NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
CONTENTS
Page
----
Report of Independent Certified Public Accountants F-3
Financial Statements
Balance Sheets as of June 30, 1999, December 31, 1998 and 1997 F-4
Statements of Operations and Comprehensive Income
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-5
Statement of Changes in Stockholder's Equity
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-6
Statements of Cash Flows
for the six months ended June 30, 1999 and
for the years ended December 31, 1998 and 1997 F-7
Notes to Financial Statements F-8
F-2
<PAGE>
S. W. HATFIELD, CPA
certified public accountants
Member: American Institute of Certified Public Accountants
SEC Practice Section
Information Technology Section
Texas Society of Certified Public Accountants
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
Board of Directors and Stockholders
Net-Tronics Communications Corporation
We have audited the accompanying balance sheets of Net-Tronics Communications
Corporation (a Delaware corporation and a wholly-owned subsidiary of Halter
Capital Corporation) as of June 30, 1999, December 31, 1998 and 1997 and the
related statements of operations and comprehensive income, changes in
stockholders' equity and cash flows for the six months ended June 30, 1999 and
for each of the years ended December 31, 1998 and 1997, respectively. 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 Net-Tronics Communications
Corporation as of June 30, 1999, December 31, 1998 and 1997, and the results of
its operations and its cash flows for the six months ended June 30, 1999 and
each of the years ended December 31, 1998 and 1997, respectively, in conformity
with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
September 14, 1999
P. O. Box 820395 9002 Green Oaks Circle, 2nd Floor
Dallas, Texas 75382-0395 Dallas, Texas 75243-7212
214-342-9635 (voice) (fax) 214-342-9601
800-244-0639 [email protected]
F-3
<PAGE>
<TABLE>
<CAPTION>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
BALANCE SHEETS
June 30, 1999, December 31, 1998 and 1997
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ 223 $ 273
Advances to parent company 223 -- --
------------ ------------ ------------
Total Assets $ 223 $ 223 $ 273
============ ============ ============
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ -- $ -- $ --
------------ ------------ ------------
Commitments and Contingencies
Stockholder's Equity
Preferred stock - $0.00001 par value
5,000,000 shares authorized; none
issued and outstanding -- -- --
Common stock - $0.00001 par value
10,000,000 shares authorized
100,000 issued and outstanding 1 1 1
Additional paid-in capital 999 999 999
Accumulated deficit (777) (777) (727)
------------ ------------ ------------
Total stockholders' equity 223 223 273
------------ ------------ ------------
Total Liabilities and Stockholder's Equity $ 223 $ 223 $ 273
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Six months Year Year
ended ended ended
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Revenues $ -- $ -- $ --
------------ ------------ ------------
Expenses
General and administrative expenses -- 50 461
------------ ------------ ------------
Net Loss -- (50) (461)
Other Comprehensive Income -- -- --
------------ ------------ ------------
Comprehensive Income $ -- $ (50) $ (461)
============ ============ ============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil nil
=== === ===
Weighted-average number of shares
of common stock outstanding 100,000 100,000 100,000
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Common Stock Additional
----------------- paid-in Accumulated
Shares Amount capital deficit Total
------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C>
Balances at January 1, 1997 100,000 $ 1 $ 999 $ (266) $ 734
Net loss for the year -- -- -- (461) (461)
------- ------- ---------- ----------- -------
Balances at December 31, 1997 100,000 1 999 (727) 273
Net loss for the year -- -- -- (50) (50)
------- ------- ---------- ----------- -------
Balances at December 31, 1998 100,000 1 999 (777) 223
Net loss for the period -- -- -- -- --
------- ------- ---------- ----------- -------
Balances at June 30, 1999 100,000 $ 1 $ 999 $ (777) $ 223
======= ======= ========== =========== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF CASH FLOWS
Six months ended June 30, 1999 and
Years ended December 31, 1998 and 1997
Six months Year Year
ended ended ended
June 30, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net loss for the period $ -- $ (50) $ (461)
Adjustments to reconcile net loss to
net cash provided by operating activities -- -- --
------------ ------------ ------------
Net cash used in operating activities -- (50) (461)
------------ ------------ ------------
Cash Flows from Investing Activities -- -- --
------------ ------------ ------------
Cash Flows from Financing Activities
Cash advanced to parent (223) -- --
------------ ------------ ------------
Net cash used in financing activities (223) -- --
------------ ------------ ------------
Decrease in Cash (223) (50) (461)
Cash at beginning of period 223 273 734
------------ ------------ ------------
Cash at end of period $ -- $ 223 $ 273
============ ============ ============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ -- $ --
============ ============ ============
Income taxes paid for the period $ -- $ -- $ --
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Net-Tronics Communications Corporation (Company) was incorporated on August 22,
1995 under the laws of the State of Delaware as a wholly-owned subsidiary of
Halter Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method 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 amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income taxes
------------
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". At December
31, 1998 and 1997, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
The Company files its income tax returns as a component of its parent
company's consolidated tax return. Accordingly, all net operating losses
are offset against the tax liabilities of the Company's parent. No net
operating loss carryforwards exist as of December 31, 1998 and 1997,
respectively.
F-8
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies - Continued
3. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of June 30, 1999, December 31, 1998 and
1997, the Company has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of June 30, 1999, the Company had advanced funds totaling approximately $223
to Halter Capital Corporation, the Company's parent. The advances are due upon
demand and are non-interest bearing.
F-9
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
BALANCE SHEETS
September 30, 1999 and 1998
(Unaudited)
1999 1998
----- -----
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ 223
Advances to parent company 223 --
----- -----
Total Assets $ 223 $ 223
===== =====
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Liabilities $ -- $ --
----- -----
Commitments and Contingencies
Stockholder's Equity
Preferred stock - $0.00001 par value
5,000,000 shares authorized; none
issued and outstanding -- --
Common stock - $0.00001 par value
10,000,000 shares authorized
100,000 issued and outstanding 1 1
Additional paid-in capital 999 999
Accumulated deficit (777) (777)
----- -----
Total stockholders' equity 223 223
----- -----
Total Liabilities and Stockholder's Equity $ 223 $ 223
===== =====
The accompanying notes are an integral part of these financial statements.
F-10
<PAGE>
<TABLE>
<CAPTION>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Nine and Three months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months Three months Three months
ended ended ended ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ --
------------- ------------- ------------- -------------
Expenses
General and administrative expenses -- 50 -- --
------------- ------------- ------------- -------------
Net Loss -- (50) -- --
Other Comprehensive Income -- -- -- --
------------- ------------- ------------- -------------
Comprehensive Income $ -- $ (50) $ -- $ --
============= ============= ============= =============
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil nil nil
=== === === ===
Weighted-average number of shares
of common stock outstanding 100,000 100,000 100,000 100,000
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-11
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
STATEMENTS OF CASH FLOWS
Nine months ended September 30, 1999 and 1998
(Unaudited)
Nine months Nine months
ended ended
September 30, September 30,
1999 1998
------------- -------------
Cash Flows from Operating Activities
Net loss for the period $ -- $ (50)
Adjustments to reconcile net loss to
net cash provided by operating activities -- --
------------- -------------
Net cash used in operating activities -- (50)
------------- -------------
Cash Flows from Investing Activities -- --
------------- -------------
Cash Flows from Financing Activities
Cash advanced to parent (223) --
------------- -------------
Net cash used in financing activities (223) --
------------- -------------
Decrease in Cash (223) (50)
Cash at beginning of period 223 273
------------- -------------
Cash at end of period $ -- $ 223
============= =============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
============= =============
Income taxes paid for the period $ -- $ --
============= =============
The accompanying notes are an integral part of these financial statements.
F-12
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS
NOTE A - Organization and Description of Business
Net-Tronics Communications Corporation (Company) was incorporated on August 22,
1995 under the laws of the State of Delaware as a wholly-owned subsidiary of
Halter Capital Corporation.
The Company has never had any operations or assets since inception. The current
business purpose of the Company is to seek out and obtain a merger, acquisition
or outright sale transaction whereby the Company's stockholders will benefit.
The Company is not engaged in any negotiations and has not undertaken any steps
to initiate the search for a merger or acquisition candidate.
The Company is fully dependent upon its current management and/or significant
stockholders to provide sufficient working capital to preserve the integrity of
the corporate entity during this phase. It is the intent of management and
significant stockholders to provide sufficient working capital necessary to
support and preserve the integrity of the corporate entity.
The Company has a year end of December 31 and follows the accrual method of
accounting.
During interim periods, the Company follows the accounting policies set forth in
its annual audited financial statements contained elsewhere in this document.
The information presented herein does not include all disclosures required by
generally accepted accounting principles and the users of financial information
provided for interim periods should refer to the annual financial information
and footnotes contained in its annual audited financial statements contained
elsewhere in this document when reviewing the interim financial results
presented herein.
In the opinion of management, the accompanying interim financial statements,
prepared in accordance with the instructions for Form 10-QSB, are unaudited and
contain all material adjustments, consisting only of normal recurring
adjustments necessary to present fairly the financial condition, results of
operations and cash flows of the Company for the respective interim periods
presented. The current period results of operations are not necessarily
indicative of results which ultimately will be reported for the full fiscal year
ending December 31, 1999.
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.
F-13
<PAGE>
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Halter Capital Corporation)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE B - Summary of Significant Accounting Policies
1. Cash and cash equivalents
-------------------------
The Company considers all cash on hand and in banks, including accounts in
book overdraft positions, certificates of deposit and other highly-liquid
investments with maturities of three months or less, when purchased, to be
cash and cash equivalents.
2. Income taxes
------------
The Company provides deferred income taxes, where material, based on the
asset and liability method under the provisions of Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes. At September
30, 1999 and 1998, respectively, the deferred tax asset and deferred tax
liability accounts, consisting solely of temporary differences in
accumulated depreciation, were not material to the financial statements and
no valuation allowance was provided against deferred tax assets.
The Company files its income tax returns as a component of its parent
company's consolidated tax return. Accordingly, all net operating losses
are offset against the tax liabilities of the Company's parent. No net
operating loss carryforwards exist as of September 30, 1999 and 1998,
respectively.
3. Loss per share
--------------
Basic earnings (loss) per share is computed by dividing the net income
(loss) by the weighted-average number of shares of common stock and common
stock equivalents (primarily outstanding options and warrants). Common
stock equivalents represent the dilutive effect of the assumed exercise of
the outstanding stock options and warrants, using the treasury stock
method. The calculation of fully diluted earnings (loss) per share assumes
the dilutive effect of the exercise of outstanding options and warrants at
either the beginning of the respective period presented or the date of
issuance, whichever is later. As of September 30, 1999 and 1998, the
Company has no warrants and/or options issued and outstanding.
NOTE C - Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts payable and notes
payable, as applicable, approximates fair value due to the short term nature of
these items and/or the current interest rates payable in relation to current
market conditions.
NOTE D - Related Party Transactions
As of September 30, 1999, the Company had advanced funds totaling approximately
$223 to Halter Capital Corporation, the Company's parent. The advances are due
upon demand and are non-interest bearing.
F-14
