Exhibit 99.1
Financial Statements
And
Independent Auditor's Report
Digital Bridge, Inc.
June 30, 2000 and 1999
BOARD OF DIRECTORS
DIGITAL BRIDGE, INC.
Burlingame, California
We have audited the accompanying balance sheet of DIGITAL BRIDGE, INC. as of
June 30, 2000 and 1999 and the related statements of operations, stockholders'
(deficit) equity and cash flows for the years then ended. These financial
statements are the responsibility of Digital Bridge, Inc.'s management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits 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 audits provide 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 Bridge, Inc. as of June
30, 2000 and 1999, and the results of its operations and its cash flows for the
years then ended, in conformity with generally accepted accounting principles.
The Company has a limited operating history and its prospects are subject to the
risks, expenses and uncertainties frequently encountered by companies in new an
rapidly evolving markets for internet products and services. As discussed in
Note 11 to the financial statements, the Company was only recently formed, and
has not generated sufficient revenues to achieve profitability. Failure to
secure financing or its ability to generate sufficient cash flows through
operations may have a material adverse impact on the Company's operations and
financial position. Management's plans in regards to these matters are also
described in Note 11. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.
September 13, 2000
By: /s/ Hood & Strong, LLP
Hood & Strong, LLP.
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<TABLE>
<CAPTION>
DIGITAL BRIDGE, INC.
BALANCE SHEET
June 30, 2000 1999
------------------------------------------------------------ ------------------------- -------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 120,542 $ 6,800
Receivables 57,856
Prepaid expenses 30,661 5,000
------------------------------------------------------------ ------------------------- -------------------------
Total current assets 209,059 11,800
FURNITURE AND EQUIPMENT, net 41,591 6,917
OTHER ASSETS 19,744 9,500
------------------------------------------------------------ ------------------------- -------------------------
$ 270,394 $ 28,217
============================================================ ========================= =========================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 91,223
Accrued expenses 10,606 $ 9,586
Notes payable 700,000
------------------------------------------------------------ ------------------------- -------------------------
Total current liabilities 801,829 9,586
------------------------------------------------------------ ------------------------- -------------------------
STOCKHOLDERS' (DEFICIT) EQUITY:
Preferred stock, $.001 par value, 500,000 shares
authorized, no shares issued and outstanding
Common stock, $.001 par value, 31,250,000 and 13,250,000
shares authorized in 2000 and 1999; shares issued and
outstanding: 27,850,000 and 13,250,000 in 2000 and 1999 22,280 13,250
Additional paid-in capital 205,312 23,750
Accumulated deficit (759,027) (18,369)
------------------------------------------------------------ ------------------------- -------------------------
Total stockholders' (deficit) equity (531,435) 18,631
270,394 28,217
============================================================ ========================= =========================
</TABLE>
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DIGITAL BRIDGE, INC.
STATEMENT OF OPERATIONS
For the Years Ended June 30, 2000 1999
---------------------------- ---------- ---------
REVENUE $ 523,502 $ 46,000
COST OF SALES 280,095 13,952
---------------------------- ---------- ---------
GROSS PROFIT 243,407 32,048
OPERATING EXPENSES:
Salaries and benefits 549,667 41,202
Professional fees 112,813
Office expenses 146,980 9,215
Other 170,416
Depreciation 4,189
---------------------------- ---------- ---------
984,065 50,417
---------------------------- ---------- ---------
NET LOSS $(740,658) $(18,369)
============================ ========== =========
LOSS PER COMMON SHARE $ 0.0267 $(0.0014)
============================ ========== =========
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<TABLE>
<CAPTION>
Digital Bridge, Inc.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
For the Years Ended June 30, 2000 and 1999
======================================================================================================
Total
Number Additional Stockholders'
of Shares Common Paid-In Accumulated Equity
Outstanding Stock Capital Deficit (Deficit)
<S> <C> <C> <C> <C> <C>
BALANCES - June 30, 1998
Common stock issued 13,250,000 $ 13,250 $ 23,750 $ 37,000
Net loss $ (18,369) (18,369)
---------------------------- ------------- ------------ -------------- ------------- ------------
BALANCES - June 30, 1999 13,250,000 13,250 23,750 (18,369) 18,631
Common stock issued,
as recapitalized 14,600,000 9,030 9,030
Additional paid-in capital 181,562 181,562
Net loss (740,658) (740,658)
---------------------------- ------------- ------------ -------------- ------------- ------------
BALANCES - June 30, 2000 27,850,000 $ 22,280 $ 205,312 $ (759,027) $ (531,435)
============================ ============= ============ ============== ============= ============
</TABLE>
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DIGITAL BRIDGE, INC.
STATEMENT OF CASH FLOWS
For the years ended June 30, 2000 1999
======================================================================
OPERATING ACTIVITIES:
Net loss $(740,658) $(18,369)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation 4,189
Increase in:
Receivables (57,856)
Prepaid expenses (25,661) (5,000)
Other assets (10,244) (9,500)
Accounts payable 91,223
Accrued expenses 1,020 9,586
----------------------------------------------- ---------- ---------
Net cash used by operating activities (737,987) (23,283)
----------------------------------------------- ---------- ---------
INVESTING ACTIVITIES:
Purchase of furniture and equipment (38,863) (6,917)
----------------------------------------------- ---------- ---------
Net cash used by investing activities (38,863) (6,917)
----------------------------------------------- ---------- ---------
FINANCING ACTIVITIES:
Proceeds from notes payable 700,000
Proceeds from issuance of common stock
and receipt of additional paid-in capital 190,592 37,000
----------------------------------------------- ---------- ---------
Net cash provided by financing activities 890,592 37,000
----------------------------------------------- ---------- ---------
INCREASE IN CASH AND CASH EQUIVALENTS 113,742 6,800
CASH AND CASH EQUIVALENTS, beginning of year 6,800
----------------------------------------------- ---------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 120,542 $ 6,800
=============================================== ========== =========
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NOTES TO FINANCIAL STATEMENTS
DIGITAL BRIDGE, INC.
NOTE 1 - ORGANIZATION:
Digital Bridge, Inc. (the Company) is a corporation organized
under the laws of the State of Nevada for the purpose of doing
business as a provider of website development and management
services.
Effective January 31, 2000, the Company and its shareholders
entered into a Reorganization and Stock Purchase Agreement with
Black Stallion Management, Inc. (Black Stallion), a Nevada
corporation. Black Stallion was a publicly traded shell company
which prior to the merger was considered a development stage
company as defined in Statement of Financial Accounting Standards
No. 7. Under the terms of the agreement, the Company's
shareholders agreed to exchange 100% of their common stock for 20
million shares of common stock of Black Stallion. All references
to the Company in these financial statements refer to the merged
entity.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
a. Basis of Presentation:
---------------------
The Company maintains its accounts on the accrual basis of
accounting. The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amount of
revenues and expenses during the reported period. Actual
results could differ from those estimates.
b. Cash and Cash Equivalents:
-------------------------
For purposes of the statement of cash flows, the Company
considers all highly liquid instruments purchased with a
maturity of three months or less to be cash equivalents (of
which there are none as of June 30, 2000 and 1999).
c. Depreciation:
------------
Fixed assets are recorded at cost. Property and equipment is
depreciated on a straight-line basis over estimated useful
lives ranging from three to seven years.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
d. Revenue Recognition:
-------------------
The Company records revenue based upon specific contract
rates for website development and management services
rendered.
e. Advertising Costs:
-----------------
The Company expenses all advertising costs, including direct
response advertising costs, as they are incurred.
f. Loss Per Share:
--------------
The computation of loss per share is based on the weighted
average number of shares outstanding during the period
presented in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share". (See
Note 8)
g. Recently Enacted Accounting Standards:
-------------------------------------
Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income", SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information",
SFAS No. 132, "Employer's Disclosure about Pensions and
Other Postretirement Benefits", SFAS No.133 (as amended by
SFAS No. 137 and 138), "Accounting for Derivative
Instruments and Hedging Activities", SFAS No. 134,
"Accounting for Mortgage-Backed Securities ", and SFAS 135,
"Rescission of FASB No. 75 and Technical Corrections", were
recently issued. SFAS No. 130, 131, 132, 133 (as amended),
134 and 135 have no current application to the Company or
their effect on the financial statements would not have been
significant.
h. Reclassifications:
-----------------
Certain items in the 1999 financial statements have been
reclassified to conform to the fiscal 2000 presentation.
Such reclassifications have no significant effect on either
net income or stockholders' equity.
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NOTE 3 - FURNITURE AND EQUIPMENT:
Furniture and equipment, at cost, is summarized as follows as of
June 30, 2000 and 1999:
2000 1999
Office equipment $ 33,210 $ 6,917
Furniture and fixtures 12,750
---------------------------------------------------------------------
45,780 6,917
Less accumulated depreciation (4,189)
---------------------------------------------------------------------
$ 41,591 $ 6,917
=====================================================================
Depreciation expense amounted to $4,237 and $0 for the periods
ended June 30, 2000 and 1999, respectively.
NOTE 4 - LEASE COMMITMENTS:
The Company leases office space under an operating lease which
expires December 31, 2002. Rent expense approximated $44,160 and
$0 for the years ended June 30, 2000 and 1999, respectively. As
of June 30, 2000, future minimum lease payments, by fiscal year,
are as follows:
Year ended May 31,
2001 $ 90,240
2002 94,080
2003 48,000
---------------------------------------
232,320
=======================================
NOTE 5 - INCOME TAXES:
No provision for federal and state income taxes has been recorded
because the Company has incurred net operating losses since
inception. As of June 30, 2000, the Company has available for
federal and California purposes net operating
loss carryforwards approximating $747,000 and $372,500,
respectively. The federal and California carryforwards are
available to offset future taxable income and expire beginning in
fiscal 2019 and 2004, respectively (subject to Internal Revenue
Service and California Code Restrictions). Deferred income tax
assets, approximating $299,000 and $149,000, respectively,
arising from such loss carryforwards have been fully reserved as
of June 30, 2000 and 1999.
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NOTE 6 - NOTES PAYABLE:
Notes payable as of June 30, 2000 consist of advances received
from two potential investors. No repayment terms have been
defined. The total amount has been reflected as a current
liability in the financial statements.
NOTE 7 - STOCK OPTIONS:
The Company had drafted a stock incentive plan for directors,
officers, employees and consultants of the Company and affiliated
companies, which would have provided for nonqualified and
incentive stock options. The plan has not been approved as of
June 30, 2000 and as such, no adjustments to the financial
statements have been made to account for any of the plan's
proposed provisions.
NOTE 8 - LOSS PER SHARE:
The following information reflects the amount used in computing
income (loss) per share:
For the For
Year Ended Year Ended
June 30, 2000 June 30, 1999
Income (loss) from continuing operations
available to common shareholders
(numerator) ($740,658) ($18,369)
Weighted average number of common shares
outstanding used in loss per share for
the period (denominator) $ 27,779,300 $ 13,250,000
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NOTE 9 - ECONOMIC DEPENDENCE AND RELATED PARTY TRANSACTIONS:
Through June 30, 2000, the Company generates the majority of its
revenues from services provided to affiliated companies. Sales to
these companies for the periods ended June 30, 2000 and 1999,
represent 100%, of total revenues.
As of June 30, 2000 and 1999, accounts receivable from these
affiliated companies totaled $47,856 and $0, respectively.
During the periods ended June 30, 2000 and 1999, certain expenses
incurred by an affiliated company on behalf of the Company were
not charged to the Company.
NOTE 10 - CONCENTRATION OF CREDIT RISK:
The Company has identified its financial instruments which are
potentially subject to credit risk. These financial instruments
consist principally of cash and cash equivalents and receivables.
During the year, the Company had significant operating cash and
cash equivalents in excess of the federally insured limits.
Credit risk for receivables is substantially mitigated by the
Company's historically short collection periods.
NOTE 11 - BUSINESS RISKS:
The Company has a limited operating history and its prospects are
subject to the risks, expenses and uncertainties frequently
encountered by companies in new and rapidly evolving markets for
Internet products and services. The Company was only recently
formed, and has not generated sufficient revenues to achieve
profitability. The Company's failure to secure financing or its
ability to generate sufficient cash flows through operations may
have a material adverse impact on the Company's future operations
and financial position. Subsequent to June 30, 2000, the Company
entered into several agreements wherein it planned to exchange
100% of three separate non-public companies through the issuance
of common stock with an aggregate estimated value of $25,482,844
(See Note 13 for additional information). The Company may still
need to raise additional funds to develop or enhance its service
offerings and to fund expansion; failure to do so could affect
the Company's ability to pursue future growth.
NOTE 12 - REORGANIZATION AND STOCK PURCHASE AGREEMENT:
Effective January 31, 2000, the Company and its shareholders
entered into a Reorganization and Stock Purchase Agreement with
Black Stallion Management, Inc. (Black Stallion), a Nevada
corporation. Under the terms of the agreement, the Company's
shareholders agreed to exchange 100% of their common stock for 20
million shares of common stock of Black Stallion. In addition,
Black Stallion agreed to a post-closing split of 1.25 to 1
forward stock split on its authorized, issued and outstanding
stock, resulting in 27,850,000 post-closing shares of common
stock issued and outstanding and 31,250,000 shares of common
stock authorized. The Company's financial statements reflect the
balances and activity immediately prior to the above
transactions.
NOTE 13 - SUBSEQUENT EVENTS:
Subsequent to June 30, 2000 the Company entered into an agreement
to exchange 100% of the outstanding common stock of 24x7
Development.com, Inc., a Delaware corporation, in a merger
transaction pursuant to which the Company will be the surviving
entity. As consideration, the Company will issue to the holders
of 24x7 common stock an aggregate of 10,000,000 shares of the
Company's common stock, with an estimated value of $18,125,000.
Subsequent to June 30, 2000 the Company entered into an agreement
to exchange 100% of the outstanding common stock of N2plus, Inc.,
a Delaware corporation, in a merger transaction pursuant to which
the Company will be the surviving entity. As consideration the
Company will issue to the holders of the N2plus, Inc. common
stock an aggregate of 1,000,000 of the Company's common stock
with an estimated value of $1,812,500.
Subsequent to June 30, 2000 the Company entered into an agreement
to exchange 100% of the outstanding common stock of Online
Television Network Services, a California corporation, in a stock
for stock transaction, pursuant to which Online Television
Network Services will be a wholly owned subsidiary of the
Company. As consideration, the Company will issue to the holders
of the Online Television Network Services an aggregate of
3,059,500 shares of the Company's stock with an estimated value
of $5,545,344. The above transactions are expected to be recorded
as a pooling interests.
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