Exhibit 99.2
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITOR'S REPORT
DIGITAL BRIDGE, INC.
SEPTEMBER 20, 2000
Independent Auditors' Report
BOARD OF DIRECTORS
DIGITAL BRIDGE, INC.
Burlingame, California
We have audited the accompanying balance sheet of DIGITAL BRIDGE, INC. as of
September 20, 2000 and the related statements of operations, stockholders'
deficit and cash flows for the period from July 1 to September 20, 2000. 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 audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Digital Bridge, Inc. as of
September 20, 2000, and the results of its operations and its cash flows for the
period 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.
November 3, 2000
By: /s/ Hood & Strong, LLP
-------------------------------
Hood and Strong, LLP.
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<TABLE>
<CAPTION>
DIGITAL BRIDGE, INC.
BALANCE SHEET
September 20, 2000
===========================================================================================
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 114,577
Receivables 184,911
Prepaid expenses 4,547
-------------------------------------------------------------------------------------------
Total current assets 304,035
FURNITURE AND EQUIPMENT, net 39,757
OTHER ASSETS 19,744
-------------------------------------------------------------------------------------------
363,536
===========================================================================================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Trade payables $ 51,413
Accrued expenses 33,938
Notes payable 700,000
Other liabilities 37,000
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Total liabilities 822,351
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STOCKHOLDERS' DEFICIT:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding
Common stock, $.001 par value, 50,000,000 shares authorized,
27,902,000 shares issued and outstanding 22,332
Additional paid-in capital 517,260
Accumulated deficit (998,407)
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Total stockholder's deficit (458,815)
-------------------------------------------------------------------------------------------
$ 363,536
===========================================================================================
</TABLE>
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<TABLE>
<CAPTION>
DIGITAL BRIDGE, INC.
STATEMENT OF OPERATIONS
For the Period From July 1 to September 20, 2000
============================================================
<S> <C>
REVENUE $ 75,564
COST OF SALES 55,000
------------------------------------------------------------
GROSS PROFIT 20,564
------------------------------------------------------------
OPERATING EXPENSES:
Salaries and benefits 124,857
Professional fees 3,623
Office expenses 128,830
Depreciation 1,834
State taxes 800
------------------------------------------------------------
259,944
------------------------------------------------------------
NET LOSS $(239,380)
============================================================
LOSS PER COMMON SHARE $ (0.0086)
============================================================
</TABLE>
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<TABLE>
<CAPTION>
DIGITAL BRIDGE, INC.
----------------------
STATEMENT OF STOCKHOLDERS' DEFICIT
For the Period From July 1 to September 20, 2000
==================================================================================================
Number Additional Total
of Shares Common Paid-In Accumulated Stockholders'
Outstanding Stock Capital Deficit Deficit
<S> <C> <C> <C> <C> <C>
BALANCES -
June 30, 2000 27,850,000 $ 22,280 $205,312 $ (759,027) $ (531,435)
Common stock issued 52,000 52 49,948 50,000
Contribution of capital 262,000 262,000
Net loss for the period
ended September 20, 2000 (239,380) (239,380)
--------------------------------------------------------------------------------------------------
BALANCES -
September 20, 2000 27,902,000 $ 22,332 $517,260 $ (998,407) $ (458,815)
==================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
DIGITAL BRIDGE, INC.
STATEMENT OF CASH FLOWS
For the Period From July 1 to September 20, 2000
===============================================================================
<S> <C>
OPERATING ACTIVITIES:
Net loss $(239,380)
Adjustments to reconcile net loss to net cash used by operations:
Depreciation 1,834
Increase in:
Receivables (127,055)
Prepaid expenses 26,114
Accounts payable (39,810)
Accrued expenses 23,332
Other liabilities 37,000
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Net cash used by operating activities (317,965)
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FINANCING ACTIVITIES:
Issuance of common stock 50,000
Contribution of capital 262,000
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Net cash provided by financing activities 312,000
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DECREASE IN CASH AND CASH EQUIVALENTS (5,965)
CASH AND CASH EQUIVALENTS, beginning of period 120,542
-------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of period $ 114,577
===============================================================================
</TABLE>
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NOTES TO FINANCIAL STATEMENTS FOR 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.
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 September 20, 2000).
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.
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.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
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 6)
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 affect on the financial statements would not have been
significant.
NOTE 3 - FURNITURE AND EQUIPMENT:
Furniture and equipment, at cost, is summarized as follows as of
September 20, 2000:
Office equipment $ 33,210
Furniture and fixtures 12,570
-----------------------------------------------------------------
45,780
Less accumulated depreciation 6,023
-----------------------------------------------------------------
$ 39,757
=================================================================
Depreciation expense amounted to $1,834 for the period ended
September 20, 2000.
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NOTE 4 - LEASE COMMITMENTS:
The Company leases office space under an operating lease which
expires December 31, 2002. Rent expense approximated $22,080 for
the period ended September 20, 2000. As of September 20, 2000,
future minimum lease payments, by fiscal year, are as follows:
Year ended June 30,
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. The net operating loss carry-forwards as of September
20, 2000 approximate $978,000. These carry-forwards will be
available to offset future taxable income and expire beginning in
2014 (subject to Internal Revenue Service and California Code
Restrictions). Deferred income tax assets arising from such loss
carryforwards have been fully reserved as of September 20, 2000.
NOTE 6 - LOSS PER SHARE:
The following information reflects the amount used in computing
income (loss) per share for the period ending September 20,
2000::
Income (loss) from continuing operations available to common
shareholders (numerator) ($ 239,380)
Weighted average number of common shares outstanding used in loss
per share for the period (denominator) $27,884,244
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NOTE 7 - NOTES PAYABLE:
At September 20, 2000 there two notes aggregating $700,000.
Interest is being accrued at 7% per annum. No repayment terms
have been defined. The total amount has been reflected as a
current liability in the financial statements.
NOTE 8 - 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
September 20, 2000 and as such, no adjustments to the financial
statements have been made to account for any of the plan's
proposed provisions.
NOTE 9 - CONCENTRATION OF CREDIT RISK:
The Company has identified its financial instruments which are
potentially subject to 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 10 - RELATED PARTY TRANSACTIONS:
As of September 20, 2000, accounts receivable from affiliated
companies totaled $96,822.
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. Effective September 20, 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.
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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.
NOTE 13 - MERGER:
Effective September 20, 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.
Effective September 20, 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.
Effective September 20, 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
3,059,000 shares of the Company's stock with an estimated value
of $5,545,344. These transactions are expected to be recorded as
a pooling of interests.
The Company's financial statements reflect the balances and
activity immediately prior to the above transaction.
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