Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
|X| Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the Fiscal Year Ended December 31, 2002
or
| | Transition Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the transition Period from to
---------- ----------
Commission file number: 000-31883
BENTLEYCAPITALCORP.COM, INC.
(Name of small business issuer in its charter)
Washington 91-2022700
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1150 Marina Village Parkway, Suite 103
Alameda, California 94501
(Address of principal executive offices) (Zip Code)
(510) 865-6412
Issuer's telephone number:
Securities registered under Section 12(b) of the Act:
(Title of Class) Name of exchange on which registered
None. None.
Securities registered under Section 12(g) of the Act: Common Stock,
$0.0001 par value
(Title of class)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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|
Registrant's revenues for its most recent fiscal year: $303,734.
The aggregate market value of the common stock held by non-affiliates of the
registrant on March 28, 2003, computed at the price at which the stock was
originally sold, was $15,000. There is no market for the common stock.
On March 28, 2003, the registrant had outstanding 11,250,000 shares of Common
Stock, $0.0001 par value per share.
Transitional Small Business Disclosure Format: Yes | | No |X|
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TABLE OF CONTENTS
PART I PAGE
Item 1. Description of Business 3
Item 2. Description of Property 12
Item 3. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 13
Item 6. Management's Discussion & Analysis of Financial Condition
and Results of Operations 13
Item 7. Financial Statements 16 and F-1
Item 8. Changes In and Disagreements with Accountants 16
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance With Section 16(a) of the Exchange Act 17
Item 10. Executive Compensation 20
Item 11. Security Ownership of Certain Beneficial Owners
And Management 20
Item 12. Certain Relationships and Related Transactions 21
Item 13. Exhibits and Reports on Form 8-K 22
Item 14. Controls and Procedures 22
SIGNATURES 23
CERTIFICATIONS 24
FINANCIAL STATEMENTS F-1
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
INTRODUCTION
BentleyCapitalCorp.com, Inc. ("Bentley") was incorporated in the State of
Washington, U.S.A. on March 14, 2000. In November 2002, we acquired Proton
Laboratories, a distributor of functional water systems. Proton itself
commenced business in 2001. We also own a license from a company named
Vitamineralherb.com to market and distribute vitamins, minerals, nutritional
supplements, and other health and fitness products in the Province of British
Columbia, Canada. Our functional currency is the U.S. dollar. Our web site,
www.protonlabs.com, is scheduled to go online in May 2003.
We filed a Registration Statement on Form SB-2 with the Securities and
Exchange Commission that was declared effective in November 2000. Prior to our
November 2002 acquisition of Proton, we were a development stage company. Our
acquisition of Proton brought with it material revenues, expenses and losses.
Our growth is dependent on attaining profit from our operations, or our raising
additional capital either through the sale of stock or borrowing. There is no
assurance that we will be able to raise any equity financing or sell any our
products at a profit.
Our independent auditors made a going concern qualification in their report
dated March 20, 2003, which raises substantial doubt about our ability to
continue as a going concern.
HISTORY
Our only asset prior to the November 2002 acquisition of Proton was a
license from a company named Vitamineralherb.com to market vitamins, minerals,
nutritional supplements and other health and fitness products in the Province of
British Columbia, Canada, through the licensor's web site which has not been
operational. We will continue to attempt to establish a business presence in
this market which consists of medical practitioners, alternative health
professionals, martial arts studios and instructors, sports and fitness
trainers, other health and fitness practitioners, school and other fund raising
programs and other similar types of customers. The license was acquired in March
2000 for a term of three years with renewal rights. The annual license fee was
$500 for maintenance of the licensor's web site. The licensor retains 50% of the
profits. The license was written-off to operations in fiscal 2000.
We entered into an Agreement and Plan of Reorganization, finalized and
closed in November 2002 whereby Proton Laboratories, LLC, a California limited
liability company ("Proton") merged with and into VWO I Inc., our wholly owned
subsidiary (the "Merger"). As a result of the Merger, Proton's sole owner,
Edward Alexander, exchanged 100% of his ownership of Proton for 8,750,000 shares
of our common stock.
VWO I Inc. changed its name to Proton Laboratories, Inc. as part of the
Merger. Proton itself was incorporated in February 2000 in the State of
California. Proton did not begin operations until January 2001 when Mr.
Alexander contributed inventory and property and equipment to Proton. Prior to
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the Merger, Mr. Alexander entered into a Stock Purchase Agreement with certain
of our shareholders. Under the Stock Purchase Agreement, Mr. Alexander
purchased 8,750,000 shares of common stock of Bentley from certain Bentley
stockholders for $170,000. The 8,750,000 shares Mr. Alexander acquired from the
shareholders were canceled as part of the Merger. The certain former
shareholders now own a de minimis number of shares of our common stock.
The Merger was accounted for as the reorganization of Proton and the
acquisition of Bentley's assets for $170,000 using the purchase method of
accounting. There were no material assets or liabilities of Bentley at the time
of the Merger. The $170,000 paid to by Mr. Alexander has been reflected as a
loss on the acquisition of Bentley in the accompanying financial statements (See
page 16 and page F-1). For financial statement purposes Proton is considered
the parent corporation but maintains Bentley as its business name (Proton is the
accounting acquiror, and Bentley is the legal acquiror).
References in this Form 10-KSB to BentleyCapitalCorp.com, Inc., Proton
Laboratories, Inc., Bentley, Proton ("we", "us" and our") include
BentleyCapitalCorp.com, Inc. and our wholly-owned subsidiary Proton
Laboratories, Inc.
In June 2002, Michael Kirsh, our former majority shareholder entered into a
Stock Purchase Agreement with Mr. Alexander pursuant to which Mr. Alexander
acquired 7,500,000 shares owned by Kirsh. In addition, Mr. Alexander acquired
1,250,000 shares owned by a former minority shareholder, Brian Gruson. The
total consideration paid by Mr. Alexander for the shares was $170,000. Mr.
Alexander borrowed money from the following individuals to purchase the shares
from Messrs. Kirsh and Gruson:
Lender Name Amount Borrowed
Thomas Dizon $40,000
A. J. Moraes $40,000
Jean Wang $90,000
Each of these loan accrues interest at 7% per annum, and the maturity date
was extended to December 31, 2003. Mr. Alexander has not paid off any of these
loans. The current aggregate balance due on these loans is $181,900. These
loans are personal obligations of Mr. Alexander, and we are not responsible for
repaying these loans.
The consideration exchanged pursuant to the Merger was the result of arms
length negotiations between us and Proton. However, no appraisal was done. In
evaluating Proton as a candidate for the proposed merger, we used criteria such
as the value of the assets of Proton, Proton's current business operations and
anticipated operations, and Proton's business name and reputation. We determined
that the consideration for the merger was reasonable.
Other than the Merger and Mr. Alexander's acquisition of 8,750,000 shares
of our common stock from shareholders prior to the Merger, there were no
material relationships among Mr. Alexander, Proton and Bentley or any of their
affiliates, directors, officers or any associates of the directors or officers.
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Our executive offices are located in Alameda, California
OUR BUSINESS--THE BACKGROUND OF FUNCTIONAL WATER
We intend to continue the business of Proton, which includes marketing
residential and commercial "functional water systems." "Functional water" is
water that has been processed through an electrolytic ion separation process or
electrolysis process and has a wide array of functional properties due to its
unique characteristics. Proton's functional water systems restructure tap water
into one type of water that is alkaline in concentration and one type of water
that is acidic in concentration. We believe that the functional water systems
that we market will have applications in a large variety of industries, such as
agriculture, organic agriculture, food processing, medicine and dentistry, heavy
industry, mining, environmental clean-up and beverages. We also intend to
continue the vitamin distribution business through our Vitamineralherb.com
license. We believe that vitamins and functional water are complementary
products that might be marketed or used in conjunction with each another.
We are an exclusive importer and master distributor of the functional water
system that are manufactured by Matsushita Electric Corporation of America. We
utilize functional water intellectual property under licensing agreements. We
supply consumer products related to functional water. We consult on projects
utilizing functional water. We facilitate knowledge between the manufacturer
and industry, and we act as educators about the benefits of functional water.
We are a provider of systems that produce functional water (also called
"electrolyzed water" or "functional electrolyzed water"). Functional water is
water that has been restructured through the process of electrolysis.
Electrolysis forces a separation to occur in the electrolytes that are present
in the water molecules. Through the process of creating functional water,
regular tap water can be restructured into two separate types of water. For
instance, tap water can be restructured into one type of water that is alkaline
in concentration and one type of water that is acidic in concentration.
We believe that water with these unique properties is desirable for a
number of reasons. Water with smaller clusters of molecules has a lower
surface tension. With a lower surface tension, water may have improved
hydrating, permeating and solubility properties. Collectively, these properties
may enhance the overall functional effectiveness of water. The separation
of the alkaline and acidic properties found in water provides the water with
functional abilities. For example, functional acidic water has disinfecting
abilities to meet a wide array of disinfecting requirements in food
processing procedures, and functional alkaline water makes an excellent drinking
water due to improved hydration.
Although not yet recognized by the Food and Drug Administration, academic
research has been published on this subject (see below, Our Business--Our
Functional Water Systems-Residential Systems). Functional water may have
applications in a variety of industries, including agriculture, organic
agriculture, food processing, medicine and dentistry, dermatology, heavy
industry, mining, environmental clean-up, product formulations and beverages.
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OUR BUSINESS--SYSTEMS AND MARKETS
We market functional water systems to the residential and commercial
markets. For the residential market, we market functional water systems that
are used to produce a health-beneficial, alkaline-concentrated drinking water.
For the commercial market, we market commercial-grade functional water systems
that are used in applications ranging from food preparation to hospital
disinfection. Other applications of our systems include agriculture, organic
agriculture, nutraceutical product formulations and heavy industrial uses. Our
goal is to take our functional water technology and market it throughout North
America.
We purchase functional water systems from Matsushita Electric Corporation
of America ("Matsushita") under a private brand name of Advanced H2O. We
purchase the systems under a pre-existing agreement between Advanced H2O, a
private company formerly owned by Edward Alexander, and Matsushita. The
agreement between Advanced H2O and Matsushita is in the process of being
assigned to us. However, if we fail to obtain the assignment of the Matsushita
agreement, then we could lose access to the Matsushita's functional water
products which would interrupt our business operations, or prevent us from
implementing our business plan.
We intend to develop our own systems and to introduce a wide array of
applications of functional water to a wide variety of industries.
Our business model envisions us as: a supplier of technology for functional
water applications; a supplier of hardware for functional water systems; a
provider of intellectual property for functional water systems under licensing
agreements; a supplier of consumer functional water products; consultants to
industries requiring and/or using functional water; facilitators between
Japanese functional water manufacturers and U.S. industrial users; and educators
of academia, government and industry on the benefits of functional water.
OUR BUSINESS--SCIENCE
"Functional water" is a term that has been assigned to a new category of
water. Functional water is water that is processed through an electrolytic ion
separation or electrolysis process and has a wide array of functional properties
due to its unique characteristics. We believe the uses for this type of water
are far reaching, as new applications and uses for functional water are being
identified on an ongoing basis. Functional water has applications in
agriculture, organic agriculture food processing, hospitals, dental clinics,
dermatological procedures, heavy industry, mining, environmental clean up,
product formulations and beverages. Functional water systems are capable of
producing the following types of functional water:
- Ionic-Structured Water
Ionic-structured water is electrolyzed drinking water that is
alkaline-concentrated and utilizes smaller molecular clusters than
regular water for improved hydration and solubility. Ionic structured
water is smooth to the palate.
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- Electro-Structured Water
Electro-structured water is water that is anti-microbial in nature and
may be effective against virus, bacteria, fungus and spores. This
water may have a wide array of disinfectant uses.
- Derma-Structured Water
Derma-structured water is electrolyzed low pH water that has
astringent and disinfecting properties and may have a wide array of
cosmetic, dermatological and post-plastic surgery applications that
may minimize infections and scarring and expedite healing.
FUNCTIONAL WATER RESEARCH IN ACADEMIA
The process to produce functional water was developed by Scottish inventor
Michael Faraday in Boston, Massachusetts in 1834. In 1929, the value of
electrolytic water separation to produce water with functional properties was
realized in Japan. Japanese researchers have since taken this process, created
a wide array of functional waters and have introduced this technology to food
processing, hospital disinfection, wound care, agriculture, organic agriculture
and food safety in Japan.
During recent years, functional water applications have been studied by
universities in the U.S. and Canada. For example, in a University of Georgia
study published in the Journal of Food Protection in 1999 entitled "Inactivation
of Escherichia coli O157:H7 and Listeria monocytogenes on Plastic Kitchen
Cutting Boards by Electrolyzed Oxidizing Water," the immersion of plastic
kitchen cutting boards in electrolyzed oxidizing water was found to be an
effective method for inactivating food-borne pathogens such as E. coli. Other
studies at the University of Georgia have looked at the efficacy of electrolyzed
oxidizing water for inactivating E. coli, Salmonella and Listeria and have
determined that such water may be a useful disinfectant. A University of Georgia
study entitled "Antimicrobial effect of electolyzed water for inactivating
Campylobacter jejuni during poultry washing" demonstrated that electrolyzed
water was effective not only in reducing the populations of C. jejuni on
chicken, but also may prevent cross-contamination of processing environments.
OUR BUSINESS--OUR FUNCTIONAL WATER SYSTEMS
Residential Systems. The residential counter-top, functional water
--------------------
systems produce water that scientists believe contains more wellness and
health-beneficial properties than regular tap water (see, "Electrolyzed-Reduced
Water Scavenges Active Oxygen Species and Protects DNA from Oxidative Damage,"
Biochemical and Biophysical Research Communications, Vol. 234, No. 1, pp.
269-274 (1997); and, Hanaoka, K., "Antioxidant Effects Of Reduced Water Produced
By Electrolysis Of Sodium Chloride Solutions," 31 Journal of Applied
Electrochemistry 1307-1313 (2001)). Generally, the residential counter-top
system sits next to the kitchen faucet, and through the use of a diverter,
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allows tap water to be routed through the system. The water is then processed
through a charcoal filter where chlorine and sediments are removed. The filtered
water then proceeds to the electrolysis chamber that is made up of electrodes
and membranes. A positive and negative electrical charge is passed through the
electrodes. The minerals that are found in the filtered water are attracted to
opposite electrodes. For example, the alkaline minerals (minerals with positive
(+) properties that include calcium, magnesium, sodium, manganese, iron and
potassium) are attracted to the negatively charged (-) electrode. The acidic
minerals (minerals with negative (-) properties include nitric acid, sulfuric
acid and chlorine) are attracted to the positively-charged (+) electrode.
Through this mineral separation process, two separate types of water are formed,
which are water with alkaline-concentrated minerals, and water with
acidic-concentrated minerals. Each type of water is held in a separate chamber
in the residential counter-top system. The alkaline-concentrated water may be
consumed for drinking and cooking purposes, while the acidic-concentrated water
may be used in a topical, astringent medium.
Commercial Systems. We are in preparation to market commercial functional
------------------
water systems to the food processing, medical and agricultural industries. The
system for the food processing industry includes (1) a hand disinfectant system
for proper hand washing, and (2) an anti-microbial water production system for
general sterilization and disinfectant needs. We also intend to market similar
systems to the medical industry. For the agricultural industry, we intend to
sell functional water systems to organic food growers who desire to use
functional water to replace the use of pesticides, fungicides, herbicides and
chemical fertilizers. Our commercial functional water systems produce
approximately one gallon per minute of electrolyzed alkaline and acidic waters.
For the food processing industry, the alkaline water may be used as an effective
medium for removing pesticides from agricultural products, while the acidic
water may be used as anti-microbial water. For the hospital industry, the
alkaline water may be used as an effective medium in removing protein buildup
from surfaces, while the acidic water may be used as anti-microbial water. For
the organic agricultural industry, the alkaline water may be used for plant
growth and as a solid nutrient, while the acidic water may be used as a
substitute for fungicides, pesticides, herbicides and sporicides.
OUR BUSINESS--MARKETING STRATEGY
We believe that keys to our success are:
- To create a strong revenue basis through the sale of residential
systems. These sales may be made through independent distributors,
network marketing, infomercials, mail order, retail sales and direct
sales generated through word-of-mouth referrals.
- To create a strong revenue basis through the sale of disinfectant
systems to the food processing industry.
- To create a strong revenue basis through licensing agreements based
upon a wide array of applications for functional water that will be
targeted to specific industries. For example, electrolyzed water may
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be used in the beverage industry to extract flavors from their natural
sources, such as extracting tea from tea leaves for use in bottled
iced tea. Electrolyzed water may also be used in the formulation of
nutraceutical-type dietary supplement products in the health-food and
dietary supplement industries.
- To continue the development of functional water applications for
industries that are currently dependent upon chemicals as a processing
medium.
In addition to the food processing, medical and agricultural markets, we
intend to develop market-driven applications for functional water, provide the
science to these applications, publish the developments in scientific and
industrial circulars and perform consulting functions to industries that can
benefit from functional water. We intend to hire engineers from Japan to design,
engineer and assemble prototypes of functional water systems that are built for
specific industrial needs. We believe that by performing these functions
ourselves, we will have all of the necessary tools to become a leading provider
of functional water technology.
OUR BUSINESS--GOVERNMENT REGULATIONS
Our functional water systems are or may be subject to regulation by a
variety of federal, state and local agencies, including the Consumer Product
Safety Commission and the Food and Drug Administration ("FDA"). Some of our
functional water systems, such as our hand disinfectant water unit, may be
subject to pre-market approval by the FDA under Title 21 of the Code of Federal
Regulations. Proton expects the approval process to take approximately 30 - 60
days, although there is no assurance that we will be able to comply.
Prior to submitting the hand disinfectant water unit to the FDA, however,
we intend to contract with a company familiar with a modern food safety
procedure known as Hazard Analysis and Critical Control Point ("HACCP"). HACCP
is a food safety procedure that focuses on identifying and preventing hazards
that could cause food-borne illnesses. We believe that complying with the HACCP
procedure may assist us in getting FDA approval, since the FDA generally
encourages retailers to apply HACCP-based food safety principles, along with
other recommended practices.
OUR BUSINESS--MARKETING AND DISTRIBUTION
We intend to develop systems for the following markets:
- Hand disinfection needs for the food processing, fast food, medical,
dental, personal care and general health care industries.
- Residential, counter-top electrolysis systems.
Hand Disinfection. After we obtain FDA approvals for the hand disinfection
-----------------
system, we plan to introduce the device and what we believe to be its
operational simplicity, user-
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friendliness, high efficacy and affordability, through industrial circulars
where hand disinfection is of a primary concern. We also intend to arrange with
a leasing company to lease the hand disinfectant system to the fast food
industry. A large part of our marketing efforts will be directed to educating
our target markets about functional water. We plan to write and publish articles
through industrial media, disinfection forums, trade shows and documentary-type
films that may be aired through CNN, PBS and Voice of America introducing a new
and novel method for hand disinfection. We intend to handle all inquiries
through a toll-free number.
We plan to hire a public relations company that provides the news media
with documentary video. For the purpose of educating the public on the
technology, processes and applications that we market. The videos will cover the
following subjects:
- Use of functional electrolyzed water for food safety.
- Use of functional electrolyzed water for effective disinfection in
hospitals and clinical settings.
- Use of functional electrolyzed water for agriculture and organic
agriculture.
- Use of functional electrolyzed water as a wellness medium.
Residential Counter Top Units. The first step towards the marketing and
-----------------------------
distribution of residential counter-top units is to develop a national product
distribution program through network marketing, mail order catalogs sales,
infomercials, independent distributor channels and word of mouth sales. Since
we understand that the demographics in these sales channels is predominately
composed of females in the age groups of 35-60, we intend to concentrate on this
market segment. The second step in the marketing and distribution of
residential counter-top units is to introduce a simplified, lower price-point
system that will be introduced through retail outlets under a series of private
labels.
Commercial Systems. In addition to marketing the residential counter top
------------------
systems, we plan to develop marketing plans for commercial systems. We may enter
into agreements with companies to act as distributors of our functional water
systems. We may also grant exclusive rights to companies to use our systems in
specific industries for specific applications in exchange for royalties.
OUR BUSINESS--COMPETITION
Our competitors include several entry-level importers of systems from Japan and
Korea. We believe that we have several distinctive advantages over entry-level
distributors.
- We and our core consultants, who are scientists, business people and
advisers, are individuals who have helped pioneer the understanding,
documentation, representation and structuring of the technology and
its relevance to the U.S. during the past nine-year period through
various companies and organizations. These core consultants are the
leaders the U.S. in the knowledge and representation of functional
water.
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- We have been able to create a strong platform of specialists to
advance functional water technology in the U.S., which would be
difficult for others to replicate due our the high level of focused
commitment and dedication.
- We have close working relationships with our Japanese counterparts
which have been developed and nurtured over the past nine-year period.
These members are highly respected within Japanese electrolysis
community and attend annual conferences as invited speakers.
- We have excellent working relationships with the Japanese
manufacturers and we are often relied upon to provide international
perspectives to be used in the refinement of their scientific, design
and engineering thought processes to create products that will be
accepted on a global basis.
- With our knowledge, experience and foresight into the electrolyzed
water industry, we are well-positioned to branch out on our own
without reliance on Japanese manufacturing, if necessary.
- We have strategically positioned ourselves as the "turn to"
organization for technology, hardware and informational support for
the public.
Although the majority of potential competitors are small resellers, the one
significant competitor that we have is named Hoshizaki U.S.A., which is an
established, U.S.-based, Japanese company that has a substantial market presence
in the areas of, and whose primary business is, refrigeration and icemakers. We
expect that we may face additional competition from new market entrants and
current competitors as they expand their business models, but we do not believe
that any real strong competitors are imminent for the foreseeable 3 to 4 year
period, other than the Hoshizaki company.
To be competitive, we must assemble a strategic marketing and sales
infrastructure. Our success will be dependent on our ability to become a
formidable marketing and sales entity based upon the technology we have and our
ability to aggressively introduce this technology and its far-reaching benefits
through documentary videos and other methods of public relations.
OUR BUSINESS--CUSTOMERS AND VENDORS
Major Customer. During 2002, sales to one customer accounted for 14%
--------------
of total sales, and during 2001, sales to this customer accounted for 11% of
total sales. As of December 31, 2002, the amount due from this customer
accounted for 23% of accounts receivable and as of December 31, 2001, the
amounts due from this customer accounted for 49% of accounts receivable. We
believe that the loss of this customer would have a negative impact on us.
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Major Vendor. During the year ended December 31, 2002, our purchases
------------
from four vendors accounted for 96% of our total purchases. During the year
ended December 31, 2001, purchases from one vendor accounted for 29% of our
total purchases. As of December 31, 2002, amounts due to the four vendors
accounted for 95% of accounts payable. As of December 31, 2001 amounts due to
the one vendor accounted for 82% of accounts payable. We believe that the loss
of these vendors would have a negative impact on us.
INTELLECTUAL PROPERTY
We plan to file patent applications for various functional water applications or
license their use from the patent holders. There can be no assurance that our
intellectual property rights, if any, will not be challenged, invalidated or
circumvented, or that any rights granted under our intellectual property will
provide competitive advantages to the us. There can be no assurance that our
patent claims allowed on any future patents would be sufficiently broad to
protect our products.
Employees
We currently have 3 full time employees, of whom 2 are in management. None
of our employees are subject to a collective bargaining agreement. We believe
that our employee relations are good.
ITEM 2. DESCRIPTION OF PROPERTY.
We lease office space located at 1150 Marina Village Parkway, Suite 103,
Alameda, CA 94501, that is approximately 1,000 square feet and we lease storage
space, on a lease with monthly payments of approximately $2,303 per month, which
will increase by 4% annually until May 2005. Under this lease, we are required
to pay a percentage of the property taxes, insurance and maintenance. We
believe that our office and storage space is adequate for our current needs, and
that additional space is available to us at a reasonable cost, if needed.
ITEM 3. LEGAL PROCEEDINGS.
We are not a plaintiff or defendant in any litigation, nor is any
litigation threatened against us.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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There have been no matters submitted to a vote shareholders during the
quarter ended December 31, 2002.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of March 28, 2003, no public trading market exists for our common stock.
We will use our best efforts to seek an NASD member firm to become our market
maker and file a Form 15c2-11 shortly after we file this Form 10-KSB so that our
common stock may trade on the OTCBB. We have no outstanding options, warrants,
convertible securities or convertible debt.
As of March 28, 2003, we had 11,250,000 shares of common stock outstanding
held by 85 shareholders of record. We have not paid any cash dividends and we do
not expect to declare or pay any cash dividends in the foreseeable future.
Payment of any cash dividends will depend upon our future earnings, if any, our
financial condition, and other factors as deemed relevant by the Board of
Directors.
In connection with the Merger by which we acquired Proton in November 2002,
we issued 8,750,000 shares of our common stock to Edward Alexander. We valued
this transaction at $170,000. This stock issuance was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended. At the same
time, Mr. Alexander returned a like amount of our shares to us for cancellation
that he had acquired from two of our former shareholders earlier in 2002. Also
at the same time, our Board of Directors authorized a common stock dividend
whereby each stockholder holder received an additional four shares for each one
share held. The record date for this dividend was the close of business on
November 16, 2002. The information in this Form 10-KSB has been adjusted to
reflect the affect of the stock dividend.
ITEM 6. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENT
Certain statements contained in this report, including, without limitation,
statements containing the words, "believes," "anticipates," "expects," and other
words of similar import, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause our actual results, performance or achievements, of to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Given these
uncertainties, readers are cautioned not to place undue reliance on such
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forward-looking statements. We disclaim any obligation to update any such
factors or to announce publicly the results of any revision of the
forward-looking statements contained or incorporated by reference herein to
reflect future events or developments. In addition to the forward-looking
statements contained in this Form 10-KSB, the following forward-looking factors
could cause our future results to differ materially our forward-looking
statements: competition, funding, government compliance and market acceptance
of our products.
INTRODUCTION
The following discussion and analysis of our financial condition and
results of operations should be read in conjunction with the audited financial
statements and accompanying notes and the other financial information appearing
elsewhere in this Form 10-KSB. The accompanying consolidated financial
statements have been prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate our continuation as
a going concern.
Our independent auditors made a going concern qualification in their report
dated March 20, 2003, which raises substantial doubt about our ability to
continue as a going concern. Our revenue decreased during 2002 and capital
contributions were required from our president to fund operations. These
conditions raise a substantial doubt about our ability to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should we be unable to
continue in existence. Our ability to continue as a going concern is dependent
upon its ability to generate sufficient cash flows to meet our obligations on a
timely basis, to obtain additional financing as may be required, and ultimately
to attain profitable operations. However, there is no assurance that profitable
operations or sufficient cash flows will occur in the future.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with generally accepted accounting principles in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenue and expenses, and related disclosure of contingent
assets and liabilities. On an ongoing basis, the Company evaluates its
estimates. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances. These estimates and assumptions provide a basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions, and these differences may
be material.
We recognize revenue when all four of the following criteria are met: (i)
persuasive evidence that an arrangement exists; (ii) delivery of the products
and/or services has occurred; (iii) the selling price is both fixed and
14
determinable and; (iv) collectibility is reasonably probable. Our revenues are
derived from sales of their industrial, environmental and residential systems
which alter the properties of water to produce functional water. We believe
that this critical accounting policy affects our more significant judgments and
estimates used in the preparation of its consolidated financial statements.
RESULTS OF OPERATIONS
We had revenue of $303,734 in 2002 and revenue of $484,393 in 2001. We had
net losses of $411,191 for the year ended December 31, 2002 and losses of
$110,939 for the year ended December 31, 2001.
We had net losses of $411,191 for the year ended December 31, 2002 and net
losses of $110,939 for the year ended December 31, 2001.
Cash used in operations for the year ended December 31, 2002 was $138,755
and cash used in operations for the year ended December 31, was $9,692.
We have devoted a significant amount of time during 2002 to completing
Proton's acquisition. A substantial amount of legal and accounting fees were
incurred in the acquisition and Merger of Proton into the subsidiary of Bentley
and the required filings with the Securities and Exchange Commission related to
the Merger. The Merger activity significantly contributed to our net loss in
2002. The $411,000 loss reported for 2002 includes $170,000 related to the
acquisition of Proton and the Merger, approximately $80,000 for legal and
accounting fees related to the Merger, and $60,000 for compensation costs for
officer services that we paid-in-kind with stock.
We are currently seeking funds to expand our marketing and revenues. We
have spent considerable time in contracting with several major overseas
corporations for the co-development of enhanced antioxidant beverages for
distribution into the overseas markets. We are working with Canadian business
associates to identify institutional businesses to market various disinfection
applications based upon functional water, pending government approval.
Major Customer. During 2002, sales to one customer accounted for 14% of
--------------
total sales, and during 2001, sales to this customer accounted for 11% of total
sales. As of December 31, 2002, the amount due from this customer accounted for
23% of accounts receivable and as of December 31, 2001, the amounts due from
this customer accounted for 49% of accounts receivable. We believe that the loss
of this customer would have a negative impact on us.
Major Vendor. During the year ended December 31, 2002, our purchases from
------------
four vendors accounted for 96% of our total purchases. During the year ended
December 31, 2001, purchases from one vendor accounted for 29% of our total
purchases. As of December 31, 2002, amounts due to the four vendors accounted
for 95% of accounts payable. As of December 31, 2001 amounts due to the one
vendor accounted for 82% of accounts payable. We believe that the loss of these
vendors would have a negative impact on us.
15
PLAN OF OPERATION
During the period from March 14, 2000 through November 15, 2002, we did not
engage in significant operations other than organizational activities,
acquisition of the rights to market Vitamineralherb, preparation for
registration of our securities under the Securities Act of 1933, as amended, and
capital raising. No revenues were received by us during that period. For the
third quarter of 2002, we incurred a loss as a result of expenses associated
with setting up a business structure to begin implementing our business plan.
In November 2002, we acquired Proton Laboratories, LLC, which is active in
the functional water business. This acquisition was reported in detail on our
Form 8-K for the event dated November 15, 2002 as filed with the Commission on
November 25, 2002. Proton is now our wholly-owned subsidiary.
LIQUIDITY
As of December 31, 2002, we had cash on hand of $1,385. During 2002,
our President funded some of our costs. Our growth is dependent on attaining
profit from our operations, or our raising additional capital either through the
sale of stock or borrowing. There is no assurance that we will be able to
raise any equity financing or sell any our products at a profit.
ITEM 7. FINANCIAL STATEMENTS.
The financial statements required by this item are set forth beginning on
page F-1.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Since inception until 2002, Manning Elliott, Chartered Accountants,
Vancouver, British Columbia, had served as our independent accountant. Until
our change in control in 2002, our principal business operations were in
Vancouver, British Columbia, Canada. In connection with our change in our
control of and our acquisition and Merger of Proton as our wholly-owned
subsidiary, our business operations have moved to California. We have
determined that it is no longer appropriate to use a Canadian accountant. On
October 9, 2002, our Board of Directors approved a change of accountants, to be
effective as of the date of the Merger. Effective November 15, 2002, we
dismissed Manning Elliott and engaged Hansen, Barnett & Maxwell of Salt Lake
City, Utah, as our independent public accountants to audit our financial
statements.
16
Manning Elliott's report on the financial statements for the fiscal years
ended December 31, 2000 and December 31, 2001, did not contain an adverse
opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit
scope or accounting principles. We believe, and have been advised by Manning
Elliott, that it concurs with such belief, that for the fiscal years ended
December 31, 2001 and December 31, 2000, and in the subsequent periods through
the date of dismissal, we and Manning Elliott did not have any disagreement on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Manning Elliott, would have caused it to make reference in
connection with its report on our financial statements to the subject matter of
the disagreement.
We requested that Manning Elliott furnish a letter addressed to the U.S.
Securities and Exchange Commission stating whether Manning Elliott agrees with
the above statements. This letter was submitted in our Form 8-K dated November
15, 2002 and filed with the Commission on November 25, 2002.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
EXECUTIVE OFFICERS AND DIRECTORS
NAME AGE POSITION
---------------------- --- -------------------------------------------
Edward Alexander 51 Director, Chief Executive Officer, Chief
Financial Officer, President and Secretary
Dick Wullaert 66 Director, Vice President and
Chief Technical Officer
Michael Fintan Ledwith 60 Director
Edward Alexander has been the owner and president of Proton Laboratories
LLC since January, 2001. Proton introduced an electrolytic water separation
technology that has many uses in industry, product formulations and consumer
products. From January, 1997 to July, 1998, Mr. Alexander served as owner and
president of Advanced H2O, LLC. In July, 1998 Mr. Alexander formed Advanced
H2O, Inc. to specialize in bottled water production. Mr. Alexander continues to
serve as a consultant to Advanced H2O, Inc. Prior to 1997, Mr. Alexander served
as General Manager, Tomoe Incorporated and held various positions with various
divisions of the U.S. Navy Resale System. In February 2002, the Securities and
Exchange Commission accepted a settlement offer from Mr. Alexander and imposed a
cease and desist order against Mr. Alexander from committing or causing any
17
violation or future violation of Section 10(b) of the Exchange Act and Rule
10b-5 thereunder. This order was imposed in connection with a press release
that Mr. Alexander was persuaded to release about Proton by a business associate
whom Mr. Alexander trusted at the time.
Dr. Dick Wullaert is currently President of Bioguard Industries, Inc., a
small technical service company specializing in water and materials science
research. Dr. Wullaert provides technical services for the production (system
design, electrode development), use (disinfection, food processing, beverages,
nutraceuticals, agriculture, organic agriculture, etc.) and testing
(conventional and new) of functional water. He has held this position since
1994. Since 1997, he has also served as President of the Functional Water
Society of North America (FWSNA), a non profit corporation dedicated to
promoting the technology and applications of functional water. He has developed
an extensive database of functional water technology and applications, organized
conferences on functional water in the US, and participated in Functional Water
Foundation Symposiums in Japan. From March 2000 to June 2001, he served as Chief
Technology Officer of Advanced H2O, Inc., where he was responsible for research
and development programs and the laboratory. From 1991 to 1999, he served as
Senior Materials Engineer, of SAIC, an NRC, program on the technical basis for
extending the license for dry cask storage of spent nuclear fuel. He managed
several projects on the electrochemical treatment of water, developed new
business in water technology and materials degradation, provided technical
support to DOE-HQ on materials, structural integrity, and life extension issues,
and he represented NRC and DOE on national consensus committees. He received his
Ph.D. in Materials Science from Stanford in 1969.
Dr. Michael Fintan Ledwith has been retired for the past five years. He was
Professor of Systematic Theology at the Pontifical University of Maynooth in
Ireland from 1976 to 1994. He was later Dean of the Faculty, Head of Department
and Editor of "The Irish Theological Quarterly. He was later appointed as a
Consulting Editor of the renowned international review "Communio" and still
serves in that capacity. He was appointed Vice-President of the University in
1980, re-appointed in 1983, and was appointed President in 1985. He served as
Chairman of the Committee of Heads of the Irish Universities and was a Member of
the Governing Bureau of the European University Presidents' Federation (CRE). He
retired from his Professorship on September 30, 1996 and has since continued to
pursue his interest in research, writing, and lecturing in the field of
actualizing human potential. Since November 2001 he has been a partner in World
of Star Stuff, which markets whole food products.
COMMITTEES
We do not have any audit, nominating, or compensation committees of the
Board, or committees performing similar functions.
MEETINGS OF THE BOARD OF DIRECTORS
The current Board did not hold any meetings during the year ended December
31, 2002.
18
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our officers, directors and
persons who beneficially own more than 10% of the our common stock to file
reports of ownership and changes in ownership with the SEC. These reporting
persons also are required to furnish us with copies of all Section 16(a) forms
they file. Edward Alexander was late in filing one Form 3.
19
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information as to our highest paid
officers and directors for our fiscal year ended December 31, 2002. No other
compensation was paid to any such officer or directors other than the
compensation set forth below.
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Pay-Outs
Other Securities All
Annual Restricted Under- Other
Name and Compen- Stock lying Compen-
Principal Year Salary Bonus sation Award(s) Options/ LTIP sation
Position SARs Payouts
$ $ $ $ # $
Edward 2002 (1) 60,000 -0- -0 -0- -0- -0- -0-
Alexander, 2001 (1) 60,000 -0- -0 -0- -0- -0- -0-
CEO, CFO 2000 (2)
---------------
(1) Mr. Alexander did not receive any cash compensation. This amount was
determined to be the value of his services and was recorded as additional
paid in capital.
(2) Proton commenced business in 2001.
OUTSTANDING STOCK OPTIONS
We have not granted any options to purchase common stock and we do not have
any outstanding options to purchase common stock.
COMPENSATION OF DIRECTORS
Our directors do not receive cash compensation for their services as
directors or members of committees of the Board of Directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
As a result of the Merger, Mr. Alexander became the majority owner of our
common stock. The following table sets forth certain information concerning the
number of shares of common stock owned beneficially as of March 28, 2003, by:
(i) each person (including any group) known by us to own more than five percent
(5%) of any class of our voting securities, (ii) each of our directors and
executive officers, and (iii) and our officers and directors as a group. Unless
otherwise indicated, the shareholders listed possess sole voting and investment
power with respect to the shares shown.
20
Name Amount of Shares Class of Percentage
and Address Beneficially Owned Securities of Class
------------------------------- ------------------ ------------ -----------
Edward Alexander
1150 Marina Village Parkway,
Suite 103
Alameda, Ca 94501 8,750,000 Common Stock 77.8%
Dick Wullaert
340 Old Mill Rd. #2
Santa Barbara, Ca 93110 -0- Common Stock -0-%
Michael Fintan Ledwith
6610 Churchill Rd. SE
Tenino, WA 98589 -0- Common Stock -0-%
Executive Officers & Directors
As A Group(3 Persons) 8,750,000 Common Stock 77.8%
We are not aware of any arrangements that could result in a change in
control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In January 2001, Edward Alexander contributed $30,731 of inventory and
$13,198 of property and equipment to us for commencement of the operations of
Proton. The inventory and property and equipment were recorded at Mr.
Alexander's basis due to the transaction being between related parties. In
addition, during the year ended December 31, 2002, Mr. Alexander contributed
$130,937 in cash to us and during the year ended December 31, 2001, Mr.
Alexander contributed $27,700 in cash to us. He originally received the
inventory and property and equipment through a severance agreement with a
previous employer.
During the years ended December 31, 2002 and 2001, Mr. Alexander did not
receive any salary. However, we determined that the fair value of his services
during 2002 and 2001 was $60,000 per year. We recorded a salary expense and
contributed capital of $60,000 during the years ended December 31, 2002 and
2001. In connection with the Merger and the conversion of Proton from a limited
liability company into a corporation, these contributions were reclassified to
common stock and additional paid-in capital.
21
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
Number
10.1 * Agreement and Plan of Reorganization dated July 25, 2002
16.1 * Letter of Manning Elliott
---------------
* Incorporated by reference to Form 8-K filed by Bentley on November 25,
2002.
(b) Reports on Form 8-K
On November 25, 2002, we filed a form 8-K dated November 15, 2003 reporting
Item 1. Change In Control Of Registrant; Item 2. Acquisition Or
Disposition Of Assets; Item 4. Changes In Registrant's Certifying
Accountant; Item 5. Other Events; And Item 7. Financial Statements And
Exhibits.
ITEM 14. CONTROLS AND PROCEDURES.
Edward Alexander, our Chief Executive Officer and Chief Financial Officer,
has concluded that our disclosure controls and procedures are appropriate and
effective. He has evaluated these controls and procedures as of a date within
90 days of the filing date of this report on Form 10-KSB. There were no
significant changes in our internal controls or in other factors that could
significantly affect these controls subsequent to the date of their evaluation,
including any corrective actions with regard to significant deficiencies and
material weaknesses.
22
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized in Alameda, California.
BENTLEYCAPITALCORP.COM, INC.
April 9, 2003 (signed)
-------------------------------
By: /s/ Edward Alexander
Edward Alexander
Director, Chief Executive Officer and
Chief Financial Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.
April 9, 2003 (signed)
-------------------------------
By: /s/ Edward Alexander
Edward Alexander
Director, Chief Executive Officer and
Chief Financial Officer
April 9, 2003 (signed)
-------------------------------
By: /s/ Dick Wullaert
Dick Wullaert
Director, Vice President and
Chief Technical Officer
April 9, 2003 (signed)
-------------------------------
By: /s/ Michael Fintan Ledwith
Michael Fintan Ledwith
Director
23
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, Edward Alexander, certify that:
1. I have reviewed this annual report on Form 10-KSB of BentleyCapitalCorp.com
Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 9, 2003
(signed) __________________
Edward Alexander
/s/ Edward Alexander, Chief Executive Officer
24
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Edward Alexander, certify that:
1. I have reviewed this annual report on Form 10-KSB of BentleyCapitalCorp.com
Inc.;
2. Based on my knowledge, this annual 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 annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures 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 annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 9, 2003
(signed) ________________
Edward Alexander
/s/ Edward Alexander, Chief Financial Officer
25
Certification of Chief Executive Officer of BentleyCapitalCorp.com, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18
U.S.C. 63.
I, Edward Alexander, the Chief Executive Officer of BentleyCapitalCorp.com, Inc.
hereby certify that BentleyCapitalCorp.com, Inc.'s periodic report on Form
10-KSB and the financial statements contained therein fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78m or 78o(d) and that information contained in the periodic report
on Form 10-KSB and the financial statements contained therein fairly represents,
in all material respects, the financial condition and results of the operations
of BentleyCapitalCorp.com, Inc.
Date: April 9, 2003
(signed) ____________________
Edward Alexander
/s/ Edward Alexander, Chief Executive Officer
Certification of Chief Financial Officer of BentleyCapitalCorp.com, Inc.
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18
U.S.C. 63.
I, Edward Alexander, the Chief Financial Officer of BentleyCapitalCorp.com, Inc.
hereby certify that BentleyCapitalCorp.com, Inc.'s periodic report on Form
10-KSB and the financial statements contained therein fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(15 U.S.C. 78m or 78o(d) and that information contained in the periodic report
on Form 10-KSB and the financial statements contained therein fairly represents,
in all material respects, the financial condition and results of the operations
of BentleyCapitalCorp.com, Inc.
Date: April 9, 2003
(signed) ___________________
Edward Alexander
/s/ Edward Alexander, Chief Financial Officer
26
BENTLEYCAPITALCORP.COM, INC
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
AND
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
HANSEN, BARNETT & MAXWELL
A Professional Corporation
CERTIFIED PUBLIC ACCOUNTANTS
BENTLEYCAPITALCORP.COM, INC
BENTLEYCAPITALCORP.COM, INC
TABLE OF CONTENTS
PAGE
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets - December 31, 2002 and 2001 F-3
Consolidated Statements of Operations for the years ended December 31, 2002 and 2001 F-4
Consolidated Statements of Stockholders' Equity (Deficit) for the year ended
December 31, 2002 and 2001 F-5
Consolidated Statement of Cash Flows for the year ended December 31, 2002 and 2001 F-6
Notes to Consolidated Financial Statements F-7
F-1
HANSEN, BARNETT & MAXWELL (801) 532-2200
A Professional Corporation Fax (801) 532-7944
CERTIFIED PUBLIC ACCOUNTANTS 5 Triad Center, Suite 750
Salt Lake City, Utah 84180
www.hbmcpas.com
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and the Stockholders
BentleyCapitalCorp.com, Inc. and subsidiaries
We have audited the consolidated balance sheets of BentleyCapitalCorp.com, Inc.
as of December 31, 2002 and 2001, and the related consolidated statements of
operations, stockholders' equity (deficit) and cash flows for the years ended
December 31, 2002 and 2001. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
BentleyCapitalCorp.com as of December 31, 2002 and 2001, and the results of its
consolidated operations and its cash flows for the years ended December 31, 2002
and 2002, in conformity with accounting principles generally accepted in the
United States of America.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has an accumulated deficit, has
suffered losses from operations and has negative working capital that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regards to these matters are also described in Note 2. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
HANSEN, BARNETT & MAXWELL
Salt Lake City, Utah
March 20, 2003
an independent member of Member of AICPA Division of Firms
BAKER TILLY Member of SECPS
INTERNATIONAL
F-2
BENTLEYCAPITALCORP.COM, INC
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 1,385 $ 12,618
Accounts receivable, less allowance of $2,442
and $1,800, respectively 32,755 25,089
Inventory, net of reserve for obsolescence of $5,572 20,661 65,441
---------- ----------
TOTAL CURRENT ASSETS 54,801 103,148
---------- ----------
PROPERTY AND EQUIPMENT
Furniture and fixtures 4,670 4,670
Equipment and machinery 42,784 11,512
Leasehold improvements 1,886 1,886
Less: accumulated depreciation (5,884) (2,352)
---------- ----------
NET PROPERTY AND EQUIPMENT 43,456 15,716
---------- ----------
TOTAL ASSETS $ 98,257 $ 118,864
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable $ 127,638 $ 98,174
Accrued expenses 183 -
---------- ----------
TOTAL CURRENT LIABILITIES 127,821 98,174
---------- ----------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, 20,000,000 shares authorized
with a par value of $0.0001; no shares issued
or outstanding. - -
Common stock, 100,000,000 common shares
authorized with a par value of $0.0001;
11,250,000 and 2,338,273 shares issued
and outstanding, respectively. 1,126 234
Additional paid in capital 491,440 131,395
Accumulated deficit (522,130) (110,939)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (29,564) 20,690
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 98,257 $ 118,864
========== ==========
The accompanying notes are an integral part of these financial statements.
F-3
BENTLEYCAPITALCORP.COM, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
SALES $ 303,734 $ 484,393
COST OF GOODS SOLD 210,091 316,147
----------- -----------
GROSS MARGIN 93,643 168,246
----------- -----------
OPERATING EXPENSES
General and administrative expenses 274,873 219,157
Fair value of officer services 60,000 60,000
----------- -----------
TOTAL OPERATING EXPENSES 334,873 279,157
----------- -----------
LOSS FROM OPERATIONS (241,230) (110,911)
----------- -----------
OTHER INCOME AND (EXPENSE)
Loss on disposal of equipment - (347)
Loss on acquisition of BentleyCapitalCorp.com (170,000) -
Interest income 39 319
----------- -----------
TOTAL OTHER EXPENSE (NET) (169,961) (28)
----------- -----------
NET LOSS $ (411,191) $ (110,939)
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.09) $ (0.08)
=========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 4,647,953 1,436,029
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
BENTLEYCAPITALCORP.COM, INC
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------- -------------------- PAID IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT TOTAL
------ ------- ----------- ------- --------- ---------- ----------
BALANCE - DECEMBER 31, 2000 - $ - $ - $ - $ - $ -
Issuance for assets contributed
by majority shareholder - - 780,360 78 43,851 - 43,929
Issuance for cash contributions - - 492,066 49 27,651 - 27,700
Issuance as compensation for officer services - - 1,065,847 107 59,893 - 60,000
Net loss for the period - - - - - (110,939) (110,939)
------ ------- ----------- ------- --------- ---------- ----------
BALANCE - DECEMBER 31, 2001 - - 2,338,273 234 131,395 (110,939) 20,690
Issuance for cash contributions - - 2,325,980 233 130,704 - 130,937
Issuance as compensation for officer services - - 1,065,847 107 59,893 - 60,000
Issuance for officer's acquisition of
BentleyCapitalCorp.com stock. - - 3,019,900 302 169,698 - 170,000
Issuance of common stock for net
assets of BentleyCapitalCorp.com - - 2,500,000 250 (250) - -
Net loss for the period - - - - - (411,191) (411,191)
------ ------- ----------- ------- --------- ---------- ----------
BALANCE - DECEMBER 31, 2002 - $ - 11,250,000 $ 1,126 $491,440 $(522,130) $ (29,564)
====== ======= =========== ======= ========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
BENTLEYCAPITALCORP.COM, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(411,191) $(110,939)
Adjustments to reconcile net loss to cash used
in operating activities:
Depreciation 3,532 2,525
Loss on impairment of inventory - 5,572
Loss on disposal of property and equipment - 347
Loss on acquisition of BentleyCapitalCorp.com 170,000 -
Fair value of officer services 60,000 60,000
Changes in operating assets and liabilities
Accounts receivable (7,666) (25,089)
Inventory 16,923 (40,282)
Accounts payable 29,464 98,174
Accrued expenses 183 -
---------- ----------
NET CASH USED IN OPERATING ACTIVITIES (138,755) (9,692)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment (3,415) (5,390)
---------- ----------
NET CASH USED IN INVESTING ACTIVITIES (3,415) (5,390)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Capital contributions 130,937 27,700
---------- ----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 130,937 27,700
---------- ----------
NET INCREASE (DECREASE) IN CASH (11,233) 12,618
CASH AT BEGINNING OF PERIOD 12,618 -
---------- ----------
CASH AT END OF PERIOD $ 1,385 $ 12,618
========== ==========
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Property and equipment contributed by majority shareholder $ - $ 13,198
Inventory contributed by majority shareholder $ - $ 30,731
Transfer of inventory to equipment $ 27,857 $ -
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATIONS
ORGANIZATION- Proton Laboratories, LLC. (Proton) was incorporated on February
16, 2000 in the State of California. Proton did not begin its operations until
January 1, 2001. On January 1, 2001, Proton's sole owner contributed inventory
and property and equipment to the Company.
BentleyCapitalCorp.com Inc. (Bentley) was incorporated in the State of
Washington on March 14, 2000. The Company acquired a license to market and
distribute vitamins, minerals, nutritional supplements, and other health and
fitness products in the Province of British Columbia, Canada. The Company was in
the development stage.
On November 15, 2002, Proton entered into an Agreement and Plan of
Reorganization with Bentley whereby the Company merged with and into VWO I Inc.
(VWO), a wholly owned subsidiary of Bentley (the "Merger"). As a result of the
Merger, Proton's sole owner, Edward Alexander, exchanged 100% of his ownership
for 8,750,000 shares of Bentley common stock, par value $0.0001 per share.
Prior to the Merger, Proton's sole owner (Mr. Alexander) entered into a Stock
Purchase Agreement with certain shareholders of Bentley. Under the Stock
Purchase Agreement, Mr. Alexander purchased 8,750,000 shares of common stock of
Bentley from certain Bentley shareholders for $170,000. The 8,750,000 shares
Mr. Alexander acquired were canceled as part of the Merger. VWO I Inc. changed
its name to Proton Laboratories, Inc. (Proton) as part of the Merger.
In accordance with SFAS 141 Business Combinations and EITF 98-3, Determining
Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a
Business, the Merger has been accounted for as the reorganization of Proton and
the acquisition of Bentley's assets for $170,000 using the purchase method of
accounting. There were no material assets or liabilities of Bentley at the time
of the Merger, accordingly, the $170,000 paid by Mr. Alexander has been
reflected as a loss on the acquisition of Bentley in the accompanying financial
statements. For financial statement purposes Proton is considered the parent
corporation but maintains BentleyCapitalCorp.com, Inc as its business name and
hereafter is collectively referred to as the "Company".
BASIS OF PRESENTATION- Proton changed from an LLC to a corporation on November
15, 2002. The effect of the corporate status of the Company has been reflected
in the accompanying consolidated financial statements. The accompanying
financial statements have been restated to reflect the shares of common stock
acquired through the merger as though they had been issued on the dates capital
contributions were received from the majority owner of the Company, including
the fair value of services rendered and the $170,000 to acquire the interest in
Bentley.
CONSOLIDATION POLICY- The accompanying consolidated financial statements reflect
the financial position of and operations for Proton as of and for the years
ended December 31, 2002 and 2001 and the operations of Bentley for the period
from November 15, 2002 through December 31, 2002. All significant intercompany
transactions have been eliminated in consolidation.
NATURE OF OPERATIONS - The Company's operations are located in Alameda,
California. The core business of the Company consists of the sales and
marketing of the Company's industrial, environmental and residential systems
which alter the properties of water to produce functional water throughout the
United States of America. The Company acts as an exclusive importer and master
distributor of these products to various companies in which uses for the product
F-7
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
range from food processing to retail water sales. Additionally, the Company
formulates intellectual properties under licensing agreements, supply consumer
products, consult on projects utilizing functional water, facilitate between
manufacturer and industry and act as educators on the benefits of functional
water.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS -The Company is subject to concentration of credit risk
with respect to sales primarily in the functional water industry and sales to a
significant customer and purchases from a significant vendor. Accounts
receivable are generally unsecured. The Company normally obtains payments from
customers prior to delivery of the related products. Otherwise, the Company does
not require collateral for accounts receivable. The amounts reported as accounts
receivable, inventory, accounts payable, and accrued expenses are considered to
be reasonable approximations of their fair values. The fair value estimates
presented herein were based on market information available to management at the
time of the preparation of the financial statements.
BUSINESS CONDITION - The accompanying consolidated financial statements have
been prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern. The company has incurred net losses of $411,191 and $110,939 for
the years ended December 31, 2002 and 2001, respectively. Cash used in
operations for the years ended December 31, 2002 and 2001 was $138,755 and
$9,692, respectively. The Company's revenues decreased during 2002 and capital
contributions were required from the company's president to fund operations.
These conditions raise a substantial doubt about the Company's ability to
continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might be necessary
should the Company be unable to continue in existence.
Management has devoted a significant amount of time during 2002 to the public
filing process. A substantial amount of legal and accounting fees were incurred
in the acquisition and merger with BentleyCapitalCorp.com and the required
filings due to the merger. These items significantly contributed to the net
loss of the Company in 2002. The $411,000 loss reported for 2002 includes
$170,000 for the acquisition of BentleyCapitalCorp.com, approximately $80,000
for legal and accounting fees related to the acquisition, and $60,000 for
compensation costs for officer services paid with stock.
The Company is currently in a start-up phase and working towards raising public
funds to expand its marketing and revenues. The Company has spent considerable
time in contracting with several major overseas corporations for the
co-development of enhanced antioxidant beverages for distribution into the
overseas markets. In addition, the Company is working with its Canadian
business associates to identify institutional businesses to market various
disinfection applications based upon functional water, pending government
approval.
F-8
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's ability to continue as a going concern is dependent upon its
ability to generate sufficient cash flows to meet its obligations on a timely
basis, to obtain additional financing as may be required, and ultimately to
attain profitable operations. However, there is no assurance that profitable
operations or sufficient cash flows will occur in the future.
INVENTORY - Inventory consists of purchased finished goods and is stated at the
lower of cost (using the first-in, first-out method) or market value. The
inventory obsolescence reserve was $5,572 as of December 31, 2002 and 2001.
PROPERTY AND EQUIPMENT - Property and equipment are stated at cost. Depreciation
is computed using the straight-line method over the estimated useful lives of
the assets. Estimated useful lives range from 3 to 7 years. Depreciation expense
for the years ended December 31, 2002 and 2001, was $3,532 and $2,525,
respectively. Expenditures for maintenance, repairs, and renewals are charged
to expense as incurred. Expenditures for major renewals and betterments that
extend the useful lives of existing equipment are capitalized and depreciated.
On retirement or disposition of property and equipment, the cost and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
recognized in the statement of operations.
The Company records impairment losses on property and equipment when indicators
of impairment are present and estimated undiscounted cash flows to be generated
by those assets are less than the assets' carrying amount.
CASH AND CASH EQUIVALENTS - The Company considers all highly liquid instruments
purchased with a maturity of less than three months to be cash equivalents.
BASIC AND DILUTED LOSS PER SHARE -Basic loss per common share is computed by
dividing net loss by the weighted-average number of common shares outstanding
during the period. Diluted loss per share is calculated to give effect to
potentially issuable common shares, except during periods when those potentially
issuable common shares would decrease the loss per share. There were no
potentially issuable common shares at December 31, 2002 and 2001.
INCOME TAXES - Prior to November 15, 2002, the Company was taxed as an LLC.
Under those provisions, the Company did not pay federal or state corporate
income taxes on its taxable income. Instead, the Company's income or loss was
passed through to the sole shareholder and reported on the individual's income
tax return. Beginning on November 15, 2002, the Company recognizes an asset or
liability for the deferred tax consequences of all temporary differences between
the tax bases of assets or liabilities and their reported amounts in the
financial statements that will result in taxable or deductible amounts in future
years when the reported amounts of the asset or liabilities are recovered.
These deferred tax assets or liabilities are measured using the enacted tax
rates that will be in effect when the differences are expected to reverse.
Deferred tax assets are reviewed periodically for recoverability and valuation
allowances and adjustments are provided as necessary.
ADVERTISING - The Company follows the policy of charging the cost of advertising
to expense as incurred. Advertising expense for the year ended December 31,
2002 and 2001 was $5,177 and $8,486, respectively.
F-9
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAJOR CUSTOMER - During the years ended December 31, 2002 and 2001, sales to one
customer accounted for 14% and 11% of total sales, respectively. As of December
31, 2002 and 2001 amounts due from this customer accounted for 23% and 49% of
accounts receivable, respectively. The Company believes the loss of this
customer may have a negative impact on the Company's financial statements.
MAJOR VENDOR - During the year ended December 31, 2002, purchases from four
vendors accounted for 96% of total purchases. During the year ended December
31, 2001, purchases from one vendor accounted for 29% of total purchases. As of
December 31, 2002, amounts due to the four vendors accounted for 95% of accounts
payable. As of December 31, 2001 amounts due to the one vendor accounted for
82% of accounts payable. The Company believes the loss of these vendors may have
a negative impact on the Company's financial statements.
REVENUE RECOGNITION - The Company recognizes revenue when all four of the
following criteria are met: (i) persuasive evidence that arrangement exists;
(ii) delivery of the products and/or services has occurred; (iii) the selling
price is both fixed and determinable and; (iv) collectibility is reasonably
probable. The Company's revenues are derived from sales of their industrial,
environmental and residential systems which alter the properties of water to
produce functional water.
NEW ACCOUNTING STANDARDS - SFAS No. 141, "Business Combinations," requires usage
of the purchase method for all business combinations initiated after June 30,
2001, and prohibits the usage of the pooling of interests method of accounting
for business combinations. The provisions of SFAS No. 141 relating to the
application of the purchase method are generally effective for business
combinations completed after July 1, 2001. Such provisions include guidance on
the identification of the acquiring entity, the recognition of intangible assets
other than goodwill acquired in a business combination and the accounting for
negative goodwill. The Company utilized this standard in the above mentioned
merger.
SFAS No. 142, "Goodwill and Other Intangible Assets," changes the current
accounting model that requires amortization of goodwill, supplemented by
impairment tests, to an accounting model that is based solely upon impairment
tests. SFAS No. 142 also provides guidance on accounting for identifiable
intangible assets that may or may not require amortization. The provisions of
SFAS No. 142 related to accounting for goodwill and intangible assets will be
generally effective for the Company at the beginning of 2002, except that
certain provisions related to goodwill and other intangible assets are effective
for business combinations completed after July 1, 2001. The Company does not
believe this statement has any impact to the Company as of December 31, 2002 or
2001.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations." SFAS No.143 addresses financial accounting and reporting for
obligations associated with the retirement of intangible long-lived assets and
associated asset retirement costs. SFAS No. 143 requires that the fair value of
a liability for an asset retirement obligation be recognized in the period in
which it has occurred. The asset retirement obligations will be capitalized as
a part of the carrying amount of the long-lived asset. SFAS No. 143 applies to
legal obligations associated with the retirement of long-lived assets that
result from the acquisition, construction, development and normal operation of
long- lived assets. SFAS No. 143 is effective for years beginning after June
15, 2002, with earlier adoption permitted. Currently, the Company does not
believe this statement will have any impact to the Company.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 establishes a single accounting
model for long-lived assets to be disposed of by sale and the recognition of
impairment of long-lived assets to be held and used. SFAS No. 144 is effective
for fiscal years beginning after December 15, 2001, with an earlier adoption
encouraged. The Company is evaluating the impact of adopting SFAS No. 144 but
believes it will not have a material effect on the Company's results of
operations or financial position.
F-10
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
Among other provisions, the statement modifies the criteria classification of
gains and losses on debt extinguishments such that they are not required to be
classified as extraordinary items if they do not meet the criteria for
classification as extraordinary items in APB Opinion No. 30. The Company
elected to adopt this standard during the year ended December 31, 2002. The
adoption of this standard has had no material effect on the Company's financial
position or results of operations.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal activities." The statement requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee plan severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. The
Company will be required to apply this statement prospectively for any exit or
disposal activities initiated after December 31, 2002. The adoption of this
standard is not expected to have a material effect on the Company's financial
position or results of operations.
In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure." This statement amends Statement No.
123, Accounting for Stock-Based Compensation, to provide alternative methods of
transition for an entity that voluntarily changes to the fair value method of
accounting for stock-based employee compensation. It also amends the disclosure
provisions of Statement No. 123 to require prominent disclosure about the
effects on reported net income of an entity's accounting policy decisions with
respect to stock-based employee compensation. Statement No. 148 also requires
disclosure about those effects in interim financial information. The adoption
of this standard has had no material effect on the Company's financial position
or results of operations.
NOTE 3 - RELATED PARTY TRANSACTIONS
On January 1, 2001, the Company's president contributed $30,731 of inventory and
$13,198 of property and equipment to the Company for commencement of their
operations. The inventory and property and equipment were recorded at the
member's basis due to the transaction being between related parties. In addition
during the years ended December 31, 2002 and 2001 the president contributed
$130,937 and $27,700 in cash to the Company, respectively. The president
originally received the inventory and property and equipment through a severance
agreement with a previous employer.
During the years ended December 31, 2002 and 2001, the president did not receive
any amounts related to his salary. The Company determined that the fair value of
the member services during 2002 and 2001 were $60,000 per year. Thus the
Company recorded a salary expense and contributed capital of $60,000 during the
years ended December 31, 2002 and 2001.
As part of the merger and the Company becoming a corporation these contributions
were reclassified to common stock and additional paid-in capital.
F-11
BENTLEYCAPITALCORP.COM, INC
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - INCOME TAXES
There was no provision for or benefit from income tax for any period. Prior to
November 15, 2002, the Company was taxed as an LLC. The components of the net
deferred tax asset at December 31, 2002 is as follows:
Bad debt reserve $ 258
Depreciation 124
Net operating loss carry forward 17,923
Less: valuation allowance (18,305)
---------
NET DEFERRED TAX ASSET $ -
=========
For tax reporting purposes, the Company has net operating loss carry forwards in
the amount of $44,662 which will expire in 2023.
The following is a reconciliation of the amount of tax benefit that would result
from applying the federal statutory rate to pretax loss with the benefit from
income taxes for August 2002 through December 2002:
Benefit at statutory rate (34%) $(73,308)
Non-deductible expenses 68,220
Change in valuation allowance 18,305
State tax benefit, net of federal tax effect (13,217)
---------
NET BENEFIT FROM INCOME TAXES $ -
=========
NOTE 5 - COMMITMENTS AND CONTINGENCIES
OPERATING LEASES - The Company currently leases office and storage space from a
third party. On March 6, 2002, the Company entered into a new lease agreement
to pay a monthly lease payment increasing by 4% annually until May 2005.
Additionally, under the lease the Company is required to pay a percentage of the
property taxes and maintenance expenses.
Future minimum lease payments under operating the lease obligation as of
December 31, 2002, was as follows:
Year ending December 31:
2003 27,647
2004 28,441
2005 11,990
-------
Minimum lease payments $68,078
=======
Rent expense for the years ended December 31, 2002 and 2001 was $39,360 and
$27,029.
F-12