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Exhibit 99.1
Conan Properties, Inc.
Financial Statements
Years Ended December 31, 1999 and 1998
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Conan Properties, Inc.
Contents
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Independent Auditors' Report 3
Financial Statements
Balance Sheet 4
Statements of Operations 5
Statements of Shareholder's Equity 6
Statements of Cash Flows 7
Summary of Significant Accounting Policies 8-9
Notes to Financial Statements 10
2
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Independent Auditors' Report
To the Shareholder
Conan Properties, Inc.
New York, New York
We have audited the accompanying balance sheet of Conan Properties, Inc. as of
December 31, 1999 and the related statements of operations, shareholders' equity
and cash flows for the years ended December 31, 1999 and 1998. 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 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 audit provides 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 Conan Properties, Inc. as of
December 31, 1999 and the results of its operations and its cash flows for the
years then ended December 31, 1999 and 1998, in conformity with generally
accepted accounting principles.
/s/ BDO Seidman, LLP
Los Angeles, California
November 5, 2000
3
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Conan Properties, Inc.
Balance Sheet
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<TABLE>
<CAPTION>
December 31, 1999
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Assets
<S> <C>
Cash $ 4,968
Literary rights 2,000
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Total assets 6,968
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Liabilities and Shareholder's Equity
Shareholder's equity
Common stock, no par value, 200 shares authorized, 100 shares issued
and outstanding 2,000
Retained earnings 4,968
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Total liabilities and shareholder's equity $ 6,968
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</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
4
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Conan Properties, Inc.
Statement of Operations
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<TABLE>
<CAPTION>
Years ended December 31, 1999 1998
-------------------------------------------------------------------------------
<S> <C> <C>
Sales $ 35,239 $ 145,684
General and administrative expenses 47,071 180,816
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Operating loss (11,832) (35,132)
Other income
Interest income 164 8,209
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Net loss (11,668) (26,923)
Income taxes - -
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$ (11,668) (26,923)
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</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
5
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Conan Properties, Inc.
Statement of Shareholder's Equity
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<TABLE>
<CAPTION>
Common Stock Total
------------------------- Retained Shareholder's
Shares Amount Earnings Equity
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997 100 $ 2,000 $ 43,559 $ 45,559
Net loss - - (26,923) (26,923)
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Balance, December 31, 1998 100 2,000 16,636 18,636
Net loss - - (11,668) (11,668)
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Balance, December 31, 1999 100 $ 2,000 $ 4,968 $ 6,968
-----------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
6
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Conan Properties, Inc.
Statements of Cash Flows
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<TABLE>
<CAPTION>
Increase (Decrease) in Cash
Years ended December 31, 1999 1998
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Cash flows from operating activities
<S> <C> <C>
Net loss $ (11,668) $ (26,923)
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Net cash used in operating activities (11,668) (26,923)
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Net decrease in cash (11,668) (26,923)
Cash, beginning of period 16,636 43,559
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Cash, end of period $ 4,968 $ 16,636
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</TABLE>
See accompanying summary of significant accounting policies and notes to
financial statements.
7
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Conan Properties, Inc.
Summary of Significant Accounting Policies
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<TABLE>
<S> <C>
Organization Conan Properties, Inc., (the "Company") was organized under the laws of the
and Business State of New York on January 28, 1977. The Company is engaged in the
business of owning and licensing certain intellectual property relating to
"Conan," "Conan the Barbarian," or variations thereon (hereafter "Conan").
Accounting The preparation of financial statements in conformity with generally accepted
Estimates accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent 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.
Revenue The Company recognizes revenues from licensing Conan in accordance with the
Recognition distribution agreement and at the time Conan is available to the licensee.
Revenue is recognized as earned and reasonably estimable.
Income Taxes The Company provides for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 requires a company to use the asset and liability method of
accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for the tax consequences of
"temporary differences" by applying enacted statutory tax rates applicable to future years to differences
between the financial statement carrying amounts and the tax bases of existing assets and liabilities and
result primarily from differences in methods used to amortize production costs. A valuation allowance is
provided when management cannot determine whether it is more likely than not that the deferred tax asset
will be realized. Under SFAS 109, the effect on deferred income taxes of a change in tax rates is recognized
in income in the period that includes the enactment date.
</TABLE>
8
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Conan Properties, Inc.
Summary of Significant Accounting Policies
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<TABLE>
<S> <C>
Literary Rights:
The cost of Literary rights are capitalized and amortized over the expected
revenue stream of the rights.
Concentration of Financial instruments which potentially expose the Company to concentration
Credit Risk of credit risk consist primarily of cash and cash equivalents. The Company
places its cash and cash equivalents with major financial institutions. At
times, cash balances may be in excess of the amounts insured by the Federal
Deposit Insurance Corporation, however, management believes the risk of loss
to be minimal.
</TABLE>
9
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Conan Properties, Inc.
Notes to Financial Statements
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<TABLE>
<S> <C>
1. Income Taxes The Company's operating loss generated a deferred tax
asset of approximately $5,000 at December 31, 1999. The
deferred tax asset has not been recognized since it is
more likely than not that the deferred tax asset will
not be realized. Accordingly, a 100% valuation allowance
has been recorded.
</TABLE>
10
