<PAGE>
EXHIBIT 99.02
NEONYOYO, INC.
(A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION> June 30, 2000
ASSETS (unaudited)
<S> <C>
Current assets:
Cash and cash equivalents $1,619,599
----------
Property and equipment, net 109,706
Other assets 40,880
----------
$1,770,185
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 49,743
Accrued liabilities 75,245
----------
Total current liabilities 124,988
----------
Series A convertible preferred stock - $0.000001 par value;
1,500,000 shares authorized, issued and outstanding; aggregate
liquidation preferences are $0.10 150,000
Series B convertible preferred stock - $0.000001 par value;
1,300,000 shares authorized, 1,098,905 issued and outstanding;
aggregate liquidation preferences are $1.82 2,000,000
Stockholders' Equity:
Common Stock - $0.000001 par value; 20,000,000 shares
authorized; 10,189,000 shares issued and outstanding 10
Additional paid-in capital 104,208
Deficit accumulated during the development stage (609,021)
----------
Total stockholders' equity 1,645,197
----------
$1,770,185
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 2000
(unaudited)
<S> <C>
Revenue: $ --
Research and development 281,882
General and administrative 347,232
---------
Total operating expenses 629,114
Loss from operations (629,114)
Interest Income and other income (expense), net 20,093
---------
Net Loss (609,021)
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Series A Series B
Convertible Convertible
Preferred Stock Preferred Stock Common Stock
----------------- ----------------- ------------------ Additional
Paid-In Accumulated
Shares Amount Shares Amount Shares Amount Capital Deficit Total
--------- ------ --------- ------ ---------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 -- $ -- -- $ -- -- $ -- $ -- $ -- $ --
Issuance of Common Stock -- -- -- -- 10,089,000 $ 10 $ 96,290 -- $ 96,300
Issuance of Common Stock for
services -- -- -- -- 100,000 -- 9,500 -- 9,500
Issuance of Series A Convertible
Preferred Stock 1,500,000 2 -- -- -- -- 149,998 -- 150,000
Issuance of Series B Convertible
Preferred Stock -- -- 1,098,905 1 -- -- 1,999,999 -- 2,000,000
Issuance costs of Common and -- -- -- -- -- -- -- -- --
Preferred Stock (1,582) (1,582)
Net loss from development stage
activities -- -- -- -- -- -- -- (609,021) (609,021)
--------- ------ --------- ------ ---------- ---- ----------- ----------- ------------
Balance at June 30, 2000 1,500,000 $ 2 1,098,905 $ 1 10,189,000 $ 10 $ 2,254,205 $ (609,021) $ 1,645,197
========= ====== ========= ====== ========== ==== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 2000
(unaudited)
<S> <C>
Cash flows used in operating activities:
Net loss $ (609,021)
Adjustment to reconcile net loss to net cash used in operating
activities:
Depreciation 2,285
Stock compensation 9,500
Changes in assets and liabilities:
Other assets (40,880)
Accounts payable 49,743
Accrued expenses 75,245
----------
Net cash used in operating activities (513,128)
----------
Cash Flows used in investing activities:
Purchase of property and equipment 111,991
----------
Net cash used in investing activities (111,991)
----------
Cash Flows from financing activities:
Proceeds from Series A preferred stock, net 150,000
Proceeds from Series B convertible preferred stock 2,000,000
Proceeds from issuance of common stock 96,300
Issuance costs of stock (1,582)
----------
Net cash provided by financing activities 2,244,718
----------
Net increase in cash and cash equivalents 1,619,599
Cash and cash equivalents at beginning of period --
----------
Cash and cash equivalents at end of period $1,619,599
==========
Supplemental non-cash activity:
Issuance of common stock for services $ 9,500
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 1. The Company and Summary of Significant Accounting Policies:
The Company
Neonyoyo, Inc. (a development stage company) was incorporated under the laws of
the State of Delaware on December 17, 1999. Neonyoyo, Inc. (the Company) is
creating a new category of wireless Internet applications that will accelerate
wireless Internet adoption and usage.
Since its inception, the Company has devoted its efforts principally to research
and development, raising capital and developing markets for its product. As a
result, the Company is considered a "development stage company." Management
believes that the Company will achieve its targeted revenue and operating goals
for 2000.
The Company's continued existence is dependent upon its ability to resolve
anticipated liquidity problems, principally by obtaining additional debt
financing and equity capital. While pursuing additional debt and equity funding,
the Company must continue to operate on limited cash flows generated internally.
The Company has experienced a net loss from continuing operations for the
period ended June 30, 2000, and anticipates additional net losses over the next
twelve months.
Management believes that the Company will be successful in obtaining the
additional capital required to complete the development process.
For the period from inception (December 17, 1999) through December 31, 1999 the
Company had no revenues and incurred expenses of less than $10,000. The results
of operations for this period have been included in the June 30, 2000 financial
statements to facilitate presentation.
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 amount of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the financial statements and reported amounts of
revenue and expenses during the reporting periods. Actual results could differ
from those estimates.
Cash and cash equivalents
Cash and cash equivalents consist primarily of cash on deposit with banks and
high quality money market instruments. The Company considers all highly liquid
investments with a maturity from the date of purchase of three months or less to
be cash equivalents.
Property and equipment
Property and equipment are stated at historical cost less accumulated
depreciation. Depreciation is computed using the straight-line method over the
useful lives of the assets, generally 3 years.
Software development costs
Software development costs incurred in the research and development of new
products and enhancements to existing products are charged to expense as
incurred. Software development costs are capitalized after technological
feasibility has been established. The period between achievement of
technological feasibility, which the Company defines as the establishment of a
working model, until the general availability of such software to customers, has
been short and software development costs qualifying for capitalization have
been insignificant. Accordingly, the Company has not capitalized any software
development costs since its inception.
Impairment of long-lived assets
The Company evaluates the recoverability of its long-lived assets in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." SFAS No. 121 requires recognition of impairment of long-lived assets in the
event the net book value of such assets exceeds the future undiscounted cash
flows attributed to such assets.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Income taxes
Income taxes are accounted for using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year
and deferred tax liabilities and assets for the future tax consequences of
events that have been recognized in the Company's financial statements or tax
returns. The measurement of current and deferred tax liabilities and assets
are based on provisions of the enacted tax law; the effects of future changes
in tax laws or rates are not anticipated. The measurement of deferred tax
assets is reduced, if necessary, by the amount of any tax benefits that, based
on available evidence, are not expected to be realized.
Stock-based compensation
The Company accounts for stock-based compensation in accordance with Financial
Accounting Standards Board Statement No. 123, Accounting for Stock-Based
Compensation (FAS 123), which prescribes accounting and reporting standards for
all stock-based compensation plans, including employee stock options. As allowed
by FAS 123, the Company has elected to account for its employee stock-based
compensation in accordance with Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees (APB 25).
Concentrations of credit risk
Financial instruments which potentially subject the Company to credit risk
consist of cash and cash equivalents. The Company's cash and cash equivalents
are placed with high credit quality financial institutions and issuers.
Comprehensive Income
The Company has adopted the provisions of SFAS No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for reporting comprehensive income
and its components in financial statements. Comprehensive income, as defined,
includes all changes in equity (net assets) during a period from non-owner
sources. As of June 30, 2000, the Company had not had any transactions that are
required to be reported in comprehensive income.
Note 2. Recent Pronouncements
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging
Activity", which was subsequently amended by Statement No. 137 (SFAS 137),
"Accounting for Derivative Instruments and Hedging Activities: Deferral of
Effective Date of FASB 133" and Statement No. 138 (SFAS 138), "Accounting for
Certain Derivative Instruments and Certain Hedging Activities: an amendment of
FASB Statement No. 133". SFAS 137 requires adoption of SFAS 133 in years
beginning after June 15, 2000. SFAS 138 establishes accounting and reporting
standards for derivative instruments and addresses a limited number of issues
causing implementation difficulties for numerous entities. The Statement
requires the Company to recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges must be recorded at fair value through
earnings. If the derivative qualifies as a hedge, depending on the nature of the
exposure being hedged, changes in the fair value of derivatives are either
offset against the change in fair value of hedged assets, liabilities, or firm
commitments through earnings or are recognized in other comprehensive income
until the hedged cash flow is recognized in earnings. The ineffective portion of
a derivative's change in fair value is recognized in earnings. The Statement
permits early adoption as of the beginning of any fiscal quarter. SFAS 133 will
become effective for the Company's first fiscal quarter in 2001 and the Company
does not expect adoption to have a material effect on its financial statements.
In March 2000, the FASB issued Interpretation No. 44, (FIN 44), "Accounting for
Certain Transactions Involving Stock Compensation - an Interpretation of APB
25". This Interpretation clarifies (a) the definition of employee for purposes
of applying Opinion 25, (b) the criteria for determining whether a plan
qualifies as a noncompensatory plan, (c) the accounting consequence of various
modifications to the terms of a previously fixed stock option or award, and (d)
the accounting for an exchange of stock compensation awards in a business
combination. FIN 44 is effective July 1, 2000, however certain conclusions in
this Interpretation cover specific events that occur after either December 15,
1998, or January 12, 2000. To the extent that this Interpretation covers events
occurring during the period after December 15, 1998, or January 12, 2000, but
before the effective date of July 1, 2000, the effects of applying this
Interpretation are recognized on a prospective basis from July 1, 2000. Neonyoyo
is currently assessing the impact, if any, of adopting this interpretation.
Note 3. Preferred Stock and Stockholders' Equity
Common Stock
The Company authorized 20,000,000 shares Common Stock, of which 2,800,000
shares have been reserved for the conversion of Series A and B Convertible
Preferred Stock and 2,000,000 shares have been reserved for issuance of stock
options. The Common Stock is subject to the prior and superior rights of the
Preferred Stock. The holders of Common Stock are entitled to one vote per share.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
During the six months ended June 30, 2000, the Company issued 100,000 shares of
Common Stock in exchange for services. The shares were valued at the current
market price of $.095 as of the date of the exchange.
Series A Convertible Preferred Stock
Series A Convertible Preferred Stock is convertible into Common Stock at the
option of the holder at any time based upon the conversion price defined in the
Amended and Restated Certificate of Incorporation. At June 30, 2000, the
conversion price was $0.10 per share. All of the outstanding shares of Series A
Convertible Preferred Stock shall be automatically converted into Common Stock
in the event of a public offering whose offering price is equal to or greater
than $5.00 per share and whose gross proceeds equal or exceed $7,500,000.
In the event of voluntary or involuntary liquidation of the Company, the holders
of the Series A Convertible Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of assets of the Company to holders of
Common Stock, an amount for each share of $0.10, plus accrued and declared, but
unpaid dividends.
Each holder of shares of Series A Convertible Preferred Stock has voting rights
equal to common stock. The holders of shares of Series A Convertible Preferred
Stock are entitled to receive dividends at the rate of $0.001 per share, per
annum, payable in preference and priority to any payment of dividends in Common
Stock when declared by the Board of Directors.
Series B Convertible Preferred Stock
Series B Convertible Preferred Stock is convertible into Common Stock at the
option of the holder at any time based upon the conversion price defined in the
Amended and Restated Certificate of Incorporation. At June 30, 2000, the
conversion price was $1.82 per share. All of the outstanding shares of Series B
Convertible Preferred Stock shall be automatically converted into Common Stock
in the event of a public offering whose offering price is equal or greater than
$5.00 per share and whose gross proceeds equal or exceed $7,500,000.
In the event of voluntary or involuntary liquidation of the Company, the holders
of the Series B Convertible Preferred Stock shall be entitled to receive, prior
and in preference to any distribution of assets of the Company to holders of
Common Stock, an amount for each share of $1.82, plus accrued and declared, but
unpaid dividends.
Each holder of shares of Series B Convertible Preferred Stock has voting rights
equal to Common Stock. The holders of shares of Series B Convertible Preferred
Stock are entitled to receive dividends at the rate of $0.13 per share, per
annum, payable in preference and priority to any payment of dividends in Common
Stock when declared by the Board of Directors.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Stock options
The Company's 2000 Stock Plan (the "Plan") allows for the grant of options to
purchase shares of Common Stock and the issuance of Common Stock directly to
eligible persons. The Plan provides for the options to be either Incentive
Options or Non-Statutory Options and approves issuance of up to 2,000,000 shares
of Common Stock over the term of the Plan. The exercise price per share of
incentive options shall not be less than 100% of the fair market value of the
shares of Common Stock. Vesting is generally ratable over a four year period
beginning one year after the grant date. No option shall have a term exceeding
ten years from the grant date.
The Plan provides the grantee the right to exercise prior to vesting. Options
exercised prior to an employee becoming fully vested in such options are subject
to repurchase by the Company should the employee be terminated or leave the
Company prior to becoming fully vested in such options. At June 30, 2000, no
shares that were exercised by optionees remained unvested and subject to
repurchase.
Pro forma information regarding net income and earnings per share is required by
FAS 123. The fair value for options was estimated at the date of grant using a
minimum value option pricing model with the following weighted-average
assumptions: weighted-average risk free interest rate of 6.00%; a dividend yield
of 0.0% and a weighted-average expected life of the option of four years.
Based upon the minimum value pricing model and assumptions used, the pro forma
net loss from development stage activities would not differ materially from the
net loss from development stage activities as reported.
A summary of the Company's 2000 Stock Plan activity and related information for
the period ended June 30, 2000 follows:
<TABLE>
<CAPTION>
Weighted-
Range of Average
Exercise Exercise
Options Prices Price
------- -------- ---------
<S> <C> <C> <C>
Outstanding, December 17, 1999 -- $ -- $ --
Granted 197,100 0.18 0.18
Exercised -- -- --
Forfeited -- -- --
------- ----- -----
Outstanding, June 30, 2000 197,100 $0.18 $0.18
======= ===== =====
Exercisable, June 30, 2000 197,100 $0.18 $0.18
======= ===== =====
</TABLE>
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
The weighted-average remaining contractual life of outstanding options is 9.5
years. The Company issued 1,518,000 shares from the plan during the period ended
June 30, 2000, of which 1,327,000 shares are unvested at June 30, 2000. These
shares may be repurchased by the Company should vesting requirements not be
fulfilled. Options available for grant at June 30, 2000 were 284,900.
Note 4. Income Taxes
At June 30, 2000, the Company had a net operating loss carryforward of
approximately $580,000 for federal tax reporting purposes and research and
development credit carryforwards of approximately $29,000. The net operating
loss and research and development credit carryforwards begin to expire in 2020
if not utilized. Utilization of the net operating losses and credits may be
subject to a substantial annual limitation due to the "change in ownership"
provisions of the Internal Revenue Code of 1986. The annual limitation may
result in the expiration of net operating losses and credits before utilization.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities at June 30, 2000 are as
follows:
<TABLE>
<S> <C>
Deferred tax asset:
Net operating loss and tax credit carryforward $ 227,200
Deferred tax liability:
Depreciation (1,000)
---------
Net deferred tax asset 226,200
Valuation allowance for deferred tax asset (226,200)
---------
Net deferred tax asset $ --
=========
</TABLE>
For financial reporting purposes, the Company has incurred a loss since its
inception. Based on the available objective evidence, management believes it is
more likely than not that the net deferred tax asset will not be fully
realizable. Accordingly, the Company has provided for a valuation allowance
against its net deferred tax asset at June 30, 2000.
<PAGE>
NEONYOYO, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
Note 5. Lease Commitments
The Company is obligated under operating lease agreements covering certain
facilities and equipment. Rent expense was approximately $17,141 for the six
months ended June 30, 2000. Future minimum lease payments by year and in
aggregate for all operating leases with initial terms of one year or more
consist of the following at June 30, 2000:
<TABLE>
<S> <C>
2001 $106,524
2002 106,524
2003 106,524
2004 106,524
2005 97,647
--------
Total minimum lease payments $523,743
========
</TABLE>
