U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
Commission file number 0-28645
CACTUS MULTIMEDIA I, INC.
-------------------------
(Name of Small Business Issuer in its Charter)
Delaware 65-0907796
-------- -----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
235 Lincoln Road, Suite 204, Miami Beach, Florida, 33139
--------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(305) 672-2700
--------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered
-------------------------------------------------------------
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $.0001
------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Exchange Act 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 [ ] No [X ]
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues (net loss) for its most recent fiscal year. $(22,267)
State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. None.
<PAGE>
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: March 25, 2000: 10,000,000 shares of
Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
- - None -
Transitional Small Business Disclosure Format (Check One)
Yes [ ] No [X]
<PAGE>
Table of Contents
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and
Related Stockholder Matters
Item 6. Management's Discussion and Analysis
Item 7. Financial Statements
Item 8. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and
Control Persons; Compliance With Section 16(a)
of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial
Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits, Lists and Reports on Form 8-K
1
<PAGE>
PART I
Item 1. Description of Business
Summary
Our company, Cactus Multimedia I, Inc., is Delaware corporation. We are
a development stage company that was incorporated on March 29, 1999 for the
purpose of engaging in the business of Internet entertainment services and
telecommunications. Since our inception, we have established and created our own
web site, grown from three to more than 27 web address links and acquired
banners from America Online.com and others. Our Internet website is
"www.cactusmultimedia.com." We are currently negotiating with telephone
switching networks, local exchange carriers (LECs) and information providers to
form strategic alliances within the Internet and telecommunications industries.
Strategy
We intend to become active in Internet entertainment services through
the registration of several Internet broadcast channels through registration of
Internet domains with InterNIC, an organization responsible for registration of
Internet domains. Our short term projections are that Internet services will
only account for a small percentage of our revenues. However, as the Internet
becomes integrated with the standard home television and phone systems, we
anticipate that a greater proportion of our revenues may be derived from this
portion of the business.
We also intend to engage in the development of proprietary software and
services designed to support and facilitate our Internet services. The
development in-house of such services as web design, programming and hosting,
will allow for cost savings and a competitive edge. We intend to focus our
development plans on areas integral to our service such as credit card
processing, live video conferencing and on-demand video via the Internet.
Development of more efficient and secure credit card processing through web
interface user management, user fraud control, the ability to support multiple
payments methods, fast database lookup and the ability to generate accurate
financial and usage reports will enable us to streamline billing and provide a
more secure environment for our customers. The development of enhanced live
video conferencing and on-demand video through such methods as streaming
technology and jpg push technology should allow us to provide our customers with
superior video quality and greater access to the attractions featured on our web
sites. The development of these services may also create the potential for a
future profit center for us through sales of these services to third parties.
We intend to generate a substantial amount of our business through
aggressive acquisitions. Once we become established, we anticipate a significant
amount of repeat business. We intend to advertise worldwide utilizing Internet
traffic, banners, and click through programs. Advertising is paid for on a
monthly basis, on a per click or hit basis,
2
<PAGE>
and can be traded for with other click through programmers. We anticipate that
advertising will account for a substantial portion of our gross revenues.
Telephone entertainment services are estimated to be a one billion
dollar industry growing at 10% per year. Internet entertainment services,
including live one-on-one interaction are currently estimated to be a three
billion dollar industry growing at 100% per year. This growth is expected to
further increase with the anticipated availability of Internet access on
standard home televisions, and emerging world Internet markets. We intend to
achieve our growth strategy through aggressive acquisitions of telephone and
Internet opportunities.
We have identified three elements as integral to the success of our
telephone entertainment services:
1. The telephone switching network which permits handling of the
large volume of calls, including forwarding, billing, and
collection.
2. Agreements with LECs, which allow a company to contract for
billing services directly through LECs. Such charges appear
directly on the over 200 million telephone bills that local
phone companies send out monthly.
3. The ability to act as an information provider. This is the
function of an advertising agency for an industry, including
information creation, placement and tracking of advertising
for providing services.
There are numerous companies which are active in at least one of the
three areas, but they either sell their service capability or information to
third parties, or they purchase the additional services from another provider.
We will attempt to become a low-cost provider in the telephone entertainment
industry through vertical integration and carefully controlled expenses.
Anticipated Expenditures
Our principal expense categories are research and development; and
indirect costs, including general and administrative expenses.
Currently, the heart of our business is research and development. We
estimate that R & D expenses will amount to 41% to 42% of our expenses. Our
indirect expenses, including general and administrative expenses should run
between 13% and 19%.
Since a substantial portion of our business is anticipated to be
conducted over the telephone, the various telephone charges will make up a major
expense. There are both direct costs of telephone line usage, which are based on
actual time used, and additional charges for service, contract, accounting, and
billing expenses. The actual usage, which is a variable expense related directly
to time and therefore to revenue, is anticipated to be
3
<PAGE>
approximately 60% of the total telephone expense. The other charges will be
primarily service related and are not significantly affected by usage. We
anticipate that telephone expenses related directly to sales will be between 13%
and 18%.
Competition
Markets for the services we provide are characterized by intense
competition and rapid change. The areas of telecommunications and Internet
services are extremely competitive. Competition will continue to increase in the
future as more companies enter the field of telephone and Internet services. Our
competitors may be able to offer customers more competitive pricing or to adapt
more quickly to new technologies and evolving customer requirements.
Employees
As of the date of this filing, we employed one employee. We utilize the
services of consultants and other outside sources in the areas of Internet,
telecommunications, corporate and financial services. We plan to significantly
expand our operations and, in connection with these operations will require
other consultants and outside services.
Item 2. Description of Our Property
We have entered into a one year lease with 305-672-9200 Management,
Inc. for its executive offices. These executive offices are located at 235
Lincoln Road, Suite 204, Miami Beach, Florida 33139. This lease is at a rate of
$120.00 per year, payable annually, and is automatically renewable for an
additional one year term. R S Schmitt, our sole director and officer, serves as
president of 305-672-9200 Management.
Item 3. Legal Proceedings
We are not a party to any legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
We have not submitted any matters to a vote of our security holders.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
There is no public trading market for our securities.
We have approximately 26 holders of record of our common stock.
4
<PAGE>
We have not declared any dividends on our common stock since our
inception. We do not anticipate declaring any dividends in the foreseeable
future. If we decide to pay dividends, our ability to pay dividends would be
restricted by our financial ability to pay dividends and Delaware law.
On March 29, 1999 we issued 9,000,000 shares of our common stock to R S
Schmitt, our founder. These shares were valued at a nominal amount. We issued
these shares relying upon the exemption from registration requirements of the
Securities Act provided by Section 4(2) of the Securities Act.
Between April 1, 1999 and April 4, 1999, we completed a private
offering of an aggregate of 1,000,000 shares of our common stock to 25
investors, all of whom were accredited, pursuant to the exemption from
registration provided by Rule 504 of Regulation D under the Securities Act at an
offering price of $.025 per share. Solicitations were made by R S Schmitt, our
director and officer. These investors received a disclosure document and
financial information concerning our company before they were sold securities.
Of the 10,000,000 shares of our common stock outstanding as of December
31, 1999, 9,000,000 shares of our common stock are restricted securities as the
term is defined under the Securities Act and must be held indefinitely unless
subsequently registered under the Securities Act of 1933 or an exemption becomes
available. An exemption which may become available in the future is Rule 144
adopted under the Securities Act. The remaining 1,000,000 outstanding shares of
our common stock were issued in accordance with and pursuant to Rule 504 under
Regulation D of the Securities Act and are not subject to restrictions on resale
under federal law.
Item 6. Management's Discussion and Analysis
General
Management's discussion and analysis contains various forward looking
statements within the meaning of the Securities and Exchange Act of 1934. These
statements consist of any statement other than a recitation of historical fact
and can be identified by the use of forward looking terminology such as "may,"
"expect," "anticipate," "estimates" or "continue" or use of negative or other
variations of comparable terminology. We caution that these statements are
further qualified by important factors that could cause actual results to differ
materially from those contained in our forward looking statements, that these
forward looking statements are necessarily speculative, and there are certain
risks and uncertainties that could cause actual events or results to differ
materially from those referred to in our forward looking statements.
We also note that comparisons of our results of operations are
impossible since we were incorporated during 1999.
Plan of Operations
5
<PAGE>
Our company is in its development stage. We have recognized limited
revenues from inception through December 31, 1999. We believe we will continue
to operate at a loss for the next 12 months. We expect to have limited sales, if
any, as we continue to develop our Internet and telecommunication business.
Liquidity and Capital Resources
Since our inception we have experienced negative cash flows and have
met our cash requirements by issuing, through a private placement, our common
stock. We generated additional funds through borrowings from a related party. We
anticipate that funds received from these sources and cash generated from our
operations should be sufficient to satisfy our contemplated cash requirements
for the next 12 months. After such time, we anticipate that we will need to
raise additional funds through private or public offerings or additional
borrowings.
We do not anticipate any significant purchase of equipment. The number
and level of our employees and consultants at year end December 31, 1999 is
adequate to maintain our business.
Sales
We earned revenues of $3,690 and have a receivable of $1,890 related to
transactions with various entities related by virtue of common ownership. In
generating these revenues, we also incurred expenses of $1,800 relating to
website trafficking fees to other website companies.
General and Administrative Expenses
We incurred expenses for management fees, consulting and other costs of
operations throughout the year. These expenses totaled approximately $22,970.
Our expenses will increase as our business develops.
Results of Operations
As stated previously, from our inception to December 31, 1999 we were
primarily involved in our organization and development of our business.
Consequently, we suffered operating and cash flow losses. Our net loss for the
year end December 31, 1999, was $22,267. We expect similar losses for the next
12 months.
Item 7. Financial Statements
The financial information required by Item 7 is included on page F-1
through F-9.
6
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
We have not changed accountants since our formation and there are no
disagreements with the findings of our accountants.
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
The following table sets forth certain information concerning each of
the our directors and executive officers:
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
R S Schmitt 35 Director, President, Secretary and
Treasurer
</TABLE>
R S Schmitt - Mr. Schmitt has been our director since our formation in
March 1999, and was elected to be our president, secretary, and treasurer in mid
1999. Mr Schmitt has extensive experience in the Internet and communications
industry. Mr. Schmitt is also a director of the following companies: Computer
Consultants & Associates, involved in the development and management of numerous
web sites; 305-672-9200 Management, a business management and consulting firm;
Mel Schmitt Realty, which handles commercial and residential sales; and Private
Client Services, a consulting company and a mortgage brokerage business, which
handles both commercial and residential financing. Mr. Schmitt was also the
managing partner of the web site Miami-Exotics. Mr. Schmitt holds a bachelor
degree in speech communication and business administration.
Our certificate of incorporation limits, to the maximum extent
permitted by Delaware general corporation law, the personal liability of
directors and officers for monetary damages for breach of their fiduciary duties
as directors and officers (other than liabilities arising from acts or omissions
that involve intentional misconduct, fraud or knowing violations of law or the
payment of distributions in violation of Delaware general corporation law). Our
certificate of incorporation provides further that we may indemnify, to the
fullest extent permitted by Delaware general corporation law, any person made a
party to an action or proceeding by reason of the fact that such person was our
director, officer, employee or agent. Subject to our certificate of
incorporation, our by-laws provide that we may indemnify directors and officers
for all costs reasonably incurred in connection with any action, suit or
proceeding in which such director or officer is finally adjudged to have been
derelict in the performance of his duties as such director or officer.
Item 10. Executive Compensation
7
<PAGE>
We have agreed to pay R S Schmitt $12,000 per year. We have entered
into a written employment agreement with Mr. Schmitt which commenced May 1,
1999. His salary is payable by utilizing a demand promissory note.
Future non-employee directors may receive reimbursement for
out-of-pocket expenses incurred while attending board meetings and it is
intended that they will receive certain non-qualified stock option grants in the
future. R S Schmitt, currently our sole director, officer and employee, may also
receive extra compensation for his service on our board of directors in the form
of non-qualified stock options. To date, we have not approved any options.
The following table sets forth all compensation awarded or to be paid
during the period ending December 31, 1999 to our executive officers:
<TABLE>
<CAPTION>
Name and Position Salary Other Compensation
- ----------------- ------ ------------------
<S> <C> <C>
R S Schmitt, President $8,000 None
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table includes certain information as of December 31,
1999 regarding the beneficial ownership of our common stock by:
(1) each stockholder known by us to be the beneficial owner of more
than 5% of our common stock,
(2) by each of our directors and executive officers, and
(3) by all of our executive officers and directors as a group. Each of
the persons named in the table has sole voting and investment power with respect
to the common stock beneficially owned.
<TABLE>
<CAPTION>
Number of Percentage of
Name and Address Shares Owned Shares owned
- ---------------- ------------ ------------
<S> <C> <C>
R S Schmitt 9,000,000 90%
235 Lincoln Road
Suite 204
Miami Beach, Florida 33139
All directors & officers 9,000,000 90%
as a group (1 person)
Item 12. Certain Relationships and Related Transactions
</TABLE>
8
<PAGE>
We have entered into a lease agreement with 305-672-9200 Management,
Inc. for its executive offices. The annual lease amount is $120.00. R S Schmitt,
our sole director and officer serves as president of 305-672-9200 Management,
Inc.
An affiliated company, related by virtue of common ownership, advanced
us certain expenses aggregating approximately $10,000, for legal expenses. The
affiliated company also agreed to fund existing liabilities of approximately
$8,800.
The majority of our revenues, expenses and a portion of our receivables
are related to transactions with various entities which are majority controlled
and owned by R S Schmitt.
Item 13. Exhibits, Lists and Reports on Form 8-K
Exhibit Index:
Articles of Incorporation*
By-laws*
Specimen Common Stock Certificate *
Subscription Agreement*
*incorporated by reference
We have not filed any reports on Form 8-K.
9
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Cactus Multimedia I, Inc.
Date: March 30, 2000 /s/ R S Schmitt
---------------
R S Schmitt, President and Director
10
<PAGE>
- --------------------------------------------------------------------------------
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)FINANCIAL STATEMENTSFOR THE PERIOD FROM INCEPTION
(MARCH 29, 1999) THROUGH
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
C O N T E N T S
Page
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS
Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Financial Statements F-6 - 8
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Stockholders
Cactus Multimedia I, Inc.
Miami, Florida
We have audited the accompanying balance sheet of Cactus Multimedia I, Inc. (a
development stage company) as of December 31, 1999, and the related statements
of operations, stockholders' equity and cash flows for the period from inception
(March 29, 1999) through December 31, 1999. 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 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 Cactus Multimedia I, Inc. as of
December 31, 1999, and the results of its operations, and its cash flows for the
period from inception (March 29, 1999) through December 31, 1999, 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 discussed in Note 4 to the
financial statements, the Company has minimal working capital as of December 31,
1999. This raises substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of
assets or the amounts and classification of liabilities that might result from
the outcome of the foregoing uncertainties.
KAUFMAN, ROSSIN & CO.
Miami, Florida
March 3, 2000 (except for the last paragraph, under organization and business
activities in Note 1, as to which the date is March 6, 2000)
F-1
<PAGE>
<TABLE>
<CAPTION>
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
====================================================================================================================================
DECEMBER 31, 1999
====================================================================================================================================
ASSETS
====================================================================================================================================
<S> <C>
CASH $ 18,472
ACCOUNTS RECEIVABLE FROM RELATED PARTIES (NOTE 2) 1,890
OTHER CURRENT ASSETS 191
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 20,553
====================================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
====================================================================================================================================
ACCRUED LIABILITIES, $10,000 TO RELATED PARTIES (NOTE 2) $ 18,820
STOCKHOLDERS' EQUITY 1,733
- ------------------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 20,553
====================================================================================================================================
</TABLE>
See accompanying notes.
F-2
<PAGE>
<TABLE>
<CAPTION>
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
====================================================================================================================================
PERIOD FROM INCEPTION (MARCH 29, 1999) THROUGH DECEMBER 31, 1999
====================================================================================================================================
====================================================================================================================================
<S> <C>
REVENUES (NOTE 2) $ 3,690
- ------------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Interest 800
Internet services 2,007
Management fee 8,000
Office 70
Professional fees 15,000
Rent 80
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 25,957
- ------------------------------------------------------------------------------------------------------------------------------------
NET LOSS $ 22,267
====================================================================================================================================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 10,000,000
====================================================================================================================================
NET LOSS PER SHARE $ -
====================================================================================================================================
</TABLE>
See accompanying notes.
F-3
<PAGE>
<TABLE>
<CAPTION>
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF STOCKHOLDERS' EQUITY
PERIOD FROM INCEPTION (MARCH 29, 1999) TO DECEMBER 31, 1999
============================================================================================================================
Common stock, $.0001 par value;
shares authorized, 100,000,000;
issued and outstanding, 10,000,000 Additional Note
------------------------------------ Paid-In Receivable -
Transaction Date Shares Par Value Capital Stockholder
============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Issuance of founder's shares 3/31/99 9,000,000 $ 900 ( $ 900) $ -
Sales of stock for cash ($.025 per share) 4/4/99 960,000 96 23,904 -
Issuance of stock for note receivable 4/4/99 40,000 4 996 ( 1,000)
Net loss from inception (March 29, 1999) to
December 31, 1999 - - - -
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL 10,000,000 $ 1,000 $ 24,000 ( $ 1,000)
============================================================================================================================
(RESTUBBED TABLE)
====================================================================================================
Deficit
Accumulated
During the
Transaction Development Stage Total
====================================================================================================
Issuance of founder's shares $ - $ -
Sales of stock for cash ($.025 per share) - 24,000
Issuance of stock for note receivable - -
Net loss from inception (March 29, 1999) to
December 31, 1999 ( 22,267) ( 22,267)
- ----------------------------------------------------------------------------------------------------
TOTAL ( $ 22,267) $ 1,733
====================================================================================================
</TABLE>
See accompanying notes.
F-4
<PAGE>
<TABLE>
<CAPTION>
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
PERIOD FROM INCEPTION (MARCH 29, 1999) THROUGH DECEMBER 31, 1999
====================================================================================================================================
====================================================================================================================================
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ( $ 22,267)
Adjustments to reconcile net loss to net cash used in operating activities:
Changes in operating assets and liabilities:
Accounts receivable ( 1,890)
Other current assets ( 191)
Accrued liabilities 18,820
- ------------------------------------------------------------------------------------------------------------------------------------
Total adjustments 16,739
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities ( 5,528)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and capital contributions 24,000
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN CASH, representing cash balance at December 31, 1999 $ 18,472
====================================================================================================================================
Supplemental Disclosures:
- ------------------------------------------------------------------------------------------------------------------------------------
Interest paid $ -
====================================================================================================================================
Income taxes paid $ -
====================================================================================================================================
Supplemental Disclosures of Non-Cash Financing Activity:
- ------------------------------------------------------------------------------------------------------------------------------------
Common stock issued in exchange for note receivable $ 1,000
====================================================================================================================================
</TABLE>
See accompanying notes.
F-5
<PAGE>
CACTUS MULTIMEDIA I, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Organization and Business ActivityCactus Multimedia I, Inc.
(the Company) was incorporated in March 1999, under the laws
of the State of Delaware. The Company's business activities to
date have primarily consisted of the formation of a business
plan for internet and telephone entertainment services.
The Company intends to become an operating company active in
internet entertainment services through the registration of
internet domains with InterNIC and may also engage in the
development of proprietary software and services designed to
support and facilitate its internet services. In addition, the
Company intends to be available as a public shell to be
acquired or to merge with another entity.
The Company is considered to be in the development stage and
the accompanying financial statements represent those of a
development stage company.
The Company filed a registration statement on Form 10-SB with
U.S. Securities and Exchange Commission (SEC) to register
certain shares of its common stock. Under a letter dated March
6, 2000, the Company was notified by the SEC that no further
review of their registration has been or will be made, and
that the Company will be subject to the reporting requirements
of section 13 and 14 of the Securities and Exchange Act of
1934.
Use of Estimates
The preparation of these 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 reported period. Actual results could differ from
those estimates.
Fair Value of Financial Instruments
The carrying values of cash, cash equivalents and accrued
liabilities approximate their fair values due to the short
maturity of these instruments.
Preferred Stock
The Company has the authority to issue 10,000,000 shares of
preferred stock, par value $0.0001 per share, which may be
divided into series and with the preferences, limitations and
relative rights determined by the Board of Directors. At
December 31, 1999 no preferred stock shares were issued and
outstanding.
F-6
<PAGE>
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
- --------------------------------------------------------------------------------
Income Taxes
The Company accounts for income taxes according to Statement
of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes". Under the liability method specified by
SFAS No. 109, deferred income taxes are recognized for the
future tax consequences of temporary differences between the
financial statement carrying amounts and tax bases of assets
and liabilities.
Net Loss Per Share
The Company applies Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" (FAS 128). Net loss
per share excludes dilution and is computed by dividing net
income by the weighted average number of common shares
outstanding during the reported periods.
Impact of the "Year 2000" Computer Issue
Although the Company has not identified any computer system or
program problems, there is still a possibility that at some
time during the Year 2000 their computer systems and programs,
as well as equipment that uses embedded computer chips, may be
unable to distinguish between the years 1900 and 2000. This
may create system errors and failures resulting in the
disruption of normal business operations. Although it is
unlikely, there may be some third parties, such as
governmental agencies, utilities, telecommunication companies,
vendors and customers that at times may not be able to
continue business with the Company due to their own Year 2000
problems.
- --------------------------------------------------------------------------------
NOTE 2. RELATED PARTY TRANSACTIONS
- --------------------------------------------------------------------------------
The Company leases its office facility on an annual basis from
a company related by virtue of common ownership. Total rent
expense amounted to $80 for the period from inception (March
29, 1999) through December 31, 1999.
During the period from inception (March 29, 1999) through
December 31, 1999, the Company contracted an affiliate,
related by virtue of common ownership, for management and
consulting services amounting to $8,000.
The Company earned revenues of $3,690 and has a receivable of
$1,890 related to transactions with various entities related
by virtue of common ownership. Also, the Company incurred
expenses of $1,800 relating to website trafficking fees to
other website companies, related by virtue of common
ownership.
An affiliate, related by virtue of common ownership, paid
certain expenses on behalf of the Company aggregating $10,000,
including consulting, recruiting, legal and other
administrative expenses. The Company owes the affiliate
$10,000 and this obligation is included in accrued
liabilities.
F-7
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NOTE 3. INCOME TAXES
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At December 31, 1999 the Company had a deferred tax asset of
approximately $3,000, resulting from net operating losses of
approximately $22,000. The deferred tax asset is offset
entirely by a valuation allowance. The net operating loss will
expire in 2019.
Deferred tax assets are reduced by a valuation allowance if,
in the opinion of management, it is more likely than not that
some portion or all of the deferred tax assets will not be
realized. Management's valuation procedures consider projected
utilization of deferred tax assets prospectively over the next
several years, and continually evaluate new circumstances
surrounding the future realization of such assets.
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NOTE 4. GOING CONCERN
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As discussed in Note 1, the Company has been in the
development stage since its inception on March 29, 1999. At
December 31, 1999 the Company has minimal working capital
available to fund operations and may not be able to commence
and/or sustain operating activity. The Company believes
however it has sufficient funds to commence operations and it
intends to fund future operations from operating cash flows
and/or from a merger with another operating entity.
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