SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 6, 2000
Real Estate Opportunities, Inc.
------------------
(Exact name of registrant as specified in its charter)
Colorado
--------------- ----------------------- ----------------
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
3225 East 2nd Avenue, Denver CO 80206
--------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 393-1600
This Form 8-K dated June 14, 2000 relates to the acquisition of
FJK Opportunities, Inc., by Real Estate Opportunities, Inc. which was
completed effective April 6, 2000. The sole purpose of this amendment is
to file the financial statements of FJK Opportunities, Inc. from
January 1, 2000 (date of incorporation) through March 31, 2000 and the
pro forma financial statements of Real Estate Opportunities, Inc. for the
three months ended April 30, 2000 and the year ended January 31, 2000
which give effect to the acquisition of FJK Opportunities, Inc.
<PAGE>
Item 7. Financial Statements and Exhibits.
(a) Financial information of business acquired.
The audited financial statements of FJK Opportunities, Inc.
are filed herewith and appear beginning at page F-2.
(b) Pro forma financial information.
The pro forma financials statements of Real Estate
Opportunities, Inc. for the three months ended April 30, 2000 and the
year ended January 31, 2000 which give effect to the acquisition of FJK
Opportunities, Inc. are filed herewith and appear beginning at page F-17.
(c) Exhibits.
The following exhibits are furnished as part of this report:
Exhibit 10.1 Stock Purchase Agreement by and between Real
Estate Opportunities, Inc. and the Shareholders of FJK Opportunities, Inc.
dated April 6, 2000*
* Previously filed with the Report on Form 8-K dated April 14, 2000.
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.
Date: June 28, 2000 Real Estate Opportunities, Inc.
By: /s/ F. Jeffrey Krupka
(President)
<PAGE>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Financial Statements
March 31, 2000
(With Independent Auditors Report Thereon)
<PAGE>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Index to Financial Statements
Page
Independent auditors' report ................................F-2
Balance sheet, March 31, 2000 ................................F-3
Statement of operations, January 1, 2000 (date of inception) through
March 31, 2000...........................................F-4
Statement of changes in shareholders' deficit, January 1, 2000
(date of inception) through March 31, 2000...............F-5
Statement of cash flows, January 1, 2000 (date of inception) through
March 31, 2000...........................................F-6
Notes to financial statements.................................F-7
F-1
<PAGE>
Independent Auditors' Report
The Board of Directors and Shareholders
FJK Opportunities, Inc.:
We have audited the accompanying balance sheet of FJK Opportunities, Inc
(the "Company") as of March 31, 2000, and the related statements of
operations, shareholders' deficit, and cash flows for the period from
January 1, 2000 (date of inception) through March 31, 2000. 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 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
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 FJK Opportunities, Inc
as of March 31, 2000, and the results of its operations and its cash flows
for the period from January 1, 2000 (date of inception) through March 31,
2000 in conformity with generally accepted accounting principles.
As discussed in Note 4 to the financial statements, the Company bought
investments from certain affiliates during the period under audit. As of
March 31, 2000, the amount of the investments acquired from affiliates
represents a substantial portion of the Company's total assets. Such
purchases are not at terms equivalent to arm's-length transactions under
generally accepted accounting principles. Accordingly, the operating
results presented may not be indicative of the operating results had the
Company not entered into these related party transactions.
Cordovano and Harvey, P.C.
Denver, Colorado
May 18, 2000
F-2
<PAGE>
<TABLE>
<CAPTION>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Balance Sheet
March 31, 2000
<S> <C>
Assets
Current assets:
Cash................................................ $28,936
Note receivable, in default (Note 4)................. 65,394
Prepaid expenses.......................................9,000
Total current assets.................................103,330
Intangible assets, net (Note 4) ..........................595,743
$699,073
Liabilities and Shareholders' Deficit
Current liabilities:
Short-term debt (Note 2) ........................... $46,592
Current maturities of long-term ......................15,779
Current maturities of long-term debt, related parties .5,721
Accrued interest payable ..............................9,048
Total current liabilities.............................77,139
Long-term debt, net of current maturities (Notes 2 &4):
Notes payable, other..................................91,788
Notes payable, related parties.......................554,221
Total long-term debt, net of current maturities .... 646,010
Total liabilities....................................723,149
Commitment (Note 6)......................................... -
F-3
<PAGE>
Shareholders' deficit:
Common stock, $0.001 par value, 50,000,000 shares
authorized, 5,232,977 shares issued and outstanding.. 5,233
Additional paid-in capital ............................-
Stock options to purchase 200,000 shares
of common stock outstanding ..........................3,400
Retained deficit ...................................(32,709)
Total shareholders' deficit .......................(24,076)
$699,073
</TABLE>
See accompanying notes to financial statements
F-4
<PAGE>
<TABLE>
<CAPTION>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Statement of Operations
For the Year Ended March 31, 2000
<S> <C>
Rental income................................................$132
Operating expenses:
General and administrative............................ 4,197
General and administrative-stock based compensation
(Note 3).............................................. 3,600
General and administrative-related parties (Note 4)....1,500
Total operating expenses...............................9,297
Loss before interest expense and income taxes.. (9,165)
Interest
expense ...................................................10,083
Loss before income taxes ..................... (19,248)
Provision for income taxes (benefit) (Note 5)........ -
Net loss ....................................$(19,248)
Net loss per share:
Basic and diluted ............................. *
Number of shares used for computing net loss per share 3,441,430
* Less than $.01
</TABLE>
See accompanying notes to financial statements
F-5
<PAGE>
<TABLE>
<CAPTION>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Statement of Changes in Shareholders' Deficit
January 1, 2000 (inception) through March 31, 2000
<S> <C> <C> <C> <C> <C> <C>
Additional Common
Common Stock Paid In Stock Retained
Shares Amount Capital Options Loss Total
Sale of common stock
net ofoffering costs
of$-0- 2,661,000 $2,661 $86,349 $ - $ - $ 89,010
Sale of common stock
net ofoffering costs
of $6000 780,430 780 110,274 - - 111,054
Shares of common stock
issued in exchange for
property (Note 3) 1,686,66 1,687 251,313 - - 253,000
Excess paid over
historical cost
Int for rights acquired
from related parties
(Note 4) - - (460,763) - (13,461) (474,224)
Shares of common stock
issuedin exchange for
services (Note 3) 20,000 20 180 - - 200
Issuance of options
to purchase 200,000
shares of common stock
(Note 3) - - - 3,400 - 3,400
Shares of common stock
issued in exchange
for debt (Note 3) 84,882 85 12,647 - - 12,732
Net loss for the
period - - - - (19,248) (19,248)
5,232,977 $5,233 $ - $3,400 $(32,709)(24,076)
See accompanying notes to financial statements
</TABLE>
F-6
<PAGE>
<TABLE>
<CAPTION>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Statement of Cash Flows
For the Year Ended March 31, 2000
<S> <C>
Operating Activities:
Net loss.......................................... $(19,248)
Adjustments to reconcile net loss to net cash to net cash used in
operating activities:
Common stock issued for interest (Note 3)............25
Common stock issued for services (Note 3).......... 200
Issuance of performance stock options (Note 3) ...3,400
Changes in current assets and current liabilities, excluding
notes payable and receivable:
Prepaid expenses........................... (9,000)
Accrued interest payable ....................9,048
Net cash used by operating activities (15,575)
Investing Activities:
Cash paid for rights to future revenues from the sale of common stock,
acquired from related party (Note 4)............... (26,480)
Cash paid for rights to future revenues from a certain note
receivable, acquired from related party (Note 4)... (14,430)
Cash paid for rights to future revenues from real estate development,
acquired from related party (Note 4) ............... (92,154)
Net cash used by investing activities(133,064)
Financing Activities:
Principal payments to related party on notes
payable (Note 4) .................................(22,489)
Proceeds from the sale of common stock, net of
offering costs .................................... 200,064
Net cash provided by investing
activities......................... 177,575
Net change in cash ........................................28,936
Cash at beginning of period ........................ -
Cash at end period ...................$28,936
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest................................... $ -
Income taxes............................... $ -
Noncash financing Activities:
Common stock issued for property...............$253,000
Common stock issued for debt....................$12,732
See accompanying notes to financial statements
F-7
<PAGE>
</TABLE>
FJK OPPORTUNITIES, INC.
(Formerly Real Estate Opportunities, Inc.)
Notes to Financial Statements
1) Summary of Significant Accounting Policies
(a) Organization and Basis of Presentation
FJK Opportunities, Inc. (the "Company") was incorporated on January 1, 2000
as FJK Millennium Fund V, Inc. The Company has raised capital and engaged
in certain real estate activity since inception. On April 6, 2000, the
Company merged with an affiliate, Real Estate Opportunities, Inc. (formerly
Monument Galleries, Inc.), a public shell company. The merger will be
accounted for as a recapitalization of FJK Opportunities, Inc. Inherent in
the Company's business are various risks and uncertainties, including its
limited operating history, historical operating losses, and the success of
its recent merger. The Company's future success will be dependent upon its
ability to create and
provide effective and competitive services on a timely and cost-effective
basis. The Company's year-end is December 31.
(b) Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(c) Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities
of three months or less when acquired to be cash equivalents.
(d) Intangible Assets
During the period from January 1,2000 (inception) through March 31, 2000,
the Company acquired certain exclusive rights to future earnings, more
fully described in Note 4. Costs of acquiring the exclusive rights are
reflected as intangibles in the accompanying financial statements. The
costs of such rights are recovered at the time the rights are sold or
otherwise disposed of. Related income is recognized when earned.
(e) Impairment of Long-Lived Assets
The Company evaluates the carrying value of its long-lived assets under the
provisions of Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets
F-8
<PAGE>
and for Long-Lived Assets to Be Disposed Of (Statement No. 121). Statement
No. 121 requires impairment losses to be recorded on long-lived assets used
in operations, when indicators of impairment are present and the
undiscounted future cash flows estimated to be generated by those assets
are less than the assets' carrying amount. If such assets are impaired,
the impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. Assets
to be disposed of are reported at the lower of the carrying value or fair
value, less costs to sell.
(f) Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (SFAS
109). SFAS 109 requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included
in the financial statements or tax returns. Under this method, deferred
tax liabilities and assets are determined based on the difference between
the financial statement and tax bases of assets and liabilities using
enacted tax rates in effect for the year in which the differences are
expected to reverse.
(g) Financial Instruments and Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consists primarily of cash and notes
receivable. As of January 31, 2000, the Company had concentrations of
credit risk in the form of a note receivable (currently in default) in the
approximate amount of $65,394, including accrued interest receivable. The
collateral supporting the financial instrument consists of real estate. If
the debtor failed completely to perform under the terms of the note and if
the collateral proved to be of no value to the Company, the loss would be
$65,394. At March 31, 2000, the fair value of the Company's financial
instruments approximate their carrying value based on their terms, the
underlying collateral and interest rates.
(h) Stock based Compensation
The Company accounts for stock-based compensation arrangements in
accordance with Statement of financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation," which permits entities to
recognize as expense over the vesting period the fair value of all
stock-based awards on the date of grant. Alternatively, SFAS No. 123
allows entities to continue to apply the provisions of Accounting Principle
Board ("APB") Opinion No. 25 and provide pro forma net earnings (loss)
disclosures for employee stock option grants as if the fair-value-based
method defined in SFAS No. 123 had been applied. The Company has elected
to continue to apply the provisions of APB Opinion No. 25 and provide the
pro forma disclosure provisions of SFAS No. 123.
F-9
<PAGE>
(i) Transfer Pricing of Transactions Among Related Entities
The Company accounts for certain related party transactions in accordance
SEC policies. The SEC staff has stated that assets should be valued at
their historical cost in a transfer of assets between companies under
common control.
(j) Loss per share
Basic earnings (loss) per share are generally calculated by dividing net
income by the weighted average number of shares outstanding. Diluted
earnings per share reflect the potential dilution that would occur if all
grants, agreements, and contracts to issue shares were exercised or
converted. Diluted loss per share is the same as basic loss per share for
the period ended March 31, 2000, as an option to sell 200,000 shares of the
Company's common stock, outstanding at March 31, 2000, was anti-dilutive
securities.
(k) Note Receivable Impairment
The Company measures impairment based on (1) the present value of the
expected future cash flows discounted at the effective interest rate of the
Note less the recorded investment in the note or (2) the fair value of the
collateral. The Company reports the entire change in present value as bad
debt expense or as a reduction in the amount of bad-debt expense that would
have been reported. The Company does not recognize interest income on
impaired loans. Cash receipts are offset against interest and then
principal. As of March 31, 2000, the investment in the impaired loan and
the related allowance for credit losses totaled $82,000 and $16,606
respectively. Credit losses for the three months ended March 31, 2000
totaled $16,606.
(l) Recent Accounting Pronouncements
The Company adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130
requires the Company to report in its financial statements, in addition to
its net income (loss), comprehensive income (loss), which includes all
changes in equity during a period from non-owner sources including, as
applicable, foreign currency items, minimum pension liability adjustments
and unrealized gains and losses on certain investments in debt and equity
securities. There were no differences between the Company's comprehensive
loss and its net loss as reported.
In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
provides guidance for determining whether computer software is internal-use
software and on accounting for the proceeds of computer software originally
developed or obtained for internal use and then subsequently sold to the
public. It also provides guidance on capitalization of the costs incurred
for computer software developed or obtained for internal use. The Company
has determined there was no impact of adopting SOP 98-1 on January 1, 2000.
<PAGE>
In June 1997, the FASB issued SFAS No. 131, "Disclosure About Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments. It also establishes standards for related disclosures
about products and services, geographic area and major customers. SFAS No.
131 is effective for fiscal years beginning after December 15, 1997. The
Company has determined that it does not have any separately reportable
business segments.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 establishes accounting
and reporting standards for derivative instruments, including derivative
instruments embedded in other contracts, and for hedging activities. SFAS
No. 133 is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. This statement is not expected to affect the Company,
as the Company currently does not have any derivative instruments or
hedging activities.
In June 1999, the FASB issued SFAS No. 137, which amended the
implementation date for SFAS No. 133 to be effective for all fiscal
quarters of all fiscal years beginning after June 15, 2000.
(2) Debt
Short-term debt obligations
The Company is indebted to three individuals, totaling $45,100, under
agreements to pay to the investors a percentage or amount of the net
proceeds from the sale of a contractual right further described in
paragraph three of Note 4. Under the terms of the agreements, the
Company is to pay to the investors a pro-rata share of the cash flows from
the note receivable described in paragraph three of Note 4 by the 25th of
each month.
Notes payable, related parties consists of the following as of March 31,
2000:
Note payable to Asset Realization, Inc. (an affiliate),
collateralized by a first deed of trust, at 13.5 percent interest
with interest due August 1, 2000 and $46,045
due August 1, 2001...................................$40,261
Note payable to Krupka-Brophy Profit Sharing plan (an affiliate)
collateralized by a first deed of trust, at 9 percent interest,
with semi-annual payments of $39,730 and a balloon payment
of $503,410 due February 3, 2002.....................529,739
570,000
Less current maturities ..............................15,779
554,221
F-10
<PAGE>
Notes payable, other consists of the following as of March 31, 2000:
Note payable to an unrelated third-party, collateralized by a
first deed of trust, at 13.5 percent interest, with semi-
annual payments of $6,338 and a balloon payment of
$32,971 due February 3, 2002 ........................$42,510
Note payable to an unrelated third-party, collateralized by a
first deed of trust, at 13.5 percent interest, with semi-
annual payments of $5,363 and a balloon payment of
$53,520 due February 3, 2002 .........................55,000
97,510
Less current maturities ...............................5,721
$91,789
Aggregate maturities required on long-term debt at March 31, 2000 as
follows:
2001......................................................$21,500
2002.......................................................11,017
2003......................................................634,993
$667,510
(3) Capital Stock
(a) Stock based Compensation
The Company issued 20,000 shares of its $.001 par value common stock to
individuals. The Company recognized $200 in expense. The transaction was
valued based on the fair value of the stock issued. The transaction was
valued by the Board of Directors, after considering contemporaneous stock
sales and other analysis.
(b) Common Stock Issued in Exchange for Property
The Company issued 1,650,000 shares of its $.001 par value common stock to
Platinum in exchange for certain rights. The Company recorded the
transactions at historical cost and accounted for the transaction as a
transfer of assets between companies under common control. In addition, the
Company issued 36,665 shares of its $.001 par value common stock to an
unrelated third-party in exchange for 3,888 shares of American Tire
Corporation common stock. The transaction was valued based on the fair
value of the Company's stock.
F-11
<PAGE>
(b) Common Stock Issued in Exchange for debt
The Company issued 84,882 shares of its $.001 par value common stock to a
shareholder in exchange for converting a short-term obligation. The
transaction was valued at the face value of the debt.
(d) Private Offering of Common Stock
On March 15, 2000, the Company circulated a Confidential Disclosure
Memorandums relating to the private offering of a minimum of 300,000 and a
maximum of 1 million shares of its common stock for $.15 per share. The
Company closed the offering on March 15, 2000 after selling 780,430 shares
for $111,054, net of offering costs of $6,000. The securities have not
been registered pursuant to the Securities Act of 1933, as amended (the
"ACT"), nor have they been registered under the securities act of any
state. These securities were offered pursuant to an exemption from
registration requirements of the Act and exemptions from registration
provided by applicable state securities laws. The securities were offered
through the Company's officers and directors, who were not paid any
commission or compensation for offering or selling the securities.
(e) Common Stock Options
The Company granted an option to purchase 200,000 shares of its common
stock at a price of $.08 per share to its corporate attorney on March 1,
2000. The option expires on March 1, 2005. The Company has accounted
for the transaction using the Black-Scholes option-pricing model as
prescribed by SFAS No. 123 using the following weighted average
assumptions:
Risk-free interest rate.....................................5.80%
Expected dividend yield .......................................0%
Expected lives ........................................1,800 days
Expected volativility .....................................60.00%
F-12
<PAGE>
(4) Related Party Transactions and Intangible Assets
The following entities are affiliates of the Company through of common
ownership and control: Krupka and Associates, LLC; Platinum Financial Fund
LLC; Krupka-Brophy Profit Sharing Plan and Retirement Trust; and Asset
Realization, Inc.
On January 20, 2000, the Company acquired a 26 percent interest in certain
commercial real property from Platinum Financial Fund LLC ("Platinum") for
$25,674 and 50,000 shares of the Company's $.001 par value common stock.
Platinum holds a one-third interest in the property. The interest entitles
Platinum to one-third of the rental income and management fees from the
property and one-third of the net proceeds from the sale of the property.
The Company recorded the transactions at Platinum's historical cost. The
difference between the transaction price ($38,672) and Platinum's
historical cost ($23,080) or $15,592 was charged to additional-paid-in
capital, in the accompanying financial statements. During the period from
January 20, 2000 through March 31, 2000, the Company received $132 and
$-0-, respectively in rent and management fees.
On March 8, 2000, the Company acquired a Promissory Note (the "Note") from
Platinum for $14,430, 100,000 shares of the Company's $.001 par value
common stock and the assumption of three debt obligations payable totaling
$59,289. The Note, which is collateralized by real property, was in
default. The Note has a face value of $82,000. The Company recorded the
Note at Platinum's historical cost and subsequently wrote the Note down to
its net realizable value at March 31, 2000. In May, 2000, the Company
received a Trustee's Certificate of Sale in the amount of $103,101. On
February 3, 2000, the Company entered into a purchase agreement to acquire
certain land held for development from the Krupka-Brophy Profit Sharing
Plan (the "Plan") for $65,000 and the assumption certain mortgage notes,
payable to the Plan and to Asset Realization, Inc. totaling $690,000 (See
Note 5). The Company recorded the transactions at the Plan's historical
cost. The difference between the transaction price ($755,000) and
Platinum's historical cost ($479,429) or $275,571 was charged to
additional-paid-in capital, in the accompanying financial statements. As
of March 31, 2000, the Company was indebted to related parties in the
amount of $570,000.
On February 3, 2000, the Company acquired the right to the proceeds from
the sale of 3,888 shares of American Tire Corporation (ATC) common stock
from Platinum for $11,480. On February 18, 2000, the Company acquired an
additional right to the proceeds from the sale of 80,000 shares of ATC
common stock from Platinum for $15,000 and the issuance of 1.5 million
shares of the Company's $.001 par value common stock. The shares of common
stock are considered "restricted securities", as that term is defined under
Rule 144 of the Securities Act of 1933, as amended. The Company recorded
the transactions at Platinum's historical cost. The difference between the
transaction price ($251,480) and Platinum's historical cost ($91,752) or
$159,728 was charged to additional-paid-in capital, in the accompanying
financial statements.
F-13
<PAGE>
During the period from January 1 through March 31, 2000, the Company
purchased consulting services related to its real estate acquisitions from
an affiliate totaling $6,000. In addition, the Company paid an affiliate
$6,000 to rent office space during the period from January 1 through March
31, 2000.
(5) Income Taxes
A reconciliation of U.S. statutory federal income tax rate to the effective
rate follows for the period from August 20, 1998 (inception) through March
31, 2000:
U.S. statutory federal rate ...............................15.00%
State income tax rate ......................................4.75%
Net operating loss for which no tax benefit is currently available -19.75%
0.00%
At March 31, 2000, the Company has a net operating loss carryforward for
federal income tax purposes of approximately $19,250, of which $19,250 is
available to offset future federal taxable income, if any, through 2014.
As a result of various stock transactions during 2000, management believes
the Company has undergone an "ownership change" as defined by Section 382
of the Internal Revenue Code. Accordingly, the utilization of a portion of
the net operating loss carryforward may be limited. Due to this
limitation, and the uncertainty regarding the ultimate utilization of the
net operating loss carryforward, no tax benefit for losses has been
provided by the Company in the accompanying financial statements, and a
valuation allowance has been recorded for the entire amount of the deferred
tax asset.
(6) Commitments
Substantially all of the Company's assets are pledged as collateral for
notes payable and debt obligations.
The Company has committed to invest an additional $50,000 to improve the
commercial real estate described in the second paragraph of Note 4.
(7) Legal Proceedings
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the
Company's financial position, results of operation or liquidity.
F-14
<PAGE>
(8) Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
Additions
Balance at Charged to
Beginning of Costs and Deductions Balance at End
Period Expenses Write-offs of Period
<S> <C> <C> <C>
For the three months
ended March 31, 2000:
Allowance for credit
losses: $ - $ - $16,606 $ -
</TABLE>
F-15
<PAGE>
REAL ESTATE OPPORTUNITIES, INC.
A Development Stage Company
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF APRIL 30, 2000
UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED APRIL 30, 2000
FOR THE YEAR ENDED DECEMBER 31, 1999
The unaudited Pro Forma Combined Balance Sheet as of April 30, 2000 and
unaudited Pro Forma Combined Statements of Operations for the three months
ended April 30, 2000 and the year ended December 31, 1999 (collectively
the Pro Forma Combined Financial Statements) give effect to the
acquisition by Real Estate Opportunities, Inc. of all of the outstanding
common stock of FJK Opportunities, Inc., a company under common control.
The transaction was accounted for as a transaction between entities
under common control. The transaction was valued at historical cost.
The Pro Forma Combined Statements of Operations were prepared
assuming that the acquisition described above was consummated as of
the beginning of each period presented. The Pro Forma Combined Balance
Sheet includes the accounting entries for the acquisition and was prepared
assuming that the transaction was consummated as of April 30, 2000.
The unaudited Pro Forma Combined Financial Statements are based upon
historical financial statements of the Registrant and FJK Opportunities,
Inc.
The pro forma adjustments and the resulting pro forma combined financial
statements have been prepared based upon available information and certain
assumptions and estimates deemed appropriate by the Registrant.
The Pro Forma Combined Balance Sheet and the Pro Forma Combined Statements
of Operations are not necessarily indicative of the results of operations
that actually would have been achieved had the acquisition been
consummated as of the dates indicated, or that may be achieved in the
future. Furthermore, the Pro Forma Combined Financial Statements do not
reflect changes that may occur as the result of post-combination activities
and other matters.
The Pro Forma Combined Financial Statements and notes thereto should be
read in conjunction with the accompanying historical financial statements
and notes thereto of FJK Opportunities, Inc. and the audited financial
statements of the Registrant in its Annual Report on Form 10-KSB for the
year ended January 31, 2000.
F-16
<PAGE>
REAL ESTATE OPPORTUNITIES, INC.
A Development Stage Company
Unaudited Pro Form Condensed, Combined Financial Information
April 30, 2000
The following unaudited pro forma condensed, combined balance sheet and pro
forma condensed, combined statement of operations give effect to the
acquisition by Real Estate Opportunities, Inc. of all of the outstanding
common stock of FJK Opportunities, Inc.
These unaudited pro forma condensed, combined statements are not
necessarily indicative of results of operations had the acquisitions
occurred at February 1, 2000, nor the results to be expected in the future.
The following footnotes should be read in understanding pro forma
adjustments to the unaudited pro forma condensed, combined statements:
A) The merger was a transaction of entities under common control, and
accordingly, was accounted for at historical cost.
B) A reconciliation of the number of shares of the Registrant's common
stock outstanding after the acquisition is as follows:
Balance at January 31, 2000 ...................................751,750
April 4, 2000, common stock dividend ..........................375,875
Shares of common stock outstanding prior to the acquisition..1,127,625
April 6, 2000, exercise of options to purchase common stock.. 200,000
April 6, 2000, shares of common stock
issued in the acquisition of FJK Opportunities........ 5,232,977
Shares of common stock outstanding after the acquisition ... 6,560,602
F-17
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED COMBINED
Balance Sheet
April 30, 2000
(unaudited)
FJK Real Estate
Opportunities, Opportunities, Pro Forma
Inc. Inc. Combined
<S> <C> <C> <C>
Assets
Current assets:
Cash $ 28,936 $ 14,066 $ 43,002
Note receivable, in
default 65,394 - 65,394
Prepaid expenses 9,000 - 9,000
Total current assets 103,330 14,066 117,396
Intangible assets, net 595,743 - 595,743
$699,073 $14,066 $713,139
Liabilities and Shareholders' Deficit
Current liabilities:
Short-term debt $ 46,592 $ - $46,592
Current maturities
of long-term debt 15,779 - 15,779
Current maturities of long-
term debt, related parties 5,721 - 5,721
Indebtedness to related
parties - - - -
Accounts payable and accrued
liabilities - 50 50
Accrued interest
payable 9,048 6,000 15,048
Total current
liabilities 77,140 6,050 83,190
Long-term debt, net of current maturities:
Notes payable, other 91,788 - 91,788
Notes payable,
related parties 554,221 - 554,221
F-18
<PAGE>
Total long-term debt, net of
current maturities 646,009 - 646,009
Total liabilities 723,149 6,050 729,199
Commitment - - -
Shareholders' deficit:
Common stock - 752 752
Additional paid-in
capital 5,233 111,439 116,672
Stock options
outstanding 3,400 - 3,400
Retained deficit (32,709) (104,175) (136,884)
Total shareholders'
deficit ( 24,076) 8,016 ( 16,060)
$699,073 $14,066 $713,139
</TABLE>
See accompanying notes
F-19
<PAGE>
<TABLE>
<CAPTION>
PRO FORMA CONDENSED COMBINED
Statement of Operations
For the Three Months Ended April 30, 2000
(unaudited)
FJK Real Estate
Opportunities, Opportunities, Pro Forma
Inc. Inc. Combined
<S> <C> <C> <C>
Net sales and gross revenues $ 132 $ - $ 132
Operating expenses:
General and administrative 4,197 8,200 12,397
General and administrative-
stock based compensation 3,600 - 3,600
General and administrative-
related parties 1,500 900 2,400
Total operating expenses 9,297 9,100 18,397
(9,165) (9,100) (18,265)
Interest expense 10,083 - 10,083
Loss before income taxes (19,248) (9,100) (28,348)
Provision for income taxes (benefit) - - -
Net loss $(19,248) (9,100) (28,348)
Net loss per share:
Basic * $(0.04) $(0.04)
Shares used for computing
net loss per share - 518,417 518,417
* Less than $.01
</TABLE>
See accompanying notes
F-20
<PAGE>
REAL ESTATE OPPORTUNITIES, INC.
A Development Stage Company
Unaudited Pro Form Condensed, Combined Financial Information
January 31, 2000
The following unaudited pro forma condensed, combined statement of
operations gives effect to the acquisition by Real Estate Opportunities,
Inc. of all of the outstanding common stock of FJK Opportunities, Inc.
This unaudited pro forma condensed, combined statement of operations is not
necessarily indicative of results of operations had the acquisitions
occurred at February 1, 1999, nor the results to be expected in the future.
The following footnote should be read in understanding pro forma
adjustments to the unaudited pro forma condensed, combined statement.
A) The Company changed from one generally accepted accounting principle to
another. See the financial statements filed with the most recent Form
10-KSB for full disclosure of the change in accounting principle.
F-21
