**UNITED STATES**

**Form 10-KSB**

XANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended August 31, 2002.

___ TRANSITION REPORT  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

For the transition period from ____ to ____.

**SUNBURST ACQUISITIONS III, INC.**



|Colorado                                       | 0-23559                  | 84-14320001                         
|---------------------------------------------- | ------------------------ | ------------------------------------
|(State or other jurisdiction of
incorporation) | (Commission File Number) | (IRS Employer Identification
Number)

|4807 S. Zang WayMorrison, Colorado       | 80465     
|---------------------------------------- | ----------
|(Address of principal executive offices) | (Zip Code)

Issuer's telephone number, including area code: (303) 979-2404

Securities to be registered under Section 12(b) of the Act:

Title of each class

Securities to be registered under Section 12(g) of the Act:

Common Stock, no par value

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange
Act during the past 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. [  ] Yes [ [X ] No

Check if  no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in
this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [  ]

State issuer's revenues for its most recent fiscal year:   $ 0.

State the aggregate market value of the voting and non-voting 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. (See definition of affiliate in
Rule 12b-2 of the Exchange Act.)

(ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be filed by Section 12, 13 or
15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. [ ]Yes [ ]
No



(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest
practicable date: As of August 31, 2002, the Company had 33,303,840 shares outstanding.

**DOCUMENTS INCORPORATED BY REFERENCE**

****If the following documents are incorporated by reference, briefly describe them and identify the part of
the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual
report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant
to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The listed documents should be
clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended
December 24, 1990).

Transitional Small Business Disclosure Format (Check one): Yes ____; No _X__



---

PART I

ITEM 1.        DESCRIPTION OF BUSINESS.

General

The Company was incorporated under the laws of the State of Colorado on August 27, 1997, and
is in the early developmental and promotional stages. To date the Company's only activities have
consisted of the raising of capital and efforts to seek one or more properties or businesses for acquisition.
The Company has not commenced any commercial operations. The Company has no full-time employees
and owns no real estate.

The Company's business plan has always been to seek, investigate, and, if warranted, acquire one
or more properties or businesses. Such an acquisition may be made by purchase, merger, exchange of
stock, or otherwise, and may encompass assets or a business entity, such as a corporation, joint venture,
or partnership. The Company has very limited capital, and it is unlikely that the Company will be able to
take advantage of more than one such business opportunity. The Company intends to seek opportunities
demonstrating the potential of long-term growth as opposed to short-term earnings.

PRIOR BUSINESS ACTIVITIES

As of August 30, 1999, the Company entered into an Agreement and Plan of Reorganization with
American Recruitment Conferences, Inc., a California corporation ("ARC"), and Workseek.com, a
California corporation ("Workseek"). ARC and Workseek, which are affiliated companies, were to be
acquired by the Company in a reverse acquisition transaction, resulting in the shareholders of ARC and
Workseek obtaining control over the Company. A series of transactions were contemplated by the
Agreement, including implementation of a 16.16-to-1 forward split, voluntary surrender for cancellation
of shares by the existing shareholders of the Company, and issuance of new shares to the ARC and
Workseek shareholders.

In contemplation of the ARC/Workseek acquisition, the contemplated forward split was
completed and shares of the Company's Common Stock were sold in a private placement in August and
September 1999, with the cash proceeds loaned to ARC.  In the private placement, a total of 1,000,000
post-split shares were sold for $1,400,000 in cash and $600,000 in receivables assigned to the Company.
Also in contemplation of completion of the ARC/Workseek acquisition, a total of 8,015,360 common
shares were voluntarily surrendered for cancellation by Company officers and other shareholders.

The ARC/Workseek acquisition was not completed, and no payments were made under the terms
of the promissory note.  Collection of the promissory note is considered doubtful.

Efforts by Company management to negotiate some type of final resolution of the matter were
not successful.  As a result, the note has been offset by a full allowance for realization and no further
efforts to resolve the matter either through negotiation or legal action are expected or contemplated.

CURRENT BUSINESS ACQUISITION ACTIVITIES

As of the end of its fiscal year August 31, 2002, the Company had not identified a business
opportunity that it planned to pursue, nor had the Company reached any agreement or definitive
understanding with any person concerning an acquisition.

No assurance can be given that the Company will be successful in finding or acquiring a
desirable business opportunity, given the limited funds that are expected to be available for acquisitions.
The Company's search will continue to be directed toward enterprises which have a desire to be become
a public corporation and which have a business plan designed to allow them to take advantage of
opportunities available to public entities.  This includes entities which have been recently organized, with
no operating history, or a history of losses attributable to under-capitalization or other factors, entities in
need of funds to develop a new product or service or to expand into a new market, entities which desire
to use their securities to make acquisitions, and entities which have a combination of these
characteristics.

In searching for investment opportunities, the Company is not restricted to any particular
geographical area or industry.  Therefore, subject to economic conditions, limitations on its ability to
locate available business opportunities, and other factors, the Company  has substantial discretion in
selecting an appropriate business opportunity.

In connection with any acquisition, it is highly likely that an amount of stock constituting control
of the Company would be issued by the Company or purchased from the Company's current principal
shareholders by the target entity or its controlling shareholders.

Other Entities

The officers, directors and principal shareholders of the Company are also the officers, directors
and principal shareholders of several other blind pool or blank check corporations.  Each of these other
corporations has the same business plan as the Company.

Investigation and Selection of Business Opportunities

To a large extent, a decision to participate in a specific business opportunity may be made upon
management's analysis of the quality of the other company's management and personnel, the anticipated
acceptability of new products or marketing concepts, the merit of technological changes, and numerous
other factors which are difficult, if not impossible, to analyze through the application of any objective
criteria.  In many instances, it is anticipated that the historical operations of a specific firm may not
necessarily be indicative of the potential for the future because of the possible need to shift marketing
approaches substantially, expand significantly, change product emphasis, change or substantially
augment management, or make other changes.

Because the Company may participate in a business opportunity with a newly organized firm or
with a firm which is entering a new phase of growth, it should be emphasized that the Company will
incur further risks, because management in many instances will not have proved its abilities or
effectiveness, the eventual market for such company's products or services will likely not be established,
and such company may not be profitable when acquired.

It is anticipated that the Company will not be able to diversify, but will essentially be limited to
one such venture because of the Company's limited financing.  This lack of diversification will not
permit the Company to offset potential losses from one business opportunity against profits from another,
and should be considered an adverse factor affecting any decision to purchase the Company's securities.

It is emphasized that management of the Company may effect transactions having a potentially
adverse impact upon the Company's shareholders pursuant to the authority and discretion of the
Company's management to complete acquisitions without submitting any proposal to the stockholders for
their consideration.  Company management does not generally anticipate that it will provide holders of
the Company's securities with financial statements, or any other documentation, concerning a target
company or its business prior to any merger or acquisition.  In some instances, however, the proposed
participation in a business opportunity may be submitted to the stockholders for their consideration,
either voluntarily by Company management which elects to seek the stockholders' advice and consent, or
because state law so requires.

The analysis of business opportunities will be undertaken by or under the supervision of the
Company's executive officers and directors.  Although there are no current plans to do so, Company
management might hire an outside consultant to assist in the investigation and selection of business
opportunities, and in that event, might pay a finder's fee.  Since Company management has no current
plans to use any outside consultants or advisors to assist in the investigation and selection of business
opportunities, no policies have been adopted regarding use of such consultants or advisors, the criteria to
be used in selecting such consultants or advisors, the services to be provided, the term of service, or
regarding the total amount of fees that may be paid.  However, because of the limited resources of the
Company, it is likely that any such fee the Company agrees to pay would be paid in stock and not in cash.
Otherwise, the Company anticipates that it will consider, among other things, the following factors:

> (1)        
> Potential for growth and profitability, indicated by new technology, anticipated market
> expansion, or new products;
> 
> (2)        Strength and diversity of existing management, or management prospects that are scheduled
> for recruitment;
> 
> (3)        Capital requirements and anticipated availability of required funds, to be provided from
> operations, through the sale of additional securities, through joint ventures or similar arrangements, or
> from other sources;
> 
> (4)        The Company's perception of how any particular business opportunity will be received by
> the investment community and by the Company's stockholders;
> 
> (5)        The availability of audited financial statements for the business opportunity; and
> 
> (6)        Whether, following the business combination, the financial condition of the business
> opportunity would be, or would have a significant prospect in the foreseeable future of becoming
> sufficient to enable the securities of the Company to qualify for listing on an exchange or on a national
> automated securities quotation system, such as NASDAQ.

No one of the factors described above will be controlling in the selection of a business
opportunity, and management will attempt to analyze all factors appropriate to the opportunity and make
a determination based upon reasonable investigative measures and available data.  Potential investors
must recognize that, because of the Company's limited capital available for investigation and
management's limited experience in business analysis, the Company may not discover or adequately
evaluate adverse facts about the opportunity to be acquired.

The Company is unable to predict when it may participate in a business opportunity and it has
not established any deadline for completion of a transaction.  It expects, however, that the process of
seeking candidates, analysis of specific proposals and the selection of a business opportunity may require
several additional months or more.

Company management believes that various types of potential merger or acquisition candidates
might find a business combination with the Company to be attractive.  These include acquisition
candidates desiring to create a public market for their shares in order to enhance liquidity for current
shareholders, acquisition candidates which have long-term plans for raising equity capital through the
public sale of securities and believe that the possible prior existence of a public market for their
securities would be beneficial, and acquisition candidates which plan to acquire additional assets through
issuance of securities rather than for cash, and believe that the possibility of development of a public
market for their securities will be of assistance in that process.  Acquisition candidates which have a need
for an immediate cash infusion are not likely to find a potential business combination with the Company
to be an attractive alternative.

Form of Acquisition

It is impossible to predict the manner in which the Company may participate in a business
opportunity.  Specific business opportunities will be reviewed as well as the respective needs and desires
of the Company and the promoters of the opportunity and, upon the basis of that review and the relative
negotiating strength of the Company and such promoters, the legal structure or method deemed by
management to be suitable will be selected.  Such structure may include, but is not limited to leases,
purchase and sale agreements, licenses, joint ventures and other contractual arrangements.  The Company
may act directly or indirectly through an interest in a partnership, corporation or other form of organization.  Implementing such structure may require the merger, consolidation or reorganization of the
Company with other corporations or forms of business organization.  In addition, the present
management and stockholders of the Company most likely will not have control of a majority of the
voting shares of the Company following a reorganization transaction.  As part of such a transaction, the
Company's directors may resign and new directors may be appointed without any vote by stockholders.

It is likely that the Company will acquire its participation in a business opportunity through the
issuance of Common Stock or other securities of the Company.  Although the terms of any such
transaction cannot be predicted, it should be noted that in certain circumstances the criteria for
determining whether or not an acquisition is a so-called "tax free" reorganization under the Internal
Revenue Code of 1986, depends upon the acquisition by the acquiring company of at least 80% of the
outstanding shares of the Company to be acquired.  In order to acquire 80% or more of the outstanding
stock of a business to be acquired, it is likely that the Company would be required to issue a substantial
number of shares.  This could result in substantial additional dilution in the equity of those who were
stockholders of the Company prior to such reorganization.  Any such issuance of additional shares might
also be done simultaneously with a sale or transfer of shares representing a controlling interest in the
Company by the current officers, directors and principal shareholders. (See "Description of Business -
General").

It is anticipated that any securities issued in any reorganization would be issued in reliance upon
exemptions, if any are available, from registration under applicable federal and state securities laws.  In
some circumstances, however, as a negotiated element of the transaction, the Company may agree to
register such securities either at the time the transaction is consummated, or under certain conditions at
specified times thereafter.  The issuance of substantial additional securities and their potential sale into
any trading market that might develop in the Company's securities may have a depressive effect upon
such market.

The Company will participate in a business opportunity only after the negotiation and execution
of a written agreement.  Although the terms of such agreement cannot be predicted, generally such an
agreement would require specific representations and warranties by all of the parties thereto, specify
certain events of default, detail the terms of closing and the conditions which must be satisfied by each of
the parties thereto prior to such closing, outline the manner of bearing costs if the transaction is not
closed, set forth remedies upon default, and include miscellaneous other terms.

Competition

The Company expects to encounter substantial competition in its efforts to locate attractive
opportunities, primarily from business development companies, venture capital partnerships and
corporations, venture capital affiliates of large industrial and financial companies, small investment
companies, and wealthy individuals.  Many of these entities will have significantly greater experience,
resources and managerial capabilities than the Company and will therefore be in a better position than the
Company to obtain access to attractive business opportunities. The Company also will experience
competition from other public "blind pool" companies, many of which may have more funds available
than does the Company.

Administrative Offices

The Company currently maintains a mailing address at  4807 S. Zang Way, Morrison, Colorado
80465, which is the office address of its President.  The Company's telephone number there is (303) 979-2404.

Other than this mailing address, the Company does not currently maintain any other office
facilities, and does not anticipate the need for maintaining office facilities at any time in the foreseeable
future.  The Company pays no rent or other fees for the use of this mailing address.

Employees

The Company is a development stage company and currently has no employees.  Management of
the Company expects to use consultants, attorneys and accountants as necessary, and does not anticipate
a need to engage any full-time employees so long as it is seeking and evaluating business opportunities.
The need for employees and their availability will be addressed in connection with the decision whether
or not to acquire or participate in specific business opportunities.  No remuneration will be paid to the
Company's officers except as set forth under "Executive Compensation" and under "Certain
Relationships and Related Transactions."

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.  Except for historical matters, the
matters discussed in this Form 10-KSB are forward-looking statements based on current expectations,
and involve risks and uncertainties.  Forward-looking statements include, but are not limited to,
statements under the following headings:

> (i)         "Description of Business - General" - the general description of the Company's plan to seek a
> merger or acquisition  candidate, and the types of business opportunities that may be pursued.
> 
> (ii)         "Description of Business - Investigation and Selection of Business Opportunities" - the steps
> which may be taken to investigate prospective business opportunities, and the factors which may be used
> in selecting a business opportunity.
> 
> (iii)         "Description of Business - Form of Acquisition" - the  manner in which the Company may
> participate in a business acquisition.

The Company wishes to caution the reader that there are many  uncertainties and unknown
factors which could affect its ability to carry out its business plan in the manner described herein.

ITEM 2.        DESCRIPTION OF PROPERTY.

The Company currently maintains a mailing address at 4807 S. Zang Way, Morrison, Colorado
80465, which is the address of its President.  The Company pays no rent for the use of this mailing
address, however, for financial statement purposes, the Company is accruing $50 per month as additional
paid-in capital for this use.  The Company does not believe that it will need to maintain an office at any
time in the foreseeable future in order to carry out its plan of operations described herein.  The
Company's telephone number is (303) 979-2404.

The Company currently has no investments in real estate, real estate mortgages, or real estate
securities, and does not anticipate making any such investments in the future.  However, the policy of the
Company with respect to investment in real estate assets could be changed in the future without a vote of
security holders.

ITEM 3.        LEGAL PROCEEDINGS.

The Company is not a party to any pending legal proceedings, and no such proceedings are
known to be contemplated.  No director, officer or affiliate of the Company, and no owner of record or
beneficial owner of more than five percent (5%) of the securities of the Company, or any associate of any
such director, officer or security holder is a party adverse to the Company or has a material interest
adverse to the Company in reference to pending litigation.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF  SECURITY HOLDERS

No matters were submitted to a vote of the security holders of the Company during the fourth
quarter of the fiscal year which ended August 31, 2002.

PART II

ITEM 5.        MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Although the Company's shares were approved for trading on the OTC Bulletin Board on
approximately November 19, 1998, under the trading symbol "SBSQ," no actual public trading of such
shares has ever occurred and no bid or asked prices have been posted.  It is not anticipated that any actual
trading activity will occur until the Company has completed a merger or acquisition transaction.  The
Company's securities are currently held of record by a total of approximately 62 persons.

No dividends have been declared or paid on the Company's securities, and it is not anticipated
that any dividends will be declared or paid in the foreseeable future.

ITEM 6.        
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Certain statements in this report, including statements in the following discussion which are not
statements of historical fact, are what are known as "forward looking statements," which are basically
statements about the future.  For that reason, these statements involve risk and uncertainty since no one
can accurately predict the future.  Words such as "plans," "intends," "will," "hopes," "seeks,"
"anticipates," "expects  "and the like often identify such forward looking statements, but are not the only
indication that a statement is a forward-looking statement.  Such forward looking statements include
statements concerning our plans and objectives with respect to the present and future operations of the
Company, and statements which express or imply that such present and future operations will or may
produce revenues, income or profits.  Numerous factors and future events could cause the Company to
change such plans and objectives or fail to successfully implement such plans or achieve such objectives,
or cause such present and future operations to fail to produce revenues, income or profits.  Therefore, the
reader is advised that the following discussion should be considered in light of the discussion of risks and
other factors contained in this report on Form 10KSB and in the Company's other filings with the
Securities and Exchange Commission.   No statements contained in the following discussion should be
construed as a guarantee or assurance of future performance or future results.

Liquidity and Capital Resources

As of August 31, 2002, the Company remains in the development stage.  For the fiscal year
ended August 31, 2002, the Company's balance sheet reflects current asset and total assets of $8, and
total current liabilities of $0.

Results of Operations

During the period from August 27, 1997 (inception) through August 31, 2002, the Company has
accumulated a deficit of $2,067,716.  This deficit is primarily the result of a $2,000,000 valuation
allowance taken against a promissory note from American Recruitment Conferences, Inc., a California
corporation ("ARC") and Workseek.com, Inc., a California corporation ("Workseek").  The promissory
note was issued to the Company to evidence a loan made in conjunction with execution of an Agreement
and Plan of Reorganizaton with ARC and Workseek, dated August 30, 1999.  The proposed transaction
was not consummated and recovery of the amount due under the promissory note was doubtful.  As a
result, as of August 31, 2000, the promissory note receivable was offset by a full allowance for
realization.

During the period from inception to August 31, 2002, the Company has engaged in no significant
operations other than organizational activities, acquisition of capital, preparation and filing of the
registration of its securities under the Securities Exchange Act of 1934, as amended, compliance with its
periodical reporting requirements, and efforts to locate a suitable merger or acquisition candidate. No
revenues were received by the Company during this period.

Plan of Operations

From the date of filing of its registration statement under the Securities Exchange Act of 1934
(December 29, 1997) until the end of the fourth quarter of 2001, the Company filed all required periodic
reports under the Securities Exchange Act of 1934.  After completing the filing of the report on Form
10KSB for the period ended August 31, 2001, the Company ceased filing reports in order to avoid
incurring additional legal and accounting expenses.

After the 2001 fiscal year, the Company remained dormant throughout the fiscal years ending
Agust 31, 2002 and August 31, 2003.  The Company incurred no expenses for legal and accounting fees
in 2002 and 2003, and it also ceased all efforts related to seeking a suitable merger or acquisition
candidate during the period it remained dormant.

Plan of Operations

The Company's plan of operations since August 31, 2001 was to remain dormant in order to
avoid incurring legal and accounting fees related to compliance with its reporting obligations. However,
in February 2004 there was a change of control, and the Company elected to begin taking the steps
necessary to file all delinquent reports and to once again become current in compliance with its reporting
obligations under the Securities Exchange Act of 1934. As of the date of filing of this report on Form
10KSB for the period ended August 31, 2002, the Company is continuing with its efforts at compliance
with its reporting obligations under the Securities Exchange Act of 1934.

For the fiscal year ending August 31, 2004, the Company's plan of operations is to remain current
in compliance with its reporting obligations under the Securities Exchange Act of 1934 and to engage in
efforts to locate a suitable merger or acquisition candidate. The Company will require additional capital
in order to pay the costs associated with making required filings and seeking out suitable merger or
acquisition candidates.

Need for Additional Financing

The Company will require additional capital in order to meet its cash needs for the next year,
including the costs of compliance with the continuing reporting requirements of the Securities Exchange
Act of 1934, as amended.

No specific commitments to provide additional funds have been  made by management or other
stockholders, and the Company has no current plans, proposals, arrangements or understandings with
respect to the sale or issuance of additional securities prior to the location of a  merger or acquisition
candidate.  Accordingly, there can be no assurance that any additional funds will be available to the
Company to allow it to cover its expenses.  Notwithstanding the foregoing, to the extent that additional
funds are required, the Company anticipates receiving such funds in the form of loans or advancements
from current shareholders without issuance of additional shares or other securities, or through the private
placement of restricted securities rather than through a public offering.

The Company may also seek to compensate providers of services by issuances of stock in lieu of
cash.  For information as to the Company's policy in regard to payment for consulting services, see
"Certain Relationships and Transactions."

ITEM 7.        	FINANCIAL STATEMENTS.

See the following pages.



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**SUNBURST ACQUISITIONS III, INC.**

(A Development Stage Company)

|Independent Auditor's Report                | F-1
|------------------------------------------- | ---
|Balance Sheet                               | F-2
|Statements of Operations                    | F-3
|Statement of Stockholders' Equity (Deficit) | F-4
|Statement of Stockholders' Equity (Deficit) | F-5
|Statements of Cash Flows                    | F-6
|Notes to Financial Statements               | F-7



---

****

|**Larry O'Donnell, CPA, P.C.Telephone (303) 745-4545** | 2228 South Fraser Street, Unit 1Aurora, Colorado 80014
|------------------------------------------------------ | ------------------------------------------------------

**INDEPENDENT AUDITORS' REPORT**

Board of Directors

Sunburst Acquisition III, Inc.

I have audited the accompanying balance sheet of Sunburst Acquisition III, Inc. as of August 31, 2002,
and the related statements of operations, changes in stockholders' equity and cash flows for each of the
two fiscal years then ended and for the period from inception August 27, 1997 to August 31, 2002.
These financial statements are the responsibility of the Company's management.  My responsibility is to
express an opinion on these financial statements based on my audits.  The financial statements of
Sunburst Acquisition III, Inc. for the period from August 27, 1997  (Date of Inception) to August 31,
2001 , were audited by other auditors whose report dated October 16, 2001, expressed an unqualified
opinion on those statements.

I conducted my audits in accordance with generally accepted auditing standards in the United States of
America.   Those standards require that I 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.  I believe that my audits provide a reasonable
basis for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Sunburst Acquisition III, Inc. as of August 31, 2002, and the results of its operations
and their cash flows for each of the year then ended and for the period from inception August 27, 1997 to
August 31, 2002, in conformity with generally accepted accounting principles in the United States of
America.

**Larry O'Donnell, CPA, P.C.**

April 27, 2004

F-1



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**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**BALANCE SHEET**

**August 31, 2002**

|                                         | **ASSETS**                                                 |                                                 |                              
|---------------------------------------- | ---------------------------------------------------------- | ----------------------------------------------- | -----------------------------
|                                         |                                                            |                                                 |                              
|CURRENT ASSETS**                         |                                                            |                                                
|                                         | Cash and cash equivalents                                  |                                                 | $                           8
|                                         | Note receivable (net of valuation allowance of $2,000,000) | -                                              
|                                         |                                                            |                                                 |                              
|                                         |                                                            | ****Total current assets                        | ****                         
|                                         |                                                            |                                                 |                              
|***************OTHER ASSETS***           | ****                                                       |                                                
|                                         | Cash - escrow****                                          | ****                                            | -                            
|                                         | Stock subscriptions receivable****                         | ****                                            | -                            
|                                         | Notes receivable assigned****                              | ****                                            | -                            
|                                         |                                                            |                                                 |                              
|                                         |                                                            | ************TOTAL ASSETS                        | ****                         
|                                         |                                                            |                                                 |                              
|                                         | **LIABILITIES AND STOCKHOLDERS' EQUITY**                   |                                                 |                              
|                                         |                                                            |                                                 |                              
|CURRENT LIABILITIES**                    |                                                            |                                                
|                                         | Accounts payable                                           |                                                 | $                           -
|                                         |                                                            |                                                 |                              
|                                         |                                                            | ****Total current liabilities                   | ****                         
|                                         |                                                            |                                                 |                              
|***************STOCKHOLDERS' EQUITY***** |                                                            |                                                
|                                         | Preferred stock, no par value; 20,000,000 shares           |                                                 |                              
|                                         |                                                            | authorized; No shares issued and outstanding    |                              
|                                         | Common stock, no par value; 100,000,000                    |                                                 |                              
|                                         |                                                            | shares authorized; 33,303,840 shares issued and |                              
|                                         |                                                            | outstanding                                     |                              
|                                         | Additional paid-in capital                                 |                                                 | 47,289                       
|                                         | Common stock subscribed                                    |                                                 | -                            
|                                         | Deficit accumulated during the development stage           |                                                 | (2,067,716)                  
|                                         |                                                            |                                                 |                              
|                                         |                                                            | Total stockholders' equity                      | ****                         
|                                         |                                                            |                                                 |                              
|                                         |                                                            | ****TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY  | $                           8

The accompanying notes are an integral part of the financial statements.

F-2



---

**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**STATEMENTS OF OPERATIONS**

|                           |                              |                              |                        | For the period                 | ****               |                        |                 |                 
|-------------------------- | ---------------------------- | ---------------------------- | ---------------------- | ------------------------------ | ------------------ | ---------------------- | --------------- | ----------------
|                           |                              |                              |                        | **************from inception** | ****               | **For the year**       | ****            | **For the year**
|****                       |                              |                              |                        | **(August 27, 1997)**          | ****               | **ended**              | ****            | **ended**       
|****                       |                              |                              |                        | **To August 31**               | ****               | **August 31,**         | ****            | **August 31,**  
|****                       |                              |                              |                        | **2002**                       | ****               | **2002**               | ****            | **2001**        
|****                       |                              |                              |                        |                                |                    |                        |                 |                 
|REVENUES                   |                              | $                          - |                        | $                        -     |                    | $                    -
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|EXPENSES                   |                              |                              |                        |                                |                    |                       
|                           | Amortization                 |                              | 300                    |                                | -                  |                        | -              
|                           | Consulting fees              |                              | 4,935                  |                                | -                  |                        | -              
|                           | General office               |                              | 2,178                  |                                | 340                |                        | 872            
|                           | Legal fees                   |                              | 31,000                 |                                | 4,838              |                        | 8,484          
|                           | Professional fees            |                              | 19,758                 |                                | 1,936              |                        | 4,116          
|                           | Rent                         |                              | 3,000                  |                                | 600                |                        | 600            
|                           | Taxes and licenses           |                              | 132                    |                                | 25                 |                        | -              
|                           | Transfer agent               |                              | 6,413                  |                                | 1,428              |                        | 289            
|                           | Valuation allowance          |                              | 2,000,000              |                                | -                  |                        | -              
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|                           |                              | Total expenses               |                        | 2,067,716                      |                    | 9,167                  |                 | 14,361          
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|NET LOSS                   |                              | (2,067,716)                  |                        | (9,167)                        |                    | (14,361)              
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|Accumulated deficit        |                              |                              |                        |                                |                    |                       
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|                           | Balance, beginning of period |                              | -                      |                                | (2,058,549)        |                        | (2,044,188)    
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|                           | Balance, end of period       |                              | $          (2,067,716) |                                | $      (2,067,716) |                        | $   (2,058,549)
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|NET LOSS PER SHARE         |                              | $                  (NIL)     |                        | $              (NIL)           |                    | $           (NIL)     
|                           |                              |                              |                        |                                |                    |                        |                 |                 
|WEIGHTED AVERAGE NUMBER OF |                              |                              |                        |                                |                    |                       
|SHARES OF COMMON STOCK     |                              |                              |                        |                                |                    |                       
|AND COMMON STOCK           |                              |                              |                        |                                |                    |                       
|EQUIVALENTS OUTSTANDING    |                              | 34,455,451                   |                        | 33,303,840                     |                    | 33,303,840            

The accompanying notes are an integral part of the financial statements.

F-3



---

**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**

|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          | Deficit           | **** |              
|--------------------------------------------- | -------------------------------------- | -------- | ------------ | ------------------- | ---------- | --------------------- | ----------------- | ---------- | ---- | ------------------- | -------- | ----------------------- | -------- | ----------------- | ---- | -------------
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          | accumulated       |      | **Total**    
|****                                          |                                        |          |              | **Preferred stock** | ****       | **Common stock**      | ****              | **Common** | **** | **Additional**      | ****     | **during the**          | ****     | **stockholders'**
|****                                          |                                        |          |              | **Number of**       | ****       |                       | ******Number of** | ****       |      | ******Stock**       | ****     | **paid-in**             | ****     | **development**   | **** | **equity**   
|****                                          |                                        |          |              | **shares**          | **Amount** | ****                  | **shares**        | **Amount** | **** | **Subscribed**      | ****     | **capital**             | ****     | **stage**         | **** | **(deficit)**
|****                                          |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Preferred stock issued for cash,              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |         
|                                              | August 27,1997 at $0.001 per share     | 80,000   | $      8,000 |                     | -          | $                   - |                   | -          |      | $                 - |          | $                     - |          | $          8,000 
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Common stock issued for services,             |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |         
|                                              | August 27, 1997 at $0.000062 per share | -        | -            |                     | 31,269,600 | 1,935                 |                   | -          |      | -                   |          | -                       |          | 1,935            
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Net loss for the period ended August 31, 1997 | -                                      | -        |              | -                   | -          |                       | -                 |            | -    |                     | (1,935)  |                         | (1,935) 
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Balance, August 31, 1997                      |                                        | 80,000   | 8,000        |                     | 31,269,600 | 1,935                 |                   | -          |      | -                   |          | (1,935)                 |          | 8,000            
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Rent at no charge                             |                                        |          | -            | -                   |            | -                     | -                 |            | -    |                     | 600      |                         | -        |                   | 600 
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Common stock issued for services,             |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |         
|                                              | July 1998 at $0.00186 per share        | -        | -            |                     | 1,616,000  | 3,000                 |                   | -          |      | -                   |          | -                       |          | 3,000            
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Net loss for the year ended August 31, 1999   | -                                      | -        |              | -                   | -          |                       | -                 |            | -    |                     | (10,305) |                         | (10,305)
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Balance, August 31, 1998                      |                                        | 80,000   | 8,000        |                     | 32,885,600 | 4,935                 |                   | -          |      | 600                 |          | (12,240)                |          | 1,295            
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Rent at no charge                             |                                        |          | -            | -                   |            | -                     | -                 |            | -    |                     | 600      |                         | -        |                   | 600 
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Common stock issued for cash,                 |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |         
|                                              | January 1999 at $0.00155 per share     | -        | -            |                     | 4,848,000  | 7,500                 |                   | -          |      | -                   |          | -                       |          | 7,500            
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Preferred stock converted to common,          |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |         
|                                              | May 1999 at $0.00309 per share         | (80,000) | (8,000)      |                     | 2,585,600  | 8,000                 |                   | -          |      | -                   |          | -                       |          | -                
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Common stock subscribed,                      |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                  
|                                              | year ended August 31, 1999             | -        | -            |                     | -          | -                     |                   | 2,000,000  |      | -                   |          | -                       |          | 2,000,000        
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Net loss for the year ended August 31, 1999   | -                                      | -        |              | -                   | -          |                       | -                 |            | -    |                     | (9,031)  |                         | (9,031) 
|                                              |                                        |          |              |                     |            |                       |                   |            |      |                     |          |                         |          |                   |      |              
|Balance, August 31, 1999                      |                                        | -        | -            |                     | 40,319,200 | 20,435                |                   | 2,000,000  |      | 1,200               |          | (21,271)                |          | 2,000,364        

The accompanying notes are an integral part of the financial statements.

F-4



---

**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)**

|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             | **Deficit**           | **** |              
|--------------------------------------------- | --------------------------------- | - | ----------------- | ------------------- | ---------- | ---------------- | ----------------- | ----------- | ----- | ------------------- | ----------- | -------------------- | ----------- | --------------------- | ---- | -------------
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             | ********accumulated   | **** | **Total**    
|****                                          |                                   |   |                   | **Preferred stock** | ****       | **Common stock** | ****              | **Common**  | ****  | **Additional**      | ****        | **during the**       | ****        | **stockholders'**    
|****                                          |                                   |   |                   | **Number of**       | ****       |                  | ******Number of** | ****        |       | ******Stock**       | ****        | **paid-in**          | ****        | **development**       | **** | **equity**   
|****                                          |                                   |   |                   | **shares**          | **Amount** | ****             | **shares**        | **Amount**  | ****  | **Subscribed**      | ****        | **capital**          | ****        | **stage**             | **** | **(deficit)**
|****                                          |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Issuance of common stock subscribed,          |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |            
|                                              | September 1999 at $2.00 per share | - | $               - |                     | 1,000,000  | $   2,000,000    |                   | (2,000,000) |       | $                 - |             | $                  - |             | $                   -
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Voluntary cancellation of outstanding shares, |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                     
|                                              | September 1999                    |   | -                 | -                   |            | (8,015,360)      | -                 |             | -     |                     | -           |                      | -           |                       | -   
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Rent at no charge                             |                                   |   | -                 | -                   |            | -                | -                 |             | -     |                     | 600         |                      | -           |                       | 600 
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Expenses paid by shareholder                  | -                                 | - |                   | -                   | -          |                  | -                 |             | 1,444 |                     | -           |                      | 1,444      
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Net loss for the year ended August 31, 2000   | -                                 | - |                   | -                   | -          |                  | -                 |             | -     |                     | (2,022,917) |                      | (2,022,917)
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Balance, August 31, 2000                      |                                   | - | -                 |                     | 33,303,840 | 2,020,435        |                   | -           |       | 3,244               |             | (2,044,188)          |             | (20,509)             
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Rent at no charge                             |                                   |   | -                 | -                   |            | -                | -                 |             | -     |                     | 600         |                      | -           |                       | 600 
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Expenses paid by shareholder                  |                                   | - | -                 |                     | -          | -                |                   | -           |       | 30,962              |             | -                    |             | 30,962               
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Net loss for the year ended August 31, 2001   | -                                 | - |                   | -                   | -          |                  | -                 |             | -     |                     | (14,361)    |                      | (14,361)   
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Balance, August 31, 2001                      |                                   | - | -                 |                     | 33,303,840 | 2,020,435        |                   | -           |       | 34,806              |             | (2,058,549)          |             | (3,308)              
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Rent at no charge                             |                                   |   | -                 | -                   |            | -                | -                 |             | -     |                     | 600         |                      | -           |                       | 600 
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Expenses paid by shareholder                  |                                   | - | -                 |                     | -          | -                |                   | -           |       | 11,884              |             | -                    |             | 11,884               
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Net loss for the year ended August 31, 2002   | -                                 | - |                   | -                   | -          |                  | -                 |             | -     |                     | (9,168)     |                      | (9,168)    
|                                              |                                   |   |                   |                     |            |                  |                   |             |       |                     |             |                      |             |                       |      |              
|Balance, August 31, 2002                      |                                   | - | $             -   |                     | 33,303,840 | $  2,020,435     |                   | -           |       | $      47,290       |             | $ (2,067,717)        |             | $               8    

The accompanying notes are an integral part of the financial statements.

F-5



---

**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**STATEMENTS OF CASH FLOWS**

|                                     |                                |                                         |                                          | For the period                 | ****             |                   |          |                 
|------------------------------------ | ------------------------------ | --------------------------------------- | ---------------------------------------- | ------------------------------ | ---------------- | ----------------- | -------- | ----------------
|                                     |                                |                                         |                                          | **************from inception** | ****             | **For the year**  | ****     | **For the year**
|****                                 |                                |                                         |                                          | **(August 27, 1997)**          | ****             | **ended**         | ****     | **ended**       
|****                                 |                                |                                         |                                          | **To August 31**               | ****             | **August 31,**    | ****     | **August 31,**  
|****                                 |                                |                                         |                                          | **2002**                       | ****             | **2002**          | ****     | **2001**        
|****                                 |                                |                                         |                                          |                                |                  |                   |          |                 
|CASH FLOWS FROM OPERATING ACTIVITIES |                                |                                         |                                          |                                |                 
|Net loss                             | $           (2,067,716)        |                                         | $          9,167                         |                                | $       (14,361)
|Adjustments to reconcile             |                                |                                         |                                          |                                |                 
|                                     | net loss to net cash flows     |                                         |                                          |                                |                  |                  
|                                     | from operating activities:     |                                         |                                          |                                |                  |                  
|                                     |                                | Amortization                            | 300                                      |                                | -                |                   | -       
|                                     |                                | Rent expense                            | 2,400                                    |                                | -                |                   | 600     
|                                     |                                | Stock issued for consulting fees        | 4,935                                    |                                | -                |                   | -       
|                                     |                                | Increase (decrease) in accounts payable | -                                        |                                | (5,209)          |                   | (15,638)
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|                                     |                                |                                         | Net cash flows from operating activities | (2,060,081)                    |                  | (10,418)          |          | (29,399)        
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|CASH FLOWS FROM INVESTING ACTIVITIES |                                |                                         |                                          |                                |                 
|                                     | Increase in organization costs | (300)                                   |                                          | -                              |                  | -                
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|                                     |                                |                                         | Net cash flows from investing activities | (300)                          |                  | -                 |          | -               
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|CASH FLOWS FROM FINANCING ACTIVITIES |                                |                                         |                                          |                                |                 
|                                     | **** Issuance of common stock  | 2,007,500                               |                                          | -                              |                  | -                
|                                     | Issuance of preferred stock    | 8,000                                   |                                          | -                              |                  | -                
|                                     | Additional paid-in capital     | 44,889                                  |                                          | 12,483                         |                  | 30,962           
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|                                     |                                |                                         | Net cash flows from financing activities | 2,060,389                      |                  | 12,483            |          | 30,962          
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|NET INCREASE (DECREASE) IN CASH      |                                |                                         |                                          |                                |                 
|                                     | **** AND CASH EQUIVALENTS      | 8                                       |                                          | (1,893)                        |                  | 1,563            
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|********CASH AND CASH EQUIVALENTS,   |                                |                                         |                                          |                                |                 
|                                     | **** BEGINNING OF PERIOD       | -                                       |                                          | 1,901                          |                  | 338              
|                                     |                                |                                         |                                          |                                |                  |                   |          |                 
|********CASH AND CASH EQUIVALENTS,   |                                |                                         |                                          |                                |                 
|                                     | **** END OF PERIOD             | $                          8            |                                          | $                 8            |                  | $           1,901

****The accompanying notes are an integral part of the financial statements.

F-6



---

**Sunburst Acquisitions III, Inc.**

**(A Development Stage Company)**

**NOTES TO FINANCIAL STATEMENTS**

**August 31, 2002**

**(Unaudited)**

**1.        Summary of Significant Accounting Policies**

**Development Stage Company**

Sunburst Acquisitions III, Inc. (a development stage company) (the "Company") was incorporated under the
laws of the State of Colorado on August 27, 1997.  The initial principal office of the corporation is 2082
Cherry Street, Denver, Colorado 80207.

The Company is a new enterprise in the development stage as defined by Statement No. 7 of the Financial
Accounting Standards Board. It has no full-time employees and owns no real property. The Company intends
to operate as a capital market access corporation by registering with the U.S. Securities and Exchange
Commission under the Securities Exchange Act of 1934.  After this, the Company intends to seek to acquire
one or more existing businesses which have existing management, through merger or acquisition.
Management of the Company will have virtually unlimited discretion in determining the business activities in
which the Company might engage. In 1999, the Company invested $2,000,000 in an acquisition candidate as
more fully described in footnote 6.  There has been no further activity in the Company since this investment.

**Accounting Method**

The Company records income and expenses on the accrual method.

**Loss per Share**

Loss per share was computed using the weighted average number of shares of common stock outstanding
during the period.

**Organization Costs**

Costs to incorporate the Company were originally capitalized to be amortized over a sixty-month period.
With the adoption of SOP 98-5, the unamortized portion of these costs was written off to expense during the
year ended August 31, 1999.

**Financial Instruments**

Unless otherwise indicated, the fair value of all reported assets and liabilities which represents financial
instruments (none of which are held for trading purposes) approximate the carrying values of such amounts.

**Statements of Cash Flows**

For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments
purchased with an original maturity of three months or less to be cash equivalents.

**Use of Estimates**

The preparation of the Company's financial statements in conformity with generally accepted accounting
principles requires the Company's management to make estimates and assumptions that effect the amounts
reported in these financial statements and accompanying notes.  Actual results could differ from those
estimates.

**Consideration of Other Comprehensive Income Items**

SFAF 130 - Reporting Comprehensive Income, requires companies to present comprehensive income
(consisting primarily of net income plus other direct equity changes and credits) and its components as part of
the basic financial statements.  For the year ended August 31, 2002, the Company's financial statements do not
contain any changes in equity that are required to be reported separately in comprehensive income.

**Stock Basis**

Shares of common stock issued for other than cash have been assigned amounts equivalent to the fair value of
the service or assets received in exchange.

**2.        Stockholders' Equity**

As of August 29, 1999, 2,035,000 shares of the Company's no par value common stock had been issued for
consulting services provided. The services were converted to shares at $0.001 per share.  As of August 29,
1999, 300,000 shares had been issued for cash at $0.025 per share, and 160,000 additional shares are
outstanding as a result of the conversion of preferred stock at $0.050 per share.

On August 30, 1999, the Company underwent a 16.16 for 1 forward stock split of its then outstanding
common shares.  In addition, and in anticipation of a merger that was not consummated, the Company sold in
a private placement a total of 1,000,000 post-split common shares at $2.00 per share.  Proceeds were received
in the form of $1,400,000 cash and $600,000 in assigned conversion agreements, under which creditors of the
merger candidate had agreed to convert prior loans to the merger candidate into common shares at the rate of
$2.00 per share.  The private placement was completed in September 1999.

Officers and other stockholders also voluntarily cancelled 8,015,360 common shares as part of the agreement
in September 1999.

All share and per share amounts have been restated.  A total of 33,303,840 shares were outstanding at August
31, 2002.

As of August 31, 2002, all shares of the Company's no par value Series A preferred stock have been
converted to common stock.

**3.        Related Party Transactions**

Following the conversion of their preferred shares, the Company's officers and directors were the owners of
26,082,240 shares of common stock.  These common shares owned by the directors account for approximately
78% of the Company's issued and outstanding shares.

The Company's President is providing office space at no charge to the Company.  For purposes of the
financial statements, the Company is accruing $50 per month as additional paid-in capital for this use.

**4.        Income Taxes**

The Company has Federal net operating loss carryforwards of approximately $2,064,700 expiring during the
years 2018 and 2021.  The tax benefit of these net operating losses is approximately $392,000 and has been
offset by a full allowance for realization.  This carryforward may be limited upon the consummation of a
business combination under IRC Section 381.  For the years ended August 31, 2002 and 2001, the valuation
allowance increased by approximately $363 and $2,734, respectively.

**Statement of Cash Flows**

Non-cash investing and financing activities for the year ended August 31, 2000 included the assignment of
notes receivable for stock in the amount of $600,000.  The stock subscription receivable of $129,000 was
collected in September 1999.

**Notes Receivable**

In connection with a proposed merger with American Recruitment Systems, Inc. ("ARS"), the cash proceeds
from a private placement were advanced to ARS pursuant to a promissory note and security agreement in the
amount of $1,400,000.  This loan, which is secured by all of the merger candidate's right of title and interest
in accounts, equipment, general intangibles, inventory, negotiable collateral, and proceeds from the
disposition of such collateral, was due and payable with interest at 10% per year on January 23, 2000.  The
merger did not occur, no payment has been made, and collection is doubtful.  The note receivable has been
offset by a full allowance for realization.

In addition, agreements between third-party investors and ARS to acquire up to $600,000 in equity interests in
ARS were assigned to the Company, which issued its own shares to the investors in lieu of ARS shares.  This
increased the amount loaned or otherwise invested by the Company in ARS to $2,000,000.  No payment has
been received on the $600,000 in assigned conversion agreements and a full allowance for realization has
been recorded.

F-7



---

**ITEM 8.        	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.**

None.

**ITEM 8A.        CONTROLS AND PROCEDURES.**

The Securities and Exchange Commission defines the term disclosure controls and procedures to mean a
company's controls and other procedures that are designed to ensure that information required to be disclosed
in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in the Securities and Exchange Commissions rules
and forms.   The Company maintains such a system of controls and procedures in an effort to ensure that all
information which it is required to disclose in the reports it files under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified under the SEC's rules and
forms.

Based on an evaluation performed, the Company's certifying officers have concluded that the disclosure
controls and procedures were effective as of August 31, 2002, to provide reasonable assurance of the
achievement of these objectives.

There was no change in the Company's internal control over financial reporting during the fiscal year ended
August 31, 2002, that has materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

**PART  III**

**ITEM 9.        
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.**

The directors and executive officers currently serving the Company are as follows:

|Name             | Age | Positions Held and Tenure                            
|---------------- | --- | -----------------------------------------------------
|Jay Lutsky       | 61  | President and a Director since August 1997           
|Michael R. Quinn | 81  | Secretary/Treasurer, and a Director since August 1997

The directors named above will serve until the next annual meeting of the Company's stockholders.
Thereafter, directors will be elected for one-year terms at the annual stockholders' meeting.  Officers will hold
their positions at the pleasure of the board of directors, absent any employment agreement, of which none
currently exists or is contemplated.  There is no arrangement or understanding between any of the directors or
officers of the Company and any other person pursuant to which any director or officer was or is to be
selected as a director or officer.

The directors and officers will devote their time to the Company's affairs on an "as needed" basis,
which, depending on the circumstances, could amount to as little as two hours per month, or more than forty
hours per month, but more than likely will fall within the range of five to ten hours per month.

Biographical Information

JAY LUTSKY

Mr. Lutsky has served as President, and as a Director of the Company since its inception.  From 1968
to 1974, Mr. Lutsky was employed at United Bank of Denver in various management positions, including
Guaranteed Check Manager, Corporate Programs Manager and Executive Lending Officer.  From April 1974
through April 1980, Mr. Lutsky was involved in the publishing and ski promotions business, serving as
President of Mountain States Ski Association, a company he helped to start.  From August 1983 through
September 1985, Mr. Lutsky worked in the positions of General Manager of the SumFun Program, Regional
marketing Manager, and Investor Relations Manager for Gold C Enterprises, Inc., a publicly-traded Colorado
corporation that published discount coupon books.  Since May of 1980, Mr. Lutsky has done business as
Dolphin & Associates, a private consulting firm and he has managed his personal investment portfolio.

Mr. Lutsky has served on the board and been president of several public companies.  From December
1986 through May, 1990, Mr. Lutsky served as president of Eagle Venture Acquisitions, Inc. ("Eagle").  Eagle
merged with Network Financial Services, Inc. ("Network") in May 1990.  Mr. Lutsky continued on the board
of Network which traded on the NASDAQ system until December, 1993.  Mr. Lutsky was a vice-president
and served on the board of Starlight Acquisitions, Inc. ("Starlight"), a blank check offering.  Starlight merged
with Toucan Gold Corporation ("Toucan"), TUGO-Bulletin Board, on May 10, 1996.  Mr. Lutsky now serves
as an advisor to the current board of directors of Toucan.  Until November, 1997, Mr. Lutsky was an officer
and served on the board of directors of Gatwick, Ltd., a Regulation A public company.  In November, 1997,
Gatwick, Ltd., changed its name to AIM Smart Corporation and completed a share acquisition transaction
with Smart AIM Corporation, a Michigan corporation.  Mr. Lutsky also  currently serves on the board of
directors of Sunburst Acquisitions V, Inc., Sunburst Acquisitions VII, Inc. and Sunburst Acquisitions VIII,
Inc., all of which are blind pool or blank check companies.

He earned a Bachelor of Science degree from Kent State University in 1967.

MICHAEL R. QUINN

Mr. Quinn has served as Secretary/Treasurer and Director of the Company since its inception.  He has
been involved with several development stage companies.  He consults with companies contemplating trading
publicly and his services consist of corporate structuring, management, accounting, productions, sales, etc.
Mr. Quinn earned the degrees of Metallurgical Engineer and Engineer of Mines at the Colorado School of
Mines in 1946.  He did graduate work and was employed as a research assistant at MIT

Mr. Quinn has served as a consultant to equity holders involved in a bankruptcy case, as a consultant
and lead plaintiff in three lawsuits, all of which have resulted in favorable  decisions for the plaintiff.

He served as President, Treasurer and Director of O.T.C. Capital Corporation ("OTC").  OTC
acquired Capital 2000.  He was a founder of American Leverage, Inc., and was its Secretary/Treasurer and a
Director until American Leverage, Inc. acquired Data National Corporation ("Data").  Data is active,
profitable and in a growth mode.  Until November, 1997, Mr. Quinn was an officer and served on the board of
directors of Gatwick, Ltd., a Regulation A public company.  In November, 1997, Gatwick, Ltd., changed its
name to Smart Aim Corporation and completed a share acquisition transaction with Smart AIM Corporation, a
Michigan corporation.  Mr. Quinn also currently serves on the board of directors of  Sunburst Acquisitions VI,
Inc., Sunburst Acquisitions VII, Inc. and Sunburst Acquisitions VIII, Inc., all of which are blind pool or blank
check companies.

**Audit Committee.**

As of the date of this Annual Report, we have not appointed members to an audit committee and,
therefore, the respective role of an audit committee has been conducted by our Board of Directors. When
established, the audit committee''s primary function will be to provide advice with respect to our financial
matters and to assist the Board of Directors in fulfilling oversight responsibilities regarding finance,
accounting, tax and legal compliance. The audit committee''s primary duties and responsibilities will be to: (i)
serve as an independent and objective party to monitor our financial reporting process and internal control
system; (ii) review and appraise the audit efforts of our independent accountants; (iii) evaluate our quarterly
financial performance as well as compliance with laws and regulations; (iv) oversee management''s
establishment and enforcement of financial policies and business practices; and (v) provide and open avenue
of communication among the independent accountants, management and the board of directors.

Our Board of Directors has considered whether the regulatory provision of non-audit service is compatible
with maintaining the principal independent accountant's independence.

**Code of Ethics**

The Company has not yet adopted a code of ethics which applies to the chief executive officer, or principal
financial and accounting officer or controller, or persons performing similar functions.  The Company is a
"blind pool" or "blank check" company whose shares are not yet trading.

Compliance With Section 16(a) of the Exchange Act.

The Company's officers and directors plan to file an Annual Statement of Changes in Beneficial Ownership.

ITEM 10.        EXECUTIVE COMPENSATION.

No officer or director received any remuneration from the Company during the fiscal year.  Until the
Company acquires additional capital, it is not intended that any officer or director will receive compensation
from the Company other than reimbursement for out-of-pocket expenses incurred on behalf of the Company.
See "Certain Relationships and Related Transactions."  The Company has no stock option, retirement,
pension, or profit-sharing programs for the benefit of directors, officers or other employees, but the Board of
Directors may recommend adoption of one or more such programs in the future.

ITEM 11.         SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED STOCKHOLDER MATTERS.

The following table sets forth, as of the end of the Company's fiscal year ended August 31, 2002, the
number of shares of Common Stock owned of record and beneficially by executive officers, directors and
persons who hold 5.0% or more of the outstanding Common Stock of the Company.  Also included are the
shares held by all executive officers and directors as a group.

|Name and Address                                              | Number of Shares Owned
Beneficially | Percent of Class Owned
|------------------------------------------------------------- | ----------------------------------- | ----------------------
|Michael R. Quinn (1)2082 Cherry StreetDenver, Colorado  80207 | 13,024,960                          | 39.11%                
|Jay Lutsky(1)4807 S. Zang WayMorrison, CO  80465              | 13,057,280                          | 39.21%                
|All directors and executiveofficers (2 persons)               | 26,082,240                          | 78.32%                

(1)The person listed is an officer, a director, or both, of the Company.

**ITEM 12.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

No officer, director, promoter, affiliate or beneficial owner of the Company has, has had, or proposes
to have, any direct or indirect material interest in any asset proposed to be acquired by the Company through
security holdings, contracts, options, or otherwise.

The Company has adopted a policy under which any consulting or finder's fee that may be paid to a
third party for consulting services to assist management in evaluating a prospective business opportunity
would be paid in stock rather than in cash.  Any such issuance of stock would be made on an ad hoc basis.
Accordingly, the Company is unable to predict whether, or in what amount,  such stock issuance might be
made.

It is not currently anticipated that any salary, consulting fee, or finder's fee shall be paid to any of the
Company's directors or executive officers, or to any other affiliate of the Company except as described under
"Executive Compensation" above.

Although management has no current plans to cause the Company to do so, it is possible that the
Company may enter into an agreement with an acquisition candidate requiring the sale of all or a portion of
the Common Stock held by the Company's current stockholders to the acquisition candidate or principals
thereof, or to other individual or business entities, or requiring some other form of payment to the Company's
current stockholders, or requiring the future employment of specified officers and payment of salaries to them.
It is more likely than not that any sale of securities by the Company's current stockholders to an acquisition
candidate would be at a price substantially higher than that originally paid by such stockholders.  Any
payment to current stockholders in the context of an acquisition involving the Company would be determined
entirely by the largely unforeseeable terms of a future agreement with an unidentified business entity.

**ITEM 13.
        EXHIBITS AND REPORTS ON FORM 8-K.**

> (a)         The Exhibits listed below are filed as part of this Annual Report.3.1  Articles of Incorporation (incorporated by reference from Registration Statement
> on Form 10-SB filed with the Securities and Exchange Commission on December
> 29, 1997).3.2  Bylaws (incorporated by reference from Registration Statement on Form 10-SB
> filed with the Securities and Exchange Commission on December 29, 1997).31.1Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities
> Exchange Act of 1934, as amended.31.2Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities
> Exchange Act of 1934, as amended.32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
> 906 of the Sarbanes-Oxley Act of 2002.32.2 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
> 906 of the Sarbanes-Oxley Act of 2002.b.   No reports on Form 8-K were filed by the Company during the last quarter of its
> fiscal year ending August 31, 2002.

**ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES**

Audit Fees

The aggregate audit and audit related fees billed by Larry O'Donnell, CPA, P.C.
 for audit of the Company's annual financial
statements and for review of the Company's quarterly financial statements filed on  Form 10-QSB were
$1,250 for the fiscal year ended August 31, 2002. For the fiscal year ended August 31, 2001, Comiskey & Company's
audit related fees were $2,515.

Tax Fees

The aggregate fees billed by Larry O'Donnell, CPA, P.C.  for tax compliance, advice and
planning were $ 0 for the fiscal
year ended August 31, 2002, and  Comiskey & Company billed $ 304 for the fiscal year ended August 31, 2001.

All Other Fees

Neither Larry O'Donnell, CPA, P.C. or Comiskey & Company billed the Company for any products and services other than the foregoing during the
fiscal years ended August 31, 2002 and August 31, 2001.



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**SIGNATURES**

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

**SUNBURST ACQUISITIONS III, INC.**

By: /S/ JAY LUTSKYJay Lutsky  (Principal Executive Officer and Director)

Date:May 24, 2004

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

**SUNBURST ACQUISITIONS III, INC.**

By: /S/ JAY LUTSKYJay Lutsky  (Principal Executive Officer and Director)

By: /S/ MICHAEL R. QUINNMichael R. Quinn  (Principal Financial Officer and Director)

Date: May 24, 2004