INDEPENDENT AUDITOR'S REPORT
WST Web Search Technologies Inc.
(A Development Stage Company)
We have audited the accompanying balance sheets of WST Web Search
Technologies Inc. (a development stage company) as of July 31, 2000, and the
related statements of operations, stockholders' equity, and cash flows for the
period since July 5, 2000 (inception) to July 31, 2000. These financial
statements are the responsibility of WST's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide 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 WST Web Search
Technologies Inc. (a development stage company) as of July 31, 2000 and the
results of its operations and its cash flows for the period since July 5, 2000
(inception) to July 31, 2000 in conformity with generally accepted accounting
principles.
Respectfully submitted
Certified Public Accountants
Salt Lake City, Utah
September 8, 2000
F-1
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
BALANCE SHEET
-------------
July 31, 2000
-------------
ASSETS
Intangibles and other assets $10,000
-------------
Total Assets $10,000
=============
Liabilities
-
-------------
Stockholders' Equity:
Common Stock, Class A, No par value
Unlimited number of shares authorized ,
Issued 100 shares at July 31, 2000 10,830
Deficit Accumulated During the
Development Stage (830)
-------------
Total Stockholders' Equity 10,000
-------------
Total Liabilities and
Stockholders' Equity $10,000
=============
The accompanying notes are an integral part of these financial statements.
F-2
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF OPERATIONS
------------------------
Since Cumulative
Inception on since
July 5, 2000 inception
through of
July 31, 2000 development stage
------------- -----------------
Revenues: $ - $ -
Expenses: 830 830
------------- -----------------
Net Loss $ (830) $ (830)
------------- -----------------
Basic & Diluted loss per share $ (8.30)
=============
The accompanying notes are an integral part of these financial statements.
F-3
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
STATEMENT OF STOCKHOLDERS' EQUITY
---------------------------------
SINCE INCEPTION TO JULY 31, 2000
--------------------------------
Deficit
Accumulated
During
Common Stock Development
Shares Amount Stage
------ ------- ------------
Balance at July 5, 2000 (inception) - $ - $ -
July 5, 2000 Issuance of stock for
payment of accounts payable and
intangible assets 100 10,830 -
Net Loss - - (830)
------ ------- ------------
Balance at July 31, 2000 100 $10,830 $ (830)
====== ======= ============
The accompanying notes are an integral part of these financial statements.
F-4
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
STATEMENTS OF CASH FLOWS
------------------------
Since Cumulative
Inception on Since
July 5, 2000 Inception
through of
July 31, Development
2000 Stage
------------ -----------
CASH FLOWS FROM OPERATING
-------------------------
ACTIVITIES:
----------
Net Loss $ (830) $ (830)
------------ -----------
Net Cash Used in operating activities (830) (830)
------------ -----------
CASH FLOWS FROM INVESTING
-------------------------
ACTIVITIES:
----------
Net cash provided by investing activities - -
------------ -----------
CASH FLOWS FROM FINANCING
-------------------------
ACTIVITIES:
----------
Capital contributed by shareholder 830 830
------------ -----------
Financing Activities 830 830
------------ -----------
Net (Decrease) Increase in
Cash and Cash Equivalents - -
Cash and Cash Equivalents
at Beginning of Period - -
------------ -----------
Cash and Cash Equivalents
at End of Period $ - $ -
============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
============ ===========
Franchise and income taxes $ - $ -
============ ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
----------------------------------------------------------- -----------
Stock issued for intangible assets $ 10,000 $ 10,000
The accompanying notes are an integral part of these financial statements.
F-5
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
SINCE INCEPTION TO JULY 31, 2000
--------------------------------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
This summary of accounting policies for WST Web Search Technologies
Inc. ("WST") is presented to assist in understanding WST's financial statements.
The accounting policies conform to generally accepted accounting principles and
have been consistently applied in the preparation of the financial statements.
The unaudited financial statements as of July 31, 2000 and for the
period since inception on July 5, 2000 to July 31, 2000 and these notes to
unaudited financial statements have been prepared by management and reflect, in
the opinion of management, all adjustments (which include only normal recurring
adjustments) necessary to fairly state the financial position and results of
operations since inception to July 31, 2000. Operating results for interim
periods are not necessarily indicative of the results which can be expected for
full years.
Organization and Basis of Presentation
--------------------------------------
WST was incorporated under the Business Corporations Act, Province of
Saskatchewan, Canada on July 5, 2000. WST is in the development stage, and has
not commenced planned principal operations.
Nature of Business
------------------
WST has no products or services as of July 31, 2000. WST was organized
to develop a new internet information search system which will provide internet
users with a set of high performance and high accuracy search tools for locating
relevant information over the World Wide Web.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, WST considers all highly
liquid debt instruments purchased with a maturity of three months or less to be
cash equivalents to the extent the funds are not being held for investment
purposes.
F-6
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
SINCE INCEPTION TO JULY 31, 2000
--------------------------------
(Continued)
-----------
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
--------------------------------------------------------------------------------
Pervasiveness of Estimates
--------------------------
The preparation of financial statements in conformity with generally
accepted accounting principles required management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Amortization
------------
Intangible assets are comprised of the business plan of operations
which includes: A Draft Proposal for Project Development and Design and
Implementation an Effective and Efficient Search Engine: A Proposal. Intangible
assets amortized over the estimated useful life of 3 to 5 years.
Loss per Share
--------------
The reconciliations of the numerators and denominators of the basic
loss per share computations are as follows:
Per-Share
Income Shares Amount
------ ------ ---------
(Numerator) (Denominator)
For the year ended July 31, 2000
--------------------------------
Basic Loss per Share
Loss to common shareholders $ (830) 100 (8.30)
=========== ====== =========
The effect of outstanding common stock equivalents would be
anti-dilutive for July 31, 2000 and are thus not considered.
F-7
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WST WEB SEARCH TECHNOLOGIES INC.
--------------------------------
(A Development Stage Company)
-----------------------------
NOTES TO UNAUDITED FINANCIAL STATEMENTS
---------------------------------------
SINCE INCEPTION TO JULY 31, 2000
--------------------------------
(Continued)
-----------
NOTE 2 - INCOME TAXES
---------------------
As of July 31, 2000, WST had a net operating loss carryforward for
income tax reporting purposes of approximately $1,000 that may be offset against
future taxable income through 2011. Current tax laws limit the amount of loss
available to be offset against future taxable income when a substantial change
in ownership occurs. Therefore, the amount available to offset future taxable
income may be limited. No tax benefit has been reported in the financial
statements, because WST believes there is a 50% or greater chance the
carryforwards will expire unused. Accordingly, the potential tax benefits of the
loss carryforwards are offset by a valuation allowance of the same amount.
NOTE 3 - DEVELOPMENT STAGE COMPANY
----------------------------------
WST has not begun principal operations and as is common with a
development stage company, WST has had recurring losses during its development
stage.
NOTE 4 - COMMITMENTS
--------------------
As of July 31, 2000 all activities of WST have been conducted by
corporate officers from either their homes or business offices. Currently, there
are no outstanding debts owed by the company for the use of these facilities and
there are no commitments for future use of the facilities.
NOTE 5 - MERGER
---------------
On July 12, 2000 WST and its sole shareholder Dr. Mengchi Liu entered
into an Acquisition Agreement (the "Agreement") with Laredo Investment Corp.
pursuant to which Dr. Mengchi Liu sold one hundred percent (100%) of WST's
issued and outstanding shares for 10,000,000 common shares of Laredo Investment
Corp.
F-8
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
On July 12, 2000, WST, Dr. Mengchi Liu, the sole shareholder of WST
and the Company executed an Acquisition Agreement that provided for the purchase
of all of the issued and outstanding shares of WST for consideration of
10,000,000 shares of common stock of the Company. The following unaudited pro
forma condensed combined financial statements are based on the July 30, 2000
(unaudited) historical financial statements of WST and the June 30, 2000
(unaudited) and December 31, 1999 historical consolidated financial statements
of WST contained elsewhere herein, giving effect to the transaction under the
purchase method of accounting, with the Company treated as the acquiring entity
for financial reporting purposes. The unaudited pro forma condensed combined
balance sheet presenting the financial position of the surviving corporation
assumes the purchase occurred as of December 31, 1999. The unaudited pro forma
condensed combined statement of operations presents the results of operations of
the surviving corporation, assuming the acquisition was completed on January 1,
1999.
The unaudited pro forma condensed combined financial statements have
been prepared by management of WST and the Company based on the financial
statements included elsewhere herein. The pro forma adjustments include certain
assumptions and preliminary estimates as discussed in the accompanying notes and
are subject to change. These pro forma statements may not be indicative of the
results that actually would have occurred if the combination had been in effect
on the dates indicated or which may be obtained in the future. These pro forma
financial statements should be read in conjunction with the accompanying notes
and the historical financial information of both WST and the Company (including
the notes thereto) included in this Form 8-K/A Current Report. (See Item 7.
"Financial Statements and Exhibits.")
F-9
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<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
-------------------------------------------
December 31, 1999
----------------
Pro Forma
Pro Forma Combine
Laredo WST Adjustments Balance
---------- ----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
------
Current Assets $ 333,216 $ - $ 333,216
- -
Fixed Assets (net) 198,800 - - 198,800
Other Assets - 10,000 - 10,000
Total Assets $ 532,016 $ 10,000 $ - $542,016
========== =========== =========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Short-Term Notes Payable 33,346 - - 33,346
Accounts Payable & Accrued Expenses 267,393 - - 267,393
Related Party Loans 63,481 - - 63,481
Current Portion of Long-Term Debt 20,479 - - 20,479
-------- ----------- ----------- ---------
Total Current Liabilities 384,699 - - 384,699
Long-Term Debt 120,600 - - 120,600
-------- ----------- ----------- ---------
Total Liabilities 505,299 - - 505,299
-------- ----------- ----------- ---------
Stockholders' Equity:
Common Stock 29,000 10,830 (830)A 39,000
Currency translation adjustment 1,349 - - 1,349
Retained Earnings (Deficit) (3,632) (830) (830)A (3,632)
-------- ----------- ----------- ---------
Total Stockholders' Equity
(Deficit) 26,717 10,000 - 36,7171
-------- ----------- ----------- ---------
Total Liabilities and Stockholders
Equity
$532,016 $ 10,000 $ - $542,016
======== =========== =========== =========
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-10
</TABLE>
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<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
--------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1999
------------------------------------
Pro Forma
Pro Forma Combine
Laredo WST Adjustments Balance
------------ ----------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Sales $1,669,034 $ $ $ 1,669,034
- -
Cost of Sales 1,213,464 - - 1,213,464
------------- ------------------ -------------- ------------
Gross Profit 455,570 - - 455,570
Expenses:
General & Administrative 361,323 830 2,000 B 364,153
Other Expense 22,224 - - 22,224
------------- ------------------ -------------- ------------
Earnings (Loss) Before Income Taxes 72,023 (830) (2,000) 69,193
------------- ------------------ -------------- ------------
Income Taxes: 15,545 - - 15,545
Net Loss $ 56,478 $ (830) $ (2,000) $ 53,648
============== ================== =============== ===========
Loss per share $ 0.00 $ 0.00 $ 0.00
============== ================== ===========
Weighted average shares outstanding 29,000,000 10,000,000 39,000,000
============== ================== ===========
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-11
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<TABLE>
<CAPTION>
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
-------------------------------------------
June 30, 2000
-------------
Pro Forma
Pro Forma Combine
Laredo WST Adjustments Balance
------------ ----------------- -------------- ------------
<S> <C> <C> <C>
ASSETS
------
Current Assets $ 667,946 $ - $ - $ 667,946
Fixed Assets (net) 404,311 - - 404,311
Other Assets - 10,000 - 10,000
------------ ----------------- -------------- ------------
Total Assets $ 1,072,257 $ $10,000 $ - $ 1,082,257
============ ================= ============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Short-Term Notes Payable 434,881 - - 434,881
Accounts Payable & Accrued Expenses 445,758 - - 445,758
Related Party Loans 65,758 - - 65,758
Current Portion of Long-Term Debt 20,200 - - 20,200
------------ ----------------- -------------- ------------
Total Current Liabilities 966,597 - - 966,597
Long-Term Debt 107,940 - - 107,940
Total Liabilities 1,074,537 - - 1,074,537
------------ ----------------- -------------- ------------
Stockholders' Equity:
Common Stock 29,000 10,830 (830) A 39,000
Currency translation adjustment (362) - - (362)
Retained Earnings (Deficit) (30,918) (830) 830 A (30,918)
------------ ----------------- -------------- ------------
Total Stockholders' Equity (Deficit) (2,280) 10,000 - 7,720
------------ ----------------- -------------- ------------
Total Liabilities and Stockholders' Equity
$ 1,072,257 $10,000 $ - $1,082,257
============ ================= ============== ============
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-12
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<TABLE>
<CAPTION>
UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS
--------------------------------------------
FOR SIX MONTHS ENDED JUNE 30, 2000
----------------------------------
Pro Forma
Pro Forma Combine
Laredo WST Adjustments Balance
------------ ----------------- -------------- ------------
<S> <C> <C> <C>
Revenues:
Sales $ 1,011,546 $ - $ - $ 1,011,546
Cost of Sales 722,191 - - 722,191
------------ ----------------- -------------- ------------
Gross Profit 289,355 - - 289,355
Expenses:
General & Administrative 265,049 830 1,000 B 266,879
Other Expense 51,592 - - 51,592
------------ ----------------- -------------- ------------
Earnings (Loss) Before Income Taxes (27,286) (830) (1,000) (29,116)
------------ ----------------- -------------- ------------
Income Taxes: - - - -
Net Loss $ (27,286) $ (830) $ (1,000) $ (29,116)
============= ================== ============== ============
Loss per share $ 0.00 $ 0.00 $ 0.00
============= ================== ============== ============
Weighted average shares outstanding 29,000,000 10,000,000 39,000,000
============= ================== ============== ============
See accompanying notes to unaudited pro forma condensed combined financial statements.
F-13
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
--------------------------------------------------------------------
(1) General
After the acquisition of WST by the Company, WST became a wholly-owned
subsidiary of the Company, with all of the outstanding shares of WST held by the
Company. After the acquisition, Dr. Mengchi Liu held 10,000,000 shares or
approximately 26% of the common stock of the Company, subject to certain
adjustments. The shareholders of the Company, prior to the acquisition, after
giving effect to the acquisition hold in the aggregate 29,000,000 shares of
common stock of the Company or approximately 74% of the common stock of the
Company.
(2) Pro Forma Adjustments
The adjustments to the accompanying unaudited pro forma condensed
combined balance sheet as of December 31, 1999 and June 30, 2000, are described
below:
(A) Record acquisition and issuance of 10,000,000 shares to Dr.
Mengchi Liu.
The adjustments to the accompanying unaudited pro forma condensed
combined statements of operations are described below:
(B) Record amortization of intangibles.
F-14
