Item 405 of Regulation S-B 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|
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
State issuer's revenues for its most recent fiscal year. For the fiscal
year ended December 31, 2004, revenues were $0.
State the aggregate market value of the voting and nonvoting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common
equity, as of a specified date within the past 60 days. As of January 11, 2008,
the approximate aggregate market value of the voting and nonvoting common equity
held by non-affiliates of the issuer was $22,000,000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. As of December 31, 2006,
issuer had 209,238,182 shares of issued and outstanding common stock, par value
$0.001.
This Annual Report on Form 10-KSB includes forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. These statements are based on our beliefs and assumptions, and on
information currently available to us. The words "anticipated," "believe,"
"expect," "plan," "intended," "seek," "estimate," "project," "could," "may," and
similar expressions are intended to identify forward-looking statements. These
statements include, among others, information regarding future operations,
future capital expenditures, and future net cash flow. Such statements reflect
our current views with respect to future events and financial performance and
involves risks and uncertainties, including general economic and business
conditions, changes in foreign, political, social and economic conditions,
regulatory initiatives and compliance with governmental regulations, the ability
to achieve further market penetration and additional customers, and various
other matters, many of which are beyond our control. Our future results and
stockholder values may differ materially from those expressed in these
forward-looking statements. Many of the factors that will determine these
results and values are beyond our ability to control or predict. Investors are
cautioned not to put undue reliance on any forward-looking statements. For these
statements, we claim the protection of the safe harbor for forward-looking
statements contained in Section 21E of the Securities Exchange Act.
This delinquent report is filed for the year ended December 31, 2004,
and is one of several reports for subsequent periods that we are filing under
Section 13 of the Securities Exchange Act after their respective due dates. The
requirement to file the associated quarterly reports for this period has been
waived by the Securities and Exchange Commission. The unaudited quarterly data
that would normally be included in the required quarterly reports is contained
herein, at the end of Item 7 Financial Statements. This report contains
information for the period to which this report relates, but does not contain
all information covering periods subsequent to the report period. For
information covering other periods, please see the applicable reports for such
period.
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 1- THE COMPANY
Schimatic Cash Transactions Network.com, Inc. (the Company) is a development
stage enterprise in the business of research, development and integration of
proprietary processes and software technologies for the electronic payment
industry, primarily involving consumer loyalty programs. Schimatic Cash
Transactions Network.com, Inc. operates principally through its wholly-owned
subsidiary, Smart Chip Technologies, LLC. The Company licenses, markets and
develops smart-card loyalty products through its subsidiary, Smart Chip
Technologies, LLC under the "Smart Chip" name.
The Company was incorporated in Florida as Apple Tree Capital Corp. in October
1996 and remained inactive until it merged in November 1998 with and
concurrently changed its name to Schimatic Cash Transactions Network.com, Inc.
In September 1999, the Company acquired all of the outstanding shares of IC One,
Inc. (IC One). The exchange was accounted for as a reverse acquisition since the
former shareholders and members of the IC One owned a majority of the
outstanding common stock of the Company after the transaction. Accordingly, the
combination of IC One and the Company was recorded as a recapitalization of IC
One, pursuant to which IC One was treated, as the acquirer for accounting
purposes and the historical financial statements presented are those of IC One
from its inception on February 26, 1997.
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Going Concern
The accompanying financial statements have been prepared according to United
States Generally Accepted Accounting Principles. The accompanying financial
statements have been prepared assuming that the Company will continue as a going
concern. The Company is a development stage enterprise and has incurred net
losses of $71,820,010 since inception. Additionally, the Company had a net
working capital deficiency of $13,788,183 and a total shareholders' deficiency
of $13,788,183 at December 31, 2004. These conditions raise substantial doubt
about the Company's ability to continue as a going concern. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Management expects to incur additional losses for the foreseeable future and
recognizes the need to raise capital through the future issuance of stock and/or
F-17
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Going Concern (Continued)
debentures in order to develop a viable business. The Company continues to
implement cost-cutting measures. It may also rely increasingly on strategic
alliances with others who will assume responsibility for financing specific
required development tasks, thus, reducing the Company's financial requirements
for the exploitation of its intellectual properties.
As of December 31, 2004, current liabilities are substantially past due. In the
event demands are made upon the Company which cannot be met and the associated
creditors successfully pursue action against the Company, the Company could be
exposed to additional costs of legal fees, interest or penalties, and may be
forced to take other defensive actions, including filing for bankruptcy.
The Company has been able to finance its operations primarily by raising capital
through the private placement of common stock and the issuance of convertible
debt.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its wholly owned subsidiaries, IC One and Smart Chip Technologies, LLC. All
significant inter-company balances and transactions have been eliminated in
consolidation.
Software Development Costs
Software development costs are expensed as incurred until technology feasibility
has been established. The Company defines the establishment of technological
feasibility as the completion of all planning, designing, coding and testing
activities that are necessary to establish products that meet design
specifications including functions, features and technical requirements.
F-18
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Research and Development Costs
Research and development expenditures are charged to expense as incurred, unless
such costs are expected to be reimbursed. The Company capitalizes costs related
to acquired technologies that have achieved technological feasibility and have
alternative uses. Research and development expenses totaled approximately
$1,908,055 and $457,594 for the years ended December 31, 2004 and 2003,
respectively.
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major additions
and betterments are capitalized. Maintenance and repairs are charged to
operations as incurred. Depreciation of property and equipment is computed by
straight-line method over the assets estimated lives. Leasehold improvements are
amortized over the lesser of the lease term or the assets' useful lives. Upon
sale or retirement of plant and equipment, the related cost and accumulated
depreciation are removed from the accounts and any gain or loss is reflected in
operations. Prior to January 1, 2003, the assets were fully depreciated.
Intangible Assets
Intellectual Property is recorded at cost less impairment written down.
Impairment tests are performed at least once a year and when conditions
indicating possible impairment exist, intellectual property is written down if
the carrying amount exceeds the fair value or if significant doubt exists with
respect to recoverability. During the year ended December 31, 2003, Patents were
written down to nil value.
Stock-Based Compensation
The Company follows Statement of Financial Accounting Standards ("SFAS") No.
123, "Accounting for Stock-Based Compensation." SFAS No. 123 establishes
accounting and reporting standards for stock-based employee compensation plans.
This statement allows companies to choose between the fair value based method of
accounting as defined in this statement and the intrinsic value based method of
accounting as prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting for Stock Issued to Employees."
The Company has elected to continue to follow the accounting guidance provided
F-19
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation-Cont'd
by APB 25, as permitted for stock-based compensation relative to the Company's
employees. Stock and options granted to other parties in connection with
providing goods and services to the Company are accounted for under the fair
value method as prescribed by SFAS 123.
In December 2002, the Financial Accounting Standard Board ("FASB") issued SFAS
No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure -
an Amendment of SFAS Statement No. 123". This statement amends SFAS No. 123 to
provide alternative methods of transition for a voluntary change to the fair
value-based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. SFAS No. 148 also requires that
those effects be disclosed more prominently by specifying the form, content, and
location of those disclosures. We have adopted the increased disclosure
requirements of SFAS No. 148 for the fiscal year ended December 31, 2004.
The additional disclosures required by SFAS No. 148 are as follows:
For Years Ended December 31,
2004 2003
---- ----
Net loss attributable to common stockholders,
as reported $(4,229,168) $(3,785,439)
Add: Stock-based compensation expense included
in reported net income, net of related
tax effect 90,049 79,139
Less: Total stock-based compensation expense
determined under the Black-Scholes fair value-based
method for all awards * (90,049) (179,028)
----------- -----------
Proforma net loss attributable to common
stockholders $(4,229,168) $(3,885,328)
=========== ===========
Basic and diluted net loss attributable to common stockholders:
As reported $ (0.03) $ (0.03)
=========== ===========
Proforma $ (0.03) $ (0.03)
|
F-20
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Stock-Based Compensation-Cont'd
* The fair value of options is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for stock
options granted during the years 2004 and 2003: annual dividends of $0; expected
volatility range of 51.52% to 160.73% for 2004 and 108.23% to 221.67% for 2003,
respectively; risk-free interest rate of 2.75% to 3% for 2004 and 2.5% for 2003;
and expected life of five to ten years.
Income Taxes
The Company accounts for income taxes in accordance with SFAS No.
109,"Accounting for Income Taxes". Deferred tax assets and liabilities are
recorded for differences between the financial statement and tax basis of the
assets and liabilities that will result in taxable or deductible amounts in the
future based on enacted tax laws and rates. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be
realized. Income tax expense is recorded for the amount of income tax payable or
refundable for the period increased or decreased by the change in deferred tax
assets and liabilities during the period.
Loss per Common Share
Basic and diluted loss per share has been calculated based upon the weighted
average number of common shares outstanding, excluding 759,056 subscribed
shares, 30,116,134 shares discussed in Note 7 and the 2,100,000 shares discussed
in Note 12, and excludes any potentially dilutive securities. Stock options and
convertible notes have been excluded as common stock equivalents in the
computation of diluted loss per share since the results would be anti-dilutive.
Obligations to issue additional shares, which could potentially dilute earnings
per share, were approximately 137,600,000 at December 31, 2004 and 122,560,000
at December 31, 2003.
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 and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
The main areas of estimates include the calculation of stock based compensation,
accrued liabilities and valuation allowance
Fair Value of Financial Instruments
The Company's financial instruments consist primarily of cash, notes payable and
accounts payable and accrued expenses, which approximate fair value because of
their short maturities. The Company's notes payable approximate the fair value
of such instruments based upon management's best estimate of interest rates that
would be available to the Company for similar financial arrangements at December
31, 2004.
F-21
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Comprehensive Income (Loss)
The Company has adopted SFAS No. 130 Reporting Comprehensive Income (Loss). This
standard requires companies to disclose comprehensive income in their
consolidated financial statements. In addition to items included in net income,
comprehensive income includes items currently charged or credited directly to
stockholders' equity, such as foreign currency translation adjustments.
Impairment of Long - Lived Assets
The Company reviews long-lived assets for impairment whenever circumstances and
situations change such that there is an indication that the carrying amounts may
not be recovered.
Recent Pronouncements
SFAS 151 - Inventory Costs--an amendment of ARB No. 43, Chapter 4. This
Statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing," to
clarify the accounting for abnormal amounts of idle facility expense, freight,
handling costs, and wasted material (spoilage). The company believes that this
standard would not have a material impact on its financial position, results of
operations or cash flows.
SFAS 152 - Accounting for Real Estate Time-Sharing Transactions -- an amendment
of FASB Statements No. 66 and 67 This Statement amends FASB Statement No. 66,
Accounting for Sales of Real Estate, to reference the financial accounting and
reporting guidance for real estate time-sharing transactions that is provided in
AICPA Statement of Position (SOP) 04-2, Accounting for Real Estate Time-Sharing
Transactions. This Statement also amends FASB Statement No. 67, Accounting for
Costs and Initial Rental Operations of Real Estate Projects, to state that the
guidance for (a) incidental operations and (b) costs incurred to sell real
estate projects does not apply to real estate time-sharing transactions. The
accounting for those operations and costs is subject to the guidance in SOP
04-2. This Statement is effective for financial statements for fiscal years
beginning after June 15, 2005. The company believes that this standard would not
have a material impact on its financial position, results of operations or cash
flows.
SFAS 153 - Exchanges of Non-monetary Assets -- an amendment of APB Opinion No.
29. The guidance in APB Opinion No. 29, Accounting for Non-monetary
Transactions, is based on the principle that exchanges of non-monetary assets
should be measured based on the fair value of the assets exchanged. The guidance
in that Opinion, however, included certain exceptions to that principle. This
Statement amends Opinion 29 to eliminate the exception for non-monetary
exchanges of similar productive assets and replaces it with a general exception
for exchanges of non-monetary assets that do not have commercial substance. A
non-monetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. The
company believes that this standard would not have a material impact on its
financial position, results of operations or cash flows.
SFAS 123R - In December 2004, the FASB issued SFAS No. 123R, "Share-Based
Payment" ("SFAS 123R"). SFAS 123R revises FASB Statement No. 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". SFAS 123R requires all public and non-public
companies to measure and recognize compensation expense for all stock-based
payments for services received at the grant-date fair value, with the cost
recognized over the vesting period (or the requisite service period). SFAS 123R
is effective for non-small business issuers for all interim periods beginning
after June 15, 2005. SFAS 123R is effective for small business issuers for all
interim periods beginning after December 15, 2005. As such, the Company is
required to adopt these provisions commencing January 1, 2006. The Company is
currently evaluating the impact of SFAS 123R on its consolidated financial
statements.
F-22
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Pronouncements- Cont'd
SFAS 154 - Financial Accounting Standards Board ("FASB") Statement No. 154
Accounting Changes and Error Corrections--a replacement of APB Opinion No. 20
and FASB Statement No. 3 This Statement replaces APB Opinion No. 20, Accounting
Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim
Financial Statements, and changes the requirements for the accounting for and
reporting of a change in accounting principle.
This Statement applies to all voluntary changes in accounting principle. It also
applies to changes required by an accounting pronouncement in the unusual
instance that the pronouncement does not include specific transition provisions.
When a pronouncement includes specific transition provisions, those provisions
should be followed. Opinion 20 previously required that most voluntary changes
in accounting principle be recognized by including in net income of the period
of the change the cumulative effect of changing to the new accounting principle.
This Statement requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless it is impracticable to
determine either the period-specific effects or the cumulative effect of the
change. When it is impracticable to determine the period-specific effects of an
accounting change on one or more individual prior periods presented, this
Statement requires that the new accounting principle be applied to the balances
of assets and liabilities as of the beginning of the earliest period for which
retrospective application is practicable and that a corresponding adjustment be
made to the opening balance of retained earnings (or other appropriate
components of equity or net assets in the statement of financial position) for
that period rather than being reported in an income statement. When it is
impracticable to determine the cumulative effect of applying a change in
accounting principle to all prior periods, this Statement requires that the new
accounting principle be applied as if it were adopted prospectively from the
earliest date practicable. This Statement defines retrospective application as
the application of a different accounting principle to prior accounting periods
as if that principle had always been used or as the adjustment of previously
issued financial statements to reflect a change in the reporting entity. This
Statement also redefines restatement as the revising of previously issued
financial statements to reflect the correction of an error. This Statement
requires that retrospective application of a change in accounting principle be
limited to the direct effects of the change. Indirect effects of a change in
accounting principle, such as a change in nondiscretionary profit-sharing
payments resulting from an accounting change, should be recognized in the period
of the accounting change. This Statement also requires that a change in
depreciation, amortization, or depletion method for long-lived, non financial
assets be accounted for as a change in accounting estimate affected by a change
in accounting principle. This Statement carries forward without change the
guidance contained in Opinion 20 for reporting the correction of an error in
previously issued financial statements and a change in accounting estimate. This
Statement also carries forward the guidance in Opinion 20 requiring
justification of a change in accounting principle on the basis of prefer
ability. FASB Statement No. 154 is effective for fiscal years beginning after
December 15, 2005.
SFAS 155 - In February 2006, the FASB issued SAFS No. 155, Accounting for
Certain Hybrid Financial Instruments. SFAS is an amendment to SFAS 133 and 140.
SFAS 155 improves financial reporting by eliminating the exception from applying
SFAS 133 to interest in securitized financial assets so similar instruments are
accounted for similarly regardless of the form of instruments. SFAS 155 is
effective for all financial instruments acquired or issued after the beginning
of an entity's first fiscal year that begins after September 15, 2006. The
Company does not expect the adoption of SFAS 155 to have an impact on its
financial position or results of operation.
SFAS 156 - In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets", which amends SFAS No. 140, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
In a significant change to current guidance, SFAS No. 156 permits an entity to
choose either of the following subsequent measurement methods for each class of
separately recognized servicing assets and servicing liabilities: (1)
Amortization Method or (2) Fair Value Measurement Method. SFAS No. 156 is
effective as of the beginning of an entity's first fiscal year that begins after
September 15, 2006. The Company is currently reviewing the effect, if any, the
proposed guidance will have on its financial position and operations.
F-23
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Pronouncements- Cont'd
FIN 48 - In July 2006, the FASB issued Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes" ("FIN 48"). FIN 48 clarifies the accounting for
uncertainty in income taxes recognized in enterprises financial statements in
accordance with SFAS No. 109, "Accounting for Income Taxes". FIN 48 prescribes a
recognition threshold and measurement attributable for the financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. FIN 48 also provides guidance on derecognizing, classification,
interest and penalties, accounting in interim periods, disclosures and
transitions. FIN 48 is effective for fiscal years beginning after December 15,
2006. The Company is currently reviewing the effect, if any, FIN 48 will have on
its financial position and operations.
SFAS 157 -In September 2006, the FASB issued SFAS No. 157, "Fair Value Measures"
("SFAS No. 157"). SFAS No. 157 defines fair value, establishes a framework for
measuring fair value in generally accepted accounting principles ("GAAP"),
expands disclosures about fair value measurements, and applies under other
accounting pronouncements that require or permit fair value measurements. SFAS
No. 157 does not require any new fair value measurements, however the FASB
anticipates that for some entities, the application of SFAS No. 157 will change
current practice. SFAS No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, which for the Company would be
its fiscal year beginning November 1, 2008. The Company is currently reviewing
the effect, if any, SFAS 157 will have on its financial position and operations.
SFAS 158 - In September 2006, the Financial Accounting Standards Board ("FASB")
issued SFAS No. 158, "Employers' Accounting for Defined Benefit Pension and
Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106,
and 132(R)". This statement requires employers to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. This statement also
requires an employer to measure the funded status of a plan as of the date of
its year-end statement of financial position, with limited exceptions. The
provisions of SFAS No. 158 are effective for employers with publicly traded
equity securities as of the end of the fiscal year ending after December 15,
2006. The adoption of this statement is not expected to have a material effect
on the Company's future reported financial position or results of operations.
SAB 108 - In September 2006, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 108 (Topic 1N), "Quantifying Misstatements
in Current Year Financial Statements" ("SAB No. 108"). SAB No. 108 addresses how
the effect of prior year uncorrected misstatements should be considered when
quantifying misstatements in current year financial statements. SAB No. 108
requires SEC registrants (i) to quantify misstatements using a combined approach
which considers both the balance sheet and income statement approaches; (ii) to
evaluate whether either approach results in quantifying an error that is
material in light of relevant quantitative and qualitative factors; and (iii) to
adjust their financial statements if the new combined approach results in a
conclusion that an error is material. SAB No. 108 addresses the mechanics of
correcting misstatements that include effects from prior years. It indicates
that the current year correction of a material error that includes prior year
effects may result in the need to correct prior year financial statements even
if the misstatement in the prior year or years is considered immaterial. Any
prior year financial statements found to be materially misstated in years
subsequent to the issuance of SAB No. 108 would be restated in accordance with
SFAS No. 154, "Accounting Changes and Error Corrections." Because the combined
approach represents a change in practice, the SEC staff will not require
registrants that followed an acceptable approach in the past to restate prior
years' historical financial statements. Rather, these registrants can report the
cumulative effect of adopting the new approach as an adjustment to the current
year's beginning balance of retained earnings. If the new approach is adopted in
a quarter other than the first quarter, financial statements for prior interim
periods within the year of adoption may need to be restated. SAB No. 108 is
effective for fiscal years ending after November 15, 2006, which for the Company
would be its fiscal year beginning November 1, 2007. The implementation of SAB
No. 108 is not expected to have a material impact on the Company's results of
operations and financial condition.
F-24
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recent Pronouncements- Cont'd
SFAS 159 - In February 2007, the FASB issued SFAS No. 159 ("SFAS 159") - the
fair value option for financial assets and liabilities including in amendment of
SFAS 115. This Statement permits entities to choose to measure many financial
instruments and certain other items at fair value. The objective is to improve
financial reporting by providing entities with the opportunity to mitigate
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. This Statement is expected to expand the use of fair value
measurement objectives for accounting for financial instruments. This Statement
is effective as of the beginning of an entity's first fiscal year that begins
after November15, 2007, and interim periods within those fiscal years. Early
adoption is permitted as of the beginning of a fiscal year that begins on or
before November 15, 2007, provided the entity also elects to apply the
provisions of FASB Statement No. 157, Fair value measurements. The Company is
currently evaluating the impact of SFAS No. 159 on its consolidated financial
statements.
Cash and Cash Equivalents
The Company considers all short-term highly liquid investments with a maturity
date of three months or less to be cash equivalents.
NOTE 3 - AMOUNTS OWED TO OFFICERS
Loans payable to officers are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.
NOTE 4 - AMOUNTS OWED TO EMPLOYEES
Amounts owed to employees are non-interest bearing advances made on behalf of
the Company that are unsecured and payable on demand.
F-25
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 5 - CONVERTIBLE NOTES PAYABLE
At December 31, 2004, secured convertible notes payable of $ 2,766,316 (2003: $
2,701,316) bear interest at a rate of 12% annually and are secured by Company's
intellectual property. The notes mature at various dates extending through
September 2004. In a letter to Note holders on December 30, 2004, the Company
advised all note holders that there had been a technical delay in conversion to
Common Stock, and that notes would be extended on a month-by-month basis until
resolution. The issue was resolved on November 30, 2006 when the number of
authorized shares was increased.
The Company has the option to repay the notes and interest in cash or convert
them into common stock based on a conversion price of $.05 per share or the
holder can elect to convert the notes to common stock based on the above stated
conversion price. The holder can convert their notes anytime. If the Company
should force a conversion of these notes into common stock, then the holder will
receive an additional amount equal in value to 25% of the principal amount in
stock options priced at $0.05 per share that can be exercised within a 5 year
period in accordance with the terms and conditions of the note.
At December 31, 2004, these notes are convertible into 55,326,320 shares of
common stock (2003: 54,026,320).
NOTE 6 - LOANS PAYABLE - CEO AMERICA
On May 17, 2002, the Company signed an agreement with CEO America, a
wholly-owned subsidiary of Consumer Economic Opportunities, whereby CEO America
agreed to pay an initial $150,000 to the Company and a second payment of
$350,000 on June 20, 2002 for ownership of the SCTN Patents with exclusive
rights for use of the patents being retained by SCTN. The agreement was to
include a 20% equity swap of the two companies. On June 4, 2002, the Company
placed title to the patents in escrow. In connection with the agreement, the
Company placed in escrow a certificate for 30,116,134 shares of SCTN common
stock as collateral. On July 2, 2002, CEO had not delivered the balance of the
money, nor had they complied with any other conditions of the escrow agreement.
The patent title and stock certificate were to remain in escrow pending either
repayment of the original $150,000 to CEO, or until the matter is settled. The
shares of common stock deposited in escrow were not considered to have been
issued or outstanding, and on April 19, 2005 the share certificate for
30,116,134 shares was cancelled. The $150,000 received from CEO America is
recorded as a non-interest bearing liability.
F-26
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 7 - DEFERRED COMPENSATION
In July 2002, various consultants, who were owed fees and/or other compensation,
signed deferred payment/compensation stock option agreements. The deferred
compensation agreements allow the holders to defer payment of their owed
compensation by electing to receive cash, common stock or stock options in
accordance with the terms of their agreements.
At December 31, 2004, deferred compensation, if the holders so elect, is
convertible into stock options totaling 18,493,000 shares (2003:13,381,250
shares) of common stock which are potentially dilutive to earnings per share.
NOTE 8 - INCOME TAXES
At December 31, 2004, the Company has available unused net operating loss
carryovers of approximately $60,000,000 that may be applied against future
taxable income and expire at various dates through 2024. The Company has a
deferred tax asset arising from such net operating loss deductions and has
recorded a valuation allowance for the full amount of such deferred tax asset
since the likelihood of realization of the tax benefits cannot be determined.
These losses may be subject to substantial limitations as a result of IRC
Section 382 rules governing changes in control.
Further, the Company has not filed any federal, state or local income or
franchise tax returns for the years ended December 31, 2004, 2003, 2002 and
2001. Such failure may have a material adverse effect on the amount of any net
operating loss carry forwards and may subject the Company to fines.
Deferred tax asset: 2004 2003
Net operating loss carry forward $24,000,000 $22,600,000
Valuation allowance (24,000,000) (22,600,000)
----------- -----------
Net Deferred Tax Asset $ - $ -
=========== ===========
|
For the year ended December 31, 2004, the valuation allowance increased
approximately $1,400,000.
F-27
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 9 - SHAREHOLDERS' DEFICIENCY
Equity Transactions
2004
On January 13, 2004 the Company issued 2,586,310 common shares in exchange for
cash. The shares were issued at $0.05.
On January 13, 2004 the Company issued 150,000 and 200,000 common shares in
exchange for services valued at $15,000 and $30,000, respectively. The shares
were issued at $0.10 and $0.15 respectively.
On January 29, 2004 the Company issued 250,000 common shares in exchange for
cash. The shares were issued at $0.30.
On February 24, 2004 the Company issued 62,500 commons shares in exchange for
cash. The shares were issued at $0.08.
On February 27, 2004 the Company issued 280,419 and 175,841 common shares for
interest payments of $36,454 and $29,013, respectively. The shares were issued
at $0.13 and $0.165, respectively.
On February 27, 2004 the Company issued 83,333 common shares in exchange for
cash. The shares were issued at $0.30.
On August 10, 2004 the Company issued 689,655 common shares in exchange for
services valued at $100,000. The shares were issued at $0.145.
On August 23, 2004 the Company issued 500,000 common shares in exchange for
services valued at $40,000. The shares were issued at $0.08.
On November 22, 2004 the Company issued 66,667 common shares, 11,111 common
shares, 90,000 common shares and 100,000 common shares in exchange for cash. The
shares were issued at $0.06, $0.09, $0.09 and $0.065, respectively.
2003
During 2003, the Company issued 23,318,345 shares and cancelled a net of
3,140,259 shares. These issuances and cancellations were transacted as follows:
During the first quarter of 2003, the Company issued 2,030,588 shares to
consultants for services rendered and 1,625,792 shares in lieu of interest
payments to convertible noteholders. During the second quarter of 2003, the
Company issued 466,378 shares to consultants for services rendered. During the
fourth quarter of 2003, the Company issued 5,950,110 shares to consultants for
services rendered, 12,206,425 shares in lieu of interest payments, 789,052
shares for settlement of debt and 250,000 common shares for cash. As an
initiative of the new corporate management, the Company reconciled its shares
issuances with its transfer agent as of December 31, 2003 and showed a net
cancellation of 3,140,259 shares issued in the prior years. These cancellations
are shown as an offset to Additional Paid in Capital on the books of the
Company.
F-28
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 9 - SHAREHOLDERS' DEFICIENCY-Cont'd
Authorized Shares
As at December 31, 2004, the Company is authorized to issue 200,000,000 shares
of common stock. At December 31, 2004, the Company had common stock shares
outstanding of 165,714,436 and an additional 137,593,602 shares issuable upon
the conversion of stock options, convertible debt and deferred compensation. As
a result, the Company would exceed the authorized amount by 103,308,038. The
Company would be required to seek shareholder approval to increase the shares
authorized limits in order to satisfy its potential conversion of dilutive
securities.
As an alternative, the Company may purchase shares of common stock in the open
market, or seek to repay the indebtedness in lieu of conversion.
Effective November 29, 2006, the Board of Directors of the Company approved
amendments to the Articles of Incorporation to adopt an increase in the capital
stock of the
Company's common stock from 200,000,000 to 500,000,000 shares. Furthermore,
during a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000. (Refer subsequent events).
NOTE 10 - STOCK OPTION PLAN
On December 8, 1999, the Company adopted an Employee Stock Option Plan (the
"Plan"). The Board of Directors administers the Plan. Under the Plan, the
Company may grant stock options, which may be incentive stock options ("ISO's")
as defined in the Internal Revenue Code, and stock awards or options which do
not qualify as ISO's to employees and officers. All employees of the Company are
eligible to participate in the Plan.
The fair value of options is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions used for stock
options granted during the years 2004 and 2003: annual dividends of $0; expected
volatility range of 51.52% to 160.73% for 2004 and 108.23% to 221.67% for 2003,
respectively; risk-free interest rate of 2.75% to 3.0% for 2004 and 2.5% for
2003; and expected life of five to ten years. The estimated weighted - average
fair values of stock options granted to employees, officers and directors during
the year 2004 and 2003 was approximately $.08 and $.07 respectively. The market
price of shares during the time of grants ranged from $0.07 to $0.17 in 2004 and
from $0.05 to $0.17 in 2003.
F-29
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 10 - STOCK OPTION PLAN-Cont'd
Stock Options
-------------------------
Weighted
Average
Exercise
Shares Price
------ -----
Outstanding at December 31, 2002 43,794,809 $ 0.09
Granted 3,430,490 $ 0.07
Exercised - -
Cancelled - -
Outstanding at December 31, 2003 47,225,299 $ 0.09
Granted 1,200,000 $ 0.11
Exercised - -
Cancelled - -
Outstanding at December 31, 2004 48,425,299 $ 0.09
|
The following table summarizes the Company's stock options outstanding and
exercisable at December 31, 2004:
Options Outstanding Options Exercisable
--------------------------------------- --------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
(In Thousands) (In Years) (In Thousands)
$0.00 - $0.23 44,845 4.73 $0.08 44,845 $0.09
$0.48 - $0.49 3,247 5.65 $0.48 3,247 $0.48
$0.64 - $0.80 333 5.33 $0.64 333 $0.64
-------- --------
48,425 48,425
======== ========
|
The market price of the 1,200,000 stock options granted in 2004 ranged from
$0.07 to $0.17.
F-30
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 11 -OUTSIDE RESEARCH AND DEVELOPMENT SERVICES
The Company retained a third-party vendor in 1997 to perform certain research
and development services relating to the Company's database technology. As of
December 31, 1999, cumulative costs incurred approximated $2,170,000, for which
the Company made cash payments of $200,000 in 1999 for such services rendered.
In 1999, the Company also issued to this vendor 2,100,000 shares of common stock
as collateral of the unpaid balance.
In June 2001, the Company reached a settlement and agreed to reduce the balance
of accounts payable to them by $770,000, to $1,200,000. The agreement resulted
in an extraordinary gain from settlement of $770,000. The agreement also calls
for the return to the Company of 2,100,000 shares of common stock placed in
escrow as collateral for the obligation. The agreement permits the Company to
repay the remaining amount over a period of time as long as fifteen months,
starting no later than September 30, 2001. The amounts expected to be repaid
will increase from $70,000 per month in September 2001 to $90,000 per month
through December 2002. During 2001, the Company made two of the four payments
due in 2001 which totaled to $140,000. The unpaid balance is $1,709,400,
including accrued interest charges of $649,400, as of December 31, 2004. In
December 2003, the Company received certificates for the return of all of the
2,100,000 shares of common stock which were then cancelled.
NOTE 12 - SHORT TERM LOANS
These short term loans and advances are non-interest bearing and were converted
to stock in 2005.
NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS
The Company is currently a defendant or co-defendant in various legal actions
arising in the ordinary course of business. There can be no assurance, the
Company will be successful in defending these actions.
Quint Star Management , Inc. vs. IC One, Inc., Arthur D. Bennet, and
Peter Bennee
On August 30, 1999, Quint Star Management, Inc. initiated an action in the Third
Judicial District Court, Salt Lake City, Utah, against IC One, Inc., Arthur D.
Bennett and Peter J. Bennee, for unpaid rent and related charges, plus costs and
attorney's fees, under the lease on our former principal executive offices in
Salt Lake City, Utah. Following the entry of judgment against IC One for $50,541
on December 7, 2000, IC One reached a payment arrangement under which we are
obligated to pay $5,000 per month, plus ongoing obligations under the lease. The
settlement obligation is guaranteed by the Company, and is secured by the
equipment, inventory, accounts and chattel paper of both the parent and IC One.
F-31
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS-Cont'd
The Company is in default in its obligations under this agreement. Upon the
expiration of the lease, an amended judgment of $222,765 (a provision has been
provided for in the financial statements at December 31, 2003) was entered to
reflect the additional unpaid rent, interest and attorney's fees.
Grish vs. Schimatic Cash Transactions Network.com a/b/a Smart Chip Technologies,
Inc. f/k/a IC One, Inc.
On September 18, 2001, we were served with a summons and complaint for an action
filed by Marilyn Grish in the Third Judicial District Court, Salt Lake County,
Utah, for breach of an independent contractor's contract and seeking unspecified
damages. On October 12, 2001, the Company filed an answer and a counterclaim
against Ms. Grish and intended to defend this matter vigorously. Ms. Grish had
taken no further action in this case and the court indicated that, unless Ms.
Grish certified she was ready for trial by August 4, 2004, the case would be
dismissed. Accordingly, the case was dismissed on August 4, 2004.
Eximsoft International, LLC and Eximsoft Technologies Pvt. Ltd.
In October 2001, IC One, Inc. entered into a settlement agreement with Eximsoft
International, LLC and Eximsoft Technologies Pvt. Ltd. to resolve claims by the
Eximsoft entities that IC One had contracted and received computer software
development and programming services and had failed to pay as agreed. IC One
agreed to pay $30,000 and provided Eximsoft with a confession of judgment that
could be filed in the Third District Court in Salt Lake City, Utah, in the event
that IC One failed to make the agreed payments. IC One paid the agreed $30,000
during 2002 and the original confession of judgment was returned by Eximsoft to
us in November 2003.
Sandra Lueck vs. Schimatic Cash Transactions Network.com, Inc. d/b/a Smart Chip
Technologies, Smart Chip Technologies L.L.C., and IC One, Inc.
On August 16, 2002, Sandra Lueck initiated an action against the Company for
unpaid wages, interest, costs and attorney's fees. On October 31, 2002, judgment
F-32
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS-Cont'd
was entered against the Company in the amounts of $11,400 for unpaid wages,
$3,300 as a continuation of wages, court costs and attorney's fees of $1,753,
and interest from the date of judgment until paid in full. On or about June 30,
2003, the Company entered into a release and settlement agreement compromising,
resolving, and settling all matters and issues between the parties. The Company
paid a total of $18,750 and a satisfaction of judgment was filed with the Third
Judicial District Court on October 14, 2003.
Greg Morrison vs. Smart Chip Technologies, L.L.C.
On April 4, 2003, Greg Morrison initiated an action against the Company in the
Third Judicial District Court for Salt Lake County, Utah for unpaid wages in the
amount of $7,948, unpaid reimbursement expenses totaling $11,868, interest on
those amounts from the date of termination, court costs and attorney's fees. The
Company agreed to pay Mr. Morrison a total of $7,500 to resolve this matter. The
Company's final payment under this agreement was made prior to July 31, 2004,
and this matter has be dismissed.
PR Newswire Association, Inc. vs. Smart Chip Technologies, L.L.C.
On May 21, 2003, PR Newswire Association, Inc. initiated an action against the
Company in the Superior Court of New Jersey, Hudson County for unpaid amounts
owed for services provided in the amount of approximately $4,000. On July 18,
2003, a judgement was entered against the Company (a provision of $4,000 has
been provided for in the financial statements at December 31, 2004). The Company
is currently in default of the judgement and would be liable to pay interest
from the date of judgement until paid in full.
James E. Biorge
The Company is reviewing, with the advice of legal counsel, whether the Company
has legal claims that may be asserted against James E. Biorge, a founder and
officer and director of IC One at the time it was acquired in September 1999. At
the time of such acquisition, the Company set aside in a special trust
approximately 7.8 million shares of common stock to be used to resolve claims
that may be asserted against IC One by persons claiming an interest in or claim
against IC One as a successor-in-interest to the assets, operations and
liabilities of CardOne, which Mr. Biorge had also been instrumental in founding
F-33
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 13 - LITIGATION AND SETTLEMENT OF CLAIMS (Continued)
and which had been involved in the initial development of the intellectual
properties subsequently acquired by IC One before IC One was acquired by us. The
Company believes that all or a portion of the 7.8 million shares then reserved
to satisfy such claims, all of which have subsequently been used for such
purpose, should properly be the responsibility of Mr. Biorge. On the basis of
our previous assertion that the Company may make such a claim against Mr. Biorge
and perhaps other reasons not known to the Company, Mr. Biorge has refused to
accept certificates for 11,503,138 shares of Company's common stock to which he
would have been entitled to receive in exchange for his stock in IC One.
On October 2, 2007, James Biorge and Jami Biorge (Mr. Biorge's daughter)
initiated an action against the company in the United States District Court for
the District of Utah (Case # 07cv00129), seeking the above-noted shares which
were previously cancelled by the Company, as well as attorney's fees and
punitive damages. The Company plans to vigorously defend itself and believes
that there is a reasonable possibility that the outcome of any claim would not
be unfavorable to the Company. Additionally, the Company may pursue claims
against Mr. Biorge and seek damages in addition to cancellation of the shares.
CardOne Development Company and CardOne Corporation
As of July 31, 2002, Messrs. Hauge and Hipsley ceased their employment with us
and signed agreements to accept their compensation on a deferred basis. In
December 2002, they signed additional agreements releasing all rights to any
claims based on the CardOne entities, terminating their association with the
Company, and agreed to accept options to purchase 725,000 shares of common stock
each. In addition, the Company agreed to issue to Mr. Hauge 700,000 shares of
our stock for work performed through December 2002.
Other Creditors
From time to time, the Company is threatened by creditors to initiate litigation
to collect amounts owed by the Company and reported on its financial statements.
In cases in which litigation is threatened or initiated, the Company seeks to
negotiate a settlement or forbearance agreement.
F-34
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 14 - PAYROLL TAXES
Internal Revenue Service
The Company's wholly owned subsidiary, IC One, Inc., has received notification
from the Internal Revenue Service that IC One has an unpaid liability for
employment taxes and amounts withheld from employees' wages for the periods from
July 1, 1999, through September 30, 2001. IC One erroneously filed an employer
tax report for the quarter ended September 30, 2001, even though it did not have
any employees and paid no payroll after June 30, 2001. Accordingly, IC One was
not required to make federal tax deposits for the periods after June 30, 2001.
The Internal Revenue Service has filed tax liens against the Company with
respect to such amounts outstanding. As of December 31, 2004, the aggregate
amount owed by IC One, together with applicable penalties and interest, for the
period from July 1, 1999, through June 30, 2001, was approximately $1,277,000.
The Company is attempting to negotiate with the Internal Revenue Service
regarding payment of the amounts owed by IC One.
The total amount of unpaid employment taxes owed by the Company was
approximately $1,277,000 (including interest and penalties of approximately
$325,000). The Company continues to work with the Internal Revenue Service via
the appeals process to resolve its outstanding liability. The Company does not
believe that the liability will hinder the progress of the Company.
Utah State Tax Commission
The State of Utah has filed tax liens against the Company of approximately
$53,000 as of December 31, 2004, for unpaid employee withholding taxes and
related amounts.
California Employment Development Corporation
The State of California has filed tax liens against the Company for unpaid
employee withholding taxes and related amounts aggregating approximately $65,000
as of December 31, 2004.
Nebraska Department of Revenue
The State of Nebraska has filed tax liens against the Company for unpaid
F-35
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 14 - PAYROLL TAXES-Cont'd
employee withholding taxes and related amounts aggregating approximately $5,000
as of December 31, 2004. On June 26, 2007, the Company paid its tax obligation
to the State of Nebraska in full.
NOTE 15 - Strategic Alliances
The Company has established strategic alliances to market its products and
services. (Refer Note 21 - Subsequent Events for licensing agreements signed
with Retention Management Group, Inc. and Phoenix Technology Holdings, Inc.)
NOTE 16 - Employment Agreements
As of December 31, 2004, the Company was obligated under two employment
agreements with certain officers. Compensation under the agreements include
annual salaries approximately $214,500.
NOTE 17 - RELATED PARTY TRANSACTIONS
As of December 31, 2004 and 2003 the Company is liable to executive officers and
directors for secured convertible promissory notes for $1,220,462, with interest
at 12%.
Interest on such notes accrued approximates $169,000 for 2004 (2003: $150,000).
These notes were assigned to Phoenix Technology Holdings Inc. in April 2006 (see
Note 20 - Subsequent Events) Also during 2004, a director maintained a current
account with the Company to assist the Company meet its operating expenses. As
of December 31, 2004, there was a payable of $19,000 (2003: $19,000)
approximately to this director.
NOTE 18 - LEASE COMMITMENT
The Company leased office space under an operating lease, which expired in 2003.
The Company now rents its principal executive offices at Las Vegas, Nevada on a
month-to-month basis, for combined rent of $12,000 per year.
NOTE 19 - DELISTING AND LATE FILINGS
The Company did not file required reports with the SEC on a timely basis and was
delisted from the OTC Bulletin Board (the "OTC"). The Company currently trades
over the counter on the Pink Sheets.
The Company is also not current with its corporate income tax return filings.
The Company's financial statements do not reflect a reserve for any potential
fines or penalties that may result from such delisting or late filings.
F-36
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS
A) Subsequent issue of common shares:
On February 1, 2005 the Company issued 250,000 common shares in exchange for
services valued at $12,500. The shares were issued at $0.05.
On March 29, 2005 the Company issued 439,905 common shares in exchange for cash.
The shares were issued at $0.07.
On April 8, 2005, the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.07
On April 28, 2005 the Company issued 100,000 common shares in exchange for cash.
The shares were issued at $0.09.
On May 4, 2005 the Company issued 248,000, 23,571, 142,857, 125,000, 47,968,
150,000 and 1,000,000 common shares in exchange for cash. The shares were issued
at $0.05, $0.06, $0.07, $0.08, $0.09, $0.12 and $0.30 respectively.
On May 4, 2005 the Company issued 1,050 common shares in exchange for past
services valued at $52.50. The shares were issued at $0.05.
On May 4, 2005, the Company issued 22,934,690 common shares for interest
payments of $1,884,829.40. The shares were issued at $0.08.
On May 4, 2005, the Company issued 13,450 common shares in exchange for cash.
The shares were issued at $0.07.
On June 2, 2005, the Company issued 62,500 common shares in exchange for cash.
The shares were issued at $0.08.
On June 6, 2005, the Company issued 800,000 common shares in exchange for cash.
The shares were issued at $0.05.
On June 15, 2005, the Company issued 100,000 and 50,000 common shares in
exchange for cash. The shares were issued at $0.05 and $0.09, respectively.
On June 15, 2005, the Company issued 100,000 common shares in exchange for
services valued at $5,000. The shares were issued at $0.05.
On July 9, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were issued at $0.05.
On July 21, 2005, the Company issued 200,000 common shares in exchange for cash.
The shares were valued at $0.05.
On September 14, 2005, the Company issued 58,413 common shares in exchange for
cash. The shares were valued at $ $0.06.
On October 31, 2005, the Company issued 323,494 common shares in exchange for
cash. The shares were valued at $ $0.05
On December 1, 2005, the Company issued 88,669 common shares in exchange for
services valued at $5,320.14. The shares were valued at $0.06.
F-37
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS
A) Subsequent issue of common shares:
On February 13, 2006, the Company issued 2,000,000 common shares in exchange for
past services valued at $100,000. The shares were issued at $0.05.
On July 14, 2006, the Company issued 200,000 common shares in exchange for past
services valued at $10,000. The shares were issued at $0.05.
On August 18, 2006, the Company issued 1,000,000 common shares in exchange for
past services valued at $70,000. The shares were issued at $0.07.
On December 15, 2006, the Company issued 3,000,000 common shares in exchange for
services valued at $150,000. The shares were issued at $0.05.
On December 15, 2006, the Company issued 709,687 common shares in exchange for
past services valued at $49,678. The shares were issued at $0.07.
On December 16, 2006, the Company issued 1,153,333 common shares in exchange for
past services valued at $55,418. The shares were issued at $0.05.
On December 20, 2006, the Company issued 540,000, 1,307,080, 4,000,000 and
2,054,079 common shares in exchange for past services valued at $54,000,
$59,584, $280,000 and $102,704, respectively. The shares were issued at $0.10,
$0.05, $0.07 and $0.05, respectively.
On January 30, 2007, the Company issued 5,850,000 common shares for past
services valued at $292,500. The shares were issued at $0.05.
On January 30, 2007, the Company issued 1,500,000, 83,333 and 94,716,005 common
shares in exchange for services, cash and interest. The shares were issued at
$0.05.
On February 5, 2007, the Company issued 2,123,208 common shares to convert
secured notes valued at $107,333. The shares were issued at $0.05.
On February 8, 2007, the Company issued 615,091 common shares to convert secured
notes valued at $30,793.75. The shares were issued at $0.05.
On February 21, 2007, the Company issued 6,400,000 common shares in exchange for
past services valued at $448,000. The shares were issued at $0.07.
On March 21, 2007, the Company issued 21,000,000 and 800,000 common shares in
exchange for past services valued at $1,260,000 and $56,000, respectively. The
shares were issued at $0.06 and $0.07, respectively.
On March 26, 2007, the Company issued 5,565,000 and 540,000 common shares for
past services valued at $ 278,250.00 and $54,000, respectively. The shares were
issued at $0.05 and $0.10, respectively.
On May 17, 2007, the Company issued 1,500,000 and 2,578,125 common shares for
cash and past services, respectively valued at $75,000.00 and $135,000,
respectively. The shares were issued at $0.05.
F-38
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS
A) Subsequent issue of common shares:
On May 30, 2007, the Company issued 500,000 and 48,521 common shares for cash
and past services, respectively valued at $25,000.00 and $2,426, respectively.
The shares were issued at $0.05.
On June 1, 2007, the Company issued 1,000,000 common shares in exchange for cash
valued at $50,000.00. The shares were issued at $0.05.
On June 11, 2007, the Company issued 400,000 common shares in exchange for cash
valued at $20,000.00. The shares were issued at $0.05. On June 12, 2007, the
Company issued 100,324,827 common shares to convert secured notes valued at
$5,016,241. The shares were issued at $0.05.
On June 13, 2007, the Company issued 1,129,874 common shares for past services
valued at $56,494. The shares were issued at $0.05.
On June 17, 2007, the Company issued 516,048 common shares to convert secured
notes valued at $25,802. The shares were issued at $0.05.
On June 28, 2007, the Company issued 400,300 common shares for past services
valued at $ 20,015. The shares were issued at $0.05.
On July 1, 2007, the Company issued 6,000,000 common shares for past services
valued at $300,000. The shares were issued at $0.05.
On July 9, 2007, the Company issued 306,908 common shares in exchange for cash
valued at $58,000.00. The shares were issued at $0.19.
On July 11, 2007, the Company issued 6,500,000 common shares for past services
valued at $400,646. The shares were issued at $0.06.
On July 20, 2007, the Company issued 8,661,648 common shares for past services
valued at $432,542. The shares were issued at $0.05.
On August 2, 2007, the Company issued 63,742,180 common shares to convert
secured notes valued at 3,187,164. The shares were valued at $0.05.
F-39
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS-Cont'd
B) Options
On January 31, 2005, the Company issued 100,000 options at a strike price of
$0.065 for services rendered.
On February 28, 2005, the Company issued 100,000 options at a strike price of
$0.072 for services rendered.
On March 31, 2005, the Company issued 100,000 options at a strike price of $0.07
for services rendered.
On April 30, 2005, the Company issued 100,000 options at a strike price of $0.05
for services rendered.
On September 19, 2005, the Company cancelled 2,679,167 options that had been
issued to a past employee.
On November 30, 2005, the Company cancelled 4,463,303 options that had been
issued to a past employee.
On March 3, 2006, the Company cancelled 1,937,333 options that had been issued
to a past employee.
On April 3, 2006, the Company cancelled 1,301,667 options that had been issued
to a past employee.
On December 15, 2006 and December 16, 2006, the Company cancelled 527,296 and
1,000,000 options, respectively, that had been issued to consulting companies
for services rendered.
On March 9, 2007, the Company cancelled 19,161,876 options that had been issued
to past employees.
On March 26, 2007 and March 28, 2007, the Company cancelled 2,861,958 and
1,038,615 options, respectively, that had been issued to past employees.
On July 16, 2007 the Company cancelled 4,098,333 options that had been issued to
past employees.
F-40
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS-Cont'd
C) Events
Joseph E. Diamond
On February 19, 2004, Joseph E. Diamond was appointed Senior Vice-President of
Administration and Finance. In addition to these duties, on November 12, 2004
Mr. Diamond was elected CEO of the Company. Mr. Diamond was relieved as CEO of
the Company and resigned his previous position on December 16, 2004. On January
26, 2005, Therese Diamond (Mr. Diamond's spouse) filed a complaint against the
Company in the Superior Court of California, County of Los Angeles bearing case
number LC-070391 and on February 4, 2005 Joseph Diamond filed a complaint
against the Company in the Superior Court of California, County of Los Angeles
bearing case number LC-070495. On February 3, 2006, the parties entered into a
Settlement and Release Agreement under which the Company agreed to issue
7,250,000 shares of common stock which resolved the matters and they were
subsequently dismissed by the Courts.
Retention Management Group, Inc.
On July 25, 2004, the Company entered into a Licensing Agreement with Retention
Management Group, Inc.(RMG), a Barbados company, in which RMG was granted a
license to market, distribute and sublicense SCTN applications and products. On
March 10, 2006, the Company asserted claims against RMG in case no. A518577
filed in the Eighth Judicial District Court of Nevada, Clark County. On May 31,
2006, the Company and RMG entered into a Settlement Agreement and Release. Under
the terms of this agreement, the Company agreed to pay RMG $ 90,000, and the
Licensing Agreement between the Company and RMG was terminated. Accordingly,
case no. A518577 was dismissed by the Court on June 23, 2006.
Donald W. Mayer
On June 1, 2005, Donald W. Mayer, an investor in the Company, initiated an
action in The Superior Court of the State of Washington, In and For the County
of King, case no. 05-2-18115-0-SEA in which the Company was named one of several
defendants. On May 13, 2006, the Parties entered into a Settlement Agreement and
Release. Accordingly, the Company was dismissed as a defendant in the case.
Miki Radivojsa
On August 8, 2005, Miki Radivojsa, CEO of Airos Group, the Company's development
partner, was elected to the Board of Directors. On August 17, 2005, Mr.
Radivojsa was elected Chairman and CEO of the Company, replacing David Simon.
Verlo Howell
On November 30, 2005, Verlo Howell initiated an action against the Company in
the Third Judicial District Court for Salt Lake County, Utah, civil no.
05-092-1235 for unpaid wages, interest and attorney costs. Mr. Howell was hired
as the Company's Executive Vice-President of Sales and Marketing pursuant to an
Employment Agreement dated May 17, 2005. On September 8, 2005, Mr. Howell's
employment was terminated with cause by the Company. We intend to assert and
pursue offsetting defenses and believe that there is a reasonable possibility
that the outcome of any claim, if asserted, would not be unfavorable to us.
F-41
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS-Cont'd
C) Events
Statute-Barred Accounts Payable
As of December 31, 2005, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of December 31, 2005,
the amount is approximately $41,000.
Phoenix Technology Holdings, Inc.
On April 6, 2006, the Company entered into a License Agreement with Phoenix
Technology Holdings Incorporated, a Turks and Caicos Islands company. Under the
terms of the agreement, the Company granted Phoenix an exclusive license to use
the Company's technology. Also, certain portions of the Company's debt,
including a significant portion of the Senior Secured Convertible Notes, unpaid
amounts owing to Airos Group for services rendered, and accrued salaries were
assumed by Phoenix and ceased accruing additional interest. Further, the
agreement provides for Phoenix to loan monies to the Company, at Phoenix's
discretion, at the rate of one percent (1%) per month, compounded monthly until
paid in full. Any such loan shall be deducted from any payments due by Phoenix
under the agreement. In order to maintain exclusivity, the Agreement calls for
certain performance targets to be met. As of April 18, 2007, these targets have
been met.
Nevada Corporation
During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to convert the Company from a Florida
corporation to a Nevada corporation.
Increase in Authorized Shares
During a special meeting of the Board of Directors on November 30, 2006, the
Board voted to approve a resolution to increase the number of authorized shares
to 500,000,000.
Change in Auditors
During a meeting of the Board of Directors on May 18, 2007, the Board voted to
approve a resolution which dismissed Marcum & Kliegman, LLP as the Company's
independent registered public accounting firm and engaged Schwartz Levitsky
Feldman LLP as the Company's independent registered public accounting firm. The
change in independent registered public accounting firms is not the result of
any disagreement with Marcum & Kliegman, LLP.
Elimination of Senior Secured Debt
In January of 2007, Noteholders which did not elect to assign their debt to
Phoenix Technology Holding, Inc. were given the option to receive their
principal investment plus accrued interest either in the form of cash or shares
in the Company. By June 2007, the last of these repayments were made, and all
Senior Secured Notes have been retired.
F-42
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Notes to Consolidated Financial Statements
December 31, 2004 and 2003
(Amounts expressed in US Dollars)
NOTE 20-SUBSEQUENT EVENTS-Cont'd
C) Events
Increase in Authorized Shares
During a special meeting of the Board of Directors on July 20, 2007, the Board
voted to approve a resolution to increase the number of authorized shares to
600,000,000.
The International Investor
On August 30, 2007, The International Investor, K.S.C.C., a Kuwait-based
company, initiated an action in the United States District Court for the
District of Nevada, case # 07-CV-1178, in which the Company was named as a
co-defendant, seeking damages in the amount of $100,000,000. The company filed
its counter-claim on September,25, 2007 and plans to vigorously defend and
counter sue TII for breach of contract, fraud, interference with contractual
relations, misappropriation of trade secrets, conversion, unjust enrichment and
to seek both compensatory and punitive damages well in excess of $100 million.
Statute-Barred Accounts Payable
As of September 20, 2007, certain accounts payable of the Company are
Statute-Barred under Utah law from being collected by creditors. However, under
US GAAP, the Company still records them as a liability. As of September 20,
2007, the amount is approximately 43,000. This amount includes the $41,000
previously Statute-Barred as of December 31, 2005.
F-43
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
As of March 31, 2004 and December 31, 2003
(Amounts expressed in US Dollars)
(Unaudited) (Audited)
March 31, December 31,
2004 2003
$ $
ASSETS
------
CURRENT ASSETS:
Cash 84,186 42,570
Prepaid Expenses and other 37,842 24,885
----------- -----------
TOTAL CURRENT ASSETS 122,028 67,455
----------- -----------
TOTAL ASSETS 122,028 67,455
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable - Vendor 1,518,600 1,455,000
Accounts payable - other 2,402,772 2,603,400
Accrued wages and payroll taxes (note 11) 1,374,916 1,361,408
Deferred compensation 1,129,499 1,216,686
Loans - CEO America 150,000 150,000
Amounts owed to employees and officers (notes 5 and 6) 887,676 783,777
Short term loans 66,793 124,315
Convertible notes payable (including amounts owed to officers
$1,220,462 prior year $1,220,462) 2,736,316 2,701,316
----------- -----------
TOTAL CURRENT LIABILITIES 10,266,572 10,395,902
----------- -----------
SHAREHOLDERS' DEFICIENCY (note 7):
Common stock - $.001 par value; 200,000,000 shares
authorized; 164,257,003 shares issued and outstanding 164,257 160,469
(2003: 160,468,600)
Additional paid-in capital 57,410,052 57,026,926
Common stock subscription receivable (475,000) (525,000)
Common stock subscribed 500,000 600,000
Deficit accumulated during the development stage (67,743,853) (67,590,842)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIENCY (10,144,544) (10,328,447)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 122,028 67,455
=========== ===========
|
F-44
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations and Comprehensive Loss
For the three month period Ended March 31, 2004 and 2003 and the Period from
Inception (February 26, 1997) to March 31, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
From Inception
March 31, (February 26, 1997)
-------------------------------- Through March 31,
2004 2003 2004
---- ---- ----
$ $ $
EXPENSES:
Selling, general and administrative (note 12) (10,781) 533,463 55,162,058
Depreciation and amortization - 837 365,010
Write-off of common stock subscription
receivable - - 2,125,000
Loss on impairment of intangible assets - - 703,211
Interest expense 163,792 75,234 8,457,364
------------- ------------- ------------
TOTAL EXPENSES 153,011 609,534 66,812,643
------------- ------------- ------------
LOSS BEFORE EXTRAORDINARY ITEM (153,011) (609,534) (66,812,643)
EXTRAORDINARY ITEM - LOSS ON
EXTINGUISHMENT OF DEBT - - (931,210)
------------- ------------- ------------
NET LOSS $ (153,011) $ (609,534) $(67,743,853)
============= ============= ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.00) $ (0.01)
============= ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 162,774,572 141,343,895
============= =============
COMPREHENSIVE LOSS
The components of comprehensive loss are as follows:
Net loss $ (153,011) $ (609,534)
Other comprehensive income (loss) foreign currency
Translation - -
Comprehensive Loss $ (153,011) $ (609,534)
|
F-45
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
Deficit
Common Common Accumulated
Common Stock Additional Stock Stock Deferred During the
Number of Paid-in Subscription to be Compen- Development
Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -
- -
Issuance of common stock for cash: - -
($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
($0.81 per share, November) 32,715 33 26,517 - - - - 26,550
Issuance of common stock for legal, - -
financial, development and
administrative services - -
($1.32 per share, March) 759 1 999 - - - - 1,000
($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
Net loss - - - - - - (17,349,205) (17,349,205)
Balance - December 31, 1997
(Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)
Issuance of common stock for cash: - -
($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
($0.87 per share, February) 108,469 108 94,342 - - - - 94,450
F-46
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes - -
($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal, - -
financial, development and
administrative services: - -
($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
Net loss - - - - - - (5,448,335) (5,448,335)
Balance - December 31, 1998
(Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)
- -
Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
($0.66 per share, January) 713,512 713 469,287 - - - 470,000
($0.68 per share, February) 129,799 130 87,870 - - - 88,000
($0.66 per share, March) 151,811 152 99,848 - - - 100,000
($0.68 per share, April) 179,137 179 120,821 - - - 121,000
($0.66 per share, May) 38,712 39 25,461 - - - 25,500
F-47
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
($0.23 per share, July) 1,009,905 1,010 232,874 - - - 233,884
($0.66 per share, September) 325,557 325 214,124 - - - 214,449
Issuance of common stock for: - -
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - 26,583
- -
Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - 481,250
- -
Investment in real estate joint
venture ($1.00 per share, December) 420,000 420 419,580 - 114000 (114,000) 420,000
- -
Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)
Issuance of common stock for software 174,583 175 114,825 - 115,000
($0.66 per share, August)
Issuance of common stock for legal,
financial, development and
administrative services:
($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
($0.66 per share, May) 57,157 57 37,593 - 37,650
($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
Net loss - - - - (7,894,949) (7,894,949)
BALANCE - December 31, 1999
(Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
($0.60 and $1.00 per share, January) 120,733 121 82,320 - - - - 82,441
($0.60 and $1.00 per share, February) 653,466 653 399,427 - - - - 400,080
($0.60 and $1.00 per share, March) 508,567 508 413,393 - - - - 413,901
($0.60 and $1.00 per share, April) 512,081 512 355,138 - - - - 355,650
($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
($0.21 and $0.60 per share, June) 761,667 762 132,838 - - - - 133,600
($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
($0.60 per share, August) 108,667 109 65,091 - - - - 65,200
F-48
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999 ($0.54 per share,
January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock for financial - -
and development services: - -
($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for legal
services - - -
($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment in Real estate joint - -
venture: - -
($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One - -
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock - -
issued in exchange, January (286,267) (286) 286 - - - -
F-49
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
Issuance of common stock for equipment
($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to settle
CardOne potential claims ($1.05 per
share, August) 294,180 294 308,595 - - - - 308,889
Stock option compensation: - -
January - - 29,588 - - - - 29,588
February - - 29,588 - - - - 29,588
March - - 29,588 - - - - 29,588
April - - 407,476 - - - - 407,476
May - - 815,726 - - - - 815,726
June - - 109,334 - - - - 109,334
July - - 109,335 - - - - 109,335
August - - 109,335 - - - - 109,335
September - - 1,599,960 - - - - 1,599,960
October - - 109,335 - - - - 109,335
November - - 109,335 - - - - 109,335
December - - 109,335 - - - - 109,335
Net loss - - - - - - (10,485,935) (10,485,935)
BALANCE, December 31, 2000 (Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)
Issuance of common stock for financial,
development and administrative services:
($0.25 per share, February) 21,386 21 5,326 - 5,347
($0.22 per share, March) 622,916 623 141,075 - 141,698
($0.15 per share, April) 402,210 402 58,017 - 58,419
($0.18 per share, May) 55,000 55 9,570 - 9,625
($0.19 per share, June) 62,115 62 11,740 - 11,802
($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
($0.16 per share, August) 270,047 270 44,118 - 44,388
($0.13 per share, September) 68,348 68 9,134 - 9,202
($0.20 per share, October) 286,406 287 57,717 - 58,004
($0.20 per share, November) 308,189 308 59,789 - 60,097
($0.23 per share, December) 395,400 395 89,297 - 89,692
F-50
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
Cancellation of common stock
issued for financial services
($1.50 per share, December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of common
stock:
February 76,527 77 (77) -
October 35,655 36 (36) -
Settlement of subscription notes
receivable:
July - - - 1,225,000 1,225,000
December - - - 75,000 75,000
Issuance of common stock for debt:
($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
$2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for interest:
($0.18 per share, January) 400,000 400 73,134 - 73,534
($0.18 per share, February) 400,000 400 73,133 - 73,533
($0.18 per share, March) 419,394 419 76,314 - 76,733
($0.21 per share, April) 548,160 548 113,652 - 114,200
($0.21 per share, May) 559,589 560 115,640 - 116,200
($0.20 per share, June) 835,145 835 164,965 - 165,800
($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
$0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
$0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for collateralized
shares - - - 863,370 863,370
Adjustment for variable option
accounting - - 55,160 - 55,160
Adjustment to issuance of common
stock for stock options, August (24,000) (24) 24 -
Loans payable - shareholder, at
$0.13 per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197
F-51
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
Issuance of additional stock for sale
of common stock for cash in 2000,
December 250,000 250 (250) -
Stock option compensation:
January - - 360,757 - 360,757
February - - 333,674 - 333,674
March - - 326,903 - 326,903
April - - 316,732 - 316,732
May - - 316,732 - 316,732
June - - 316,732 - 316,732
July - - 3,477,119 - 3,477,119
August - - 316,731 - 316,731
September - - 324,131 - 324,131
Issuance of common stock to Card One:
($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
($0.16 per share, August) 3,944,986 3,945 627,253 - 631,198
($0.12 per share, September) 8,060 8 959 - 967
Net loss - - - - (14,774,236) (14,774,236)
BALANCE, December 31, 2001 (Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)
Issuance of common stock for
debt:
($0.37 per share, May) 114,308 114 41,723 - - - 41,837
($0.37 per share, July) 18,180 18 6,636 - - - 6,654
($0.37 per share, September) 24,645 25 8,995 - - - 9,020
Issuance of common stock for
interest:
($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725
F-52
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
($0.07 per share, October) 140,000 140 8,960 - - - 9,100
($0.08 per share, November) 113,750 114 8,986 - - - 9,100
($0.04 per share, December 211,628 212 8,889 - - - 9,101
Issuance of common stock for
financial, development and
administrative services:
($0.19 per share, March) 200,000 200 37,800 - - - 38,000
($0.08 per share, July) 200,000 200 16,040 - - - 16,240
($0.18 per share, August) 452,429 453 79,225 - - - 79,678
($0.06 per share, September) 120,000 120 7,440 - - - 7,560
($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
($0.05 per share, December) 480,000 480 21,120 - - - 21,600
($0.06 per share, December) 700,000 700 41,800 - - - 42,500
Cancellation of common stock
issued for directors' fees:
($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
Compensation for consultants - 328,665 - - - 328,665
Accrued compensation converted
into options - 145,000 - - - 145,000
Stock option compensation:
March - 233,579 - (22,919) - 210,660
April - 790 - - - 790
May - 790 - - - 790
June - 791 - - - 791
July - 72,479 - - - 72,479
August - 7,712 - - - 7,712
September - 15,680 - - - 15,680
October - 790 - - - 790
November - 790 - - - 790
December - 37,650 - (6,890) - 30,760
Amortization of deferred option
compensation:
January - - - -
February - - - -
F-53
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through March 31, 2004
(Amounts expressed in US dollars)
March - - - -
April - - - 790 - 790
May - - - 790 - 790
June - - - 791 - 791
July - - - 790 - 790
August - - - 790 - 790
September - - - 791 - 791
October - - - 790 - 790
November - - - 790 - 790
December - - - 791 - 791
Valuation adjustment for
collateralized shares - 103,991 - 103,991
Shares issued for settlements:
($0.08 per share, September) 286,267 286 22,615 - - - 22,901
($0.05 per share, December) 30,588 31 1,498 - - - 1,529
Net loss - - - - (7,738,743) (7,738,743)
BALANCE, December 31, 2002
(Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696)(63,805,403) (7,972,081)
Issuance of stock for services rendered:
($0.05 per share, February) 1,530,588 1,530 75,030 76,560
($0.05 per share, March) 500,000 500 24,500 25,000
($0.05 per share, June) 466,378 466 22,853 23,319
($0.05 per share, October) 7,050 7 345 352
($0.05 per share, November) 5,002,144 5,002 245,105 250,107
($0.05 per share, December) 240,916 241 11,805 12,046
($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of
interest payments:
($0.05 per share, March) 1,625,792 1,626 84,541 86,167
($0.05 per share, December) 12,206,425 12,207 627,387 639,594
Issuance of stock for cash: 250,000 250 24,750 25,000
Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement
of debt:
($0.05 per share, November) 389,052 389 19,065 19,454
F-54
|
($0.05 per share, December) 400,000 400 19,600 20,000
Stock option compensation: 79,139 79,139
Amortization of deferred option
compensation: 22,696 22,696
Net Stock cancellation
adjustment (3,140,259) (3,140) 3,140 -
Write-off of stock subscription
receivable 32,639 32,639
Net Loss (3,785,439) (3,785,439)
BALANCE, December 31, 2003
(Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
Issuance of stock for services
rendered:
($0.10 per share, January) 150,000 150 14,850 15,000
($0.15 per share, January) 200,000 200 29,800 30,000
Issue of stock in lieu of
interest payments:
($0.13 per share, February) 280,419 280 36,174 36,454
($0.165 per share, February) 175,841 176 28,838 29,014
Issue of stock for cash:
($0.05 per share, January) 2,586,310 2,586 126,729 129,315
($0.30 per share, January) 250,000 250 74,750 (75,000) -
($0.08 per share, February) 62,500 63 4,937 5,000
($0.30 per share, February) 83,333 83 24,917 (25,000) -
Common stock subscription received 50,000 50,000
Stock option compensation 42,131 42,131
Net Loss (153,011) (153,011)
BALANCE, March 31, 2004
(Unaudited) 164,257,003 164,257 57,410,052 (475,000) 500,000 - (67,743,853) (10,144,543)
|
F-55
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Statement of Cash Flows
Three months Ended March 31, 2004 and 2003 and Period from Inception (February
26, 1997) through March 31, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
From Inception
March 31, (February 26, 1997)
-------------------------------- Through March 31,
2004 2003 2004
----------------------------------------------------------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (153,011) (609,534) (67,743,853)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - 837 365,010
Stock option compensation 42,131 2,960 10,455,736
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 45,000 101,559 24,730,021
Common stock issued for interest expense 65,468 86,167 7,020,283
Common stock issued to settle CardOne
claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (12,957) - (7,824)
Accounts payable and accrued expenses (210,707) 198,913 8,928,735
----------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (224,076) (219,098) (10,314,616)
----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)
----------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
----------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - 76,793 - 321,793
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 35,000 13,500 3,481,827
Proceeds from common stock subscription
Received 50,000 - 300,000
Sales of common stock - - 5,889,130
Amounts owed to employees and officers 103,899 204,658 686,770
----------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 265,692 218,158 10,829,520
----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 41,616 (940) 84,186
CASH AT BEGINNING OF PERIOD 42,570 1,316 -
----------------------------------------------------------
CASH AT END OF PERIOD 84,186 376 84,186
----------------------------------------------------------
|
F-56
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
As of June 30, 2004 and December 31, 2003
(Amounts expressed in US Dollars)
(Unaudited) (Audited)
June 30, December 31,
2004 2003
$ $
ASSETS
------
CURRENT ASSETS:
Cash 116,303 42,570
Prepaid Expenses and other 70,660 24,885
----------- -----------
TOTAL CURRENT ASSETS 186,963 67,455
----------- -----------
TOTAL ASSETS 186,963 67,455
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable - Vendor 1,582,200 1,455,000
Accounts payable - other 3,291,147 2,603,400
Accrued wages and payroll taxes (note 11) 1,390,833 1,361,408
Deferred compensation 1,401,647 1,216,686
Loans - CEO America 150,000 150,000
Amounts owed to employees and officers (notes 5 and 6) 961,406 783,777
Short term loans 106,590 124,315
Convertible notes payable (including amounts owed to officers
$1,220,462 prior year $1,220,462) 2,766,316 2,701,316
----------- -----------
TOTAL CURRENT LIABILITIES 11,650,139 10,395,902
----------- -----------
SHAREHOLDERS' DEFICIENCY (note 7):
Common stock - $.001 par value; 200,000,000 shares
authorized; 164,257,003 shares issued and outstanding 164,257 160,469
(2003: 160,468,600)
Additional paid-in capital 57,428,391 57,026,926
Common stock subscription receivable (400,000) (525,000)
Common stock subscribed 500,000 600,000
Deficit accumulated during the development stage (69,155,824) (67,590,842)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIENCY (11,463,176) (10,328,447)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 186,963 67,455
=========== ===========
|
F-57
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations and Comprehensive Loss
For the six month period Ended June 30, 2004 and 2003 and the Period from
Inception (February 26, 1997) to June 30, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
For the Quarter For the Six Months From Inception
Ended June 30, Ended June 30, February 26, 1997)
------------------------------ ------------------------------ through June 30,
2004 2003 2004 2003 2004
---- ---- ---- ---- ----
$ $ $ $ $
EXPENSES:
Selling, general and administrative (note 12) 967,775 279,324 956,971 812,787 56,129,833
Depreciation and amortization - 837 - 1,674 365,010
Write-off of common stock subscription
receivable - - - - 2,125,000
Loss on impairment of intangible assets - - - - 703,211
Interest expense 444,197 76,596 608,012 151,830 8,901,561
------------- ------------- ------------- ------------- -----------
TOTAL EXPENSES 1,411,972 356,757 1,564,982 966,291 68,224,615
------------- ------------- ------------- ------------- -----------
LOSS BEFORE EXTRAORDINARY ITEM (1,411,972) (356,757) (1,564,982) (966,291) (68,224,615)
EXTRAORDINARY ITEM - LOSS ON
EXTINGUISHMENT OF DEBT - - - - (931,210)
------------- ------------- ------------- ------------- ------------
NET LOSS $ (1,411,972) $ (356,757) $ (1,564,982) $ (966,291) $(69,155,825)
============= ============= ============= ============= ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.01) $ (0.01) $ (0.01) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 164,257,003 144,019,444 163,515,788 142,681,669
============= ============= ============= =============
COMPREHENSIVE LOSS
The components of comprehensive loss
are as follows:
Net loss $ (1,411,972) $ (356,757)
Other comprehensive income (loss)
foreign currency Translation - -
Comprehensive Loss $ (1,411,972) $ (356,757)
|
F-58
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
Deficit
Common Common Accumulated
Common Stock Additional Stock Stock Deferred During the
Number of Paid-in Subscription to be Compen- Development
Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -
Issuance of common stock for cash: - -
($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
($0.81 per share, November) 32,715 33 26,517 - - - - 26,550
Issuance of common stock for legal,
financial, development and
administrative services
($1.32 per share, March) 759 1 999 - - - - 1,000
($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
Net loss - - - - - - (17,349,205) (17,349,205)
Balance - December 31, 1997 (Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)
Issuance of common stock for cash:
($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
($0.87 per share, February) 108,469 108 94,342 - - - - 94,450
F-59
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes
($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal,
financial, development and
administrative services:
($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
Net loss - - - - - (5,448,335) (5,448,335)
Balance - December 31, 1998 (Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)
Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
($0.66 per share, January) 713,512 713 469,287 - - - 470,000
($0.68 per share, February) 129,799 130 87,870 - - - 88,000
($0.66 per share, March) 151,811 152 99,848 - - - 100,000
($0.68 per share, April) 179,137 179 120,821 - - - 121,000
($0.66 per share, May) 38,712 39 25,461 - - - 25,500
F-60
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
($0.23 per share, July) 1,009,905 1,010 232,874 - - - - 233,884
($0.66 per share, September) 325,557 325 214,124 - - - - 214,449
Issuance of common stock for:
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - - 26,583
Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - - 481,250
Investment in real estate joint
venture ($1.00 per share, December) 420,000 420 419,580 - 114000 (114,000) 420,000
Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)
Issuance of common stock for software 174,583 175 114,825 - 115,000
($0.66 per share, August)
Issuance of common stock for legal,
financial, development and
administrativeservices:
($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
($0.66 per share, May) 57,157 57 37,593 - 37,650
($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
Net loss - - - - (7,894,949) (7,894,949)
BALANCE - December 31, 1999 (Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
($0.60 and $1.00 per share, January) 120,733 121 82,320 - - - - 82,441
($0.60 and $1.00 per share, February) 653,466 653 399,427 - - - - 400,080
($0.60 and $1.00 per share, March) 508,567 508 413,393 - - - - 413,901
($0.60 and $1.00 per share, April) 512,081 512 355,138 - - - - 355,650
($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
($0.21 and $0.60 per share, June) 761,667 762 132,838 - - - - 133,600
($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
($0.60 per share, August) 108,667 109 65,091 - - - - 65,200
F-61
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999
($0.54 per share, January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock fo
financial and development services:
($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for
legal services
($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment in Real estate
joint venture:
($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock
issued in exchange, January (286,267) (286) 286 - - - -
F-62
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
Issuance of common stock for equipment
($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to settle
CardOne potential claims ($1.05 per
share, August) 294,180 294 308,595 - - - - 308,889
Stock option compensation:
January - - 29,588 - - - - 29,588
February - - 29,588 - - - - 29,588
March - - 29,588 - - - - 29,588
April - - 407,476 - - - - 407,476
May - - 815,726 - - - - 815,726
June - - 109,334 - - - - 109,334
July - - 109,335 - - - - 109,335
August - - 109,335 - - - - 109,335
September - - 1,599,960 - - - - 1,599,960
October - - 109,335 - - - - 109,335
November - - 109,335 - - - - 109,335
December - - 109,335 - - - - 109,335
Net loss - - - - - - (10,485,935) (10,485,935)
BALANCE, December 31, 2000 (Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)
Issuance of common stock for financial,
development and administrative services:
($0.25 per share, February) 21,386 21 5,326 - 5,347
($0.22 per share, March) 622,916 623 141,075 - 141,698
($0.15 per share, April) 402,210 402 58,017 - 58,419
($0.18 per share, May) 55,000 55 9,570 - 9,625
($0.19 per share, June) 62,115 62 11,740 - 11,802
($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
($0.16 per share, August) 270,047 270 44,118 - 44,388
($0.13 per share, September) 68,348 68 9,134 - 9,202
($0.20 per share, October) 286,406 287 57,717 - 58,004
($0.20 per share, November) 308,189 308 59,789 - 60,097
($0.23 per share, December) 395,400 395 89,297 - 89,692
F-63
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
Cancellation of common stock issued for
financial services ($1.50 per share,
December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of
common stock:
February 76,527 77 (77) -
October 35,655 36 (36) -
Settlement of subscription notes
receivable:
July - - - 1,225,000 1,225,000
December - - - 75,000 75,000
Issuance of common stock for debt:
($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
$2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for
interest:
($0.18 per share, January) 400,000 400 73,134 - 73,534
($0.18 per share, February) 400,000 400 73,133 - 73,533
($0.18 per share, March) 419,394 419 76,314 - 76,733
($0.21 per share, April) 548,160 548 113,652 - 114,200
($0.21 per share, May) 559,589 560 115,640 - 116,200
($0.20 per share, June) 835,145 835 164,965 - 165,800
($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
$0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
$0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for
collateralized shares - - - 863,370 863,370
Adjustment for variable option
accounting - - 55,160 - 55,160
Adjustment to issuance of common
stock for stock options, August (24,000) (24) 24 -
Loans payable - shareholder, at
$0.13 per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197
F-64
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
Issuance of additional stock for sale
of common stock for cash in 2000, 250,000 250 (250)
December
Stock option compensation:
January - - 360,757 - 360,757
February - - 333,674 333,674
March - - 326,903 - 326,903
April - - 316,732 - 316,732
May - - 316,732 - 316,732
June - - 316,732 - 316,732
July - - 3,477,119 - 3,477,119
August - - 316,731 - 316,731
September - - 324,131 - 324,131
Issuance of common stock to Card One:
($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
($0.16 per share, August) 3,944,986 3,945 627,253 631,198
($0.12 per share, September) 8,060 8 959 - 967
Net loss - - - - (14,774,236) (14,774,236)
-
BALANCE, December 31, 2001 (Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)
Issuance of common stock for
debt:
($0.37 per share, May) 114,308 114 41,723 - - - 41,837
($0.37 per share, July) 18,180 18 6,636 - - - 6,654
($0.37 per share, September) 24,645 25 8,995 - - - 9,020
Issuance of common stock for
interest:
($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725
F-65
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
($0.07 per share, October) 140,000 140 8,960 - - - 9,100
($0.08 per share, November) 113,750 114 8,986 - - - 9,100
($0.04 per share, December 211,628 212 8,889 - - - 9,101
Issuance of common stock for
financial, development and
administrative services:
($0.19 per share, March) 200,000 200 37,800 - - - 38,000
($0.08 per share, July) 200,000 200 16,040 - - - 16,240
($0.18 per share, August) 452,429 453 79,225 - - - 79,678
($0.06 per share, September) 120,000 120 7,440 - - - 7,560
($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
($0.05 per share, December) 480,000 480 21,120 - - - 21,600
($0.06 per share, December) 700,000 700 41,800 - - - 42,500
Cancellation of common stock
issued for directors' fees:
($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
Compensation for consultants - 328,665 - - - 328,665
Accrued compensation converted - 145,000 - - - 145,000
into options
Stock option compensation:
March - 233,579 - (22,919) - 210,660
April - 790 - - - 790
May - 790 - - - 790
June - 791 - - - 791
July - 72,479 - - - 72,479
August - 7,712 - - - 7,712
September - 15,680 - - - 15,680
October - 790 - - - 790
November - 790 - - - 790
December - 37,650 - (6,890) - 30,760
Amortization of deferred option
compensation:
January - - - -
February - - - -
F-66
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through June 30, 2004
(Amounts expressed in US dollars)
March - - - -
April - - - 790 - 790
May - - - 790 - 790
June - - - 791 - 791
July - - - 790 - 790
August - - - 790 - 790
September - - - 791 - 791
October - - - 790 - 790
November - - - 790 - 790
December - - - 791 - 791
Valuation adjustment for
collateralized shares - 103,991 - 103,991
Shares issued for settlements:
($0.08 per share, September) 286,267 286 22,615 - - - 22,901
($0.05 per share, December) 30,588 31 1,498 - - - 1,529
Net loss - - - - (7,738,743) (7,738,743)
BALANCE, December 31, 2002
(Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696)(63,805,403) (7,972,081)
Issuance of stock for services
rendered:
($0.05 per share, February) 1,530,588 1,530 75,030 76,560
($0.05 per share, March) 500,000 500 24,500 25,000
($0.05 per share, June) 466,378 466 22,853 23,319
($0.05 per share, October) 7,050 7 345 352
($0.05 per share, November) 5,002,144 5,002 245,105 250,107
($0.05 per share, December) 240,916 241 11,805 12,046
($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of interest
payments:
($0.05 per share, March) 1,625,792 1,626 84,541 86,167
($0.05 per share, December) 12,206,425 12,207 627,387 639,594
Issuance of stock for cash: 250,000 250 24,750 25,000
Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement
of debt:
($0.05 per share, November) 389,052 389 19,065 19,454
F-67
|
($0.05 per share, December) 400,000 400 19,600 20,000
Stock option compensation: 79,139 79,139
Amortization of deferred option
compensation: 22,696 22,696
Net Stock cancellation
adjustment (3,140,259) (3,140) 3,140 -
Write-off of stock subscription
receivable 32,639 32,639
Net Loss (3,785,439) (3,785,439)
BALANCE, December 31, 2003
(Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
Issuance of stock for services
rendered:
($0.10 per share, January) 150,000 150 14,850 15,000
($0.15 per share, January) 200,000 200 29,800 30,000
Issue of stock in lieu of
interest payments:
($0.13 per share, February) 280,419 280 36,174 36,454
($0.165 per share, February) 175,841 176 28,838 29,014
Issue of stock for cash:
($0.05 per share, January) 2,586,310 2,586 126,729 129,315
($0.30 per share, January) 250,000 250 74,750 (75,000) -
($0.08 per share, February) 62,500 63 4,937 5,000
($0.30 per share, February) 83,333 83 24,917 (25,000) -
Common stock subscription
received 125,000 125,000
Stock option compensation 60,470 60,470
Net Loss (1,564,982) (1,564,982)
BALANCE, June 30, 2004
(Unaudited) 164,257,003 164,257 57,428,391 (400,000) 500,000 - (69,155,824) (11,463,176)
|
F-68
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Statement of Cash Flows
Six months Ended June 30, 2004 and 2003 and Period from Inception (February 26,
1997) through June 30, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
From Inception
June 30, (February 26, 1997)
--------------------------------------- Through June 30,
2004 2003 2004
----------------------------------------------------------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (1,564,982) (966,291) (69,155,824)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - 1,674 365,010
Stock option compensation 60,470 5,920 10,474,075
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 45,000 124,878 24,730,021
Common stock issued for interest expense 65,468 86,167 7,020,283
Common stock issued to settle CardOne
claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (45,775) - (40,642)
Accounts payable and accrued expenses 1,029,333 428,872 10,168,775
----------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (410,486) (318,780) (10,501,026)
----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)
----------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
----------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - 116,590 - 495,905
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 65,000 67,500 3,511,827
Proceeds from common stock subscription
received 125,000 - 375,000
Sales of common stock - - 5,754,815
Amounts owed to employees and officers 177,629 250,650 760,500
----------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 484,219 318,150 11,048,047
----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH 73,733 (630) 116,303
CASH AT BEGINNING OF PERIOD 42,570 1,316 -
----------------------------------------------------------
CASH AT END OF PERIOD 116,303 686 116,303
----------------------------------------------------------
|
F-69
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Balance Sheets
As of September 30, 2004 and December 31, 2003
(Amounts expressed in US Dollars)
(Unaudited) (Audited)
September 30, December 31,
2004 2003
$ $
ASSETS
------
CURRENT ASSETS:
Cash 13,293 42,570
Prepaid Expenses and other 78,266 24,885
----------- -----------
TOTAL CURRENT ASSETS 91,559 67,455
----------- -----------
TOTAL ASSETS 91,559 67,455
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
----------------------------------------
CURRENT LIABILITIES:
Accounts payable - Vendor 1,645,800 1,455,000
Accounts payable - other 3,817,502 2,603,400
Accrued wages and payroll taxes (note 11) 1,403,742 1,361,408
Deferred compensation 1,690,975 1,216,686
Loans - CEO America 150,000 150,000
Amounts owed to employees and officers (notes 5 and 6) 1,067,896 783,777
Short term loans 133,410 124,315
Convertible notes payable (including amounts owed to officers
$1,220,462 prior year $1,220,462) 2,766,316 2,701,316
----------- -----------
TOTAL CURRENT LIABILITIES 12,675,641 10,395,902
----------- -----------
SHAREHOLDERS' DEFICIENCY (note 7):
Common stock - $.001 par value; 200,000,000 shares
authorized; 165,446,658 shares issued and outstanding 165,447 160,469
(2003: 160,468,600)
Additional paid-in capital 57,583,859 57,026,926
Common stock subscription receivable (350,000) (525,000)
Common stock subscribed 500,000 600,000
Deficit accumulated during the development stage (70,483,388) (67,590,842)
----------- -----------
TOTAL SHAREHOLDERS' DEFICIENCY (12,584,082) (10,328,447)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIENCY 91,559 67,455
=========== ===========
|
F-70
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Operations and Comprehensive Loss
For the nine month period Ended Septmeber 30, 2004 and 2003 and the Period from
Inception (February 26, 1997) to September 30, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
For the Quarter For the Nine Months From Inception
Ended Sept 30, Ended Sept 30, February 26, 1997)
------------------------------ ----------------------------- through Sept.30,
2004 2003 2004 2003 2004
---- ---- ---- ---- ----
$ $ $ $ $
EXPENSES:
Selling, general and administrative (note 12) 869,933 420,336 1,826,901 1,233,123 56,999,766
Depreciation and amortization - 837 - 2,511 365,010
Write-off of common stock subscription
receivable - - - - 2,125,000
Loss on impairment of intangible assets - - - - 703,211
Interest expense 457,631 77,794 1,065,645 229,624 9,359,192
------------- ------------- ------------ ------------- ------------
TOTAL EXPENSES 1,327,564 498,967 2,892,546 1,465,258 69,552,179
------------- ------------- ------------ ------------- ------------
LOSS BEFORE EXTRAORDINARY ITEM (1,327,564) (498,967) (2,892,546) (1,465,258) (69,552,179)
EXTRAORDINARY ITEM - LOSS ON
EXTINGUISHMENT OF DEBT - - - - (931,210)
------------- ------------- ------------ ------------- ------------
NET LOSS $ (1,327,564) $ (498,967) $ (2,892,546) $ (11,465,258) $(70,483,389)
============= ============= ============ ============= ============
NET LOSS PER SHARE, BASIC AND DILUTED $ (0.01) $ (0.00) $ (0.02) $ (0.01)
============= ============= ============= =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC AND DILUTED 164,644,934 144,413,274 163,894,917 143,263,131
============= ============= ============= =============
COMPREHENSIVE LOSS
The components of comprehensive loss
are as follows:
Net loss $ (1,327,564) $ (498,967)
Other comprehensive income (loss)
foreign currency Translation - -
Comprehensive Loss $ (1,327,564) $ (498,967)
|
F-71
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
Deficit
Common Common Accumulated
Common Stock Additional Stock Stock Deferred During the
Number of Paid-in Subscription to be Compen- Development
Shares Amount Capital Receivable Issued sation Stage Total
Balance - February 26, 1997 (Inception) - $ - $ - $ - - - $ - $ -
Issuance of common stock for cash:
($1.32 per share, March) 35,676 36 46,964 - - - - 47,000
($0.92 per share, April) 10,032 10 9,207 - - - - 9,217
($0.75 per share, June) 28,085 28 20,972 - - - - 21,000
($0.71 per share, July) 452,223 452 322,434 - - - - 322,886
($0.69 per share, August) 695,447 695 477,005 - - - - 477,700
($0.68 per share, September) 42,128 42 28,487 - - - - 28,529
($0.81 per share, November) 32,715 33 26,517 - - - 26,550
Issuance of common stock for legal,
financial, development and
administrative services
($1.32 per share, March) 759 1 999 - - - - 1,000
($0.92 per share, April) 379,528 380 349,620 - - - - 350,000
($0.92 per share, May) 12,870,501 12,871 11,811,512 - - - - 11,824,383
($0.71 per share, July) 3,779,301 3,779 2,684,854 - - - - 2,688,633
($0.69 per share, August) 1,479,869 1,480 1,012,322 - - - - 1,013,802
($0.68 per share, September) 263,471 263 178,162 - - - - 178,425
($0.81 per share, November) 74,957 75 61,150 - - - - 61,225
Net loss - - - - - - (17,349,205) (17,349,205)
Balance - December 31, 1997 (Audited) 20,144,692 20,145 17,030,205 0 0 0 (17,349,205) (298,855)
Issuance of common stock for cash
($2.63 per share, January) 94,882 95 249,905 - - - - 250,000
($0.87 per share, February) 108,469 108 94,342 - - - - 94,450
F-72
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
($0.69 per share, March) 176,131 176 122,094 - - - - 122,270
($0.70 per share, April) 206,944 207 144,026 - - - - 144,233
($0.67 per share, May) 471,374 471 317,029 - - - - 317,500
($2.45 per share, June) 26,567 27 64,973 - - - - 65,000
($1.24 per share, July) 19,356 19 23,981 - - - - 24,000
($2.63 per share, August) 1,898 2 4,998 - - - - 5,000
($0.68 per share, September) 284,393 284 194,383 - - - - 194,667
($0.66 per share, October) 68,315 68 44,932 - - - - 45,000
($0.65 per share, November) 523,935 524 338,874 - - - - 339,398
($0.66 per share, December) 37,953 38 24,962 - - - - 25,000
Issuance of common stock for notes
($0.69 per share, July) 1,897,639 1,898 1,298,102 (1,300,000) - - - -
Issuance of common stock for legal,
financial, development and
administrative services:
($0.69 per share, March) 3,795 4 2,631 - - - - 2,635
($0.70 per share, April) 67,708 68 47,122 - - - - 47,190
($0.67 per share, May) 340,057 340 228,710 - - - - 229,050
($2.45 per share, June) 379,528 380 928,191 - - - - 928,571
($1.24 per share, July) 815,985 816 1,010,949 - - - - 1,011,765
($0.68 per share, September) 152,388 152 104,158 - - - - 104,310
($0.66 per share, October) 15,181 15 9,985 - - - - 10,000
($0.65 per share, November) 51,616 52 33,384 - - - - 33,436
Net loss - - - - - - (5,448,335) (5,448,335)
Balance - December 31, 1998 (Audited) 25,888,806 25,889 22,317,936 (1,300,000) 0 0 (22,797,540) (1,753,715)
Issuance of common stock in exchange 18,597,792 18,597 777,516 - - - 796,113
Issuance of common stock for cash:
($0.66 per share, January) 713,512 713 469,287 - - - 470,000
($0.68 per share, February) 129,799 130 87,870 - - - 88,000
($0.66 per share, March) 151,811 152 99,848 - - - 100,000
($0.68 per share, April) 179,137 179 120,821 - - - 121,000
($0.66 per share, May) 38,712 39 25,461 - - - 25,500
F-73
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
($0.23 per share, July) 1,009,905 1,010 232,874 - - - 233,884
($0.66 per share, September) 325,557 325 214,124 - - - 214,449
Issuance of common stock for:
Computer services ($2.34 per share,
September) 11,357 11 26,572 - - - 26,583
Shareholder's loan ($2.75 per share,
November) 175,000 175 481,075 - - - 481,250
Investment in real estate joint venture
($1.00 per share, December) 420,000 420 419,580 - 114000 (114,000) 420,000
Issuance of common stock for notes
($1.32 per share, July) 759,056 759 999,241 (1,000,000)
Issuance of common stock for software 174,583 175 114,825 - 115,000
($0.66 per share, August)
Issuance of common stock for legal,
financial, development and
administrative services:
($0.68 per share, February) 1,968,326 1,968 1,332,506 - 1,334,474
($0.68 per share, April) 1,913,579 1,914 1,290,633 - 1,292,547
($0.66 per share, May) 57,157 57 37,593 - 37,650
($0.66 per share, September) 1,500,860 1,501 986,242 - 987,743
Net loss - - - - (7,894,949) (7,894,949)
BALANCE - December 31, 1999 (Audited) 54,014,949 54,014 30,034,004 (2,300,000) 114,000 0 (30,806,489) (2,904,471)
Issuance of common stock for cash:
($0.60 and $1.00 per share, January) 120,733 121 82,320 - - - - 82,441
($0.60 and $1.00 per share, February) 653,466 653 399,427 - - - - 400,080
($0.60 and $1.00 per share, March) 508,567 508 413,393 - - - - 413,901
($0.60 and $1.00 per share, April) 512,081 512 355,138 - - - - 355,650
($0.60 per share, May) 475,834 476 285,024 - - - - 285,500
($0.21 and $0.60 per share, June) 761,667 762 132,838 - - - - 133,600
($0.21 per share, July) 160,000 160 95,840 - - - - 96,000
($0.60 per share, August) 108,667 109 65,091 - - - - 65,200
F-74
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
($0.40 per share, September) 110,062 110 43,915 - - - - 44,025
($0.40 per share, October) 25,000 25 9,975 - - - - 10,000
($0.40 per share, November) 100,000 100 39,900 - - - - 40,000
Issuance of common stock for cash
received in 1999
($0.54 per share, January) 211,669 212 113,788 - (114,000) -
Issuance of common stock for debt
and interest:
($1.50 per share, April) 1,122,918 1,123 1,683,254 - - - - 1,684,377
($0.60 per share, October) 2,632 3 1,576 - - - - 1,579
($0.43 per share, November) 55,814 56 23,944 - - - - 24,000
($0.40 per share, December) 77,083 77 30,756 - - - - 30,833
Issuance of common stock for financial
and development services:
($2.66 per share, February) 22,768 23 60,449 - - - - 60,472
($2.50 per share, March) 139,988 140 349,830 - - - - 349,970
($1.97 per share, April) 28,527 29 56,066 - - - - 56,095
($1.43 per share, May) 3,000 3 4,287 - - - - 4,290
($1.94 per share, June) 90,700 91 175,485 - - - - 175,576
($1.42 per share, July) 28,640 29 40,642 - - - - 40,671
($0.98 per share, August) 16,114 16 15,842 - - - - 15,858
($0.66 per share, September) 40,067 40 26,398 - - - - 26,438
($0.64 per share, October) 58,397 58 37,278 - - - - 37,336
($0.40 per share, November) 21,155 21 8,441 - - - - 8,462
Issuance of common stock for
legal services
($0.35 per share, November) 500,000 500 174,500 - - - - 175,000
Issuance of common stock for
investment in Real estate joint venture
($2.00 per share, March) 28,432 28 56,836 - - - - 56,864
($0.33 per share, October) 101,975 102 33,550 - - - - 33,652
Issuance of common stock to IC One
shareholders, January 119,905 120 (120) - - - -
Cancellation of shares of common stock
issued in exchange, January (286,267) (286) 286 - - - -
F-75
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
Issuance of common stock for equipment
($1.00 per share, January) 8,000 8 7,992 - - - - 8,000
Issuance of common stock to
settle CardOne potential claims
($1.05 per share, August) 294,180 294 308,595 - - - - 308,889
Stock option compensation:
January - - 29,588 - - - - 29,588
February - - 29,588 - - - - 29,588
March - - 29,588 - - - - 29,588
April - - 407,476 - - - - 407,476
May - - 815,726 - - - - 815,726
June - - 109,334 - - - - 109,334
July - - 109,335 - - - - 109,335
August - - 109,335 - - - - 109,335
September - - 1,599,960 - - - - 1,599,960
October - - 109,335 - - - - 109,335
November - - 109,335 - - - - 109,335
December - - 109,335 - - - - 109,335
Net loss - - - - - - (10,485,935) (10,485,935)
BALANCE, December 31, 2000 (Audited) 60,236,723 60,237 38,734,475 (2,300,000) 0 0 (41,292,424) (4,797,712)
Issuance of common stock for financial,
development and administrative services:
($0.25 per share, February) 21,386 21 5,326 - 5,347
($0.22 per share, March) 622,916 623 141,075 - 141,698
($0.15 per share, April) 402,210 402 58,017 - 58,419
($0.18 per share, May) 55,000 55 9,570 - 9,625
($0.19 per share, June) 62,115 62 11,740 - 11,802
($0.19 per share, July) 1,101,580 1,102 204,601 - 205,703
($0.16 per share, August) 270,047 270 44,118 - 44,388
($0.13 per share, September) 68,348 68 9,134 - 9,202
($0.20 per share, October) 286,406 287 57,717 - 58,004
($0.20 per share, November) 308,189 308 59,789 - 60,097
($0.23 per share, December) 395,400 395 89,297 - 89,692
F-76
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
Cancellation of common stock issued
for financial services ($1.50 per share,
December) (55,000) (55) (82,445) - (82,500)
Issuance of common stock for
directors' fees
($1.29 per share, March) 335,000 335 432,365 - 432,700
Adjustment to issuance of
common stock:
February 76,527 77 (77) -
October 35,655 36 (36) -
Settlement of subscription
notes receivable:
July - - - 1,225,000 1,225,000
December - - - 75,000 75,000
Issuance of common stock for debt:
($0.02 per share, October) 1,385,710 1,386 23,614 - 25,000
$2.74 per share, November) 105,128 105 287,895 - 288,000
Issuance of common stock for interest:
($0.18 per share, January) 400,000 400 73,134 - 73,534
($0.18 per share, February) 400,000 400 73,133 - 73,533
($0.18 per share, March) 419,394 419 76,314 - 76,733
($0.21 per share, April) 548,160 548 113,652 - 114,200
($0.21 per share, May) 559,589 560 115,640 - 116,200
($0.20 per share, June) 835,145 835 164,965 - 165,800
($0.15 per share, July) 1,459,568 1,460 222,340 - 223,800
$0.15 per share, August) 1,677,982 1,678 253,792 - 255,470
($0.15 per share, September) 1,793,356 1,793 268,677 - 270,470
($0.15 per share, October) 1,335,406 1,335 304,473 - 305,808
$0.19 per share, November) 1,709,659 1,710 323,125 - 324,835
($0.63 per share, December) 339,398 339 180,273 - 180,612
Valuation adjustment for
collateralized shares - - - 863,370 863,370
Adjustment for variable
option accounting - - 55,160 - 55,160
Adjustment to issuance of common
stock for stock options, August (24,000) (24) 24 -
Loans payable - shareholder,
at $0.13 per share, July 1,992,187 1,992 253,008 - 255,000
Stock options granted for wages, July - - 919,197 - 919,197
F-77
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
Issuance of additional stock for
sale of common stock for cash in
2000, December 250,000 250 (250) -
Stock option compensation:
January - - 360,757 - 360,757
February - - 333,674 - 333,674
March - - 326,903 - 326,903
April - - 316,732 - 316,732
May - - 316,732 - 316,732
June - - 316,732 - 316,732
July - - 3,477,119 - 3,477,119
August - - 316,731 - 316,731
September - - 324,131 - 324,131
Issuance of common stock to Card One:
($0.21 per share, July) 3,341,974 3,342 698,473 - 701,815
($0.16 per share, August) 3,944,986 3,945 627,253 - 631,198
($0.12 per share, September) 8,060 8 959 - 967
Net loss - - - - (14,774,236) (14,774,236)
BALANCE, December 31, 2001 (Audited) 86,704,204 86,704 50,899,028 (136,630) 0 0 (56,066,660) (5,217,558)
Issuance of common stock for
debt:
($0.37 per share, May) 114,308 114 41,723 - - - 41,837
($0.37 per share, July) 18,180 18 6,636 - - - 6,654
($0.37 per share, September) 24,645 25 8,995 - - - 9,020
Issuance of common stock for
interest:
($0.12 per share, January) 3,679,936 3,680 419,513 - - - 423,193
($0.11 per share, February) 3,947,206 3,947 430,245 - - - 434,192
($0.12 per share, March) 3,690,397 3,690 439,157 - - - 442,847
($0.06 per share, April) 7,380,795 7,381 435,467 - - - 442,848
($0.08 per share, May) 5,094,311 5,094 427,922 - - - 433,016
($0.08 per share, June) 5,273,031 5,273 427,116 - - - 432,389
($0.06 per share, July) 7,848,393 7,849 423,812 - - - 431,661
($0.08 per share, August) 5,743,000 5,743 424,982 - - - 430,725
F-78
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
($0.07 per share, September) 6,759,204 6,759 422,299 - - - 429,058
($0.07 per share, October) 140,000 140 8,960 - - - 9,100
($0.08 per share, November) 113,750 114 8,986 - - - 9,100
($0.04 per share, December 211,628 212 8,889 - - - 9,101
Issuance of common stock for
financial, development and
administrative services:
($0.19 per share, March) 200,000 200 37,800 - - - 38,000
($0.08 per share, July) 200,000 200 16,040 - - - 16,240
($0.18 per share, August) 452,429 453 79,225 - - - 79,678
($0.06 per share, September) 120,000 120 7,440 - - - 7,560
($0.07 per share, November) 1,263,242 1,263 80,847 - - - 82,110
($0.05 per share, December) 480,000 480 21,120 - - - 21,600
($0.06 per share, December) 700,000 700 41,800 - - - 42,500
Cancellation of common stock
issued for directors' fees:
($1.29 per share, April) (110,000) (110) (141,790) - - - (141,900)
($1.29 per share, June) (75,000) (75) (96,675) - - - (96,750)
Compensation for consultants - 328,665 - - - 328,665
Accrued compensation converted - 145,000 - - - 145,000
intooptions
Stock option compensation:
March - 233,579 - (22,919) - 210,660
April - 790 - - - 790
May - 790 - - - 790
June - 791 - - - 791
July - 72,479 - - - 72,479
August - 7,712 - - - 7,712
September - 15,680 - - - 15,680
October - 790 - - - 790
November - 790 - - - 790
December - 37,650 - (6,890) - 30,760
Amortization of deferred option
compensation:
January - - - -
February - - - -
F-79
|
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Consolidated Statements of Changes in Stockholders' Deficiency
For the Period from Inception (February 26, 1997) Through September 30, 2004
(Amounts expressed in US dollars)
March - - - -
April - - - 790 - 790
May - - - 790 - 790
June - - - 791 - 791
July - - - 790 - 790
August - - - 790 - 790
September - - - 791 - 791
October - - - 790 - 790
November - - - 790 - 790
December - - - 791 - 791
Valuation adjustment for - 103,991 - 103,991
collateralizedshares
Shares issued for settlements:
($0.08 per share, September) 286,267 286 22,615 - - - 22,901
($0.05 per share, December) 30,588 31 1,498 - - - 1,529
Net loss - - - - (7,738,743) (7,738,743)
BALANCE, December 31, 2002
(Audited) 140,290,514 140,291 55,748,366 (32,639) (22,696) (63,805,403) (7,972,081)
Issuance of stock for services
rendered:
($0.05 per share, February) 1,530,588 1,530 75,030 76,560
($0.05 per share, March) 500,000 500 24,500 25,000
($0.05 per share, June) 466,378 466 22,853 23,319
($0.05 per share, October) 7,050 7 345 352
($0.05 per share, November) 5,002,144 5,002 245,105 250,107
($0.05 per share, December) 240,916 241 11,805 12,046
($0.06 per share, December) 700,000 700 41,300 42,000
Issuance of stock in lieu of
interest payments:
($0.05 per share, March) 1,625,792 1,626 84,541 86,167
($0.05 per share, December) 12,206,425 12,207 627,387 639,594
Issuance of stock for cash: 250,000 250 24,750 25,000
Common stock subscribed (525,000) 600,000 75,000
Issuance of stock for settlement
of debt:
($0.05 per share, November) 389,052 389 19,065 19,454
F-80
|
($0.05 per share, December) 400,000 400 19,600 20,000
Stock option compensation: 79,139 79,139
Amortization of deferred option
compensation: 22,696 22,696
Net Stock cancellation
adjustment (3,140,259) (3,140) 3,140 -
Write-off of stock subscription
receivable 32,639 32,639
Net Loss (3,785,439) (3,785,439)
BALANCE, December 31, 2003
(Audited) 160,468,600 160,469 57,026,926 (525,000) 600,000 - (67,590,842) (10,328,447)
Issuance of stock for services
rendered:
($0.10 per share, January) 150,000 150 14,850 15,000
($0.15 per share, January) 200,000 200 29,800 30,000
($0.145 per share, August) 689,655 690 99,310 100,000
($0.08 per share, August) 500,000 500 39,500 40,000
Issue of stock in lieu of
interest payments:
($0.13 per share, February) 280,419 280 36,174 36,454
($0.165 per share, February) 175,841 176 28,838 29,014
Issue of stock for cash:
($0.05 per share, January) 2,586,310 2,586 126,729 129,315
($0.30 per share, January) 250,000 250 74,750 (75,000) -
($0.08 per share, February) 62,500 63 4,937 5,000
($0.30 per share, February) 83,333 83 24,917 (25,000) -
Common stock subscription
received 175,000 175,000
Stock option compensation 77,128 77,128
Net Loss (2,892,546) (2,892,546)
BALANCE, September 30, 2004 165,446,658 165,447 57,583,859 (350,000) 500,000 - (70,483,388) (12,584,082)
(Unaudited)
|
F-81
SCHIMATIC CASH TRANSACTIONS NETWORK.COM, INC.
(A Development Stage Enterprise)
Interim Statement of Cash Flows
Nine months Ended September 30, 2004 and 2003 and Period from Inception
(February 26, 1997) through September 30, 2004
(Amounts expressed in US Dollars)
(Unaudited)
For the Period
Nine Months Ended From Inception
September 30, (February 26, 1997)
------------------------------------- Through Sept 30,
2004 2003 2004
-----------------------------------------------------------
$ $ $
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss (2,892,546) (1,465,258) (70,483,388)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization - 2,511 365,010
Stock option compensation 77,128 8,880 10,490,733
Adjustment for variable accounting of options 55,160
Amortization of deferred option compensation - - 22,696
Common stock issued for services
and compensation 185,000 124,878 24,870,021
Common stock issued for interest expense 65,468 86,167 7,020,283
Common stock issued to settle CardOne
Claims 1,667,299
Common stock issued for directors' fees 432,700
Write-off of common stock subscription
receivable - - 2,125,000
(Gain) loss on extinguishment of debt - - 931,210
Loss on impairment of assets - - 703,211
Changes in current assets and liabilities:
Prepaid Expenses and other (53,380) (417) (48,248)
Accounts payable and accrued expenses 1,921,525 817,655 11,060,967
-----------------------------------------------------------
NET CASH USED IN OPERATING ACTIVITIES (696,806) (425,584) (10,787,347)
-----------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment - - (347,349)
Acquisition of patents - - (46,854)
Investment in real estate joint venture - - (36,515)
-----------------------------------------------------------
NET CASH USED IN INVESTING ACTIVITIES - - (430,718)
-----------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayments of) loans payable - 143,410 - 522,725
shareholders
Loans - CEO America - - 150,000
Proceeds from notes payable 65,000 133,400 3,511,827
Proceeds from common stock subscription
received 175,000 - 425,000
Sales of common stock - - 5,754,815
Amounts owed to employees and officers 284,119 296,641 866,990
-----------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 667,529 430,041 11,231,357
-----------------------------------------------------------
NET INCREASE (DECREASE) IN CASH (29,276) 4,457 13,293
CASH AT BEGINNING OF PERIOD 42,570 1,316 -
-----------------------------------------------------------
CASH AT END OF PERIOD 13,293 5,773 13,293
-----------------------------------------------------------
|
F-82
