10KSB 1 mercury10ksb.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB ----------- ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001 MERCURY SOFTWARE ---------------------------------------------- (Name of Small Business Issuer in its Charter) Nevada 52-1146119 ------ ---------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) Room 1502, Sunning Court, Hoi Ping Road, Causeway Bay, Hong Kong N/A (Address of principal executive offices) (Zip Code) Issuer's telephone number: (011) 852-2808-4329 SECURITIES REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT: None SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: Title of each class to be so registered Common Stock 1 Check whether the issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendments to this Form 10-KSB. [ ] The issuer's revenues for the Fiscal Year ended December 31, 2001 were $0 The aggregate market value of the voting stock (which consists solely of shares of Common Stock) held by non-affiliates of the issuer as of December 30, 2001, computed by reference to the market value of the registrant's common stock as reported by the over-the-counter bulletin board, was approximately $-. As at December 31, 2001, there were 19,156,500 shares of the issuer's common stock outstanding. Transitional Small Business Disclosure Format (check one) Yes [ ] No [X] 2 PART 1 ------ Statements contained in the annual report that are not historical facts are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ materially from estimated results. Such risks and uncertainties are detailed in filings with the Securities and Exchange Commission, including without limitation in Item 1. "BUSINESS" and Item 6 "MANAGEMENT'S DISCUSSION AND DESCRIPTION OR PLAN OF OPERATION" below. ITEM 1. DESCRIPTION OF BUSINESS A. IN GENERAL. Mercury Software (the "Company"), a Nevada Corporation, was incorporated on January 29, 1997. The Company is a development stage company, engaged in the business of software sales through its fully operational e commerce site on the Internet. software. The Company's plan is to further develop its Internet web site, www.internetsoftwaresales.com, and to provide after market support by local support teams of computer and software technicians and personnel. The Company has hired a web site designer with experience not only web site development but also wholesale buying and retail sales of software. The Company's plan is to become the leading seller of consumer related software on the Internet. Government approval is not necessary for the Company's business, and government regulations have no or only a negligible effect on their respective businesses. The Company has not booked any significant research and development costs and therefor do not expect to pass any of those costs to customers. And has no product development or research and development costs. The Company's mailing address is Room 1502, Sunnin gcourt, Hoi Ping Road, Causeway Bay, Hong Kong. The telephone number of its principal executive office is (011) 852-2808-4329. FORWARD LOOKING STATEMENTS This registration statement contains forward-looking statements. The Company's expectation of results and other forward-looking statements contained in this registration statement involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expected are the following: business conditions and general economic conditions; competitive factors, such as pricing and marketing efforts; and the pace and success of product research and development. These and other factors may cause expectations to differ. THE INDUSTRY The Internet industry is a young industry, but one of the fastest growing industries in the country. The Company has seen a market niche in providing computer software and hardware sales, coupled with local aftermarket support, as opposed to an Internet sale that never involves the prospect of human contact, if the customer has a problem or a question. 3 MARKETING The Company is developing an Internet web site with full e commerce capabilities, which will offer the company's products for sale to the Internet consumer. In addition, the Company will promote its web site and its products by conventional advertising and marketing. With the proceeds of this offering, the Company plans to hire a sales force and offer "multi-level marketing" incentives for sales. To help achieve its sales goals, the Company plans to implement an aggressive online marketing campaign. The objective will be to name awareness for the Company in the online community and to continually acquire new visitors to its Web site. One of the best ways to attract this target audience is to achieve high visibility in the places where prospective customers are likely to be browsing. The Company's online campaign will target sites that generate high traffic from Internet users who fit the Company's customer profile. In order to create this market presence and increase customer awareness, the Company intends to promote its Web site on the most effective search engines, directories and promotional sites the Internet offers. However, the Company has not yet developed its Web site, and there can be no assurance that it will implement these programs. The programs to establish visibility and increase traffic to the web site include directory submissions to make sure the company is listed in the top five listings on the major search engines such as Yahoo, America Online, Excite, Infoseek, HotBot, AltaVista, and Lycos, when a potential visitor types in key words related to software sales. Of course, there can be no assurance that the Company can obtain such a status, but it will continually update its submissions to search engines to keep them current and will update its site weekly. The Company will review its site data to optimize its listing. Once the site data has been perfected, the Company's site will be submitted to the top 75 search engines and promotional sites. 4 While listing a Web site with the search engines and promotional sites is a high priority for the foundation of the Company's Internet program, targeted links with sites of similar interest is another powerful method of obtaining visitors that are interested in the Company's site. The Company will search for sites of similar interest where it is likely to find its target audience to place targeted links. These links will increase targeted traffic to the Company's Web site. The Company intends to design a professional banner and place it with various sites on a "reciprocal" basis, at no charge to the Company. The Company also plans to purchase online ad banners on highly trafficked Web sites that appeal to the Company's target audience. The Company will work with a nationally recognized media buying firm to research the sites that are regularly visited by prospective customers in order to design and to execute an online advertising campaign on a cost-per-lead or similar direct response basis. Online communities such as Mailing Lists, Newsgroups, and Online Service Forums tend to be very successful in driving traffic to sites as Internet surfers use these communities to get advice from their peers. The Company will work with a firm to seed messages about its offerings in the various online communities that are visited by its target audience. Companies specializing in Community Discussion Seeding include Word of Net Promotions, Webpromote and Agency. Targeted e-mail announcements with information about the Company's products and services will be sent to individuals who have expressed an interest in receiving information within targeted categories. These individuals have voluntarily signed up to receive these e-mail messages about specific topics and are more likely to read them. Response rates are expected to average between 5% to 10%. These efforts will results in Company Web site visits by these individuals because they have an interest in the Company's products and services and can click-through Hyperlinks created in the Company's e-mail announcement. Each e-mail message will contain a header that specifies that the e-mail was sent to the recipient because they had subscribed to a particular service. 5 The Company expects to maintain a clean corporate image by practicing "etiquette" when sending e-mail messages. In order to differentiate between e-mail messages that are voluntarily requested and true "spamming" from unwelcome sources, the Company plans to only send targeted e mail to those individuals who have voluntarily requested to receive such announcements, and always give the participants the option to remove themselves from the e mail lists. The Company intends to announce its products and services on the Web in press releases. Favorable articles or editorial pieces about the Company's Web site can generate tremendous visibility and opportunity to sell its products and services. The Company will e-mail its press releases to targeted publications selected from a database of over 30,000 media resources. Press releases can be distributed within 72 hours. THE PRODUCTS The Company offers a full line of consumer oriented computer software manufactured by others. PATENTS The Company holds no patents for its products. The Company is the registered owner of the Internet domain name, www.internetsoftwaresales.com. COMPETITION The business of providing retail computer software sales is one of intense competition. Other companies making Internet software sales and other companies with one or more affiliate or retail locations have financial resources superior to the Company, so there can be no assurance that the Company's projected income will not be affected by its competition. There are also many other companies with greater financial resources that the Company who offer computer sales on the Internet. However, the Company feels it is able to compete adequately with 6 these other companies, by maintaining and updating its website to insure that it receives recognition from the Internet search engines on an ongoing basis, and from specializing in the niche of software used in the medical and legal fields. However, there can be no assurance that companies with greater buying power will be able to undercut the Company's pricing structure. GOVERNMENT REGULATION Government approval is not necessary for the Company's business, and government regulations have no effect or a negligible effect on its business. EMPLOYEES The Company presently employs two employees, the President, Cassandra Dean-Rankin, who devotes 50% of her work time to the company, and Allen Dean, who devotes 50% of his work time to the company. ITEM 2. DESCRIPTION OF PROPERTY The Company rents professional offices from its attorney, Kenneth G. Eade, on a month to month basis, pursuant to an oral agreement. The Company has no other property, other than office equipment. The Company owns its domain name to its web site, www.internetsoftwaresales.com. ITEM 3. LEGAL PROCEEDINGS The Company is not subject to any litigation. ITEM 4. NONE 7 PART II ------- ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. The Company's Common Stock has been quoted on the over-the-counter bulletin board, under the symbol "MERY" The high and low sale prices of company common stock were $.35 and $.75, respectively during fiscal year 2001. The Company considers its Common stock to be thinly traded and that any reported bid or sale prices may not be a true market-based valuation of the Common Stock. As of December 31, 2001, there were 31 record holders of the Company's Common Stock. The Company has not paid any cash dividends since its inception and does not contemplate paying dividends in the foreseeable future. It is anticipated that earnings, if any, will be retained for the operation of the Company's business. The following table sets forth the range of high and low bid information for each full quarterly period of the last fiscal year: Period Reported Average High Bid Average Low Bid --------------- ---------------- --------------- Quarter ended March 31, 2001 No data available Quarter ended June 30, 2001 No data available Quarter ended September 30, 2001 No data available Quarter ended December 31, 2001 $.75 $.35 PENNY STOCK STATUS If and when it creates a market for its common stock, the Company's common stock is a "penny stock," as the term is defined by Rule 3a51-1 of the Securities Exchange Act of 1934. This makes it subject to reporting, disclosure and other rules imposed on broker-dealers by the Securities and Exchange Commission requiring brokers and dealers to do the following in connection with transactions in penny stocks: 1. Prior to the transaction, to approve the person's account for transactions in penny stocks by obtaining information from the person regarding his or her financial situation, investment experience and objectives, to reasonably determine based on that information that transactions in penny stocks 8 are suitable for the person, and that the person has sufficient knowledge and experience in financial matters that the person or his or her independent advisor reasonably may be expected to be capable of evaluating the risks of transactions in penny stocks. In addition, the broker or dealer must deliver to the person a written statement setting forth the basis for the determination and advising in highlighted format that it is unlawful for the broker or dealer to effect a transaction in a penny stock unless the broker or dealer has received, prior to the transaction, a written agreement from the person. Further, the broker or dealer must receive a manually signed and dated written agreement from the person in order to effectuate any transactions is a penny stock. 2. Prior to the transaction, the broker or dealer must disclose to the customer the inside bid quotation for the penny stock and, if there is no inside bid quotation or inside offer quotation, he or she must disclose the offer price for the security transacted for a customer on a principal basis unless exempt from doing so under the rules. 3. Prior to the transaction, the broker or dealer must disclose the aggregate amount of compensation received or to be received by the broker or dealer in connection with the transaction, and the aggregate amount of cash compensation received or to be received by any associated person of the broker dealer, other than a person whose function in solely clerical or ministerial. 4. The broker or dealer who has effected sales of penny stock to a customer, unless exempted by the rules, is required to send to the customer a written statement containing the identity and number of shares or units of each such security and the estimated market value of the security. The imposition of these reporting and disclosure requirements on a broker or dealer make it unlawful for the broker or dealer to effect transactions in penny stocks on behalf of customers. Brokers or dealers may be discouraged from dealing in penny stocks, due to the additional time, responsibility involved, and, as a result, this may have a deleterious effect on the market for the company's stock. 9 (1) The above quotations reflect inter-dealer prices, without retail mark up, mark down or commission and may not represent actual transactions. (2) Source of information: Stockmaster Stock Quotation Service (Stockmaster.com) and Freerealtime.com, NASD Bulletin Board. SECURITY HOLDERS The approximate number of record holders of shares of the common stock of the Company outstanding as of December 31, 2001 was 31. DIVIDENDS No dividends have been declared or paid on the Company's common stock. ITEM 6. MANAGEMENT DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS PLAN OF OPERATIONS The Company is engaged in the business of software sales and computer services. The Company's plan is to further develop and promote its Internet web site and offer discount sales of software to the public, with after market support by local support teams of computer and software technicians and personnel. The Company has financed its operations to date through the sale of its securities. During the next twelve months, the Company plans to satisfy its cash requirements by additional equity financing. The Company has no current material commitments. The Company intends to undertake a subsequent private placement of its common stock in order to raise future development and operating capital. The Company depends upon capital to be derived from future financing activities such as subsequent offerings of its stock. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its common stock. The Company believes that its efforts to raise capital will be assisted greatly by obtaining a quotation of its common stock on the NASD OTC Bullwtin Board, but there can be no assurance that it will be successful in obtaining this listing. 10 The Company has no current material commitments. The Company will seek to raise capital as a cash reserve, but there can be no assurance that the Company will be successful in raising the capital it needs through sales of its common stock. There is no contemplated product research and development costs the Company will perform for the next twelve months, because the Company employee who is designing and promoting the web site has been prepaid with company stock. There is no expected purchase or sale of any plant or significant equipment, and there is no expected significant changes in the number of employees contemplated. The Company's plan of operations over the next 12 months includes the implementing its marketing plan by developing its web site, and vigorously promoting free memberships therein, which will enable members to purchase software at significant retail discounts. The Company will seek to foster long term relationships and word of mouth referrals through customer service and will seek to acquire affiliates through this process to establish affiliated retail locations. Operators of retail locations will split 50% of gross profits from all sales and services. The Company has no current material commitments. The Company has just recently commenced operations, has no significant revenue, and is dependent upon the raising of capital through placement of its common stock. There can be no assurance that the Company will be successful in raising the capital it requires through the sale of its common stock. PATENTS The Company holds no patents for its service-related software. However, the Company's software is proprietary and is protected by United States copyright law. The Company owns the domain name www.internetsoftwaresales.com. FORWARD LOOKING STATEMENTS This registration statement contains forward-looking statements. The Company's expectation of results and other forward-looking statements contained in this registration statement involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially from those expected 11 are the following: business conditions and general economic conditions; competitive factors, such as pricing and marketing efforts; and the pace and success of product research and development. These and other factors may cause expectations to differ. ITEM 7. FINANCIAL STATEMENTS Information with respect to this item is contained in the financial statements appearing on Item 13 of this Report. Such information is incorporated herein by reference. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There were no changes in, or disagreements with accountants on accounting and financial disclosure for the two most recent fiscal years. PART III. --------- ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT. Directors are elected by the shareholders to terms of one year. Officers serve at the pleasure of the Board of Directors, and serve one year terms unless removed by the Board prior to their terms. The Executive Officers of the Company and its subsidiaries, and their ages, are as follows: Name Age Position ---------- --- -------- Cassondra Dean Ranken 38 President, Director, Alan George Dean 74 Secretary, Treasurer, Director Richard Johnson 45 Director Tayne Ashford 50 Director 12 FAMILY RELATIONSHIPS. There are no family relationships among directors, executive officers or other persons nominated or chosen by the Company to become officers or executive officers. INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. The Company is not aware of any material legal proceedings involving any director, director nominee, promoter or control person including criminal convictions, pending criminal matters, pending or concluded administrative or civil proceedings limiting one's participation in the securities or banking industries, or findings of securities or commodities law violations. SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE. Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than ten percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the "SEC"). Officers, directors and greater than ten percent shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file. Based solely on its review of the copies of such forms received by it, or written representations from certain reporting persons, the Company believes that, during the fiscal year ended December 31, 2001, all filing requirements applicable to its officers, directors and greater than ten percent beneficial owners were complied with. 13 ITEM 10. EXECUTIVE COMPENSATION. The Company has made no provisions for cash compensation to its officers and directors. No cash salaries are being paid at the present time, and will not be paid unless and until there is available cash flow from operations to pay salaries. There were no grants of options or SAR grants given to any executive officers during the last fiscal year. LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR The Company has no long-term incentive plans or awards to report for last fiscal year other than that which has already been reported. COMPENSATION OF DIRECTORS The members of the Company's Board of Directors are reimbursed for actual expenses incurred in attending Board meetings. EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT, AND CHANGE-IN-CONTROL ARRANGEMENTS There are no written contracts or agreements. Employee compensation is set by the members of the Board of Directors. ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information regarding the beneficial ownership of the shares of Common Stock of the Company as of the date of this disclosure(1), by (I) each person who is known by the Company to be the beneficial owner of more than five percent (5%) of the issued and outstanding shares of common stock, (ii) each of the Company's directors and executive officers, and (iii) all directors and executive officers as a group. Name and Address Number of Shares Percentage Owned ---------------- ---------------- ---------------- Officers and Directors -0- -0- as a Group ITEM 12. NONE 14 ITEM 13. FINANCIAL STATEMENTS MERCURY SOFTWARE (A Development Stage Company) FINANCIAL STATEMENTS December 31, 2001 CONTENTS Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . F 2 Balance Sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . F 3 Statements of Operations . . . . . . . . . . . . . . . . . . . . . . F 4 Statements of Stockholders' Equity (Deficit) . . . . . . . . . . . . F 5 Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . F 6 Notes to the Financial Statements . . . . . . . . . . . . . . . . . F 7 F-1 Independent Auditor's Report Board of Directors and Stockholders MERCURY SOFTWARE We have audited the balance sheet of MERCURY SOFTWARE (a development stage company) as of December 31, 2001 and 2000 the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended and for the period January 29, 1997 (inception) through December 31, 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2001 financial statements referred to above present fairly, in all material respects, the financial position of MERCURY SOFTWARE, as of December 31, 2001 and 2000 and, and the results of its operations and its cash flows for the years then ended, and for the period January 29, 1977 (inception) through December 31, 2001, in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Company will continue as going concern. As discussed in Note 4, the Company is in development stage and has limited assets, limited working capital, and has sustained losses during its development stage which together raise substantial doubt about its ability to continue as a going concern. Management plans regarding those matters are also discussed in Note 4. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. By: /s/ Rogelio G. Castro ------------------------- Rogelio G. Castro Certified Public Accountant Oxnard, California March 28, 2002 F-2 MERCURY SOFTWARE (A Development Stage Company) Balance Sheets December 31, 2001 2000 ------- ------- CURRENT ASSETS Cash $ -- $ -- ------- ------- Total Current Assets -- -- ------- ------- TOTAL ASSETS $ -- $ -- ======= ======= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Total Current Liabilities $ -- $ -- STOCKHOLDERS' EQUITY (DEFICIT) Common stock, $0.001 par value; 25,000,000 shares authorized; 19,156,000 shares issued and outstanding 1,277 1,277 Additional paid-in capital 1,800 1,800 Deficit accumulated during the development stage (3,077) (3,077) ------- ------- Total Stockholders' Equity (Deficit) -- -- ------- ------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ -- $ -- ======= ======= See accompanying notes to the financial statements. F-3 MERCURY SOFTWARE (A Development Stage Company) Statements of Operations January 29, 1997 For the years (inception) ended through December 31, December 31, 2001 2000 2001 ----- ------- ------- Income $-- $ -- $ -- ----- ------- ------- Expenses: General & administrative -- 1,815 3,077 ----- ------- ------- Total Expenses -- 1,815 3,077 ----- ------- ------- Net Loss $-- $(1,815) $(3,077) ===== ======= ======= See accompanying notes to the financial statements. F-4 MERCURY SOFTWARE (A Development Stage Company) Statements of Stockholders' Equity (Deficit) For the years ended December 31, 2001 and 2000 and for the period January 29, 1997 (inception) through December 31, 2001 Deficit Accumulated Additional During the Common Stock Paid-In Development Shares Amount Capital Stage ---------- ---------- ---------- ---------- At inception on January 29, 1997 14,625,000 $ 975 $ -- $ -- Net loss - December 31, 1997 -- -- -- (1,160) ---------- ---------- ---------- ---------- Balance, December 31, 1997 14,625,000 975 -- (1,160) ---------- ---------- ---------- ---------- Balance, December 31, 1998 14,625,000 975 -- (1,160) ---------- ---------- ---------- ---------- Balance, December 31, 1999 14,625,000 975 -- (1,160) Stocks issued for services 1,531,500 102 -- -- Net loss December 31, 1999 -- -- -- (102) ---------- ---------- ---------- ---------- Balance, December 31, 1999 16,156,500 1,077 -- (1,262) Stocks issued for services 3,000,000 200 1,800 -- Net loss December 31, 2000 -- -- -- (1,815) ---------- ---------- ---------- ---------- Balance, December 31, 2000 19,156,500 1,277 1,800 (3,077) ---------- ---------- ---------- ---------- Balance, December 31, 2001 19,156,500 $ 1,277 $ 1,800 $ (3,077) ========== ========== ========== ========== See accompanying notes to the financial statements. F-5 MERCURY SOFTWARE (A Development Stage Company) Statements of Cash Flows January 29, 1997 For the years (inception) ended through December 31, December 31, ----- ------- ------- 2001 2000 2001 ----- ------- ------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $-- $(1,815) $(3,077) Adjustments to reconcile net loss to net cash (used) by operating activities: Stocks issued for services -- 1,815 3,077 ----- ------- ------- Net Cash (Used) by Operating Activities -- -- -- ----- ------- ------- Increase (Decrease) Cash -- -- -- ----- ------- ------- Ending Cash $-- $ -- $ -- ===== ======= ======= See accompanying notes to the financial statements. F-6 MERCURY SOFTWARE (A Development Stage Company) Notes to the Financial Statements December 31, 2001 NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS MERCURY SOFTWARE (a development stage company) (the Company) was organized under the laws of the State of Nevada on January 29, 1997 The purpose of the Company is to engage in the business of software sales and computer services. The Company has been in the development stage since its inception. Planned principal operations have not commenced since then. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a. Accounting Method The Company's financial statements are prepared using the accrual method of accounting. The Company has elected a December 31 year-end. b. Cash Equivalents The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. c. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. e. Revenue Recognition Policy The Company currently has no source of revenues. f. Basic (Loss) Per Share The following is an illustration of the reconciliation of the numerators and denominators of the basic loss per share calculation: For the years ended December 31. 2001 2000 ------------- ----------- Net loss (numerator) $ -- $ (1,815) Weighted average shares outstanding (denominator) 19,156,500 19,156,500 Basic loss per share $ (0.0) $ (0.0) ============= ============ Dilutive loss per share is not presented as there are no potentially dilutive items outstanding. NOTE 2 - STOCK SPLITS In November 2000, the board of directors approved a fifteen-for-one stock split of the Company's common stock. All periods presented have been restated to give retroactive recognition to the stock split. F-7 MERCURY SOFTWARE (A Development Stage Company) Notes to the Financial Statements (continued) December 31, 2001 NOTE 3 - INCOME TAXES The Company has adopted the provision of SFAS No. 109 "Accounting for Income Taxes." It requires recognition of deferred tax liabilities and assets for the expected future tax consequences. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Mercury Software has incurred losses that can be carried forward to offset future earnings if conditions of the Internal Revenue codes are met. The Company's total deferred tax assets as of December 31, 2001 is as follows: Net operating loss carry-forward $ 1,046 Valuation allowance (1,046) ------- $ -- ======= The difference between the income tax benefit in the accompanying statements of operations and the amount that would result if the a federal statutory rate of 34% were applied to pretax loss is as follows for the year ended December 31, 2001: Income tax benefit at statutory rate $ 1,046 Valuation allowance (1,046) ------- $ -- ======= The net operating losses carry forward of $3,077 for federal tax purposes will expire in year 2021. NOTE 4 - GOING CONCERN The Company has nominal assets and no current operations with which to create operating capital. It has an accumulated deficit of $3,077 at December 31, 2001. These factors raise substantial doubt about the company's ability to continue as a going concern. The company seeks to raise operating capital through private placements of its common stock. However, there can be no assurance that such offering or negotiations will be successful. F-8 ITEM 14. EXHIBITS, FINANCIAL STATEMENTS (a) Financial Statements (included in Part II of this Report): Report of Independent Certified Public Accountant Financial Statements Balance Sheets Statement of Loss And Accumulated Deficit Statements of Cash Flows Statements of Stockholder's Equity Notes to Consolidated Financial Statements (b) Reports on Form 8-K: Not applicable (c) Exhibits Exhibit No. Description ----------- ----------- 3 (a) Articles of Incorporation Mercury Software (incorporated by reference to form 10K for December 31, 1999) 3 (a)(1) Certificate of Amendment to Articles of Incorporation (incorporated by reference to form 10K for December 31, 1999) 3 (b) By-laws Mercury Software (incorporated by reference to form 10K for December 31, 1999) 4 (a) Specimen certificate of common stock (incorporated by reference to form 10K for December 31, 1999) 10 Other Documents - Not applicable SIGNATURES Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized. Mercury Software /s/ Cassandra Dean-Rankin ------------------------- CASSANDRA DEAN-RANKIN, President and Director Date: March 28, 2002 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Allen Dean -------------- ALLEN DEAN, Treasurer and Director Date: March 28, 2002 15