-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MtnnD0eBPZzVMBeLjBkOAnL70o3OJubtOODZSvn3XJCvRqb4jeNabLrk7ysAgw9k n6YzaST6P9txuOdIo38g5w== 0001092306-04-000627.txt : 20040820 0001092306-04-000627.hdr.sgml : 20040820 20040820125953 ACCESSION NUMBER: 0001092306-04-000627 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040630 FILED AS OF DATE: 20040820 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DISCOVERY INVESTMENTS INC CENTRAL INDEX KEY: 0001083459 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 880409151 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26175 FILM NUMBER: 04988272 BUSINESS ADDRESS: STREET 1: 6767 W. TROPICANA AVENUE STREET 2: SUITE 207 CITY: LAS VEGAS STATE: NV ZIP: 89103 BUSINESS PHONE: 866-351-5099 MAIL ADDRESS: STREET 1: 12405 SO. VENICE BLVD. STREET 2: UNIT 223 CITY: LOS ANGELES STATE: CA ZIP: 90066 10QSB 1 form10qsb063004.txt FORM 10-QSB 06-30-04 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 JUNE 30, 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 (I.R.S. Employer Identification No.) incorporation or organization) 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) Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes [X] No APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 27,870,383 COMMON SHARES - ------------------------- Transitional Small Business Disclosure Format (Check one): Yes No [X] PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS. DISCOVERY INVESTMENTS, INC. (A Development Stage Company) CONSOLIDATED FINANCIAL REPORTS JUNE 30, 2004 (UNAUDITED) DECEMBER 31, 2004 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 JUNE 30, 2004 June 30, 2004 June 30, 2003 December December 31, 2003 31, 2002 ASSETS CURRENT ASSETS Cash $3,624 $0 $0 $0 Goodwill $0 $0 $0 $0 Assets of discontinued operations $0 $0 $0 $467,621 Total current assets $3,624 $0 $0 $467,621 TOTAL ASSETS $3,624 $0 $0 $467,621 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $0 $0 $0 $62 Accounts payable $40,863 $54,847 $54,847 $4,847 Officers' advances $44,150 $63,693 $63,693 $63,693 Liabilities of discontinued operations $0 $0 $0 $2,319,298 Total current liabilities $85,013 $118,540 $118,540 $2,387,900 TOTAL LIABILITIES $85,013 $118,540 $118,540 $2,387,900 STOCKHOLDERS' EQUITY 27,870,383 shares at June 30, 2004 $228,040 $24,500 $24,500 $38,500 Retained Earnings $(309,429) $(143,040) $(143,040) $(1,958,779) TOTAL STOCKHOLDERS' EQUITY $(81,389) $(118,540) $(118,540) $(1,920,279) Total liabilities and stockholders' equity $3,624 $0 $0 $467,621
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF INCOME JUNE 30, 2004 Sept 10, 1996 Six Months Ended Years Ended (Inception) to June 30, June 30, December 31, December 31, June 30, 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 $136,389 $50,000 $80,000 $21,266 1,961,627 Net operating income (loss) $(136,389) $(50,000) $(80,000) $(21,266) $(1,961,627) Non operating income (expense) $0 $0 $(80,000) $0 $(284,753) Net (Loss) before extraordinary item $(136,389) $(50,000) $(80,000) $(21,266) $(2,246,380) Reorganization items $0 $0 $0 $0 $(30,858) Net (Loss) from continuing operations $(136,389) $(50,000) $(80,000) $(21,266) $(2,277,238) Extraordinary gain on prepetition debt discharge $0 $0 $0 $0 $1,985,317 $(136,389) $(50,000) $(80,000) $(21,266) $(29,921) Gain (Loss) from discontinued operations $0 $2,539,282 $(1,851,739) $(1,865,677) $(1,865,677) Net income (loss) $(136,389) $2,489,282 $(1,771,739) $(1,886,943) $(2,157,959) Net income (loss) per share basic and diluted (Note 2) $(0.006) $0.10 $(0.10) $(0.08) $(0.2356) Average number of shares of common stock outstanding 27,520,382 24,499,583 24,449,583 23,540,679 8,309,752
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY JUNE 30, 2004 Additional Additional Common Stock Paid-In Paid-In Shares Amount Capital Capital (Deficit) Total 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 $(1,866,943) $(1,866,943) 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 Dec. 31, 2003 2,670,800 $133,540 $(1,958,779) $(1,906,179) Net Income for year ended Dec. 31, 2003 0 0 $1,771,739 $1,771,739 Balance, March 31, 2004 27,170,383 $158,040 $(173,040) $(15,000) Issued May, 2004 700,000 $70,000 $0 $0 Balance, June 30, 2004 27,870,383 $228,040 $(173,040) $(15,000)
See Accompanying Notes to Consolidated Financial Statements.
DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) CONSOLIDATED STATEMENTS OF CASH FLOWS JUNE 30, 2004 Six Months Ended Years Ended June 30, June 30, December 31, December 31, September 10, 1996 (inception) to 2004 2003 2003 2002 June 30, 2004 Cash Flows From Operating Activities Net income (loss) $(136,389) $(50,000) $(80,000) $(21,266) $(276,889) Impairment of Intangible Asset 0 0 0 4,800 4,800 Extraordinary gain on pre-petition debt discharge 0 0 0 0 (1,985,347) Professional fees 0 0 0 0 65,858 Changes in assets and liabilities Increase in accounts payable and accrued (13,624) 50,000 10,153 0 421,913 expenses (pre-petition) Increase in accounts payable and accrued expenses (post-petition) 0 0 0 2,773 4,909 Increase in officer advances (pre-petition) 0 0 63,693 0 17,576 Increase in officer advances (post-petition) (49,916) 0 0 0 13,970 Net cash provided by (used in) operating (199,916) 0 (133,540) 0 1,735,010 activities before reorganization activities (Decrease) in 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 (65,858) Net cash (used in) reorganization activities 0 0 0 0 0 Net cash (used in) operating activities 0 0 0 0 (1,650,010) Cash Flows From Investing Activities 203,540 0 0 0 0 Cash Flows From Financing Activities Issuance of common stock 0 0 133,540 0 50,010 Proceeds from notes payable 0 0 0 0 1,600,000 Net cash provided by financing activities 203,540 0 0 0 1,650,010 Net increase (decrease) in cash and cash equivalents 3,916 0 0 0 0 Cash and cash equivalents, beginning of period 0 0 0 0 0 Cash and equivalents, end of period 0 0 0 0 0 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 Issuance of shares on acquisition of Bycom 0 4,800 4,800 0 4,800 Media
See Accompanying Notes to Consolidated Financial Statements. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 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 June 30, 2003 and December 31, 2002 and 2001. 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. 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. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 AND DECEMBER 31, 2003 AND 2002 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
The following proforma statements of operations reflect the results of operations as if the reorganization had been effective December 31, 2000. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 AND DECEMBER 31, 2003 AND 2002
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 June 30, 2004 and years ended December 31, 2003 and 2002: June 30, 2004 December 31, 2003 December 31, 2002 Professional Fees $35,000 $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 was engaged in multimedia applications for internet-based businesses. Utilizing business search tools and databases, Bycom intended to be able to locate and access global business information. Bycom intended to use its technology in order to enter into various business combinations with entities that offer products or services that are susceptible to internet marketing. As an alternative, Bycom was also to sell, for a fee, this information and was to act as an "out-source provider" of information. Bycom is current inactive. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 AND DECEMBER 31, 2003 AND 2002 The Company has recorded the excess of the purchase price over the net book value of Bycom as goodwill on consolidation. NOTE 5. STOCKHOLDERS' EQUITY COMMON STOCK The authorized common stock of the Company consists of 100,000,000 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 issued 2.5 shares for each share owned. In lieu of issuing a fractional share certificate, the Company rounded up to a full share. On September 4, 2002, 14,000,000 shares were issued for the acquisition of Cavio Corportion. In the second quarter of 2003 the Company unwound the transaction and cancelled the 14,000,000 shares. This resulted in approximately 24,499,600 shares outstanding as of June 30, 2003. 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. (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. Basic net loss per common share is based on the weighted average number of shares of common stock outstanding for the six months ended June 30, 2004 and 2003 was 27,520,382, and 24,499,583, respectively, for the years ended December 31, 2003 and 2002, 24,499,583 and 23,540,670, respectively, and 8,309,752 since inception. As of June 30, 2004 and December 31, 2003 and 2002 and since inception, the Company had no dilutive potential common shares. DISCOVERY INVESTMENTS, INC. (A DEVELOPMENT STAGE COMPANY) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2004 AND DECEMBER 31, 2003 AND 2002 NOTE 6. INCOME TAXES There is no provision for income taxes for the period ended June 30, 2004, 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 June 30, 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION. 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. Prior to the date hereof, the Company had entered into preliminary negotiations to acquire all of the issued and outstanding shares of stock of Ultrabio Technological Limited, Incorporated, a British Virgin Island corporation. As of the date hereof, said negotiations have terminated. The Company is currently engaged in negotiations with the Evergreen Asset Group, a British Virgin Island corporation, a company under formation which will be the successor to various China business entities ("Evergreen") that are engaged in the business of designing, construction and operation of waste water treatment plants in China. The Company has been informed that Evergreen receives revenues from Chinese municipal authorities based upon a per gallon price for water treated and released. In connection with the negotiations to acquire all of the issued and outstanding shares of stock of Evergreen, 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 Evergreen Asset Group, there is no assurance that the Company will consummate the business combination, and if consummated, that the Company will be profitable. The Company is dependent upon its sole officer to meet any de minimis costs that it may incur. Donald Bell, an officer and director of the Company, has agreed to provide the necessary funds, without interest, for the Company to comply with the Securities Exchange Act of 1934, as amended; provided that he is an officer and director of the Company when the obligation is incurred. Since the Company had no operating history nor any revenues or earnings from operations as of June 30, 2004 and currently has limited assets or financial resources, the Company will in all likelihood continue to sustain operating expenses without corresponding revenues. This may result in the Company incurring a net operating loss which will increase continuously until the Company can implement its business plan. The Company is actively pursuing business opportunities. Accounting for Good Will and Other Intangible Assets. In July 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards "SFAS" No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires business combinations initiated after June 30, 2001 to be accounted for using the purchase method of accounting, and broadens the criteria for recording intangible assets separate from goodwill. Recorded goodwill and intangibles will be evaluated against these new criteria and may result in certain intangibles being subsumed into goodwill, or alternatively, amounts initially recorded as goodwill may be separately identified an recognized apart form goodwill. SGAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangibles. Under a non-amortization approach, goodwill and certain intangibles is more than its fair value. Goodwill is the excess of the acquisition costs of the acquired entity over the fair value of the identifiable net assets acquired. The Company is required to test goodwill and intangible assets that are determined to have an indefinite life for impairments at least annually. The provisions of SFAS No. 142 require the completion of an annual impairment test with any impairments recognized in current earnings. The provisions of SFAS No. 141 and SFAS No. 142 may be applicable to the Evergreen transaction referred to in the Plan of Operation above. The Company has been informed that the proposed transaction with Evergreen will be accounted for as a reverse acquisition with the Company being the surviving registrant. As a result, Evergreen's shareholders will exercise control over the Company. The transaction will be deemed to be a capital transaction where the Company and Bycom are treated as a non-business entity. Therefore, the accounting for the business combination is identical to that resulting from a reverse merger, except no goodwill or other intangible assets will be recorded. For accounting purposes, Evergreen will be treated as the accounting acquirer and, accordingly, will be presented as the continuing entity. At the time of the business combination, the transaction between Bycom and the Company may require restatement to reflect the application of SFAS No. 141 and SFAS No. 142. 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. (a) Board Meeting The board held three meetings during the quarter ended June 30, 2004. (b) Committees 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. The Company filed a Form 8-K on April 4, 2004 disclosing the preliminary negotiations and the press release referring to the now terminated proposed transaction with Ultrbio Technological Limited, Incorporated. 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. DISCOVERY INVESTMENTS INC. (Registrant) By: /s/ Donald Bell, President and sole Director (Signature and Title)* Date: August 20, 2004 EX-31.1 2 ex31-1.txt CERTIFICATION OF CFO AND CEO EXHIBIT 31.1 CERTIFICATIONS I, Donald Bell, certify that: 1. I have reviewed this Form 10-QSB of Discovery Investments Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15-(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 20, 2004 /s/ DONALD BELL ___________________________________ Donald Bell President and sole Director EX-32.2 3 ex32-1.txt CERTIFICATION OF CEO & CFO EXHIBIT 32.1 SECTION 1350 CERTIFICATIONS CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Form 10-QSB of Discovery Investments Inc. (the "Company") on Form 10-QSB for the period ended June 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Donald Bell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that based on my knowledge: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: August 20, 2004 /s/ DONALD BELL ______________________________________ Donald Bell President and sole Director A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN THE ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO DISCOVERY INVESTMENTS INC. AND WILL BE RETAINED BY DISCOVERY INVESTMENTS INC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST. -----END PRIVACY-ENHANCED MESSAGE-----