EXHIBIT 99.1
IMPULSE MEDIA TECHNOLOGIES INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
Report of Independent Certified Public Accountants F-2
Consolidated Financial Statements:
Balance Sheets as of February 28, 2001 (Audited)
and August 31, 2001 (Unaudited) F-3
Statements of Operations for the period from inception (October 25,
2000) through February 28, 2001 (Audited), for the six months ended
August 31, 2001 (Unaudited), and from inception through
August 31, 2001 (Unaudited) F-4
Statements of Stockholders' Equity as of February 28, 2001 (Audited)
and August 31, 2001 (Unaudited) F-5
Statements of Cash Flows for the period from inception (October 25,
2000) through February 28, 2001 (Audited), for the six months ended
August 31, 2001 (Unaudited), and from inception through
August 31, 2001 (Unaudited) F-6
Notes to Financial Statements F-8 to F-14
F-1
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
INDEPENDENT ACCOUNTANTS' REPORT
Board of Directors
Impulse Media Technologies Inc.
We have audited the accompanying consolidated balance sheets of Impulse
Media Technologies Inc. as of February 28, 2001, and the related consolidated
statements of operations, stockholders' equity, and cash flows for the period
from October 25, 2000 (date of inception) through February 28, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards 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 presentations. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Impulse Media
Technologies Inc. as of February 28, 2001, and the results of its operations,
its stockholders' equity, and its cash flows for the period from October 25,
2000 (date of inception) through February 28, 2001, in conformity with generally
accepted accounting principles in the United States of America.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As described in Note 3, the
Company has suffered prior operating losses since inception that raise
substantial doubts about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Miller and McCollom
MILLER AND MCCOLLOM
Certified Public Accountants
4350 Wadsworth Boulevard, Suite 300
Wheat Ridge, Colorado 80033
November 30, 2001
F-2
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED BALANCE SHEET
ASSETS
February 28, August 31
2001 2001
(Audited) (Unaudited)
------------- -------------
Current assets:
Cash $ 903 $ 1,476
Accounts receivable 927 33,321
Stock subscriptions receivable 13,434 --
Prepaid expenses 1,632 1,346
------------- -------------
Total current assets 16,896 36,143
Intangible assets (Note 6 and Note 10) 70 8,282
Property and equipment, net of accumulated
depreciation of $322 -- 8,111
------------- -------------
Total assets $ 16,966 $ 52,536
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 66,152 $ 266,579
Technology acquisition payable (Note 7) -- 212,953
Loans payable -- 28,673
Compensation withholding for stock subscriptions -- 12,465
------------- -------------
Total current liabilities 66,152 520,670
Commitments and contingencies (Notes 9 and 11)
Stockholders' equity (Notes 6 and 11):
Common stock, $.001 par value
7,776,083 and 9,466,083 shares issued
at February 28, 2001 and August 31, 2001 7,776 9,466
Additional paid-in capital 28,386 399,196
Accumulated deficit (85,691) (875,077)
Accumulated other comprehensive
income (loss) 343 (1,719)
------------- -------------
Total stockholders' equity (deficit) (49,186) (468,134)
------------- -------------
Total liabilities and stockholders' equity $ 16,966 $ 52,536
============= =============
The accompanying notes to financial statements are an integral part of this statement.
F-3
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
October 25, 2000 October 25, 2000
(inception) Six Months (inception)
Through Ended Through
February 28, August 31, August 31,
2001 2001 2001
(Audited) (Unaudited) (Unaudited)
---------------- ---------------- ----------------
Expenses
Professional fees $ 32,579 $ 148,625 $ 181,204
Depreciation expense -- 322 322
Software development costs 7,931 39,924 47,855
Management fees 27,372 43,777 71,149
Administrative expenses 6,210 53,947 60,157
Other administrative costs 11,599 2,791 14,390
---------------- ---------------- ----------------
Total expense 85,691 289,386 375,077
---------------- ---------------- ----------------
Net loss $ (85,691) $ (289,386) $ (375,077)
================ ================ ================
Net loss per common share $ (.01) $ (.03) $ (.04)
================ ================ ================
Weighted average shares
outstanding 7,662,083 9,059,440 8,523,536
================ ================ ================
Other comprehensive income:
Net loss $ (85,691) $ (289,386) $ (375,077)
Foreign currency
exchange gain (loss) 343 (2,062) (1,719)
---------------- ---------------- ----------------
Total other comprehensive income
(loss) $ (85,348) $ (291,448) $ (376,796)
================ ================ ================
The accompanying notes to financial statements are an integral part of this statement.
F-4
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
Deficit
Accumulated Total
Common Stock Additional During the Other Stockholders'
------------------------- Paid-in Development Comprehensive Equity
Shares Amount Capital Stage Income (Deficit)
----------- ----------- ----------- ----------- ----------- -----------
Common shares issued for
services on October 25, 2000
(date of inception) 7,662,083 $ 7,662 $ -- $ -- $ -- $ 7,662
Common shares issued for cash 114,000 114 28,386 -- -- 28,500
Net loss for the period from
date of inception through
February 28, 2001 -- -- -- (85,691) 343 (85,348)
----------- ----------- ----------- ----------- ----------- -----------
Balance, February 28, 2001
(Audited) 7,776,083 7,776 28,386 (85,691) 343 (49,186)
Common shares issued for
transfer of WAP technology
(Note 6) on April 20, 2001 1,200,000 1,200 248,800 -- -- 250,000
Common shares issued for
cash at $0.25 during the
period ended August 31, 2001 490,000 490 122,010 -- -- 122,500
Distribution (Note 6) -- -- -- (500,000) -- (500,000)
Net loss for the six months
ended August, 31, 2001 -- -- -- (289,386) (2,062) (291,448)
----------- ----------- ----------- ----------- ----------- -----------
Balance, August 31, 2001
(Unaudited) 9,466,083 $ 9,466 $ 399,196 $ (875,077) $ (1,719) $ (468,134)
The accompanying notes to financial statements are an integral part of this statement.
F-5
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
October 25, 2000 October 25, 2000
(inception) Six Months (inception)
Through Ended Through
February 28, August 31, August 31,
2001 2001 2001
(Audited) (Unaudited) (Unaudited)
-------------- -------------- --------------
Cash flows from operating activities:
Net loss for the period $ (85,691) $ (289,386) $ (375,077)
Reconciling adjustments -
Adjustments to reconcile net loss
to net cash used in operating
activities
Amortization -- 322 322
Common stock issued for services 7,662 -- 7,662
Compensation withholding -- 12,465 12,465
Net change in operating assets
and liabilities -
Stock subscription receivable (13,434) 13,434 --
Accounts receivable (927) (32,394) (33,321)
Prepaid expenses (1,632) 286 (1,346)
Accounts payable and accrued
liabilities 66,152 163,380 229,532
-------------- -------------- --------------
Net cash provided (used) by operating activities (27,870) (131,893) (159,763)
Cash flows from investing activities:
Purchase of property and equipment -- (8,433) (8,433)
Acquisition of intangible assets (70) (8,212) (8,282)
-------------- -------------- --------------
Net cash (used) by investing activities (70) (16,645) (16,715)
Cash flows from financing activities:
Common stock issued for cash 28,500 122,500 151,000
Loans -- 28,673 28,673
-------------- -------------- --------------
Net cash provided by financing activities 28,500 151,173 179,673
-------------- -------------- --------------
Gain (loss) on foreign currency translation 343 (2,062) (1,719)
-------------- -------------- --------------
Net increase in cash 903 573 1,476
Cash, beginning of period -- 903 --
-------------- -------------- --------------
Cash, end of period $ 903 $ 1,476 $ 1,476
============== ============== ==============
The accompanying notes to financial statements are an integral part of this statement.
F-6
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOW
October 25, 2000 October 25, 2000
(inception) Six Months (inception)
Through Ended Through
February 28, August 31, August 31,
2001 2001 2001
(Audited) (Unaudited) (Unaudited)
-------------- -------------- --------------
Supplemental cash flow information:
Interest paid $ -- $ -- $ --
============== ============== ==============
Income taxes paid $ -- $ -- $ --
============== ============== ==============
Non-cash investing and financing transactions:
Acquisition of WAP technology $ -- $ 500,000 $ 500,000
Amount due and unpaid -- 250,000 250,000
-------------- -------------- --------------
Common stock issued $ -- $ 250,000 $ 250,000
============== ============== ==============
Compensation withholding for
stock subscription $ -- $ 12,465 $ 12,465
============== ============== ==============
Stock issued for services provided
during the period from inception
through February 28, 2001 $ 7,662 $ -- $ 7,662
============== ============== ==============
Distribution (Note 6) $ -- $ 500,000 $ 500,000
============== ============== ==============
The accompanying notes to financial statements are an integral part of this statement.
F-7
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS
Impulse Media Technologies Inc. (the "Company") was incorporated October 25,
2000, in the State of Nevada. As of February 28, 2001 and August 31, 2001, the
Company was in the Development Stage. The Company has a wholly owned subsidiary,
Impulse Media Technologies (BC), Inc., which was formerly IWAP Media Inc., which
was incorporated in the Province of British Columbia, Canada. The Company has
selected February 28 as its fiscal year end, and the accompanying financial
statements are stated in US dollars and are prepared in accordance with
accounting principles generally accepted in the United States.
The Company facilitates the marketing of music and music related products
through the synchronization of radio and TV play lists and commercials in real
time using wireless hand held or stationary devices.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements reflect the following significant accounting policies:
USE OF 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 period. Actual results could differ from those
estimates.
REVENUE RECOGNITION
The Company has not received any revenues through the dates of these
financial statements. The Company has adopted the revenue recognition
principles as described in Note 4.
LOSS PER SHARE
Loss per share is computed in accordance with SFAS No. 128, " Earnings
per Share". Basic loss per share is calculated by dividing the net loss
available to common stockholders by the weighted average number of
common shares outstanding for the period.
F-8
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
The Company follows the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes", which
requires the Company to recognize deferred tax liabilities and assets
for the expected future tax consequences of events that have been
recognized in the Company's financial statements or tax returns using
the liability method. Under this method, deferred tax liabilities and
assets are determined based on the temporary differences between the
financial statement carrying amounts and tax bases of assets and
liabilities using enacted rates in effect in the years during which the
differences are expected to reverse and upon the possible realization
of net operating loss carry forwards.
COMPREHENSIVE INCOME
SFAS No. 130, " Reporting Comprehensive Income", establishes standards
for reporting and presentation of comprehensive income (loss). This
standard defines comprehensive income as the changes in equity of an
enterprise except those resulting from stockholder transactions.
Comprehensive loss for the period ended February 28, 2001 equaled the
net loss for the period less the gain from currency translation.
STARTUP COSTS
The Company adopted Statement of Position No. 98-5 ("SOP 98-5"),
"Reporting the Costs of Start-Up Activities." SOP 98-5 requires that
all non-governmental entities expense the cost of start-up activities,
including organizational costs as those costs are incurred.
FOREIGN EXCHANGE
These financial statements are expressed in US dollars. Other
currencies have been translated into US funds using the temporal
method, as follows:
i. Monetary items, at the rate of exchange prevailing as at the
balance sheet date.
ii. Non-Monetary items, at the historical rate of exchange
iii. Revenue and expenses, at the period average in which the
transaction occurs.
F-9
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets are recorded at cost. Amortization is to be provided
on a systematic basis over the estimated useful lives of the assets
from the date that they are first put into use, which is currently
expected to be 20% on a straight line method.
Please see Note 9 for the future effects of the implementation of
Financial Accounting Standard No. 142.
CAPITAL ASSETS
Capital assets are recorded at cost. Depreciation and amortization are
recorded based over their estimated useful lives as follows:
Office furniture and equipment 20% Straight line
Computer equipment 20% Straight line
Computer hardware 30% Straight line
Computer software 100% Straight line
Leasehold improvements Life of lease Straight line
PRODUCT DEVELOPMENT COSTS
Product development costs are expensed until the technological
feasibility of the product has been established. After technological
feasibility is established and until the product is available for
general release, software development, product enhancements, and
acquisition costs are capitalized. For all periods presented, product
development costs have been expensed in the periods incurred, as the
criteria eligible for capitalization have not been met.
WEBSITE DEVELOPMENT COSTS
The Company accounts for Website development costs in accordance with
the FASB Emerging Issue Task Force 00-2 ("EITF"), Accounting for
Website Development Costs. EITF 00-2 requires all costs related to the
development of websites other than those incurred during the
application development stage to be expensed as incurred. Costs
incurred during the application development state are required to be
capitalized and amortized over the estimated useful life of the
software.
F-10
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable and accounts payable. It is management's opinion that the
Company is not exposed to significant interest, currency or credit
risks arising from these financial instruments and the fair value of
these instruments approximate their carrying value since they are short
term in nature.
NOTE 3- GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As at the
reporting dates, the Company has reported a net liability position and has
accumulated operation losses since its inception. The continuation of the
Company is dependent upon the continuing financial support of creditors and
stockholders and upon obtaining capital requirements of the Company. There is no
assurance that such activity will generate funds sufficient to maintain
operations on an ongoing basis.
NOTE 4 - RECENT ACCOUNTING PRONOUNCEMENTS
In December 1999, The Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarized certain of the SEC's views regarding the
application of generally accepted accounting principles to revenue recognition
in financial statements. In June 2000, the SEC amended SAB 101 to require
companies with fiscal years beginning after December 15, 1999 to implement the
provisions of SAB 101 no later than the fourth fiscal quarter. The Company
adopted the provisions of SAB 101 in the fiscal quarter ending February 28,
2001. Since the Company has not had any revenue through the period of its
financial statements, the adoption of the provision did not have any effect on
its financial statements. The Company intends to comply with the provisions when
it has revenues.
The Company adopted Statement of Position No. 98-5 ("SOP 98-5"), "Reporting the
Costs of Start-Up Activities." SOP 98-5 requires that all non-governmental
entities expense the cost of start-up activities, including organizational costs
as those costs are incurred.
F-11
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 5 - CONSOLIDATION OF FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of Impulse Media
Technologies (BC) Inc. (formerly IWAP Media Inc.), a wholly-owned subsidiary,
incorporated in the Province of British Columbia, Canada.
NOTE 6 - TECHNOLOGY TRANSFER AGREEMENT
On April 20, 2001, the Company entered into an agreement with Megastation.com
Inc. ("Megastation") for the acquisition of a 100% interest in a wireless
application protocol ("WAP") technology and methodology described in US
provisional patent application nos. 60/225,664 and 60/210,934. The terms of the
acquisition are outlined below.
As consideration for the WAP technology, the Company has agreed to pay
Megastation $250,000 in cash by October 20, 2002 and has issued 1,200,000 fully
paid non-assessable shares to Megastation. If the Company raises an aggregate of
$2,000,000 in equity or loan financing on or before October 20, 2002, the cash
consideration shall become payable in full immediately.
The Company has recorded the WAP technology as an intangible asset and has been
shown in the accompanying consolidated statement of stockholders' equity as a
distribution. In addition to the transaction being among related parties, no
verifiable historical cost is available and, consequently, no value for the
acquired technology is recorded.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Company has shown the amount payable of $250,000 as described in Note 6 as a
current liability. This amount has been reduced by $37,047 for amounts owed the
Company by Megastation. After the issuance of stock described in the prior note,
Megastation owns approximately 6% of the Company's outstanding common stock.
F-12
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 8 - INCOME TAXES
The Company is subject to both Canadian and United States income taxes, with the
majority of the transactions incurred through August 31, 2001 being subject to
Canadian income taxes. The tax effects of temporary differences that give rise
to the Company's deferred tax assets are as follows:
February 28, August 31,
2001 2001
------------ ------------
Tax loss carry forwards - (34,153)
Valuation allowance (34,153) (128,237)
------------ ------------
$ (34,153) $ (162,390)
------------ ------------
The provision for income taxes differs from the amount estimated using the
federal statutory income tax rate as follows:
February 28, August 31,
2001 2001
------------ ------------
Provision (benefit) at federal statutory rate (34,153) (162,390)
Increase in Valuation allowance 34,153 162,390
------------ ------------
$ - $ -
------------ ------------
The Company evaluates its valuation allowance requirements based on projected
future operations. When circumstances change and this causes a change in
management's judgment about the recoverability of deferred tax assets, the
impact of the change on the valuation allowance is reflected in current income.
The amount of deferred tax assets may change materially if there is a change in
ownership of the Company.
NOTE 9 - COMMITMENTS
Effective November 1, 2001, the Company entered into a sublease agreement to
lease office space. The approximate annual base rental expense is as follows:
2002 $14,597
2003 43,792
2004 4,866
F-13
IMPULSE MEDIA TECHNOLOGIES INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF AUGUST 31, 2001 AND FOR THE SIX MONTHS THEN ENDED IS
UNAUDITED.)
NOTE 10 - OTHER INTANGIBLE ASSETS
In June 2001, the Financial Accounting Standards Board issued statement of
Financial Accounting Standard No. 142 "Goodwill and Other Intangible Assets",
effective for fiscal years beginning after December 15, 2001. Under the new
rules other intangible assets will continue to be amortized over their useful
lives.
The Company will apply the new rules on accounting for other intangible assets
beginning in the first quarter of fiscal 2003. During fiscal 2003, the Company
will perform the first of the required impairment tests of indefinite lived
intangible assets. Since the Company has not yet commenced the use of the
technology, the effect of these tests on the earnings and financial position of
the Company cannot be determined.
NOTE 11 - COMMON STOCK - SUBSEQUENT EVENTS
On September 5, 2001, the Company entered into a binding legal agreement (the
"Stock Exchange Agreement") with Denmans.com Inc. ("Denmans") whereby the
Company's outstanding shares were to be transferred to Denmans for 9,466,083
shares of Denmans' common stock, representing approximately 46% of Denmans'
common stock outstanding, after the issuance of Denmans' stock to the Company's
shareholders. The Stock Exchange Agreement was completed on October 19, 2001.
Prior to the completion of the Stock Exchange Agreement, the Company restated
and realigned the "Founders Stock" which had been issued on October 25, 2000,
(date of inception) after giving effect to the issuance of an additional
2,948,889 shares. The Founders Stock, including the additional shares, has been
recorded as being issued for services valued at $0.001 and is shown as being
issued on October 25, 2000. Except for one shareholder, shareholders who had
purchased stock since inception through August 31, 2001, approved the issuance
of the additional common stock. The dissenting shareholder, who owns
approximately 2.6% of the Company's common stock, has not consented to the
issuance of additional shares. Therefore, the Company may be contingently liable
to the dissenting shareholder for issuing the additional shares without its
consent. A total of 1,150,000 shares of the additional shares shown above have
been retained in trust by two of the Company's officers for subsequent transfer
to such persons as determined by the Board of Directors.
F-14