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U.S. Securities and Exchange Commission
Washington, D.C. 20549
Amendment No. 1
To
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
DIGS, INC.
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(Name of Small Business Issuer in its charter)
Delaware 95-4603237
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
17327 Ventura Boulevard, Suite 200 Encino, California 91316
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(Address of principal executive offices)
Issuer's telephone number: (818) 995 - 3650
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Securities to be registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
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Securities to be registered under Section 12(g) of the Act:
Common
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(Title of class)
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(Title of class)
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PART I
Forward Looking Statements
The sections of this Report on Form 10-SB containing such forward-looking
statements include "Description of Business," "Historical Background," "Growth,"
"Acquisitions," "Products and Services," "Marketing and Sales," Patent
Development," "Markets" and "Competition" under Item 1 below, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" under
Item 2 below. Statements in this Form 10-SB which address activities, events or
developments that the registrant expects or anticipates will or may occur in the
future, including such topics as future issuances of shares, future capital
expenditures (including the amount and nature thereof), expansion and other
development and technological trends of industry segments in which the
registrant is active, business strategy, expansion and growth of the
registrant's and its competitors' business and operations and other such matters
are forward-looking statements. Although the registrant believes the
expectations expressed in such forward-looking statements are based on
reasonable assumptions within the bounds of its knowledge of its business, a
number of factors could cause actual results to differ materially from those
expressed in any forward-looking statements, whether oral or written, made by or
on behalf of the registrant.
The registrant's operations are subject to factors outside its control. Any
one, or a combination, of these factors could materially affect the results of
the registrant's operations. These factors include: (a) changes in levels of
competition from current competitors and potential new competition; (b) loss of
a significant customer; and (c) changes in availability or terms of working
capital financing from vendors and lending institutions. The foregoing should
not be construed as an exhaustive list of all factors that could cause actual
results to differ materially from those expressed in forward-looking statements
made by the registrant. Forward-looking statements made by or on behalf of the
registrant are based on a knowledge of its business and the environment in which
it operates, but because of the factors listed above, actual results may differ
from those anticipated results described in these forward-looking statements.
Consequently, all of the forward-looking statements made are qualified by these
cautionary statements and there can be no assurance that the actual results or
developments anticipated by the registrant will be realized or, even if
substantially realized, that they will have the expected consequences to or
effects on the registrant or its business or operations.
ITEM 1. DESCRIPTION OF BUSINESS.
General
Digs, Inc. (the "Company" or "DIGS") provides comprehensive multimedia and
Internet communication solutions for public companies to proactively tell their
story to the investment community, its stockholders and employees. The Company's
CD-ROM program is a state of the art story telling tool creating a virtual road
show of a company's story. The program tells a client's "story" on a specially
designed Internet linked CD-ROM and delivers it, in an attention getting
package, to the computer screens of the client's shareholders, interested
investors, the business community and the media.
The Company's primary product is the Investor Relations CD-ROM ("IRCD").
The IRCD program tells a corporate story by integrating the traditional printed
report approach with the latest CD-ROM and Internet interactive video, audio,
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and animation technology. IRCD presents a company's story on an Internet-linked
multimedia CD-ROM. IRCD describes the business of a company utilizing video,
audio, animated graphics and text. The company's message is communicated via
CD-ROM linked to the Internet. The approach makes the often-dry corporate
profile come alive, by using video, audio, text and graphics to present a
company's corporate story, including financial highlights, product data and
other information. The IRCD is user-friendly and Internet-linked. A number of
specialized IRCD packages and programs, including a compacted Annual Report
package as well as an Environmental, Health and Safety CD-ROM which offers a new
multimedia approach to tell a company's Environmental, Health and Safety
policies, current results and achievements are available. All IRCD packages
offer savings to companies over traditional written reports in both production
and mailing costs. In addition, once an IRCD has been received by a shareholder,
additional CD's are never sent as updates, rather, any new and updated
information and statistics can be added to the existing CD through a simple
Internet uplink, thus, further reducing costs of handling and mailing.
Traditional paper reports require new paper and packaging for every update,
which adds expense to both production and postage. While traditional reports are
still required by law, a condensed version can be inserted into the IRCD jacket,
thereby decreasing the cost of expensive postage.
The Company believes that this means of delivery information is
particularly important in an era when millions of investors worldwide are using
their computers and Internet as investment tools.
The Company is not dependent on long term clientele, rather it is in
constant recruitment of new accounts. While annual revenues appear to be
generated from a particular group of clients, the customers will change on a
yearly basis.
Products
IRCD. The Company's principal product is the Investor Relations CD-ROM
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("IRCD"). Companies can use this easy CD-ROM format to communicate with its
stockholders, market makers and investment analysts. One CD-ROM is capable of
providing information that would require more than 1,000 pages if the
traditional written report was prepared. Complete financial information,
including financial statements, schedules and notes, together with yearly
comparison graphs of revenues, sales, profits, earnings per share, etc., are all
set forth in a colorful and creative manner. Audio not only includes music and
sound effects but conversation by company executives, such as its President,
Chief Financial Officer or Chief Scientist, explaining the company's business,
financial success and/or new products and inventions. The IRCD makes an
excellent alternative to a written annual report or other written information
companies periodically send to its stockholders. Through a direct link to the
Internet, financial statements and other corporate happenings can be kept
current by accessing that company's Website.
Each IRCD is equipped with a link, which connects to the Internet, and will
access the particular company's website. This feature is available as long as
the computer in use has Internet capabilities.
EHSCD. The Company developed its Environmental Health and Safety CD-ROM
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("EHSCD") for those companies that are primarily in the natural resources
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business. The EHSCD utilizes text, graphics, video and audio in a dynamic manner
to describe and explain a company's environmental, health and safety and natural
resource preservation to investors, environmental groups, media, the public and
to governmental agencies. The Company has produced an EHSCD for Atlantic
Richfield Corporation ("ARCO") who is using it primarily for information
regarding their efforts in the environmental, health and safety areas. In May
1999, the Company launched its new Website, EHSREPORTS.COM. This Website helps
Internet users search by company, or industry, for environmental health and
safety reports available in print, online and interactive CD-ROM formats from
hundreds of leading international corporations.
EOCD. The Company, using a similar format as its IRCD, has developed an
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Employee Orientation CD-ROM ("EOCD"). The EOCD was developed for internal use by
companies. It is designed to familiarize new employees with their company by
providing a comprehensive look at the company's people, products, services and
policies. The production uses video, audio, graphics and text in a lively,
informative and fun presentation.
Marketing and Customers
The Company markets its products to large public companies who are seeking
unique, efficient and inexpensive distribution of corporate business and
financial information. The Company markets these services through personal
contacts with customers and investment relations firms.
The Company employs two full time employees to market its products. The
Company's sales persons solicit business from existing and prospective
customers. The sales person also acts as service representative to ensure that
the Company's production staff promptly respond to customer instructions and
meets customer needs.
Since beginning full time operations in December, 1998, the Company has
provided its IRCD products for customers ranging from The Cheesecake Factory to
Mikohn Corp., a manufacturer and developer of systems and games for the gaming
industry. The first two customers utilizing the Company's EOCD product are The
Limited, Inc. and Intimate Brands, Inc., the parent company of Victoria's
Secrets, Inc. The Company's EHSCD product was chosen by Atlantic Richfield
Corporation to communicate their commitment to a clean environment to its
shareholders, government agencies and the media.
Production
The Company creates or accepts a client's videos, pictures, copy ("assets")
and, using the Company's proprietary application software, produces a Master
CD-ROM of the client's story.
The basic package includes filming three corporate executive interviews,
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programming a 10-page corporate profile section, a financial Bottom Line section
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featuring charts illustrating all financial aspect of the company, a products
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and services section, a research library section, and a proprietary Uplink
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function with an update feature.
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Once the "master" is produced, the Company contracts with outside
replication houses and printers to produce the final product.
Reorganization
Prior to the reorganization with Digital Corporate Profiles, Inc. ("DCP"),
DIGS, Inc. (the "Company"), formerly known as Advanced Laser Products, Inc. (a
Delaware corporation), has one inactive subsidiary, Advanced Laser Products,
Inc. ("ALP") (a Nevada corporation). Effective November 9, 1998, in connection
with the agreement of reorganization (the "Reorganization"), the Company issued
5,194,968 shares of its common stock at $.001 par value per share in exchange
for all of the outstanding common stock of DCP. DCP then became a wholly owned
subsidiary of the Company based on a conversion ratio of 3 shares of the
Company's common stock for each share of DCP's stock. For further discussion
relating to the accounting for reorganization, See Note 9 of DIGS, Inc. and
Subsidiaries' Notes to Consolidated Financial Statements. The shareholders of
DCP became the owners of approximately 99% of the outstanding shares of the
Company after the reorganization.
Employees
The Company currently employs seven full time employees of which two are in
management and administration, two in marketing, two in computer programming and
research, and one in finance. The employees are not unionized and management
believes the Company's relationship with its employees is good.
The Company is a Delaware corporation, its executive offices are located at
17327 Ventura Boulevard, Suite 200, Encino, California 91316, and its telephone
number is 818-995-3650.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Overview:
Effective November 9, 1998, in connection with an agreement of
reorganization, the Company issued 5,194,968 shares of its common stock at $.001
par value per share in exchange for all of the outstanding common stock of
Digital Corporate Profiles, Inc., a California corporation ("DCP"), in which DCP
became a wholly-owned subsidiary of the Company based on a conversion ratio of
three shares of the Company's common stock for each share of DCP's stock. The
merger qualified for a tax-free reorganization and has been accounted for as a
pooling of interests. Accordingly, the Company's consolidated financial
statements have been restated for all periods prior to the business combination
to include the combined revenues of DIGS, Inc.(formerly known as Advanced Laser
Products, Inc.), a Delaware corporation, and DCP. DCP provides complete
multimedia and internet communications solutions for public companies to
proactively tell their story to the worldwide investment community. DCP produces
investor relations CD-ROM (IRCD) packages for its corporate and investor
relations clients. DCP also offers the environmental health and safety CD-ROM
(EHSCD) to dynamically tell the environmental, health and safety story to
investors, environmental groups, media and the public. DIGS, Inc. has no
revenues for the years ended December 31, 1998 and 1997. The Company operates in
only one business segment. During the year ended December 31, 1998, sales to
three customers accounted for approximately 96% of total revenues. All share and
per share amounts have been adjusted to reflect the 1 for 10 reverse stock split
effective April 20, 1998 and the 1 for 20 reverse stock split effective October
16, 1998.
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Years Ended December 31, 1998 and 1997:
Revenues increased to $171,694 for the year ended December 31, 1998 from
$110,107 for the year ended December 31, 1997. The increase was primarily due to
the overall increase of sales volume and activity during the year ended December
31, 1998.
Cost of sales increased to $96,980 for the year ended December 31, 1998
from 63,745 for the year ended December 31, 1997. The increase was primarily
due to the Company's overall increase of sales volume and activity during the
year ended December 31, 1998.
Operating expense increased to $535,231 for the year ended December 31,
1998 from $233,620 for the year ended December 31, 1997. The increase was
primarily due to hiring additional staff to manage and support the growth during
1998. In 1998, the Company entered into an employment agreement with its
President, which accounts for an increase of officer salaries by $83,489. The
total increases in salaries and related personnel costs accounted for 85% of the
increase in operating expense. Increase in sales commission, professional fees,
outside services, and rent expense also contributed to the increase of operating
expense.
Other income and (expense) increased to $21,169 for the year ended December
31, 1998 from ($1,991) for the year ended December 31, 1997. The increase was
primarily due to the increase of sublease rental income of $23,000 in 1998.
Interest expense decreased to ($1,831) for the year ended December 31, 1998 from
($2,814) for the year ended December 31, 1997. Interest expense consists
primarily of interest expense on the note payable to stockholder.
As a result of operating losses and the Company's inability to recognize a
benefit from its deferred tax assets, the Company has not recorded a provision
for federal income taxes for the years ended December 31, 1998 and 1997;
however, the Company incurred a minimum state income tax expense of $800 in 1998
and 1997. As of December 31, 1998, the Company had $711,466 of net operating
loss carry forwards for federal income tax purposes, which expire beginning in
2011. The Company has provided a full valuation allowance on its deferred tax
assets, consisting primarily of net operating loss carry forwards, due to the
likelihood that the Company may not generate sufficient taxable income during
the carry-forward period to utilize the net operating loss carry forwards.
Unrealized loss on investment in equity securities increased to $7,850 for
the year ended December 31, 1998 from $0 for the year ended December 31, 1997.
The unrealized loss was contributed by the decrease in market value, comparing
to historical cost of investment securities as of December 31, 1998.
Three Months Ended March 31, 1999 and 1998:
Revenues increased to $291,964 for the three months ended March 31, 1999
from $37,543 for the three months ended March 31, 1998. The increase was
primarily due to the overall increased sales volume and activity during the
first quarter of 1999. The increase in revenues is primarily attributable to the
increase in the marketing effort.
The Company currently anticipates that its revenue for 1999 would increase
by approximately 250%. However, the Company anticipates that it would generate a
net loss from 1999 due to the increase in marketing expenses, personnel related
costs, and outside service costs of 780%, 71%, and 167%, respectively.
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Cost of sales increased to $26,009 for the three months ended March 31,
1999 from $17,477 for the three months ended March 31 1998. The increase was
primarily due to the significant increase in marketing expense, personnel
related costs, and outside service costs.
Operating expense increased to $239,836 for the three months ended March
31, 1999 from $56,190 for the three months ended March 31, 1998. The increase
was primarily due to the significant increase in marketing expense, personnel
related costs, and outside service costs.
Other income (and expense) increased to $1,950 for the three months ended
March 31, 1998 from ($1,203) for the three months ended December 31, 1997. The
increase was primarily due to net changes in sublease rental income, interest
expense, and realized loss on sale of securities. Sublease rental income
increased to $9,800 for the three months ended December 31, 1998 from $0 for the
year ended December 31, 1997. Interest expense decreased to $0 from ($1,203) for
the three months ended March 31, 1999 and 1998, respectively. The Company
recognized a realized loss on sale of investment securities, which was offset
against unrealized loss, recorded as of December 31, 1998.
As a result of operating losses and the Company's inability to recognize a
benefit from its deferred tax assets, the Company has not recorded a provision
for federal income taxes for the three months ended March 31, 1999 and 1998;
however, the Company paid a minimum state income tax expense of $800 for the
first quarter of 1998. As of December 31, 1998, the Company had $711,466 of net
operating loss carry forwards for federal income tax purposes, which expire
beginning in 2011. The Company has provided a full valuation allowance on its
deferred tax assets, consisting primarily of net operating loss carry forwards,
due to the likelihood that the Company may not generate sufficient taxable
income during the carry-forward period to utilize the net operating loss
carry forwards.
Liquidity and Capital Resources:
Since 1996, the Company has funded its operations and met its capital
expenditure requirements through private sale of equity securities, through
short-term loans from stockholders and unrelated parties, and through cash
generated from sale of its CD-ROM products and annual service contracts of its
Internet Website. Proceeds from sale of common stock through March 31 1999
totaled approximately $1,306,000.
The Company had negative cash flows from operating activities since 1997.
Net cash used in operating activities was $135,084 in 1997, $383,189 in 1998,
and $181,177 in the first three months of 1999. Net cash used in operating
activities in each of these periods was primarily the result of net operating
losses. These operating cash outflows were partially offset by the increases in
deferred rent credit and accounts receivable, and the decreases in accounts
payable and accrued expenses.
Net cash used by investing activities was $51,750 in 1997, $88,042 in 1998,
and $0 in the first three months of 1999. To date, the Company investing
activities have consisted of purchases of property and equipment and investment
in program development. Capital expenditures for property and equipment totaled
$12,615 in 1997, $79,042 in 1998, and $7,475 for the first three months of 1999.
Capital expenditures for program development totaled $39,135 in 1997, $0 in
1998, and $13,500 for the first three months of 1999.
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As of December 31, 1998, the Company's principal commitments consisted of a
two-year operating lease of the corporate office and a one-year employment
agreement with the Company's President.
As of March 31, 1999, the Company had $314,918 in cash. The Company
anticipates that the existing cash and any cash generated from operations will
be sufficient to fund its operating activities, capital expenditures and other
obligations through at least December 31, 1999. However, the Company may need to
raise additional funds in order to fund more rapid expansion, to expand its
marketing activities, to develop and enhance existing products, or to acquire
businesses or technologies. If the company is not successful in generating
sufficient cash flow from operations, it may need to raise additional capital
through public or private financing or other arrangements. If additional funds
were raised through the issuance of equity securities, the percentage of the
stock owned by the then current stockholders would be reduced. Furthermore, such
equity might have rights, preferences or privileges senior to current common
stock.
Year 2000 Issue:
The Year 2000 Issue refers generally to the problems that some computer
systems may have in determining the correct year for the century. For example,
software with date-sensitive functions that is not Year 2000 compliant may not
be able to distinguish whether "00" means 1900 or 2000, which may result in
failures or the creation of erroneous results.
The Company's primary management information and business systems are
running on third party software packages purchased and implemented in 1997.
These software packages are maintained and upgraded annually. Management
anticipates that these packages are Year 2000 compliant; however, the Company
will obtain Year 2000 compliance statements from the software makers. The
Company believes that the total cost of Year 2000 compliance efforts will not be
material; however, if the Company experiences unforeseen problems with respect
to the Year 2000, the Company could incur additional expense to correct these
problems.
In addition, the Company intends to obtain Year 2000 compliance statements
from other third parties, including the landlord, banks, Internet service
providers, customers, and major suppliers. Failure to achieve Year 2000
readiness by any of the Company's vendors and third parties could disrupt its
operations and hurt its business.
New Accounting Pronouncements:
In June 1997, the Financial Accounting Standards Board issued Statement No.
130, "Reporting Comprehensive Income" ("SFAS No. 130"), which is effective for
financial statements issued for fiscal years beginning after December 15, 1997.
SFAS No. 130 establishes standards for the reporting and display of
comprehensive income, its components and accumulated balances in a full set of
general purpose financial statements. SFAS No. 130 defines comprehensive income
to include all changes in equity except those resulting from investments by
owners and distributions to owners. Among other disclosures, SFAS No. 130
requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is presented with the same prominence as other
financial statements. The Company adopted SFAS No. 130 for its fiscal year
beginning January 1, 1998, and does not anticipate that adoption of SFAS No. 130
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will have a material effect on its financial statement presentation and
disclosures.
In June 1997, the Financial Accounting Standards Board issued Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information "
("SFAS No. 131"), which supersedes SFAS No. 14, "Financial Reporting for
Segments of a Business Enterprise," and which is effective for financial
statements issued for fiscal years beginning after December 15, 1997. SFAS No.
131 establishes standards for the way that public companies report information
about operating segments in annual financial statements and requires reporting
of selected information about operating segments in interim financial statements
issued to the public. SFAS No. 131 also establishes standards for disclosures by
public companies regarding information about their major customers, operating
segments, products and services, and the geographic areas in which they operate.
SFAS No. 131 defines operating segments as components of an enterprise about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance. SFAS No. 131 requires comparative information for earlier
years to be restated. The Company adopted SFAS No. 131 for its fiscal year
beginning January 1, 1998. Adoption of SFAS No. 131 did not have a material
effect on the Company's financial statement presentation and disclosures.
In February 1998, the Financial Accounting Standards Board issued Statement
No. 132, "Employers' Disclosures about Pensions and Other Post retirement
Benefits" ("SFAS No. 132"), which is effective for financial statements issued
for fiscal years beginning after December 15, 1997. SFAS No. 132 revises
employers' disclosures about pension and other post retirement benefit plans.
SFAS No. 132 requires comparative information for earlier years to be restated.
The Company adopted SFAS No. 132 for its fiscal year beginning January 1, 1998.
Adoption of SFAS No. 132 did not have any effect on the Company's financial
statement presentation and disclosures.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS No.
133"), which is effective for financial statements for all fiscal quarters of
all fiscal years beginning after June 15, 2000. SFAS No. 133 standardizes the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, by requiring that an entity recognize those items
as assets or liabilities in the statement of financial position and measure them
at fair value. SFAS No. 133 also addresses the accounting for hedging
activities. The Company will adopt SFAS No. 133 for its fiscal year beginning
January 1, 2000, and does not anticipate that adoption of SFAS No. 133 will have
any effect on its financial statement presentation and disclosures.
ITEM 3. DESCRIPTION OF PROPERTY.
The Company presently leases, from a third party, 6,153 square feet of
office space at 17327 Ventura Boulevard, Suite 200, Encino, California 91316,
pursuant to a lease with a term ending July 31, 2000, providing for monthly rent
of $7,691. The lease provides options to renew for an additional three and five
years. The Company does not anticipate changing its present leasing situation or
purchasing any real property in the near future.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
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(a) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS:
The following table sets forth certain information regarding the ownership
of the Company's Common Stock known by the Company to be the beneficial owner of
more than 5% of the Common Stock of the Company as of May 31, 1999. Except as
otherwise indicated, the Company has been advised that all individuals listed
below have the sole power to vote and dispose of the number of shares set forth
opposite their names.
Beneficial
Ownership of
Name and Address Common Stock Percent of Class
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Allen Kelsey Grammer Trust 450,000 6.8.
c/o Donald J. Miod
Miod & Company
15456 Ventura Boulevard, Suite 500
Sherman Oaks, CA 91403
First Capital Network, 1 439,992 6.6
Worldwide Insurance Consultants, 1 439,992 6.6
Jamie Mazur1, 2 219,996 3.3
Jennifer Mazur1, 2 219,996 3.3
Emily Mazur1, 2 219,996 3.3
Trent Mazur1, 2 219,996 3.3
1 The address of each of the beneficial owners identified is c/o Corporate
Financial Enterprises, 2224 Main Street, Santa Monica, CA 90405.
2 Jamie, Jennifer, Emily and Trent Mazur are siblings and their parents
disclaim beneficial ownership of these shares. Emily and Trent Mazur are
minors, and their shares are held by Michelle Mazur, their mother, as
custodian.
(b) SECURITY OWNERSHIP OF MANAGEMENT:
The following table sets forth certain information regarding the ownership
of the Company's Common Stock which are deemed under the current rules of the
Securities and Exchange Commission to be beneficially owned by the Company's
executive officers and directors, individually, and all executive officers and
directors as a group, as of May 31, 1999. Except as otherwise indicated, the
Company has been advised that all individuals listed below have the sole power
to vote and dispose of the number of shares set forth opposite their names.
Name, Title and Address Number of Shares Percent of Class
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Peter B. Dunn 1,330,500 20.0
President and Director
17327 Ventura Boulevard, Suite 200
Encino, CA 91316
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Allen Dunn 165,000 2.5
Vice President, COO and Director
17327 Ventura Boulevard, Suite 200
Encino, CA 91316
David L. Fleming 120,000 1.8
Secretary and Director
17327 Ventura Boulevard, Suite 200
Encino, CA 91316
Officers and Directors as a Group
(3 Persons) 1,615,500 24.3
(c) CHANGES IN CONTROL:
There are no arrangements known to the Company which may result in a change
in control of the Company.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
(a) OFFICERS AND DIRECTORS: The following table provides information
concerning each executive officer and director of the Company. All directors
hold office until the next annual meeting of shareholders or until their
successors have been elected and qualified.
Age Title
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Peter B. Dunn 59 President,
Chief Financial Officer and Director
Allen Dunn 32 Chief Operating Officer and Director
David L. Fleming 48 Secretary and Director
PETER B. DUNN founded Digital Corporate Profiles, Inc. ("DCP"), a
wholly-owned subsidiary of the Company, in July 1996 and has served as Chairman
of the Board, President, Chief Executive officer, Chief Financial Officer and
Treasurer of DCP since that time, and as President and Chief Financial Officer
for the Company since November 1998. From 1987 to 1996, Mr. Dunn was President
of Lucky Dog Productions where he produced, directed and/or wrote 12 Golf TV
shows/videos, one commercial, two cable TV pilots and a made-for-video movie for
such clients as Paramount Home Video, Classic Golf International, British
Broadcasting Corp., Lifetime Vision, Ltd, and Best of British Film and TV, Ltd.
From 1980 to 1987, he was President of International Special Promotions (ISP), a
special events marketing company serving companies such as Coca-Cola, R.J.
Reynolds, and Proctor and Gamble. From 1972 to 1980, Mr. Dunn was Chief
Executive Officer of Western Corporate Services, Inc., which he founded in 1972.
Western Corporate Services is the owner of U.S. Stock Transfer Corporation,
which is the third largest independent stock transfer agency in the United
States. Mr. Dunn remains a major shareholder and member of the Board of
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Directors of Western Corporate Services. Mr. Dunn received his Bachelor of Arts
in Industrial Management from Clarkson University, and attended graduate school
at the University of California, Los Angeles, where he studied Math and
Business.
ALLEN DUNN joined Digital Corporate Profiles, Inc. ("DCP"), a wholly-owned
subsidiary of the Company at its inception, in July 1996, in its computer
department and, since November 1998, has been serving as Chief Operating Officer
and director of both the Company and DCP. Mr. Dunn has been responsible for the
Company's web page design and Html coding, as well as website maintenance of the
Company's UNIX operating system. From August 1997 to March 1998, Mr. Dunn was
director of sales and marketing. From June 1994 to January 1996, Mr. Dunn
freelanced as a computer programmer and a children's self-defense instructor.
During this time, the primary focus of Mr. Dunn's athletic career was competing
in national Tae Kwon Do tournaments highlighted in an attempt to qualify for the
U.S. National Tae Kwon Do Team at the Olympic Training Center located in
Colorado Springs, Colorado. Mr. Dunn received his Bachelor of Arts in Economics
from California State University at Northridge in 1993, and is an alumnus of the
University of Colorado School of Astrophysics and Atmospherics. He is currently
pursuing an advanced degree in Computer Science at California State University
at Northridge, as well as completing a Microsoft certified program at New
Horizons Computer School in Los Angeles, California. Mr. Dunn is the son of
Peter Dunn.
DAVID L. FLEMING joined the Board of Directors of Digital Corporate
Profiles, Inc., a wholly-owned subsidiary of the Company, in July 1996 and has
been a director and Secretary of the Company since November 1998. Since 1991,
Mr. Fleming has been a managing partner in DG&F Design, a privately owned
graphic arts company.
ITEM 6. EXECUTIVE COMPENSATION.
(a) SUMMARY COMPENSATION TABLE: The following information is provided for
the Company's Chief Executive officer during the Company's last completed fiscal
year. The Company had no executive officers whose total annual salary and bonus
exceeded $100,000 for such year.
Annual Compensation Long Term Compensation
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Awards Payouts
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Secur-
ities
All Rest- Under- All
Other ricted lying Other
Name and Compen- Stock Options/ LTIP Compen-
Position Year Salary Bonus sation Awards SARs Payouts sation
- --------------------------------------------------------------------------------
Peter B.
Dunn, CEO 1998 $80,000 -0- -0- -0- -0- -0- -0-
1997 $ 5,000 -0- -0- -0- -0- -0- -0-
1996 -0- -0- -0- -0- -0- -0- -0-
- --------------------------------------------------------------------------------
12
<PAGE>
OPTIONS/SAR GRANTS in Last Fiscal Year: None. On January 2, 1999, pursuant
to a 1999 Stock Incentive Plan, the Company granted options to Peter Dunn and
Allen Dunn to purchase 100,000 shares and 80,000 shares, respectively. The
exercise price for Peter Dunn was $5.50 per share, and for Allen Dunn $5.00 per
share. For Peter Dunn, the options expire five years from date of grant and, for
Allen Dunn, the options expire ten years from date of grant. As of May 31, 1999,
no options have been exercised.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In 1997 and 1998, the Company borrowed monies from Peter Dunn, its
President, evidenced by a demand loan agreement with interest at 10% per annum.
In December 1998, the Company repaid $47,321 to Mr. Dunn, representing all
amounts owed to Mr. Dunn, including interest.
ITEM 8. DESCRIPTION OF SECURITIES.
(a) GENERAL:
The Company has authorized 100,000,000 shares consisting of 80,000,000
shares of Common Stock, $.001 par value, and 20,000,000 shares of Preferred
Stock, $.01 par value. There are issued and outstanding, as of May 31, 1999,
6,648,631 shares of Common Stock (258 holders of record). No Preferred Stock has
been issued.
(b) COMMON STOCK:
Each share of Common Stock entitles the holder thereof to one vote, either
in person or by proxy, at a meeting of shareholders. The holders are not
permitted to vote their shares cumulatively. Accordingly, the holders of more
than 50% of the issued and outstanding shares of Common Stock can elect all of
the directors of the Company.
All shares of Common Stock are entitled to participate ratably in dividends
when and as declared by the Company's Board of Directors out of the funds
legally available therefore. Any such dividends may be paid in cash, property or
additional shares of Common Stock. The Company has not paid any dividends since
its inception and presently anticipates that no dividends will be declared in
the foreseeable future. Any future dividends will be subject to the discretion
of the Company's Board of Directors and will depend upon, among other things,
future earnings, the operating and financial condition of the Company, its
capital requirements, general business conditions and other pertinent facts.
Therefore, there can be no assurance that any dividends on the Common Stock will
be paid in the future.
Holders of Common Stock have no preemptive or other subscription rights,
conversion rights, redemption or sinking fund provisions. In the event of the
dissolution, whether voluntary or involuntary, of the Company, each share of
Common Stock is entitled to share ratably in any assets available for
distribution to holders of the equity securities of the Company after
satisfaction of all liabilities.
(c) PREFERRED STOCK:
The Company is authorized to issue up to 20,000,000 shares of Preferred
Stock, $.01 par value, of which no shares are issued and outstanding.
13
<PAGE>
The Board of Directors has authority to issue the authorized Preferred
Stock in one or more series, each series to have such designation and number of
shares as the Board of Directors may fix prior to the issuance of any shares of
such series. Each series may have such preferences and relative, participating,
optional or other special rights, with such qualifications, limitations or
restrictions, as are stated in the resolution or resolutions providing for the
issue of such series as may be adopted from time to time by the Board of
Directors prior to the issuance of any shares of such series.
(d) 1999 STOCK INCENTIVE PLAN:
On January 2, 1999, the Company's Board of Directors approved a 1999 Stock
Incentive Plan (the "1999 Plan"), subject to approval, within twelve months, by
the stockholders. The purpose of the 1999 Plan is to enable the Company to
recruit and retain selected officers and other employees by providing equity
participation in the Company to such individuals. Under the 1999 Plan, regular
salaried employees, including directors, who are full time employees, may be
granted options exercisable at not less than 100 percent of the fair value of
the shares at the date of grant. The exercise price of any option granted to an
optionee who owns stock possessing more than ten percent of the voting power of
all classes of stock of the Company must be 110 percent of the fair market value
of the common stock on the date of grant, and the duration may not exceed five
years. Options generally become exercisable at a rate of 33 percent of the
shares subject to option one year after grant. The remaining shares generally
become exercisable ratably over an additional 24 months. The duration of options
may not exceed ten years. Options under the Plan are nonassignable, except in
the case of death and may be exercised only while the optionee is employed by
the Company, or in certain cases, within a specified period after termination of
employment (within three months) or death (within twelve months). The purchase
price and number of shares that may be purchased upon exercise of options are
subject to adjustment in certain cases, including stock splits,
recapitalizations and reorganizations.
The number of options granted and to whom, are determined by the Board of
Directors, at their discretion.
Under the 1999 Plan, there were 750,000 shares available for grant. As of
May 31, 1999, 287,000 options have been granted and are outstanding under the
1999 Plan, leaving a balance of 463,000 shares available for grant.
(e) TRANSFER AGENT:
The Transfer Agent for the Company's common stock is Signature Stock
Transfer, Inc., 14675 Midway Road, Suite 229, Dallas, Texas 75244.
14
<PAGE>
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
OTHER STOCKHOLDER MATTERS.
Market Information
The Common Stock of the Company is traded under the symbol DIGS in the
over-the-counter market through the NASD's electronic OTC Bulletin Board
service. The following table sets forth the range of high and low bid prices per
share of the Common Stock for each of the periods indicated. These quotations
reflect inter-dealer prices, without retail mark-up, mark-down or commissions,
and may not necessarily represent actual transactions. In November 1998 the
Company acquired Digital Corporate Profiles, Inc. ("DCP"). For a period of at
least two years prior thereto, the Company was inactive and trading in its
common stock was very sporadic. There was very little liquidity due to the
low volume. Therefore, any quotations prior to the DCP transaction would be
meaningless and misleading.
Bid Prices
-------------------------
High Low
---- ---
Quarter ended:
- ---------------
December 31, 1998 $6.87 $4.87*
March 31, 1999 $7.00 $3.00
June 30, 1999 $8.50 $8.50
September 30, 1999 $7.75 $7.75
Through October 25, 1999 $8.25 $8.00
* Reflects a 1 for 20 reverse stock split.
Holders of Common Stock
As of May 31, 1999, the number of holders of record of common stock was 258.
Dividends
To date, the company has not paid any cash dividends on its common stock
and does not anticipate paying cash dividends in the foreseeable future. The
Company anticipates that all earnings, if any, for the foreseeable future will
be retained for development of the Company's business.
ITEM 2. LEGAL PROCEEDINGS.
On November 20, 1998, a Complaint was filed against the Company and others
in the United States District Court in Los Angeles, California by Jason Nelbert,
15
<PAGE>
a shareholder of the Company. The Complaint alleges, among other things, the
sale to plaintiff, in May of 1996, of unregistered securities and breach of
contract. Plaintiff requests, among other things, damages in an amount
unascertained, according to proof and an award of common stock alleged to be
owned by Plaintiff and in an amount to be proved at trial. The Company denies
any liability and is diligently defending this matter. The Company's investment
banking firm has agreed to hold the Company harmless for any and all damages,
including, but not limited to, the cost of litigation resulting from this
lawsuit.
ITEM 3.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
(1) On November 9, 1998, in connection with a Plan and Agreement of
Reorganization (the "Plan"), the Company issued 5,194,968 shares
of its Common Stock in exchange for all of the outstanding common
stock of Digital Corporate Profiles, Inc. ("DCP"). Upon the close
of the Plan, DCP's shareholders owned approximately 99% of the
outstanding Common Stock of the Company. as a Result, DCP became a
wholly-owned subsidiary of the Company.
(2) On November 10, 1998, the Company sold 1,400,000 shares of Common
Stock to four individuals pursuant to a Rule 504 offering. The
shares were sold at $0.71 per share for gross proceeds of
$994,000. The Company had reasonable grounds to believe that each
purchaser was capable of evaluating the merits and risks of his
investment and bearing the economic risks of his investment. The
Company had not raised, over the prior twelve months, more than
one million dollars inclusive of the proceeds from this offering.
Accordingly, the Company believes that this transaction was exempt
from the registration provisions of the Securities Act of 1933, as
amended, pursuant to the exemption under Regulation D of that Act,
and the Rules and Regulations promulgated thereunder.
(3) On January 2, 1999, the Board of Directors duly adopted a stock
option plan, subject to shareholder approval, pursuant to which
options to purchase up to 750,000 shares of the Company's Common
Stock may be granted by a committee of directors to key employees
and others. Each option will have a term not to exceed ten years,
or such shorter period as is determined by the Board of Directors,
and will be exercisable at the per share fair market value of the
Company's Common Stock as at the date of grant. As of May 31,
1999, option to purchase 287,000 shares of Common Stock have been
granted.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporate Law ("GCL") of the State of Delaware
empowers a Delaware corporation, such as the Company, to indemnify its directors
and officers under certain circumstances. The Company's Certificate of
16
<PAGE>
Incorporation provides that the Company shall indemnify such persons to the
fullest extent permitted by Delaware law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors and officers and controlling persons of
the Company pursuant to the provisions of Delaware law or otherwise, the Company
has been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in said Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the Company in the
successful defense of any action, suit, or proceeding) is asserted by a
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy in said Act and will be governed by the final adjudication of such
issue.
Article Seventh of the Company's Certificate of Incorporation provides that
the Company shall, to the full extent permitted by Section 145 of the Delaware
General Corporation Law, as amended from time to time, indemnify all persons
whom it may indemnify pursuant thereto.
17
<PAGE>
PART F/S
The following financial statements are included as a separate section
following the signature page to this Form 10-SB and are incorporated herein by
reference.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
----
Audited Financial Statements:
Independent Auditors' Report F-2
Prior Independent Auditors' Report F-3 - F-4
Consolidated Balance Sheet as of December 31, 1998 F-5
Consolidated Statements of Operations - Years Ended
December 31, 1998 and 1997 F-6
Consolidated Statements of Stockholders' Equity -
Years Ended December 31, 1998 and 1997 F-7
Consolidated Statements of Cash Flows - Years Ended
December 31, 1998 and 1997 F-8
Notes to Consolidated Financial Statements F-9 - F-16
Unaudited Financial Statements
Consolidated Balance Sheet - Three Months Ended
March 31, 1999 F-17
Consolidated Statements of Operations - Three
Months Ended March 31, 1999 and 1998 F-18
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1999 and 1998 F-19
Notes to Consolidated Financial Statements F-20
18
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
Item Description
2. Plan and Agreement of Reorganization between the Registrant and
Digital Corporate Profiles, Inc. dated October 3, 1998.*
3.(i) Articles of Incorporation and Amendments thereto.*
(ii) By-Laws of Registrant.*
10.(i) Registrant's 1999 Stock Incentive Plan.*
(ii) Employment Agreement between Registrant's wholly-owned subsidiary
and Peter Dunn.*
23. Subsidiaries of Registrant.
- -------------------
* Previously filed.
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
DIGS, INC.
Date: October 26, 1999
By: /s/ Peter B. Dunn
----------------------------------------------------
Peter B. Dunn, President and Chief Financial Officer
19
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
INDEX TO FINANCIAL STATEMENTS
Pages
------------------
Independent Auditors' Report F - 2
Prior Independent Auditors' Reports F - 3 - F - 4
Consolidated Balance Sheet as of December 31, 1998 F - 5
Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997 F - 6
Consolidated Statements of Stockholders' Equity
For the Years Ended December 31, 1998 and 1997 F - 7
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1998 and 1997 F - 8
Notes to Consolidated Financial Statements F - 9 - F - 16
Unaudited Financial Statements
Consolidated Balance Sheet - Three Months Ended
March 31, 1999 F-17
Consolidated Statements of Operations - Three
Months Ended March 31, 1999 and 1998 F-18
Consolidated Statements of Cash Flows - Three
Months Ended March 31, 1999 and 1998 F-19
Notes to Consolidated Financial Statements F-20
F - 1
<PAGE>
INDEPENDENT AUDITORS' REPORT
April 5, 1999
To the Board of Directors
DIGS, Inc. and Subsidiaries
Encino, California
We have audited the accompanying consolidated balance sheet of DIGS, Inc.
(a Delaware corporation) and subsidiaries as of December 31, 1998 and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
financial statements of Digital Corporate Profiles, Inc. (Subsidiary) as of
December 31, 1997 were audited by other auditors whose report dated April 10,
1998, expressed an unqualified opinion on those statements.
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 and reports of other auditors provide a reasonable
basis for our opinion.
In our opinion, the 1998 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of DIGS,
Inc. and subsidiaries as of December 31, 1998, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
CALDWELL, BECKER, DERVIN, PETRICK & CO., L. L. P.
F - 2
<PAGE>
JAAK (JACK) OLESK
Certified Public Accountant
270 North Canon Drive, Suite 203
Beverly Hills, California 90210
(310) 288-0693
INDEPENDENT AUDITOR'S REPORT
To the Shareholders and Board of directors
Advanced Laser Products, Inc.
I have audited the accompanying balance sheet of Advanced Laser Products,
Inc. as of August 31, 1998 and December 31, 1997 and the related statements of
operations, stockholders' equity (deficit) and cash flows for, each of the two
years in the period ended December 31, 1997, and for the eight month period
ended August 31, 1998. These financial statements are the responsibility of the
company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I 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.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Advanced Laser Products,
Inc. as of August 31, 1998, and December 31, 1997 and the results of its
operations and its cash flows for each of the two years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 2 to the
financial statements, the company has suffered recurring losses from operations
that raises substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
(X) JAAK OLESK, CPA
signature
Beverly Hills, California
September 14, 1998
F-3
<PAGE>
KELLOGG & ANDELSON
ACCOUNTANCY CORPORATION
Board of Directors
Digital Corporate Profiles, Inc.
(Formerly known as StockNet, Inc.)
Encino, California
Independent Auditor's Report
We have audited the accompanying balance sheet of Digital Corporate Profiles,
Inc. (formerly known as StockNet, Inc.) as of December 31, 1997 and the related
statements of operations and accumulated deficit and cash flows for the year
then ended. 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 the 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 Digital Corporate Profiles,
Inc. (formerly known as StockNet, Inc.), as of December 31, 1997 and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ Kellogg & Andelson
signature
April 10, 1998
MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
C.P.A. ASOCIATES OFFICES IN PRINCIPLE CITIES
14724 VENTURA BOULEVARD. SECOND FLOOR, SHERMAN OAKS, CALIFORNIA 91403
PHONE (818) 971-5100 FAX (818) 971- 5155
F - 4
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
ASSETS
CURRENT ASSETS
Cash (Note 2) $ 515,920
Marketable equity securities (Notes 2 and 3) 1,150
Accounts receivable - trade 3,183
------------------
Total Current Assets 520,253
PROPERTY AND EQUIPTMENT,
net of accumulated depreciation (Notes 2 and 5) 90,552
PROGRAM DEVELOPMENT COSTS,
net of accumulated amortization (Notes 2 and 6) 47,755
LONG-TERM ASSETS
Deferred tax assets (Note 4) --
------------------
Total Assets $ 658,560
==================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 20,912
Payroll tax liabilities 11,339
Accrued vacation pay 4,635
Sub-lease deposits 3,000
------------------
Total Current Liabilities 39,886
OTHER LIABILITIES
Deferred rent credit (Note 7) 31,667
------------------
Total Liabilities 71,553
------------------
STOCKHOLDERS' EQUITY
Preferred stock, par value $.01 per share; 20,000,000
shares authorized, 0 shares issued and outstanding --
Common stock, par value $.001 per share; 80,000,000
shares authorized, 6,648,631 shares issued and
outstanding 6,649
Additional paid-in capital 2,965,840
Accumulated other comprehensive income (loss) (7,850)
Retained (deficit) (2,377,632)
------------------
Total Stockholders' Equity 587,007
------------------
Total Liabilities and Stockholders' Equity $ 658,560
==================
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
F - 5
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
1998 1997
----------------- ----------------
REVENUE (Notes 2 and 8)
Investor relations CD-ROM (IRCD) $ 166,564 $ 82,770
Stocknet-USA directories 5,130 27,337
----------------- ----------------
Total Revenue 171,694 110,107
----------------- ----------------
COST OF SALES
IRCD production costs 72,972 59,815
Others 24,008 3,930
----------------- ----------------
Total Cost of Sales 96,980 63,745
----------------- ----------------
Gross Profit 74,714 46,362
----------------- ----------------
OPERATING EXPENSES
Auto expense 18,282 7,624
Depreciation and amortization (Note 12) 14,717 17,767
Commissions 17,974 3,124
Marketing 14,400 34,358
Outside services 43,817 27,025
Printing 19,824 5,122
Professional services 33,126 13,916
Rent (Note 7) 44,445 18,000
Salaries - officers 121,989 38,500
Salaries - other 113,257 16,000
Taxes - payroll 20,565 14,740
Others 72,835 37,444
----------------- ----------------
Total Operating Expenses (535,231) (233,620)
----------------- ----------------
(Loss) from Operations (460,517) (187,258)
OTHER INCOME (EXPENSE)
Rental income (Note 7) 23,000 --
Other income -- 823
Interest expense (1,831) (2,814)
----------------- ----------------
(Loss) Before Income Taxes (439,348) (189,249)
PROVISION FOR INCOME TAX (Note 4) (800) (800)
----------------- ----------------
Net (Loss) (440,148) (190,049)
OTHER COMPREHENSIVE INCOME, net of tax:
Unrealized holding(loss)arising during period
(Notes 2 and 3) (7,850) --
----------------- ----------------
Comprehensive Income (Loss) $ (447,998) $ (190,049)
================= ================
(Loss) per common share and common
share equivalent (Note 2) $ (.10) $ (.06)
================= ================
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
F - 6
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Common Stock Additional Other Retained
------------------ --------------------------------- Paid-In Comprehensive Earnings
Shares Amount Shares Amount Capital Income (Deficit) Total
--------- -------- ----------------- ---------------- ------------- ---------------- ----------------- ----------
Balance as
previously
reported
Dec. 31, 1996 3,135,000 $ 3,135 $ 197,453 $ (81,269) $ 119,319
(Note 9)
Stock sales
April 8, 1997 300,000 300 99,700 100,000
(Note 10)
Net(loss)for the (167,504) (167,504)
year ended
Dec. 31, 1997
Prior period
adjustment
Dec. 31, 1997 (Note 12) (22,545) (22,545)
-------- ---------- ------------- ---------- -------------- --------------- --------------- -------------
Balance at
Dec. 31, 1997 -- -- 3,435,000 3,435 297,153 -- (271,318) 29,270
Stock sales
Sept. 15, 1998 (Note 10) 1,759,968 1,760 9,975 11,735
Reorganization
with DIGS, Inc. 53,663 54 1,666,112 (1,666,166) 0
Nov. 9, 1998
(Note 9)
Stock sales
Nov. 10, 1998
(Note 11) 1,400,000 1,400 992,600 994,000
Net(loss)for the
year ended
Dec. 31, 1998 (440,148) (440,148)
Unrealized holding (loss)
Dec. 31, 1998 (7,850) (7,850)
(Notes 2 and 3)
--------- ---------- ------------ ---------- -------------- --------------- --------------- ------------
Balance at
Dec. 31, 1998 -- $ -- 6,648,631 $ 6,649 $ 2,965,840 $ (7,850) $ (2,377,632) $ 587,007
========= ========== ============= ========== ============== =============== =============== ============
</TABLE>
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
F - 7
<PAGE>
DIGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<S> <C> <C>
1998 1997
--------------------- -------------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net loss $ (440,148) $ (190,049)
Adjustments to reconcile net (loss) to net cash provided (used)
by operating activities:
Amortization and depreciation 31,607 17,766
(Increase) in accounts receivable (3,183) --
(Decrease) Increase in current liabilities and accrued expenses (6,102) 37,199
Increase in deposits 3,000 --
Increase in deferred rent credit 31,667 --
------------------- -------------------
Net Cash Flows (Used) by Operating Activities (383,159) (135,084)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Acquisition of property and equipment (79,042) (12,615)
(Increase) in program development cost -- (39,135)
Acquisition of marketable equity securities (9,000) --
------------------- -------------------
Net Cash Flows (Used) by Investing Activities (88,042) (51,750)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt -- 100,200
Issuance of common stock (Notes 10 and 11) 1,005,735 100,000
(Decrease) in note payable to stockholders (47,321) --
Payment of long-term debt -- (52,879)
------------------- -------------------
Net Cash Flows Provided by Financing Activities 958,414 147,321
------------------- -------------------
NET INCREASE (DECREASE) IN CASH 487,213 (39,513)
CASH AT THE BEGINNING OF THE YEAR 28,707 68,220
------------------- -------------------
CASH AT THE END OF THE YEAR $ 515,920 $ 28,707
=================== ===================
ADDITIONAL DISCLOSURES:
Cash paid during the year for:
Interest $ 1,831 $ 2,814
=================== ===================
Income Taxes $ 800 $ 800
=================== ===================
NON-CASH INVESTING AND FINANCING TRANSACTIONS:
Common stock issued in exchange for subsidiary's common stock
$ 312,322 $ --
=================== ===================
</TABLE>
The Accompanying Notes are an Integral Part of the Consolidated Financial
Statements
F - 8
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - DESCRIPTION OF BUSINESS
DIGS, Inc. (the Company), formerly known as Advanced Laser Products, Inc.,
a Delaware corporation, was incorporated on June 27, 1986 as Skin Research
Laboratories, Ltd. On September 25, 1990, the Company changed its name to
Medipak Corporation. On February l, 1995, the Company changed its name to
Advanced Laser Products, Inc. In the late 1980's, the Company was attempting to
enter the medical receivables financing business. On November 9, 1998, the
Company acquired Digital Corporate Profiles, Inc. (DCP) (see Note 9). DCP
provides complete multimedia and Internet communications solutions for public
companies to proactively tell their story to the worldwide investment community.
DCP produces investor relations CD-ROM (IRCD) packages for its corporate and
investor relations clients. DCP also offers the environmental health and safety
CD-ROM (EHSCD) to dynamically tell the environmental, health and safety story to
investors, environmental groups, media and the public.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation
- ----------------------
The consolidated financial statements include the accounts of DIGS, Inc.
and its wholly owned subsidiaries, Digital Corporate Profiles, Inc. (DCP), a
California corporation, and Advanced Laser Products, Inc., a Nevada corporation
(inactive). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Reclassifications
- -----------------
Certain prior year balances have been reclassified to conform with the
current year presentation.
Cash and Cash Equivalents
- -------------------------
The Company and its subsidiaries consider cash on hand and cash in banks as
cash and cash equivalents.
As of December 31, 1998, the Company funds held in its operating checking
account exceeded FDIC limit by $415,920.
Marketable Securities
- ---------------------
Marketable securities consist of common stock. Marketable securities are
stated at market value as determined by the most recently traded price of each
security at the balance sheet date, with the unrealized gains and losses, net of
tax, reported as a separate component of stockholders' equity. All marketable
securities are defined as available-for-sale securities under provisions of
Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities."
Revenue Recognition
- -------------------
Design and development contract revenues are billed in equal one-third
installments as the contracts progress. All payments are nonrefundable and
F - 9
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition (continued)
- -------------------------------
revenue is recognized when earned. Revenue is deemed to be earned when there is
no future performance obligation. Future performance obligation ceases when the
product is approved by client and shipped. The average length of a contract is
approximately two months.
Annual service contract revenues are recognized when earned. Annual service
contracts are billed at the beginning of each quarter and recognized on the
straight-line basis over the contract life, which is twelve months. The advance
charges are recorded and presented as deferred revenue until earned.
As of December 31, 1998 and 1997, the Company did not have any open contracts.
Earnings Per Share
- ------------------
Earnings per share are computed on the basis of the weighted average number
of common shares outstanding during the year. The weighted average shares
outstanding for the years ended December 31, 1998 and 1997 were 4,024,105 and
3,355,274, respectively (see Note 9). Fully diluted per share data is not
presented, as the effects would be antidilutive.
Property and Equipment
- ----------------------
Depreciation of equipment and amortization of leasehold improvements is
calculated by the straight-line and accelerated methods based on the following
estimated useful lives:
Years
------------
Computer 5
Furniture and fixtures 7
Organizational costs 5
Computer software 5
Leasehold improvements 10
Long-Lived Assets
- -----------------
In 1998, the Company adopted SFAS 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." In accordance
with SFAS 121, long-lived assets held and used by the Company are reviewed for
impairment whenever events or changes in circumstances indicated that the
carrying amount of an asset might not be fully recoverable. For purposes of
evaluating the recoverability of long-lived assets, the estimated future cash
flows associated with the asset would be compared to the asset's carrying amount
to determine if a write-down to market value or discounted cash flow value is
required. The adoption of SFAS 121 had no impact on the Company's financial
position or on its results of operations.
Program Development Costs
- -------------------------
F - 10
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 1998, the Company adopted Statement of Position 98-1, "Accounting
for Costs of Computer Software Developed or Obtained for Internal Use."
Capitalized program development costs consist of consulting and programming
costs. The Company capitalizes internally developed software costs based on a
project-by-project analysis of each project's significance to the Company and
its estimated useful life. All capitalized software costs are amortized on a
straight-line method over a period of five years.
Income Taxes
- ------------
This Company has adopted SFAS No. 109, "Accounting for Income Taxes", which
requires a liability approach to financial accounting and reporting for income
taxes. The difference between the financial statement and tax bases 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 deferred tax asset accounts to the amounts
that will more likely than not be realized. Income tax expense is the current
tax payable or refundable for the period, plus or minus the net change in the
deferred tax asset and liability accounts.
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 disclosures. Accordingly,
actual results could differ from those estimates.
Year 2000 Compliance
- --------------------
In general, management believes its computerized systems used to report
financial information are year 2000 compliant. Management does not foresee any
material year 2000 problems with the Company's vendors, service providers, or
other third parties which affect the Company's financial information.
Name Change
- -----------
On March 17, 1998, Digital changed its name from Stocknet-USA, Inc. to
Digital Corporate Profiles, Inc.
On October 8, 1998, the Company changed its name from Advanced Laser
Products, Inc. (a Delaware corporation) to DIGS, Inc.
NOTE 3 - MARKETABLE EQUITY SECURITIES
Cost and fair value of marketable equity securities at December 31, 1998
are as follows:
F - 11
<PAGE>
DIGS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS ADVANCED LASER PRODUCTS, INC.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
Gross Gross
Unrealized Unrealized
Cost Gains Losses Fair Value
--------- --------------- --------------- ------------
Available for Sale
Equity securities $ 9,000 $ -- $ (7,850) $ 1,150
======== =========== =========== ========
Gross unrealized losses during the year ended December 31, 1998 amounted to
$7,850.
NOTE 4 - INCOME TAXES
The Company has available at December 31, 1998, net operating loss
carryforwards totaling $711,466 that may be offset against future taxable. If
not used, the net operating loss carryforwards will expire as follows:
Operating Losses
Year 2011 $ 81,269
Year 2012 190,049
Year 2018 440,148
------------------
$ 711,466
==================
The net deferred tax assets, resulting from the net operating loss,
included in the accompanying balance sheet include the following amounts of
deferred tax assets and liabilities at December 31, 1998:
Deferred Tax Asset - Current $ --
Deferred Tax Asset - Non-Current 224,237
------------------
224,237
Valuation allowance (224,237)
------------------
$ --
==================
For the year ended December 31, 1998, valuation allowance increased by
$156,530. Due to the uncertainty of the realization of the net operating loss
carryforwards, the Company has established a valuation allowance against the
carryforward benefits in the amount of $224,237.
The components of the provision for income taxes are as follows:
1998 1997
------------------- ------------------
Current
State $ 800 $ 800
=================== ==================
F - 12
<PAGE>
NOTE 5 - PROPERTY AND EQUIPMENT
Computer $ 47,032
Furniture and fixtures 4,691
Organizational costs 4,996
Computer software 21,180
Leasehold improvements 43,524
-----------------
121,423
Less accumulated amortization and depreciation ( 30,871)
-----------------
$ 90,552
=================
Amortization and depreciation expenses for the years ended December 31,
1998 and 1997 were $18,356 and $12,515, respectively. Depreciation and
amortization expense for the year ended December 31, 1997 included an $835 prior
year adjustment (see Note 12). In 1998, the Company allocated amortization
expense to cost of sales in an amount of $3,639.
NOTE 6 - PROGRAM DEVELOPMENT COSTS
Program development costs $ 66,257
Less accumulated amortization (18,502)
------------------
$ 47,755
==================
Amortization expense for the years ended December 31, 1998 and 1997 was
$13,251 and $5,252, respectively. Amortization expense for the year ended
December 31, 1997 included a $4,670 prior year adjustment (see Note 12). In
1998, the Company allocated amortization expense to cost of sales in an amount
of $13,251.
NOTE 7 - COMMITMENTS
As of September 1, 1997, the Company entered into an operating lease for
its offices expiring on August 31, 2007. The lease agreement contains certain
terms and conditions, which include, but are not limited to, property taxes,
insurance, rent increases, and repairs and maintenance. As of August 1, 1998,
the above lease commitment was terminated at the request of the lessor. The
Company was discharged of any future lease payment obligation.
In August 1998, the Company entered in a new two-year operating lease on
its current premises, expiring July 31, 2000, for the monthly lease payment of
$7,691. The lease agreement contains certain terms and conditions, which
include, but are not limited to, property taxes, insurance, rent increases,
repairs and maintenance. There is an option to renew the lease for additional
three and five years.
The following is a schedule of future minimum rental payments required
under the above operating leases as of December 31, 1998:
F - 13
<PAGE>
Year Ending December
31, Amount
------------------------ ------------------
1999 $ 92,295
2000 53,837
------------------
$ 146,132
==================
The above rental expenses will be offset by $21,000 in sublease rental
income through July 31, 1999.
For the years ended December 31, 1998 and 1997, rental expenses were
$44,445 and $18,000, respectively. Rentals under the subleases expiring July 31,
2000 amounted to $23,000 in 1998. (See Note 14).
In 1998, the lessor compensated DCP in an amount of $40,000 for moving to
its current facility. As of December 31, 1998, the above amount has been
classified as deferred rental credit and amortized on a straight-line method
over the term of the lease. In 1998, the amortized credit of $8,333 was offset
against rental expense.
On March 1, 1998, DCP entered into an employment contract with its
president that provides for an annual salary of $96,000 as well as annual
vacation, sick pay, bonus, and miscellaneous reimbursement of out-of-pocket
costs. The contract expires on February 28, 2000.
NOTE 8 - MAJOR CUSTOMERS
For the years ended December 31, 1998 and 1997, sales to three customers
accounted for approximately 96% and 87% of total revenue, respectively. The
total revenue received from these customers in 1998 and 1997 was as follows:
For the Years Ended December 31,
-------------------------------------------------------
1998 1997
------------------------ -----------------------
Customer A $ 29,045 16.9% $ 0 .0%
Customer B 27,541 16.0 18,325 16.6
Customer C 107,500 62.6 30,000 27.2
Customer D 0 0 47,427 43.0
--------------- -------- -------------- --------
$ 164,086 95.5% $ 95,752 86.8%
=============== ======== ============== ========
NOTE 9 - AGREEMENT OF REORGANIZATION
Effective November 9, 1998, in connection with the agreement of
reorganization, the Company issued 5,l94,968 shares of its common stock at $.001
par value per share, in exchange for all of the outstanding common stock of
Digital Corporate Profiles, Inc. (DCP), in which DCP became a wholly owned
subsidiary of the Company based on a conversion ratio of 3 shares of the
Company's common stock for each share of DCP's stock. The merger qualified for a
tax-free reorganization and has been accounted for as a recapitalization of
Digital Corporate Profiles, Inc. at book value.
F - 14
<PAGE>
NOTE 10 - SALE OF DCP'S STOCK
In 1997, DCP issued 100,000 shares of its common stock, an equivalent of
300,000 shares of the Company, no par, to two unrelated individuals at the price
of $1 per share. The net proceeds were $100,000. These shares were outstanding
at the time of the reorganization with the Company (see Note 9).
On March 20, 1998, pursuant to a short-term loan agreement, DCP's Board of
Directors authorized the issuance of 586,656 shares of its common stock, an
equivalent of 1,759,968 shares of the Company, no par, to various unrelated
individuals at the price of $.02 per share. All transactions were finalized on
September 15, 1998. The net proceeds were $11,734. These shares were outstanding
at the time of the reorganization with the Company (see Note 9).
NOTE 11 - SALE OF DIGS' STOCK
On November 10, 1998, the Company issued 1,400,000 shares of common stock
through a 504 offering, which is available to non-reporting and non-investment
companies for offerings of not more than $1,000,000 of securities in the
12-month period under section 3(b) of the (1933) Securities Act. The net
proceeds of the offering were $994,000. The Company used $600,000 of the net
proceeds to repay outstanding short-term debts.
NOTE 12 - PRIOR PERIOD ADJUSTMENT
Due to the discovery of unrecorded liabilities and the miscalculation of
depreciation as of December 31, 1997, the following adjustments were made to
DCP's beginning retained earnings as of January l, 1998:
Amortization and depreciation $ 5,505
Commission 3,124
Accounting fees 13,916
------------------
$ 22,545
==================
The above changes increased DCP's net loss for the year ended December 31,
1997 from $167,504 to $190,049.
NOTE 13 - LITIGATION
The Company is a defendant in a suit in which the plaintiff is seeking
recovery of approximately $85,000. The dispute arose as to the investment made
by the plaintiff and the non-delivery of the shares by the Company. The
Company's investment banking firm agreed to hold the Company and DCP harmless
for any and all damages including, but not limited, to the cost of litigation
resulting from this suit. Consequently, no provision has been made in the
accounts for any liability from this suit.
NOTE 14 - RELATED PARTY TRANSACTIONS
F - 15
<PAGE>
For the first eight months of 1997, the Company leased its facilities from
the majority stockholder. The amount of rent paid to the stockholder during 1997
was $18,000.
For the year ended December 31, 1998, the Company paid its Secretary
approximately $9,000 for services in connection with the production of its
products.
For the year ended December 31, 1998, DCP repaid the president of the
Company the short-term note in an amount of $47,321. This amount was on DCP's
books since December 31, 1997.
NOTE 15 - SUBSEQUENT EVENTS
On March 2, 1999, DCP paid a commission in an amount of $3,124 to U. S.
Stock Transfer for referring customers during the year ended December 31, 1997.
The president of DCP is also a member of the Board of Directors and a
shareholder of U.S. Stock Transfer.
On January 2, 1999, pursuant to a 1999 Stock Incentive Plan, the Company
granted 287,000 options to the following individuals:
Exercise Expire From
Options Price Date of Grant
------------- --------------- ---------------
Peter Dunn, President 100,000 $ 5.50 5 yrs.
Allen Dunn, Vice President 80,000 5.00 10 yrs.
Various other individuals 107,000 5.00 10 yrs.
-------------
287,000
=============
F - 16
<PAGE>
DIGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash $ 314,918
Accounts receivable - trade 203,011
------------------
Total Current Assets 517,929
PROPERTY AND EQUIPTMENT,
net of accumulated depreciation 93,437
PROGRAM DEVELOPMENT COSTS,
net of accumulated amortization 57,943
LONG-TERM ASSETS
Deferred tax assets --
-----------------
Total Assets $ 669,309
=================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expense $ 17,517
Sub-lease deposits 3,000
-----------------
Total Current Liabilities 20,517
-----------------
OTHER LIABILITIES
Deferred rent credit 26,666
-----------------
STOCKHOLDERS' EQUITY 47,183
-----------------
Preferred stock, par value $.01 per share; 20,000,000
shares authorized, 0 shares issued and outstanding --
Common stock, par value $.001 per share; 50,000,000
shares authorized, 6,648,631 shares issued and
outstanding 6,649
Additional paid-in capital 2,965,840
Retained (deficit) (2,377,632)
Income 27,269
-----------------
Total Stockholders' Equity 622,126
-----------------
Total Liabilities and Stockholders' Equity $ 669,309
=================
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-17
<PAGE>
DIGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE THREE MONTHS PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
For the Quarter Ended
March 31,
-------------------------------
1999 1998
-------------------------------
REVENUE
CD-ROM $ 291,964 $ 33,981
Stocknet-USA directories 0 3,612
-------------- ------------
Total Revenue 291,964 37,543
-------------- ------------
COST OF SALES
IRCD production costs 18,790 12,800
Others 7,219 4,677
-------------- ------------
Total Cost of Sales 26,009 17,477
-------------- ------------
Gross Profit (Loss) 265,955 20,066
-------------- ------------
OPERATING EXPENSES
Marketing 64,118 315
Outside services 30,500 0
Payroll expenses 66,150 20,664
Rent Expense 19,123 6,300
Tax - payroll 6,456 3,277
Others 136,730 32,249
-------------- ------------
Total Operating Expenses 239,836 56,190
-------------- ------------
Income (Loss) From Operations 26,119 (36,184)
OTHER INCOME (EXPENSE)
Rental income 9,800 0
Interest expense 0 (1,203)
Realized (loss) on sale of securities (7,850) 0
-------------- ------------
Income (Loss) Before Taxes 28,069 (37,387)
(PROVISION) FOR INCOME TAX (800) 0
-------------- ------------
Net Income (Loss) 27,269 (1,203)
OTHER COMPREHENSIVE INCOME, net of tax:
Add reclassification adjustment for (loss)
included in net income 7,850 0
-------------- ------------
Comprehensive Income (Loss) $ 35,119 (37,387)
============== ============
(Loss) per common share and common share equivalent
$ 0.01 $ (0.01)
============== ============
Weighted average common shares outstanding 5,272,280 3,435,000
============== ============
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-18
<PAGE>
DIGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
<TABLE>
<S> <C> <C>
1999 1998
--------------------- -------------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
Net income loss $ 27,269 $ (37,327)
Adjustments to reconcile net (loss) to net cash provided (used)
by operating activities:
Amortization and depreciation 7,902 7,902
(Increase) in accounts receivable (199,828) (26,785)
(Decrease) Increase in current liabilities and accrued expenses (19,369) (3,790)
Realized loss on sale of marketable equity securities 7,850 --
(Decrease) in deferred rent credit (5,001)
------------------- -------------------
Net Cash Flows (Used) by Operating Activities (181,177) (60,000)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
Acquisition of property and equipment (7,475) (1,248)
(Increase) in program development cost (13,500) --
Sale of marketable equity securities 1,150 --
------------------- -------------------
Net Cash Flows (Used ) by Investing Activities (19,825) (1,248)
------------------- -------------------
CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
Proceeds from issuance of short-term debts -- 71,085
------------------- -------------------
Net Cash Flows Provided by Financing Activities -- 71,085
------------------- -------------------
NET INCREASE (DECREASE) IN CASH (201,002) 9,837
CASH AT THE BEGINNING OF THE YEAR 515,920 28,707
------------------- -------------------
CASH AT THE END OF THE PERIODS $ 314,918 $ 38,544
=================== ===================
ADDITIONAL DISCLOSURES:
Interest paid $ -- $ 1,203
=================== ===================
Income taxes paid $ 800 $ --
=================== ===================
NON-CASH INVESTING AND FINANCING TRANSACTIONS
Realized (loss) on sale of marketable equity securities $ (7,850 ) $ --
------------------- ------------------
</TABLE>
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-19
<PAGE>
DIGS, INC. AND SUBSIDIARIES
SELECTED INFORMATION
Substantially All Disclosures Required By Generally Accepted Accounting
Principles are Not Included MARCH 31, 1999 (UNAUDITED)
NOTE 1 - MANAGEMENT'S STATEMENT
In the opinion of the management the accompanying unaudited financial
statements contain all adjustments (all of which are normal and recurring in
nature) necessary to present fairly the financial position of DIGS, Inc. and
subsidiaries (the Company) at March 31, 1999, and the results of operations and
the cash flows for the quarter periods ended March 31, 1999 and 1998. The notes
to the Consolidated Financial Statements which are incorporated by reference
into the 1998 Form 10-SK should be read in conjunction with these Consolidated
Financial Statements.
NOTE 2 - AGREEMENT OF REORGANIZATION
Effective November 9, 1998, in connection with the agreement of
reorganization, the Company issued 5,l94,968 shares of its common stock at $.001
par value per share, in exchange for all of the outstanding common stock of
Digital Corporate Profiles, Inc. (DCP), in which DCP became a wholly owned
subsidiary of the Company based on a conversion ratio of 3 shares of the
Company's common stock for each share of DCP's stock. The merger qualified for a
tax-free reorganization and has been accounted for as a recapitalization of
Digital Corporate Profiles, Inc. at book value.
For periods preceding the merger, there were no intercompany transactions
that required elimination from the combined consolidated results of operations
and there were no adjustments necessary to conform the accounting practices of
the two companies.
See Accompanying Notes to Unaudited Consolidated Financial Statements
F-20
<PAGE>
EXHIBIT 23
Subsidiaries of Registrant
Name State of Incorporation
---- ----------------------
Advanced Laser Products, Inc. Nevada
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1999 DEC-31-1998
<PERIOD-END> MAR-31-1999 DEC-31-1998
<CASH> 314,918 515,920
<SECURITIES> 0 1,150
<RECEIVABLES> 203,011 3,183
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 517,929 520,253
<PP&E> 208,655 187,680
<DEPRECIATION> 57,275 49,373
<TOTAL-ASSETS> 669,309 658,560
<CURRENT-LIABILITIES> 20,517 39,886
<BONDS> 0 0
0 0
0 0
<COMMON> 6,649 6,649
<OTHER-SE> 615,777 580,358
<TOTAL-LIABILITY-AND-EQUITY> 669,309 658,560
<SALES> 291,964 171,694
<TOTAL-REVENUES> 291,964 171,694
<CGS> 26,009 96,980
<TOTAL-COSTS> 265,845 632,211
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 7,850 0
<INTEREST-EXPENSE> 0 1,831
<INCOME-PRETAX> 28,069 (439,348)
<INCOME-TAX> 800 800
<INCOME-CONTINUING> 27,269 (440,148)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 27,269 (440,148)
<EPS-BASIC> 0.01 (0.10)
<EPS-DILUTED> 0.00 0.00
</TABLE>