Registration of Securities of a Small-Business Issuer — Form 10-SB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10SB12G Form 10-Sb Pursuant to 12(G) 25 101K
2: EX-3.01 Articles of Incorporation of Dynamic Realty, Inc. 6 22K
3: EX-3.02 Amendment to Articles of Incorporation 1 6K
4: EX-3.03 By-Laws of Dynamic Reality, Inc. 11 45K
5: EX-4.1 Form of Stock Certificate 1 5K
6: EX-10.1 Agreement With Vstore Inc. 6 35K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
DYNAMIC REALITY, INC.
(Exact of Small Business Issuer in its Charter)
NEVADA 91-1997729
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
141 ADELAIDE STREET WEST, STE 1004, TORONTO, ONTARIO M5H 3L5
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (416) 628-5264
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Securities registered pursuant to section 12(b) of the Act:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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NONE NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
COMMON STOCK, PAR VALUE $.001 PER SHARE
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(TITLE OF CLASS)
TABLE OF CONTENTS
[Download Table]
ITEM NUMBER AND CAPTION PAGE
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PART I
ITEM 1. DESCRIPTION OF BUSINESS 3
ITEM 2. MANAGEMENT'S DISCUSSION AND PLAN OF OPERATIONS 7
ITEM 3. DESCRIPTION OF PROPERTIES 8
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL 9
OWNERS AND MANAGEMENT
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS 9
AND CONTROL PERSONS
ITEM 6. EXECUTIVE COMPENSATION 10
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 10
ITEM 8. DESCRIPTION OF SECURITIES 11
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S 12
COMMON EQUITY AND OTHER STOCKHOLDER MATTERS
ITEM 2. LEGAL PROCEEDINGS 12
ITEM 3. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS 12
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES 12
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS 12
PART F/S
13
ITEM 1. FINANCIAL STATEMENTS
PART III
ITEM 1. INDEX TO EXHIBITS 22
2
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Dynamic Reality, Inc. intends to develop a vertical internet-based retail,
marketing and consumer product information portal, focused on electronic
products. Dynamic Reality is a company in the development stage. Dynamic Reality
was incorporated in the State of Nevada on December 31, 1996. From incorporation
until late 2000, Dynamic Reality had no business operations of any kind.
We currently do not have capital to implement the business plan and must obtain
funding. If we do not receive funding, we will have to discontinue our business
plan. The independent auditors of Dynamic Reality have qualified their opinion
as to our ability to continue as a going concern. To fund our operations, we
intend to seek either debt or equity capital or both, strategic alliances and
joint venture arrangements and acquisitions of businesses with ongoing
profitable operations, among other things. Until such time as Dynamic Reality
has adequate funding, the stockholders, officers and directors have committed to
advance the operating expenses of the company.
Dynamic Reality has no commitments for funding from unrelated parties or any
other agreements that will provide working capital. We cannot give any assurance
that Dynamic Reality will locate any funding or enter into any agreements that
will provide the required operating capital.
BUSINESS STRATEGY
Our plan is to design and build a vertical, internet based, customized retail
marketing and consumer information portal. The objective of the portal is to
provide retail consumers with a wide range of electronic consumer products with
readily available and timely product and industry-related information and news,
and links to other retail and vendor electronics web sites.
In February 2001, we registered an on-line store with Vstore.com, located at
http://dynamicreality.vstorecomputers.com/ on which we have established our
internet-based electronic product retail store known as The Store.
The product focus will be on consumer electronic products. We believe there will
continue to be an active replacement market for persons seeking to upgrade what
they have and an expanding market for computer related products and other
electronic products. We believe there are in excess of 14,000 products which we
will offer through The Store that enjoy regular consumer attention in this
market segment and about which information is needed that prospective customers
will seek and find useful.
Currently, the Vstore is our only source for products and information. If we are
successful in raising capital we intend to expand our site where the Vstore is
only a part of the site and not the main page or body of the site. In the future
when we become more firmly established, we will identify the specific products
that will be represented on our website among those available from Vstore.com
and from establishing the necessary direct alliances or sources for products and
product information. We intend to offer higher quality and reliable products
that have a consumer following and are provided by more established
manufacturers. As part of this process, we will be identifying sources of timely
information and news on the products and companies that will be represented in
The Store. Together, these elements, we believe, will be of added value to
consumers and serve to generate customer contacts on our website. We believe
that consumers today are well informed and, if not, seek out information so that
they become well informed and demand a broad selection of products. The Store
intends to meet these demands.
Simultaneously with product identification and product information sources, we
are developing a focused marketing strategy to introduce The Store to consumers
to generate Internet-based traffic to it. We intend to target individual
consumers and small businesses.
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Our sources of revenues principally will be from product sales. Our product
revenues will be a percentage of the product purchase price, both as
pre-established form time to time by Vstore.com for those products purchased
through our website. For our company to be successful, we will have to operate
efficiently on the limited revenue percentages we earn. Therefore, we will be
dependent on increasing traffic to our website and generating increasing sales
through our website to increase our income. In the future, we may generate
revenues from advertising and click-through fees. Advertising revenues will be
related to the size and quality of the website audience. They may include the
sale of advertising banners, placement of pop-up windows and sponsorship or
other promotional rights. Click-through revenues will result from participation
in programs with other on-line partners and revenue sharing arrangements.
Revenue sharing and commission type income is expected to be a small percentage
of the ultimate sale revenue generated by a person that initially locates a
product on our website but links elsewhere at which website the purchase is
made.
AGREEMENT WITH VSTORE.COM
We have a contractual agreement with Vstore.com to provide e-commerce and other
technology services for the operation of our website and to provide access to
the products we will offer in The Store.
There are over 14,000 products for which Vstore.com has selling arrangements and
from which consumers visiting our site may select. We currently can select only
from the products that Vstore offers. When customers order products from The
Store under our current arrangement they are in essence ordering direct from the
Vstore through an electronic link. Vstore.com processes the credit card
information for verification and payment, and then forwards the order to one of
the product suppliers pursuant to its fulfillment arrangements. Vstore.com has
fulfillment arrangements with either manufacturers, wholesalers or other
intermediaries who will receive the order and ship it to The Store's customer.
Vstore.com will also handle overseeing orders, cancellations and returns and
tracking product sales. Vstore.com will provide customer service. We will
receive various sales activity reports from Vstore.com. We will be paid a
percentage of the purchase price for all completed sales as a referral fee.
Payments will be made quarterly, in arrears from Vstore.com. In the future we
intend to offer our own array of products through direct agreements with
manufacturers.
Vstore.com also hosts The Store on their server. Therefore, we are dependant on
Vstore.com maintaining the necessary equipment and contractual arrangements that
will permit persons to locate and use our website. We believe that outsourcing a
large portion of our technology infrastructure in this manner will permit us to
be able to reduce up-front costs associated with constructing and expanding a
complex e-commerce and product information community.
Vstore.com is authorized by TRUSTe, the leading privacy seal program on the
internet. TRUSTe is an independent organization dedicated to building consumer
trust and confidence in the internet. We believe that shopping on our website
using the services of Vstore.com is entirely safe for the use of consumer credit
card information. Notwithstanding the foregoing, in the event of fraud conducted
in a sale originating on our website, we may be held liable for improper charges
to our consumers credit cards. In addition, although we are exclusively a
marketing portal, we may be held partially or fully responsible for defective
products sold though our website.
PRODUCTS
We plan to offer a broad selection of personal computer hardware, software,
peripherals and accessories. Our product offering will be orientated towards the
intermediate to sophisticated individual and small business consumers. We
believe that these consumers are better educated about the products they want,
more willingly upgrade and expand their computer systems and seek out higher
margin products than first time personal computer buyers.
We believe that the increased familiarity with and acceptance of computers will
continue to generate demand for a wide variety of personal computer products.
For example, we see demand being generating from the following:
- growing use of the Internet as a source of entertainment,
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- on-line shopping,
- improvements in graphical interfaces,
- development of integrated software packages such as office
suite products,
- the constant flow of new interactive educational and
entertainment products, and
- new technologies such as the CD ROM which provides a
multimedia experience involving full-motion video and stereo
sound.
The products that we will offer will include computer and computer-related
products, brand-name desktops, notebooks, and personal organizers by
manufacturers such as Compaq Computer Corporation, Cannon Inc., Hewlett-Packard
Company and software from Microsoft Corporation, Lotus Development Corporation
and Adobe Systems Incorporated. We also will offer digital cameras, laser
printers, laser jet and color jet printers, monitors and flatbed scanners. Our
merchandise offerings are delimited by those that Vstore.com has marketing
arrangements with and to which we have access through our Vstore.com agreement.
All of our products will be purchased on-line and will be supplied either by the
manufacturer or by other companies on a drop shipment basis. Dynamic Reality
will not carry any inventory.
MARKETING
The key to success of The Store is the creation of a marketing strategy that
attracts consumers to our website who stay there to order products they see
offered.
Our overall marketing program will be designed to generate customer awareness of
The Store and create a base of users of our website. Our initial target for 2001
is to establish a base of 20,000 users. We plan to take steps to increase this
base to 100,000 in 2002 and 250,000 in 2003.
To establish the user base and create consumer traffic to our website, we intend
to enter into marketing relationships and leverage existing relationships with
leading on-line content providers, search engines and other e-commerce
companies. These alliances and relationships include, but are not limited to,
on-line promotions, advertising and targeted e-mail. Were appropriate, we will
use print, radio and television and bulk mailings. We also expect to engage
qualified marketing consultants for assistance in developing a comprehensive and
effective longer-term marketing plan and strategy.
In addition, our longer term plans include the addition of customer reward-type
programs, such as affiliation and membership plans whereby consumers would earn
points that could be utilized to obtain product pricing discounts. We have not
formulated a specific points plan at this time, but our intent to create one
that is competitive to existing plans but is different enough to draw attention
to our website.
An important part of our marketing will be to create brand identification of our
website. We recognize the importance of the goodwill associated with a
successful website and the confidence consumers have in using it for their
informational and product needs. Over time brand identification becomes an
important asset of the company. To that end, we plan to devote substantial
effort to creating a website that is up to date, easy to use and secure. In
addition, we will continually evaluate the products offered to be competitive
and well regarded. Finally, we plan to provide the kind of product information
and website links that consumers demand. Over time, were it is warranted, we
will offer consumer newsletters, message boards and chat rooms.
Although many of our marketing plans have been successfully used in the past by
different web based companies, there is no assurance that we will be able to use
them successfully to create the consumer base we seek. Moreover, because the
consumer is increasingly sophisticated and exposed to a myriad of marketing
programs, we will have to constantly appraise our strategies and seek out ways
to change and improve them so as to remain fresh and competitive. No assurance
can be given that we will successfully change and update our marketing in a way
that continues to generate positive consumer reaction to our website.
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COMPETITION
In vertical internet marketing and in internet marketing generally, we face
enormous competition from many sources. Most importantly, there are very few
barriers to entry for other persons to establish websites to sell their
products. In fact, the existence of Vstore.com and similar companies, encourages
direct competition and costs very little to establish. In the electronics field
there are many competitors, most of whom have greater financial and personnel
resources than we have. Many of these competitors are well established and well
recognized brick and mortar retailers, most of which have website presenses that
offer products that will be competitive to us. In addition, there are specialty
electronics manufacturers and supplies which have websites of their own and with
which we will compete.
We plan to be competitive on the basis of creating market awareness of our
website and The Store. To achieve that awareness we will have to engage in
marketing programs that differentiate us from others, some of which will be
expensive. To the extent we are able to spend any financial resources on our
marketing we will be at a competitive advantage to many websites that make
little effort to create a market presence. We also plan to differentiate our
website from those of our competitors by defining the vision of the company as
an information technology ally to our clients. Competition in the retail
marketplace is great, and we will not be able to compete in any effective way
without providing additional value to consumers. We believe our information
resources, our convenient and secure website, and our product offerings will
create that differentiation.
Our ability to compete will be dependant on the level of shipping charges and
other order fulfillment expenses we must impose. Any significant increase in the
cost of shipping and other expenses may put internet shipping at a disadvantage
compared to bricks and mortar shopping locations.
REGULATION
Currently the principal law regulating our business is general consumer
protection law at the federal and state level. These laws generally govern all
commercial transactions and touch on all aspect of a consumer purchase
transaction.
Because of the growing presence of the internet and the increasing advantage to
e-commerce, it is expected that the laws specifically regulating business
transactions on the internet will develop to meet its unique characteristics.
Although we are unaware of any specific law initiatives, we would expect any new
laws to be burdensome and impose additional costs or limit activities that would
result in a hindering of e-commerce, as we are able to conduct it today.
Advertisers focus their efforts on reaching particular demographic groups.
Therefore, advertising revenues will be highly dependant on our ability to use
information about our website users and share the information with others. If we
are not able to legally share information regarding our customers with potential
advertisers, our ability to generate advertising revenues will suffer. The
public is becoming increasingly concerned about issues relating to privacy on
the internet. This increased sensitivity could result in the adoption of
stringent legislation that prevents or limits our ability to use personal and
other data about our customers.
Internet transaction taxation is an area that has been the subject of much
scrutiny during the last several years. As internet sales increase, the manner
in which sales taxes are imposed on transactions will have to reevaluated by the
various taxing authorities. To the extent that governmental authorities impose
sales or other taxes on e-commerce transactions in excess of current taxation
policies, there may be a slowing of the use of the internet as a way to obtain
products.
The information about products that we may use from time to time will be subject
to copyright and other intellectual property laws. Although we intend to obtain
licenses or permission arrangements for the use of information content on our
website, if we fail to obtain the necessary permits or we use the information
beyond the scope of the permit, we will be responsible for the damages asserted
by the owner of the information. In some instances, violations of the rights of
others may result in liability measured in multiples of the actual damages. If
we become subject to any
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claims for the violation of the intellectual property of others, our financial
condition will be materially and adversely affected.
Any new legislation or regulation regarding the internet, or the application of
existing laws and regulations to the internet which are not currently imposed
thereon, could materially adversely affect our business. If we are alleged to
violate federal, state or foreign, civil or criminal law, even if we could
successfully defend the claims, it could materially adversely affect us.
EMPLOYEES
We currently employ one person as our executive officer. This person is Ms.
Cindy Roach who devotes approximately one-half of her business time to the
affairs of the company. We do not have any other employees at this time.
ITEM 2. MANAGEMENTS'S DISCUSSION AND PLAN OF OPERATION
FORWARD LOOKING STATEMENTS
When used in this Form 10-SB and in future filings by Dynamic Reality with the
Securities and Exchange Commission, the words or phrases "will likely result,"
"management expects," or we expect," "will continue," "is anticipated,"
"estimated," or similar expression or use of the future tense, are intended to
identify forward looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance
on any such forward-looking statements, each of which speak only as of the date
made. These statements are subject to risks and uncertainties, some of which are
described below and others are described in other parts of this Form 10-SB.
Actual results may differ materially from historical earnings and those
presently anticipated or projected. We have no obligation to publicly release
the result of any revisions that may be made to any forward-looking statements
to reflect anticipated events or circumstances occurring after the date of such
statements.
SELECTED FINANCIAL DATA
Because Dynamic Reality is a development stage company, selected financial data
would not be meaningful. Reference is made to the financial statements of
Dynamic Reality included elsewhere in the document.
OVERALL OPERATING RESULTS
We have had no revenues since our inception (December 31, 1996) through the
current reporting period (December 31, 2000).
Operating expenses over that same four-year time frame totaled $14,300. $5,000
of these expenses were incurred on December 31, 1996 for consulting services
rendered by our first president and chairman of the board, Mr. Antonio Garcia.
Mr. Garcia received 950,000 shares or 9.5% of our current issued and outstanding
common stock for these services. $300 was expensed for the fiscal year ended
December 31, 1999 for legal and accounting services. For the year ended December
31, 2000, we incurred $9,000 for consulting services rendered by our current
president and chairman of the board, Ms. Cindy Roach. Ms. Roach received
9,000,000 shares of our common stock (90% of our current issued and outstanding
shares) for these services.
We have incurred a cumulative net loss since inception of $14,300 which was
caused by the expenses discussed in the previous paragraph.
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LIQUIDITY AND CAPITAL RESOURCES:
We do not currently have any working capital with which we can fund our future
operations. Our auditors have issued a going-concern opinion. We cannot assure
you that we will be able to continue our operations without adequate funding.
On December 20, 2000, we signed two separate promissory notes totaling $7,500
for investment consulting services to be performed. Both notes have a maturity
date of February 15, 2002. This resulted in an increase in prepaid expenses of
$7,500 which is our only asset. Our total liabilities consist of the $7,500 of
promissory notes and an accounts payable balance of $300 for the legal and
accounting services performed in 1999. Total stockholders' deficit at December
31, 2000 was $(300).
PLAN OF OPERATION
Our business plan anticipates that we will generate sufficient revenues from
commissions earned on sales through our web site; however, there can be no
assurances given that such revenue will occur.
We plan to seek capital to fund our operations through a private placement of
our securities. We may also seek acquisition opportunities with operating
companies. We estimate that we will need approximately $1,000,000 to fund our
operations and implement our business plan during the next two to three years.
We have no financing commitments or acquisition arrangements or prospects at
this time. We anticipate needing capital for the following purposes:
[Download Table]
Working capital expenses, including adding staff, office space
and general operating expenses $500,000
Test marketing, strategic planning and consulting expenses 250,000
Product development 250,000
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Total $1,000,000
We believe that we will require additional financing (over and above the
aforementioned offering) in the future for the funding of marketing and
advertising expenses. We cannot assure you that we will be successful in raising
any of the capital needed to fund our operations.
EMPLOYEES
Currently we employ one person on a part time basis. If the business grows as we
plan, we anticipate that we will need additional persons to fill administrative
and technical positions. In that event, we intend to employ a mix of persons on
a full and part time basis or on a consultant basis. We believe that there are
many persons available with the skills we will require either in the Toronto
area or on a telecommuting basis. We believe we will need website programmers,
marketing personnel, telemarketing personnel, content developers, accounting
personnel and general administrative personnel.
NEW ACCOUNTING PRONOUNCEMENTS
We have adopted FASB Statement 128. It is not expected that we will be impacted
by other recently issued standards. FASB Statement 128 presents new standards
for computing and presenting earnings per share (EPS). The Statement is
effective for financial statements for both interim and annual periods ending
after December 15, 1997.
FASB Statement 131 presents new standards for disclosures about segment
reporting. We do not believe that this accounting standard applies to us as all
of our operations are integrated for financial reporting and decision-making
purposes.
ITEM 3. DESCRIPTION OF PROPERTIES.
The offices of the company are located at 141 Adelaide Street West, Suite 1004,
Toronto, Ontario, M5H 3L5. The telephone number is 416-628-5297.
8
Pursuant to an oral agreement, we are entitled to use office space otherwise
provided to our executive officer. In addition, we are provided office services
as may be required from time to time. We do not pay any amount for the office
space or services. Any costs of this office are considered immaterial to the
financial statements and accordingly are not reflected.
We believe that this facility is adequate to meet our needs in the foreseeable
future. In the event our business expands, we believe we will have to find new
offices. We believe that there is ample space available in the Toronto area to
which we may relocate at competitive rates.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 28, 2001, the name and shareholdings
of each person who owns of record, or was known by the us to own beneficially,*
5% or more of the shares of the common stock currently issued and outstanding;
the name and shareholdings, including options to acquire the common stock, of
each director; and the shareholdings of all executive officers and directors as
a group.
[Download Table]
NUMBER OF PERCENTAGE
SHARES OF
NAME OF PERSON OR GROUP OWNED OWNERSHIP
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Cindy Roach(1) ..................... 9,000,000 90.0%
Antonio Garcia(1) .................. 950,000 9.5%
All executive officers and
directors as a group (one person) .. 9,000,000 90.0%
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* Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Shares of common stock
issuable upon the exercise of options or warrants currently exercisable
or exercisable or convertible within 60 days, are deemed outstanding
for computing the percentage ownership of the person holding such
options or warrants but are not deemed outstanding for computing the
percentage ownership of any other person.
(1) Ms. Roach's address is 141 Adelaide Street West, Suite 1004, Toronto,
Ontario, M5H 3L5.
(2) Mr. Garcia's address is 2828 West Lincoln, Anaheim, California 92806.
There are currently no outstanding options or warrants to purchase shares of our
stock.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Ms. Cindy Roach, 37, has been the president, treasurer and secretary and a
director of the company since October 2000. Ms. Roach has been the secretary of
LRS Capital Inc., a company engaged in mineral exploration, since October 2000.
From March 2001, Ms. Roach has been a director of CraftClick, Inc., a company
filing reports under the Securities Exchange Act of 1934 pursuant to Section
15(d), which company is engaged in winding up its business as a web site for
consumer craft supplies. Ms. Roach has over 10 years experience as a consultant
with group benefits and human resources administration. From 1990 to 2000, Ms.
Roach was a group benefits consultant to Watson Wyatt Worldwide, a
multi-national benefit consulting organization.
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ITEM 6. EXECUTIVE COMPENSATION
The following table reflects compensation paid to the mostly highly compensated
executive officer of Dynamic Reality at the end of the fiscal year 2000.
[Enlarge/Download Table]
LONG TERM COMPENSATION
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AWARDS PAYOUTS
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ANNUAL COMPENSATION RESTRICTED SECURITIES
---------------------------------- STOCK UNDERLYING LTIP ALL OTHER
SALARY BONUS OTHER AWARD OPTIONS PAYOUTS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) ($) SARS(#) ($) ($)
--------------------------- ---- -------- -------- -------- ---------- ---------- -------- ------------
Cindy Roach
President & Chairman of the
Board ........................ 2000 $0 $0 $ 9,000(1) $0 0 0 $0
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(1) Ms. Roach received 9,000,000 shares of our common stock valued at $.001 per
share for consulting services rendered. These services were valued at $9,000.
She does not currently receive any salary.
Until we have sufficient capital or revenues, Ms. Roach will not be provided
cash remuneration. At such time as we are able to provide a regular salary, it
is our intention that Ms. Roach will become employed pursuant to an executive
employment agreement, at an annual salary to be determined based on her then
level of time devoted to the Company and the scope of her responsibilities.
Until we enter into an employment agreement, we may use shares of common stock
to compensate Ms. Roach. In addition, we may use common stock to compensate
others for services to the Company.
DIRECTOR COMPENSATION
Persons who are directors and employees will not be additionally compensated for
their services as a director. There is no plan in place for compensation of
persons who are directors who are not employees of the Company, but it is
expected that in the future we will create a remuneration and reimbursement
plan.
OTHER COMPENSATION ARRANGEMENTS
Although we do not have any formal equity-based compensation plan, we do have
the ability to enter into options and similar equity-based agreements with
employees, consultants and others. In the future, we may enter into these types
of agreements as the sole means or as part of the overall compensation of
someone working for the company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
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ITEM 8. DESCRIPTION OF SECURITIES
The authorized capital stock consists of 100,000,000 shares of capital stock,
all of which is designated common stock, $.001 par value. As of March 28, 2001,
there were 10,000,000 shares of common stock issued and outstanding.
COMMON STOCK DESCRIPTION
The holders of common stock are entitled to one vote per share on all matters
submitted to a vote of the shareholders. In addition, the holders are entitled
to receive dividends ratably, if any, as may be declared from time to time by
the board of directors out of legally available funds. In the event of our
dissolution, liquidation or winding-up, the holders of common stock are entitled
to share ratably in all the assets remaining after payment of all our
liabilities and subject to the prior distribution to any senior securities that
may be outstanding at that time. The holders of common stock do not have
cumulative voting rights or preemptive or other rights to acquire or subscribe
for additional, unissued or treasury shares. The holders of more than 50% of
such outstanding shares, voting at an election of directors can elect all the
directors on the board of directors if they so choose and, in such event, the
holders of the remaining shares will not be able to elect any of the directors.
All outstanding shares of common stock are, when issued, the shares of common
stock offered hereby, are full paid and non-assessable.
STOCK TRANSFER AGENT
The stock transfer agent for the common stock is Executive Registrar, 3118 West
Thomas Road, Suite 707, Phoenix, Arizona 85017.
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PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The common stock is not traded in any market or electronic medium. We intend to
seek inclusion in the Over-the-Counter Bulletin Board and are in the process of
implementing steps to that end. There can be no assurance given that the common
stock will be traded in any public market. Moreover, if our common stock is
traded, there can be no assurance given that there will be active trades in the
security or at all. Therefore, holders of our common stock may not be able to
sell it from time to time.
HOLDERS
As of March 28, 2001, there were 27 holders of record of the common stock.
DIVIDENDS
We have never paid any dividends. For the foreseeable future, we anticipate that
we will use any funds available to the company to finance the growth of our
operations and that we will not pay cash dividends to holders of common stock.
The payment of dividends, if any, in the future is within the discretion of the
board of directors and will depend on our earnings, capital requirements,
restrictions imposed by lenders and on our financial condition, having funds
legally available to pay dividends and other relevant factors.
ITEM 2. LEGAL PROCEEDINGS
None.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
On January 17, 2001, we issued 9,000,000 shares of common stock to Ms. Cindy
Roach, the President of the Company, in payment of her services as a consultant
in the preparation of our business plan. We have expensed $9,000 for these
services. The issuance was made under Section 4(2) of the Securities Act of 1933
on the basis that Ms. Roach is a sophisticated investor. Ms. Roach is a director
or has been an employee/consultant and is or has been a stockholder of several
public and private companies, some of which operate in the area of internet
marketing.
On December 20, 2000, the company borrowed an aggregate of $7,500 from two
individuals, Mr. Alan Akrelrod and ZDG Investments Limited, respectively. These
issuances were made under Section 4(2) of the Securities Act of 1933 on the
basis that the lenders were either sophisticated investors in venture capital
and start up financing opportunities or were accredited investors. The use of
the capital raised from these loans was general working capital and payment of
operating expenses.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Nevada Business Corporation Act permits Nevada corporations such as ours to
include in the articles of incorporation a provision eliminating or limiting
directors' exposure to liability for monetary damages for breaches of their duty
of care as directors, if the director acted in good faith and with ordinary
care. The act does not eliminate the directors' liability for monetary damages
for acts or omissions not in good faith or involving the intentional violations
of law, the improper purchase or redemption of stock, payment of improper
dividends or any transaction from which the director received an improper
personal benefit.
12
The act also permits Nevada corporations to include in the articles of
incorporation a provision to indemnify any and all persons it has the power to
indemnity. The act provides that a Nevada corporation may indemnify a person who
was, is or is threatened to be made, a named party in a proceeding because the
person is or was acting on behalf of the corporation. The indemnification by the
corporation may be made if it is determined that the person conducted himself in
good faith, reasonably believed that the conduct was in the corporation's best
interests if the indemnitee is a director, or was at least not opposed to the
corporations' best interests if the person was someone other than a director.
Directors may not be indemnified if the person improperly benefited personally
or the person is found liable to the corporation. The indemnification may be in
respect of judgments, penalties, fines, settlements and reasonable expenses
actually incurred.
We have implemented the above-described provisions in our articles of
incorporation. In addition, our by-laws provide for similar provisions. We do
not have separate agreements of indemnification or advancement of expenses. We
do not have directors and officers insurance.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers or persons controlling our company pursuant
to the foregoing provisions, we have been informed that in the opinion of the
SEC, indemnification is against public policy and is therefore unenforceable. In
the event that a claim for indemnification against liabilities, other than the
payment by us of expenses incurred by a director, officer or controlling person
in successful defense of any action, suit or proceedings, is asserted by such
director, officer or controlling person in connection with the securities being
offered or sold by us, we will, unless in the opinion of its counsel that the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it is
against public policy as expressed in the federal securities law, and will be
governed by the final adjudication of such case.
PART F/S
Our financial statements are included in this report beginning on page F-1,
immediately following this section.
13
INDEX TO FINANCIAL STATEMENTS
TABLE OF CONTENTS
[Enlarge/Download Table]
PAGE
----
Report of Simon Krowitz Bolin & Associates, P.A. independent accountants F-2
Balance Sheet for the years ended December 31, 2000 and December 31, 1999 F-3
Statements of Income and Retained Earnings for the years ended December 31,
2000 and December 31, 1999 F-4
Comparative Statements of Cash Flows for the Two Years ended December 31, 2000
and December 31, 1999 and inception to December 31, 2000 F-5
Statement of Changes in Stockholders' Equity since inception, December 31, 1996
through December 31, 2000 F-6
Notes to Financial Statements F-7
F-1
SIMON KROWITZ BOLIN & ASSOCIATES, P.A.
11300 ROCKVILLE PIKE, SUITE 800
ROCKVILLE, MARYLAND 20852
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Dynamic Reality, Inc.
Toronto, Ontario
CANADA
We have audited the accompanying balance sheet of Dynamic Reality, Inc. (a
development stage company) as of December 31, 2000 and the related statements of
income and retained earnings and cash flows for the year then ended. These
financial statements are the responsibility of Dynamic Reality's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements as of December 31, 1999 were audited by
another auditor. We did not audit or review them and accordingly, express no
opinion or other form of assurance on them.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Dynamic Reality, Inc. as of
December 31, 2000 and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
The accompanying financial statements have been presented assuming that the
Company will continue as a going concern. As discussed in Note 9 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ Simon Krowitz Bolin & Associates, P.A.
February 20, 2001
F-2
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
DECEMBER 31,
[Download Table]
2000 1999
---------- ----------
ASSETS
OTHER ASSETS
Prepaid Expenses $ 7,500 0
---------- ----------
TOTAL ASSETS $ 7,500 $ 0
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 300 $ 300
LONG-TERM LIABILITIES
Notes Payable 7,500 0
---------- ----------
TOTAL LIABILITIES 7,800 300
---------- ----------
STOCKHOLDERS' EQUITY
Common Stock - $0.001 par value; 100,000,000 shares
authorized, 1,000,000 shares issued and outstanding 1,000 1,000
Common Stock Subscribed, 9,000,000 shares 9,000
Additional Paid in Capital 4,000 4,000
Retained Earnings (Deficit) (14,300) (5,300)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (300) (300)
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,500 $ 0
========== ==========
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-3
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE PERIODS
[Enlarge/Download Table]
December 31,
1996
(inception) to
January 1, 2000 to January 1, 1999 to December 31,
December 31, 2000 December 31, 1999 2000
------------------- ------------------ --------------
REVENUES $ 0 $ 0 $ 0
------------ ------------ ------------
GENERAL AND ADMINISTRATIVE EXPENSES
Operating Expenses 9,000 0 14,000
Legal and Accounting 300 300
------------ ------------ ------------
NET (LOSS) (9,000) (300) (14,300)
RETAINED EARNINGS (DEFICIT) - BEGINNING (5,300) (5,000) 0
------------ ------------ ------------
RETAINED EARNINGS - ENDING $ (14,300) $ (5,300) $ (14,300)
============ ============ ============
NET (LOSS) PER SHARE - BASIC $ (0.00) $ (0.00) $ (0.00)
WEIGHTED AVERAGE SHARES USED IN PER
SHARE CALCULATION - BASIC 10,000,000 10,000,000 10,000,000
============ ============ ============
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-4
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENTS OF CASH FLOWS
FOR THE PERIOD
[Enlarge/Download Table]
December 31,
1996
(inception) to
January 1, 2000 to January 1, 1999 to December
December 31, 2000 December 31, 1999 31, 2000
------------------ ------------------ --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (Loss) $ (9,000) $ (300) $ (5,300)
Adjustments to reconcile net income to net cash (used) by
operating activities:
Changes in assets and liabilities:
Increase in Accounts Payable 0 300 300
Increase in Prepaid Expenses (7,500) 0 (7,500)
---------- ---------- ----------
NET CASH (USED) BY OPERATING ACTIVITIES (16,500) 0 (12,500)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Common Stock 0 300 5,000
Increase in Notes Payable 7,500 0 7,500
Common Stock Subscribed 9,000 0 0
---------- ---------- ----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 16,500 0 12,500
NET INCREASE IN CASH 0 0 0
CASH - BEGINNING 0 0 0
---------- ---------- ----------
CASH - ENDING $ 0 $ 0 $ 0
========== ========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Significant Non-cash Financing Activities:
Common Stock Issued for Services Rendered at
December 31, 1996 (inception) $ $ 0 $ 5,000
Common Stock Subscribed for Services Rendered 9,000
========== ========== ==========
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-5
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CHANGES OF SHAREHOLDERS' EQUITY
FOR THE PERIOD DECEMBER 31, 1996 (INCEPTION) TO DECEMBER 31, 2000
[Enlarge/Download Table]
ADDITIONAL
PAID IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------------ ------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1996
(INCEPTION) 0 $ 0 $ 0 $ 0 $ 0
ISSUANCE OF COMMON STOCK FOR
SERVICES RENDERED @ 1.00 PER SHARE 5,000 5,000 0 0 5,000
NET LOSS 0 0 0 (5,000) (5,000)
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1996 5,000 5,000 0 (5,000) 0
NET LOSS - YEAR ENDED DECEMBER
31, 1997 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1997 5,000 5,000 0 (5,000) 0
NET LOSS - YEAR ENDED DECEMBER 31,
1998 0 0 0 0 0
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1998 5,000 5,000 0 (5,000) 0
ON MARCH 10, 1999:
- CHANGED VALUE OF STOCK FROM NO
PAR VALUE TO 0.001 PER SHARE 0 (4,000) 4,000 0 0
- FORWARD SPLIT 200:1 RESULTED IN
ADDITIONAL ISSUANCE 995,000 0 0 0 0
NET LOSS - YEAR ENDED DECEMBER
31, 1999 0 0 0 (300) (300)
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 1999 1,000,000 1,000 4,000 (5,300) (300)
NET LOSS - YEAR ENDED DECEMBER
31, 2000 0 0 0 (9,000) (9,000)
COMMON STOCK SUBSCRIBED 9,000,000 9,000 0 0 9,000
------------ ------------ ------------ ------------ ------------
BALANCE - DECEMBER 31, 2000 10,000,000 $ 10,000 $ 4,000 $ (14,300) $ (300)
============ ============ ============ ============ ============
SEE AUDITORS' REPORT AND NOTES TO FINANCIAL STATEMENTS.
F-6
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
History and Business Activity - Dynamic Reality, Inc. (the "Company")
is a development stage company in accordance with SFAS No. 7, with no
current business operations as of December 31, 2000. The Company was
incorporated in the state of Nevada on December 31, 1996 under the name
Dynamic Reality Incorporated. The Company's business goal is to develop
and implement a successful internet-based retail, marketing and
consumer product information portal. The Company has adopted a business
plan to enter the internet-based, on-line marketing and electronic
product retail marketplace. In addition to electronic product
retailing, the portal will provide consumers with timely product and
industry-related information and news of interest and under
co-marketing arrangements, convenient, electronic lines to additional
web sites.
Income Taxes - Income taxes are computed using the asset and liability
method. Under the asset and liability method, deferred income tax
assets and liabilities are determined based on the differences between
the financial reporting and tax bases of assets and liabilities and are
measured using the currently enacted tax rates and laws. A valuation
allowance is provided for the amount of deferred tax assets that, based
on available evidence, are not expected to be realized.
Basic and Diluted Net Income (Loss) Per Share - Basic net income (loss)
per share is computed using the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per
share is also computed using the weighted average number of common
shares outstanding during the period. The Company has no convertible
debentures or shares outstanding and no stock options or warrants
outstanding.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reported period. Actual
results could differ from those estimates.
NOTE 2 - INCOME TAXES
Since the Company has not yet realized income as of the date of this
report, no provision for income taxes has been made.
F-7
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2000
NOTE 3 - SHAREHOLDERS EQUITY
Common Stock - The initial authorized common stock of Dynamic Reality,
Inc. consists of 25,000 shares with no par value.
On March 10, 1999 the State of Nevada approved the Company's restated
articles of incorporation which increased the authorized shares of
common stock from 25,000 common shares to 100,000,000 common shares.
The par value was changed from no par to $.001.
On March 10, 1999 the Board of Directors authorized the forward split
on a 200:1 ratio, of the outstanding common shares of the company, thus
increasing its number of outstanding shares from 5,000 to 1,000,000.
On March 10, 1999 the Board of Directors authorized a stock issuance
totaling 995,000 common shares of the company to reflect the change
above.
Preferred Stock - Dynamic Reality, Inc. has no preferred stock.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property.
Office space and services are made available through an officer without
charge. Such costs are immaterial to the financial statements and
accordingly are not reflected herein. The officers and directors are
involved in other business activities and most likely will become
involved in other business activities in the future. If a specific
business opportunity becomes available, such persons may face a
conflict of interest. A Company policy for handling such a conflict has
not yet been formulated.
NOTE 5 - CONTINGENCIES
Legal - The Company is not currently aware of any other legal
proceedings or claims that the Company believes will have, individually
or in the aggregate, a material adverse effect on the company's
financial position or results of operations.
F-8
DYNAMIC REALITY, INC.
(A DEVELOPMENT STAGE COMPANY)
NOTES TO FINANCIAL STATEMENT
DECEMBER 31, 2000
NOTE 7 - COMMITMENTS
The Company has signed two separate promissory notes with Mr. Alan
Akselrod and ZDG Investments Limited for the sum of USD $5,000 and USD
$2,500, respectively on December 20, 2000. They both are due on
February 15, 2002.
NOTE 8 - SUBSEQUENT EVENTS
An additional 9,000,000 shares of common stocks were authorized and
issued to the Company's majority owned president, Cindy Roach, on
January 17, 2001 for her consulting service of drafting the business
plan.
NOTE 9 - GOING CONCERN
The Company's financial statements are prepared using generally
accepted accounting principles applicable to a going concern which
contemplates the realization of assets and the liquidation of
liabilities in the normal course of business. The Company has not
established revenues sufficient to cover its operating costs and allow
it to continue as a going concern. It is the intent of the Company to
seek capital by the sale of securities or loans. Until that time the
stockholders/officers and/or directors have committed to advancing the
operating costs of the Company interest free.
F-9
PART III
ITEM 1. INDEX TO EXHIBITS
[Download Table]
Exhibit Number Name of Exhibit
3.01 Articles of Incorporation of Dynamic Reality, Inc.*
3.02 Amendment to Articles of Incorporation of Dynamic
Reality, Inc.*
3.03 By-laws of Dynamic Reality, Inc.*
4.1 Form of Stock Certificate*
10.1 Agreement with Vstore, Inc.*
----------
* Filed herewith
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
DYNAMIC REALITY, INC.
April 6, 2001 By /s/ Cindy Roach
-----------------------------------------
Cindy Roach, President, Secretary, Treasurer
& Chief Financial Officer
21
INDEX TO EXHIBITS
[Download Table]
EXHIBIT
NUMBER DESCRIPTION
------- -----------
3.01 Articles of Incorporation of Dynamic Reality, Inc.*
3.02 Amendment to Articles of Incorporation of Dynamic
Reality, Inc. *
3.03 By-laws of Dynamic Reality, Inc.*
4.1 Form of Stock Certificate*
10.1 Agreement with Vstore Inc.*
----------
* Filed herewith
22
Dates Referenced Herein
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