<PAGE>
EXHIBIT 99.1
HOME GAMBLING
NETWORK, INC.
(A DEVELOPMENT STAGE
ENTERPRISE)
FINANCIAL
STATEMENTS
YEARS ENDED
DECEMBER 31, 1999
AND 1998 AND FOR
THE CUMULATIVE
PERIOD FROM
AUGUST 2, 1995,
THROUGH
DECEMBER 31, 1999
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
YEARS ENDED DECEMBER 31, 1999 AND 1998
AND FOR THE CUMULATIVE PERIOD FROM AUGUST 2, 1995 THROUGH
DECEMBER 31, 1999
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CONTENTS
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INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Balance sheet 2
Statements of development stage operations and deficit 3
Statements of cash flows 4
NOTES TO FINANCIAL STATEMENTS 5-6
PRO FORMA FINANCIAL INFORMATION* 7
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* Not covered by independent auditors' report.
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Home Gambling Network, Inc.
Las Vegas, Nevada
We have audited the accompanying balance sheet of Home Gambling Network,
Inc., (the Company) (a development stage enterprise) as of December 31, 1999,
and the related statements of development stage operations and deficit, and
cash flows for each of the two years ended December 31, 1999 and 1998 and for
the period from inception, August 2, 1995 through December 31, 1999. 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 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 accompanying financial statements of Home Gambling
Network, Inc., present fairly, in all material respects, its financial
position as of December 31, 1999, and the results of its operations and cash
flows for the periods presented, 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, the
Company's ability to pay its obligations when due and to commence operations
is dependent upon its issuing licenses for its product and its ability to
raise additional capital. These conditions raise substantial doubt as to the
Company's ability to continue as a going concern. Management's plans in
regard to those matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
April 4, 2000
1
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
DECEMBER 31, 1999
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ASSETS
CURRENT ASSETS, cash $ 623
FURNITURE, FIXTURES AND EQUIPMENT, net of
accumulated depreciation 13,718
Patent 80,445
---------------
$ 94,786
===============
LIABILITIES AND STOCKHOLDERS' EQUITY DEFICIENCY
CURRENT LIABILITIES, accounts payable $ 135,197
ADVANCES FROM STOCKHOLDERS 110,125
---------------
245,322
---------------
STOCKHOLDERS' EQUITY DEFICIENCY:
Common stock, 10,000,000 shares authorized, 1,000,000
issued and outstanding, $.001 par value 1,000
Deficit accumulated in the development stage (151,536)
---------------
(150,536)
---------------
$ 94,786
===============
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SEE NOTES TO FINANCIAL STATEMENTS.
2
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF DEVELOPMENT STAGE OPERATIONS AND DEFICIT
YEARS ENDED DECEMBER 31, 1999 AND 1998, AND FOR THE CUMULATIVE
PERIOD FROM AUGUST 2, 1995, THROUGH DECEMBER 31, 1999
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Year ended December 31, August 2, 1995,
---------------------------------- through
1999 1998 December 31, 1999
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Selling, general and administrative expenses $ 126,631 $ 25,198 $ 152,699
Forfeited license deposit revenue (13,460) (13,460)
Interest expense 7,866 3,740 12,297
-------------- -------------- --------------
NET LOSS 121,037 28,938 151,536
DEFICIT ACCUMULATED IN THE DEVELOPMENT STAGE:
Beginning of period 30,499 1,561
-------------- -------------- --------------
End of period $ 151,536 $ 30,499 $ 151,536
============== ============== ==============
NET LOSS PER COMMON SHARE $ 0.121 $ 0.029 $ 0.152
============== ============== ==============
NUMBER OF COMMON SHARES OUTSTANDING 1,000,000 1,000,000 1,000,000
============== ============== ==============
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SEE NOTES TO FINANCIAL STATEMENTS.
3
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998, AND FOR THE CUMULATIVE
PERIOD FROM AUGUST 2, 1995, THROUGH DECEMBER 31, 1999
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Operating activities:
Net cash provided by operating activities $ 22,903
Investing activities:
Payments of patent costs (22,280)
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Net increase in cash and balance, end of year $ 623
=============
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SEE NOTES TO FINANCIAL STATEMENTS.
4
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
YEARS ENDING DECEMBER 31, 1999 AND 1998, AND FOR THE CUMULATIVE
PERIOD FROM INCEPTION, AUGUST 2, 1995, THROUGH DECEMBER 31, 1999
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1. BACKGROUND INFORMATION:
BUSINESS ACTIVITIES AND HISTORY. Home Gambling Network, Inc. (the Company)
holds a patent for a method that allows entities that it licenses, via the
internet and other electronic media, to bring live gaming to players in
remote locations, and that enables making and receiving electronic payments
to and from such players. The Company has been in the development stage since
its inception, August 2, 1995.
In February 2000, in what is commonly referred to as a "reverse acquisition,"
100% of the Company's stock was effectively exchanged for a controlling
interest in a publicly held "shell" company, PCG Media, Inc. (referred to
herein as PCG, which concurrently changed its name to i2corp.com). Prior to
this transaction, PCG had recently registered its outstanding common stock
with the United States Securities and Exchange Commission (SEC) under the
Securities Exchange Act of 1934. For financial accounting purposes, the
acquisition will be treated as an acquisition of PCG by the Company and as a
recapitalization of the Company. The historical financial statements
presented are those of the Company.
EQUIPMENT, FURNITURE AND FIXTURES. Equipment, furniture and fixtures are
stated at cost. Depreciation is provided using the declining balance method
over the estimated useful lives of the assets.
PATENT COSTS. Patent costs are amortized over the life of the patents.
ADVERTISING COSTS. Costs for advertising are expensed as incurred.
Advertising costs expensed totaled $24,342 and $4,701 in 1999 and 1998.
USE OF ESTIMATES. Timely preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures,
some of which may require revision in futures periods.
2. COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES. Subsequent to year-end, the Company entered into noncancelable
operating lease agreements for automobiles and office space.
The Company's minimum future lease under noncancelable operating leases are as
follows as of December 31, 1999:
2000 $ 54,244
2001 64,964
2002 9,440
GOING CONCERN. The accompanying financial statements have been prepared assuming
that the company will continue as a going concern. The Company has accumulated a
development stage deficit of $151,536. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
It is management's plan to pursue additional financing with a minority
stockholder in addition to exploring other financing options in the investment
community. In that connection, subsequent to the PCG acquisition in February
2000, the Company borrowed $500,000 from a minority shareholder in PCG and
issued an unsecured note payable July 2000, with interest at 6%.
Management also plans to execute licensing agreements in 2000, which would
generate operating revenues.
OTHER CONTINGENCY. The Company has been presented with claims asserting that
certain individuals are entitled to an aggregate of approximately 400,000 shares
of the Company's common stock. Based on the available evidence, management
believes these claims are inconsistent with the Company's records and invalid.
It is believed that there may be other similar claims asserted in the future.
However, based, in part, upon the advice of counsel, management believes that
such matters will not have a significant effect on the Company if the Company
was required to issue such shares.
5
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HOME GAMBLING NETWORK, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDING DECEMBER 31, 1999 AND 1998, AND FOR THE CUMULATIVE
PERIOD FROM INCEPTION, AUGUST 2, 1995, THROUGH DECEMBER 31, 1997
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3. INCOME TAXES:
Because, as of December 31, 1999, the Company has engaged in extensive
development stage activities and generated limited revenues over a period of
five years, it has incurred substantial losses, the income tax benefits of which
have been effectively offset by a 100% valuation allowance and, therefore are
not reflected in the accompanying financial statements.
4. CAPITALIZATION AND RELATED PARTY TRANSACTIONS:
The Company was capitalized at its inception with 1,000,000 shares of common
stock at par value issued in exchange for $1,000 in funds advanced on its behalf
by the stockholders.
In addition, the Company's sole source of financing has been advances made on
its behalf by its stockholders (Note 6), which have accrued interest at federal
statutory rates and are due on demand. Interest charged to operations on these
related party obligations totaled $6,621, $3,740 and $691 for 1999, 1998 and the
prior period presented, respectively.
In addition, the Company's officer/stockholders have provided their services to
the Company, during the audit period, without compensation.
5. FINANCIAL INSTRUMENTS:
The carrying amounts of financial instruments approximates their fair value
because of their short maturities or because the debt bears fixed rates that
approximate current rates available on similar borrowings, except for
stockholder advances, for which the fair value cannot be estimated because of
the nature of related party transactions.
6. SUPPLEMENTAL CASH FLOW INFORMATION:
Since no bank account was opened for the Company until June 1999; no statement
of cash flows is presented for periods prior to 1999.
RECONCILIATION OF 1999 NET LOSS TO NET CASH USED IN
OPERATING ACTIVITIES:
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Net loss $(121,037)
Depreciation and amortization 5,943
Interest expense accrued 6,621
Increase in accounts payable 131,376
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Net cash provided by operations $ 22,903
=========
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NON-CASH INVESTING AND FINANCING ACTIVITIES. Advances made by the shareholders
on behalf of the Company for patent costs, other asset purchases, and selling,
general and administrative expenses totaled $53,319, $38,117 and
$99,073 in 1999, 1998 and the cumulative period presented, respectively.
6
