<PAGE> 1
Exhibit 99
FINANCIAL STATEMENTS
--------------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999
----------
C O N T E N T S
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report .......................................... 1
Balance Sheet ......................................................... 2
Statements of Operations .............................................. 3
Statements of Stockholder's Deficit ................................... 4
Statements of Cash Flows .............................................. 5
Notes to Financial Statements ......................................... 6-9
</TABLE>
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<PAGE> 2
Board of Directors and Stockholders
Internet Services Network, Inc.
Punta Gorda, Florida
Independent Auditors' Report
----------------------------
We have audited the accompanying balance sheet of Internet Services
Network, Inc. as of December 31, 1999 and the related statements of operations,
stockholder's deficit and cash flows for the years ended December 31, 1999 and
1998. 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 audits 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 Internet Services
Network, Inc. as of December 31, 1999 and the results of its operations and its
cash flows for the years ended December 31, 1999 and 1998 in conformity with
generally accepted accounting principles.
/s/HILL, BARTH & KING LLC
Certified Public Accountants
May 16, 2000
Naples, Florida
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<PAGE> 3
BALANCE SHEET
-------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS
------
CURRENT ASSETS
Prepaid insurance $ 443
Deposits 4,100
--------
TOTAL CURRENT ASSETS 4,543
--------
PREMISES AND EQUIPMENT, NET - NOTES C AND E 70,434
--------
OTHER ASSETS
Deferred tax assets - NOTE F 8,102
--------
$ 83,079
========
LIABILITIES AND STOCKHOLDER'S DEFICIT
-------------------------------------
CURRENT LIABILITIES
Lines of credit - NOTE D $ 21,430
Bank overdraft 11,625
Accounts payable 1,635
Deferred revenue 7,232
Due to affiliates 66,693
Current portion of long-term debt 11,415
--------
TOTAL CURRENT LIABILITIES 120,030
--------
LONG-TERM DEBT, LESS CURRENT PORTION 15,014
------------------------------------ --------
STOCKHOLDER'S DEFICIT
Common stock, $.10 par value, authorized
10,000,000 shares, issued and
outstanding 1,000 shares 100
Accumulated deficit (52,065)
--------
TOTAL STOCKHOLDER'S DEFICIT (51,965)
--------
$ 83,079
========
</TABLE>
See accompanying notes to financial statements
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<PAGE> 4
STATEMENTS OF OPERATIONS
------------------------
INTERNET SERVICES NETWORK, INC.
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
INCOME
------
Internet service fees $292,345 $ 85,069
Other revenue 9,506 3,401
-------- ---------
TOTAL INCOME 301,851 88,470
-------- ---------
OPERATING EXPENSES
------------------
Cost of revenues 124,549 58,057
Advertising 20,969 13,061
Bank and service charges 12,312 3,327
Consulting fees 0 16,400
Depreciation 9,564 2,370
Employee leasing costs 52,109 49,740
Rent 10,270 2,182
Other occupancy and
office expenses - NOTE H 18,208 16,958
Other expenses - NOTE I 11,648 6,646
-------- ---------
TOTAL OPERATING EXPENSES 259,629 168,741
-------- ---------
OPERATING INCOME (LOSS) 42,222 (80,271)
OTHER DEDUCTION
---------------
Interest expense 1,471 0
-------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 40,751 (80,271)
INCOME TAXES (CREDIT) - NOTE F 8,354 (16,456)
------------------------------ -------- ---------
NET INCOME (LOSS) $ 32,397 $ (63,815)
======== =========
</TABLE>
See accompanying notes to financial statements
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<PAGE> 5
STATEMENTS OF STOCKHOLDER'S DEFICIT
-----------------------------------
INTERNET SERVICES NETWORK, INC.
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------ ---------- ----------- -----
<S> <C> <C> <C> <C>
Balance (deficit)
December 31, 1997 $100 $0 $(20,647) $(20,547)
Comprehensive income:
Net loss for 1998 0 0 (63,815) (63,815)
--------
Total comprehensive income (63,815)
---- -- -------- --------
Balance (deficit)
December 31, 1998 100 0 (84,462) (84,362)
Comprehensive income:
Net income for 1999 0 0 32,397 32,397
--------
Total comprehensive income 32,397
---- -- -------- --------
Balance (deficit)
December 31, 1999 $100 $0 $(52,065) $(51,965)
==== == ======== ========
</TABLE>
See accompanying notes to financial statements
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<PAGE> 6
STATEMENTS OF CASH FLOWS
------------------------
INTERNET SERVICES NETWORK, INC.
Years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
------------------------------------
Net income (loss) $ 32,397 $(63,815)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation 9,564 2,370
Deferred income taxes 8,354 (16,456)
Increase in other assets (4,072) (471)
Increase in deferred revenue 2,990 4,242
Increase (decrease) in accounts payable
and other liabilities (64,416) 101,506
-------- --------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (15,183) 27,376
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
------------------------------------
Purchase of premises and equipment (12,725) (27,633)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (12,725) (27,633)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
------------------------------------
Net borrowings on short-term debt 21,430 0
Principal payments on capital lease
obligations (5,260) 0
Bank overdraft 11,625 0
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 27,795 0
-------- --------
NET DECREASE IN CASH (113) (257)
CASH
----
Beginning of year 113 370
-------- --------
End of year $ 0 $ 113
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
------------------------------------------------
Cash paid during the period for
interest $ 1,471 $ 0
======== ========
Capital lease obligation incurred for
the acquisition of new equipment $ 31,689 $ 0
======== ========
</TABLE>
See accompanying notes to financial statements
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<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
-----------------------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999 and 1998
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
--------------------------------------------------------------------
Nature of Business:
Internet Services Network, Inc. ("ISNI" or the "Company") is an
internet service provider currently serving individuals and small businesses
primarily in Charlotte County, Florida. ISNI is also a provider of web hosting
services, a complement to its internet access business.
The Company offers up to 56K modem access and IDSN (Integrated Digital
Service Network) connectivity. As of December 31, 1999, the Company served
approximately 2,000 subscribers, including 27 web hosting subscribers. The
Company's services include dial-up Internet access, web hosting, and other
value-added services such as web page design and web-server co-location. The
Company's dial-up internet access and web hosting are offered in various price
and usage plans designed to meet the needs of its customers.
Premises and Equipment:
Premises and equipment are recorded at historical cost. Depreciation of
premises and equipment is computed using the straight-line method over the
estimated useful lives of the assets.
Revenue Recognition:
The Company recognizes revenue when services are provided. Deferred
revenue represents amounts relating to the prepayment of internet service fees.
These amounts will be recognized as services are provided, typically during the
following two month period.
Advertising:
The Company expenses the costs of advertising as incurred. Advertising
expense for the year ended December 31, 1999 and 1998 was $20,969 and $13,061,
respectively.
Use of Estimates:
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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
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<PAGE> 8
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999 and 1998
NOTE B - CONTROLLING INTEREST AND RELATED PARTY TRANSACTIONS
------------------------------------------------------------
Controlling Interest:
One stockholder owns 100% of the Company's outstanding stock.
Related Party Transactions:
During the year ended December 31, 1999, the Company received advances
from its stockholder and two affiliated corporations. As of December 31, 1999,
the Company owes $66,693 to the affiliated corporations and the Company had
repaid all amounts advanced by the stockholder. Both affiliates are 100% owned
by the same stockholder of Internet Services Network, Inc. The Company also owes
$6,832 to an affiliate for a capital lease obligation as of December 31, 1999.
The Company sub-leases office space from an affiliated company. The
agreement provides for monthly rent to be paid as well as portions of all real
estate taxes, utilities, insurance and maintenance of the property. The office
space leased from the affiliated company is under a month-to-month operating
lease calling for payments of $849. Rental expense charged to operations under
this lease totaled $10,270 and $2,182 for the years ended December 31, 1999 and
1998, respectively.
NOTE C - PREMISES AND EQUIPMENT
-------------------------------
Premises and equipment consists of the following as of December 31,
1999:
<TABLE>
<S> <C>
Leasehold improvements $11,396
Furniture and office equipment 1,942
Computer equipment and software 36,498
Equipment under capital lease 31,689
Sign 942
-------
82,467
Less accumulated depreciation 12,033
-------
$70,434
=======
</TABLE>
Depreciation expense for the years ended December 31, 1999 and 1998 was
$9,564 and $2,370, respectively.
NOTE D - BANK LINES OF CREDIT
-----------------------------
The corporation has available $30,000 in unsecured lines of credit
payable to a bank. As of December 31, 1999, the Company had borrowed $17,255 and
$4,175 on demand notes with interest rates of 11.5% and 15.4%, respectively,
under this agreement. One note, for $25,000, is personally guaranteed by the
stockholder of the corporation.
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<PAGE> 9
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999 and 1998
NOTE E - LEASES WHERE COMPANY IS LESSEE
---------------------------------------
The Company leases certain equipment under capital lease obligations.
The monthly payments total $1,174 including interest. The equipment under
capital lease obligations is depreciated over its estimated useful life and
consists of the following at December 31, 1999:
<TABLE>
<S> <C>
Computer equipment and software $31,689
Less accumulated depreciation 2,514
------
$29,175
</TABLE>
Following is a summary of future minimum lease payments under capital
leases, together with the present value of net minimum lease payments as of
December 31, 1999:
<TABLE>
<S> <C>
Year Ending -
December 31, 2000 $14,094
December 31, 2001 9,995
December 31, 2002 7,170
-------
TOTAL MINIMUM LEASE PAYMENTS 31,259
Less amount representing interest 4,830
-------
PRESENT VALUE OF NET
MINIMUM LEASE PAYMENTS $26,429
=======
</TABLE>
NOTE F - INCOME TAXES
---------------------
At December 31, 1999 and 1998, the Company assessed its earnings history
and trend over the past year, its estimate of future earnings, and the
expiration date of the net operating loss carryforward and determined that it is
more likely than not that the deferred tax assets will be realized in the near
term.
The components of deferred tax assets and deferred tax liabilities at
December 31, are as follows:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 8,157 $12,747
Deferred revenue 1,483 870
Other deductions 3,488 4,942
------- -------
13,128 18,559
------- -------
Deferred tax liabilities:
Depreciation on premises and equipment 5,026 2,103
------- -------
Deferred tax assets, net $ 8,102 $16,456
======= =======
</TABLE>
At December 31, 1999, the Company had a tax net operating loss carryforward
of approximately $39,800 expiring in 2018. The provision for income taxes at
December 31, 1999 and 1998 is comprised solely of deferred income taxes.
-8-
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
-----------------------------------------
INTERNET SERVICES NETWORK, INC.
December 31, 1999 and 1998
NOTE G - SUBSEQUENT EVENT
-------------------------
On March 22, 2000, the Company consummated an Agreement and Plan of
Merger (Agreement) with Hawkeye Corporation. Hawkeye Corporation was formed in
August 1999 and capitalized with $500. It had no operations through the date of
merger. Under the agreement, each outstanding share of the Company's common
stock was converted into and exchanged for 24,000 shares of Hawkeye common
stock. The merger was accounted for as a pooling of interests.
NOTE H - OTHER OCCUPANCY AND OFFICE EXPENSES
--------------------------------------------
The following amounts comprise general operating expenses for the years
ended December 31:
<TABLE>
<CAPTION>
1999 1998
------ -------
<S> <C> <C>
Equipment rental $ 1,172 $ 267
Licenses and permits 122 120
Office supplies 9,097 11,046
Postage and delivery 451 969
Repairs 2,169 2,608
Telephone 216 1,319
Utilities 1,747 629
Printing 70 0
Insurance 3,164 0
------- -------
TOTALS $18,208 $16,958
======= =======
</TABLE>
NOTE I - OTHER EXPENSES
-----------------------
The following amounts comprise other expenses for the years ended
December 31:
<TABLE>
<CAPTION>
1999 1998
------- ------
<S> <C> <C>
Automobile $ 256 $ 0
Commission 5,774 732
Dues and subscriptions 1,786 870
Miscellaneous 2,831 3,020
Professional fees 650 1,416
Other taxes 26 608
Travel and entertainment 325 0
------- ------
TOTALS $11,648 $6,646
======= ======
</TABLE>
-9-
