Quantum Bit Induction Technology, Inc.
Financial Statements





April 14, 2003



QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
BALANCE SHEET
MARCH 31, 2003

ASSETS
 
CURRENT ASSETS
Cash and cash equivalents $ 18,919
Short-term investments 57,700
 
Total current assets 71,619
 
PROPERTY AND COMPUTER EQUIPMENT, net 2,644
 
TOTAL ASSETS $74,263
 

LIABILITIES AND SHAREHOLDERS’ DEFICIT
 
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 63,623
Payable to officers 701,239
Short-term note payable 67,697
 

Total current liabilities 832,559
 

SHAREHOLDERS’ DEFICIT
Common stock, par value $.001, 200,000,000
shares authorized, 45,000,000 shares
outstanding 45,000
Paid-in capital 32,030
Deficit accumulated during the development stage (801,063)
Accumulated other comprehensive loss (34,263)
 
Total shareholders’ deficit (758,296)
 
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT $ 74,263







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

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS

January 28,1999
For the Year Ended March 31 (Date of Inception) to
  2002 2003 March 31, 2001
 
REVENUE $ 2,550 $ 6,050 $ 18,097
 
EXPENSES
General and administrative 33,986 47,045 342,658
Research and development 50,980 38,227 398,270
 
Total expenses 84,966 47,045 740,928
 
OTHER INCOME (EXPENSE)
Gain (loss) on sale of short-term investment - - (114,910)
Interest income - - 332
Interest expense (319) - (1,881)
 
Total Other Income (319) - (116,459)
 
NET LOSS (82,735) (40,995) (839,290)
 
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized gain (loss) on investments net of
reclassification adjustment - - (34,263)
 
COMPREHENSIVE LOSS $ (82,735) $ (40,995) $(873,553)

















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

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
STATEMENT OF SHAREHOLDERS' DEFICIT
FROM APRIL 1, 2001 TO MARCH 31, 2003

            Accumulated  
        Paid   Other  
  Comprehensive Common Stock In Retained Comprehensive
  Income (Loss) Shares Amount Capital Deficit Income (Loss) Total
Capital Contributed $     $1,000 $   $1,000
Net Loss (59,419)       (59,419)   (59,419)
Balance at March 31, 2001 (524,812) 45,000,000 45,000 26,130 (677,333) (34,263) (640,466)
             
Comprehensive income (loss):              
Capital Contributed       5,900     5,900
Net Loss (82,735)       (82,735)   (82,735)
Unrealized gain on investments              
Comprehensive loss (607,547)           (76,835)
               
Balance at March 31, 2002   45,000,000 45,000 32,030 (760,068)   (717,301)
               
Comprehensive income (loss):              
Capital Contributed              
Net Loss (40,995)       (40,995)   (40,995)
Unrealized loss on investments              
Reclassification adjustment              
for loss on sale of securities              
Comprehensive loss (40,995)       (40,995)   (40,995)
               
Balance at March 31, 2003   45,000,000 $45,000 $32,030 $(801,063) $(34,263) $(758,296)
















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

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS

January 28, 1999
For the Year Ended March 31, (Date of Inception)
2002 2003 to March 31, 2003
CASH FLOWS FROM OPERATING ACTIVITIES
   Net Loss $ (82,735) $ (40,995) $ (839,290)
     Adjustments to reconcile net loss to net cash used
       in operating activities:
       (Gain) loss on sale of short-term investments _ _ (114,910)
       Depreciation expense 587 587 1,174
       Stock issued for services _ _ 300
     Changes in working capital:
       (Increase) decrease in other receivables 1,737 _ (18,596)
       Increase (decrease) in accounts payable
         and accrued liabilities 72,984 94,511 223,398
     Net cash used in operating activities (7,427) 54,103 (747,924)
CASH FLOWS FROM FINANCING ACTIVITIES
     Proceeds from note payable _ _ 67,697
     Proceeds from financing activities _ 9,048 9,048
     Proceeds from officers to finance operations 5,900 161,034
     Proceeds from issuance of common stock _ _ 20,820
     Sale of investments to finance operations _ _ 328,582
     Net cash provided by financing activities 5,900 9,048 550,384
    
     Net increase (decrease) in cash and cash equivalents (6,594) 9,048 16,924
CASH AT BEGINNING OF YEAR 9,470 2,876 _
CASH AT END OF YEAR $ 2,876 $ 11,923 _
NON CASH FINANCING AND INVESTING ACTIVITIES
     Contributions of short-term investments at cost _ _ $ 1,280,575
     Withdrawal of short-term investments at cost _ _ (745,279)
     Change in unrealized gain (loss) _ _ (34,263)
     Stock issued for fair market value of equipment _ _ 1,000
     Stock issued for payment of liabilities _ _ 48,010


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

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 28, 1999 (Date of Inception)
TO MARCH 31, 2003

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations and Organization

Quantum Bit Induction Technology, Inc. (the Company) is a development stage Company that was incorporated in Nevada on January 28, 1999. The Company’s focus is quantum feedback control applied to the many worlds interpretation of quantum mechanics.

Cash and Cash Equivalents

For the purposes of the statement of cash flows, the Company considers all short-term securities purchased with maturity of three months or less to be cash equivalents.

Short-term Investments

The Company follows Statement of Financial Accounting Standards No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” Accordingly, the Company’s short-term investments have been classified as available-for-sale and slated at their fair market value. All short-term investments are available for current operations and are classified as current assets in the balance sheet. Unrealized holding gains and losses are included as a component of other comprehensive income until realized. Realized gains and losses are determined by the specific identification method and are reflected in income.

Property and Equipment

Property and equipment consists of computer equipment and are stated at cost. Depreciation is provided for using straight-line method over the estimated useful lives of three years. Routine repairs and maintenance are charged to operations as incurred while the costs of significant improvements are capitalized. Depreciation expense was $587 for the years ending March 31, 2002 and 2003. Accumulated depreciation was $1,174 from January 28, 1999 (the Date of Inception) to the year ended March 31, 2003.

Income Taxes

The Company has adopted SFAS No. 109, “Accounting for Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. The difference between the financial statement and tax basis of assets and liabilities is determined annually. Deferred income tax assets and liabilities are computed for those differences that have future tax consequences using the currently enacted tax laws and rates that apply to the periods in which they are expected to affect taxable income. Valuation allowances are established, if necessary, to reduce the deferred tax asset to the amount that will assure full realization.

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD FROM JANUARY 28, 1999(Date of Inception)
TO MARCH 31, 2003

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES continued

Revenue Recognition

Currently, the Company’s only sources of income have been from consulting services, interest on money market accounts, gains on sale of securities and sales of Power Project Sponsorships. This income is recognized in the period in which the consulting services, sales of Sponsorships and interest income are earned and securities sold.

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 disclosure. Accordingly, actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments which potentially subject the Company to significant concentrations of credit risk consist of cash and investments.

The Company maintains cash and cash equivalents and investments with various major financial institutions. Investment securities are exposed to various risks, such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that each change could materially affect the amounts reported in the financial statement.

Going Concern

Since inception, the Company has been considered a development stage company and has not generated any significant operating revenue. To fund its development stage activities to date, the Company has relied on funding by the Company’s President, Officers and some directors. The Company plans to syndicate Sponsorships to the Projects that are under development. Sponsors receive Rights under Conditions for a Term in exchange for Sponsorship fees. The Company has collected on seven of its Power Sponsorships for $5,000 each and a number of others have been subscribed. The Company plans to sell a total of 300 Sponsorships that will generate revenue of $1,500,000. This revenue will be sufficient for the Company to meet its operating cash requirements and fund further research and development. Accordingly, the Company’s ability to continue operations through 2004 depends on its success in sales of Sponsorships or obtaining equity or debt financing. The Company is also considering raising capital through private securities offerings and registering for “Pink Sheet” trades.

QUANTUM BIT INDUCTION TECHNOLOGY, INC.
(A Development Stage Company)
NOTES TO THE FINANCIAL STATEMENTS
FOR THE PERIOD OF JANUARY 28, 1999 (Date of Inception)
TO MARCH 31, 2003

2. INCOME TAXES

As of March 31, 2003, the Company has net operating tax loss carry forwards of approximately $839,290. The carry forwards begin to expire in the year 2019.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. It is doubtful that the Company will realize any net deferred tax assets when applying this rule:

Deferred tax assets:
  Net operating loss carry forwards
  Less: valuation allowance
    Net deferred tax assets

3. PAYABLE TO OFFICERS

The Company has a payable to the President of the Company and another Officer for contributions from the President and the Officer to fund the operations of the Company since inception through March 31, 2003.

4. NOTE PAYABLE

On June 28, 2000, the Company entered into an unsecured promissory note agreement of $30,000 with an individual. The note payable bears interest at 6.94% with a due date of June 28, 2001. No principal or interest payments have been made through March 31, 2003.

The individual has also been issued 300,000 shares of the Company’s common stock and the option to $0.15 per share for up to one year after retirement of the promissory note or June 28, 2002. The Company has calculated the fair market value of the option using the Black-Scholes option pricing model and determined that the fair market value was not material.

5. COMMON STOCK

In addition to shares that were issued directly to the Board of Directors, the Board of Directors and the President of the Company control approximately 66.7% and 7.2% respectively of the Company’s issued stock at March 31, 2003.