EXHIBIT 99.6
Financial Statements and Independent Auditors' Report
ONLINE TELEVISION NETWORK SERVICES, INC.
May 31, 2000 and 1999
BOARD OF DIRECTORS
ONLINE TELEVISION NETWORK SERVICES, INC.
San Diego, California
We have audited the accompanying balance sheet of ONLINE TELEVISION NETWORK
SERVICES, INC. as of May 31, 2000 and 1999 and the related statements of
operations, stockholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of Online Television Network
Services, 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 Online Television Network
Services, Inc. as of May 31, 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 and
rapidly evolving markets for internet products and services. As discussed in
Note 10 to the financial statements, the Company 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 10. The financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
October 27, 2000
By: /s/ Hood & Strong, LLP
-------------------------------
Hood & Strong, LLP
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<TABLE>
<CAPTION>
ONLINE TELEVISION NETWORK SERVICES, INC.
BALANCE SHEET
May 31, 2000 1999
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<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,086 $ 11,824
Receivables 82,179 76,497
Prepaid expenses 2,069 623
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Total current assets 87,334 88,944
FURNITURE AND EQUIPMENT, net 74,955 451,201
OTHER ASSETS 3,963
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$ 166,252 $ 540,145
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 64,450 $ 45,121
Accrued expenses 36,889 764
Leases 8,323
Current portion of long-term debt 197,190
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Total current liabilities 109,662 243,075
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LONG-TERM LIABILITIES:
Capital lease obligation 5,442
Notes payable 991,509
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5,442 991,509
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Total liabilities 115,104 1,234,584
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STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $1 par value, 1,000,000 shares authorized,
1,000,000 and 25,000 shares issued and outstanding 1,000,000 25,000
Additional paid-in capital 1,452,145 5,000
Accumulated deficit (2,400,997) (724,439)
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Total stockholders' equity (deficit) 51,148 (694,439)
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$ 166,252 $ 540,145
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</TABLE>
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ONLINE TELEVISION NETWORK SERVICES, INC.
STATEMENT OF OPERATIONS
For the Years Ended May 31, 2000 1999
--------------------------- ------------ -----------
REVENUES $ 417,787 $ 524,694
OPERATING EXPENSES:
Salaries and benefits 1,107,677 560,659
Professional fees 14,394 7,478
Office expenses 757,691 465,506
Other 80,757 1,069
Depreciation 133,026 104,595
State taxes 800 800
--------------------------- ------------ -----------
2,094,345 1,140,107
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NET LOSS $(1,676,558) $ (615,413)
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<TABLE>
<CAPTION>
ONLINE TELEVISION NETWORK SERVICES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended May 31, 2000 and 1999
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Total
Number Additional Stockholders'
of Shares Common Paid-in Accumulated Equity
Outstanding Stock Capital Deficit (Deficit)
<S> <C> <C> <C> <C> <C>
BALANCES - MAY 31, 1998
Common stock issued 25,000 $ 25,000 $ 5,000 $ (109,026) $ (79,026)
Net loss for the year
ended May 31, 1999 (615,413) (615,413)
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BALANCES - May 31, 1999 25,000 25,000 5,000 (724,439) (694,439)
Common stock issued 283,100 283,100 266,900 550,000
Debt converted to
common stock 691,900 691,900 397,918 1,089,818
Extinguishment of debt
by related party 782,327 782,327
Net loss for the year
ended May 31, 2000 (1,676,558) (1,676,558)
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BALANCES - May 31, 2000 1,000,000 $ 1,000,000 $ 1,452,145 $ (2,400,997) $ 51,148
==================================================================================================
</TABLE>
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ONLINE TELEVISION NETWORK SERVICES, INC.
STATEMENT OF CASH FLOWS
For the Year Ended May 31, 2000 1999
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OPERATING ACTIVITIES:
Net loss $(1,676,558) $(615,413)
Adjustments to reconcile net loss to net cash
used by operations:
Depreciation 133,026 104,595
Loss on disposal of assets 82,260
Changes in:
Receivables (5,682) (41,763)
Prepaid expenses (1,446) 4,877
Other assets (3,963)
Accounts payable 19,329 44,766
Accrued expenses 36,125 (285)
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Net cash used by operating activities (1,416,909) (503,223)
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INVESTING ACTIVITIES:
Proceeds from sale of assets 229,988
Purchase of furniture and equipment (69,028) (464,127)
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Net cash provided (used) by investing activities 160,960 (464,127)
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FINANCING ACTIVITIES:
Reduction in capital lease obligation 13,765
Proceeds from issuance of notes payable 683,446 979,039
Issuance of common stock 550,000
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Net cash provided by financing activities 1,247,211 979,039
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(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,738) 11,689
CASH AND CASH EQUIVALENTS, beginning of period 11,824 135
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CASH AND CASH EQUIVALENTS, end of period $ 3,086 $ 11,824
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NON-CASH ACTIVITIES:
Debt converted to common stock $ 1,089,818
Debt forgiven by stockholders $ 782,327
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NOTES TO FINANCIAL STATEMENTS ONLINE TELEVISION NETWORK SERVICES, INC.
NOTE 1 - ORGANIZATION:
Online Television Network Services, Inc. (the Company) is a
corporation organized under the laws of the State of
California. The Company was founded in 1997 for the purpose
of designing and managing comprehensive online benefits
communication and trust administration tools for labor
unions, specializing in the design and development of
benefits-specific internet sites form multi-employer union
pension/health and welfare trust organizations.
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.
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NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):
e. 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
May 31, 2000 and 1999:
2000 1999
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Office equipment $ 170,827 521,385
Furniture and fixtures $ 30,995 55,857
$ 201,822 $ 577,242
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Less accumulated depreciation 126,867 126,041
74,955 451,201
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Depreciation for the years ended May 31, 2000 and 1999 was
$133,026 and $104,595 respectively.
NOTE 4 - LEASE COMMITMENTS:
The Company leases office space under an operating lease which
expires May 15, 2004. Rent expense approximated $16,396 for the
period ended September 20, 2000. As of September 20, 2000, future
minimum lease payments, by fiscal year, are as follows:
Year ended May 31,
2001 $ 64,941
2002 67,539
2003 70,241
2004 32,771
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$ 235,492
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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 May 31,
2000 approximate $1,600,000. These carry-forwards will be
available to offset future taxable income and expire beginning in
2012. (subject to Internal Revenue Service and California Code
Restrictions)
Deferred income tax assets arising from such loss carryforwards
have been fully reserved as of May 31, 2000 and 1999.
NOTE 6 - CAPITALIZED LEASE OBLIGATION:
Capitalized leases bearing interest at rates ranging from 20% to
28% per annum. These leases expire between October 31 and
December 31, 2001.
NOTE 7 - NOTES PAYABLE TO STOCKHOLDERS:
At May 31, 1999, there were stockholder loans in the amount of
$552,881. These loans plus additional loans made during the
fiscal year 2000 of $229, 446 were forgiven by the stockholders
in the year ended May 31, 2000.
NOTE 8 - LINE OF CREDIT:
At May 31, 1999, the Line of Credit had an outstanding balance of
$635,818. This line of credit was assumed by stockholders in the
year ended May 31, 2000. In the year ended May 31, 2000 the
balance due on this debt and other stockholder debt totaling
$1,089,818 were converted to 691,000 share of the Company's
common stock.
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 from receivables is substantially mitigated by the
Company's historically short collection periods.
NOTE 10 - 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 has not generated
sufficient revenues to achieve profitabity.
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. As noted in Note 10, the Company is being
merged with Digital Bridge, Inc., a publicly-held company.
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NOTE 11 - SUBSEQUENT EVENTS:
Effective September 20, 2000 the stockholders of the Company
entered into an agreement to exchange 100% of their outstanding
common stock to Digital Bridge, Inc., a Nevada corporation, in a
stock for stock transaction, pursuant to which the Company will
be a wholly owned subsidiary of the Digital Bridge, Inc. As
consideration, the stockholders received an aggregate of
3,059,500 shares of the Digital Bridge, Inc.'s stock with an
estimated value of $5,545,344. The above transaction is expected
to be recorded as a pooling of interests
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