UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
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Commission File Number: 000-33305
Reel Staff, Inc.
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(Exact name of small business issuer as specified in its charter)
Nevada 95-4863690
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1069 South Alfred Street, Los Angeles, California 90035
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(Address of principal executive offices)
(323) 359.1531
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(Issuer's Telephone Number)
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date. As of August 14, 2002, there were
18,269,476 shares of the issuer's $.001 par value common stock issued and
outstanding.
1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
REEL STAFF, INC.
BALANCE SHEET
JUNE 30, 2002
(UNAUDITED)
ASSETS
------
Current assets
Cash $ 663
Other current assets ---
-------------
Total current assets 663
Other assets ---
-------------
Total assets $ 663
=============
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
Current liabilities
Accounts payable and accrued expenses $ 31,833
Note payable 25,000
-------------
Total current liabilities 56,833
Stockholders' Deficit
Preferred stock, $.001 par value;
Authorized shares -- 5,000,000
Issued and outstanding share -- 0
---
Common stock, $.001 par value;
Authorized shares-- 50,000,000
Issued and outstanding shares-- 5,673,750 5,674
Additional paid-in capital 12,736
Accumulated deficit (74,580)
--------------
Total stockholders' deficit (56,170)
--------------
Total liabilities and stockholders' deficit $ 663
==============
See accompanying notes to financial statements.
2
REEL STAFF, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
--------------------------- -------------------------
2002 2001 2002 2001
---- ---- ---- ----
Net revenues $ --- $ 528 $ 1,293 $ 528
Operating expenses
Consulting services --- 4,100 --- 4,100
Legal and professional fees 43,048 6,230 53,238 6,230
Occupancy 500 --- 1,000 ---
Office expense 30 35 517 35
----------------- ----------------- ----------------- -----------------
Total operating expenses 43,578 10,365 54,755 10,365
----------------- ----------------- ----------------- -----------------
Loss from operations (43,578) (9,837) (53,462) (9,837)
Other income (expense) (449) --- (449) ---
----------------- ----------------- ----------------- -----------------
Loss before provision for
income taxes (44,027) (9,837) (53,911) (9,837)
Provision for income
tax expense (benefit) 800 --- 800 ---
----------------- ----------------- ----------------- -----------------
Net loss/comprehensive loss $ (44,827) $ (9,837) $ (54,711) $ (9,837)
================= ================= ================= =================
Net loss/comprehensive loss per
common share - basic and diluted
$ --- $ --- $ --- $ ---
================= ================= ================= =================
Weighted average of common shares--
basic and diluted 5,673,750 5,690,575 5,673,750 5,690,575
================= ================= ================= =================
See accompanying notes to financial statements.
3
REEL STAFF, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
MAY 21, 2001 (INCEPTION) THROUGH JUNE 30, 2002
(UNAUDITED)
Common Stock Additional
------------ Paid-In Accumulated
Shares Amount Capital Deficit Total
----------- ----------- ----------- ----------- -----------
Balance, May 21, 2001 --- $ --- $ --- $ --- $ ---
Issuance of common stock,
May 22, 2001 5,500,000 5,500 --- --- 5,500
Issuance of common stock,
May 28, 2001 10,000 10 190 --- 200
Issuance of common stock,
June 13, 2001 345,000 345 6,555 --- 6,900
Issuance of common stock,
June 17, 2001 30,000 30 570 --- 600
Issuance of common stock,
June 28, 2001 228,750 229 4,346 --- 4,575
Net loss/comprehensive loss --- --- --- (9,837) (9,837)
------------ ----------- ----------- ----------- -----------
Balance, June 30, 2001 6,113,750 6,114 11,661 (9,837) 7,938
------------ ----------- ----------- ----------- -----------
Redemption of stock
November 15, 2001 (440,000) (440) --- --- (440)
Net loss/comprehensive loss --- --- --- (10,032) (10,032)
------------ ----------- ----------- ----------- -----------
Balance, December 31, 2001 5,673,750 5,674 11,661 (19,869) (2,534)
------------ ----------- ----------- ----------- -----------
Cost of occupancy
contributed by officer --- --- 1,000 --- 1,000
Cost of legal fees
contributed by officer --- --- 75 --- 75
Net loss/comprehensive loss --- --- --- (54,711) (54,711)
------------ ----------- ----------- ----------- -----------
Balance, June 30, 2002 5,673,750 $ 5,674 $ 12,736 $ (74,580) $ (56,170)
============ =========== =========== =========== ===========
See accompanying notes to financial statements.
4
REEL STAFF, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
-------------------------
2002 2001
---- ----
Cash flows from operating activities
Net loss $ (54,711) $ (9,837)
Adjustments to reconcile net loss to net cash used in
operating activities
Expenses paid with common stock --- 5,700
Occupancy cost contributed by officer 1,000 1,158
Legal fees paid by officer 75 ---
Changes in operating assets and liabilities
Increase in accounts payable and accrued expenses 26,833 4,665
--------------- ---------------
Net cash provided (used) by operating activities (26,803) 528
Cash flows from investing activities --- ---
--------------- ---------------
Net cash provided by investing activities --- ---
Cash flows from financing activities
Proceeds from note payable 25,000 ---
Proceeds from issuance of common stock --- 12,075
--------------- ---------------
Net cash provided by financing activities 25,000 12,075
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Net increase (decrease) in cash (1,803) 12,603
Cash, beginning of period 2,466 ---
--------------- ---------------
Cash, end of period $ 663 $ 12,603
=============== ===============
Supplemental disclosure of cash flow information
Income taxes paid $ --- $ ---
================ ===============
Interest paid $ --- $ ---
================ ===============
See accompanying notes to financial statements.
5
REEL STAFF, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
NOTE 1 - NATURE OF OPERATIONS
Reel Staff, Inc. (the "Company") provides production and
post-production staffing services to film, video, and television production
companies. The Company was incorporated in the state of Nevada on May 21, 2001
and is headquartered in Los Angeles, California.
NOTE 2 - BASIS OF PRESENTATION
The unaudited financial statements included herein have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB and Item 310(b)
of Regulation S-B. In the opinion of management, all adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and six months ended June 30,
2002 and for the period from May 21, 2001 (inception) through June 30, 2001 are
not necessarily indicative of the results that may be expected for the years
ended December 31, 2002 and 2001. For further information, these financial
statements and the related notes should be read in conjunction with the
Company's audited financial statements for the period ended December 31, 2001
included in the Company's annual report on Form 10-KSB.
NOTE 3 - COMMON STOCK
On May 22, 2001, the Company issued 3,900,000 shares of its common
stock to its officers and founders for consulting services and 1,600,000 shares
of its common stock to various individuals for legal services rendered in
connection with the initial organization costs incurred. Since there was no
readily available market value at the time the services were rendered, par value
of $0.001 per share was considered as a reasonable estimate of fair value by all
parties.
On May 28, 2001, the Company issued 10,000 shares of its common
stock to an individual for consulting and design services. Since the Company had
prepared a Private Placement Memorandum Offering (as described in the following
paragraph), the Company utilized the value of its common stock associated with
that offering of $0.02 per share. This amount was considered a reasonable
estimate of fair value between the Company and the individual.
On June 30, 2001, the Company completed a "best efforts" offering of
its common stock pursuant to the provisions of Section 4(2) of the Securities
Act of 1933 and Rule 506 of Regulation D promulgated by the Securities and
Exchange Commission. In accordance with the Private Placement Memorandum
Offering, which was initiated on May 25, 2001, the Company issued 603,750 shares
of its common stock at $0.02 per share for a total of $12,075 from June 13th -
June 30th 2001.
NOTE 4 - RELATED PARTY TRANSACTIONS
On May 22, 2001, the Company issued 3,900,000 shares of its common
stock to it current officers for services as described in Note 3.
6
REEL STAFF, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2002
(UNAUDITED)
NOTE 5 - NOTE PAYABLE
The Company has a note payable to a third party in the amount of
$25,000. Per the terms of the promissory note, the principal is due and payable
on December 31, 2002 plus interest at the rate of 8% per annum.
NOTE 6 - SUBSEQUENT EVENTS
Merger and Acquisition -- On June 24, 2002, as amended and restated on
July 15, 2002, the Company entered into a Share Exchange Agreement to acquire
100% of the issued and outstanding shares of Flight Safety Technologies, Inc. in
exchange for 8,505,857 shares of the Company's common stock. The acquisition is
pending the approval of the Company's board of directors; the board of directors
of Flight Safety Technologies, Inc.; and, the fulfillment of certain other
conditions prior to closing. For more detail of the Share Exchange Agreement,
refer to our current report filed on Form 8-K on July 18, 2002.
Stock Split -- On July 18, 2002, the Company's board of directors
declared a three and twenty-two hundredths to one (3.22:1) forward stock split
to the stockholders of record as of July 29, 2002. The stock dividend was paid
on July 30, 2002 and resulted in an increase of the Company's issued and
outstanding common stock to 18,269,476 shares.
Corporate Name -- On July 31, 2002, the Company's board of directors
approved a change of the corporate name to "Flight Safety Technologies, Inc.".
Pursuant to the preliminary information statement filed on Schedule 14C on July
31, 2002, the name change will become effective upon the closing of the Share
Exchange Agreement as referred to above, or August 20, 2002, whichever is later.
7
Item 2. Plan of Operation
--------------------------
This following information specifies certain forward-looking statements of
management of the company. Forward-looking statements are statements that
estimate the happening of future events and are not based on historical fact.
Forward-looking statements may be identified by the use of forward-looking
terminology, such as "may", "shall", "will", "could", "expect", "estimate",
"anticipate", "predict", "probable", "possible", "should", "continue", or
similar terms, variations of those terms or the negative of those terms. The
forward-looking statements specified in the following information have been
compiled by our management on the basis of assumptions made by management and
considered by management to be reasonable. Our future operating results,
however, are impossible to predict and no representation, guaranty, or warranty
is to be inferred from those forward-looking statements.
The assumptions used for purposes of the forward-looking statements specified in
the following information represent estimates of future events and are subject
to uncertainty as to possible changes in economic, legislative, industry, and
other circumstances. As a result, the identification and interpretation of data
and other information and their use in developing and selecting assumptions from
and among reasonable alternatives require the exercise of judgment. To the
extent that the assumed events do not occur, the outcome may vary substantially
from anticipated or projected results, and, accordingly, no opinion is expressed
on the achievability of those forward-looking statements. We cannot guaranty
that any of the assumptions relating to the forward-looking statements specified
in the following information are accurate, and we assume no obligation to update
any such forward-looking statements.
Our current business is to provide staffing services to film, video and
television production companies. Our staffing services consist of production
services but we intend to expand those services to include postproduction work
as well as talent and casting services. The services, skills and labor offered
by us will generally include production assistants, as well as film and video
crews, such as back line technicians, carpenters, lighting designers, lighting
technicians, riggers, sound designers, stage and scenery designers and other
skilled laborers.
To date, we have not been successful in fully implementing our business plan due
to lack of funds. Accordingly, we have been researching potential acquisitions
or other suitable business partners which will assist us in realizing our
business objectives. In that regard, on June 24, 2002, we entered into a Share
Exchange Agreement ("Agreement") with Flight Safety Technologies, Inc., a
Delaware corporation ("Flight Safety"), and certain of its shareholders, to
acquire 100% of the issued and outstanding shares of Flight Safety (the
"Acquisition"). In consideration for acquiring all of Flight Safety's issued and
outstanding shares, we have agreed to issue 8,505,857 shares of our common
stock.
Completion of the Acquisition is subject to approval by our board of directors
and board of directors and the shareholders of Flight Safety. The Acquisition is
also subject to various closing conditions and conditions precedent, including
the completion of satisfactory due diligence reviews by both parties.
Flight Safety is developing advanced systems to enhance aviation safety and
reduce airport delays. Using its patented opto-acoustic technology, it is
currently developing a cost-effective system to monitor air disturbances known
as "wake vortex turbulence," created by departing and arriving aircraft in the
vicinity of airports. Flight Safety believes that its patented wake-vortex
detection system, in consort with NASA-developed, vortex-track prediction
technology, will improve airport traffic safety, streamline the landing/takeoff
process, reduce passenger delays, and generate substantial cost savings for
airports and the airline industry.
Liquidity and Capital Resources. We had cash of $663 as of June 30, 2002. Our
total assets were also $663 as of June 30, 2002. On March 20, 2002, we entered
into a promissory note in the amount of $25,000 with an unrelated party. The
note matures on March 20, 2003, and carries an interest rate of 8% due at
maturity. Our total liabilities were approximately $56,833 as of June 30, 2002,
which were represented by $31,833 for accounts payable and accrued expenses, and
$25,000 for that note payable.
8
Results of Operations.
Revenue. For the six months ended June 30, 2002, we realized revenues of
approximately $1,293 from providing production staffing services. If we are not
able to complete the Acquisition described above, we will attempt to generate
more revenues by expanding our customer base for our film services business.
Operating Expenses. For the six months ended June 30, 2002, our total operating
expenses were approximately $54,755. The majority of those expenses were
represented by legal and professional fees of $53,238. We also had $1,000 in
occupancy expenses and $517 in office supplies and expenses. For the six months
ended June 30, 2002, we experienced a net loss of approximately $53,911. In
connection with the Acquisition described above, we anticipate that we will
continue to incur significant general and administrative expenses.
Our Plan of Operation for the Next Twelve Months. During the next month, we hope
to complete the Acquisition described above. We cannot guaranty that we will
acquire or merge with Flight Safety or any other third party, or that in the
event we acquire or merge Flight Safety, or another third party, such
acquisition or merger will increase the value of our common stock.
We had cash of $663 as of June 30, 2002. In the opinion of management, available
funds will satisfy our working capital requirements through October 2002. Our
forecast for the period for which our financial resources will be adequate to
support our operations involves risks and uncertainties and actual results could
fail as a result of a number of factors. If we are not able to complete the
Acquisition, we anticipate that we may need to raise additional capital to
continue operations. Such additional capital may be raised through public or
private financing as well as borrowings and other sources. We cannot guaranty
that additional funding will be available on favorable terms, if at all. If
adequate funds are not available, then our ability to expand our operations may
be adversely affected. If adequate funds are not available, we hope that our
officers and directors will contribute funds to pay for our expenses, although
we cannot that guaranty that our officers will pay those expenses.
We are not currently conducting any research and development activities and do
not anticipate conducting such activities in the near future. We do not
anticipate hiring additional employees or independent contractors unless we are
able to expand our current operations. We are focusing our efforts on completing
the Acquisition of Flight Safety. We do not anticipate that we will purchase or
sell any significant equipment.
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
--------------------------
None.
Item 2. Changes in Securities.
-----------------------------
None.
Item 3. Defaults Upon Senior Securities
----------------------------------------
None.
Item 4. Submission of Matters to Vote of Security Holders
----------------------------------------------------------
None.
Item 5. Other Information
--------------------------
9
Subsequent to the reporting period covered by this report we undertook the
following actions:
On July 18, 2002 we filed a Form 8-K to report the Share Exchange Agreement
described above. The Agreement was dated June 24, 2002 and amended July 15,
2002.
On July 30, 2002, we authorized a 3.22 to1 split of our common stock by means of
a dividend of two and twenty-two hundredths (2.22) shares of common stock for
each share of common stock for holders of record on July 29, 2002. As a result,
we have 18,269,475 shares of common stock issued and outstanding.
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
None.
10
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Reel Staff, Inc.,
a Nevada corporation
August 14, 2002 By: /s/ Renee McCracken
-----------------------------
Renee McCracken
Its: President, Secretary, Director
11
CERTIFICATIONS
I, Renee McCracken, certify that:
1. I have read this quarterly report on Form 10-QSB of Reel Staff, Inc.;
2. To my knowledge, the information in this report is true in all
important respects as of June 30, 2002; and
3. This report contains all information about the company of which I am
aware that I believe is important to a reasonable investor, in light of
the subjects required to be addressed in this report, as of June 30,
2002.
For purposes of this certification, the information is "important to a
reasonable investor" if:
(a) There is substantial likelihood that a reasonable investor would view
the information as significantly altering the total mix of information
in the report; and
(b) The report would be misleading to a reasonable investor if the
information was omitted from the report.
Date: August 14, 2002
By: /s/ Renee McCracken
-----------------------
Renee McCracken
Its: Chief Executive Officer
12
CERTIFICATIONS
I, Carol McCracken, certify that:
4. I have read this quarterly report on Form 10-QSB of Reel Staff, Inc.;
5. To my knowledge, the information in this report is true in all
important respects as of June 30, 2002; and
6. This report contains all information about the company of which I am
aware that I believe is important to a reasonable investor, in light of
the subjects required to be addressed in this report, as of June 30,
2002.
For purposes of this certification, the information is "important to a
reasonable investor" if:
(c) There is substantial likelihood that a reasonable investor would view
the information as significantly altering the total mix of
information in the report; and
(d) The report would be misleading to a reasonable investor if the
information was omitted from the report.
Date: August 14, 2002
By: /s/ Carol McCracken
---------------------------
Carol McCracken
Its: Chief Financial Officer
13