10QSB 1 form10qsb033104.txt FORM 10-QSB DATED 03-31-04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2004 | | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 000-26175 DISCOVERY INVESTMENTS INC. (Exact name of small business issuer as specified in its charter) NEVADA 88-0409151 (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) 6767 W. TROPICANA AVE., SUITE 207, LAS VEGAS, NV 89103 (Address of principal executive offices) (866) 351-5099 (Issuer's telephone number) (Former name,former address and former fiscal year,if changed since last report) Indicate by check mark whether the registrant (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 / / Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes / / No /X/ State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: At March 31, 2004, there were outstanding 27,170,383 shares of the Registrant's Common Stock, $.001 par value. As of the date hereof, there were outstanding 29,809,007 shares of Registrant's Common Stock, $.001 par value. Transitional Small Business Disclosure Format: Yes / / No /X/ PART I - FINANCIAL INFORMATION Item 1. Financial Statements. DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED FINANCIAL REPORTS March 31, 2004 (unaudited) December 31, 2003 DISCOVERY INVESTMENTS, INC. (A Development Stage Company) Contents FINANCIAL STATEMENTS Balance Sheets 2 Statements of Income 3 Statements of Stockholders' Equity 4 Statements of Cash Flows 5-6 Notes to Financial Statements 7-15
DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED Balance Sheets MARCH 31, 2004 March 31, March 31, December 31, December 31, 2004 2003 2003 2003 ----------- ----------- ------------ ------------ ASSETS CURRENT ASSETS Cash $3,019 $9,829 $0 $0 Assets of discontinued operations $0 $467,621 $0 $467,621 Total current assets $3,019 $477,450 $0 $467,621 TOTAL ASSETS $3,019 $477,450 $0 $467,621 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $0 $0 $0 $62 Accounts payable $30,000 $4,847 $15,000 $4,847 Officers' advances $59,300 $63,693 $0 $63,693 Liabilities of discontinued operations $0 $2,539,282 $0 $2,319,298 Total current liabilities $89,300 $2,607,822 $15,000 $2,387,900 LONG TERM DEBT $0 $0 $0 $0 TOTAL LIABILITIES $89,300 $2,607,822 $15,000 $2,387,900 STOCKHOLDERS' EQUITY $158,040 $38,500 $158,040 $38,500 Accumulated deficit $(244,321) $(2,168,872) $(173,000) $(1,958,779) TOTAL STOCKHOLDERS' EQUITY $(86,281) $(2,130,372) $(15,000) $(1,920,279) Total liabilities and stockholders' equity $3,019 $477,450 $0 $467,621
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF INCOME March 31, 2003 Sept 10, 1996 Three Months Ended Years Ended (Inception) to March 31, March 31, December 31, December 31, March 31, 2004 2003 2003 2002 2004 ----------- --------- ------------ ------------ ------------- Revenues $0 $0 $0 $0 $0 Cost of revenue $0 $0 $0 $0 $0 Gross profit $0 $0 $0 $0 $0 General, selling and administrative expenses $71,281 $0 $80,000 $21,266 1,816,519 Net operating income expense $71,281 $0 $0 $0 $284,753 Operating (Loss) $(71,281) $0 $(80,000) $(21,266) $(2,102,272) Reorganization items $0 $0 $0 $0 $30,858 Net (Loss) before extraordinary item $0 $0 $0 $(21,266) $(2,132,130) Extraordinary gain on prepetition debt discharge $0 $0 $0 $0 $1,985,347 Net (Loss) from continuing operations $(71,281) $0 $0 $(21,266) $(146,783) (Loss) from discontinued $0 $(210,155) $(1,851,739) $(1,865,677) $(2,075,832) operations Net income (loss) $(71,281) $(210,155) $(1,771,739) $(1,866,943) $(2,222,615) Net income (loss) per share basic and diluted (Note 2) $(0.003) $(0.005) $(0.072) $(0.079) $(0.2685) Average number of shares of common stock outstanding 27,170,383 38,449,583 24,499,583 23,540,670 8,278,121
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY March 31, 2004 Accumulated (Deficit) Additional During Common Stock Paid-In Development Shares Amount Capital Stage (Deficit) Balance, December 31, 2000 7,350,000 $7,350 $(1,903,643) $(1,896,293) Issuance of common stock, pursuant to bankruptcy order, issued November 29, 2001 349,583 $350 $350 0 Net Income, December 31, 2001 $1,844,157 $1,844,157 Balance, December 31, 2001 7,699,583 $7,700 $(59,836) $(52,136) Issuance of common stock on acquisition of Bycom Media Inc. on May 5, 2002 16,800,000 $16,800 $(12,000) $4,800 Issuance of common stock on acquisition of Cavio Corporation September 4, 2002. 14,000,000 $14,000 $14,000 Net (Loss) December 31, 2002 $(1,886,943) $(1,886,943) Balance, December 31, 2002 38,499,583 $38,500 Balance, March 31, 2003 38,499,583 $38,500 $(1,958,779) $(1,920,179) Cancellation of shares issued on the Cavio Acquisition (14,000,000) (14,000) 14,000 100 Issued to settle debt 31/12/03 2,670,800 133,540 0 133,540 Net Income for year ended 31/12/03 0 0 1,771,739 1,771,739 Balance, March 31, 2004 27,170,383 $158,040 $(173,040) $(15,000)
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED STATEMENTS OF CASH FLOWS March 31, 2004 Three Months Ended Years Ended March 31, March 31, December 31, December 31, September 10, 1996 (inception) to 2004 2003 2003 2002 March 31, 2004 Cash Flows From Operating Activities Net income (loss) $(71,281) $(210,155) $0 $(21,266) $(356,938) Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities: Impairment on Intangible assets 0 0 0 4,800 4,800 Extraordinary gain on pre-petition debt discharge 0 0 0 0 (1,985,347) Reorganization items Professional fees 0 0 0 0 30,858 Changes in assets and liabilities Increase in accounts payable and accrued expenses (pre-petition) 15,000 219,984 0 0 621,797 Increase in accounts payable and accrued expenses (post-petition) 0 0 0 0 4,909 Increase in officer advances (pre-petition) 59,300 0 0 2,773 76,876 Increase in officer advances (post-petition) 0 0 0 13,693 63,693 Net cash provided by (used in) operating 0 0 0 0 (1,552,100) activities before reorganization activities (Decrease) to Cash Resulting from Reorganization Items: Pre-petition claims paid pursuant to plan 0 0 0 0 (19,142) Professional fees paid 0 0 0 0 (30,858) Net cash (used in) reorganization activities 0 0 0 0 Net cash (used in) operating activities 0 0 0 0 (1,592,271) Cash Flows From Investing Activities 0 0 0 0 Cash Flows From Financing Activities Issuance of common stock 0 0 0 0 2,100 Proceeds from notes payable 0 0 0 1,600,000 Net cash provided by financing activities 0 0 0 0 1,602,100 Net increase (decrease) in cash and cash equivalents 3,019 9,829 0 0 12,848 Cash and cash equivalents, beginning of period 0 0 0 0 0 Cash and equivalents, end of period 3,019 9,829 0 0 12,848 Supplemental Schedule of Non-Cash Investing and Financing Activities Discharge of short term notes payable 0 0 0 0 0 Discharge of long term notes payable 0 0 0 0 Issuance of shares on acquisition of Bycom 0 4,800 0 0 0 Media Inc.
See Accompanying Notes to Consolidated Financial Statements. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 Note 1. Nature of Business and Significant Accounting Policies NATURE OF BUSINESS: Discovery Investments, Inc. ("Company") was organized September 10, 1996 under the laws of the State of Nevada. The Company currently has no operations and, in accordance with Statement of Financial Accounting Standard (SFAS) No. 7, "ACCOUNTING AND REPORTING BY DEVELOPMENT STAGE ENTERPRISES," is considered a development stage company. On August 9, 2001 ("Petition Date"), the Company filed a voluntary petition for Chapter 11 protection pursuant to the United States Bankruptcy Code. As of that date, The United States Bankruptcy Court for the District of Nevada ("Bankruptcy Court") assumed jurisdiction over the assets of the Company. On September 24, 2001, the Bankruptcy Court confirmed the Disclosure Statement and Plan of Reorganization (the "Plan") submitted by the Debtors. On September 24, 2001 the Plan became effective. A SUMMARY OF THE COMPANY'S SIGNIFICANT ACCOUNTING POLICIES IS AS FOLLOWS: BASIS OF PRESENTATION The Company implemented guidance provided by the American Institute of Certified Public Accountants Statement of Position 90-7 "Financial Reporting By Entities in Reorganization Under the Bankruptcy Code" ("AICPA SOP 90-7") as of September 30, 2001. Accordingly, the Company's financial statements for the periods prior to September 30, 2001 are not comparable to financial statements presented on or subsequent to September 30, 2001. These consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Bycom Media Inc., as at June 30, 2002 and for the period from May 5, 2002 to June 30, 2002. 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH For the Consolidated Statements of Cash Flows, all highly liquid investments with maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of March 31, 2004 and December 31, 2003 and 2002. INCOME TAXES Income taxes are provided for using the liability method of accounting in accordance with SFAS No. 109 "ACCOUNTING FOR INCOME TAXES." A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 REPORTING ON COSTS FOR START-UP ACTIVITIES Statement of Position 98-5 ("SOP 98-5), "REPORTING ON THE COSTS OF START-UP ACTIVITIES" which provides guidance on the financial reporting of start-up and organization costs, requires most costs of start-up activities and organization costs to be expensed as incurred. With the adoption of SOP 98-5, there has been little to no effect on the Company's consolidated financial statements. YEAR END The Company originally selected March 31 for its fiscal year end. In 2000, the Company changed its fiscal year end to December 31. Note 2. Restructuring Items Pursuant to he Disclosure Statement and Plan of Reorganization becoming effective September 24, 2001, all general unsecured claims were discharged in exchange for cash payments totaling $50,000. An impaired interest holder-shareholder paid $30,858 for the Chapter 11 administrative claims. The remaining $19,142 was distributed to the Class One impaired creditors on a pro-rata basis, along with a pro-rata share of unregistered common stock, not to exceed 100,000 shares, of the Debtor. The discharge of debt has been reflected in the accompanying December 31, 2001 financial statements. The Company's post-reorganization balance sheet as of September 24, 2001 becomes the opening balance sheet for the reorganized Company, as reflected in the following table:
Adjustments to Record the Plan or Reorganization Balance Sheet Debt Discharge Balance Sheet ASSETS $0 $0 $0 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $19,182 $30,858 $50,000 Liabilities Subject to Compromise Short term notes payable $100,000 $(100,000) $0 Accounts payable 82,160 (82,160) 0 Interest payable 284,753 (284,753) 0 Officer's advances 17,576 (17,576) 0 Notes payable 1,500,000 (1,500,000) 0 Total Liabilities Subject to Compromise $1,984,489 $(1,984,489) $0 Total Liabilities $2,003,671 $(1,953,631) $(50,000) Stockholders' Equity Common stock $2,100 $0 $2,100 Accumulated Deficit (2,005,771) (1,953,631) (52,100) Total Stockholders' Equity $(2,003,671) $(1,953,631) $(50,000) Total Liabilities and Stockholders' Equity $0 $0 $0
DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 The following proforma statements of operations reflect the results of operations as if the reorganization had been effective December 31, 2000. PRO FORMA STATEMENTS OF INCOME For the Year Ended December 31, 2001 As Reported Adjustments Proforma Revenues $0 $0 $0 Cost of revenue 0 0 0 Gross profit $0 $0 $0 General, selling and administrative expenses 11,579 0 11,579 Operating Loss $(11,579) $0 $(11,579) Non-operating income (expense) Interest expense (98,753) 0 (98,753) (Loss) before reorganization items and $(110,332) $0 $(110,332) extraordinary item Reorganization items (Note 2) (30,858) 30,858(1) 0 (Loss) before extraordinary item $(141,190) $30,858 $(110,332) Extraordinary gain on pre-petition debt discharge (Note 2) $1,985,347 $(1,985,347)(2) $0 Net income (loss) $1,844,157 $(1,954,489) $(110,332) Net (loss) per share, Basic and diluted (Note 2) $(0.87) $(0.93) $(0.05) (1) Elimination of effect of reorganization items (2) Elimination of the gain on pre-petition debt discharge.
Note 3. Reorganization Items Reorganization Items consisted of the following for the period ended March 31, 2003 and years ended December 31, 2003 and 2002: March 31, 2004 December 31, 2003 December 31, 2002 Professional Fees $25,000 $80,000 $80,000 Note 4. Acquisition of Bycom Media Inc. On April 29, 2002, the Company entered into a Plan and Agreement of Reorganization ("the Plan") with Bycom Media, Inc., an Ontario, Canada corporation ("Bycom"). Pursuant to the Plan, the Company acquired all the outstanding shares of Bycom for 4,800,000 shares of Company stock. Bycom became a wholly owned subsidiary of the Company. The closing of the purchase of Bycom occurred on May 5, 2002. Bycom is engaged in multimedia applications for internet-based businesses. Utilizing business search tools and databases, Bycom will be able to locate and access global business information. Bycom intends to use its technology in order to enter into various business DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 combinations with entities that offer products or services that are susceptible to internet marketing. As an alternative, Bycom will also sell, for a fee, this information and will act as an "out-source provider" of information. As an "out-source provider," the information will be cost-effective for the user. This is because the customer typically lacks the technology expertise, capital, personnel or ability to bear the time to market and operating risk to install, maintain and monitor business information. Bycom for itself and for its customers will provide personnel who are readily available to respond to technical issues and marketing issues, and who can assist in developing and implementing the effective use of the business search tools and data base. The Company has recorded the excess of the purchase price over the net book value of Bycom as goodwill on consolidation. Bycom is currently inactive. Note 5. Stockholders' Equity COMMON STOCK The authorized common stock of the Company consists of 25,000,000 shares with par value of $0.001. On September 15, 1996, the Company authorized and issued 21,000 shares of its no par value common stock in consideration of $2,100 in cash. On March 15, 1999, the State of Nevada approved the Company's amended Articles of Incorporation, which increased its capitalization from 25,000 common shares to 25,000,000 common shares. The no par value was changed to $0.001 per share. Also, on March 15, 1999, the Company's shareholders approved a forward split of its common stock at one hundred shares for one share of the existing shares. The number of common stock shares outstanding increased from 21,000 to 2,100,000. Prior period information has been restated to reflect the stock split. As part of the reorganization explained in Note 2, the Company issued 99,881 shares of stock to the Class One impaired creditors on November 29, 2001. On April 25, 2002, the sole director of the Company adopted a resolution that resulted in a stock dividend. For stockholders of record on May 5, 2002, the Company will issue 2.5 shares for each shares owned. In lieu of issuing a fractional share certificate, the Company shall round up to a full share. On September 4, 2002 14,000,000 shares were issued for the acquisition of Cavio Corportion. Later in 2003, the Cavio acquisition was cancelled and the 14,000,000 shares were cancelled. In December of 2003 2,670,000 shares were issued to settle debt. This resulted in 27,170,383 shares outstanding as of March 31, 2004. On April 29, 2002, the Company issued 4,800,000 pursuant to a Plan of Reorganization whereby it acquired all of the outstanding shares of Bycom Media Inc. therefore (Note 4). On July 10, 2002, the State of Nevada approved the Company's amended Articles of Incorporation, which increased its capitalization from 25,000,000 common shares to 100,000,000 common shares. The Company has not authorized any preferred stock. NET LOSS PER COMMON SHARE Net loss per share is calculated in accordance with SFAS No. 128, "EARNINGS PER SHARE." The weighted-average number of common shares outstanding during each period is used to compute basic loss per share. Diluted loss per share is computed using the weighted averaged number of shares and dilutive potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 Basic net loss per common share is based on the weighted average number of shares of common stock outstanding for the three months ended March 31, 2004 and March 31, 2003 was 27,170,383, and 38,449,583, respectively, for the years ended December 31, 2003 and 2002, 24,499,583 and 23,540,670, respectively, and 8,278,121 since inception. As of March 31, 2004 and December 31, 2003 and 2002 and since inception, the Company had no dilutive potential common shares. Note 6. Income Taxes There is no provision for income taxes for the period ended March 31, 2003, 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 March 31, 2004 is as follows: Net operating loss carry forward $3,634 Valuation allowance $(3,634) Net deferred tax asset $0 The net federal operating loss carry forward will expire in 2020. This carry forward may be limited upon the consummation of a business combination under IRC Section 381. For financial reporting purposes, the Company reported an extraordinary gain in the amount of $1,984,489 resulting from the cancellation of indebtedness that occurred from the bankruptcy discharge on the effective date. Pursuant to Section 1087 of the Internal Revenue Code, this extraordinary gain is excluded from income taxation and certain tax attributes of the Company are eliminated or reduced, up to the amount of such income excluded from taxation. As a result, the Company's net operating loss carryforwards were reduced by the $1,984,489 Note 7. Going Concern The Company's consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern. This contemplates the realization of assets and the liquidation of liabilities in the normal course of business. Currently, the Company does not have significant cash of other material assets, nor does it have operations or a source of revenue sufficient to cover its operation costs and allow it to continue as a going concern. Until the Company has sufficient operations, the officers and directors have committed to advancing the operating costs of the company. Note 8. Related Party Transactions The Company neither owns nor leases any real or personal property. The resident agent of the corporation provides office services without charge. Such costs are immaterial to the financial statements and accordingly, have not been reflected therein. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts. Note 9. Warrants and Options There are no warrants or options outstanding to acquire any additional shares of common stock of the Company. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2004 AND DECEMBER 31, 2003 AND 2002 Note 10. Other Events/Subsequent Event On April 29, 2002, the Company entered into a Plan and Agreement of Reorganization with Bycom Media Inc., an Ontario, Canada corporation ("Bycom"). Pursuant to the Plan, the Company acquired all the outstanding shares of Bycom for 4,800,000 shares of Common Stock. On October 5, 2002, there was a closing under the Plan and Bycom became a wholly owned subsidiary of the Company and there was a change of control. Bycom was engaged in multimedia applications for internet-based business. Utilizing business search tools and databases, Bycom intended to be able to locate and access global business information for a fee, or was to act as an "out-source provider" of information. Bycom is currently inactive. On September 4, 2002, the Company completed a transaction set out in a Plan and Agreement of Reorganization dated June 13, 2002, pursuant to which the Company acquired all of the outstanding shares of Cavio Corporation, a Washington corporation, ("Cavio") in exchange for 14 million share of Common Stock. Due to poor market condition and the Company's inability to seek adequate financing from third parties to properly finance the operations of Cavio, on December 2, 2002 the Company's Board of Directors approved, subject to receiving the approval of a majority of the shareholders, to unwind the acquisition of Cavio in cancellation of the shares of Common Stock issued. On December 2, 2002, the Company unanimously approved the disposition of its interest in Cavio and thereafter received the consent of a majority of the outstanding shares of the Company Common Stock. The Company determined that the effective date for the divestiture to be June 30, 2003. Between March 31, 2004 and May 21, 2004, the Company sold and issued for cash or in cancellation of indebtedness, 2,670,000 shares of the Company's Common Stock. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The discussion contained herein contains "forward- looking statements" that involve risk and uncertainties. These statements may be identified by the use of terminology such as "believes," "expects," "may," "should" or anticipates" or expressing this terminology negatively or similar expressions or by discussions of strategy. The cautionary statements made in this Form 10QSB should be read as being applicable to all related forward-looking statements wherever they appear in this Form 10QSB. Our actual results could differ materially from those discussed in this report. Generally. The Company currently has no assets or operations. As of the date hereof, the Company can be defined as a "shell" company, whose sole purpose is to locate and consummate a merger or acquisition with another public entity or a private entity. Plan of Operation. The Company intends to seek to acquire assets or shares of an entity actively engaged in business that generates revenues in exchange for its securities. As of the date hereof, the Company has entered into preliminary negotiations to acquire all of the issued and outstanding shares of stock of Ultrabio Technology Limited, Incorporated, a British Virgin Island corporation. In connection with the negotiations to acquire all of the issued and outstanding shares of stock of Ultrabio Technological Limited, Incorporated, the Company has been informed that the Securities and Exchange Commission is considering amendments to the Form 8-S and the Form 8-K. The proposed amendments may expand the definition of a shell company to be broader than a company with no or nominal operations/assets or assets consisting of cash and cash equivalents, the amendments may prohibit the use of a From S-8 (a form used by a corporation to register securities issued to an employee, director, officer, consultant or advisor, under certain circumstances), and may revise the Form 8-K to require a shell company to include current Form 10 or Form 10-SB information, including audited financial statements, in the filing on Form 8-K that the shell company files to report the acquisition of the business opportunity. Financial Condition. The Company's auditor's going concern opinion for prior year ended and the notation in the financial statements indicate that the Company does not have significant cash or other material assets and that we are relying on advances from stockholders, officers and directors to meet limited operating expenses. The Company does not have sufficient cash or other material assets or do we have sufficient operations or an established source of revenue to cover our operational costs that would allow us to continue as a going concern. Liquidity and Operational Results. The Company has no current operating history nor any revenues or earnings from pending operations. The Company has limited assets or financial resources. The Company will, in all likelihood, sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This may result in the Company incurring a net operating loss that will increase continuously until the Company can consummate a business combination with a profitable business opportunity. Although the Company is in negotiations to acquire all of the issued and outstanding stock of Ultrabio Technology Limited, Incorporated, a British Virgin Island corporation, there is no assurance that the Company will consummate the business combination, and if consummated, that the Company will be profitable. Item 3. Qualitative and Quantitative Disclosures About Market Risk. The Company has not considered nor conducted any research concerning qualitative and quantitative market risk. Item 4. Evaluation of Disclosure on Controls and Procedures. Based on an evaluation of our disclosure controls and procedures as of the end of the period covered by this Form 10QSB (and the financial statements contained in the report), our president has determined that the our current disclosure controls and procedures are effective. There have not been any changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) or any other factors during the quarter covered by this report, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. Board Meeting. The Company held one (1) meeting during the quarter, by written consent by the sole director. Audit Committee. The board of directors has not established any audit committee. In addition, the Company does not have any other compensation or executive or similar committees. The Company recognizes that an audit committee, when established, will play a critical role in the financial reporting system of the Company by overseeing and monitoring management's and the independent auditors' participation in the financial reporting process. At such time as the Company establishes an audit committee, its additional disclosures with the Company's auditors and management may promote investor confidence in the integrity of the financial reporting process. Until such time as an audit committee has been established, the full board of directors will undertake those tasks normally associated with an audit committee to include, but not by way of limitation, the (i) review and discussion of the audited financial statements with management, (ii) discussions with the independent auditors the matters required to be discussed by the Statement On Auditing Standards No. 61, as may be modified or supplemented, and (iii) receive from the auditors disclosures regarding the auditors' Independents Standards Board Standard No. 1, as may be modified or supplemented. Item 6. Exhibits and Reports on Form 8-K. There were no reports on Form 8-K filed during the quarter for which this report is filed. The Company did file a Form 8-K on April 4, 2004 disclosing the preliminary negotiations referred to in Item Part II, Item 2 above. The following exhibits are filed with this report: 31.1 Certification of Chief Executive Officer and Chief Financial Officer 32.1 Section 906 Certification. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 21, 2004 DISCOVERY INVESTMENTS INC. (Registrant) By: /s/ Donald Bell, President and sole Director (Signature and Title)