,
1994 for the purpose of developing technology-based knowledge solutions for
the corporate marketplace.
On April 30, 1999, the Company ceased business operations and terminated
all remaining employees. This action was necessary in light of the Company's
liquidity needs and lack of revenue opportunities.
Since the Company ceased its business operations, it has sold a majority of
its physical assets and intellectual property. Currently, the Company is
exploring potential uses of its public shell. While the Company pursues such
opportunities, it intends to comply with all future SEC reporting requirements
in order to maintain its status as a public company.
Basis of Presentation
The accompanying unaudited financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for interim
financial information. The preparation of financial statements in accordance
with generally accepted accounting principles require management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities, including the disclosure of contingent assets
and liabilities at the date of the accompanying interim financial statements,
and the reported amounts of revenue and expenses during the reporting period. In
the opinion of management, the interim financial statements include all
adjustments necessary for a fair presentation of the results of operations for
the interim periods presented.
Operating results for the three and nine months ended September 30, 2000
are not necessarily indicative of the operating results to be expected for the
year ending December 31, 2000.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted. The statements should be read in conjunction with the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The following presentation of management's discussion and analysis of the
Company's financial condition and results of operation should be read in
conjunction with the Company's financial statements and notes contained herein
for the three and nine months ended September 30, 2000 and 1999.
RESULTS OF OPERATIONS
REVENUES. Revenues were $0 for the third quarter of 2000 compared to
$28,035 for the third quarter of 1999. For the nine-month period ended September
30, 2000, revenues were $0 compared to $254,199 for the comparable period of
1999. This decrease was due to the Company's decision to cease its business
operations effective April 30, 1999.
COST OF REVENUES. Cost of revenues were $0 for the third quarter of 2000
compared to $3,065 for the third quarter of 1999. For the nine-month period
ended September 30, 2000, cost of revenues were $0 compared to $129,774 for the
comparable period of 1999. This decrease was due to the Company's decision to
cease its business operations effective April 30, 1999.
OPERATING EXPENSES. Operating expenses were $10,691 for the third quarter
of 2000 compared to $131,470 for the third quarter of 1999. For the nine-month
period ended September 30, 2000, operating expenses were $42,991 compared to
$742,365 for the comparable period of 1999. Expenses incurred during the three
and nine months ended September 30, 2000 were entirely for general and
administrative purposes, including rent for a small office, professional fees
and miscellaneous office expenses.
The Company expects that it will continue to incur general and
administrative expenses for the remainder of 2000 as it continues to maintain a
small administrative office, pursues opportunities for its public shell and
maintains its status as a fully reporting company with the Securities and
Exchange Commission.
GAIN ON SALE OF DOMAIN NAME. During the second quarter of 2000, the Company
received a final payment of $7,130 in connection with the sale of one of its
Internet domain names. Including the initial payment of $5,975 received during
the first quarter of 2000, the Company has received total proceeds of $13,105.
INTEREST INCOME. Interest income was $141 for the third quarter of 2000
compared to interest income of $1,250 for the third quarter of 1999. For the
nine-month period ended September 30, 2000, interest income was $517, compared
to interest income of $6,369 for the same period of 1999. The decrease between
periods is attributed to declining cash reserves.
NET LOSS. Net loss was $10,550 for the third quarter of 2000 compared to a
net loss of $20,250 for the third quarter of 1999. For the nine-month period
ended September 30, 2000, net loss was $29,369 compared to a net loss of
$526,571 for the same period of 1999. Since the Company has ceased business
operations, it does not expect to incur additional substantial losses in 2000,
except for expenses relating to the operation of a small office, pursuing
opportunities for its public shell and SEC public filing requirements.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $12,415 as of September 30,
2000, compared to $40,986 as of December 31, 1999. This decrease in cash and
cash equivalents was due primarily to the net loss from operations for the
nine-months ended September 30, 2000.
The Company expects that its current cash balance will allow it to meet
its operating expenditures through December 31, 2000.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO. DESCRIPTION
27.1 Financial Data Schedules
99.1 Cautionary Statement
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter ended September 30, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
REALITY INTERACTIVE, INC.
Dated: November 14, 2000 By /s/ Paul J. Wendorff
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Paul J. Wendorff
Its Chief Executive Officer
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EXHIBIT INDEX
Exhibit
No. Description
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99.1 Cautionary Statement
10
