<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
Commission file number: 0-27862
REALITY INTERACTIVE, INC.
(Exact name of registrant as specified in its charter)
MINNESOTA 41-1781991
------------------------------ ---------------------------------
State or other jurisdiction of I.R.S. Employer Identification No.
incorporation of organization
SUITE 121
7885 FULLER ROAD
EDEN PRAIRIE, MINNESOTA 55345 (612) 253-4713
- --------------------------------------- -----------------------------
Address of principal executive offices Registrant's telephone number
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. [X] Yes [ ] No
At April 30, 2000, 4,677,407 shares of registrant's $.01 par value Common Stock
were outstanding.
Transitional Small Business Issuer Format [ ] Yes [X] No
<PAGE> 2
FORM 10-QSB INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements..................................................3
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...........................................7
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K......................................8
SIGNATURES.....................................................................9
EXHIBIT INDEX.................................................................10
SAFE HARBOR STATEMENT UNDER THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This Quarterly Report on Form 10-QSB contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements involve risks and uncertainties that may cause
the Company's actual results to differ materially from the results discussed in
the forward-looking statements.
On April 30, 1999, the Company ceased business operations. Management
of the Company believes this action was necessary in light of the Company's
current liquidity needs and lack of short-term revenue opportunities.
Since April 30, 1999, the Company has been exploring potential uses of
its public shell. While the Company seeks potential uses for the public shell,
the primary factor that might cause such difference in results is the Company's
inability to find a suitable acquisition or merger candidate or other use for
its public shell in the near future.
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
REALITY INTERACTIVE, INC.
BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
2000 1999
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents...................................... $ 30,946 $ 40,986
Prepaid expenses and other current assets...................... 895 2,921
------------ ------------
Total assets........................................... $ 31,841 43,907
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 8,460 $ 9,688
Accrued liabilities........................................ 7,953 7,953
------------ ------------
Total current liabilities.............................. 16,413 17,641
------------ ------------
Stockholders' equity:
Common stock, $.01 par value, 25,000,000 shares authorized;
4,677,407 shares outstanding at both dates............. 46,774 46,774
Additional paid-in capital................................. 15,386,692 15,386,692
Accumulated deficit........................................ (15,418,038) (15,407,200)
------------ ------------
Total stockholders' equity............................. 15,428 26,266
------------ ------------
Total liabilities and stockholders' equity............. $ 31,841 $ 43,907
============ ============
</TABLE>
See accompanying notes to the financial statements.
3
<PAGE> 4
REALITY INTERACTIVE, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Product revenues........................................ $ 0 $ 72,824
Service revenues........................................ 0 800
----------- -----------
Total revenues.................................. 0 73,624
----------- -----------
Cost of product revenues................................ 0 17,436
Cost of service revenues................................ 0 0
----------- -----------
Total cost of revenues.......................... 0 17,436
----------- -----------
Gross profit............................................ 0 56,188
----------- -----------
Operating expenses:
Sales and marketing................................. 0 68,095
Research and development............................ 0 68,506
General and administrative.......................... 17,009 200,893
----------- -----------
Total operating expenses........................ 17,009 337,494
----------- -----------
Operating loss.......................................... (17,709) (281,306)
Gain on sale of domain name......................... 5,975 0
Interest income (expense), net...................... 196 3,430
----------- -----------
Net loss........................................ $ (10,838) $ (277,876)
=========== ===========
Basic and diluted earnings (loss) per share............. $ (0.00) $ (0.06)
=========== ===========
Weighted average common shares outstanding.............. 4,677,407 4,677,407
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
4
<PAGE> 5
REALITY INTERACTIVE, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................. $ (10,838) $ (277,876)
Reconciliation of net loss to net cash used by operating activities:
Depreciation and amortization.................................... 0 15,000
Changes in assets and liabilities:
Accounts receivable.............................................. 0 198,261
Prepaid expenses and other current assets........................ 2,026 (47,581)
Accounts payable................................................. (1,228) (5,548)
Accrued liabilities.............................................. 0 (3,339)
Deferred revenue................................................. 0 19,950
Other current liabilities........................................ 0 (1,572)
----------- -----------
Net cash used by operating activities........................ (10,040) (102,705)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES: 0 0
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES: 0 0
----------- -----------
Net cash provided (used) during period................................... (10,040) (102,705)
CASH AND CASH EQUIVALENTS:
Beginning of period.................................................. 40,986 291,697
=========== ===========
End of period........................................................ $ 30,946 $ 188,992
=========== ===========
</TABLE>
See accompanying notes to the financial statements.
5
<PAGE> 6
REALITY INTERACTIVE, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 months ended March 31, 2000 are not
necessarily indicative of the operating results to be expected for the year
ending December 31, 2000.
Certain information and footnote disclosures normally included in
financial statements in accordance with generally accepted accounting principles
have been omitted. The statements should be read in conjunction with the
Company's Annual Report on Form 10-KSB for the year ended December 31, 1999.
6
<PAGE> 7
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION
The following presentation of management's discussion and analysis of
the Company's financial condition and results of operation should be read in
conjunction with the Company's financial statements and notes contained herein
for the first quarter ended March 31, 2000 and 1999.
RESULTS OF OPERATIONS
REVENUES. Revenues were $0 for the first quarter of 2000, compared to
revenues of $73,624 for the first quarter 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 first quarter of
2000, compared to $17,436 for the first quarter of 1999. The decrease in cost of
revenues was due to the Company's decision to cease business operations
effective April 30, 1999.
OPERATING EXPENSES. Operating expenses were $17,009 for the first
quarter of 2000, compared to $337,494 for the first quarter of 1999. This
decrease in operating expenses was due to the Company's decision to cease
business operations effective April 30, 1999. Expenses incurred during the first
quarter of 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 first quarter of 2000, the
Company received a partial payment of $5,975 in connection with the sale of one
of the its Internet domain names. Upon transfer of the domain name to the
purchaser, the Company will be entitled to receive a final payment of
approximately $6,000. The Company expects to receive this payment during the
second quarter of 2000.
INTEREST INCOME. The Company's interest income was $196 for the first
quarter of 2000, compared to interest income of $3,430 for the first quarter of
1999. The decrease in interest income is attributed to declining cash reserves.
NET LOSS. Net loss was $10,838 for the first quarter of 2000, compared
to a net loss of $277,876 for the first quarter 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.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents were $30,946 as of March 31,
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
quarter ended March 31, 2000.
The Company expects that its current cash balance will allow it to meet
its minimal operating expenditures at least through June 30, 2000.
7
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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
March 31, 2000
8
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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: May 12, 2000 By /s/ Paul J. Wendorff
--------------------------------
Paul J. Wendorff
Chief Executive Officer
9
<PAGE> 10
EXHIBIT INDEX
Exhibit
No. Description
- ------- ------------------------------
27.1 Financial Data Schedule
99.1 Cautionary Statement
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 30,946
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 31,841
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 31,841
<CURRENT-LIABILITIES> 16,413
<BONDS> 0
0
0
<COMMON> 46,774
<OTHER-SE> (31,346)
<TOTAL-LIABILITY-AND-EQUITY> 31,841
<SALES> 0
<TOTAL-REVENUES> 6,171
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 17,009
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,838)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,838)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,838)
<EPS-BASIC> (.00)
<EPS-DILUTED> (.00)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
CAUTIONARY STATEMENT
Reality Interactive, Inc. (the "Company"), or persons acting on behalf
of the Company, or outside reviewers retained by the Company making statements
on behalf of the Company, or underwriters, from time to time make, in writing or
orally, "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. When used in conjunction with an identified
forward-looking statement, this Cautionary Statement is for the purpose of
qualifying for the "safe harbor" provisions of such sections and is intended to
be a readily available written document that contains factors which could cause
results to differ materially from such forward-looking statements. These factors
are in addition to any other cautionary statements, written or oral, which may
be made or referred to in connection with any such forward-looking statement.
The following matter, among others, may have a material adverse effect
on the business, financial condition, liquidity, results of operations or
prospects, financial or otherwise, of the Company. Reference to this Cautionary
Statement in the context of a forward-looking statement or statements shall be
deemed to be a statement that may cause actual results to differ materially from
those in such forward-looking statement or statements:
DISCONTINUATION OF CURRENT OPERATIONS. The Company ceased its business
operations effective April 30, 1999. Management of the Company believes this
action was necessary in light of the Company's current liquidity needs and lack
of short-term revenue opportunities. The Company is currently exploring
potential uses for the Company in its current form as an inoperative public
company. In the meantime, the Company intends to comply with all SEC filing
requirements in order to maintain the Company's good standing under the
Securities Exchange Act of 1934, as amended. In the event the Company is unable
to find a suitable acquisition or merger candidate or other suitable use for the
Company in the near future, the Company will be liquidated and its remaining
assets will be distributed to its creditors in satisfaction of its then-current
obligations and, if any assets remain thereafter, to its shareholders. There can
be no assurance that any such candidate or other suitable use for the Company or
its assets will be found.
