<PAGE> 1
UNITED STATES
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): October 31, 2000
COMMISSION FILE NUMBER 0-29369
CREATIVE TECHNOLOGIES HOLDINGS INC.
---------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 88-0409146
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1900 Avenue of the Stars, Suite 1635
Los Angeles, California 90067
----------------------------------------- ---------
(Address of principal executive offices) (Zip code)
Morning Splendor Management, Inc.
1105 Terminal Way, Suite 202
Reno, Nevada 89502
----------------------------------------------
(Former name, former address and former fiscal
year, if changed since last report.)
<PAGE> 2
Item 1. Changes in Control of Registrant
On October 31, 2000, there was a change in control of Registrant. Morgan &
Lynch, a corporation, acquired 8,500,000 shares of the common stock of
Registrant in exchange for all of the issued and outstanding shares of stock
owned by it in Creative Technology & Interactive Entertainment Group, Inc.
Creative Technology & Interactive Entertainment Group, Inc. owns 70% of the
issued and outstanding shares of stock of the corporation known as Creative
Technology & Entertainment Group, Inc., a Nevada corporation. Pursuant to the
Plan and Agreement of Reorganization, at the closing, the name of Registrant was
changed from Morning Splendor Management, Inc. to Creative Technology Holdings
Inc., and Morgan & Lynch nominated certain new officers and directors. The
number of percentage of the shares of common stock owned of record and
beneficially by Morgan & Lynch, the majority shareholder, and each officer and
director of Registrant, individually and as a group, are as follows:
<TABLE>
<CAPTION>
Number of Shares Percentage of
Name and Address of Common Stock Common Stock
of Owner Owned Owned
---------------- ---------------- -------------
<S> <C> <C>
Morgan & Lynch, Inc. 8,500,000 85%
1900 Avenue of the Stars
Suite 1635
Los Angeles, CA 90067
Roy Rayo 0 0%
1900 Avenue of the Stars
Suite 1635
Los Angeles, CA 90067
Claudine Montenegro 0 0%
1900 Avenue of the Stars
Suite 1635
Los Angeles, CA 90067
All officers and directors
as a group [2 individuals] 0 0%
</TABLE>
Item 2. Acquisition or Disposition of Assets
(a) On October 31, 2000, there was a closing under the Plan and Agreement
of Reorganization by and between Creative Technology & Interactive Entertainment
Group, Inc., Morning Splendor Management, Inc. and Morgan & Lynch, Inc.
Registrant acquired all of the issued and outstanding shares of stock of
Creative Technology & Interactive Entertainment Group, Inc. in exchange for
8,500,000 shares of Registrant.
(b) Creative Technology & Entertainment Group, Inc. is a Nevada corporation
engaged in the development of Internet-
<PAGE> 3
based interactive entertainment software to create online casinos, sports
betting, sports pools, bingo and wagering products. Registrant intends to
utilize the Microsoft Windows MT 4.0 for the operating system and the Microsoft
SQL Server 7.0 as the server platform. Registrant will seek out a partner to
develop internally a secured web-based system wherein casino operators can
manage the day-to-day operations of the casino. The intended system is to
provide web-based applications which allow administering the casino and consumer
records remotely. Registrant would generate financial and customer reports,
manage customer accounts, process financial transactions, change and modify
betting limits, manage or control those not permitted to participate in the
casino (black listed - both as to individual players and venue of the players).
Registrant's applications would be distributed through the so-called broadband
delivery architecture, to be contracted out with third-party technology
providers, wherein streaming video and wireless technology will be utilized.
Registrant will introduce interactive products and their services targeted to
the new consumer to the internet gambling experience, as well as those who may
not have been satisfied utilizing other sites presently being operated by the
European and Asian casino operators.
Registrant faces intense competition in every facet of business. The
following companies are competitors in the area of Internet gaming software:
MicroGaming Systems, Inc., Cryptologic, Inc., Boss Media AB, Casinobuilder.com,
and StarNet. All of these companies have substantially greater assets and
resources than Registrant does. Their ability to market their products is
greater. In addition, their software programs offer a more expansive collection
of casino games. These companies have established distribution networks. In
contrast, Registrant is beginning the marketing of products and services and has
limited assets or resources at this time to compete with large companies.
Registrant anticipates that strategic competition will become more intense
as new companies enter the internet gaming software market. To remain
competitive, Registrant may have to reduce the anticipated cost of its products
and services, which may negatively affect its potential profitability or lead to
additional losses.
Registrant believes that potential new competitors, including large
interactive and online software companies, media companies, and electronic
gaming companies, such as Sega and Sony, may increase their focus on the
interactive wagering market.
Registrant also anticipates that significant overseas competition will
emerge. This may eventually result in additional competition as these overseas
competitors expand.
Registrant does not own any registered patents, copyrights or trademarks.
In addition, Registrant is not a party to any agreements in which it is
obligated to pay royalties.
<PAGE> 4
Jurisdictional regulation of Internet gaming is the process whereby
Governments (jurisdictions) through law and licensing control the fair and
equitable operation of gaming businesses. Jurisdictional regulation provides a
confirmation to the Internet gambler, that the games originating from that
jurisdiction are fair and are operated by responsible business people. The
Registrant continues to support activities that protect both the consumer and
the operator of such businesses.
Registrant does not operate Internet casinos and therefore is not subject
to any government regulation regarding Internet gaming. Nonetheless, because its
business is dependent upon sales of its products and services to Internet
casinos, its revenues may be negatively affected due to regulation of the
Internet gaming business. While Registrant intends to concentrate marketing
efforts upon the Australian, Caribbean, European and African gaming markets
that permit Internet gaming, international, federal, state or local laws may be
imposed at any time. The uncertainty surrounding the regulation of Internet
gaming could have a material adverse effect on Registrant's business, revenues,
operating results and financial condition. Registrant monitors the changes in
any laws regarding Internet gaming. Should Internet gaming be declared illegal
in certain jurisdictions Registrant contemplates doing business in, and/or there
is a materially adverse effect upon business due to such declared illegality,
Registrant may be forced to change its business plan.
Registrant's management remains concerned about the continued interest by
federal and state lawmakers to prohibit Internet gambling. If Internet gambling
is prohibited, interest in our products and services will diminish. On November
19, 1999, the United States Senate passed S. 692, called the Internet Gambling
Prohibition Act. On July 17, 1999, the U.S. House of Representatives failed to
pass H.R. 3125, the U.S. House of Representative's version of the Senate Bill S.
692.
Passage of such a gambling prohibition law would prohibit all Internet
gambling sites from soliciting or collecting wagers from bettors in the United
States. Registrant does not now or intend in the future to transact business
with any Internet gambling sites located in the United States or that solicits
or collects wagers from bettors in the United States.
Registrant's policy is to provide software product only to casino operators
who hold a license or demonstrate that they have a license pending.
Item 5. Other
On November 16, 2000, the Company sold and issued 2,000,000 shares of its
common stock pursuant to Regulation S, in cancellation of indebtedness of
$500,000 to Netsat Holdings, Ltd.
<PAGE> 5
Item 7. Financial Statements and Exhibits
(a) Exhibits:
Exhibit No. Description
----------- -----------
2.1 Plan and Agreement of Reorganization dated October 25,
2000, by and between Creative Technology & Interactive
Entertainment Group, Inc., Morning Splendor Management,
Inc. and Morgan & Lynch, Inc.
3.1 Certificate of Amendment to Articles of Incorporation.
21 List of subsidiaries.
23 Consents of Josefina C. de la Cruz, C.P.A.
(b) Financial statements:
Creative Technology & Interactive Entertainment Group,
Inc., a majority owned subsidiary; Consolidated
Financial statements of August 31, 2000
Creative Technology & Interactive Entertainment Group,
Inc.; Financial statements of August 31, 2000.
Creative Technology & Entertainment Group, Inc.;
Financial statements of August 31, 2000.
SIGNATURE
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 thereunto duly authorized.
Dated: November 27, 2000 CREATIVE TECHNOLOGIES HOLDINGS INC.
By: /s/ Roy Rayo
-----------------------------
Roy Rayo
President
<PAGE> 6
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
AND
MAJORITY OWNED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
<PAGE> 7
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
AND
MAJORITY OWNED SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 2000
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT................................................ 1
CONSOLIDATED BALANCE SHEET.................................................. 2-3
CONSOLIDATED STATEMENT OF OPERATIONS........................................ 4
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY.............................. 5
CONSOLIDATED STATEMENT OF CASH FLOWS........................................ 6
NOTES TO FINANCIAL STATEMENTS............................................... 7-12
</TABLE>
<PAGE> 8
JOSEFINA C. DE LA CRUZ, C.P.A.
A PROFESSIONAL CORPORATION
2700 N MAIN STREET, SUITE 990 TEL. NO. (714) 558-8703
SANTA ANA, CA 92705 FAX NO. (714) 558-7940
E-MAIL ADDRESS: [email protected]
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Creative Technology & Interactive Entertainment Group, Inc.
Carson City, Nevada
We have audited the accompanying consolidated balance sheet of Creative
Technology & Interactive Entertainment Group, Inc., (a Development Stage
Company) and subsidiary, as of August 31, 2000 and the related statements of
operations, stockholders' equity and cash flows for the period June 27, 2000
(date of inception) to August 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Creative Technology
& Interactive Entertainment Group, Inc. (A Development Stage Company) and
subsidiary as of August 31, 2000 and the results of its operations and cash
flows for the period then ended in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note #6 to the
consolidated financial statements, the Company and subsidiary have no
established source of revenue. This raises substantial doubt about its ability
to continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
Josefina C. de la Cruz
Certified Public Accountant
September 20, 2000
1
<PAGE> 9
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP INC.
AND MAJORITY OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2000
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $106,788
Advances to Employees 12,387
Prepaid Rent 8,575
--------
TOTAL CURRENT ASSETS 127,750
--------
PROPERTY AND EQUIPMENT, net of
accumulated depreciation (Note 2) 12,580
--------
OTHER ASSETS
Escrow Deposit 25,000
Security Deposit 7,300
--------
TOTAL OTHER ASSETS 32,300
--------
TOTAL ASSETS $172,630
========
</TABLE>
See notes to consolidated financial statements.
2
<PAGE> 10
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP INC.
AND MAJORITY OWNED SUBSIDIARY
CONSOLIDATED BALANCE SHEET
AUGUST 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts Payable $ 63,394
Payroll Taxes Payable 21,752
Advances From Officers (Note 8) 24,400
---------
TOTAL CURRENT LIABILITIES 109,546
---------
MINORITY INTEREST (Note 5) (73,913)
---------
STOCKHOLDERS' EQUITY (Note 4)
Common Stock - $0.001 par value per share;
100,000,000 shares authorized;
500,000 shares issued and outstanding 500
Paid-in Capital 499,500
Accumulated Deficit (363,003)
---------
Total stockholders' equity 136,997
---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 172,630
=========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 11
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP INC.
AND MAJORITY OWNED SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD JUNE 27, 2000 (DATE OF INCEPTION) TO AUGUST 31, 2000
<TABLE>
<S> <C>
REVENUE $ 0
---------
EXPENSES
General, selling and administrative expenses 490,482
Depreciation 434
---------
Total Expenses 490,916
---------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (490,916)
LOSS APPLICABLE TO MINORITY INTEREST 127,913
---------
NET LOSS $(363,003)
=========
BASIC NET LOSS PER COMMON SHARE $ (0.7260)
=========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 500,000
=========
</TABLE>
See notes to consolidated financial statements.
4
<PAGE> 12
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP INC.
AND MAJORITY OWNED SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE PERIOD JUNE 27, 2000 (DATE OF INCEPTION) TO AUGUST 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL
PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------ ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Beginning balance 0 $ 0 $ 0 $ 0 $ 0
Stocks issued for cash
on August 31, 2000 500,000 500 499,500 500,000
Net loss, June 27, 2000
to August 31, 2000 (490,916) (490,916)
Minority interests in
subsidiary's deficit 127,913 127,913
--------- --------- --------- --------- ---------
Ending balance
August 31, 2000 500,000 $ 500 $ 499,500 $(363,003) $ 136,997
========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
5
<PAGE> 13
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP INC.
AND MAJORITY OWNED SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD JUNE 27, 2000 (DATE OF INCEPTION) TO AUGUST 31, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(363,003)
Adjustment to reconcile net loss to net cash
provided by operating activities
Depreciation 434
Minority interest in net loss of subsidiary (127,913)
Increase in current assets (20,962)
Increase in current liabilities 85,146
---------
Total adjustments (63,295)
---------
Net cash used in operating activities (426,298)
---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (13,014)
Escrow and other deposits (32,300)
Sale of common shares 554,000
---------
Net cash from investing activities 508,686
---------
CASH FLOWS FROM FINANCING ACTIVITIES
Advances from officers 24,400
---------
Net cash provided by financing activities 24,400
---------
NET INCREASE IN CASH 106,788
CASH, BEGINNING OF PERIOD 0
---------
CASH, END OF PERIOD $ 106,788
=========
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 14
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
Creative Technology & Interactive Entertainment Group, Inc. (Parent) was
organized on June 27, 2000 under the laws of the State of Nevada. The Company
currently has no operations. Parent company initially acquired 70% of the
outstanding stock of an operating development stage company, Creative Technology
and Entertainment Group, Inc. (Subsidiary) pursuant to a stock purchase
agreement. Subsequent stock purchase by parent company increased its ownership
of the subsidiary to 73.3% as of August 31, 2000.
Subsidiary was organized on May 19, 2000 under the laws of the State of
Nevada as Creative Technology & Entertainment Group, Inc. It is currently
engaged in software development. Both parent and subsidiary are development
stage companies as defined in Financial Accounting Standards Board Statement No.
7. Both are concentrating substantially all efforts in raising capital and
development business operations in order to generate significant revenues.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidation Policy
--------------------
The accompanying consolidated financial statements include the
accounts of the parent company, Creative Technology & Interactive
Entertainment Group, Inc. and its subsidiary, Creative Technology and
Entertainment Group, Inc. All inter-company transactions and balances
have been eliminated in consolidation.
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
7
<PAGE> 15
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
------------
Income taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
(SFAS #109) "Accounting for Income Taxes." A deferred tax asset or
liability is recorded for all temporary differences between financial
and tax reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
Reporting on Costs of Start-Up Activities
-----------------------------------------
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" provides guidance on the financial reporting of
start-up costs and organization costs. It requires most costs of
start-up activities and organization costs to be expended as incurred.
With the adoption of SOP 98-5, there has been little or no effect on
the company's financial statements.
Loss Per Share
--------------
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share." Basic loss per share is computed by dividing losses available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects per
share amounts that would have resulted if dilutive common stock
8
<PAGE> 16
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
equivalents had been converted to common stock. As of August 31,2000,
the Company had no dilutive common stock such as stock options.
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are stated at cost. Depreciation is
provided by use of the straight-line method over the estimated useful
lives of the related assets, less residual value where appropriate as
follows:
Building 20 years
Office Equipment 5 years
Machinery 10 years
Leasehold Improvements 5 years
Year End
--------
The Company has selected December 31 as its year-end.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended August 31, 2000
due to the consolidated net loss and no state income tax in Nevada, the state of
the Company's domicile and operations. The Company's total deferred tax asset as
of August 31, 2000 is as follows:
<TABLE>
<S> <C>
Net operating loss carry forward $ 490,916
Valuation allowance $ 490,916
Net deferred tax asset 0
</TABLE>
The federal net operating loss carry forward will expire on 2020. This
carry forward may be limited upon the consummation of a business combination
under IRC Section 381.
9
<PAGE> 17
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
------------
The authorized common stock of the parent company consists of 100
million shares with a par value of $.001 per share. On August 31,
2000, the company issued 500,000 shares of its $.001 par value common
stock for a consideration of $500,000 cash.
Investment in Subsidiary
------------------------
Pursuant to a stock purchase agreement on August 21, 2000, the company
purchased 14 million shares or 70% of the issued and outstanding stock
of its subsidiary for a total consideration of $4,354,000. Terms and
conditions of the agreement are:
(a) Initial payment was US$ 400,000 and the balance of US$ 3,954,000
payable in (10) monthly consecutive installments on the 15th day
of each month beginning August 2000 and ending on May 2001 (the
maturity date). The obligation is represented by a non-interest
bearing conditional promissory note.
(b) The payments on the promissory note are subject to the
realization of the expected financial projections in the
"Business Plan" and achievement of the "Development Milestone
Projection" for the development of Inner G software system by the
subsidiary.
At August 31, 2000, the balance of the conditional promissory note payable
to its subsidiary is $3,830,000.
10
<PAGE> 18
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
Scheduled note payments are as follows:
<TABLE>
<S> <C>
September 15, 2000 US$ 300,000.00
October 15, 2000 US$ 305,000.00
November 15, 2000 US$ 305,000.00
December 15, 2000 US$ 300,000.00
January 15, 2001 US$ 760,000.00
February 15, 2001 US$ 800,000.00
March 15, 2001 US$ 785,000.00
April 15, 2001 US$ 140,000.00
May 15, 2001 US$ 135,000.00
-------------
Total US$3,830,000.00
=============
</TABLE>
NOTE 5 - MINORITY INTEREST
Minority interest in the subsidiary company is 26.7% as of August 31, 2000.
Minority interest consists of the following:
<TABLE>
<S> <C>
5,333,334 shares, common stock @ $.01 par value $ 53,334
Paid-in capital 666
Minority interest share of deficit (127,913)
----------
Total Minority Interest $ (73,913)
==========
</TABLE>
11
<PAGE> 19
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC. AND
MAJORITY OWNED SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
August 31, 2000
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. It is the
intent of the Company to seek a merger with an existing, operating company.
NOTE 7 - WARRANTS AND OPTIONS
There are no warrants and options outstanding to acquire any additional
shares of common stock.
NOTE 8 - OFFICERS ADVANCES
While the company is seeking additional capital through a merger with an
existing Company, an officer of the Company has advanced funds on behalf of the
Company to pay for any costs incurred by it. These funds are interest free.
12
<PAGE> 20
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 2000
<PAGE> 21
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS' REPORT...................................................... 1
ASSETS............................................................................ 2
LIABILITIES AND STOCKHOLDERS' EQUITY.............................................. 3
STATEMENT OF OPERATIONS........................................................... 4
STATEMENT OF STOCKHOLDERS' EQUITY................................................. 5
STATEMENT OF CASH FLOWS........................................................... 6
NOTES TO FINANCIAL STATEMENTS..................................................... 7-11
</TABLE>
<PAGE> 22
JOSEFINA C. DE LA CRUZ, C.P.A.
A PROFESSIONAL CORPORATION
2700 N MAIN STREET, SUITE 990 TEL. NO. (714) 558-8703
SANTA ANA, CA 92705 FAX NO. (714) 558-7940
e-mail address: [email protected]
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Creative Technology & Interactive Entertainment Group, Inc.
Carson City, Nevada
We have audited the accompanying balance sheet of Creative Technology &
Interactive Entertainment Group, Inc., (a Development Stage Company), as of
August 31, 2000 and the related statements of operations, stockholders' equity
and cash flows for the period June 27, 2000 (date of inception) to August 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Creative Technology &
Interactive Entertainment Group, Inc. (A Development Stage Company) as of August
31, 2000 and the results of its operations and cash flows for the period then
ended in conformity with generally accepted accounting principles.
The accompanying financial statement has been prepared assuming the Company will
continue as a going concern. As discussed in Note #6 to the financial statement,
the Company has no established source of revenue. This raises substantial doubt
about its ability to continue as a going concern. The financial statement does
not include any adjustments that might result from the outcome of this
uncertainty.
Josefina C. de la Cruz
Certified Public Accountant
September 19, 2000
1
<PAGE> 23
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
-------------
August 31, 2000
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS
Cash in Bank $ 400
OTHER ASSETS
Investment in Subsidiary (Note 3) 4,361,000
----------
TOTAL ASSETS $4,361,400
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 24
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
-------------
August 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C>
LIABILITIES
CURRENT LIABILITIES
Accrued Expense Payable $ 18,840
Advances From Officers 24,400
-----------
43,240
OTHER LIABILITIES
Notes Payable (Note 7) 3,830,000
-----------
TOTAL LIABILITIES 3,873,240
-----------
STOCKHOLDERS' EQUITY (Note 5)
Common stock, $.001 par value per share
100,000,000 shares authorized;
500,000 shares issued and outstanding 500
Additional Paid-in Capital 499,500
Accumulated loss during the development stage (11,840)
-----------
TOTAL STOCKHOLDERS' EQUITY 488,160
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,361,400
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 25
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
-----------------------
For the Period June 27, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<S> <C>
REVENUE $ 7,000
---------
EXPENSES
General, Selling
and Administrative 18,840
---------
NET PROFIT (LOSS) $ (11,840)
=========
NET LOSS PER SHARE $(0.02368)
=========
AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 500,000
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 26
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
--------------------------------------------
For the Period June 27, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
-------- -------- ----------- ------------
<S> <C> <C> <C> <C>
INCEPTION AT JUNE 27, 2000 0 $ 0 $ 0 $ 0
Stocks issued for cash on
August 31, 2000 500,000 500 499,500
Net loss, June 27, 2000 to
August 31, 2000 (11,840)
-------- -------- -------- --------
BALANCE, AUGUST 31, 2000 500,000 $ 500 $499,500 $(11,840)
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 27
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
-----------------------
For the Period June 27, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (11,840)
Adjustment to reconcile net loss
to net cash provided by operating activities
Increase in accrued expenses 18,840
-----------
CASH PROVIDED BY OPERATING ACTIVITIES 7,000
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in subsidiary (4,361,000)
Proceeds from sale of common shares 500,000
-----------
CASH PROVIDED BY INVESTING ACTIVITIES (3,861,000)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable (Note 7) 3,830,000
Advances from officers 24,400
-----------
CASH PROVIDED BY FINANCING ACTIVITIES 3,854,400
-----------
NET INCREASE IN CASH 400
CASH, BEGINNING OF PERIOD 0
-----------
CASH, END OF PERIOD $ 400
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 28
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on June 27, 2000 under the laws of the State of
Nevada as Creative Technology & Interactive Entertainment Group, Inc. The
Company currently has no operations. The Company is a development stage company
as defined in Financial Accounting Standards Board Statement No. 7. It is
concentrating substantially all of its efforts in raising capital and developing
its business operations in order to generate significant revenues.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
------------
Income taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
(SFAS #109) "Accounting for Income Taxes." A deferred tax asset or
liability is recorded for all temporary differences between financial
and tax reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
7
<PAGE> 29
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
Reporting on Costs of Start-Up Activities
-----------------------------------------
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" provides guidance on the financial reporting of
start-up costs and organization costs. It requires most costs of
start-up activities and organization costs to be expended as incurred.
With the adoption of SOP 98-5, there has been little or no effect on
the company's financial statements.
Loss Per Share
--------------
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share." Basic loss per share is computed by dividing losses available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects per
share amounts that would have resulted if dilutive common stock
equivalents had been converted to common stock. As of August 31, 2000,
the Company had no dilutive common stock such as stock options.
Year End
--------
The Company has selected December 31 as its year-end.
Year 2000 disclosure
--------------------
The Y2K issue had no effect on this Company.
NOTE 3 - INVESTMENT IN SUBSIDIARY
Pursuant to a purchase stock agreement on August 21, 2000 and as stated on
Note 7, the company has investment in a development stage Nevada Company,
Creative Technology and Entertainment Group, Inc. The Company owns 73.3% of the
outstanding voting common stock as of August 31, 2000 of CTE. Detail on the
investment account which is carried at cost is as follows:
8
<PAGE> 30
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
<TABLE>
<CAPTION>
DATE OF PURCHASE DESCRIPTION ACQUISITION COST
---------------- ----------- ----------------
<S> <C> <C>
August 21, 2000 14,000,000 shares, common stock $ 4,354,000
August 31, 2000 666,666 shares, common stock 7,000
-----------
Total investment in subsidiary $ 4,361,000
===========
</TABLE>
NOTE 4 - INCOME TAXES
There is no provision for income taxes for the period ended August 31, 2000
due to the net loss and no state income tax in Nevada, the state of the
Company's domicile and operations. The Company's total deferred tax asset as of
August 31, 2000 is as follows:
<TABLE>
<S> <C>
Net operating loss carry forward $ 11,840
Valuation allowance $ 11,840
Net deferred tax asset $ 0
</TABLE>
The federal net operating loss carry forward will expire on 2020. This
carry forward may be limited upon the consummation of a business combination
under IRC Section 381.
NOTE 5 - STOCKHOLDERS' EQUITY
Common Stock
------------
The authorized common stock of Creative Technology & Interactive
Entertainment Group, Inc. consists of 100,000,000 shares with a par value
of $0.001 per share.
Creative Technology & Interactive Entertainment Group, Inc has no preferred
stock.
On August 31, 2000, the company issued 500,000 shares of its $.001 par
value common stock in consideration of $500,000 in cash.
9
<PAGE> 31
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
NOTE 6 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, nor does it have an established source of revenues sufficient to cover
its operating costs and to allow it to continue as a going concern. It is the
intent of the Company to seek a merger with an existing, operating company.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On August 21, 2000, a stock investment agreement with conditional
promissory note was entered between the Company and Creative Technology and
Entertainment Group, Inc. (CT Entertainment). CT Entertainment sold and issued
70% of its total issued and outstanding shares equivalent to fourteen million
(14,000,000) shares for four million three hundred fifty-four thousand dollars
(US$ 4,354,000). Terms and conditions of the agreement are:
(a) Initial payment was US$ 400,000 and the balance of US$ 3,954,000
payable in (10) monthly consecutive installments on the 15th day of each
month beginning August 2000 and ending on May 2001 (the maturity date). The
obligation is represented by a non-interest bearing conditional promissory
note.
(b) The payments on the promissory note are subject to the realization of
the expected financial projections in the "Business Plan" and achievement
of the "Development Milestone Projection" for the development of Inner G
software system.
At August 31, 2000, the balance of the conditional promissory note payable
is $3,830,000.
10
<PAGE> 32
CREATIVE TECHNOLOGY & INTERACTIVE
ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
Scheduled note payments are as follows:
<TABLE>
<S> <C>
September 15, 2000 US$ 300,000.00
October 15, 2000 US$ 305,000.00
November 15, 2000 US$ 305,000.00
December 15, 2000 US$ 300,000.00
January 15, 2001 US$ 760,000.00
February 15, 2001 US$ 800,000.00
March 15, 2001 US$ 785,000.00
April 15, 2001 US$ 140,000.00
May 15, 2001 US$ 135,000.00
-------------
Total US$3,830,000.00
=============
</TABLE>
NOTE 8 - WARRANTS AND OPTIONS
There are no warrants and options outstanding to acquire any additional
shares of common stock.
NOTE 9 - OFFICERS ADVANCES
While the company is seeking additional capital through a merger with an
existing Company, an officer of the Company has advanced funds on behalf of the
Company to pay for any costs incurred by it. These funds are interest free.
11
<PAGE> 33
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
FINANCIAL STATEMENTS
AUGUST 31, 2000
<PAGE> 34
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITORS" REPORT............................................... 1
ASSETS..................................................................... 2
LIABILITIES AND STOCKHOLDERS" EQUITY....................................... 3
STATEMENT OF OPERATIONS.................................................... 4
STATEMENT OF STOCKHOLDERS" EQUITY.......................................... 5
STATEMENT OF CASH FLOWS.................................................... 6
NOTES TO FINANCIAL STATEMENTS.............................................. 7-10
</TABLE>
<PAGE> 35
JOSEFINA C. DE LA CRUZ, C.P.A.
A PROFESSIONAL CORPORATION
2700 N MAIN STREET, SUITE 990 TEL. NO. (714) 558-8703
SANTA ANA, CA 92705 FAX NO. (714) 558-7940
E-MAIL ADDRESS: [email protected]
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS" REPORT
----------------------------
Board of Directors
Creative Technology & Entertainment Group, Inc.
Carson City, Nevada
We have audited the accompanying balance sheet of Creative Technology &
Entertainment Group, Inc., (a Development Stage Company), as of August 31, 2000
and the related statements of operations, stockholders' equity and cash flows
for the period May 19, 2000 (date of inception) to August 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 audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Creative Technology &
Entertainment Group, Inc. (A Development Stage Company) as of August 31, 2000
and the results of its operations and cash flows for the period then ended in
conformity with generally accepted accounting principles.
The accompanying financial statement has been prepared assuming the Company will
continue as a going concern. As discussed in Note #5 to the financial statement,
the Company has no established source of revenue. This raises substantial doubt
about its ability to continue as a going concern. The financial statement does
not include any adjustments that might result from the outcome of this
uncertainty.
Josefina C. de la Cruz
Certified Public Accountant
September 19, 2000
1
<PAGE> 36
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
-------------
August 31, 2000
ASSETS
------
<TABLE>
<S> <C>
CURRENT ASSETS
Cash in Bank $ 106,388
Advances to Employees 12,387
Prepaid Rent 8,575
-----------
TOTAL CURRENT ASSETS 127,350
-----------
PROPERTY AND EQUIPMENT
Office Equipment 13,014
Accumulated Depreciation (434)
-----------
TOTAL PROPERTY AND EQUIPMENT, NET 12,580
-----------
OTHER ASSETS
Notes Receivable (Note 7) 3,830,000
Escrow Deposit 25,000
Security Deposit 7,300
-----------
TOTAL OTHER ASSETS 3,862,300
-----------
TOTAL ASSETS $ 4,002,230
===========
</TABLE>
See accountant's report and accompanying notes.
2
<PAGE> 37
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
-------------
August 31, 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts Payable $ 44,554
Payroll Taxes Payable 21,752
-----------
TOTAL LIABILITIES 66,306
-----------
STOCKHOLDERS' EQUITY (Note 4)
Common stock, authorized 100,000,000 shares
of $.01 par value, 20,000,000 shares issued and
outstanding at August 31, 2000 200,000
Paid-in Capital 4,215,000
Accumulated deficit (479,076)
-----------
TOTAL STOCKHOLDERS' EQUITY 3,935,924
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,002,230
===========
</TABLE>
See accountant's report and accompanying notes.
3
<PAGE> 38
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF OPERATIONS
-----------------------
For the Period May 19, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<S> <C>
REVENUE $ 0
---------
EXPENSES
General, Selling and
Administrative Expenses 478,642
Depreciation 434
---------
Total Expenses 479,076
---------
NET LOSS $(479,076)
=========
</TABLE>
See accountant's report and accompanying notes.
4
<PAGE> 39
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Period May 19, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT
----------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
INCEPTION AT MAY 19, 2000 0 $ 0 $ 0 $ 0
Stocks issued for cash and
promissory note on August 31, 2000 14,000,000 140,000 4,214,000
Stocks issued for services
on August 30, 2000 4,000,000 40,000
Stocks issued for services
on August 30, 2000 2,000,000 20,000 1,000
Net loss, May 19, 2000 to August 31, 2000 $ (479,076)
---------- ---------- ---------- ----------
BALANCE, AUGUST 31, 2000 20,000,000 $ 200,000 $4,215,000 $ (479,076)
========== ========== ========== ==========
</TABLE>
See accountant's report and accompanying notes.
5
<PAGE> 40
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
For the Period May 19, 2000 (Date of Inception) to August 31, 2000
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (479,076)
Adjustment to reconcile net loss to net
cash provided by operating activities
Depreciation 434
Increase in current assets (20,962)
Increase in current liabilities 66,306
-----------
NET CASH USED IN OPERATING ACTIVITIES (433,298)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES
Issuance of common shares 4,415,000
Escrow and other deposits (32,300)
Purchase of equipment (13,014)
-----------
NET CASH FROM INVESTING ACTIVITIES 4,369,686
-----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes receivable (3,830,000)
-----------
NET CASH FROM FINANCING ACTIVITIES (3,830,000)
-----------
NET INCREASE IN CASH 106,388
CASH, BEGINNING OF PERIOD 0
-----------
CASH, END OF PERIOD $ 106,388
===========
</TABLE>
See accountant's report and accompanying notes.
6
<PAGE> 41
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
NOTE 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was organized on May 19, 2000 under the laws of the State of
Nevada as Creative Technology & Entertainment Group, Inc. It is currently
engaged in software development. The Company is a development stage company
as defined in Financial Accounting Standards Board Statement No. 7. It is
concentrating substantially all of its efforts in raising capital and
developing its business operations in order to generate significant
revenues.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
-----------------
The Company records income and expenses on the accrual method.
Estimates
---------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
Income Taxes
------------
Income taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109
(SFAS #109) "Accounting for Income Taxes." A deferred tax asset or
liability is recorded for all temporary differences between financial
and tax reporting. Deferred tax expense (benefit) results from the net
change during the year of deferred tax assets and liabilities.
7
<PAGE> 42
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
Reporting on Costs of Start-Up Activities
-----------------------------------------
Statement of Position 98-5 ("SOP 98-5"), "Reporting on the Costs of
Start-Up Activities" provides guidance on the financial reporting of
start-up costs and organization costs. It requires most costs of
start-up activities and organization costs to be expended as incurred.
With the adoption of SOP 98-5, there has been little or no effect on
the company's financial statements.
Loss Per Share
--------------
Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS #128) "Earnings Per
Share". Basic loss per share is computed by dividing losses available
to common stockholders by the weighted average number of common shares
outstanding during the period. Diluted loss per share reflects per
share amounts that would have resulted if dilutive common stock
equivalents had been converted to common stock. As of August 31, 2000,
the Company had no dilutive common stock such as stock options
Year End
--------
The Company has selected December 31 its year-end.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period ended August 31, 2000
due to the net loss and no state income tax in Nevada, the state of the
Company's domicile and operations. The Company's total deferred tax asset as of
August 31, 2000 is as follows:
<TABLE>
<S> <C>
Net operation loss carry forward $ 479,076
Valuation allowance $ 479,076
Net deferred tax asset $ 0
</TABLE>
The federal net operating loss carry forward will expire on 2020. This
carry forward may be limited upon the consummation of a business combination
under IRC Section 381.
8
<PAGE> 43
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
NOTE 4 - STOCKHOLDERS" EQUITY
Common Stock
------------
The authorized common stock of Creative Technology & Entertainment Group,
Inc. consists of 100,000,000 shares with a par value of $0.01 per share;
20,000,000 shares of stock are issued and outstanding as of August 31,
2000.
NOTE 5 - GOING CONCERN
The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course
of business. However, the Company fully depends upon significant cash from
investors to cover its operating costs and to allow it to continue as a
going concern. A Stock Investment Agreement with Conditional Promissory
Note has been entered into with Creative Technology & Interactive
Entertainment Group, Inc. for ensuring continuous cash in-flow to enable
the realization of project timeliness. Details of the agreement are under
Note 7.
NOTE 6 - RELATED PARTY TRANSACTIONS
There are no related party transactions at August 31, 2000.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
On August 21, 2000, a stock investment agreement with conditional
promissory note was entered between the Company and Creative Technology &
Interactive Entertainment Group, Inc. (CTIE). CTIE acquired 70% of its total
issued and outstanding shares of the Company consisting of fourteen million
(14,000,000) shares for four million three hundred fifty-four thousand dollars
(US$ 4,354,000). Terms and conditions of the agreement are:
(a) Initial payment was US$ 400,000 and the balance of US$ 3,954,000
payable in (10) monthly consecutive installments on the 15th day of
each month beginning August 2000
9
<PAGE> 44
CREATIVE TECHNOLOGY & ENTERTAINMENT GROUP, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENTS
-----------------------------
August 31, 2000
and ending on May 2001 (the maturity date). The obligation is
represented by a non-interest bearing conditional promissory note.
(b) The payments on the promissory note are subject to the realization of
the Company's expected financial projections in the "Business Plan"
and achievement of the "Development Milestone Projection" for the
development of Inner G software system.
At August 31, 2000, the balance of the conditional promissory note
receivable is $3,830,000.
<TABLE>
<CAPTION>
Payment Date Amount
------------ ------
<S> <C>
September 15, 2000 $ 300,000
October 15, 2000 305,000
November 15, 2000 305,000
December 15, 2000 300,000
January 15, 2001 760,000
February 15, 2001 800,000
March 15, 2001 785,000
April 15, 2001 140,000
May 15, 2001 135,000
-----------
Total $ 3,830,000
===========
</TABLE>
NOTE 8 - WARRANTS AND OPTIONS
There are no warrants and options outstanding to acquire any additional
shares of common stock.
10
