**SECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

**FORM 10-KSB**

 

**(Mark one)**

**ý        ANNUAL REPORT PURSUANT TO SECTION 13 OR  15(d) OF THESECURITIES EXCHANGE ACT OF 1934 (Fee required)**

 

**For thefiscal year ended March 31, 2002**

 

**or**

 

**o        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 (No fee required)**

 

**For thetransition period from               to               **

 

**CommissionFile Number 0-12612**

 

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**IQUniverse, Inc.**

(Exact name of SmallBusiness Issuer in its Charter)

 

| **Minnesota**                                                     |   | **41-1442918**                        |
|-------------------------------------------------------------------|--------|---------------------------------------|
| (State or other  jurisdiction

of incorporation or  organization) |   | (IRS Employer

Identification Number) |

 

**Riverplace**

**65 Main Street SE, Suite 141**

**Minneapolis, Minnesota 55414**

(Address of principalexecutive offices)

 

**(612) 676-1436**

(Issuer’s TelephoneNumber, Including Area Code)

 

Former name, ifapplicable: **Calendar Capital, Inc**.

 

Check whether the issuer (1) filed all reports required to be filed bySection 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes ý

 

Check if no disclosure of delinquent filers pursuant to Item 405 ofRegulation S-B is contained in this form, and no disclosure will be contained,to the best of the registrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-KSB or anyamendment to this Form 10-KSB.  o

 

The issuer’s revenues for its most recent fiscal year were -$0-.

 

The aggregate market value of the shares of common stock as of March31, 2002 (based upon a bid price of $1.01 per share) held by nonaffiliates ofthe registrant was approximately $655,879.86.

 

Transitional Small Business Disclosure Format:  Yes   o   No   ý  

 

As of March 31, 2002, there were 649,386 shares of common stockoutstanding.

 

----

 

**PART I**

 

**ITEM 1.  BUSINESS**

 

*BusinessDevelopment*

 

IQUniverse, Inc., is a corporation organized underMinnesota law.  The corporation was formerly named Calendar Capital, Inc.and before that AorTech, Inc.  Angicor Limited, incorporated underMinnesota law November 16, 1981, was a predecessor of the Company. Angicor commenced operations in January of 1983 and sought protection from itscreditors by means of a bankruptcy proceeding under Chapter 11 of the UnitedStates Bankruptcy Code on July 15, 1988.  On February 2,1990, Angicormerged with Medical Funding Corporation, a Minnesota corporation incorporatedon October 19,1989.  Pursuant to the Articles of Merger, Angicor becamethe surviving corporation in the merger and its name was changed to AorTech,Inc.

 

Effective June 30, 1991, the Company, in a mergertransaction, acquired the operating assets and the business of A-1 Engineering,Inc., a Minnesota corporation (“A-1 Engineering”).  The majority of thoseassets were later sold back to the previous owners of A-1 Engineering.

 

Effective November 2, 1992, AorTech entered into anagreement to sell substantially all of its operating assets to Follow MotionLimited, a Scotland corporation.  The sale of substantially all ofAorTech’s operating assets was approved at a Special Meeting of Shareholdersheld on March 26, 1993.  At such meeting, the shareholders also approved achange in the name of the Company and on March 31, 1993, the name of thecorporation was changed to Calendar Capital, Inc.

 

In December 1994, lacking any operating capital, theCompany closed down its offices, released its remaining employees and ceasedoperations.  The Company remained dormant until July 1999.

 

In July 1999, a new Board of Directors was appointedwhich arranged for a cash infusion sufficient to bring the Company current inits obligations as a public company and elected new officers anddirectors.  The Board then arranged for the acquisition of aprivately-held company known as Internet Holdings, Ltd. Effective January 1,2000, Calendar Capital, Inc. entered into a stock exchange agreement to acquireall of the outstanding common stock of Internet Holdings, Ltd. in what waseventually finalized as a reverse merger effective April 5, 2001. The acquiredbusiness was renamed Entrenaut, Inc. after the acquisition and operated as asubsidiary of Calendar Capital, Inc.

 

In September 2000 Entrenaut acquired 100% of theequity in OfficeCause, Inc. The name of OfficeCause was changed to IQ Trust,Inc. and IQ Trust and Entrenaut were merged. The survivor was renamed IQUniverse, Inc.

 

On April 5, 2001 IQUniverse was merged into CalendarCapital, Inc. and the surviving corporation was renamed IQUniverse, Inc. TheCompany now trades on the OTCBB under the symbol IQUN.

 

*Businessof the Issuer*

 

IQUniverse currently has no operations. Previously theCompany sought to build and market a customized online shopping mall targetedat the higher education market that was accessed through college web sites. Inspite of positive test results at two Beta sites the Company was ultimatelyunable to create the necessary critical mass to yield a viable business and didnot have the capital to continue pursuing the concept.

 

On February 6, 2002 the Company entered into an AssetPurchase Agreement with Wireless Ronin Technologies, Inc. (“WRT”) whereby anewly formed subsidiary of IQ Universe will purchase all of the assets andassume certain liabilities of WRT in exchange or 13,000,000 shares ofIQUniverse, Inc. Common Stock.  Theclosing of the acquisition is contingent upon the shareholders of IQUniverseauthorizing sufficient common stock to finalize the purchase and the holders ofSeries B and Series C Preferred Stock stock agreeing to waive their liquidationrights. A shareholders meeting is planned for mid-August 2002.

 

Wireless Ronin has designed a market-ready wirelesshandheld computer called the freedomPORTTM with an open platform that providesflexibility, familiarity, and expandability for the mobile workforce. Based onthe familiar and enterprise-compatible Microsoft® Windows®CE 3.0 operating system, freedomPORTTM easily connects to the Internet throughvirtually any existing wireless handset, landline or LAN. Utilizing residentsoftware or accessing virtually any Web-based software without limitation orrestriction, it can perform the wide variety of tasks typically relegated tolarger laptop

 

2

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computers. Unique hardware and software design gives users enhancedproductivity by enabling the sending and receiving of full graphic andtext-based content (including e-mail messages with attachments). From managing contactlists to checking inventory, reviewing patient profiles to organizingschedules, users have the power and convenience of full mobility.

 

If the acquisition is closed as anticipated the newsubsidiary will continue to operate as Wireless Ronin, Inc. As such it willconstitute the core business of the Company. The acquisition will result in thecurrent shareholders of WRT becoming the controlling shareholders of theCompany.

 

Through June 2002, the Company has advanced $535,000with interest at 8% in loans to WRT to provide it with working capital forproduct development and marketing.

 

*Personnel*

 

IQUniverse, Inc. employs only its Chief ExecutiveOfficer, Paul Crawford.  The Company utilizes the services of variousconsultants on a project basis.

 

**ITEM 2.  DESCRIPTION OF PROPERTY.**

 

The Company maintains its offices at 65 Main StreetSE, Minneapolis, Minnesota.  At that address the Company directly leases2,489 square feet for $3,629.79 per month (including CAM) pursuant to a leaseexpiring March 31, 2006.  In addition, the Company has assumed thelease payment on 1,800 square feet also leased to Crawford Capital andpreviously used by Entrenaut, Inc.  This space is subject to a leaseexpiring August 31, 2002 at a rental of $2,347.91 per month (including CAM). Currently one-half or 900 square feet of this space has been sub-let for$800.00 per month.  In total, the Company has direct and indirect officerental costs of a net $5,977.70 per month.

 

**ITEM 3.  LEGAL PROCEEDINGS.**

 

The Company is in default on $260,000 in convertibledebentures.  The Company is also in default on an employment contractit had with a former Chief Executive Officer.  (See Executive Compensationat Item 10).

 

**ITEM 4.   SUBMISSIONOF MATTERS TO A VOTE OF SECURITY HOLDERS**

 

The Company did not hold any shareholders meetingswithin the last fiscal year and no matters were submitted to a vote ofshareholders.

 

3

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**PART II**

 

**ITEM 5.  MARKET FOR THE REGISTRANT’S COMMON EQUITY**

**AND RELATED STOCKHOLDER MATTERS.**

 

The Company’s common stock is traded on the OTCBulletin Board  (OTCBB)  under the symbol “IQUN”.  From July 15,1991 until June 9, 1994, the Company’s common stock had been traded on theNASDAQ Small-Cap Market System under the symbol “CCAP”.  On June 9, 1994,the stock was de-listed by NASDAQ for failure to maintain an adequate bidprice.

 

The following table sets forth, for the periodsindicated, the range of high and low bid prices of the Company’s commonstock.  The prices represent quotations between dealers without adjustmentfor retail markups, markdowns or commissions and may not represent actualtransactions.

 
| **Fiscal Year Ended**

**March 31, 2001** |   | **High** |   | **Low** |   | **Fiscal  Year Ended**

**March 31,  2002** |   | **High**       |   | **Low** |   |
|-------------------------------------------|--------|----------|--------|---------|--------|---------------------------------------------|--------|----------------|--------|---------|--------|
| First Quarter                             |   | $        | .625   |    | $      | .062                                        |   | First Quarter  |   | $       | 1.20   |   | $ | 1.20 |   |
| Second Quarter                            |   | $        | .500   |    | $      | .000                                        |   | Second Quarter |   | $       | 0.76   |   | $ | 0.76 |   |
| Third Quarter                             |   | $        | .375   |    | $      | .000                                        |   | Third Quarter  |   | $       | 1.20   |   | $ | 1.20 |   |
| Fourth Quarter                            |   | $        | .156   |    | $      | .031                                        |   | Fourth Quarter |   | $       | 1.01   |   | $ | 1.01 |   |

 

The Company has never paid a cash dividend on itscapital stock and does not expect to pay a cash dividend in the foreseeablefuture.  No dividends may be paid on common stock unless adequateprovision has been made for payment of all dividends, if any, due with respectto its Series B  and Series C Preferred Stock.

 

As of March 31, 2002, the Company had approximately1200 shareholders of record.

 

**ITEM 6.  PLAN OF OPERATION**

 

**THE FOLLOWING DISCUSSION AND ANALYSISSHOULD BE READ IN CONJUNCTION WITH THE COMPANY’S CONSOLIDATED FINANCIALSTATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS REPORT.  EXCEPTFOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE DISCUSSION IN THIS REPORTCONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS ANDUNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY’S PLANS, OBJECTIVES,EXPECTATIONS AND INTENTIONS.  THESE FORWARD-LOOKING STATEMENTS OF THECOMPANY ARE BASED ON THE CURRENT EXPECTATIONS OF THE COMPANY, AND THE COMPANYASSUMES NO OBLIGATION TO UPDATE THIS INFORMATION.  THE COMPANY’S ACTUALRESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HERE.**

 

IQUniverse, Inc. — OVERVIEW

 

Without any current operations the Company is focusedon making an acquisition that will enhance shareholder value.  Management believes that the closing of theasset acquisition of Wireless Ronin Technologies, Inc. is highly probable andhas been working with WRT management on their marketing and productdevelopment, as well as lending money to WRT for working capital.

 

A Proxy Statement is being prepared for a SpecialShareholders Meeting in mid-August to seek shareholder approval of certainitems necessary to close the WRT Acquisition.

 

The Company has most recently been funding itsobligations through the private placement sale of subordinated debentures andpersonal loans from Paul Crawford, the Company’s CEO.  The Company plansto seek additional funds in the private or public equity or debt markets inorder to maintain and expand the IQUniverse offerings.  The Company’slong-term success depends upon its ability to attract capital and it may not beable to obtain such financing when needed or on acceptable terms in which casethe Company’s ability to execute its business strategy will be seriouslyimpaired.

 

The Company does not anticipate adding any staff untiladditional funding is realized.

 

4

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**ITEM 7.  FINANCIAL STATEMENTS.**

 

See Appendix.

 

5

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**PART III**

 

**ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.**

 

*Directorsand Executive Officers*

 

Stated as follows are the names, ages and positions ofeach of the directors and executive officers of IQUniverse, Inc., the year wheneach director became a member of the Board of Directors and information regardingthe business experience of each of the identified persons during the past fiveyears.  Under the provisions of the Bylaws of the Company, directors areelected to serve for a term expiring at the next annual meeting of shareholdersand until their successors are elected and qualify.  Officers are electedto serve for an indefinite term.

 
| **Name**         |   | **Age** |   | **Director  Since** |   | **Position**                         |   |
|------------------|--------|---------|--------|---------------------|--------|--------------------------------------|--------|
| Paul D. Crawford |   | 65      |   | 1999                |   | Director and Chief Executive Officer |   |
| Daniel C. Neisen |   | 38      |   | 1999                |   | Director                             |   |

 

Andrew V. Johnson and Jill Miyamoto resigned from theBoard of Directors at fiscal year end 2002.

 

**Paul D. Crawford,** is the Chief Executive Officer of IQUniverse,Inc.  From July 1995 to June 1996, he was Chief Executive Officer ofRestaurant Concepts, Inc.  From July 1993 through January 1996, he wasalso a registered securities representative.  On September 15, 1997,without admitting or denying the allegations, Crawford accepted a censure andtwo years suspension from the securities industry by agreement with NASDRegulation, Inc.  In December 1996, Mr. Crawford declared personalbankruptcy and was discharged in March 1997.  Mr. Crawford has beeninvolved in numerous early stage companies through Crawford CapitalCorporation.  Mr. Crawford has been an entrepreneur as well as a venturecapitalist.  In 1981, he founded Cellcom Corporation to file for the firstTwin Cities wireless cellular telephone license.  Cellcom was funded by asmall group of Twin Cities entrepreneurs, Cellcom subsequently entered into astrategic relationship with MCI.  MCI/Cellcom was issued the license bythe F.C.C. in 1983 and began operating in 1984.  The MCI/Cellcom cellularlicense was acquired by McCaw Communication in July, 1986.

 

**Daniel C. Neisen,** along with his brother, Dennis, founded Neisen BrothersPartnership in 1980.  The Partnership acquires and manages several on andoff sale municipal liquor establishments in Minnesota and also owns extensivefarmland in Central Minnesota.

 

*Compliancewith Section 16(a) of the Securities Exchange Act of 1934*

 

Section 16(a) of the Securities Exchange Act of 1934requires the Company’s directors and executive officers and persons who ownmore than ten percent of a registered class of the Company’s equity securitiesto file with the Securities and Exchange Commission initial reports ofownership and reports of changes in ownership of common stock and other equitysecurities of the Company.  Officers, directors and greater than tenpercent shareholders are required by SEC regulation to furnish the Company withcopies of all Section 16(a) forms they file.

 

To the Company’s knowledge, based solely on review ofthe copies of such reports furnished to the Company and written representationsthat no other reports were required, during the fiscal year ended march 31,2002, all Section 16(a) filing requirements applicable to its officers anddirectors were complied with.

 

**ITEM 10.  EXECUTIVE COMPENSATION**

 

The following table summarizes the executivecompensation for the persons who served as Chief Executive Officers of theCompany during the fiscal 2001.

 

6

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**SUMMARY COMPENSATION TABLE**

 
|                                                       |   | **Annual  Compensation** |   | **Long Term  Compensation Awards** |   |
|------------------------------------------------------------|--------|--------------------------|--------|------------------------------------|--------|
| **Name and**

**Principal**

**Position**                  |   | **Fiscal**

**Year**     |   | **Salary**                         |   | **Other**

**Annual**

**Compensation** |   | **Options** |   |
|                                                       |   |                     |   |                               |   |   |   |   |   |
| Paul D. Crawford  received no compensation in 2001 or 2002 |   | 2002                     |   | 0                                  |   | $31,755.00(1) |   | 0 |   |

 

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(1) Money paid by the Company for office space and telephone used byCrawford Capital Corp.

 

The following table summarizes grants of options to the person whoserved as Chief Executive Officer of the Company during fiscal 2002.

 

**OPTION GRANTS IN LAST FISCAL YEAR**

(Individual Grants)

 
| **Name**               |   | **Options**

**Granted**

**(No.)** |   | **Percent of**

**Total  Options**

**Granted to**

**Employees**

**in Fiscal  Year** |   | **Exercise  or**

**Base Price**

**($/Share)(1)** |   | **Expiration**

**Date** |   |
|------------------------|--------|-------------------------------------|--------|----------------------------------------------------------------------------------------|--------|----------------------------------------------------|--------|--------------------------|--------|
| Paul D.  Crawford |   | 0                                   |   | 0                                                                                      |   | 0                                                  |   | 0                        |   |

 

The following table summarized the purchases of the Company’s commonstock pursuant to the exercise of options (as well as the number and value ofunexercised options) granted to the person who served as the Chief ExecutiveOfficer of the Company during fiscal 2002.

 

**AGGREGATED OPTION EXERCISE IN LAST FISCAL**

**YEAR AND FISCAL YEAR-END OPTION VALUES**

 
| **Name**               |   | **Shares**

**Acquired**

**on**

**Exercise**

**(No.)** |   | **Value**

**Realized(1)** |   | **Number of**

**Unexercised**

**Options at**

**FY-End (No.)**

**Exercisable/**

**Unexercisable** |   | **Value of**

**Unexercised**

**In-the-Money**

**Options at**

**FY-End(1)**

**Exercisable/**

**Unexercisable** |   |
|------------------------|--------|-----------------------------------------------------------|--------|----------------------------|--------|-------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------|--------|
| Paul D.  Crawford |   | None                                                      |   | None                       |   | None                                                                                                  |   | None                                                                                                                |   |

 

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(1) Options are “in-the-money” if the fair market value of theunderlying shares at fiscal year end is greater than the exercise price.

 

*EmploymentAgreement*

 

On August 1, 1993, Vincent G. Ella, then Chairman ofthe Board of Directors of the Company, was elected Chief Executive Officer ofthe Company.  Effective as of September 1, 1993, the Company entered intoa five-year employment agreement with Mr. Ella.  Pursuant to thatagreement, Mr. Ella was to receive a base salary of not less than $120,000 peryear together with yearly increases of not less that 10%  The Agreementalso provided that Mr. Ella shall receive options to purchase not less than100,000 shares on September 1 of 1994, 1995, 1996 and 1997 at the then currentmarket value.  All such options to be immediately exercisable and toexpire ten years from the date of grant.  If the agreement is terminatedby Mr. Ella for good cause, as defined in the agreement, the Company must payhim an amount equal to his base salary for the remaining term of theagreement.  On October 20, 1994, Mr. Ella notified the Board of Directorsthat the Company was in

 

7

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breach of the agreement by virtue of its inability to pay him hissalary or reimburse expenses as they became due.  Mr. Ella advised theBoard that unless the breach was cured, he would treat the situation as aconstructive termination without cause, thus leaving him free to seek otheremployment, which he did.  The Company has an ongoing obligation under theterns of the agreement.  At March 31, 1995, the Company had $39,230 inunpaid compensation due Mr. Ella accrued for calendar year 1994, for which theCompany is indebted to him along with his contract salary for calendar years1995, 1996 and 1997 totaling approximately $600,000.  In fiscal 2000, theCompany paid Mr. Ella $15,000 of the accrued 1994 unpaid compensation.  Infiscal 2001, the Company paid Mr. Ella $6,000 of the accrued 1994 unpaidcompensation and in fiscal year 2002 paid Mr. Ella $5,000.

 

*Directors’Fees*

 

Directors of the Company receive no cash compensationfor serving as directors.  Directors may be paid a fee of $100 per hourfor extraordinary services beyond normal duties as a director.  No suchfees were paid in fiscal 2002.

 

**ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIALOWNERS AND MANAGEMENT**

 

The following information is given as of March 31,2002, with respect to each person who is known to the Company to be thebeneficial owner of more than 5 percent of any class of its capital stock, eachdirector of the Company individually, and by all directors and executive officersof the Company as a group.  Unless otherwise indicated, each suchbeneficial owner is believed to hold the common stock with sole voting andinvestment power.

 

**AS OFMARCH 31, 2002:**

 
| **Title of  Class** |   | **Name and  Address of Beneficial Owner**                                                                                                     |   | **Amount and  Nature of**

**Beneficial  Ownership** |   | **Percent of**

**Class** |   |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------|--------|---------------------------|--------|
| Common Stock        |   | Paul D. Crawford(1)

7718 Taylor Street

NE Spring Lake Park, MN 55432                                                                        |   | 27,500                                               |   | 4.20                      |   |
| Common Stock        |   | Daniel and Dennis Neisen(2) Partnership

125 North Meridian Street

Belle Plaine, MN 56001                                                    |   | 125,000                                              |   | 19.27                     |   |
| Common Stock        |   | All Directors and Executive Officers as a Group (2  persons)                                                                                  |   | 152,500                                              |   | 23.55                     |   |
| Series B  Preferred |   | Neisen Farm

125 North Meridian Street

Belle Plaine, MN 56011                                                                                |   | 6,000                                                |   | 7.53                      |   |
| Series B  Preferred |   | K&J Investments.

6291 West 230th Street

Belle Plaine, MN 56011                                                                          |   | 10,000                                               |   | 12.55                     |   |
| Series B  Preferred |   | Susan K. Thomas and James W. Brehl, as Trustees of

the William H. Thomas Family Trust

3265 Robinson’s Bay Road

Wayzata, MN 55391 |   | 5,000                                                |   | 6.28                      |   |
| Series B  Preferred |   | William Bruggeman

20 Anemone Circle

North Oaks, MN 55127                                                                                    |   | 5,000                                                |   | 6.28                      |   |
| Series B  Preferred |   | William P. Bernard

Rapid City, SD                                                                                                            |   | 12,500                                               |   | 15.69                     |   |
| Series B  Preferred |   | Marilyn G. Erickson

Rapid City, SD                                                                                                           |   | 11,860                                               |   | 14.89                     |   |
| Series C  Preferred |   | Dolores E. Crawford(3)

7118 Taylor Street NE

Spring Lake Park, MN 55432                                                                     |   | 20,000                                               |   | 10.00                     |   |
| Series C  Preferred |   | Paul D. Crawford(1)

7118 Taylor Street NE

Spring Lake Park, MN 55432                                                                        |   | 41,653                                               |   | 20.83                     |   |

 

8

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| Series C  Preferred |   | Daniel and Dennis Neisen Partnership

125 North Meridian Street

Belle Plaine, MN 56001   |   | 12,500 |   | 6.25 |   |
|---------------------|--------|-------------------------------------------------------------------------------------------|--------|--------|--------|------|--------|
| Series C  Preferred |   | K&J Investments

6291 West 230th Street

Belle Plaine, MN 56011                       |   | 12,750 |   | 6.38 |   |
| Series C  Preferred |   | Gary Macho

24774 East Cedar Lake Drive

New Prague, MN 56071                             |   | 15,300 |   | 7.65 |   |
| Series C  Preferred |   | StoreItOnLine.Com, Inc.

c/o Jean-Paul Lamere

512 Virginia Avenue

Minneapolis, MN 55356 |   | 15,000 |   | 7.50 |   |

 

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(1)           Mr. Crawford is theCEO of the Corporation.

(2)           Daniel Neisen is aDirector of the Company.

(3)           Dolores Crawford isthe wife of Paul Crawford.

 

**ITEM12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.**

 

                Upon becoming adirector and CEO of the Company in July, 1999, Paul D. Crawford subscribed topurchase 500,000 shares of common stock (pre reverse split) at a price of $.04per share as part of the reorganization.

 

                Prior to theacquisition of all of the outstanding common stock of Entrenaut, Inc., Paul D.Crawford, the Chief Executive Officer and Director of the Company owned 23.43%of Entrenaut, Inc. and as a result of the stock exchange of the Company’sSeries C preferred stock for Entrenaut, Inc. common stock, he individually owns41,653 shares of the Series C convertible stock making him the largest holderof this series and when combined with the 20,000 shares of Series C he assignedto his wife, Delores Crawford, gives him a 30.83% ownership of the Series Cpreferred stock.  Assuming the conversion of the  Series C preferredstock, Mr. Crawford owns 17.21% of the common stock of the Company.

 

                Through itssubsidiary, Entrenaut, Inc., the Company previously acquired minority interestsin two companies for which it provided incubator services:  Chefinabox,Inc. and OfficeCause.com, Inc.  Both of these companies were controlled byPaul D. Crawford, the Company’s Chief Executive Officer and Director who owned68.96% and 77.77% of the two companies respectively. Chefinabox,Inc has ceasedoperations and OfficeCause.com was renamed IQ Trust, Inc.  Subsequently,Mr. Crawford canceled his stock in IQ Trust, Inc. giving Entrenaut, Inc. 100%ownership and the Company was then merged into Entrenaut.

 

                Paul D. Crawfordwas also a co-founder and is a significant shareholder of Commission Junction,Inc., a company in which the Company has acquired a minority interest forinvestment purposes.  Mr. Crawford is no longer an officer or director ofCommission Junction, Inc.

 

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

 

(a)           *Exhibits*

 
| **EXHIBIT**

**NUMBER** |   | **DESCRIPTION**                                                                                                                              |
|-------------------------|--------|----------------------------------------------------------------------------------------------------------------------------------------------|
| 2.1                     |   | Amended Plan of Reorganization, dated October 16,  1989.  (Exhibit 2.2)(1)                                                              |
|                    |   |                                                                                                                                         |
| 2.2                     |   | Articles of Merger and Restated Articles of  Incorporation, dated February 27, 1990 with Medical Funding  Corporation.  Exhibit 2.2)(1) |
|                    |   |                                                                                                                                         |
| 2.3                     |   | Agreement and Plan of Merger, dated June 28, 1991  with A-1Engineering, Inc., Gordon Neuman and Clayton Neuman.  (Exhibit  2.1)(3)      |

 

9

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| **EXHIBIT**

**NUMBER** |   | **DESCRIPTION**                                                                                                                                                 |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 2.4                     |   | Articles of Merger and Agreement and Plan of Merger,  dated April 2, 2001, with IQ Universe, Inc. (Exhibit 99.2)(15)                                            |
|                    |   |                                                                                                                                                            |
| 3.1                     |   | Amendments to Articles of Incorporation dated  February 14, 2001 and April 2, 2001, attaching Certificate of Creation of  Series C Convertible Preferred Stock* |
|                    |   |                                                                                                                                                            |
| 3.2                     |   | Bylaws.  (Exhibit 3.1)(1)                                                                                                                                  |
|                    |   |                                                                                                                                                            |
| 4.1                     |   | Form of stock purchase warrant.  (Exhibit  4.2)(1)                                                                                                         |
|                    |   |                                                                                                                                                            |
| 4.2                     |   | Warrant Agreement (Exhibit 4.3)(1)                                                                                                                              |
|                    |   |                                                                                                                                                            |
| 4.3                     |   | Certificate of Creation of Series A. Convertible  Preferred Stock.  (Exhibit 10.2)(9)                                                                      |
|                    |   |                                                                                                                                                            |
| 4.4                     |   | Designation of Rights and Preferences of Series B  Convertible Preferred Stock (Exhibit 10.2)(9)                                                                |
|                    |   |                                                                                                                                                            |
| 4.5                     |   | Certificate of Designation of Additional Shares of  Series B Convertible Preferred Stock.  (Exhibit 10.1)(10)                                              |
|                    |   |                                                                                                                                                            |
| 4.6                     |   | Articles of Correction of Designation of Additional  Shares of Series B Convertible Preferred Stock.  (Exhibit 10.2)(10)                                   |
|                    |   |                                                                                                                                                            |
| 4.7                     |   | Statement of Cancellation of Designation of Series A  Convertible Preferred Stock.  (Exhibit 4.7)(12)                                                      |
|                    |   |                                                                                                                                                            |
| 10.1                    |   | Amended and Restated 1990 Stock Option Plan.(5)                                                                                                                 |
|                    |   |                                                                                                                                                            |
| 10.2                    |   | Outside Directors’ Option Plan.  (Exhibit  10.10)(2)                                                                                                  |
|                    |   |                                                                                                                                                            |
| 10.3                    |   | First Amendment to Outside Directors’ Option  Plan.  Exhibit 10.9)(4)                                                                                 |
|                    |   |                                                                                                                                                            |
| 10.4                    |   | Non-qualified, Non-Plan Option granted to John B.  Knauff, March 31, 1994.                                                                                      |
|                    |   |                                                                                                                                                            |
| 10.5                    |   | Non-qualified, Non-Plan Option granted to Lewis N.  Mirviss, March 31, 1994.                                                                                    |
|                    |   |                                                                                                                                                            |
| 10.6                    |   | Employment Agreement dated effective September 1,  1993, by and between Vincent G. Ella and Calendar Capital, Inc. (Exhibit  10.3)(10)                          |
|                    |   |                                                                                                                                                            |
| 10.7                    |   | Employment Agreement with Robert J. Keyport, dated  November 2, 1992.  (Exhibit 10.10)(7)                                                                  |
|                    |   |                                                                                                                                                            |
| 10.8                    |   | Severance Agreement with Gregory J. Ruehle, dated  November 2, 1992.  (Exhibit 10.11)(7)                                                                   |
|                    |   |                                                                                                                                                            |
| 10.9                    |   | Employment Agreement, dated effective July 19, 1993,  by and between John B. Hendricks and Caribbean Casinos, Ltd.  (Exhibit  10.20)(12)                   |
|                    |   |                                                                                                                                                            |
| 10.10                   |   | Employment Agreement, dated effective July 19, 1993,  by and between Valerie B. Hendricks and Caribbean Casinos, Ltd.   (Exhibit 10.21)(12)                |

 

10

----

 
| **EXHIBIT**

**NUMBER** |   | **DESCRIPTION**                                                                                                                                                                   |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.11                   |   | Employment Agreement, dated effective July 19, 1993,  by and between Philip H. Plowright and Caribbean Casinos, Ltd.  (Exhibit  10.22)(12)                                   |
|                    |   |                                                                                                                                                                              |
| 10.12                   |   | Asset Purchase Agreement with Follow Motion Limited,  dated December 12, 1992.(6)                                                                                                 |
|                    |   |                                                                                                                                                                              |
| 10.13                   |   | Amendment #1 to Asset Purchase Agreement, effective  September 30, 1993.(13)                                                                                                      |
|                    |   |                                                                                                                                                                              |
| 10.14                   |   | Amendment #2 to Asset Purchase Agreement, effective  April 28, 1994.(13)                                                                                                          |
|                    |   |                                                                                                                                                                              |
| 10.15                   |   | Lease with NWC Limited Partnership, dated May 18,  1993.  (Exhibit 10.12)(7)                                                                                                 |
|                    |   |                                                                                                                                                                              |
| 10.16                   |   | Sublease with Faegre & Benson, a Minnesota  general partnership, dated May 7, 1993.  (Exhibit 10.13)(7)                                                                  |
|                    |   |                                                                                                                                                                              |
| 10.17                   |   | Assignment of Lease and Consent to Assignment, dated  May 16 19   (13)                                                                                                  |
|                    |   |                                                                                                                                                                              |
| 10.18                   |   | Lease by and between MEPC American Properties, Inc.  and the Company, dated April 20, 1994.(13)                                                                                   |
|                    |   |                                                                                                                                                                              |
| 10.19                   |   | Share Purchase Agreement, dated April 2, 1994, with  Lightning Bingo (Exhibit 2.1)(11)                                                                                            |
|                    |   |                                                                                                                                                                              |
| 10.20                   |   | Escrow Agreement, with respect to Lightning  Casino.  (Exhibit 2.2)(11)                                                                                                      |
|                    |   |                                                                                                                                                                              |
| 10.21                   |   | Promissory Note with respect to Lightning  Casino.  (Exhibit 2.3)(11)                                                                                                        |
|                    |   |                                                                                                                                                                              |
| 10.22                   |   | Unanimous Shareholders Agreement with respect to  Lightning Casino.  (Exhibit 2.4)(11)                                                                                       |
|                    |   |                                                                                                                                                                              |
| 10.23                   |   | Operating Management Agreement with respect to  Lightning Casino.  (Exhibit 10.1)(11)                                                                                        |
|                    |   |                                                                                                                                                                              |
| 10.24                   |   | Plan of Reorganization of Lilly Belle’s, Inc.  proposed by the Debtor in Possession and Calendar Capital, Inc., dated  January 31, 1994.  (Exhibit 10.24)(12)           |
|                    |   |                                                                                                                                                                              |
| 10.25                   |   | Disclosure Statement to Accompany Plan of  Reorganization, dated January 31, 1994.  (Exhibit 10.25)(12)                                                                      |
|                    |   |                                                                                                                                                                              |
| 10.26                   |   | Amended Disclosure Statement to accompany the Plan  of Reorganization of Lilly Belle’s, Inc. proposed by the Debtor and Calendar  Capital, Inc., dated January 31, 1994.(13) |
|                    |   |                                                                                                                                                                              |
| 10.27                   |   | Letter Agreement dated July 6, 1993, by and among  Calendar Capital, Inc., Mark J. Kallenbach and Johnnie L. Ransom.   Exhibit 10.14)(12)                                    |
|                    |   |                                                                                                                                                                              |
| 10.28                   |   | Cabinet Decision, dated June 26, 1991, permitting  casino vessel operation.  (Exhibit 10.16)(12)                                                                             |
|                    |   |                                                                                                                                                                              |
| 10.29                   |   | Cabinet Decision, dated October 8, 1993, with  respect to casino vessel operation.  (Exhibit 10.16)(12)                                                                      |
|                    |   |                                                                                                                                                                              |
| 10.30                   |   | Bareboat Charter Agreement, dated July 19, 1993, by  and between Sea Dancer, Inc. and Alpha Travel (Antigua) Limited.   (Exhibit 10.17)(12)                                  |
|                    |   |                                                                                                                                                                              |
| 10.31                   |   | Assignment and Assumption Agreement, dated July 21,  1993, by and between Alpha Travel (Antigua) Limited.  (Exhibit 10.18)(12)                                               |

 

11

----

 
| **EXHIBIT**

**NUMBER** |   | **DESCRIPTION**                                                                                                                                        |
|-------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32                   |   | Contract for Sale and Purchase, dated September 3,  1993, by and between Emerald Syndicate, Inc. and Calendar Capital, Inc.   (Exhibit 10.19)(12) |
|                    |   |                                                                                                                                                   |
| 10.33                   |   | Stock exchange Agreement, dated January 1, 2000,  between Calendar Capital, Inc. and Entrenaut, Inc. (Exhibit 10.1)(14)                                |
|                    |   |                                                                                                                                                   |
| 16.1                    |   | Letter of Ernst & Young.  (Exhibit 10.1)(8)                                                                                                   |
|                    |   |                                                                                                                                                   |
| 21.1                    |   | Subsidiaries of Registrant.(13)                                                                                                                        |

 

----

| *      | Filed herewith                                                                                                                              |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------|
|   |                                                                                                                                        |
| (1)    | Incorporated by reference to the specified exhibit  to the Form 8-K dated July 5, 1990.                                                     |
|   |                                                                                                                                        |
| (2)    | Incorporated by reference to the specified exhibit  to the Form 10-K Annual Report for the fiscal year ended March 31, 1991.                |
|   |                                                                                                                                        |
| (3)    | Incorporated by reference to the specified exhibit  to the Form 8-K dated July 11, 1991.                                                    |
|   |                                                                                                                                        |
| (4)    | Incorporated by reference to the specified exhibit  to the Form 10-K Annual Report for the fiscal year ended March 31, 1992.                |
|   |                                                                                                                                        |
| (5)    | Incorporated by reference to the Proxy Statement for  the August 20, 1992 Annual Meeting of Shareholders.                                   |
|   |                                                                                                                                        |
| (6)    | Incorporated by reference to the Proxy Statement for  the March 26, 1993 Annual Meeting of Shareholders.                                    |
|   |                                                                                                                                        |
| (7)    | Incorporated by reference to the specified exhibit  to the Form 10-KSB, Annual Report for the fiscal year ended April 3, 1993.              |
|   |                                                                                                                                        |
| (8)    | Incorporated by reference to the specified Form 8-K,  dated August 10, 1993.                                                                |
|   |                                                                                                                                        |
| (9)    | Incorporated by reference to the specified exhibit  to the Form 10-QSB/A Quarterly Report for the quarter ended October 2, 1993.            |
|   |                                                                                                                                        |
| (10)   | Incorporated by reference to the specified exhibit  to the Form 10-QSB/A Quarterly Report for the quarter ended January 1, 1994.            |
|   |                                                                                                                                        |
| (11)   | Incorporated by reference to the Form 8-K, dated  April 2, 1994.                                                                            |
|   |                                                                                                                                        |
| (12)   | Incorporated by reference to the specified exhibit  to the Registration Statement on Form S-1, filed with the Commission on March  4, 1994. |
|   |                                                                                                                                        |
| (13)   | Incorporated by reference to the specified exhibit  to the Form 10-KSB, Annual Report for the fiscal year ended April 2,  1994.        |
|   |                                                                                                                                        |
| (14)   | Incorporated by reference to the specified exhibit  to the Form 8-K dated February 1,2000.                                                  |
|   |                                                                                                                                        |
| (15)   | Incorporated by reference to the specified exhibit  to the Form 8-K dated April 11, 2001.                                                   |

 

12

----

 

A copy of any of the exhibits listed or referred to herein will befurnished at a reasonable cost to any person who was a stockholder of theCompany as of June 30, 2000, upon receipt from any such person of a writtenrequest for any such exhibit.  Such request should be sent to IQUniverse,Inc., 65 Main Street SE, Suite 141, Minneapolis, Minnesota 55414.

 

(b)           *Reports on Form 8-K. *During the third quarter of the period covered by this report, a Form 8-Kwas filed August 9, 2001, regarding a letter of intent entered into with ChrisSchmidt, the CEO of Microsell, Inc.

 

13

----

 

**SIGNATURES**

 

In accordance with Section 13 or 15(d) of theSecurities Exchange Act of 1934, the Registrant has duly caused this report tobe signed on its behalf by the undersigned, thereunto duly authorized.

 
|                        | IQUNIVERSE, INC. |
|-----------------------------|------------------|
|                        |             |
| Dated:  July 12, 2002. | By:              | /s/ Paul D. Crawford |   |
|                        |             | Paul D. Crawford |
|                        | Its:             | Chief Executive Officer |

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the dateindicated.

 
| /s/ Paul D. Crawford |                               |
|----------------------|------------------------------------|
|                 | Chairman of the Board of Directors | July 12, 2002 |
| Paul D. Crawford     | CEO, President and CFO             |   |
|                 |                               |
| /s/ Dan Neisen       |                               |
|                 | Director                           |   |
| Dan Neisen           |                               | July 12, 2002 |

 

14

----

 

**APPENDIX**

 

 

 

 

 

 

 

 

 

 

INDEPENDENT AUDITORS’REPORT

 

 

Board of Directors

IQUniverse, Inc.

Minneapolis, Minnesota

 

We have audited the balance sheets of IQUniverse, Inc. as of March 31,2001 and 2002, and the related statements of operations, shareholders’ deficitand cash flows for the years then ended. These financial statements are the responsibility of the Company’smanagement.  Our responsibility is toexpress an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with auditing standards generallyaccepted in the United States of America. Those standards require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that ouraudits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above presentfairly, in all material respects, the financial position of IQUniverse, Inc. asof March 31, 2001  and 2002, and theresults of its operations and its cash flows for the years then ended, inconformity with accounting principles generally accepted in the United Statesof America.

 

The accompanying financial statements have been prepared assuming thatthe Company will continue as a going concern. As discussed in Note 1 and Note2, a significant portion of the Company’s assets are investments in start-upcompanies that have not yet developed profitable operations and that needadditional capital. Also, the Company has incurred significant losses sinceinception and needs to raise additional capital.  These factors raise substantial doubt about the Company’s abilityto continue as a going concern. Management’s plans in regard to these matters also are described in Note1.  The financial statements do notinclude any adjustments that might result from the outcome of this uncertainty.

 

 

/s/ Schechter Dokken Kanter Andrews & Selcer Ltd.

 

 

July 12, 2002

Minneapolis, Minnesota

 

15

----

 

**IQUNIVERSE, INC.**

 

**BALANCE SHEETS —**March 31, 2001 and 2002

 
|                                                                                               |   | **2001**    |    | **2002**   |   |
|----------------------------------------------------------------------------------------------------|--------|-------------|---------|------------|--------|
| ***Assets:***                                                                                      |   |        |    |       |   |
| Current assets:                                                                                    |   |        |    |       |   |
| Cash                                                                                               |   | $           | 553     |       | $      | 7,937 |   |
| Related party  receivables                                                                         |   | 47,000      |    |       |   |
| Prepaid and  other                                                                                 |   | 18,612      |    | 14,266     |   |
|                                                                                               |   |        |    |       |   |
| Total current  assets                                                                              |   | 66,165      |    | 22,203     |   |
|                                                                                               |   |        |    |       |   |
| Property and  equipment, net of accumulated depreciation of $8,668 in 2001 and $15,996 in  2002    |   | 32,134      |    | 26,051     |   |
| Investments, net  of valuation allowance of $507,500 and $162,500 for 2001 and 2002,  respectively |   | 434,500     |    | 418,250    |   |
|                                                                                               |   |        |    |       |   |
| Total assets                                                                                       |   | $           | 532,799 |       | $      | 466,504 |   |
|                                                                                               |   |        |    |       |   |
| ***Liabilities and shareholders’ deficit:***                                                  |   |        |    |       |   |
| Current liabilities:                                                                               |   |        |    |       |   |
| Note payable,  bank                                                                                |   | $           | 200,000 |       | $      | 150,000 |   |
| Notes payable,  other                                                                              |   | 60,000      |    | 50,000     |   |
| Convertible  debentures                                                                            |   | 385,000     |    | 385,000    |   |
| Convertible  subordinate debentures                                                                |   | 100,000     |    | 776,227    |   |
| Accounts payable                                                                                   |   | 33,972      |    | 133,944    |   |
| Accounts payable,  related party                                                                   |   | 48,996      |    |       |   |
| Accrued expenses                                                                                   |   | 327,830     |    | 384,157    |   |
| Due to related  party                                                                              |   | 718,094     |    | 815,826    |   |
|                                                                                               |   |        |    |       |   |
| Total current  liabilities                                                                         |   | 1,873,892   |    | 2,695,154  |   |
|                                                                                               |   |        |    |       |   |
| Convertible  subordinate debentures                                                                |   | 389,256     |    | 424,407    |   |
|                                                                                               |   |        |    |       |   |
| Shareholders’  deficit:                                                                       |   |        |    |       |   |
| Preferred stock:                                                                                   |   |        |    |       |   |
| Series B  convertible                                                                              |   | 882         |    | 882        |   |
| Series C  convertible                                                                              |   | 2,000       |    | 2,000      |   |
| Common stock                                                                                       |   | 6,488       |    | 6,494      |   |
| Additional  paid-in capital                                                                        |   | 906,485     |    | 974,979    |   |
| Stock  subscriptions receivable                                                                    |   | (124,000    | )       | (124,000   | )      |
| Accumulated  deficit                                                                               |   | (2,522,204  | )       | (3,513,412 | )      |
|                                                                                               |   |        |    |       |   |
|                                                                                               |   | (1,730,349) |    | (2,653,057 | )      |
|                                                                                               |   |        |    |       |   |
| Total  liabilities and shareholders’ deficit                                                  |   | $           | 532,799 |       | $      | 466,504 |   |

 

 

 

 

 

See notes to financialstatements.

 

2

----

 

 

**IQUNIVERSE, INC.**

 

**STATEMENTS OF OPERATIONS**

 

Years ended March 31,2001 and 2002

 

 
|                                                         |   | **2001**   |       | **2002** |    |
|--------------------------------------------------------------|--------|------------|------------|----------|---------|
|                                                         |   |       |       |     |    |
| Related party  management and consulting fees                |   | $          | 89,120     |     |    |   |
|                                                         |   |       |       |     |    |
| Less direct  costs                                           |   | 76,845     |       |     |    |
|                                                         |   |       |       |     |    |
| Net revenues                                                 |   | 12,275     |       |     |    |
|                                                         |   |       |       |     |    |
| General and  administrative expenses                         |   | 1,025,826  |       | $        | 516,546 |   |
| Loss (gain) on  disposal of investments                      |   | (249,960   | )          | 225,250  |    |
| Equity in losses  of affiliated companies                    |   | 45,385     |       |     |    |
| Loss due to  revaluation and write down of impaired assets   |   | 1,405,754  |       |     |    |
|                                                         |   |       |       |     |    |
|                                                         |   | 2,227,005  |       | 741,796  |    |
|                                                         |   |       |       |     |    |
| Loss from  operations                                        |   | (2,214,730 | )          | (741,796 | )       |
|                                                         |   |       |       |     |    |
| Interest:                                                    |   |       |       |     |    |
| Income                                                       |   | 33,603     |       | 2,037    |    |
| Expense                                                      |   | (143,017   | )          | (245,746 | )       |
| Miscellaneous                                                |   |       |       | (6,166   | )       |
|                                                         |   | (109,414   | )          | (249,875 | )       |
|                                                         |   |       |       |     |    |
| Loss before income  taxes and extraordinary gain             |   | (2,324,144 | )          | (991,671 | )       |
|                                                         |   |       |       |     |    |
| Extraordinary  gain, write-off of note payable, other        |   | 150,000    |       |     |    |
|                                                         |   |       |       |     |    |
| Loss before  income taxes                                    |   | (2,174,144 | )          | (991,671 | )       |
|                                                         |   |       |       |     |    |
| Income tax  benefit                                          |   | (1,871     | )          | (463     | )       |
|                                                         |   |       |       |     |    |
| Net loss                                                     |   | $          | (2,172,273 | )        | $       | (991,208 | ) |
|                                                         |   |       |       |     |    |
| Loss per common  share, basic and diluted                    |   | $          | (3.35      | )        | $       | (1.53 | ) |
|                                                         |   |       |       |     |    |
| Weighted average  number of common shares, basic and diluted |   | 648,821    |       | 649,386  |    |

 

 

 

 

 

 

 

See notes to financialstatements.

 

3

----

 

**IQUNIVERSE, INC.**

 

**STATEMENTS OF SHAREHOLDERS’ DEFICIT**

 

Years ended March 31,2001 and 2002

 
|                                                         |   | **Preferred  stock,**

**Series B  convertible**

**100,000  shares**

**authorized,  par**

**value $.01** |   | **Preferred  stock,**

**Series C  convertible**

**200,000  shares**

**authorized,  par**

**value $.01** |   | **Common  stock**

**700,000  shares**

**authorized,  par**

**value $.01** |      |       |   |        |   |       |   |                                     |    |
|--------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|-----------|------------|--------|-------------|--------|------------|--------|------------------------------------------|---------|
|                                                         |   | **Shares**                                                                                                  |   | **Amount**                                                                                                  |   | **Shares**                                                                   |      | **Amount** |   | **Shares**  |   | **Amount** |   | **Additional**

**paid-in**

**capital** |    | **Stock**

**subscriptions**

**receivable** |   | **Accumulated**

**deficit** |   | **Total** |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Balance, March 31, 2000                                      |   | 1,763,200                                                                                                   |   | $                                                                                                           | 17,632 |                                                                         | 3,992,128 |       | $      | 39,921      |   | 12,976,418 |   | $                                        | 129,764 |   | $ | 667,749 |   | $ | (124,000 | ) | $ | (349,931 | ) | $ | 381,135 |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Warrant adjustment                                           |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   | (2,086                                   | )       |   |   |   |   | (2,086 | ) |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Warrant exercised                                            |   |                                                                                                        |   |                                                                                                        |   | 33,334                                                                       |      | 333        |   |        |   |       |   | 24,667                                   |    |   |   |   |   | 25,000 |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Company expense incurred by Chief Executive Officer          |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   | 15,675                                   |    |   |   |   |   | 15,675 |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Cancellation of Chief Executive Officer stock                |   |                                                                                                        |   |                                                                                                        |   | (25,462                                                                      | )         | (254       | )      |        |   |       |   | 22,454                                   |    |   |   |   |   | 22,200 |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Value adjustment for 1-20 Reverse split                      |   | (1,675,040                                                                                                  | )      | (16,750                                                                                                     | )      | (3,800,000                                                                   | )         | (38,000    | )      | (12,327,597 | )      | (123,276   | )      | 178,026                                  |    |   |   |   |   |   |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Net loss                                                     |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   | (2,172,273 | ) | (2,172,273 | ) |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Balance, March 31, 2001                                      |   | 88,160                                                                                                      |   | 882                                                                                                         |   | 200,000                                                                      |      | 2,000      |   | 648,821     |   | 6,488      |   | 906,485                                  |    | (124,000 | ) | (2,522,204 | ) | (1,730,349 | ) |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Incentives granted for debt exchange and bank note guarantee |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   | 68,500                                   |    |   |   |   |   | 68,500 |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Share rounding for reverse split                             |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   | 565         |   | 6          |   | (6                                       | )       |   |   |   |   |   |   |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Net loss                                                     |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   | (991,208 | ) | (991,208 | ) |
|                                                         |   |                                                                                                        |   |                                                                                                        |   |                                                                         |      |       |   |        |   |       |   |                                     |    |   |   |   |   |   |   |
| Balance, March 31, 2002                                      |   | 88,160                                                                                                      |   | $                                                                                                           | 882    |                                                                         | 200,000   |       | $      | 2,000       |   | 649,386    |   | $                                        | 6,494   |   | 974,979 |   | $ | (124,000 | ) | $ | (3,513,412 | ) | $ | (2,653,057 | ) |
|                                                              |        |                                                                                                             |        |                                                                                                             |        |                                                                              |           |            |        |             |        |            |        |                                          |         |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

 

See notes to financialstatements.

 

4

----

 

**IQUNIVERSE, INC.**

 

**STATEMENTS OF CASH FLOWS**

 

Years ended March 31,2001 and 2002

 

 
|                                                                         |   | **2001**   |       | **2002** |   |
|------------------------------------------------------------------------------|--------|------------|------------|----------|--------|
|                                                                         |   |       |       |     |   |
| Cash flows from  operating activities:                                       |   |       |       |     |   |
| Net loss                                                                     |   | $          | (2,172,273 | )        | $      | (991,208 | ) |
| Adjustments to  reconcile net loss to net cash used in operating activities: |   |       |       |     |   |
| Warrant value  adjustment                                                    |   | (2,086     | )          |     |   |
| Depreciation                                                                 |   | 7,291      |       | 7,911    |   |
| Company expenses  incurred by the Chief Executive Officer                    |   | 37,875     |       |     |   |
| Amortization                                                                 |   | 16,251     |       |     |   |
| Non-cash  incentives                                                         |   |       |       | 54,627   |   |
| Revaluation and  write down of impaired assets                               |   | 1,405,754  |       |     |   |
| Write off note  payable, other                                               |   | (150,000   | )          |     |   |
| Equity in losses  of affiliated companies                                    |   | 45,385     |       |     |   |
| Loss (gain) on  sale of investments                                          |   | (249,960   | )          | 225,250  |   |
| Change in  operating assets and liabilities:                                 |   |       |       |     |   |
| Prepaid and  other                                                           |   | 14,836     |       | (319     | )      |
| Accounts payable                                                             |   | (119,521   | )          | 99,972   |   |
| Accounts  payable, related party                                             |   | 29,694     |       | (48,996  | )      |
| Accrued expenses                                                             |   | 105,365    |       | 152,480  |   |
|                                                                         |   |       |       |     |   |
| Net cash used in  operating activities                                       |   | (1,031,389 | )          | (500,238 | )      |
|                                                                         |   |       |       |     |   |
| Cash flows from  investing activities:                                       |   |       |       |     |   |
| Purchase of  equipment                                                       |   | (14,072    | )          | (3,000   | )      |
| Proceeds from  sale of equipment                                             |   |       |       | 1,172    |   |
| Investments:                                                                 |   |       |       |     |   |
| Cash paid for  investments                                                   |   | (392,694   | )          | (315,000 | )      |
| Proceeds from  sale of investments                                           |   | 383,460    |       | 87,000   |   |
|                                                                         |   |       |       |     |   |
| Net cash used in  investing activities                                       |   | (23,306    | )          | (229,828 | )      |
|                                                                              |        |            |            |          |        |  |  |

 

 

 

 

 

 

 

 

See notes to financialstatements.

 

5

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|                                       |   | **2001**  |   | **2002** |   |
|--------------------------------------------|--------|-----------|--------|----------|--------|
|                                       |   |      |   |     |   |
| Cash flows from  financing activities:     |   |      |   |     |   |
| Proceeds from:                             |   |      |   |     |   |
| Note payable,  bank                        |   | $         | 8,000  |     |   |   |
| Notes payable,  other                      |   | 40,000    |   | $        | 20,000 |   |
| Advances from  related party               |   | 665,952   |   | 107,395  |   |
| Convertible  debentures                    |   | 374,256   |   |     |   |
| Convertible  subordinate debentures        |   |      |   | 690,100  |   |
| Warrants  exercised                        |   | 25,000    |   |     |   |
| Payments on  notes payable:                |   |      |   |     |   |
| Other                                      |   | (30,000   | )      | (30,000  | )      |
| Bank                                       |   | (50,000   | )      | (50,000  | )      |
|                                       |   |      |   |     |   |
| Net cash  provided by financing activities |   | 1,033,208 |   | 737,495  |   |
|                                       |   |      |   |     |   |
| Net increase  (decrease) in cash           |   | (21,487   | )      | 7,384    |   |
|                                       |   |      |   |     |   |
| Cash, beginning                            |   | 22,040    |   | 553      |   |
|                                       |   |      |   |     |   |
| Cash, ending                               |   | $         | 553    |     | $      | 7,937 |   |

 

 

 

 

 

 

 

See notes to financialstatements.

 

6

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|                                                                                      |   | **2001** |    | **2002** |   |
|-------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
| Supplemental  disclosure of cash flow information:                                        |   |     |    |     |   |
| Cash paid for:                                                                            |   |     |    |     |   |
| Interest                                                                                  |   | $        | 31,566  |     | $      | 21,216 |   |
|                                                                                      |   |     |    |     |   |
| Income taxes  (refunds)                                                                   |   | $        | 25      |     | $      | (788 | ) |
|                                                                                      |   |     |    |     |   |
| Supplemental  schedule of non-cash investing and financing activities:                    |   |     |    |     |   |
|                                                                                      |   |     |    |     |   |
| Stock warrants  and options issued for debt guarantee and consulting                      |   | $        | 15,675  |     |   |   |
|                                                                                      |   |     |    |     |   |
| Write-off of  note payable, other                                                         |   | $        | 150,000 |     |   |   |
|                                                                                      |   |     |    |     |   |
| Accrued interest  converted to debt                                                       |   | $        | 32,088  |     | $      | 35,151 |   |
|                                                                                      |   |     |    |     |   |
| Investments  transferred to settle accounts payable                                       |   | $        | 99,260  |     |   |   |
|                                                                                      |   |     |    |     |   |
| Sale of  investment:                                                                      |   |     |    |     |   |
| Original cost of  investment                                                              |   |     |    | $        | 21,250 |   |
| Gain on sale                                                                              |   |     |    | 29,750   |   |
|                                                                                      |   |     |    |     |   |
| Total proceeds  credited to related party to reduce related party debt                    |   |     |    | $        | 51,000 |   |
|                                                                                      |   |     |    |     |   |
| Additional  paid-in-capital, incentives granted for debt exchange and bank note guarantee |   |     |    | $        | 68,500 |   |
|                                                                                      |   |     |    |     |   |
| Distribution of  investment in partial settlement of due to related party                 |   |     |    | $        | 24,665 |   |

 

 

 

 

 

 

 

See notes to financialstatements.

 

7

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**IQUNIVERSE, INC.**

 

**NOTES TO FINANCIAL STATEMENTS**

 

Years ended March 31,2001 and 2002

 

**1.     Summary of significant accounting policies:**

 

Nature of operations and subsequent event:

IQUniverse, Inc. (Company) formerly known as CalendarCapital Inc. dba Entrenaut, Inc. located in Minneapolis, Minnesota, was foundedon July 1, 1999 with the purpose of starting, developing, and managingInternet-related businesses.  Initially,the design was to incubate development-stage companies.   By March 31, 2001, the Company had refocusedits business to a developer and operator of a single business concept utilizingthe Internet as a tool to provide products and services to institutions ofhigher learning and their students. Using a software developed by a former investee, the Company establishedIQTrust, a customized online shopping mall accessed through college Web sites.A feasibility study conducted in early August 2001 concluded that assumptionsnecessary to support IQTrust and related products were not feasible at thattime.

 

On October 8, 2001, the Company entered into a letterof intent to merge with Wireless Ronin Technologies, Inc. (Wireless Ronin), adeveloper of a wireless hand-held computer for industrial and businessapplications. Wireless Ronin is currently a development stage enterprise withno sales revenue since its inception in March 2000.  On February 6, 2002, the Company entered into an asset purchaseagreement, subsequently modified, whereby the Company would acquire WirelessRonin.  Under the terms of the agreement,the Company would form a wholly owned subsidiary to acquire all of the assetsand assume certain liabilities of Wireless Ronin in exchange for 13,000,000shares of Company common stock.  The13,000,000 shares will represent approximately 75% of the Company’s commonstock.  The acquisition will beaccounted for as a reverse merger.  Theagreement is contingent upon consent of Wireless Ronin’s shareholders,satisfactory due diligence, and approval by the Company’s shareholders toeliminate the preferred liquidation preference for the Series B and C preferredstock and to increase the authorized number of common stock to 100,000,000shares.  The Company anticipates ashareholders’ meeting in summer 2002.

 

Cash:

The Company maintains its cash at a financial institutionin Minnesota.  At times, the bankbalance exceeds limits insured by Federal agencies.

 

Property and equipment:

Property and equipment are recorded at cost.  Depreciation is calculated on astraight-line basis over the estimated useful lives of the respective assets.

 

The estimated useful lives are as follows:

 
| Computer software      | 3 years |
|------------------------|---------|
| Office equipment       | 5 years |
| Furniture and fixtures | 7 years |

 

8

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Stock compensation:

 

The Company accounts for its stock-based compensationawards to employees under Accounting Principles Board (APB) Opinion No. 25, *“Accountingfor Stock Issued to Employees”*, and discloses the required pro formaeffect on net loss as recommended by Statement of Financial Accounting Standards(SFAS) No. 123, *“Accounting for Stock-Based Compensation.”*

 

Investments:

Investments are recorded at either cost or equitymethod as appropriate.  Loss andvaluation allowances are recorded when deemed appropriate.

 

Basis of presentation:

The Company’s financial statements for the years endedMarch 31, 2001 and 2002 have been prepared on a going concern basis, whichcontemplates the realization of assets and the settlement of liabilities andcommitments in the normal course of business.

 

The Company has incurred losses of $3.5 millionthrough March 31, 2002 and will incur additional costs as it continues todevelop its operations.  The Company isin default on some of its debt obligations. Also, a substantial amount of the Company’s assets are investments inand advances to start-up companies, the realization of which is entirelydependent on these companies developing profitable operations. The Company’sability to continue as a going concern is largely dependent on its ability, aswell as the ability of the companies in which it has investments, to raiseadditional capital.  These factors,among others, raise substantial doubt about the Company’s ability to continueas a going concern. The financial statements do not include any adjustmentsrelating to recoverability and classification of recorded asset amounts or theamounts and classification of liabilities that might result if the Company isunable to continue as a going concern.

 

The Company’s financial and business plans are focusedprimarily on the acquisition of Wireless Ronin.  The Company hopes that the acquisition will help the Companyattract new investors and ultimately, to achieve profitability.  There is no assurance that the Company willbe able to successfully implement its plan and therefore might not be able tocontinue as a going concern.

 

 

9

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Use of estimates:

The preparation of financial statements in conformitywith generally accepted accounting principles requires management to make estimatesand assumptions that affect certain reported amounts and disclosures.  Accordingly, actual results could differfrom those estimates.

 

Significant estimates inherent in the preparation ofthe accompanying financial statements include management’s estimates of thevaluation of investments.  It isreasonably possible that a change in these estimates could occur in the nearterm.

 

Fair value of financial instruments:

Statements of Financial Accounting Standards No. 107, *“Disclosuresabout Fair Value of Financial Instruments,”* requires disclosure offair value information about financial instruments, whether or not recognizedin the balance sheet.  In cases wherequoted market prices are not available, fair values are based on estimates usingpresent value or other value techniques. Those techniques are significantly affected by the assumptions used,including the discount rate and estimates of future cash flows.  In that regard, the derived fair valueestimates cannot be substantiated by comparison to independent markets and inmany cases, could not be realized in immediate settlement of theinstruments.  Statement No. 107 excludescertain financial instruments and all non-financial instruments from itsdisclosure requirements.  Accordingly,the aggregate fair value amounts presented do not represent the underlyingvalue of the Company.

 

For cash, the carrying value is a reasonable estimateof its fair value.  It was not practicalto estimate the fair value of non-marketable investments because of the lack ofquoted market prices and the inability to estimate fair values withoutincurring excessive costs.  The fairvalues for debentures and notes payable are estimated to approximate thecarrying amount as the interest stated in those agreements approximatesinterest rates currently being offered on similar instruments.

 

Loss per share:

Basic earnings (loss) per common share are based onthe weighted average number of common shares outstanding in each year.  Diluted loss per common share is calculatedby adjusting outstanding shares, assuming conversion of all potential dilutivestock options and warrants, convertible debentures, and convertible preferredstock.

 

Stock options to purchase 53,838 and 51,050 shares ofcommon stock at March 31, 2001 and 2002, respectively, were not used in thecalculation of diluted loss per share because they were anti-dilutive.  Potential conversion of preferred stock,convertible debentures, and warrants and options to purchase preferred stock,into approximately 3,500,000 and 5,569,000 shares of common stock at March 31,2001 and 2002, respectively, were not used in the calculation of diluted lossper share because they were anti-dilutive.

 

10

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**2.     Investment activity:**

 

The Company has investments in companies that are recorded on eitherthe cost or equity method as follows:

 

Cost method:

Commission Junction, Inc. and Idealab! Holdings,L.L.C.:

In fiscal year 2000, the Company paid cash of $500,000to acquire common stock of Commission Junction, Inc., (Commission Junction) acompany that provides a mechanism for affiliates and merchants to find eachother over the Internet and track transactions between the two companies.

 

During fiscal year 2001, the Company swapped 40,000shares of Commission Junction stock for 4,000 shares of an Internet incubator,Idealab! Holdings, L.L.C (Idealab!) preferred stock. This investment wasrecorded at the original cost of the Commission Junction stock of$200,000.  On January 18, 2002, theCompany sold all of its Idealab! shares for $40,000, realizing a loss of$160,000.

 

During fiscal 2001, the Company sold 27,600 CommissionJunction shares for a realized gain of $193,200 and the Company transferred8,500 shares to a vendor to satisfy payables of $99,260 for a gain of $56,760.During fiscal year 2002, the Company sold 3,250 shares for a realized gain of$29,750.  Remaining shares at March 31,2002 total 20,650 and are carried at cost of $103,250.

 

Superior Broadband, Inc.:

During fiscal year 2000, the Company made an initialcash investment of $75,000 and acquired 7,500 shares of Superior Broadband,Inc., (Superior) a premium access internet service provider of wirelessbroadband to high band width demand customers. In April 2000, the Company purchased an additional 10,000 shares for$20,000.  During fiscal year 2002,Superior was sold and the Company’s investment was not recoverable, generatinga loss of $95,000.

 

JCafe, Inc.:

The Company loaned $150,000 to JCafe, Inc. (JCafe) astart-up company that has launched a proprietary solution for managing thedelivery of training and educational content over the Internet.  JCafe is currently in default on thenote.  The note is convertible into150,000 shares of JCafe common stock. The Company also received warrants to purchase an additional 150,000shares of JCafe common stock at $.625 per share.  This investment has a 100% valuation allowance on the note andaccrued interest, which total $162,500 at March 31, 2001 and 2002.

 

Biopolymer Engineering, Inc.:

In November 1999, the Company loaned BiopolymerEngineering, Inc. $20,000 with interest at 9%. This loan was due on December 31, 2000. Effective March 31, 2002, the Company distributed this asset to itsChief Executive Officer by offsetting the balance due plus accrued interestagainst amounts owed to the Chief Executive Officer at that date.

 

11

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StoreItOnline.com, Inc.:

During fiscal year 2000, the Company paid cash of$75,000, issued 15,000 shares of its Series C preferred stock valued at$225,000 and issued stock warrants to purchase 10,000 additional Series Cpreferred shares to acquire common stock of StoreItOnLine.com, Inc.,(StoreItOnline) a high capacity, web-based storage business.  A valuation allowance of $345,000, equal tothe total investment, was recorded at March 31, 2001 and the investment waswritten off in fiscal year 2002.

 

Wireless Ronin Technologies, Inc.:

From October 2001 through March 2002, the Companyadvanced $315,000 to Wireless Ronin with interest at 8%.  From April through June 2002, the Companyhas subsequently advanced an additional $220,000 to Wireless Ronin for a totalof $535,000.  See Note 1 regarding theplanned acquisition of Wireless Ronin.

 

Equity method:

OfficeCause.com, Inc. and Chefinabox, Inc.:

During fiscal year 2000, the Company paid cash of$215,000 to acquire 21.18% of the common stock of Chefinabox, Inc.,(Chefinabox) a development stage virtual restaurant.  The difference between the cost of the investment and the amountof underlying equity in net assets of the investee of $169,458 was beingamortized over 60 months.

 

During fiscal year 2000, the Company paid cash of$200,000 to acquire 22.22% of the common stock of OfficeCause.com, Inc.,(OfficeCause) a development stage virtual storefront.  The difference between the cost of the investment and the amountof underlying equity in net assets of the investee of $155,556 had beenrecorded as goodwill.

 

During the first quarter of fiscal year 2001,additional advances were made of $59,926 to Chefinabox and $98,287 toOfficeCause.  During the second quarterof fiscal year 2001, the Company determined that its investments in Chefinaboxand OfficeCause did not have continuing value as those entities had notdeveloped sustained profitable operations and accordingly, the Companywrote-off its investments of $615,790 and the remaining goodwill of $276,261 inthe quarter ended September 30, 2000.

 

**3.     Related parties:**

 

OfficeCause.com, Inc. and Chefinabox, Inc.:

The Company entered into incubation agreements withChefinabox and OfficeCause.  Under theseagreements, the Company provided incubation and management services to theseaffiliates. Total amounts charged under these incubation agreements were$44,926 to Chefinabox for the year ended March 31, 2001.

 

 

12

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The majority shareholder of Chefinabox and OfficeCausewas also the Chief Executive Officer and Chairman of the Board of Directors ofthe Company.  The majority shareholderof OfficeCause rescinded his subscription on October 31, 2000 for stock inOfficeCause and the Company became the sole owner of OfficeCause.  OfficeCause was merged into the Company infiscal year 2001 with nominal assets and liabilities and this resulted in again of $2,648 in the year ended March 31, 2001 statement of operations.  The Company previously wrote-off itsinvestment in OfficeCause.

 

Net Medical, Inc.:

During fiscal year 2001, the Company borrowed $3,000from Net Medical, Inc., which has the same Chief Executive Officer as theCompany.  A balance of $2,722 is owed atMarch 31, 2002.

 

Crawford Capital Corp.:

The Company pays for office space and telephone usedby Crawford Capital Corp., a company with the same Chief Executive Officer asthe Company.  In lieu of compensation tothe Chief Executive Officer, the Company has included these amounts in generaland administrative expenses and totaled $35,748 and $31,755 for the years endedMarch 31, 2001 and 2002, respectively.

 

Chief Executive Officer:

The Chief Executive Officer loans money to the Companyin the form of notes payable.  The notesbear interest at 9% and are due at various dates through March 2003.  Due to related parties includes principaltotaling $678,029 and accrued interest of $37,343 at March 31, 2001 andprincipal totaling $714,759 and accrued interest of $98,345 at March 31, 2002.

 

Related party receivables:

Related party receivables at March 31, 2001 represents$47,000 due from a shareholder for the remaining balance due on purchase ofCommission Junction stock from the Company.

 

**4.     Notes payable:**

 

Note payable, bank:

Note payable, bank, includes borrowings of $200,000and $150,000 for March 31, 2001 and 2002, respectively, with monthly paymentsof interest only at an interest rate of 1.5% over prime.  The interest rate was 9.5% and 6.5% at March31, 2001 and 2002, respectively.  Theprincipal balance of the note was due June 19, 2002.  The note is secured by all business assets of the Company, a bankaccount pledged by a shareholder of the Company, a personal guarantee for theentire amount of the credit facility by the same shareholder and 20,000 sharesof the Company’s Commission Junction stock. That shareholder received warrants and extended expiration dates onother previously issued warrants as consideration for the guarantee.  This beneficial consideration has beenvalued at $40,000 and has been added to additional paid in capital and recordedas additional interest expense over the term of the note.  The due date of the note has been extendedto August 19, 2002, and in addition to the existing collateral, the ChiefExecutive Officer has personally guaranteed the note.

 

13

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Notes payable, other:

Included in note payable, other, is a $50,000 loanfrom a shareholder.  The note was due onDecember 31, 2000 with interest at 10%. The note, as amended, remains indefault and includes a guarantee by the Chief Executive Officer to transferpersonally owned shares of Commission Junction stock in the event of default bythe Company.  No shares have yet beentransferred to satisfy this obligation.

 

During fiscal 2001, the Company borrowed $10,000 froma mortgage bank maturing on December 31, 2000 and bearing interest at 10%.  The note, with accrued interest, was paid bythe Company in June 2001.

 

Extraordinary gain:

The Company borrowed $150,000 from an unrelated partyas evidenced by a note due on June 1, 1995 with no stated rate of interest andcollateralized by certain equipment . The Company relinquished control of the equipment prior to 1995.  The amount was written off by the Company asof March 31, 2001 as management believes the statute of limitations hasexpired.

 

**5.     Convertible debentures:**

 

The Company has issued $385,000 of convertible debentures at interestrates of 8% and 9%.  The conversionfeatures expired between 1993 and 1994. The Company had not repaid these obligations. As a result, an individualdebenture holder with a $125,000 balance sued the Company for repayment of thedebenture claiming that the Company defaulted by not paying agreed-upon monthlyinterest payments in a timely manner. The Company elected not to defend thesuit, thus a default judgement in favor of the debenture holder was awarded.

 

Interest expense related to these debentures was $32,650 for each ofthe periods ended March 31, 2001 and 2002.

 

On April 12, 2002, the Company entered into several agreements with theindividual debenture holder resulting in the satisfaction of thejudgement.  Under the agreements, thedebenture holder’s original 9% debenture of $125,000 was exchanged for a new 8%debenture of like amount, convertible at .50 cents per share during the 90 daysafter an approved increase in the Company’s authorized shares.  After the 90 days has expired, theconversion price is equal to 80% of the average trading price of the stock forthe previous 90 trading days.  Inaddition, the debenture holder entered into a new $50,000 8% convertibledebenture with similar conversion features, and collateralized by certain stockowned personally by the Chief Executive Officer of the Company and certain debtcovenants.  The Company defaulted onthis note on June 15, 2002, however, the debt holder has not yet exercised hisremedies. The debenture holder was also issued warrants to purchase 200,000shares at an exercise price of $1.50 per share, expiring on April 12, 2005.

 

14

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The Company hasalso issued the following convertible subordinate debentures:

 
|                                          |   | **2001** |    | **2002**  |    |
|-----------------------------------------------|--------|----------|---------|-----------|---------|
| 10%  debentures(a)                            |   | $        | 165,000 |      |    |   |
| 10% debentures(b)                             |   | 100,000  |    | $         | 100,000 |   |
| 9% debentures(c)                              |   | 224,256  |    |      |    |
| 10%  debentures(d)                            |   |     |    | 424,407   |    |
| 8% debentures(e)                              |   |     |    | 342,500   |    |
| 8% debentures(f)                              |   |     |    | 134,000   |    |
| 8% debentures(g)                              |   |     |    | 213,600   |    |
| Less unamortized  cost of incentives(h)       |   |     |    | (13,873   | )  |
|                                          |   | 489,256  |    | 1,200,634 |    |
| Less current  portion                         |   | 100,000  |    | 776,227   |    |
| Long-term  convertible subordinate debentures |   | $        | 389,256 |      | $       | 424,407 |   |

 

----

(a)   During May and June 2000, the Company sold$265,000 of 10% subordinate convertible debentures due December 31, 2000.  The debentures were convertible into 1 shareof Company stock for each $5 of debt converted and also included one Quickwit,Inc. (a company developed by the Chief Executive Officer) share priced at $.05 pershare and one warrante for each $1 of funds loaned.  The warrants are exercisable at $.50 per Quickwit stock unit witheach unit consisting of one share and an additional detachable warrant thatexercises at $1.  The Chief Executive Officer determined after thedebenture issuance that the development of Quickwit, Inc. was not feasible;accordingly, no value has been attached to the debenture enhancements relatedto Quickwit, Inc.  The Companywas in default on the payment of these debentures at March 31, 2001 and thenotes were refinanced in April and May 2001.

 

(b)   DuringJune 2000, the Company sold a 10% subordinate convertible debenture dueDecember 31, 2000.  The debenture isconvertible into 20,000 shares of Company stock and also included 100,000 sharesof Quickwit, Inc. (a company developed by the Chief Executive Officer) and apersonal guarantee by the Chief Executive Officer of the Company,collateralized by 10,000 shares of Commission Junction common stock owned bythe Chief Executive Officer.  Thedebenture holder was also granted an option to acquire up to 10,000 shares ofthe Company owned by the Chief Executive Officer at a price of $1 per share;the estimated value of this enhancement was $15,675 and was recorded as anexpense.  The Chief Executive Officerdetermined after the debenture issuance that the development of Quickwit, Inc.was not feasible; accordingly, no value has been attached to the debentureenhancements related to Quickwit, Inc. This debenture is in default.

 

(c)   From January through September 2000, theCompany sold 9% debentures, due in one year from date of issuance.  Each $5,000 unit 

 

15

----

 

        converted into 1,000 common shares at $5per share.  These debentures wererefinanced in April and May 2001.

 

(d)   During April and May 2001, the Companyrefinanced $389,256 of convertible subordinate debentures, resulting in thecapitalization of $35,151 of accrued interest. The new 10% debentures are due at various dates in April and May 2003and are convertible at a price of $2.00 per share.

 

(e)  During May and June 2001, the Company issued$342,500 of convertible debentures. Most  debentures have an unstatedinterest rate.  Interest is beingimputed at 8%.  Each $10,000 ofdebentures is convertible into 20,000 shares of common stock and 10,000warrants exercisable at $1.50 per share. The warrants expire 3 years from conversion.  The common share conversion option is limited to a period endingno later than January 1, 2002, after which time they are convertible at thelower of $2 or 80% of the previous 90 day average price.  There is no stated due date for thedebentures.

 

(f)    DuringSeptember through November 2001, the Company issued $134,000 of convertiblesubordinate debentures with stated interest rates of 8% and converts into onecommon share  $.50 per share plus athree-year warrant to purchase another common share at $1.50 for each dollarinvested.  The right to convert expires90 days after the shareholders approve an increase in authorized shares afterwhich time the debenture is convertible at the lower of $2 or 80% of theprevious 90 day average price.    Thesedebentures are collateralized by 100,000 shares of Cubic Energy, owned by PaulCrawford, Chief Executive Officer of the Company.  There is no stated due date for the debentures.  The holders of $44,000 of these debentureswere also granted one warrant for each dollar loaned, exercisable at $1.50 andexpiring in December 2003.  The warrantswere deemed to have no value at the date of issuance.

 

(g)   FromOctober 2001 through March 2002, the Company issued $213,600 of convertibledebentures of which most debentures have stated interest rates of 8%.  $55,900 of the debentures do not have astated interest rate, and interest is being imputed at 8%.  The right to convert expires 90 days afterthe shareholders approve an increase in authorized shares after which time thedebenture is convertible at the lower of $2 or 80% of the previous 90 dayaverage price.  The holders of these debentureswere also granted one warrant for each dollar loaned, exercisable at $1.50 andexpiring in December 2003.  The warrantswere deemed to have no value at the date of issuance.

 

(h)   Duringfiscal year 2002, the Company exchanged $60,000 of debentures for increasedloans from these individuals totaling $106,000.  The new debenture agreements offered more favorable conversioncharacteristics.  The estimated value ofthe beneficial terms of $28,500 has been added to additional paid in capitaland is being amortized as additional interest expense over the life of therelated debentures.

 

16

----

 

**6.     Commitments and contingency:**

 

Operating leases:

The Company rents office space with future minimumlease payments under these operating leases as follows:

 

| **Year** |   | **Amount** |   |
|----------|--------|------------|--------|
|     |   |       |   |
| 2003     |   | $          | 26,524 |   |
| 2004     |   | 22,400     |   |
| 2005     |   | 23,646     |   |
| 2006     |   | 24,890     |   |
|     |   |       |   |
|     |   | $          | 97,460 |   |
|          |        |            |        |  |  |

 

Rent expense and related common area maintenance charges under alloperating leases for the years ended March 31, 2001 and 2002 were $63,905 and$47,563, respectively.

 

17

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Contingency:

Calendar Capital, Inc. entered into an employmentagreement in September of 1993 with its then chief executive officer.  The agreement, which expired in August 1998,called for, among other items, a base salary of $120,000 annually withincreases of at least 10% per annum as well as granting options to purchase100,000 shares of common stock each year of the agreement.  The Company is currently in negotiationswith the former chief executive officer to settle amounts due under theagreement.  As of March 31, 2002, themaximum potential liability under this agreement is approximately $600,000.  The former chief executive officer is theCompany’s current special securities counsel. The Company had accrued $39,230 with respect to the contract, of which$18,631 and $13,631 remained outstanding at March 31, 2001 and 2002,respectively.  The Company believes thatit will not incur liability beyond that which is recorded in the financialstatements.

 

**7.     Income taxes:**

 

The income tax provision consists of the following:

 
|                         |   | **2001**      |   | **2002** |   |
|------------------------------|--------|---------------|--------|----------|--------|
| Current income  taxes:       |   |          |   |     |   |
| Federal                      |   | $             | (1,871 | )        | $      | (463 | ) |
|                         |   |          |   |     |   |
| Deferred income  taxes:      |   |          |   |     |   |
| Federal                      |   | (531,000      | )      | (401,000 | )      |
| State                        |   | (177,000      | )      | (134,000 | )      |
|                         |   |          |   |     |   |
|                         |   | (708,000      | )      | (535,000 | )      |
|                         |   |          |   |     |   |
| Valuation  allowance         |   | 708,­000 |   | 535,000  |   |
|                         |   |          |   |     |   |
|                         |   | 0             |   | 0        |   |
|                         |   |          |   |     |   |
| Income tax  expense (credit) |   | $             | (1,871 | )        | $      | (463 | ) |

 

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Deferred income taxes arise from temporary differences resulting fromincome and expense items reported for financial accounting and tax purposes indifferent periods.  Deferred taxes areclassified as current or noncurrent, depending on the classification of theassets and liabilities to which they relate. Deferred taxes arising fromtemporary differences that are not related to an asset or liability areclassified as current or noncurrent depending on the periods in which thetemporary differences are expected to reverse. Temporary differences giving rise to the deferred tax asset consistprimarily of net operating loss carryforwards valuation reserves and goodwillamortization.  Temporary differencesgiving rise to the deferred tax liability consist primarily of the excess ofdepreciation expense for tax purposes over the amount for financial reportingpurposes.

 

The income tax provision for continuing operations varied from thefederal statutory tax rate as follows:

 
|                                |   | **2001** |   | **2002** |   |
|-------------------------------------|--------|----------|--------|----------|--------|
|                                |   |     |   |     |   |
| U.S. statutory  rate                |   | (34.00   | )%     | (34.00   | )%     |
| Equity in net  losses of affiliates |   | 21.40    |   |     |   |
| Goodwill  amortization              |   | 4.10     |   |     |   |
| Valuation  allowance                |   | 8.50     |   | 34.00    |   |
|                                |   |     |   |     |   |
|                                |   | 0.00     | %      | 0.00     | %      |

 

During fiscal years 1990 and 2000, Calendar Capital, Inc. experiencedsignificant ownership changes, resulting in a limitation of future utilizationof pre-ownership change net operating losses. Utilization of net operating losses generated prior to the ownershipchange in fiscal year 1990 is limited to $68,000 per year plus amounts notutilized in prior years, and $1,020,000 in the aggregate, through the year2005. Subsequent to this change in ownership, Calendar Capital, Inc.accumulated additional net operating losses and had cumulative losses ofapproximately $5,000,000 prior to the fiscal year 2000 change in ownership. TheCompany has not yet determined the amount of these cumulative losses that willbe available to offset future taxable income. Accordingly, no deferred tax asset and related valuation allowance hasbeen recorded relating to these cumulative losses.  The Company has not recomputed its compliance with Section 382 ofthe Internal Revenue Code since 1990. As of March 31, 2002, the Company has net operating loss carryforwardsof approximately $3,100,000 that will expire beginning in 2020.

 

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The components of deferred tax assets and liabilities are as follows:

 
|                                                                   |   | **2001** |    | **2002**    |   |
|------------------------------------------------------------------------|--------|----------|---------|-------------|--------|
|                                                                   |   |     |    |        |   |
| Deferred tax  liability, temporary differences related to depreciation |   | $        | 4,700   |        | $      | 4,700 |   |
|                                                                   |   |     |    |        |   |
| Tax effect of  net operating loss carryforwards                        |   | (748,700 | )       | (1,283,700  | )      |
|                                                                   |   |     |    |        |   |
| Tax effect of  future temporary differences and carryforwards          |   | (744,000 | )       | (1,279,000) |   |
|                                                                   |   |     |    |        |   |
| Less net  deferred tax asset valuation allowance                       |   | 744,000  |    | 1,279,000   |   |
|                                                                   |   |     |    |        |   |
| Net deferred tax  asset                                                |   | $        |  0 |        | $      | 0 |   |

 

The valuation allowance was recorded to reflect the estimated amount ofdeferred tax assets which may not be realized in future years.

 

**8.     Stock warrants:**

 

The Company has issued warrants to certain debt holders, guarantors,vendors, and an investee in exchange for accepting shares of the Company’sstock as partial consideration for the purchase of the investee’s stock.  The fair value of these warrants wasrecorded as additional paid-in capital. The Company has also issued warrants to employees.

 

The Company has issued warrants to purchase Series C Convertible stockat $15 per share as follows:

 
|                             |   | **2001**  |   | **2002** |   |
|----------------------------------|--------|-----------|--------|----------|--------|
|                             |   |      |   |     |   |
| Beginning of  year               |   | 36,500    |   | 28,667   |   |
| Granted                          |   | 1,500     |   |     |   |
| Exercised                        |   | (9,333    | )      | (500     | )      |
| Expired                          |   | 0         |   | 0        |   |
|                             |   |      |   |     |   |
| End of year                      |   | 28,667    |   | 28,167   |   |
|                             |   |      |   |     |   |
| Weighted average  remaining life |   | 1.75 yrs. |   | .75 yrs. |   |

 

Warrants to purchase Series C Convertible stock expire at various datesbetween September 2002 and December 2003.

 

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The Company has issued warrants to purchase common stock as follows:

 
|                             |   | **2001**  |   | **2002**  |   |
|----------------------------------|--------|-----------|--------|-----------|--------|
|                             |   |      |   |      |   |
| Beginning of  year               |   | 0         |   | 13,850    |   |
| Granted                          |   | 13,850    |   | 565,051   |   |
| Exercised                        |   | 0         |   | 0         |   |
| Expired                          |   | 0         |   | 0         |   |
|                             |   |      |   |      |   |
| End of year                      |   | 13,850    |   | 578,901   |   |
|                             |   |      |   |      |   |
| Weighted average  remaining life |   | 1.73 yrs. |   | 1.58 yrs. |   |

 

The warrants to purchase common stock expire at various dates throughDecember 31, 2003.

 

In order to allow an investor to convert 1,667 Series C convertible preferredstock into common stock and not exceed the 700,000 share authorized limit, theChief Executive Officer, during fiscal year 2001, canceled 1,273 personalshares of stock. The Chief Executive Officer received no consideration for thistransaction.  The Company estimated thefair value of the Chief Executive Officer’s stock cancellation at $25,000, thecash value the warrant holder paid. This amount was credited to additional paid in capital, and $2,800 wascharged against stock and additional paid in capital for the originaltransaction and $22,200 was expensed.

 

The Company accounts for stock-based compensation using the intrinsicvalue method prescribed by APB Opinion No. 25 and related interpretations.  No compensation cost has been recognized forwarrants issued to employees when the exercise price of the warrants issued areat least equal to the fair value of the stock on the date of the issue.  Had compensation costs for these warrantsbeen determined consistent with SFAS No. 123, the Company’s net loss would havebeen unchanged as the warrants were determined to have no fair value on thedate of issuance.  The fair value ofeach warrant for the proforma disclosures required by SFAS No. 123 is estimatedon the grant date using the Black-Scholes option-pricing model with thefollowing assumptions:

 
| Dividend yield           |   | None    |
|--------------------------|--------|---------|
| Expected  volatility     |   | None    |
| Expected life of  option |   | 3 years |
| Risk-free  interest rate |   | 5.00%   |

 

 

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**9.     Stock options:**

 

The Company has a stock option plan reserving 15% of the outstandingshares of the Company’s common stock for future issuance.  Under the terms of this stock option plan,the Company may grant to its employees and consultants options to purchaseshares with a term not to exceed ten years.

 

The Company also has a stock option plan reserving 5,000 shares of theCompany’s common stock for issuance to outside directors.  Under the terms of this plan, eligibledirectors receive an option for 250 shares in the first year elected as adirector; in subsequent years eligible directors receive an option for 100shares.  The exercise price of theoptions shall be 100% of the current market price on the date of the grant.  The term of the options is ten years.

 

In consideration for providing a loan to the Company during fiscal2000, the Company issued an option to acquire up to 4,000 shares of Series CPreferred Convertible Stock at $25.00 per share.  The option shall not expire until the later of six months beyondthe payoff of the loan or December 31, 2002. The option has not been exercised as of March 31, 2002.

 

During fiscal year 2001, the Company issued options to an outsidedirector to purchase 12,500 shares of common stock at $5 per share.  These options expire January 2004.  Since the strike price of the option washigher than the market value of the stock at the time of issue, no expense wasrecorded by the Company with respect to these options.

 

Option activity in common stock is:

 
|                             |   | **2001** |   | **2002** |   |
|----------------------------------|--------|----------|--------|----------|--------|
|                             |   |     |   |     |   |
| Beginning of  year               |   | 41,338   |   | 53,838   |   |
| Granted                          |   | 12,500   |   | 0        |   |
| Exercised                        |   | 0        |   | 0        |   |
| Expired                          |   | 0        |   | 2,788    |   |
|                             |   |     |   |     |   |
| End of year                      |   | 53,838   |   | 51,050   |   |
| Weighted average  remaining life |   | 2.4 yrs. |   | 1.4 yrs. |   |

 

The weighted average exercise price is $18.07 with a range of $3.80 -$42.40.

 

 

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**10.  Preferred stock:**

 

The Company’s preferred stock consists of Series B ConvertiblePreferred Stock (Series B) and Series C Convertible Preferred Stock (Series C).

 

The holders of Series B are entitled to receive cumulative dividends atthe rate of four percent of the stated value ($10.00) of such shares payableannually, when and if declared by the Board of Directors.  Each share of Series B is convertible at theoption of the holder into one share of common stock.  The holders of Series B have one vote per share. The Series Bshares have a liquidation preference of $10.00 per share plus any accumulatedand unpaid dividends. Accumulated and unpaid dividends approximates $247,000and $283,000 at March 31, 2001 and 2002, respectively.

 

The holders of Series C are not entitled to receive dividends.  Each share of Series C is convertible at theoption of the holder into twelve and one-half shares of common stock.  The holders of Series C have twelve and one-halfvotes per share.  On or after January 1,2001, the Company may redeem, in whole or in part, the shares of Series C at aredemption price of $25 per share.  TheSeries C shares have a liquidation preference of $25 per share.

 

 

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