Board of Directors
5 Starliving Online, Inc.
Seattle, WA
ACCOUNTANT'S REVIEW REPORT
We have reviewed the accompanying balance sheet of 5 Starliving Online, Inc.
(a development stage enterprise) as of August 31, 2000, and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the three months ended August 31, 2000, and August 31, 1999, and for the
period from June 8, 1998 (inception) to August 31, 2000. These financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
The financial statements for the period ended May 31, 2000 were audited by
us and we expressed an unqualified opinion on them in our report dated
July 10, 2000, but we have not performed any auditing procedures since that
date.
As discussed in Note 2, the Company has been in the development stage since
its inception on June 8, 1998. Realization of a major portion of the assets
is dependent upon the Company's ability to meet its future financing
requirements, and the success of future operations. Management's plans
regarding those matters also are described in Note 2. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Williams & Webster, P.S.
Certified Public Accountants
Spokane, Washington
October 12, 2000
<PAGE>
<TABLE>
5 STARLIVING ONLINE INC.
(A DEVELOPMENTAL STAGE ENTERPRISE)
BALANCE SHEETS
<C> <C> <C>
August 31, 2000 May 31, 2000
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 64,478 $ 44,274
Related party note receivable 13,180 12,862
Total Current Assets 77,658 57,136
OTHER ASSETS
Website Development 2,658 --
Accumulated Amortization (222) --
Total Other Assets 2,436 --
TOTAL ASSETS $ 80,094 $ 57,136
LIABILITIES & STOCKHOLDERS' EQUITY
(DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 1,700 $ --
Related Party Note Payable 238,715 154,959
Total Current Liabilities $ 240,415 $ 154,959
COMMITMENTS & CONTINGENCIES -- --
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock,20,000,000 shares
authorized,$0.0001 par value; no
shares issued and outstanding
Common stock, 80,000,000 shares
authorized,$0.001 par value; 8,046,805
shares issued and
outstanding 805 805
Additional paid-in capital 59,575 59,575
Deficit Accumulated during
the developmental stage (220,701) (158,203)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (160,321) (97,823)
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY (DEFICIT) $ 80,094 $ 57,136
<C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
5 STARLIVING ONLINE INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF OPERATIONS
<C> C> <C> <C>
For the 3 months For the 3 months From June 8, 1998
ended 08/31/00 ended 08/31/99 (inception)-Aug.
(unaudited) (unaudited) 31/00 (unaudited)
REVENUES $ -- $ -- $ --
EXPENSES
Salaries 13,000 -- 43,229
Consulting 16,243 4,173 64,874
Advertising and promo 4,329 -- 4,329
Filing Fees -- 54 5,886
Legal and Professional 6,175 4,450 55,867
Office expense 15,098 571 31,991
Travel 4,356 -- 4,356
Amortization 222 -- 222
Transfer Agent 524 553 2,899
TOTAL EXPENSES 59,947 9,801 213,653
LOSS FROM OPERATIONS (59,947) (9,801) (213,653)
OTHER INCOME (EXPENSE)
Interest Income 319 -- 682
Interest Expense (3,770) -- (8,729)
Miscellaneous Income 900 -- 999
TOTAL OTHER INCOME (2,551) -- (7,048)
LOSS BEFORE INCOME TAXES (62,498) (9,801) (220,701)
INCOME TAXES -- -- --
NET LOSS $ (62,498) $ (9,801) $ (220,701)
Net Loss Per Common
Share, Basic & Diluted $ (0.01) $ nil $ (0.04)
Weighted Average Number
Of Common Stock Shares
Outstanding, Basic &
Diluted 8,046,805 4,250,000 6,271,065
<C> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
5 STARLIVING ONLINE INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
<C> <C> <C> <C> <C> <C>
Additional Deficit Acc Total
Paid - in during the Stockholders'
# of Shares Amount Capital Dev. stage Equity (def.)
Issuance of common
Stock for cash at
$.0025
Per share 40,000 $ 4 $ 96 $ -- $ 100
Issuance of common
Stock from sale of
Private placement
for Cash at $.0025
per share 3,960,000 396 9,504 -- 9,900
Issuance of common
Stock from sale of
Private placement for
Cash at $.20 per share 250,000 25 49,975 -- 50,000
Loss for period ending
May 31/99 -- -- -- (19,822) (19,822)
Balance, May 31/99 4,250,000 425 59,575 (19,822) 40,178
Issuance of common stock
For services at $.0001
Per share 3,796,805 380 -- -- 380
Loss for year ending
May 31, 2000 -- -- -- (138,381) (138,381)
Balance (deficit)
May 31, 2000 8,046,805 805 59,575 (158,203) (97,823)
Loss for the period
Ended August 31, 2000 -- -- -- (62,498) (62,498)
Balance, August 31, 2000
(unaudited)
8,046,805 $ 805 $ 59,575 $ (220,701) $ (160,321)
<C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
<TABLE>
5 STARLIVING ONLINE INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CASH FLOWS
<C> <C> <C> <C>
For the 3 mos. For the 3 mos. June 8, 1998
ended 08/31/00 ended 08/31/99 (inception)
(unaudited) (unaudited) 05/31/00
(unaudited)
CASH FLOWS FROM OPERATING
ACTIVITIES
Net Loss $ (62,498) $ (9,801) $ (220,701)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Amortization Expenses 222 -- 222
Increase in Notes Receivable (318) -- (13,180)
Increase in Accounts Payable 1,700 -- 1,700
Payment of expenses from issuance
Of stock -- -- 380
Net Cash (used) in operating
activities (60,894) (9,801) (231,579)
CASH FLOWS FROM INVESTING
ACTIVITIES
Increase in website development (2,658) -- (2,658)
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from Note Payable 83,756 -- 238,715
Proceeds from sale of common stock -- -- 60,000
Net cash provided by financing
activities 83,756 -- 298,715
Change in Cash 20,204 (9,801) 64,478
Cash, beginning of period 44,274 40,178 --
Cash, end of period $ 64,478 $ 30,377 $ 64,478
Supplemental disclosures:
Interest paid $ -- -- --
Income Taxes Paid -- -- --
Non-cash transactions:
Issuance of common stock for
Consulting services $ -- -- 380
<C> <C> <C> <C>
</TABLE>
<PAGE>
5 STARLIVING ONLINE INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO THE FINANCIAL STATEMENTS
AUGUST 31, 2000
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
5 Starliving Online, Inc., formerly HiTech Investment, Inc., (hereinafter
"the Company"), was incorporated on June 8, 1998, under the laws of the State
of Delaware for the purpose of pursuing certain high technology opportunities
and alliances and to assist in the establishment and development of an
internet electronic commerce venture. The Company is implementing the
consumer, industrial and business to business purchasing network whereby
companies will be able to introduce their products for sale via the Company's
website address. The Company maintains offices in Seattle, Washington, and
in Vancouver, British Columbia. The Company's fiscal year end is May 31.
On April 9, 1999 the Company amended its articles of incorporation to
reflect the name change to 5 Starliving Online, Inc.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies is presented to assist in
understanding the Company's financial statements. The financial statements
and notes are representations of the Company's management, which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
Interim Financial Statements
The interim financial statements as of August 31, 2000 and for the three
months ended August 31, 2000, included herein, have been prepared for the
Company without audit. They reflect all adjustments, which are, in the
opinion of management, necessary to present fairly the results of operations
for these periods. All such adjustments are normal recurring adjustments.
The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the full fiscal year.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting.
Use of Estimates
The process of preparing financial statements in conformity with generally
accepted accounting principles requires the use of estimates and assumptions
regarding certain types of assets, liabilities, revenues, and expenses. Such
estimates primarily relate to unsettled transactions and events as of the
date of the financial statements. Accordingly, upon settlement, actual
results may differ from estimated amounts.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Development Stage Activities
The Company has been in the development stage since its formation in
June 1998 and has not yet realized any revenues from its planned operations.
It is primarily engaged in the pursuit of high technology opportunities and
alliances for the establishment and development of an internet electronic
commerce venture.
Cash and Cash Equivalents
For purposes of the Statement of Cash Flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less
to be cash equivalents.
Fair Value of Financial Instruments
The carrying amounts for cash, receivables, and payables approximate their
fair value.
Derivative Instruments
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This standard establishes accounting
and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the balance sheet and measure those instruments at
fair value. At August 31, 2000, the Company has not engaged in any
transactions that would be considered derivative instruments or hedging
activities.
Impaired Asset Policy
In March 1995, the Financial Accounting Standards Board issued a statement
entitled "Accounting for Impairment of Long-lived Assets." In complying with
this standard, the Company reviews its long-lived assets quarterly to
determine if any events or changes in circumstances have transpired which
indicate that the carrying value of its assets may not be recoverable.
The Company determines impairment by comparing the undiscounted future cash
flows estimated to be generated by its assets to their respective carrying
amounts.
The Company does not believe any adjustments are needed to the carrying value
of its assets at August 31, 2000.
Revenue Recognition
The Company will recognize revenue from internet-based affiliate programs
when funds are earned, measurable and recognizable.
Advertising Expense
Advertising costs are expensed when incurred.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Compensated Absences
As the Company is still in the development stage, it currently does not have
a policy regarding accruals of compensated absences. The Company intends to
expense these costs as incurred.
Provision for Taxes
At August 31, 2000, the Company had net operating losses of approximately
$220,000 since its inception. No provision for taxes or tax benefit has been
reported in the financial statements, as there is not a measurable means of
assessing future profits or losses.
Basic and Diluted Loss Per Share
Loss per share was computed by dividing the net loss by the weighted average
number of shares outstanding during the period. The weighted average number
of shares was calculated by taking the number of shares outstanding and
weighting them by the amount of time that they were outstanding. Basic and
diluted loss per share was the same, as there were no common stock
equivalents outstanding.
Going Concern
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.
As shown in the accompanying financial statements, the Company incurred a
net loss of $223,137 for the period from June 8, 1998 (inception) to
August 31, 2000, and had no sales. The future of the Company is dependent
upon its ability to obtain financing and upon future profitable operations
from the commercial success of its internet electronic commerce venture.
Management has plans to seek additional capital through a private placement
of its common stock. The financial statements do not include any adjustments
relating to recoverability and classification of recorded assets, or the
amounts and classification of liabilities that might be necessary in the
event the Company cannot continue in existence.
NOTE 3 - COMMON STOCK
The Company is authorized to issue 80,000,000 shares of $0.0001 par value
common stock.
During the period from June 8, 1998 (inception) to May 31, 1999, 4,250,000
shares of common stock were sold, (4,000,000 at $0.0025 per share, and
250,000 at $0.20 per share), under Regulation D, Rule 504.
On November 30, 1999, the Company entered into a management agreement that
provided specific services to the Company in exchange for 3,750,000 shares
of the Company's common stock. These shares are restricted by Rule 144 of
the Securities Act of 1933 and are restricted as to public transfer for a
minimum period of one year. Of the total shares issued, 3,750,000 shares
were issued to officers and directors of the Company.
On February 29, 2000, the Company entered into a consulting agreement that
provided specific services to the Company in exchange for 35,693 shares of
the Company's common stock. These shares are restricted by Rule 144 of the
Securities Act of 1933 and are restricted as to public transfer for a minimum
period of one year.
On March 31, 2000, the Company entered into a purchase agreement in exchange
for 11,112 shares of the Company's common stock. These shares are restricted
by Rule 144 of the Securities Act of 1933 and are restricted as to public
transfer for a minimum period of one year. Subsequently, the agreement was
not finalized and it is management's intent to reacquire the shares issued.
NOTE 4 - PREFERRED STOCK
The Company's preferred stock has not been issued. The Company is authorized
to issue 20,000,000 shares of $0.0001 par value preferred stock, which
contains no voting privileges and is not entitled to accrued dividends or
conversion into shares of the Company's common stock.
NOTE 5 - STOCK OPTIONS
In November 1999, the Company adopted a Stock Option Incentive Plan
("November 1999 Plan"). The plan allows management to grant up to 800,000
shares of common stock at its discretion.
In November 1999, management granted options from the November 1999 plan for
390,000 shares of common stock to Mola Investments Ltd. ("Mola") for
strategic advisory and introduction services. These options are available
for exercise at the sole discretion of Mola.
In February 2000, the Company adopted a second Stock Option Incentive Plan
("February 2000 Plan"). This plan allows the Company to distribute up to
3,500 shares of common stock at the discretion of the board of directors.
In March 2000, management granted options from the November 1999 Plan for
110,000 shares of common stock to Eileen Hayward for notes payable. These
options are available for exercise at the sole discretion of Ms. Hayward.
See Note 6.
<PAGE>
The following is a summary of the Company's stock option activity through
August 31, 2000:
<TABLE>
<C> <C> <C>
Number of Weighted Average
Shares Exercise Price
Options outstanding and exercisable
at 5-31-1999 -- --
Outstanding at 6-1-1999 -- --
Granted 503,500 $ 0.2753
Exercised -- --
Forfeited -- --
Outstanding at 5-31-2000 503,500 $ 0.2753
Options exercisable at 5-31-2000 503,500 $ 0.2753
Outstanding at 6-1-2000 503,500 $ 0.2753
Granted -- --
Exercised -- --
Forfeited -- --
Outstanding at 8-31-2000 503,500 $ 0.2753
Weighted average fair value of options granted during
the fiscal year ended May 31, 2000
$ 0.2753
<C> <C> <C>
</TABLE>
<PAGE>
NOTE 6 - RELATED PARTIES
The Company occupies office space provided by Mr. Paul Hayward, the president
of the Company at no charge. The value of this space is not considered
materially significant for financial reporting purposes.
In March 2000, the Company adopted a stock option plan for shares exercisable
by Ms. Eileen Hayward for a $150,000 note payable. Ms. Hayward is the mother
of Paul Hayward, the Company's president. See Note 8.
In February 2000, the Company lent $12,500 to director Kali Palmer.See Note 7.
NOTE 7 - NOTES RECEIVABLE
In February 2000, the Company lent $12,500 to Kali Palmer, a director of the
Company. This uncollateralized note is due on February 15, 2001 with an
annual interest rate of 10%. For the three months ended August 31, 2000,
$318 of interest was accrued on the note receivable.
NOTE 8 - NOTES PAYABLE
In February 2000, the Company borrowed $150,000 from Mrs. Eileen Hayward, a
related party. This uncollateralized note is due on February 1, 2001, with
an annual interest rate of 10%. For the three months ended August 31, 2000,
$3,770 of interest expense was accrued on the note payable.
In July 2000, the Company received $79,988 from a related party and
classified the amount as a note payable. Repayment of this uncollateralized
note is dependent upon successful future operations.
NOTE 9 - WEBSITE DEVELOPMENT
In August 2000, the Company revised and expanded its website. The cost of
development was $2,658 and will be amortized over a period of 12 months.
Amortization expense for the three months ended August 31, 2000, was $222.
NOTE 10 - YEAR 2000 ISSUES
Like other companies, 5 Starliving Online, Inc. may be adversely affected if
the computer systems it, its suppliers or customers use do not properly
process and calculate date-related information and data from the period
surrounding and including January 1, 2000. This is commonly known as the
"Year 2000" issue.
Additionally, this issue could impact non-computer systems and devices such
as production equipment and elevators, etc. At this time, because of the
complexities involved in the issue, management cannot provide assurances
that the Year 2000 issue will not have an impact on the Company's operations.
The Company has reviewed its business and processing systems and believes
that the majority of its systems are already Year 2000 compliant. Based on
preliminary assessments, the Company regards the costs associated with Year
2000 readiness to be immaterial. Costs for Year 2000 compliance are expensed
as incurred.
<PAGE>
5 STARLIVING ONLINE INC.
MANAGEMENT'S DISCUSSION AND RESULTS OF OPERATIONS
The last quarter has seen management define and refine their business strategy,
especially in relation to marketing.
In the near term the Company would like to see a European listing and stock
market presence.
5 STARLIVING ONLINE INC.
10229 19th AVE S.W.
SEATTLE, WA, 98146
Gentlemen,
Pursuant to the requirements of the Securities Exchange Act of 1934, we are
transmitting herewith the attached form 10-Q.
Sincerely,
5 STARLIVING ONLINE INC.
PAUL HAYWARD
CEO
