Exhibit 10.3


 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


FINANCIAL STATEMENTS


 


DECEMBER 31, 2002 AND 2001


 

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


TABLE OF CONTENTS


 


	
  Independent Auditors’ Report

  
	
   

  
	
  Financial
  Statements:

  
	
   

  
	
  Balance Sheets

  
	
   

  
	
  Statements of Operations

  
	
   

  
	
  Statements of Stockholders’ Equity

  
	
   

  
	
  Statements of Cash Flows

  
	
   

  
	
  Notes to Financial Statements

  



 

















 


INDEPENDENT
AUDITORS’ REPORT


 


To the Board of Directors and
Stockholders


of Public Media Works, Inc.


 


We have audited the
accompanying balance sheets of Public Media Works, Inc. (a Delaware
corporation) as of December 31, 2002 and 2001, and the related statements of
operations, stockholders’ equity and cash flows for the years ended December
31, 2002 and 2001 and for the period May 15, 2000 (inception) through December
31, 2000. These financial statements are the responsibility of the Company’s
management.  Our responsibility is to
express an opinion on these financial statements based on our audits.


 


We conducted our audits in
accordance with U.S. generally accepted auditing standards.  Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. 
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our
audits provide a reasonable basis for our opinion.


 


In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Public Media Works, Inc. as of December 31, 2002 and
2001, and the results of its operations and its cash flows for the years ended
December 31, 2002 and 2001 and for the period May 15, 2000 (inception) through
December 31, 2000 in conformity with U.S. generally accepted accounting
principles.


 


The accompanying financial
statements have been prepared assuming that the Company will continue as a
going concern. As disclosed in Note 8 to the financial statements, the Company
incurred a net loss of $272,818 during the year ended December 31, 2002, and as
of that date, the Company’s current liabilities exceeded its current assets by
$526,707. These factors create an uncertainty as to the Company’s ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon additional capital contributions from the sale of
stock and the ability to generate operating revenue as the Company transitions
from a development stage company to an operating company (see notes 8 and 9).
The financial statements do not include any adjustments that might be necessary
should the company be unable to continue as a going concern.


 


Salt Lake City, Utah


May 23, 2003


 


1

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


BALANCE SHEETS


 


DECEMBER 31, 2002 and 2001


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  
	
  Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Assets:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  206

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total current assets

  	
   

  	
  —

  	
   

  	
  206

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property and Equipment:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Furniture and leasehold improvements

  	
   

  	
  20,054

  	
   

  	
  20,054

  	
   

  
	
  Computers and office equipment

  	
   

  	
  38,384

  	
   

  	
  46,142

  	
   

  
	
   

  	
   

  	
  58,438

  	
   

  	
  66,196

  	
   

  
	
  Less: accumulated depreciation

  	
   

  	
  26,622

  	
   

  	
  18,273

  	
   

  
	
   

  	
   

  	
  31,816

  	
   

  	
  47,923

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unamortized intangible assets, web site
  development

  	
   

  	
  115,000

  	
   

  	
  115,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Assets

  	
   

  	
  $

  	
  146,816

  	
   

  	
  $

  	
  163,129

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liabilities and Stockholders’ Equity

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Liabilities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts payable and accrued expenses

  	
   

  	
  $

  	
  3,289

  	
   

  	
  $

  	
  2,549

  	
   

  
	
  Accrued interest, stockholders

  	
   

  	
  63,566

  	
   

  	
  36,366

  	
   

  
	
  Notes payable, stockholders

  	
   

  	
  459,852

  	
   

  	
  392,137

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total current liabilities

  	
   

  	
  526,707

  	
   

  	
  431,052

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stockholders’ Equity:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock, $.01 par value 20,000,000
  shares authorized, 17,800,000 and 19,600,000 issued and outstanding

  	
   

  	
  178,000

  	
   

  	
  196,000

  	
   

  
	
  Additional paid-in capital

  	
   

  	
  392,195

  	
   

  	
  213,345

  	
   

  
	
  Deficit accumulated during the development
  stage

  	
   

  	
  (950,086

  	
  )

  	
  (677,268

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Stockholders’ Equity

  	
   

  	
  (379,891

  	
  )

  	
  (267,923

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Liabilities and Stockholders’ Equity

  	
   

  	
  $

  	
  146,816

  	
   

  	
  $

  	
  163,129

  	
   

  



 


The accompanying notes are an integral

part of the financial statements.


 


2

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF
OPERATIONS


 


YEARS ENDED DECEMBER 31, 2002 AND 2001


AND FOR THE PERIOD MAY 15, 2000 (INCEPTION)


THROUGH DECEMBER 31, 2000


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  For the
  period 

  May 15, 2000

  (Inception)

  Through

  December 31,

  2000

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  December 31,

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revenues

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Expenses:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Advertising and promotion

  	
   

  	
  —

  	
   

  	
  130

  	
   

  	
  16,534

  	
   

  	
  16,664

  	
   

  
	
  Auto expenses

  	
   

  	
  —

  	
   

  	
  2,280

  	
   

  	
  2,902

  	
   

  	
  5,l82

  	
   

  
	
  Insurance

  	
   

  	
  —

  	
   

  	
  4,745

  	
   

  	
  5,816

  	
   

  	
  10,561

  	
   

  
	
  Professional fees

  	
   

  	
  20,960

  	
   

  	
  290

  	
   

  	
  14,820

  	
   

  	
  36,070

  	
   

  
	
  Office expenses

  	
   

  	
  2,487

  	
   

  	
  10,213

  	
   

  	
  29,097

  	
   

  	
  41,797

  	
   

  
	
  Public relations

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  8,211

  	
   

  	
  8,211

  	
   

  
	
  Rent

  	
   

  	
  1,000

  	
   

  	
  8,410

  	
   

  	
  6,360

  	
   

  	
  15,770

  	
   

  
	
  Salaries

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  244,245

  	
   

  	
  394,245

  	
   

  
	
  Payroll taxes

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  7,217

  	
   

  	
  7,217

  	
   

  
	
  Telephone and utilities

  	
   

  	
  1,139

  	
   

  	
  3,987

  	
   

  	
  11,427

  	
   

  	
  16,553

  	
   

  
	
  Web development/ Consulting costs

  	
   

  	
  21,361

  	
   

  	
  41,137

  	
   

  	
  94,286

  	
   

  	
  156,784

  	
   

  
	
  Depreciation

  	
   

  	
  11,451

  	
   

  	
  12,509

  	
   

  	
  6,326

  	
   

  	
  30,286

  	
   

  
	
  Travel and entertainment

  	
   

  	
  30,691

  	
   

  	
  4,651

  	
   

  	
  58,891

  	
   

  	
  94,233

  	
   

  
	
  Other

  	
   

  	
  1,073

  	
   

  	
  2,712

  	
   

  	
  38,776

  	
   

  	
  42,561

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total operating expenses

  	
   

  	
  240,162

  	
   

  	
  91,064

  	
   

  	
  544,908

  	
   

  	
  876,134

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating loss

  	
   

  	
  (240,162

  	
  )

  	
  (91,064

  	
  )

  	
  (544,908

  	
  )

  	
  (876,134

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other income (expense):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  (4,656

  	
  )

  	
  (2,245

  	
  )

  	
  —

  	
   

  	
  (6,901

  	
  )

  
	
  Interest income

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  649

  	
   

  	
  649

  	
   

  
	
  Interest expense

  	
   

  	
  (27,200

  	
  )

  	
  (27,200

  	
  )

  	
  (10,900

  	
  )

  	
  (65,300

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total other income (expense)

  	
   

  	
  (31,856

  	
  )

  	
  (29,445

  	
  )

  	
  (10,251

  	
  )

  	
  (71,552

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss before income taxes

  	
   

  	
  (272,018

  	
  )

  	
  (120,509

  	
  )

  	
  (555,159

  	
  )

  	
  (947,686

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Provision for income taxes

  	
   

  	
  800

  	
   

  	
  800

  	
   

  	
  800

  	
   

  	
  2,400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Loss

  	
   

  	
  $

  	
  (272,818

  	
  )

  	
  $

  	
  (121,309

  	
  )

  	
  $

  	
  (555,959

  	
  )

  	
  $

  	
  (950,086

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


3

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF
STOCKHOLDERS’ EQUITY


 


YEARS ENDED DECEMBER 31, 2002 AND 2001

AND FOR THE PERIOD MAY 15, 2000 (INCEPTION)

THROUGH DECEMBER 31, 2000


 


	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Additional

  	
   

  	
  Deficit

  Accumulated

  During the

  	
   

  
	
   

  	
   

  	
  Common
  Stock

  	
   

  	
  Paid-in

  	
   

  	
  Development

  	
   

  
	
   

  	
   

  	
  Shares

  	
   

  	
  Amount

  	
   

  	
  Capital

  	
   

  	
  Stage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, May 15, 2000

  	
   

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash at $.05/share
  on June 16, 2000

  	
   

  	
  200,000

  	
   

  	
  2,000

  	
   

  	
  8,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash and Company
  expenses paid directly by shareholder at $.08/share on June 16, 2000

  	
   

  	
  600,000

  	
   

  	
  6,000

  	
   

  	
  44,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash at $.025/share
  on June 23, 2000

  	
   

  	
  2,000,000

  	
   

  	
  20,000

  	
   

  	
  30,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued to officers for
  services rendered during 2000 at $.01/share

  	
   

  	
  16,800,000

  	
   

  	
  168,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed by shareholders during
  2000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  53,750

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the period May 15, 2000
  (inception) through December 31, 2000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (555,959

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2000

  	
   

  	
  19,600,000

  	
   

  	
  196,000

  	
   

  	
  135,750

  	
   

  	
  (555,959

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed and Company expenses paid
  directly by shareholders

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  77,595

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the year ended December 31,
  2001

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (121,309

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2001

  	
   

  	
  19,600,000

  	
   

  	
  $

  	
  196,000

  	
   

  	
  $

  	
  213,345

  	
   

  	
  $

  	
  (677,268

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


4

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF STOCKHOLDERS’ EQUITY -
CONTINUED


 


YEARS ENDED DECEMBER 31, 2002 AND 2001

AND FOR THE PERIOD MAY 15, 2000 (INCEPTION)

THROUGH DECEMBER 31, 2000


 


	
   

  	
   

  	
  Common
  Stock

  	
   

  	
  Additional

  Paid-in

  	
   

  	
  Deficit

  Accumulated

  During the

  Development

  	
   

  
	
   

  	
   

  	
  Shares

  	
   

  	
  Amount

  	
   

  	
  Capital

  	
   

  	
  Stage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2001

  	
   

  	
  19,600,000

  	
   

  	
  $

  	
  196,000

  	
   

  	
  $

  	
  213,345

  	
   

  	
  $

  	
  (677,268

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed by shareholders during
  2002

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  10,850

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shares returned to treasury as part of
  reorganization on November 1, 2002

  	
   

  	
  (16,800,000 

  	
  )

  	
  (168,000

  	
  )

  	
  168,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued to officers for
  services rendered per November 1, 2002 reorganization at $.01/share

  	
   

  	
  15,000,000

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the year ended December 31,
  2002

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (272,818

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2002

  	
   

  	
  17,800,000

  	
   

  	
  $

  	
  178,000

  	
   

  	
  $

  	
  392,195

  	
   

  	
  $

  	
  (950,086

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


5

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF
CASH FLOWS


 


YEARS ENDED DECEMBER 31, 2002 AND 2001


AND FOR THE PERIOD MAY 15, 2000 (INCEPTION)


THROUGH DECEMBER 31, 2000


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  For the
  period 

  May 15, 2000

  (Inception)

  Through

  December 31,

  2000

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  December 31,

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss

  	
   

  	
  $

  	
  (272,818

  	
  )

  	
  $

  	
  (121,309

  	
  )

  	
  $

  	
  (555,959

  	
  )

  	
  $

  	
  (950,086

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjustments to reconcile net loss to cash
  provided by operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expenses paid directly by related party
  creditors

  	
   

  	
  66,715

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  66,715

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  4,656

  	
   

  	
  2,245

  	
   

  	
  —

  	
   

  	
  6,901

  	
   

  
	
  Depreciation

  	
   

  	
  11,451

  	
   

  	
  12,509

  	
   

  	
  6,326

  	
   

  	
  30,286

  	
   

  
	
  Contributions from stockholders

  	
   

  	
  —

  	
   

  	
  26,805

  	
   

  	
  28,500

  	
   

  	
  55,305

  	
   

  
	
  Common stock issued for services

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  168,000

  	
   

  	
  318,000

  	
   

  
	
  Increase (decrease) in accounts payable and
  accrued expenses

  	
   

  	
  27,940

  	
   

  	
  27,180

  	
   

  	
  11,735

  	
   

  	
  66,855

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash used by operating activities:

  	
   

  	
  (12,056

  	
  )

  	
  (52,570

  	
  )

  	
  (341,398

  	
  )

  	
  (406,024

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from investing activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchase of property and equipment

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (69,003

  	
  )

  	
  (69,003

  	
  )

  
	
  Web site development costs capitalized

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (115,000

  	
  )

  	
  (115,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash used by investing activities:

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  (184,003

  	
  )

  	
  $

  	
  (184,003

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


6

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF CASH FLOWS - CONTINUED


 


YEARS ENDED DECEMBER 31, 2002 AND 2001


AND FOR THE PERIOD MAY 15, 2000 (INCEPTION)


THROUGH DECEMBER 31, 2000


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  December 31,

  2000

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  December 31,

  2002

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from financing activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issuance of common stock

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  81,500

  	
   

  	
  $

  	
  81,500

  	
   

  
	
  Cash contributed by stockholders

  	
   

  	
  10,850

  	
   

  	
  50,790

  	
   

  	
  53,750

  	
   

  	
  115,390

  	
   

  
	
  Proceeds from related party borrowings

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  	
  392,137

  	
   

  	
  393,137

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash provided by financing activities:

  	
   

  	
  11,850

  	
   

  	
  50,790

  	
   

  	
  527,387

  	
   

  	
  590,027

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net increase (decrease) in cash

  	
   

  	
  (206

  	
  )

  	
  (1,780

  	
  )

  	
  1,986

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash, beginning of period

  	
   

  	
  206

  	
   

  	
  1,986

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash, end of period

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  206

  	
   

  	
  $

  	
  1,986

  	
   

  	
  $

  	
  —

  	
   

  
	
  Interest paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  1,734

  	
   

  	
  $

  	
  1,734

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income taxes paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  



 


The accompanying notes are an integral

part of the financial statements.


 


7

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


NOTES TO
FINANCIAL STATEMENTS


 


 


1.                                       Summary
of Business and Significant Accounting Policies


 


a.               Summary of
Business


 


The Company
was incorporated under the laws of the State of Delaware on May 15, 2000.  The Company was formed to pursue
opportunities in the motion picture industry. 
The Company plans to utilize the concept of interactive marketing.  Interactive marketing is a new method to
market, promote and produce films. The new marketing method will presell
product placement in films to help fund production costs in the initial stages.
The Company has not commenced principal operations and is considered a
“Development Stage Company” as defined by the Financial Accounting Standards
Board Statement No. 7.


 


b.              Cash Flows


 


For purposes
of the statement of cash flows, the Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash or
cash equivalents.


 


c.               Property and
Equipment


 


Property and
equipment are stated at cost less accumulated depreciation. Depreciation is
provided using straight-line methods based on estimated useful lives of five to
seven years.


 


d.              Use of Estimates


 


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


 


2.                                       Unamortized
Intangible Asset


 


In September
2000, the Company hired a web site development company to develop its
interactive marketing web site for $115,000. At December 31, 2002 and 2001, the
intangible asset has been assigned a fair value of $115,000.


 


Costs incurred
internally to maintain and further develop the web site have been recognized as
an expense when incurred.


 


The
interactive marketing web site is still in the development stage. The Company
has determined that the fair value of the intangible asset has not been
impaired.


 


8

















 


3.                                       Notes
Payable, Stockholders


 


The Company
has notes payable with two stockholders. The balance at December 31, 2002 and
2001 was $459,852 and $392,137, respectively. The notes are unsecured and due
on demand. Interest is being charged at 8% on $340,000. The remaining amount is
non-interest bearing.


 


4.                                       Preferred
Stock


 


The Company
has been authorized to issue 5,000,000 shares of preferred stock of which no
preferred stock has been issued as of December 31, 2002. The Company has the
authorization to issue the preferred stock in one or more series and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of each series.


 


5.                                       Issuance
of Common Stock


 


During June
2000, the company issued 2,800,000 shares of its common stock at an aggregate
price of $110,000 of which $81,500 was received in cash and $28,500 in Company
expenses paid directly by a stockholder.


 


During the
year 2000, the Company issued 16,800,000 shares of its common stock to three
officers for services rendered. The common shares were valued at $.01 per share
for an aggregate price of $168,000. The $168,000 is included in salaries
expense in the accompanying statement of operations. In November 2002, the
Company hired a new chief executive officer and restructured the equity of the
Company. As part of the restructuring, the 16,800,000 common shares were
returned to Treasury. Pursuant to a board of directors resolution effective
November 1, 2002, the Company issued three officers 15,000,000 shares of its
common stock at $.01 per share for an aggregate cost of $150,000 for services
rendered. The $150,000 is included in salaries expense in the accompanying statement
of operations.


 


6.                                       Stock
Options and Warrants


 


No options or
warrants are outstanding to acquire the Company’s common stock.


 


9

















 


7.                                       Income
Taxes


 


The provision
for income tax consists of the following components at December 31, 2002, 2001
and 2000:


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  2000

  	
   

  
	
  Current:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Federal income taxes

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  State income taxes

  	
   

  	
  800

  	
   

  	
  800

  	
   

  	
  800

  	
   

  
	
  Deferred

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  



 


The following
reconciles income taxes reported in the financial statements to taxes that
would be obtained by applying regular tax rates to income before taxes:


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  2000

  	
   

  
	
  Expected tax benefit using regular rates

  	
   

  	
  $

  	
  (92,486

  	
  )

  	
  $

  	
  (40,973

  	
  )

  	
  $

  	
  (188,754

  	
  )

  
	
  State minimum tax

  	
   

  	
  800

  	
   

  	
  800

  	
   

  	
  800

  	
   

  
	
  Valuation allowance

  	
   

  	
  92,486

  	
   

  	
  40,973

  	
   

  	
  188,754

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax Provision

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  



 


Due to the
Company being in the development stage and incurring net operating losses, a
valuation allowance has been provided to reduce deferred tax assets to the
amount that is more likely to be realized. The net deferred tax assets consist
of the following components:


 


	
   

  	
   

  	
  2002

  	
   

  	
  2001

  	
   

  	
  2000

  	
   

  
	
  Deferred tax assets

  	
   

  	
  $

  	
  92,486

  	
   

  	
  $

  	
  40,973

  	
   

  	
  $

  	
  188,754

  	
   

  
	
  Valuation allowance

  	
   

  	
  (92,486

  	
  )

  	
  (40,973

  	
  )

  	
  (188,754

  	
  )

  
	
  Deferred tax liabilities

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net deferred tax assets 

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  



 


The Company
has loss carryforwards totaling $629,686 that may be offset against future
federal income taxes. If not used, the carryforwards will expire as follows:


 


	
   

  	
   

  	
  Operating
Losses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2020

  	
   

  	
  $

  	
  387,159

  	
   

  
	
  2021

  	
   

  	
  120,509

  	
   

  
	
  2022

  	
   

  	
  122,018

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  629,686

  	
   

  



 


10

















 


8.                                       Development
Stage and Operating Deficits


 


As shown in
the accompanying financial statements, the Company incurred a net loss of
$272,818 during the year ended December 31, 2002 and accumulated losses of
$950,086 since opening for business in 2000. The Company’s current liabilities
exceed its current assets by $526,707 at December 31, 2002. These factors
create an uncertainty as to the Company’s ability to continue as a going
concern. The ability of the Company to continue as a going concern is dependent
upon the success of raising additional capital through the issuance of common
stock and the ability to generate operating revenue. The financial statements
do not include any adjustments that might be necessary should the Company be
unable to continue as a going concern.


 


9.                                       Subsequent
Event


 


During April
and May 2003, the Company issued 850,000 shares of its common stock at $.40 per
share for a total amount of $340,000.


 


In May 2003,
the Company paid $50,000 to a shareholder for reimbursement of Company expenses
paid directly by the shareholder in a prior year. The $50,000 payable is
included in notes payable, shareholders in the accompanying balance sheet (see
note 3).


 


11

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


 


FINANCIAL STATEMENTS


 


 


JUNE 30, 2003 AND DECEMBER 31, 2002


 

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


TABLE OF CONTENTS


 


	
  Independent Auditors’ Report

  
	
   

  
	
  Financial
  Statements:

  
	
   

  
	
  Balance Sheets

  
	
   

  
	
  Statements of Operations

  
	
   

  
	
  Statements of Stockholders’ Equity

  
	
   

  
	
  Statements of Cash Flows

  
	
   

  
	
  Notes to Financial Statements

  



 

















 


INDEPENDENT AUDITORS’ REPORT


 


To the Board of Directors and
Stockholders


of Public Media Works, Inc.


 


We have audited the
accompanying balance sheets of Public Media Works, Inc. (a Delaware
corporation) as of June 30, 2003 and December 31, 2002, and the related
statements of operations, stockholders’ equity and cash flows for the six
months ended June 30, 2003 and the years ended December 31, 2002 and 2001.
These financial statements are the responsibility of the Company’s
management.  Our responsibility is to
express an opinion on these financial statements based on our audits.


 


We conducted our audits in
accordance with U.S. generally accepted auditing standards.  Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement.  An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.  We believe that our audits provide a
reasonable basis for our opinion.


 


In our opinion, the financial
statements referred to above present fairly, in all material respects, the
financial position of Public Media Works, Inc. as of June 30, 2003 and December
31, 2002, and the results of its operations and its cash flows for the six
months ended June 30, 2003 and the years ended December 31, 2002 and 2001 in
conformity with U.S. generally accepted accounting principles.


 


The accompanying financial
statements have been prepared assuming that the Company will continue as a
going concern. As disclosed in Note 8 to the financial statements, the Company
incurred a net loss of $236,150 and $272,818, respectively, during the six
months ended June 30, 2003 and the year ended December 31, 2002, and as of June
30, 2003, the Company’s current liabilities exceeded its current assets by
$415,569. These factors create an uncertainty as to the Company’s ability to
continue as a going concern. The ability of the Company to continue as a going
concern is dependent upon additional capital contributions from the sale of
stock and the ability to generate operating revenue as the Company transitions
from a development stage company to an operating company (see notes 8 and 9).
The financial statements do not include any adjustments that might be necessary
should the company be unable to continue as a going concern.


 


Salt Lake City, Utah


August 22, 2003


 


1

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


BALANCE SHEETS


 


JUNE 30, 2003 AND DECEMBER 31, 2002


 


	
   

  	
   

  	
  June 30,

  2003

  	
   

  	
  December
  31,

  2002

  	
   

  
	
  Assets

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Assets:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  $

  	
  118,738

  	
   

  	
  $

  	
  —

  	
   

  
	
  Prepaid expenses

  	
   

  	
  2,816

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total current assets

  	
   

  	
  121,554

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Property and Equipment:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Furniture and leasehold improvements

  	
   

  	
  20,054

  	
   

  	
  20,054

  	
   

  
	
  Computers and office equipment

  	
   

  	
  38,384

  	
   

  	
  38,384

  	
   

  
	
   

  	
   

  	
  58,438

  	
   

  	
  58,438

  	
   

  
	
  Less: accumulated depreciation

  	
   

  	
  31,910

  	
   

  	
  26,622

  	
   

  
	
   

  	
   

  	
  26,528

  	
   

  	
  31,816

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Unamortized intangible assets, web site
  development

  	
   

  	
  115,000

  	
   

  	
  115,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Assets

  	
   

  	
  $

  	
  263,082

  	
   

  	
  $

  	
  146,816

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Liabilities and Stockholders’ Equity

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Current Liabilities:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Accounts payable and accrued expenses 

  	
   

  	
  $

  	
  32,781

  	
   

  	
  $

  	
  3,289

  	
   

  
	
  Accrued interest, stockholders

  	
   

  	
  77,166

  	
   

  	
  63,566

  	
   

  
	
  Notes payable, stockholders

  	
   

  	
  427,176

  	
   

  	
  459,852

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total current liabilities

  	
   

  	
  537,123

  	
   

  	
  526,707

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Stockholders’ Equity:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock, $.01 par value 20,000,000
  shares authorized, 18,650,000 and 17,800,000 issued and outstanding

  	
   

  	
  186,500

  	
   

  	
  178,000

  	
   

  
	
  Additional paid–in capital

  	
   

  	
  725,695

  	
   

  	
  392,195

  	
   

  
	
  Deficit accumulated during the development
  stage

  	
   

  	
  (1,186,236

  	
  )

  	
  (950,086

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Stockholders’ Equity

  	
   

  	
  (274,041

  	
  )

  	
  (379,891

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Liabilities and Stockholders’ Equity

  	
   

  	
  $

  	
  263,082

  	
   

  	
  $

  	
  146,816

  	
   

  



 


The accompanying notes are an integral

part of the financial statements.


 


2

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF OPERATIONS


 


SIX MONTHS ENDED JUNE 30, 2003 AND


YEARS ENDED DECEMBER 31, 2002 AND 2001


 


	
   

  	
   

  	
  Six Months

  Ended

  June 30,

  2003

  	
   

  	
  Year Ended

  December 31,

  2002

  	
   

  	
  Year Ended

  December 31,

  2001

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  June 30,

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revenues

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating Expenses:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Advertising and promotion

  	
   

  	
  217

  	
   

  	
  —

  	
   

  	
  130

  	
   

  	
  16,881

  	
   

  
	
  Auto expenses

  	
   

  	
  18,061

  	
   

  	
  —

  	
   

  	
  2,280

  	
   

  	
  23,243

  	
   

  
	
  Insurance

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  4,745

  	
   

  	
  10,561

  	
   

  
	
  Professional fees

  	
   

  	
  10,682

  	
   

  	
  20,960

  	
   

  	
  290

  	
   

  	
  46,752

  	
   

  
	
  Office expenses

  	
   

  	
  4,755

  	
   

  	
  2,487

  	
   

  	
  10,213

  	
   

  	
  46,552

  	
   

  
	
  Public relations

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  8,211

  	
   

  
	
  Rent

  	
   

  	
  5,400

  	
   

  	
  1,000

  	
   

  	
  8,410

  	
   

  	
  21,170

  	
   

  
	
  Salaries

  	
   

  	
  118,750

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  512,995

  	
   

  
	
  Payroll taxes

  	
   

  	
  11,613

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  18,830

  	
   

  
	
  Telephone and utilities

  	
   

  	
  2,398

  	
   

  	
  1,139

  	
   

  	
  3,987

  	
   

  	
  18,951

  	
   

  
	
  Web development/ Consulting costs

  	
   

  	
  13,080

  	
   

  	
  21,361

  	
   

  	
  41,137

  	
   

  	
  169,864

  	
   

  
	
  Depreciation

  	
   

  	
  5,288

  	
   

  	
  11,451

  	
   

  	
  12,509

  	
   

  	
  35,574

  	
   

  
	
  Travel and entertainment

  	
   

  	
  29,620

  	
   

  	
  30,691

  	
   

  	
  4,651

  	
   

  	
  123,853

  	
   

  
	
  Other

  	
   

  	
  2,686

  	
   

  	
  1,073

  	
   

  	
  2,712

  	
   

  	
  45,247

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total operating expenses

  	
   

  	
  222,550

  	
   

  	
  240,162

  	
   

  	
  91,064

  	
   

  	
  1,098,684

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Operating loss

  	
   

  	
  (222,550

  	
  )

  	
  (240,162

  	
  )

  	
  (91,064

  	
  )

  	
  (1,098,684

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Other income (expense):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  —

  	
   

  	
  (4,656

  	
  )

  	
  (2,245

  	
  )

  	
  (6,901

  	
  )

  
	
  Interest income

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  649

  	
   

  
	
  Interest expense

  	
   

  	
  (13,600

  	
  )

  	
  (27,200

  	
  )

  	
  (27,200

  	
  )

  	
  (78,900

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total other income (expense)

  	
   

  	
  (13,600

  	
  )

  	
  (31,856

  	
  )

  	
  (29,445

  	
  )

  	
  (85,152

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Loss before income taxes

  	
   

  	
  (236,150

  	
  )

  	
  (272,018

  	
  )

  	
  (120,509

  	
  )

  	
  (1,183,836

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Provision for income taxes

  	
   

  	
  —

  	
   

  	
  800

  	
   

  	
  800

  	
   

  	
  2,400

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net Loss

  	
   

  	
  $

  	
  (236,150 

  	
  )

  	
  $

  	
  (272,818

  	
  )

  	
  $

  	
  (121,309

  	
  )

  	
  $

  	
  (1,186,236

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


3

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF
STOCKHOLDERS’ EQUITY


 


FOR THE PERIOD MAY 15, 2000 (INCEPTION)


THROUGH JUNE 30, 2003


 


 


	
   

  	
   

  	
  Common Stock

  	
   

  	
  Additional

  Paid-in

  	
   

  	
  Deficit

  Accumulated

  During the

  Development

  	
   

  
	
   

  	
   

  	
  Shares

  	
   

  	
  Amount

  	
   

  	
  Capital

  	
   

  	
  Stage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, May 15, 2000

  	
   

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash at $.05/share
  on June 16, 2000

  	
   

  	
  200,000

  	
   

  	
  2,000

  	
   

  	
  8,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash and Company expenses
  paid directly by shareholder at $.08/share on June 16, 2000

  	
   

  	
  600,000

  	
   

  	
  6,000

  	
   

  	
  44,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash at $.025/share
  on June 23, 2000

  	
   

  	
  2,000,000

  	
   

  	
  20,000

  	
   

  	
  30,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued to officers for
  services rendered during 2000 at $.01/share

  	
   

  	
  16,800,000

  	
   

  	
  168,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed by shareholders during
  2000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  53,750

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the period May 15, 2000
  (inception) through December 31, 2000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (555,959

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2000

  	
   

  	
  19,600,000

  	
   

  	
  196,000

  	
   

  	
  135,750

  	
   

  	
  (555,959

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed and Company expenses paid
  directly by shareholders

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  77,595

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the year ended December 31,
  2001

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (121,309

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2001

  	
   

  	
  19,600,000

  	
   

  	
  $

  	
  196,000

  	
   

  	
  $

  	
  213,345

  	
   

  	
  $

  	
  (677,268

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


4

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF STOCKHOLDERS’ EQUITY - CONTINUED


 


FOR THE PERIOD MAY 15, 2000 (INCEPTION)


THROUGH JUNE 30, 2003


 


	
   

  	
   

  	
  Common
  Stock

  	
   

  	
  Additional

  Paid-in

  	
   

  	
  Deficit

  Accumulated

  During the

  Development

  	
   

  
	
   

  	
   

  	
  Shares

  	
   

  	
  Amount

  	
   

  	
  Capital

  	
   

  	
  Stage

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2001

  	
   

  	
  19,600,000

  	
   

  	
  $

  	
  196,000

  	
   

  	
  $

  	
  213,345

  	
   

  	
  $

  	
  (677,268

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed by shareholders during
  2002

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  10,850

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Shares returned to treasury as part of
  reorganization on November 1, 2002

  	
   

  	
  (16,800,000 

  	
  )

  	
  (168,000

  	
  )

  	
  168,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued to officers for
  services rendered per November 1, 2002 reorganization at $.01/share

  	
   

  	
  15,000,000

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the year ended December 31,
  2002

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (272,818

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, December 31, 2002

  	
   

  	
  17,800,000

  	
   

  	
  178,000

  	
   

  	
  392,195

  	
   

  	
  (950,086

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash contributed by shareholders during
  2003

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  2,000

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for cash at $.40/share
  during April through June 2003

  	
   

  	
  850,000

  	
   

  	
  8,500

  	
   

  	
  331,500

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss for the six months ended June 30,
  2003

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (236,150

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Balance, June 30, 2003

  	
   

  	
  18,650,000

  	
   

  	
  $

  	
  186,500

  	
   

  	
  $

  	
  725,695

  	
   

  	
  $

  	
  (1,186,236

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


5

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF CASH FLOWS


 


SIX MONTHS ENDED JUNE 30, 2003 AND


YEARS ENDED DECEMBER 31, 2002 AND 2001


 


	
   

  	
   

  	
  Six Months

  Ended

  June 30,

  2003

  	
   

  	
  Year Ended

  December 31, 

  2002

  	
   

  	
  Year Ended

  December 31,

  2001

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  June 30,

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net loss

  	
   

  	
  $

  	
  (236,150

  	
  )

  	
  $

  	
  (272,818

  	
  )

  	
  $

  	
  (121,309

  	
  )

  	
  $

  	
  (1,186,236

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjustments to reconcile net loss to cash
  provided by operating activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Expenses paid directly by related party
  creditors

  	
   

  	
  17,324

  	
   

  	
  66,715

  	
   

  	
  —

  	
   

  	
  84,039

  	
   

  
	
  Loss on disposal of fixed assets

  	
   

  	
  —

  	
   

  	
  4,656

  	
   

  	
  2,245

  	
   

  	
  6,901

  	
   

  
	
  Depreciation

  	
   

  	
  5,288

  	
   

  	
  11,451

  	
   

  	
  12,509

  	
   

  	
  35,574

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Contributions from stockholders

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  26,805

  	
   

  	
  55,305

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock issued for services

  	
   

  	
  —

  	
   

  	
  150,000

  	
   

  	
  —

  	
   

  	
  318,000

  	
   

  
	
  Increase in prepaid expenses

  	
   

  	
  (2,816

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (2,816

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Increase (decrease) in accounts payable and
  accrued expenses

  	
   

  	
  43,092

  	
   

  	
  27,940

  	
   

  	
  27,180

  	
   

  	
  109,947

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash used by operating activities:

  	
   

  	
  (173,262

  	
  )

  	
  (12,056

  	
  )

  	
  (52,570

  	
  )

  	
  (579,286

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from investing activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Purchase of property and equipment

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (69,003

  	
  )

  
	
  Web site development costs capitalized

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  (115,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash used by investing activities:

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  (184,003

  	
  )

  



 


The accompanying notes are an integral

part of the financial statements.


 


6

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


STATEMENTS OF CASH
FLOWS - CONTINUED


 


SIX MONTHS ENDED JUNE 30, 2003 AND


YEARS ENDED DECEMBER 31, 2002 AND 2001


 


	
   

  	
   

  	
  Six Months

  Ended

  June 30,

  2003

  	
   

  	
  Year Ended

  December 31,

  2002

  	
   

  	
  Year Ended

  December 31,

  2001

  	
   

  	
  For the
  period

  May 15, 2000

  (Inception)

  Through

  June 30,

  2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash flows from financing activities:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Issuance of common stock

  	
   

  	
  $

  	
  340,000

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  421,500

  	
   

  
	
  Cash contributed by stockholders

  	
   

  	
  2,000

  	
   

  	
  10,850

  	
   

  	
  50,790

  	
   

  	
  117,390

  	
   

  
	
  Proceeds from related party borrowings

  	
   

  	
  —

  	
   

  	
  1,000

  	
   

  	
  —

  	
   

  	
  393,137

  	
   

  
	
  Repayment of related party borrowings

  	
   

  	
  (50,000

  	
  )

  	
  —

  	
   

  	
  —

  	
   

  	
  (50,000

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net cash provided by financing activities:

  	
   

  	
  292,000

  	
   

  	
  11,850

  	
   

  	
  50,790

  	
   

  	
  882,027

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net increase (decrease) in cash

  	
   

  	
  118,738

  	
   

  	
  (206

  	
  )

  	
  (1,780

  	
  )

  	
  118,738

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash, beginning of period

  	
   

  	
  —

  	
   

  	
  206

  	
   

  	
  1,986

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Cash, end of period

  	
   

  	
  $

  	
  118,738

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  206

  	
   

  	
  $

  	
  118,738

  	
   

  
	
  Interest paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  1,734

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Income taxes paid

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  



 


The accompanying notes are an integral

part of the financial statements.


 


7

















 


PUBLIC MEDIA WORKS, INC.


(A Development Stage Company)


 


NOTES TO
FINANCIAL STATEMENTS


 


1.                                       Summary
of Business and Significant Accounting Policies


 


a.               Summary of
Business


 


The Company
was incorporated under the laws of the State of Delaware on May 15, 2000.  The Company was formed to pursue
opportunities in the motion picture industry. 
The Company plans to utilize the concept of interactive marketing.  Interactive marketing is a new method to
market, promote and produce films. The new marketing method will presell
product placement in films to help fund production costs in the initial stages.
The Company has not commenced principal operations and is considered a
“Development Stage Company” as defined by the Financial Accounting Standards
Board Statement No. 7.


 


b.              Cash Flows


 


For purposes
of the statement of cash flows, the Company considers all highly liquid
investments purchased with a maturity of three months or less to be cash or
cash equivalents.


 


c.               Property and
Equipment


 


Property and
equipment are stated at cost less accumulated depreciation. Depreciation is
provided using straight-line methods based on estimated useful lives of five to
seven years.


 


d.              Use of Estimates


 


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


 


2.                                       Unamortized
Intangible Asset


 


In September
2000, the Company hired a web site development company to develop its
interactive marketing web site for $115,000. At June 30, 2003 and December 31,
2002, the intangible asset has been assigned a fair value of $115,000.


 


Costs incurred
internally to maintain and further develop the web site have been recognized as
an expense when incurred.


 


The
interactive marketing web site is still in the development stage. The Company
has determined that the fair value of the intangible asset has not been
impaired.


 


8

















 


3.                                       Notes
Payable, Stockholders


 


The Company
has notes payable with two stockholders. The balance at June 30, 2003 and
December 31, 2002 was $427,176 and $459,352, respectively. The notes are
unsecured and due on demand. Interest is being charged at 8% on $340,000. The
remaining amount is non-interest bearing.


 


4.                                       Preferred
Stock


 


The Company
has been authorized to issue 5,000,000 shares of preferred stock of which no
preferred stock has been issued as of June 30, 2003. The Company has the
authorization to issue the preferred stock in one or more series and to
determine the voting rights, preferences as to dividends and liquidation,
conversion rights, and other rights of each series.


 


5.                                       Issuance
of Common Stock


 


During April
through June 2003, the Company issued 850,000 shares of its common stock at
$.40 per share for a total amount of $340,000.


 


During June 2000,
the company issued 2,800,000 shares of its common stock at an aggregate price
of $110,000 of which $81,500 was received in cash and $28,500 in Company
expenses paid directly by a stockholder.


 


During the
year 2000, the Company issued 16,800,000 shares of its common stock to three
officers for services rendered. The common shares were valued at $.01 per share
for an aggregate price of $168,000. The $168,000 is included in salaries
expense in the accompanying statement of operations. In November 2002, the
Company hired a new chief executive officer and restructured the equity of the
Company. As part of the restructuring, the 16,800,000 common shares were
returned to Treasury. Pursuant to a board of directors resolution effective
November 1, 2002, the Company issued three officers 15,000,000 shares of its
common stock at $.01 per share for an aggregate cost of $150,000 for services
rendered. The $150,000 is included in salaries expense in the accompanying
statement of operations.


 


6.                                       Stock
Options and Warrants


 


No options or
warrants are outstanding to acquire the Company’s common stock.


 


9

















 


7.                                       Income
Taxes


 


The provision
for income tax consists of the following components at June 30, 2003 and
December 31, 2002 and 2001:


 


	
   

  	
   

  	
  June 30,

  2003

  	
   

  	
  December
  31,

  2002

  	
   

  	
  December
  31,

  2001

  	
   

  
	
  Current:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Federal income taxes

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  
	
  State income taxes

  	
   

  	
  —

  	
   

  	
  800

  	
   

  	
  800

  	
   

  
	
  Deferred

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  



 


The following
reconciles income taxes reported in the financial statements to taxes that
would be obtained by applying regular tax rates to income before taxes:


 


	
   

  	
   

  	
  June 30,

  2003

  	
   

  	
  December
  31,

  2002

  	
   

  	
  December
  31,

  2001

  	
   

  
	
  Expected tax benefit using regular rates

  	
   

  	
  $

  	
  (80,291

  	
  )

  	
  $

  	
  (92,486

  	
  )

  	
  $

  	
  (40,973

  	
  )

  
	
  State minimum tax

  	
   

  	
  —

  	
   

  	
  800

  	
   

  	
  800

  	
   

  
	
  Valuation allowance

  	
   

  	
  80,291

  	
   

  	
  92,486

  	
   

  	
  40,973

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Tax Provision

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  800

  	
   

  	
  $

  	
  800

  	
   

  



 


Due to the
Company being in the development stage and incurring net operating losses, a
valuation allowance has been provided to reduce deferred tax assets to the
amount that is more likely to be realized. The net deferred tax assets consist
of the following components:


 


	
   

  	
   

  	
  June 30,

  2003

  	
   

  	
  December
  31,

  2002

  	
   

  	
  December
  31,

  2001

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Deferred tax assets

  	
   

  	
  $

  	
  402,504

  	
   

  	
  $

  	
  322,213

  	
   

  	
  $

  	
  229,727

  	
   

  
	
  Valuation allowance

  	
   

  	
  (402,504

  	
  )

  	
  (322,213

  	
  )

  	
  (229,727

  	
  )

  
	
  Deferred tax liabilities

  	
   

  	
  —

  	
   

  	
  —

  	
   

  	
  —

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Net deferred tax assets

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  	
  $

  	
  —

  	
   

  



 


The Company
has loss carryforwards totaling $865,836 that may be offset against future
federal income taxes. If not used, the carryforwards will expire as follows:


 


	
   

  	
   

  	
  Operating
Losses

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  2020

  	
   

  	
  $

  	
  387,159

  	
   

  
	
  2021

  	
   

  	
  120,509

  	
   

  
	
  2022

  	
   

  	
  122,018

  	
   

  
	
  2023

  	
   

  	
  236,150

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  $

  	
  865,836

  	
   

  



 


10

















 


8.                                       Development
Stage and Operating Deficits


 


As shown in
the accompanying financial statements, the Company incurred a net loss of
$236,150 and $272,818, respectively, during the six months ended June 30, 2003
and year ended December 31, 2002 and accumulated losses of $1,186,236 since
opening for business in 2000. The Company’s current liabilities exceed its
current assets by $415,569 at June 30, 2003. These factors create an
uncertainty as to the Company’s ability to continue as a going concern. The
ability of the Company to continue as a going concern is dependent upon the
success of raising additional capital through the issuance of common stock and
the ability to generate operating revenue. The financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.


 


9.                                       Subsequent
Event


 


On July 23,
2003, the Company entered into a Share Exchange Agreement with Burnam
Management, Inc. (BMI), a Delaware publicly traded company. The agreement is scheduled
to close on or before August 31, 2003. The shareholders of the company have
agreed to surrender all shares to BMI, then BMI will issue from authorized but
previously unissued shares, 19,062,500 shares of BMI common voting shares to
the Company’s Current Stockholders. As a result of the exchange, the Company
will become a wholly-owned subsidiary of BMI. After the exchange, the total of
BMI shares issued and outstanding will amount to 24,062,500.


 


During July
and August 2003, the Company issued 412,500 shares of its common stock at $.40
per share for a total amount of $165,000.


 


11