10KSB 1 f10k_dec2001entertech.txt FORM 10-KSB - 12/31/01 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM l0-KSB ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year ended: December 31, 2001 Commission File No. 0-21275 ENTER TECH CORP. ----------------------------------------------------------------- (Exact Name of Small Business Issuer as specified in its Charter) (Formerly Known as Walnut Capital, Inc.) NEVADA 84-1349553 ------------------------------- ------------------------ (State or other Jurisdiction of (I.R.S. Employer Identi- Incorporation or Organization) fication Number) 430 East 6th Street, Loveland, Colorado 80537 ----------------------------------------------------------- (Address of principal executive offices including zip code) (970) 669-5292 ---------------------------------------------- Issuer's Telephone Number, Including Area Code Securities Registered Pursuant to Section 12(b) of the Act: None. Securities Registered Pursuant to Section 12(g) of the Act: Common Stock, $.0001 Par Value Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-8 is not contained in this Form, and no disclosure will be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X] The aggregate market value of the Issuer's common stock held by non-affiliates as of April 10, 2002 (valued at the average of the bid and asked price as of April 10, 2001) was $927,474. The Issuer had no revenues in its most recent fiscal year. As of April 10, 2002, a total of 17,089,984 shares of common stock were outstanding. Documents incorporated by reference. There are no (1) annual report to security holders; (2) proxy or information statements; or (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act") incorporated by reference herein. Traditional Small Business Disclosures Format (Check one): Yes No X --- --- TABLE OF CONTENTS Page ---- Item 1: Description of Business.......................................... 3 Item 2: Description of Property ......................................... 7 Item 3: Legal Proceedings................................................ 7 Item 4: Submission of Matters to a Vote of Security Holders.............. 7 Item 5: Market for Common Equity and Related Matters..................... 7 Item 6: Plan of Operation................................................ 10 Item 7: Financial Statements............................................. 11 Item 8: Changes in and Disagreements with Accountants on Accounting Financial Disclosure ................................. 27 Item 9: Directors and Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.............................................. 27 Item 10: Executive Compensation........................................... 28 Item 11: Security Ownership of Certain Beneficial Owners and Management............................................ 29 Item 12: Certain Relationships and Related Transactions................... 30 Item 13: Exhibits and Reports on Form 8-K................................. 31 Signatures................................................................. 32 2 ITEM 1. DESCRIPTION OF BUSINESS GENERAL AND HISTORY Enter Tech Corporation. (the "Company"), formerly known as Walnut Capital, Inc. was incorporated on July 1, 1996, under the laws of the State of Nevada, to engage in any lawful corporate undertaking, including, but not limited to, selected mergers and acquisitions. The Company has been in the developmental stage since incorporation and has no active business operations to date. The Company's offices are located at 430 East 6th Street, Loveland, Colorado 80537 and its telephone number is (970) 669-4918. In October 1996, the Company filed a registration statement with the Securities and Exchange Commission on Form 10-SB, whereby it registered its common stock under Section 12(g) of the Securities Exchange Act of 1934, as amended (the "34 Act"). On June 2, 1998, the Company completed a merger of the Company and Links, Ltd., a Wyoming corporation, whereby the Company was the surviving entity. Pursuant to the Articles of Merger filed in the respective States of Wyoming and Nevada, the Company's name was changed from Walnut Capital, Inc. to Enter Tech Corporation to more accurately describe the proposed business of the Company. Following the merger, the Company attempted to complete the development of a prototype of a proposed kiosk, or vending machine, through which Links had previously planned to market computer software, music and possibly digital video products stored on disks or computer hard drives. The prototype eventually became obsolete and could not be mass-produced on terms commercially favorable to the Company. During the first quarter of 2000, the Company moved to acquire and provide additional kiosk-related technologies, services and products through its corporate acquisitions of Shopping mall Online, Inc. and Wavepower, Inc. which are hereinafter discussed. In October of 2000, the Company revised its business plan relative to the proposed kiosk operations. It entered into agreements with Hitdisc.com, Inc. (Hitdisc") and Northern Communications Group, Inc. (NCG"). The licensing agreement with Hitdisc provides that: (1) the Company will purchase and place the music kiosk manufactured by Hitdisc; and (2) Hitdisc will manage the operational aspects of the kiosks, including royalties, software programming and content updating. The Northern Communications Group, Inc. will provide the necessary communication services and management for the installed kiosks under a joint venture agreement with the Company. See Proposed Business Operations below. During late 1999 and early 2000, the Company negotiated with the Reserve Foundation Trust ("Trust") for equity capital to finance the Company's proposed operations. On March 15, 2000, Enter Tech entered into a stock purchase and subscription agreement with the Trust under which it was to purchase 6,000,000 restricted shares of Enter Tech common stock in exchange for cash of $10 million. When the agreement was signed, the Trust provided Enter Tech with $50,000 in interim debt financing. That amount was subsequently increased to a total of $250,000. On May 4, 2000, the Trust indicated that all conditions to the stock purchase had been satisfied and that it would go forward with providing the $10 million in funds to Enter Tech. As of June 12, 2000, $600,000 of additional funds had been received making a total amount received from the Trust of $850,000. At this time the Company was informed by the Trust that it would not be able to complete the scheduled investments as provided under the agreement. After extensive discussions with the Trust in August of 2000 the Company instructed its counsel to take appropriate action to protect the Company's best interests. As of the date hereof, the Trust and the Company are in the process of negotiating a settlement on all issues relating to the stock purchase agreement and the Trust's default thereunder. It is anticipated that, if completed, the settlement will result in the Trust acquiring common stock of the Company in an amount materially less than the 6,000,000 shares for the $850,000 previously invested and an additional investment materially less than the $9,150,000 remaining amount due under the agreement. Although the Company has issued a stock certificate for the 6,000,000 shares to be purchased by the Trust, no shares have or will be delivered to the Trust until the issues between the Trust and the Company have been resolved. 3 On January 7, 2000, the Company, Shopping Mall Online, Inc. ("SMO"), a Washington corporation, and Robert Pratt ("Pratt") and the Company entered into an agreement (the "Agreement"), pursuant to which, among other things, the Company acquired 80% of the outstanding common stock of SMO from Pratt. SMO is developing a concept of Internet shopping and related E-commerce technology. The consideration for the acquisition was 2,400,000 shares of common stock of the Company. This acquisition was made, in part, to provide a marketing outlet for the Company's music kiosk which was then still under development. It was also made in anticipation that the then on-going negotiations with the Reserve Foundation Trust would result in the acquisition of capital to fund the SMO business and the kiosk project. In October of 2000, after the default of the Trust in its capital investments and the inability of the Company to acquire a sufficient amount of additional capital, the Company, SMO and Mr. Pratt agreed to substantially rescind the Company's acquisition of the SMO. The Company returned 80% of SMO's then outstanding stock to Mr. Pratt and received back from him 1,920,000 shares of the Company's common stock. The Company retains 20% of the then outstanding shares of SMO's stock and Mr. Pratt kept 480,000 shares of the Company. Mr. William H. Carpenter, Jr., who had been appointed to the Company's Board of Directors in September of 2000 as SMO's designated nominee, resigned from that position. On February 8, 2000, the Company signed a non-binding letter of intent with Wavepower, Inc., which contemplated the acquisition by the Company of 80% of the outstanding stock of WavePower, Inc., a development stage company intending to develop a network which would move traditional computer applications out of the conventional personal computer and onto a central network which would allow a user to access the power, applications and connectivity of a series of networked computers from their individual terminals. The Company anticipated that equity capital would be acquired from the Reserve Trust Foundation to finance the development activities of Wavepower and the Trust made the Company's acquisition of Wavepower one of the conditions to its obligation under its stock purchase agreement with the Company. On April 19, 2000 the Company acquired 80% of the outstanding stock of Wavepower in exchange for 5,000,000 shares of its common stock and an option to purchase up to 3,000,000 shares of the Company's authorized Preferred Stock over a three-year term ending April 30, 2003 at $.001 per share. The option was to be exercisable increments over its term subject to Wavepower meeting stated amounts of net pre-tax profits. After the acquisition, management of the Company determined that the assets and project of Wavepower were not as represented. On September 12, 2000 Enter Tech Corporation notified management of WavePower of the formal rescission of the Reorganization Agreement dated April 19, 2000, citing several material misrepresentations as to the intellectual property owned by WavePower, the status of the development of Wavepower products and services, the ability of WavePower to bring its products and services to market and the overall originality and viability of the WavePower concept. The letter also served as a demand for return of all stock and funds issued pursuant to that agreement as the stock was not validly issued due to the lack of value in the consideration received from the shares. The transfer agent has been notified that all shares involved in this transaction are not to be transferred. The certificate for the 5,000,000 shares of the Company's common stock has not been returned to the Company. Future litigation may be required to determine the validity of their issuance and status. On June 6, 2000, Enter Tech entered in agreements with a consortium of companies to facilitate development of markets and revenue sources, strategic development partners, business intelligence, investor relations and public relations efforts on a global basis. The Company issued shares of restricted stock to the following in exchange for their promise to perform services of the described natures during the 12-18 month period following the execution of the agreements. Information on these stock issuances is set forth in the following table: PARTY NUMBER OF SHARES NATURE OF SERVICES The Challenge Limited 900,000 shares Development of Latin American markets, strategic partners and affiliations Profile Venture, Ltd. 800,000 shares Development of Pacific Rim Markets, strategic partners and Affiliations 4 Skyline Marketing Associates, Ltd. 825,000 shares Developments of European Union markets, strategic Partners and affiliations Wall Street Relations Group 300,000 shares Investor and Public Relations Services California Business 300,000 shares Business Information and Intelligence, Inc. Intelligence services On September 13, 2000, the Company formally notified each of these five companies that their contract was canceled due lack of performance and other potential legal issues and demanded that all of the 3,125,000 shares of restricted common stock be returned to the Company. None of the shares have been returned as of the date of this 10-KSB. The transfer agent has been notified that all shares involved in this transaction are not to be transferred. It is the Company's position that these shares were not validly issued. Future legal action may be required to determine the validity of these shares. On July 21, 2000, Enter Tech was not able to meet payroll because of the Funding problems reported by the Reserve Foundation Trust. The Company began aggressively seeking other sources of funding to continue its operations while the issue with the Reserve Foundation Trust was solved or other substantial funding sources were found. In order to continue operations, the Company approached the employees with an option to be paid minimum wage in cash with the remainder of their salaries being issued in S-8 stock. Qualified employees in general agreed to this method of payment. The Company filed a Registration Statement on Form S-8 on September 12, 2000 in the total aggregate amount of 58,098 shares. Those shares were issued to eight employees as compensation for the period ending September 30, 2000. On August 2, 2000 Enter Tech entered in an agreement with Profile Venture, Ltd. to establish several possible investment groups or partners for immediate funding needs of the company. The management of Profile agreed to enter into a subscription agreements for a total of one million dollars in the next ten days for two million shares of Enter Tech restricted stock. Due to the urgency of the financial situation and the apparent favorable relationship with Profile management, the board concluded that sending certificates for the stock prior to having an executed subscription agreement was reasonable, as Profile management indicated that the stock would be held in escrow until the funds were released. Management of Profile then presented a subscription agreement with unacceptable terms to Enter Tech management that was immediately rejected. Profile indicated that this was only a draft agreement, but as further due diligence was completed, Enter Tech found that an agreement had already been consummated and that funds for 100,000 shares at $0.60 per share had been exchanged between Profile and a third party. The funds resulting from that transaction were not delivered to Enter Tech. The company immediately demanded delivery of the funds and all remaining stock. Profile management returned all but 270,000 shares and the 100,000 shares that had been sold to the third party. On further investigation Enter Tech found that these restricted shares were committed as part of this contract as an escrow agreement held against registration of the stock for public sale. The management and legal counsel for Enter Tech are working towards a solution in this matter. On October 13, 2000, Enter Tech Corporation entered into a joint venture agreement with Northern Communications Group, Inc. (NCG) to provide "last mile" communications solutions and management for connectivity of the Hitdisc music kiosks and other projects requiring communications expertise. NCG has also been developing a high speed, wireless Internet Service Provider (ISP) system that will be deployed as part of the last mile solutions, not only for the kiosk projects, but for other business to business market segments. On October 27, 2000, Enter Tech Corporation entered into a licensing agreement with Hitdisc.com, Inc. whereas Enter Tech will capitalize the production of the Hitdisc "ZapDisc" (TM) kiosk and assist in the placement of the equipment. Hitdisc will provide all management of operational aspects of the kiosk, including royalties, software programming, and daily information updates. As part of the agreement, NCG will be responsible for communications for kiosks purchased and deployed by Enter Tech as part of the licensing agreement. 5 On December 19, 2000, Enter Tech Corporation formed QuickGold 2000, LLC, a limited liability company, registered in the State of Colorado for future marketing purposes that may necessitate a joint venture -type of operational agreement. As of the date of this filing, no activities or members have been added to the LLC. As of July, 2001 Enter Tech Corporation entered into a license agreement with Global Marketing Consultants for the marketing rights to the QuickGold concept. PROPOSED BUSINESS OPERATIONS The Company is a successor to Links, Ltd. a Wyoming corporation, and neither entity has had revenues from operations from its inception. Links, Ltd. was incorporated for the purpose of developing kiosks or vending machines that would market computer software, music and possibly digital video stored on discs. For several years, the Company unsuccessfully attempted to develop a commercially viable kiosk to provide such services. In the beginning of the year 2000, the Company attempted to provide additional kiosk-related technologies and services through its acquisitions of Shopping Mall Online, Inc. and Wavepower, Inc. In the third quarter of 2000, the Company management elected to change their business plans to encompass a third-party agreement with HitDisc.com, Inc., a manufacturer of a kiosk compatible with the concept and design of the company. The agreement calls for Enter Tech to purchase and deploy the Hitdisc kiosks and to provide the communications infrastructure for those units. Hitdisc.com, Inc. will provide management for the entire kiosk system including management of royalties, software development and all normal operational aspects. To facilitate communications infrastructure for this agreement and for other market segments that the Company has targeted, Enter Tech entered into a joint venture agreement with Northern Communications Group, Inc. ("NCG") on October 13, 2000, whereas they will be the exclusive provider of communications needs for Enter Tech projects including all communications installation and management for the Hitdisc kiosk purchased and deployed by Enter Tech. We cannot assure you that we will ever be able to develop a commercially successful kiosk, nor can we assure you that any kiosk concept licensed from another company will be a commercially viable product. Hitdisc is currently continuing its beta tests prior to attempting further market penetration. The Hitdisc project has been put in suspense for lack of a beneficial beta test. The Company has since changed its focus to facilitate the infrastructure and marketing of high-speed Internet access, wireless ISP and related appliances, equipment, software and services in the business-to-business market segment. The Company has researched and projected costs for installation and operation of a basic high-speed Internet access for the hospitality industry. NCG has researched and projected costs of equipment acquisition for this market segment On June 15, 2001, the Company licensed its portion of the Joint Venture Agreement with Northern Communications Group, Inc. (NCG) to Global Marketing Consultants (which is wholly owned by D. William Thomas, a director and President of the Company. Under the agreement, Enter Tech has licensed their 50% position in the Joint Venture with NCG in exchange for 40% of the net income produced by the Joint Venture. Global will retain 10% of the net income for its management, sales and marketing efforts. The Joint Venture intends to market its' Custom-Room-Connect (TM) high speed Internet access, web appliance and Video on Demand systems to multi-unit dwellings and the hospitality industry. The Custom-Room-Connect (TM) system provides unique solutions to the hospitality and Multi-Unit Dwellings that involve a variety of high-speed Internet access systems, certain co-marketing and revenue sharing models for web appliances, advertising sales and unique Video on Demand systems that have VCR functionality. As part of the agreement, Global will sell, and manage the Custom-Room-Connect (TM) program in conjunction with NCG. Enter Tech will participate when needed in certain marketing and sales efforts as defined by the Joint Venture partners. Global was formed in 1988 to provide marketing expertise to new businesses. The Company has specialized in market research and channel sales implementation. GMC has also consulted to companies for funding methodologies and business expansion. Management felt that licensing their portion of the joint venture may be the right approach to fulfilling the immediate needs and opportunities that the Joint Venture has to penetrate the market with its unique systems. On February 11, 2002 Global Marketing Consultants notified Enter Tech Corporation that it was terminating its Comprehensive License Agreement due to the many misinterpretations that exist in the Agreement. Currently, Global and the Company are restructuring the License Agreement to remove any misunderstanding that currently exist. The new agreement should be in place within the next 30 days. 6 The Company intends to re-establish its infrastructure over the next 120 days so that it may participate with the Joint Venture as a marketing contractor or in other such role that would increase the Joint Venture's revenue. Enter Tech has been able to establish several potential clients for the Custom-Room-Connect program in Europe and Latin America and intends to pursue them to broker potential foreign licenses for use of the system. COMPETITION The area of business related to high-speed Internet access, wireless Internet Service Providers (ISP) related telecommunications equipment, and related software and services is crowded with many vendors and marketers, ranging from small to some of the largest multi-national companies. There can be no guarantee that the Company will be able to successfully market any product or service it may develop or to become profitable. At this time, the Company has no patent or proprietary protection with respect to any of its concepts and there is nothing to prevent anyone else from pursuing these potential lines of business. EMPLOYEES As of December 31, 2001, the Company had no full-time employees. 7 ITEM 2. DESCRIPTION OF PROPERTY On July 1, 2000 Enter Tech entered into a lease agreement to pay $3,000 per month for approximately 2,637 square feet of office space located at 1031 N. Lincoln Avenue, Loveland, Colorado for a term of 5 years. The company has not yet occupied the space. The Company is still currently occupying space at 430 East 6th Street, Loveland, Colorado on a month-to-month basis for a rental fee of $1,500 per month. The Company has not been able to operate efficiently out of the space at 430 East 6th Street,. However, it is still anticipated that the facilities on Lincoln Avenue will provide for adequate space for the projected term of the lease. The Company intends to move into these new facilities when such becomes practicable, depending upon availability of additional capital. The Company has still not finalized its plans for occupancy for the new facility. The Company reached an agreement with Global Marketing for Global to assume the lease on 1031 Lincoln St and 430 E. 6th St. ITEM 3. LEGAL PROCEEDINGS Except as set forth herein the Company is not a party to any material pending legal proceedings; nor are any such proceedings involving the Company contemplated by a governmental authority to the knowledge of the Company. On February 24, 2000, the Company initiated a civil action by it against Jerry Stiles, a/k/a Gerald C. Stiles, a former officer of and consultant to the Company, in the District Court of Douglas County, Colorado and Stiles answered with a counterclaim as described in the Form 10-QSB filed for the quarter ending March 31, 2000. As of December 31, 2000, there has been no material change in the status of this suit. On May 25, 2000, claimant David M. Matus in District Court of Larimar County, Colorado named Enter Tech as a party in a suit along with seven other defendants as described in the Form 10-QSB for the quarter ended June 30, 2000. There has been no discovery to date and the case is its early stages, we cannot predict the outcome of this litigation at this time. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fiscal year 2000 through the solicitation of proxies or otherwise. ITEM 5. MARKET FOR COMMON EQUITY AND RELATED MATTERS. The Company's common stock has been quoted on the OTC Bulletin Board under the symbol ENTR since May 1999. To the knowledge of the Company there have been few trading transactions in its common stock. The following table sets forth high and low bid prices of the common stock of the OTC Bulletin Board for the periods indicated. The bid prices represent prices between dealers, which do not indicate retail markups, markdowns or commissions and the bid prices may not represent actual transactions. Period High Low -------- ------- ------ January 2000 - March 2000 $5.0000 $ .75 April 2000 - June 2000 $3.7500 $1.125 July 1990 - September 2000 $1.6250 $ .25 October 2000 - December 2000 $0.2812 $ .80 January 2001 - March 2001 $5.1100 $ .057 April 2001- June 2001 $0.1000 $ .055 June 2001 - September 2001 $0.0900 $ .040 October 2001 - December 2001 $0.0600 $ .020 The number of record holders of common stock of the Company as of March 31, 2002 was 77. 8 The holders of common stock are entitled to receive dividends as may be declared by the Board of Directors out of funds legally available therefore. The Company has never declared any dividend. It does not anticipate declaring and paying any cash dividend in the foreseeable future. The Company did not sell any securities during the period from January 1, 2001 through March 31, 2002 without registration under the Securities Act of 1933. ITEM 6. PLAN OF OPERATION RESULTS OF OPERATIONS During the period from the Company's inception on July 1, 1996 until June 2, 1998 the Company engaged in no significant operations other than the search for possible acquisition candidates. The Company received no revenues during this period other than a limited amount of interest income. Since the Company's acquisition of Links, Ltd., the Company has focused on developing a market for its products and on raising capital. The Company currently remains in the development stage and has generated no revenues as of December 31, 2001. LIQUIDITY AND CAPITAL RESOURCES As of the end of the reporting period, the Company had no material cash or cash equivalents. There was no significant change in working capital during this fiscal year other than defined below. As of December 31, 2000, Enter Tech had no material commitments for capital expenditures and no plans to pay dividends to its shareholders. Previously, Enter Tech entered into a subscription agreement with the Reserve Foundation Trust which the Company can only assume as of the end of the reporting period, will not be funded. Enter Tech anticipates that it may not be able to maintain a development schedule that may still move the projects forward and Enter Tech will be dependent upon the acquisition of additional capital to fund its operations over the next 12-month period. The Company previously contemplated the option of acquiring a "kiosk" company that has already developed some or all of the concepts conceived by the Company. On October 27, 2000 Enter Tech entered into a licensing agreement with Hitdisc.com, Inc., a manufacturer of a kiosk compatible with the concept and design of the company. The agreement calls for Enter Tech to purchase and deploy the Hitdisc kiosks and to provide the communications infrastructure for those units in conjunction with NCG. Hitdisc.com, Inc. will provide management for the entire kiosk system including management of royalties, software development and all normal operational aspects. Northern Communications Group, Inc. entered into a joint venture agreement with Enter Tech on October 13, 2000. The agreement as amended to date provides that they will be the exclusive provider of communications needs for Enter Tech projects including all communications installation and management for the Hitdisc kiosk purchased and deployed by Enter Tech. We cannot assure you that we will ever be able to develop a commercially successful kiosk, nor can we assure you that any kiosk concept licensed from another company will be a commercially viable product. There is no assurance that the kiosks will function as planned by Enter Tech and Hitdisc, or can be manufactured at a unit cost commercially favorable to Enter Tech. We cannot assure you that Enter Tech will be able to generate any revenues from sales or that any sales will be made of kiosks or from kiosk vending operations. Any and all agreements were terminated for lack of any viable beta test information. NCG's technology is designed to enhance the kiosk operational design and provide potential customers via high speed Internet access and wireless connectivity in the mall or retail location in addition to the business to business market segment NCG has targeted as part of their marketing plan. The agreement with NCG may enhance the effectiveness of the Hitdisc kiosk commerce activity and vice versa. Additional employees will be required to continue the development process of the services provided by NCG, most of who are expected to be technical professionals. However it is anticipated that these individuals will be in the employ of NCG, not Enter Tech. We are currently evaluating the projected capital needs for the deployment of the kiosk in conjunction with Hitdisc.com, Inc. and for operation of the agreement with NCG. It is anticipated that operational revenues generated by the NCG joint venture may support the operations of the joint venture. Some currently undefined and unknown circumstances may require additional capital to support future growth. No assurances can be given that these additional funds would be available if necessary. 9 ITEM 7. FINANCIAL STATEMENTS INDEX TO FINANCIAL STATEMENTS ENTER TECH CORP. (A Development Stage Company) FINANCIAL STATEMENTS with REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Report of Independent Certified Public Accountants 11 Financial Statements: Balance Sheet 12 Statements of Operations 13 Statement of Changes in Stockholders' (Deficit) 14 Statements of Cash Flows 15 Notes to Financial Statements 16 10 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Enter Tech Corp. Loveland, CO We have audited the accompanying balance sheet of Enter Tech Corp. (a development stage company) as of December 31, 2001, and the related statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 2001 and 2000 and the period from August 18, 1997 (date of inception) through December 31, 2001. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Enter Tech Corp. (a development stage company) as of December 31, 2001, and the results of its statements of operations, stockholders' (deficit) and cash flows for the years ended December 31, 2001 and 2000 and the period from August 18, 1997 (date of inception) through December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 1, the Company has sustained operating losses since inception and has a net capital deficiency that raise substantial doubts 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. /s/ Schumacher & Associates, Inc. Schumacher & Associates, Inc. Certified Public Accountants 2525 Fifteenth Street, Suite 3H Denver, Colorado 80211 April 5, 2002 11
ENTER TECH CORP. ---------------- (A Development Stage Company) BALANCE SHEET December 31, 2001 ASSETS Current Assets: $ - ----------- Total Current Assets - ----------- Equipment, net of accumulated depreciation of $12,296 10,411 Other assets 48 ----------- TOTAL ASSETS $ 10,459 =========== LIABILITIES AND STOCKHOLDERS' (DEFICIT) Current Liabilities: Accounts payable and accrued expenses 341,965 Stock compensation payable 27,450 Customer deposits 60,000 Notes payable, related parties 1,143,544 Notes payable, other 250,000 ----------- Total Current Liabilities 1,822,959 ----------- TOTAL LIABILITIES 1,822,959 ----------- Commitments and contingencies (Notes 1,2,4,5,6,7,8,9,10,11,and 12) - Stockholders' (Deficit): Preferred stock, $.0001 par value 5,000,000 shares authorized, 1,000,000 issued and outstanding 100 Common stock, $.0001 par value 100,000,000 shares authorized, 17,089,984 issued and outstanding 1,709 Additional Paid In Capital 4,982,584 Stock subscriptions receivable, services (115,120) Accumulated (Deficit) (6,681,491) ----------- (1,812,218) Treasury Stock, 2,825,000 shares (282) ----------- TOTAL STOCKHOLDERS' (DEFICIT) (1,812,500) ----------- TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) $ 10,459 ===========
The accompanying notes are an integral part of the financial statements. 12
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF OPERATIONS For the Period from August 18, 1997 (date of inception) Year Ended Year Ended through December 31, December 31, December 31, 2001 2000 2001 ----------- ------------ ------------- Revenue $ - $ - $ - ----------- ----------- ----------- Expenses: Salaries - 117,489 117,489 Depreciation 4,541 6,935 12,295 Management fees - - 30,000 Supplies 19,499 24,430 Professional fees 414,881 812,537 1,488,254 Rent 49,615 71,117 149,877 Sales promotion - - 20,500 Travel - 130,529 173,873 Telephone 2,259 21,495 38,872 Stock for services 843,176 1,873,673 3,974,923 Other 7,903 269,902 298,612 Write down of carrying value of Technology and License Agreement - - 227,943 ----------- ----------- ----------- Total Operating Expenses 1,322,375 3,323,176 6,557,068 ----------- ----------- ----------- Net Operating (Loss) (1,322,375) (3,323,176) (6,557,068) Other Income (Expense): Interest income - 5 5 Interest expense (90,727) (33,701) (124,428) ----------- ----------- ----------- Net (Loss) $(1,413,102) $(3,356,872) $(6,681,491) ----------- ----------- ----------- Per Share $ (.08) $ (.31) $ (.58) =========== =========== =========== Weighted Average Shares Outstanding 17,089,984 10,743,108 11,488,566 ========== =========== ===========
The accompanying notes are an integral part of the financial statements. 13
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) For the Period from August 18, 1997 (date of inception) through December 31, 2001 Subscriptions Additional Preferred Stock Common Stock Receivable Paid-in Accumulated No./Shares Amount No./Shares Amount Services Capital (Deficit) Total ---------- ------ ---------- ------- ------------ ---------- ----------- ------ Balance at August 18, 1997 - $ - - $ - $ - $ - $ - $ - Common stock issued for cash, at inception, at $.01 per share - - 2,400,000 240 - 235,684 - 235,924 Net loss for the period ended December 31, 1997 - - - - - - (237,924) (237,924) --------- ---- ---------- ------ --------- ----------- ------------ ------------ Balance at December 31, 1997 - - 2,400,000 240 - 235,684 (237,924) (2,000) Recapitalization - - 1,250,000 125 - (16,046) - (15,921) Net loss for the year ended December 31, 1998 - - - - - - (115,928) (115,928) --------- ---- ---------- ------ --------- ----------- ----------- ----------- Balance at December 31, 1998 - - 3,650,000 365 - 219,638 (353,852) (133,849) Common stock issued for services at $.81 - - 200,000 20 - 161,980 - 162,000 Net loss for the year ended December 31, 1999 - - - - - - (1,557,665) (1,557,665) --------- ---- ---------- ------ --------- ----------- ------------ ------------ Balance at December 31, 1999 - - 3,850,000 385 - 381,618 (1,911,517) (1,529,514) 14 Preferred stock issued for services 1,000,000 100 - - - 249,900 - 250,000 Common stock issued for services - - 3,428,598 342 - 1,275,452 - 1,275,794 Common stock subscribed for future services - - 3,125,000 313 (3,799,764) 5,273,125 - 1,473,674 Common stock issued for cash - - 1,129,286 113 - 132,387 - 132,500 Common stock issued for acquisitions - - 5,480,000 548 - 35,296 - 35,844 Additional paid-in capital Reserve Foundation Trust - - - - - 476,000 - 476,000 Net loss for the year ended December 31, 2000 - - - - - - (3,356,872) (3,356,872) --------- ---- ---------- ------- ---------- ---------- ----------- ---------- Balance at December 31, 2000 1,000,000 100 17,012,884 1,701 (3,799,764) 7,823,778 (5,268,389) (1,242,574) Common stock issued for services - - 77,100 8 - 5,775 - 5,783 Return of stock - - - - 2,847,251 (2,846,969) - 282 Amortization of future services - - - - 837,393 - - 837,393 Net loss for the year ended December 31, 2001 - - - - - - (1,413,102) (1,413,102) --------- ---- ---------- ------ ---------- ---------- ----------- ----------- Balance at December 31, 2001 1,000,000 $100 17,089,984 $1,709 $ (115,120) $4,982,584 $(6,681,491) $(1,812,218) ========= ==== ========== ====== ========== ========== ============ ===========
The accompanying notes are an integral part of the financial statements. 15
ENTER TECH CORP. ---------------- (A Development Stage Company) STATEMENTS OF CASH FLOWS For the Period from August 18, 1997 (date of inception) Year Ended Year Ended through December 31, December 31, December 31, 2001 2000 2001 ----------- ------------ ------------ Cash Flows from Operating Activities: Net (Loss) $(1,413,102) $(3,356,872) $(6,681,491) Adjustment to reconcile net (loss) to net cash provided by operating activities: Depreciation 4,541 6,935 12,295 Stock for services 843,176 1,873,673 3,974,923 (Increase) decrease in other assets - (48) (48) Increase in customer deposits - - 60,000 Increase in accounts payable and accrued expenses 90,409 216,045 341,966 ----------- ----------- ----------- Net Cash (Used in) Operating Activities (474,976) (1,260,267) (2,292,355) ----------- ----------- ----------- Cash Flows from Investing Activities: Acquisition of equipment - (14,515) (22,707) ------------ ----------- ----------- Net Cash (Used in) Investing Activities - (14,515) (22,707) ----------- ----------- ----------- Cash Flows from Financing Activities: Preferred and common stock issued and additional paid-in capital - 825,515 1,045,518 (Increase) in deferred offering costs - (124,000) (124,000) Increase in notes payable, other - 234,194 250,000 Increase in payable, related parties 474,555 339,480 1,143,544 ----------- ----------- ----------- Net Cash Provided by Financing Activities 474,555 1,275,189 2,315,062 ----------- ----------- ----------- Increase (decrease) in Cash (421) 407 - Cash, Beginning of Period 421 14 - ------------ ----------- ----------- Cash, End of Period $ - $ 421 $ - ============ =========== =========== Interest Paid $ 90,727 $ 33,701 $ 124,428 ============ =========== =========== Income Taxes Paid $ - $ - $ - ============ =========== ===========
The accompanying notes are an integral part of the financial statements. 16 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (1) Summary of Accounting Policies ------------------------------ This summary of significant accounting policies of Enter Tech Corp. (a development stage company) (Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who 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. (a) Description of Business ----------------------- The Company was organized on June 14, 1996 as a Nevada corporation in order to evaluate, structure and complete a merger with, or acquisition of, prospects consisting of private companies, partnerships or sole proprietorships. Effective June 2, 1998, the Company completed a business combination with Links, Ltd. as described in Note (2). The Company is a development stage company since principle planned operations have not yet commenced. The Company has selected December 31 as its year end. (b) Use of Estimates in the Preparation of Financial Statements ----------------------------------------------------------- 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. (c) Basis of Presentation - Going Concern ------------------------------------- The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplates continuation of the Company as a going concern. However, the Company has sustained operating losses since inception and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management is attempting to raise additional capital. In view of these matters, realization of certain of the assets in the accompanying balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to meet its financial requirements, raise additional capital, and the success of its future operations. 17 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (c) Basis of Presentation - Going Concern, Continued ------------------------------------------------ Management is in the process of attempting to raise additional capital and reduce operating expenses. Management believes that its ability to raise additional capital and reduce operating expenses provide an opportunity for the Company to continue as a going concern. (d) Income Taxes ------------ As of December 31, 2001, the Company had net operating losses available for carryover to future years of approximately $6,680,000, expiring in various years through 2020. Utilization of these carryovers may be limited if there is a change in control of the Company. As of December 31, 2001, the company has total deferred tax assets of approximately $1,336,000 due to operating loss carryforwards. However, because of the uncertainty of potential realization of these tax assets, the Company has provided a valuation allowance for the entire $1,336,000. Thus, no tax assets have been recorded in the financial statements as of December 31, 2001. (2) Business Combinations --------------------- On June 2, 1998, Enter Tech Corp. (Company), completed a business combination with Links, Ltd., a development stage company. Pursuant to the business combination, 3,235,000 shares of the Company's common stock were issued for 100% of the issued and outstanding stock of Links, Ltd. Subsequently, 835,000 of the shares issued pursuant to this business combination were canceled resulting in 2,400,000 net shares issued. Since the controlling shareholders of Links, Ltd. own approximately 65.7% of the Company, a controlling interest in the Company, the transaction was accounted for as a reverse acquisition whereby, the equity accounts of Links, Ltd. were carried over into the accompanying financial statements. Links, Ltd. was incorporated on August 18, 1997. On January 7, 2000, the Company entered into an agreement with Shopping Mall Online, Inc. and an individual whereby the Company acquired 80% of the outstanding common stock of Shopping Mall Online. The consideration for the acquisition was 2,400,000 shares of the Company's common stock. The agreement also provided that if for any reason the Company's common stock was not trading above a $1.00 bid price at the time the Rule 144 restrictive legend on the stock certificate for the 2,400,000 shares of the Company's common stock is removed, the Company would issue additional shares of its common stock to the individual. The value of the additional shares to be issued will be equal to the difference between $2.4 million and the value of the 2,400,000 shares of common stock issued under the agreement based on the then existing bid price. 18 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (2) Business Combinations, Continued -------------------------------- The business combination has been accounted for as a purchase. No goodwill has been recorded in the transaction because the former owner of Shopping Mall Online, Inc. now owns 31% of the Company. The 2,400,000 shares of common stock have been recorded at predecessor cost of Shopping Mall Online, Inc. All costs related to development of Shopping Mall Online, Inc. have been expensed. The agreement also provided the voting rights with respect to the common stock of Shopping Mall Online would remain with the individual until the restrictive legend on the 2,400,000 shares of the Company's common stock is removed. On October 27, 2000, the Company agreed to sell the controlling interest in Shopping Mall Online back to its management. The Company redeemed 1,920,000 shares of the Company's common stock from the president of Shopping Mall Online, Inc. in exchange for 1,440,000 shares of Shopping mall Online's common stock being held by the Company. The president of Shopping Mall online retained 480,000 restricted shares of the Company's common stock, and the Company retained 480,000 shares of Shopping Mall Online's common stock. On April 19, 2000, the Company acquired 80% of the outstanding shares of common stock of WavePower, Inc., a development stage company, in exchange for 5,000,000 restricted shares of the Company's common stock under an Acquisition Agreement. In addition, the Company agreed to reserve 3,000,000 shares of its 5,000,000 authorized shares of preferred stock for issuance as further payment for the acquisition to the former sole shareholder of WavePower, Inc. These shares would be issued upon exercise of an option to be granted to the shareholder. The option would provide: (a) For a three year term ending April 30, 2003; (b) For an exercise price of $.001 per share; (c) For the exercise of up to 1,000,000 shares during each of the following periods during the term of the employment agreement with the option holder: 12th and 13th months, 24th and 25th months, and 35th and 36th months. The option further provides that its exercise of the stated amounts during the respective periods is further conditioned upon WavePower, Inc. meeting stated amounts of net pre tax profits. The acquisition agreement also provides that The remaining 2,000,000 authorized shares of the Company's preferred stock may be issued to the existing member of the Company's management and significant consultants. 19 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (2) Business Combinations, Continued -------------------------------- The 5,000,000 shares of restricted common stock that were issued to WavePower, Inc. increased the Company's outstanding shares of common stock to 12,783,000. The transaction was recorded at predecessor cost since the 5,000,000 shares were approximately 39% of the Company's total issued and outstanding shares of common stock. Effective September 26, 2000, the Company rescinded this Plan of Reorganization and Acquisition. The former shareholders of WavePower, Inc. have not returned the Company's common stock nor funds advanced to WavePower during the period from April 19, 2000 through the date of rescission. The 5,000,000 shares are shown as outstanding at December 31, 2001. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. Effective December 19, 2000, QuickGold 2000 LLC was formed to further the business of the joint venture agreement, and became a wholly owned subsidiary of the Company. QuickGold 2000 LLC has had no operations to date. (3) License and Other Intangible Assets ----------------------------------- The former parent company of Links, Ltd. acquired certain technology and license rights from an unrelated third party for $227,943. These intangible assets were contributed to Links, Ltd. Management of the Company reviewed the intangible assets for impairment and provided a valuation allowance for the total $227,943. (4) Notes Payable, Related Parties ------------------------------ As of December 31, 2001, notes payable to related parties totaled $1,143,544. These notes bear interest at approximately 12% per annum and were payable at December 31, 2001 and 2002. (5) Consulting and Employment Agreements ------------------------------------ Effective July 1, 1998, the Company entered into a one year contract with the Vice President of the Company, which required this individual to provide consulting services for fees of $500 per month and 750,000 shares of stock to be issued pursuant to a Form S-8 Registration Statement. The Company has paid no compensation to this individual to date and has not issued the 750,000 shares of stock. The December 31, 2001 financial statements include an accrual of stock and services payable in the amount of $7,500 related to services performed by this individual. 20 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (5) Consulting and Employment Agreements, Continued ----------------------------------------------- Effective August 25, 1999, the Company entered into an agreement with a consultant to provide management consulting services to assist in developing the Company. The consultant is to be paid $75 per hour plus 1,000 restricted shares of common stock for every hour worked. At December 31, 2000, the Company owed $3,750 in consulting fees. In addition, the Company agreed to compensate the consultant for other services with restricted common stock. Effective January 1, 2000, the Company entered into an agreement with a consultant to provide consulting services for assistance in completing a private placement or secondary offering, and other consulting services. The consultant is to be paid $10,000 per month plus 200,000 shares of restricted common stock per year provided the business plan established for the Company is met. The term is for two years, expiring on December 31, 2001. Subsequent to December 31, 2001 this agreement was terminated. Effective January 1, 2000, the Company entered into an agreement with a director of the Company, to attempt to build revenues of the Company and assist in the development of the Company's product. The director is to be paid $10,000 per month plus expenses. The term is for two years, expiring December 31, 2002, with an option to renew for two additional years. Effective May 15, 2000, the Company entered into an employment agreement with an individual to research market conditions and conduct feasibility studies of projects being considered by the Company. The employee is to be paid $18,000 per year plus certain benefits. The agreement expires on May 15, 2001. Effective May 22, 2000, the Company entered into an executive compensation agreement with the Company's prior president. The president was to be paid $10,000 per month plus certain benefits. The term was for two years with an option to renew for an additional two year period on June 30, 2002. Effective August 1, 2000, the Company entered into an agreement with an attorney to provide legal services to the Company. The attorney is to be paid $5,000 per month plus $5,000 per month in publicly traded stock of the Company. The agreement expires on August 1, 2001 with an automatic renewal of one year unless terminated earlier. 21 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (5) Consulting Agreements, Continued -------------------------------- Effective September 1, 2000, the company entered into an agreement with a consultant to provide assistance in developing business opportunities and revenue. The consultant is to be paid $8,000 monthly plus expenses. The agreement expired on August 31, 2001. (6) Marketing and Administration of Sales Agreement ----------------------------------------------- The Company entered into an agreement with a previous director of the Company for the marketing and administration of sales through certain identified locations and the division of profits after the director has recovered related costs. The company currently has orders for the purchase of thirty kiosk software vending units at $50,000 per unit from a previous director. The Company received $60,000 of deposits related to these orders. The Company is uncertain whether it will be able to deliver the units and it is not determinable at this time whether a refund will be required. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (7) Preferred Stock --------------- On April 10, 2000, the board of directors of the Company agreed to establish two voting trusts in which the Company would place 5,000,000 shares of the Company's preferred stock. The first trust initially had 3,000,000 preferred shares being held in reserve for the acquisition of WavePower, Inc. as outlined in the definitive agreement. Because of the rescission of the WavePower acquisition, the board of directors elected to hold the 3,000,000 preferred shares for future use. The second trust contains 2,000,000 preferred shares of Company stock that will be used for the benefit and distribution to the officers, directors and significant consultants to the Company with the option of a distribution of up to 1,000,000 of these preferred shares for additional compensation as they may, from time to time, come available to the Company. As of December, 2000, these 1,000,000 preferred shares were issued to two directors and a consultant of the Company. The 1,000,000 preferred shares were recorded as compensation in the amount of $250,000. The director of the Company will retain sole voting rights for both trusts. The 5,000,000 shares of preferred stock have the following rights, privileges and limitations: (a) Liquidation preference to receive any distributions in liquidation of the Company up to the amount of $0.10 per share, but does not participate in any additional distributions, (b) Right to vote five votes per share on all issues considered by the shareholders, (c) Convertible into two shares of common stock for each share of preferred, and (d) Callable by the Company upon 30 days written notice at $.001 per share, provided that the holder may convert the preferred into common stock during the 30-day period. 22 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (8) Common Stock ------------ During the year ended December 31, 1999, the Company issued 200,000 shares of its restricted common stock in exchange for services. Also during the year ended December 31, 1999, the Company committed to issuing 1,543,000 shares of its restricted common stock in exchange for services. A total of $1,103,574 was accrued to reflect the stock compensation payable at December 31, 1999. All but 20,000 of these shares were issued during 2000. During the year ended December 31, 2000, the Company issued 3,428,598 of its restricted common stock in exchange for services. Also during the year ended December 31, 2000, the Company committed to issuing 50,000 shares of its restricted common stock in exchange for services. The total accrued stock compensation payable at December 31, 2000 was $19,950. Also during the year ended December 31, 2000, the Company issued 1,129,286 shares of its restricted common stock for $132,500 cash. Also during the year ended December 31, 2000, the Company issued 7,500 to its president as an adjustment to a previous issuance. Also during the year ended December 31, 2000, the Company issued 3,125,000 shares of its restricted common stock to various entities in exchange for future marketing and other services to be performed during the 12-18 month period following the execution of the agreements. During November 2000, the Company rescinded these agreements due to concern regarding possible violations of various securities and common laws. The Company has requested the return of the 3,125,000 shares, of which 2,825,000 have been returned. The remaining 300,000 shares have not been returned. The marketing and other services are being amortized over the agreement periods. Also during the year ended December 31, 2000, the Company hired an entity to procure additional short- term funding. As a result, the Company issued 2,000,000 shares of its restricted common stock. The entity sold 370,000 shares of such stock to a third party for $60,000. The Company has received $10,000, the entity received $15,000 in commissions, and the balance of $35,000 remains due and owing to the Company. The remaining 1,630,000 shares were returned to the Company and canceled. During the year ended December 31, 2001, the Company issued 77,100 shares of its restricted common stock to two individuals in exchange for services valued at $5,783. 23 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (9) Equity Financing Agreement -------------------------- On March 15, 2000, the Company entered into a stock purchase and subscription agreement with the Reserve Foundation Trust, whereby the trust is to purchase 6,000,000 restricted shares of the Company's common stock in exchange for $10,000,000. When the agreement was signed the trust provided the Company with $50,000 in interim debt financing. That amount was subsequently increased to a total of $250,000. The interim financing the trust provided the Company in the amount of $250,000 is to be repaid in full as per the terms of the Stock Purchase and Subscription agreement on or before May 15, 2000. As of September 30, 2000, the Company has not paid this debt. On May 4, 2000, the Trust indicated that all conditions to the stock purchase had been satisfied and that it would go forward with providing the $10,000,000 in funds to the Company. As of June 12, 2000, $600,000 of the subscribed funds had been received. On July 19, 2000, the Board of Directors of the Company met to discuss banking/funding problems with the Reserve Foundation Trust. As of August 1, 2000, the Company instructed corporate counsel to prepare to take whatever action it deemed is appropriate and in the best interest of the Company. As of April 11, 2001, counsel had not yet taken action on the matter. The stock certificates for the 6,000,000 shares of common stock were canceled during the last quarter of 2000. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. (10) Litigation Litigation against the Company has been threatened during May, 2000 by a corporation which alleges that the Company has not fulfilled an agreement to issue 1,000,000 shares of the Company's common stock in consideration of the waiver of any rights by the corporation or affiliated entities to acquire WavePower, Inc., which the Company acquired on April 19, 2000. The Company is of the view that the conditions precedent to the issuance of such stock were not fulfilled and that the agreement was repudiated. The Company filed an answer to the complaint on June 29, 2000. Due to the preliminary stage of the matter, the ultimate resolution of this contingency cannot presently be determined. (11) Litigation-Former Officer During February, 2000 the Company commenced litigation against a former officer of the Company alleging failure of the former officer to meet certain performance standards. The Company is seeking cancellation of the agreement to issue 750,000 shares of Company common stock and the payment of $500 per month compensation to the former officer and the return of 500,000 shares of stock previously issued. A contingency exists with respect to this matter, the ultimate resolution of which cannot presently be determined. 24 ENTER TECH CORP. ---------------- (A Development Stage Company) NOTES TO FINANCIAL STATEMENTS December 31, 2001 (12) Licensing Agreement ------------------- Effective October 27, 2000, the Company entered into a licensing venture agreement with an entity whereby the Company agreed to purchase 30 dual terminal digital vending machines at a price of $125,000 plus expenses and 60 single terminal digital vending machines at a purchase price not yet determined within three months. The Company agreed to purchase an additional 30 dual terminal digital vending machines at a price of $125,000 plus expenses and 60 single terminal digital vending machines at a purchase price not yet determined within nine months. The Company was also responsible to license this technology and to promote, develop a market, sell and distribute custom music CD products created by the digital vending machines. The term of this agreement was to become effective on the date the manufacturer receives the first purchase order and shall continue for five years, unless terminated in accordance with the terms of the agreement. Subsequent to December 31, 2001, this license was transferred to another entity. (13) Joint Venture Agreement ----------------------- Effective October 13, 2000, the Company entered into a joint venture agreement with an entity, whereby the entity would be the exclusive provider of communications needs for the Company's projects including all communications installation and management for the kiosk purchased and deployed by the Company. On June 15, 2001, the Company licensed its portion of the joint venture agreement to another entity. 25 ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACOUNTANTS ON ACCOUNTING FINANCIAL DISCLOSURE There have been no disagreements between the Company and its independent accountants on any matter of accounting principals or practices or financial statement disclosures since the Company's inception ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT. Certain information with respect to the Directors and Officers of the Company is as follows: Name Age Positions and Offices Held -------- --- -------------------------- D. William Thomas 60 President, and Director Mark A. Thomas 34 Director/Secretary D. William Thomas has assumed the duties of President and director on an interim basis. The company is pursuing other business entities to acquire with substantial long term revenues that will fit the other business plans of the company. The Company's Directors will serve in such capacity until the next annual meeting of the Company's shareholders and until their successors have been elected and qualified. The Officers serve at the discretion of the Company's Directors. The only family relationship among the Company's Directors and Officers is that D. William Thomas is the father of Mark A Thomas. There are no present arrangements with any other persons by which they are to become Officers or Directors of the Company. The Company presently has no committees. Set forth below are the names of all Directors and Executive Officers of the Company, all positions and offices with the Company held by each such person, the period during which he or she has served as such, and the business experience of such persons during at least the last five years. D. WILLIAM THOMAS. Mr. Thomas became a director and its President on March 9, 2002. Since October of 1984, his principal occupation has been as the owner of Advance Marketing Analysis, a consulting firm of Loveland, Colorado. From August of 1994 to June of 1999, he also served as President of Mach One Corporation of Loveland, Colorado. Mr. Thomas attended Hastings College of Hastings, Nebraska for two years. 26 MARK A. THOMAS. Mr. Thomas worked in the entertainment industry designing and installing post product facilities for over 5 years. His duties involved engineering editing bay, duplication and sound facilities as well as participating in several design teams responsible for digital video production. Being fluent in the communications technology as well as computer networking led him to the telecommunications environment, primarily the convergence of the two technologies. Mr. Thomas was a founder and engineer of NCG, Inc. for a seven year period ending February 2001. Vernon C. Kendrick was issued 4,415,000 shares of the Company's common stock in April of 2000. This stock was issued as consideration in the Company's acquisition of WavePower, Inc. The Company has rescinded the WavePower transaction for misrepresentation of and lack of value in the WavePower stock received by the Company. It is the Company's position that these shares are void and not validly issued. However, pending receipt and cancellation of the certificates for these shares or a binding legal determination that they are not validly issued they are included as outstanding in this report. If these shares were validly issued, they would constitute 25.9% of the Company's outstanding stock. To the knowledge of the Company, Mr. Kendrick has not filed a Form 3 reporting any beneficial ownership of this stock under Section 16(a) of the Securities Exchange Act of 1934. Preliminary discussing are taking place to have these shares returned without instituting litigation. ITEM 10. EXECUTIVE COMPENSATION On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who has served as a director of the Company since July 30, 1999 and who served as its President from July 30, 1999 through May 31, 2000. Under the Agreement, Mr. Lindsey is to devote his full working time and best efforts to develop revenues for the Company. The agreement, as amended on January 1, 2000 and March 1, 2000: (i) provided for a consulting fee of $5,000 a month from August 1, 1999 through February 29, 2000; (ii) provides for a fee of $10,000 a month from March 1, 2000 through its term ending December 31, 2002; and (iii) provided that he became the Chairman of the Board and Chief Executive Officer of the Company on January 1, 2000. The Company has not had sufficient funds to pay Mr. Lindsey the fees due under the Agreement. Accordingly, for the period from July 30, 1999 through December 31, 1999, be was paid $20,000 in cash and $40,000 in the form of a promissory note. For the year 2000, he was paid $45,750 in cash and $59,250 in the form of a promissory note. These notes bear interest at 12% per annum and was due December 31. 2001. Mr. Lindsey resigned as an Officer and Director of the Company on February 25, 2002. A total of $120,000 has been accrued by the Company for his unpaid fees for the year 2001. During 1999, the Company paid Gregory J. Kaiser the President, Secretary and a director of the Company, consulting fees of $20,000 in cash and $9,820 in the form of a promissory note. Under the provisions of Consulting and Employment Agreements dated September 1, 1999, May 22, 2000 and July 1, 2000; (i) Mr. Kaiser served as a consultant to the Company from September 1, 1999 through May 31, 2000 and from July 1, 2000 to the present; (ii) he served the Company as an employee at a salary of $9,000 a month for June of 2000 which was paid in cash; (iii) he received consulting fees at the rate of $5,000 a month paid in cash for the four month period ended December 31, 1999 (a total of $20,000); (iv) he has received consulting fees at the rate of $5,000 a month for the period January 1, 2000 through May 31, 2000 and at the rate of $10,000 a month for the period July 1, 2000 through December 31, 2000 which total $85,000 and were paid in the form of a promissory note; and (v) the term of the amended agreement ends June 30, 2002. The promissory notes to Mr. Kaiser bear interest at the rate of 12% per annum and was due December 31, 2001. In December of 2000, the Company issued 500,000 shares of its common stock each to Mr. Lindsey and Mr. Kaiser as additional compensation for services. Mr. Kaiser resigned as an Officer and Director of the Company on February 25, 2002. A total of $120,000 has been accrued by the Company for his unpaid fees for the year 2001. The Company does not have any retirement, pension, profit-sharing or insurance or medical reimbursement plans for its officers or directors. 27 ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth, as of March 1, 2001, the stock ownership of each person known by the Company to be the beneficial owner of five percent or more of the Company's Common Stock, each Director individually and all Directors and Officers of the Company as a group:
Title of Name, Position(s) and Address Amount of Beneficial of Class of Beneficial Owner Ownership Percentage of Class -------- ------------------------------ --------------------- ------------------- Common D. William Thomas, President and Director 937 East 7th Street Loveland, Colorado 80537 900,000 5.26% Common Mark A. Thomas, Director and Secretary 4519 W. 6th Street Greeley, Colorado 80634 60,000 .35% - Common All Officers and Directors as a Group (2 persons) 960,000 5.61% Common Sam J. Lindsey 3407 Riva Ridge Drive Ft. Collins, Colorado 80526 900,000 5.26% Common D. William Thomas, President and Director 937 East 7th Street Loveland, Colorado 80537 900,000 5.26% Common E.M.M. Company Trust, Beneficial Shareholder 22585 Seaver Court Santa Clarita, California 91350 1,378,600 8.1% Common Vernon C. Kendrick, Beneficial Shareholder 255 SW 14th Place Boca Raton, Florida 33432 4,415,000(1) 25.8%(1) Common The Challenge Limited c/o The Belize Bank, Ltd 60 Market Square #364 Belize City, Belize 900,000(2) 5.26%(2)
------------------ (1) These shares we issued in the acquisition of 80% of the stock of WavePower, Inc. in April of 2000. The Company has rescinded that transaction because of misrepresentation of and lack of value in the consideration received for these shares. See Item 1. Above. Accordingly, it is the Company's position that these shares were not validly issued and will not be considered as outstanding by the Company. However, pending receipt and cancellation of the certificate representing these shares and/or a binding legal determination that they are not validly issued they will be listed herein. 28 (2) These shares were issued in exchange for a contractual promise to perform services for the Company. On September 13, 2000, the Company notified the holder that the service contract was canceled for failure of performance and other legal issues and that this stock was not validly issued. It is the Company's position that these shares were not validly issued and will not be considered outstanding by the Company. However, pending receipt and cancellation of the certificate representing these shares and/or a binding legal determination that they are not validly issued, they will be listed herein. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS D. William Thomas, and Mark A. Thomas, the officers and directors of the Company, may be deemed to be its "parents", as that term is defined under the Securities Act of 1934, by virtue of their positions. In addition, Mr. D. William Thomas, a Founder and a principal shareholder of the Company may be deemed to be such a parent. On January 1, 1999, the Company entered into a Consulting Agreement with Sam J. Lindsey, who became a director and President of the Company on July 30, 1999. Under the agreement Mr. Lindsey is to devote his full working time and best efforts to develop revenues. The agreement is for a two-year term ending December 31, 2000 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999 the total accrued amount due to Mr. Lindsey was $40,000. The Company has issued its promissory note to Mr. Lindsey for this $40,000. The note is due December 31, 2000 and bears interest at the rate of 12% per annum. It is anticipated that this agreement will remain in place and accruals of or payments on the consulting fee continued, until the Company develops salary compensation package for its officers at which time the agreement will be terminated. In addition to the accrual of the consulting fee to Mr. Lindsey, the Company on November 20, 1999, authorized the issuance of 400,000 shares to him of the common stock. On December 1, 2000, the Company issued 500,000 shares to Mr. Lindsey as compensation for services under the Agreement. This Agreement has now terminated On January 1, 1999, the Company entered into a consulting agreement with Mr. D. William Thomas under which he has and is to provide services to the Company. The agreement is for a term of two years ending December 31, 2001 and provides for monthly payments of $5,000. The Company has not had sufficient funds to make all the payments on this obligation and as of December 31, 1999, the total accrued amount due to Mr. Thomas was $40,000. The Company has issued its promissory note to Mr. Thomas for this $40,000. The note is due December 31, 2001 The Company has issued an additional note to Mr. Thomas for $60,000 for the consulting fees for the year 2000. This note also bears 12% interest per annum and is due December 31, 2001, and bears interest at the rate of 12% per annum. This agreement also provides for the issuance to Mr. Thomas of 200,000 shares of common stock per year if certain business goals are met by the Company. On November 20, 1999, the Company authorized the issuance to Mr. Thomas of 500,000 shares of common stock as total stock compensation for all consulting services rendered and to be entered under the agreement. This Agreement has now terminated. On December 1, 2000,the Company issued 500,000 shares of common stock to Gregory J. Kaiser, as officer and director of the Company. These shares were issued to Mr. Kaiser as compensation for services rendered. On April 19, 2000, the Company issued 4,415,000 shares of its common stock to Vernon C. Kendrick in the transaction in which the Company acquired 80% of the outstanding stock of WavePower, Inc. These 4,415,000 shares would constitute approximately 25.9% of the Company's outstanding stock as of March 1, 2001. The Company has rescinded the WavePower acquisition because of misrepresentation of and lack of value in the consideration received by the Company. The Company has demanded the certificates for these shares be returned for cancellation and has instructed the Company's Transfer Agent that they are not to be transferred. It is the Company's position that these shares are void and not validly issued. However, pending receipt and cancellation of the certificates for the shares and/or a binding legal determination that they were not validly issued they are included in this report. 29 For a discussion of the possible reinstatement of an agreement between the Company and Global Marketing Consultants, an entity owned by D. William Thomas, president and Director of the Company, see Item 1. DESCRIPTION OF BUSINESS - PROPOSED For details of the lease by the Company of its office facilities in Loveland, Colorado from an entity owned by D. William Thomas, a principal shareholder of the Company, see ITEM 2. DESCRIPTION OF PROPERTY. ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS.
EXHIBIT NUMBER DESCRIPTION LOCATION ------- ------------ -------- 3(i).1 Articles of Incorporation Incorporated by Reference to Exhibit 2.1 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 3(i).2 Articles of Merger (containing Incorporated by Reference to Exhibit 3(i).2 to Amendment to Articles of the Registrant's Form 10-KSB for the period Incorporation to change name) ended December 31, 1999. (No. 0-21275) 3(ii).1 Bylaws Incorporated by reference to Exhibit 2.2 to the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 3(ii).2 Amendment to Bylaws Incorporated by Reference to Exhibit 3(ii).2 to the Registrant's Form 10-KSB for the period ended December 31, 1999. (No. 0-21275) 10.1 Lock-up Agreements by Company Incorporated by reference to Exhibit 3.1 to Shareholders the Registrant's Form 10-SB Registration Statement filed on 8/28/96. (No. 0-21275) 10.2 Joint Venture Agreement with Incorporated by reference to Exhibit 10-B of A.W. Hogan the Registrant's Form 8-K filed 6/2/98 (No. 0-21275) 10.3 Form 8-K dated 6/2/98 Relative to Incorporated by reference to Form 8-K filed Business Combination with Links, Ltd. on August 12, 1998. (No. 0-21275) 10.4 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.2 Between Company and Advance to Form 10-QSB for period ended 6/1/99 Marketing Analysis filed on August 23, 1999. (No. 0-21275) 10.5 Consulting Agreement dated 1/1/99 Incorporated by reference to Exhibit 10.3 to Between Company and Sam J. Lindsey Form 10-QSB for period ended 6/1/99 filed on August 23, 1999. (No. 0-21275) 10.6 Agreement and Plan of Reorganization Incorporated by reference to Exhibit 10.1 to dated 1/7/2000 Between Company and Form 8-K filed on January 21, 2000. (No. 0-21275) and Shopping Mall Online, Inc. 30 10.7 Stock Purchase and Subscription Incorporated by reference to Exhibit 10.7 to Agreement Between Company and Registrant's Form 10-KSB for the period The Reserve Foundation Trust ended December 31, 1999. (No. 0-21275) 10.8 Promissory Note of Company to Incorporated by reference to Exhibit 10.8 to The Reserve Foundation Trust Registrant's Form 10-KSB for the period ended December 31, 1999. (No. 0-21275) 10.9 Reorganization Agreement dated Incorporated by reference to Exhibit 2.1 to Form April 19, 2000 among Enter Tech 10-QSB for Quarter Ended March 31, 2000. Filed Corporation, WavePower, Inc., on May 15, 2000. (No. 0-21275) and Vernon C. Kendrick 10.10 Employment Agreement among Enter Incorporated by Reference to Exhibit 10.1 to Form Tech Corporation, WavePower, Inc., 10-QSB for Quarter Ended March 31, 2000. Filed and Vernon C. Kendrick on May 15, 2000. (No. 0-21275) 10.11 Voting Trust Agreement Incorporated by Reference to Exhibit 10.1 to Form 10-QSB for Quarter Ended March 31, 2000. Filed on May 15, 2000. (No. 0-21275) 10.12 Joint Venture Agreement between Incorporated by Reference to Exhibit 10.12 to Form Enter Tech Corporation and Northern 10-KSB for Fiscal Year Ended December 31, 2000. Communications Group, Inc. dated Filed April 16, 2001. (No. 0-21275) 10/13/00 10.13 Licensing Agreement between Enter Incorporated by Reference to Exhibit 10.13 to Form Tech Corporation and Hitdisc.com, Inc. 10-KSB for Fiscal Year Ended December 31, 2000. dated 10/27/00 Terminated. Filed April 16, 2001. (No. 0-21275) 10.14 Employment Agreement between Incorporated by Reference to Exhibit 10.14 to Form Enter Tech Corporation and Gregory 10-KSB for Fiscal Year Ended December 31, 2000. J. Kaiser Terminated. Filed April 16, 2001. (No. 0-21275)
(b) REPORTS ON FORM 8-K. No reports on Form 8-K were filed during the quarter ended December 31, 2001. 31 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunder duly authorized. SIGNATURE TITLE DATE /s/ D. William Thomas President and Director, April 12, 2002 ---------------------- D. William Thomas /s/ Mark A Thomas Secretary and Director, April 12, 2002 ---------------------- Mark A. Thomas 32