Exhibit 10(ii)
BOARD OF TRADE CENTER
FINANCIAL STATEMENTS
December 31, 1999 and 1998
[WITH INDEPENDENT AUDITORS' REPORT]
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BOARD OF TRADE CENTER
Table of Contents
Page
Independent Auditors' Report...................................................1
Statements of Income for the years ended December 31, 1999 and 1998............2
Notes to Financial Statements................................................3-5
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INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Cyberbotanical Inc.
Salt Lake City, Utah
We have audited the accompanying statements of income of the Board of Trade
Center for the years ended December 31, 1999 and 1998. 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 generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 results of operations of the Board of Trade Center
for the years ended December 31, 1999 and 1998 in conformity with generally
accepted accounting principles, excluding items not comparable to the proposed
future operations of the property as required by Regulation S-B item 310(e) of
the Securities and Exchange Commission.
/s/ Mantyla McReynolds
--------------------------------
Mantyla McReynolds
November 7, 2000
Salt Lake City, Utah
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BOARD OF TRADE CENTER
Statements of Income
for the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
RENTAL INCOME $ 293,910 $ 291,375
EXPENSES
Equipment rental 7,668 7,668
Insurance 3,474 4,028
Legal & accounting 2,291 1,875
Property management fees 42,000 42,000
Property taxes 11,206 11,662
Repairs & maintenance 48,946 60,031
Other real estate expenses 4,482 3,322
Utilities 85,789 91,423
Parking garage 5,200 5,540
Tenant reimbursement (5,276) (5,276)
TOTAL EXPENSES 205,780 222,273
------------------- --------------------
NET INCOME $ 88,130 $ 69,102
=================== ====================
</TABLE>
See accompanying notes to financial statements
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NOTE 1 Summary of Significant Accounting Policies
Nature of Operations
The Board of Trade Center (BOTC) is a seven story office building located at 120
South Market in Wichita Kansas. For the years 1999 and 1998 rental revenues from
entities owned or controlled by owners of BOTC accounted for 59% and 60% of the
totals. The building was purchased by Cyberbotanical, Inc.. on August 31, 2000.
Cyberbotanical, Inc. is not related to, does not control, and is not controlled
by the sellers or tenants of BOTC.
Items Not Comparable
In accordance with SEC reporting requirements the Company has excluded from
these financial statements items that are not comparable to the proposed future
operations of the property. Items that have been excluded are mortgage interest,
leasehold rental, depreciation, corporate expenses and federal and state income
taxes. The inclusion of any of these items would significantly change the stated
results of operations.
Deferred Income Taxes
In February 1992, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard (SFAS) No. 109, "Accounting For
Income Taxes," which is effective for fiscal years beginning after December 15,
1992. SFAS No. 109 requires the asset and liability method of accounting for
income taxes. The asset and liability method requires that the current or
deferred tax consequences of all events recognized in the financial statements
are measured by applying the provisions of enacted tax laws to determine the
amount of taxes payable or refundable currently or in future years. The Company
has ignored any expense, benefit or liability derived from income taxes in this
presentation. The income taxation of sellers is not comparable to the proposed
future operations of the property. Any recognition of federal and state income
taxes would significantly change the stated results of operations.
Depreciation
Depreciation of property and equipment has been excluded from these financial
statements. Depreciation of the seller's basis is not comparable to the proposed
future operations of the property. Any recognition of depreciation expense would
significantly change the stated results of operations.
Net Income Per Common Share
Net income per common share is not comparable to the proposed future operations
of the property and therefore has not been presented.
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 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 revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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NOTE 2 Related Party Transactions
Rental income from entities related to or controlled by sellers of BOTC for 1999
and 1998 was $173,212 and $176,232 respectively.
NOTE 3 Accounting for Income Taxes
The Company has elected to exclude income tax expense from this presentation, as
any inclusion would not be comparable to the proposed future operations of the
property. The recognition of income tax expense would significantly change the
stated results of operations.
NOTE 4 Property and Equipment
Property and equipment, along with the related depreciation expense has been
excluded from these financial statements. The Company paid $49,108 and $10,107
during 1999 and 1998 respectively for building improvements and tenant
alterations. No expense was recognized for these expenditures or for
depreciation of the improvements and alterations. The cost basis and
depreciation expense of property and equipment for the prior owners is not
comparable to the proposed future operations of the property. The recognition of
depreciation expense would significantly change the stated results of
operations.
NOTE 5 Debt
The Company's long-term debt and mortgage interest expense has been excluded
from these financial statements. These items are not comparable to the proposed
future operations of the property. Recognition of long-term debt and mortgage
interest expense would significantly change the stated results of operations.
NOTE 6 Description of Leasing Arrangements
The Company leases office space primarily under noncancelable operating leases
that expire at various dates in each year through 2003. The lease agreements
typically provide for a specific monthly payment plus reimbursement of certain
operating costs. Tenant alterations are paid for by the company; an amortization
of such costs over three to five years is added to the tenants monthly rent over
the three to five year period. The following is a summary of future rentals
under noncancelable operating leases:
Year ended December 31,
2000 $ 281,255
2001 260,753
2002 85,121
2003 4,300
------------------
$ 631,429
==================
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BOARD OF TRADE CENTER
Statement of Estimated Taxable Results
For the year ended December 31, 1999
(unaudited)
1999
-----------------
RENTAL INCOME $ 293,910
EXPENSES
Depreciation 13,805
Equipment Rental 7,668
Insurance 3,474
Legal & Accounting 2,291
Property Management Fees 42,000
Property Taxes 11,206
Repairs & Maintenance 48,946
Other real estate expenses 4,482
Utilities 85,789
Parking Garage 5,200
Tenant reimbursement (5,276)
-----------------
TOTAL EXPENSES 219,585
-----------------
NET TAXABLE INCOME $ 74,325
=================
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BOARD OF TRADE CENTER
Statement of Estimated Cash made Available by Operations
For the year ended December 31, 1999
(Unaudited)
1999
------------
Estimated Cash Flows from Operating Activities
Net Income $ 74,325
Adjustments to net income (loss) to reconcile net
income to cash provided (used) by operations:
Depreciation 13,805
(Increase) decrease in accounts receivable -
(Increase) decrease in other current assets -
Increase (decrease) in accounts payable -
Increase (decrease) in accrued expenses -
------------
Total Adjustments 13,805
Net Cash Provided (Used) by Operating Activies $ 88,130
============
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BOARD OF TRADE CENTER
NOTES TO ESTIMATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. Basis of Presentation
The accompanying estimated financial statements have been prepared by management
in accordance with the instructions in Item 310 (e) of the Securities Exchange
Act and, therefore, do not include all information and footnotes required by
generally accepted accounting principles, but do include items previously
removed because they were not comparable to future operations. Non-comparable
items include mortgage interest, leasehold rental, depreciation, corporate
expenses and federal and state income taxes.
2. Principle Assumptions used in preparing financial statements
Item 310 (e) requires that estimated financial statements be provided which
include items excluded for non- comparable purposes to arrive at estimated
statements of operations and cash provided from operations. The Board of Trade
building was purchased with cash and therefore, no amounts for mortgage interest
or debt servicing have been included in the estimated statements. However,
depreciation expense has been included. The calculation of depreciation expense
was performed as follows:
Capitalized cost of building $ 538,379
-divided by-
GAAP useful life 39 years
--------
Annual straight-line depreciation amount $ 13,805
Since depreciation is the only non-cash expense for the Board of Trade building,
it has been added back to arrive at the statement of estimated cash provided by
operations.
