REPORT OF OPPENHEIM & OSTRICK, CPA's
INDEPENDENT AUDITORS
The Board of Directors and Shareholders of
Digital Technologies Media Group, Inc.
We have audited the accompanying balance sheet of Digital Technologies Media
Group, Inc. as of December 31, 1998 and 1999 and the related statements of
income, shareholder's equity, and cash flows for each of the two years ended
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 auditing standards generally accepted
in the United States. 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 Digital Technologies Media Group,
Inc. as of December 31, 1998 and 1999 and the result of its operations,
shareholder's equity and its cash flows for the year ended December 31, 1999 in
conformity with accounting principles generally accepted in the United States.
/s/ Mr. Gil Ostrick
------------------------
Culver City, California
April 4, 2000
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
BALANCE SHEET
DECEMBER 31, 1999
ASSETS
Current assets:
Cash $ 74
Other assets:
Security deposits 630
-----------
Total assets $ 704
===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable - related party $ 7,227
Accrued expenses 127,293
Loans payable - related party 1,000
-----------
Total current liabilities $ 135,520
Long-term liabilities:
Prepetition liabilities 565,549
-----------
Total liabilities $ 701,069
Shareholder's equity:
Common stock par value $.01 25,000,000 shares
authorized, issued and outstanding 3,790,627 shares 25,732
Paid-in capital 508,704
Accumulated deficit (1,234,801)
-----------
Total shareholder's deficit (700,365)
-----------
Total liabilities and shareholder's equity $ 704
===========
See accompanying notes
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
STATEMENT OF INCOME
FOR YEARS ENDED DECEMBER 31, 1998 AND 1999
Years Ended December 31,
1998 1999
(Unaudited)
----------- ---------
Revenues $ 0 $ 0
----------- ---------
Operating expenses:
General and administrative 16,632 143,240
----------- ---------
Loss before income tax (16,632) (143,240)
Provision for income tax 0 0
----------- ---------
Net loss $ (16,632) $(143,240)
=========== =========
Loss per share:
Basic $ 0 $ $.04
Shares used to compute basic earnings
Per share 3,790,627 3,790,627
See accompanying notes
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<TABLE>
<CAPTION>
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
STATEMENT OF SHAREHOLDER'S EQUITY
FOR YEARS ENDED DECEMBER 31, 1998 AND 1999
Common Stock Paid-in Accumulated
Shares Amount Capital Deficit Total
--------- --------- --------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance at January 1,
1998 (unaudited) 3,790,627 $ 25,732 $ 508,704 $(1,074,929) $(540,473)
Net loss (unaudited) 0 0 0 (16,632) (16,632)
Balance at December 31,
1998 3,790,627 25,732 508,704 (1,091,561) (557,125)
Net loss 0 0 0 (143,240) (143,240)
--------- --------- --------- ------------ ----------
Balance at December 31, 1999 3,790,627 $ 25,732 $ 508,704 $(1,234,801) $(700,365)
========= ========= ========= ============ ==========
</TABLE>
See accompanying notes
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
STATEMENT OF CASH FLOWS
FOR YEARS ENDED DECEMBER 31, 1998 AND 1999
Years Ended December 31,
1998 1999
(Unaudited)
----------- ----------
OPERATING ACTIVITIES:
Net loss $(16,632) $(143,240)
CHANGES IN OPERATING ASSETS AND LIABILITIES:
Security deposits (130) (500)
Accounts payable 0 3,383
Accrued expenses 0 127,293
--------- ----------
Net cash used by operating activities (16,762) (13,064)
FINANCING ACTIVITIES:
Loans from related party 0 1,000
Loans payable - Prepetition debt 23,900 5,000
--------- --------
Net cash provided by financing activities 23,900 6,000
--------- --------
Net increase (decrease) in cash 7,138 (7,064)
Cash, beginning of year 0 7,138
--------- --------
Cash, end of year $ 7,138 $ 74
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Income tax paid for the years $ 0 $ 0
Interest expense paid for the years $ 0 $ 0
See accompanying notes
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
1. Summary of significant accounting policies:
Business
Digital Technologies Media Group, Inc., a Delaware corporation is the debtor in
a Chapter 11 bankruptcy case. On January 26, 1999, Digital Technologies Media
Group, Inc. (the "Debtor"), commenced a bankruptcy case by filing a voluntary
Chapter 11 petition under the United States Bankruptcy Code ("Code"), 11 U.S.C.
S 101 et seq. Chapter 11 allows the Debtor, and under some circumstances,
Creditors and other parties in interest, to propose a plan of reorganization
("Plan").
The Plan is a reorganizing plan. In other words, the Debtor seeks to satisfy its
obligations to Creditors by issuing its securities pursuant to the terms of the
Plan. The reorganized Debtor will change its name to Central Coast Capital
Venture Corporation, and will become a Nevada corporation, operating and
conceived as a closed end mutual fund, specifically designed to engage in
investments of startup (venture capital) companies. The Reorganized Debtor will
be engaged as a Business Development Corporation (a "BDC") under the Investment
Company Act. The Reorganized Debtor's common stock will be distributed to the
Debtor's Creditors and Interest Holders in exchange for their Claims and
Interests. As a result of the Plan, Debtor's secured Creditors will hold a 2.31%
ownership interest in the Reorganized Debtor, general unsecured creditors will
hold a 21.47% ownership interest in the Reorganized Debtor; and, Interest
Holders will hold a 1.34% interest in the Reorganized Debtor.
The Reorganized Debtor will be a Business Development under the Investment
Company Act. The Reorganized Debtor's investment objective will be to invest in
companies with gross sales of less than $500,000 per annum and selected
situations (such as leveraged buyouts and established business operations) that
will benefit from long-term capital growth. The Reorganized Debtor will derive
its income through management consulting fees and profit from the selective
sales of the companies contained in its investment portfolio.
The Effective Date of the proposed Plan is the later of (i) the first business
day after the eleventh (11th) day following Confirmation of the Plan; or (ii)
the first business day after such date on which there is not force any stay of
injunction against the enforcement of the Plan or the Confirmation Order. It is
anticipated that the Effective Date of the Plan will be May 1, 2000.
F-7
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
1. Summary of significant accounting policies (cont'd):
Events Leading to Chapter 11 Filing
The Debtor was organized January 15, 1949 in the State of Utah under the name of
Oil Securities Company, Inc. In July 1984, the original corporation was merged
into Oil Securities, Inc., a Nevada corporation, formed for the sole purpose of
effecting the merger. Thereafter, when its oil and gas business failed, the
Debtor files a chapter 11 case. The Debtor emerged from chapter 11 in or about
1990. Thereafter, to facilitate a merger, on July 30, 1996, the Debtor merged
into Miller & Benson International, Ltd., a dormant Delaware Public Holding
Company, which then changed its name to Digital Technologies Media Group, Inc.,
to facilitate its new business. The new business of the Debtor was to capitalize
on the growth in the distribution of multimedia programming. The Debtor is a
pubic company whose stock is not currently listed for trading.
Digital Technologies Media Group, Inc. (the Company) was organized in April
1995, a Delaware corporation for the purpose of funding the development of
television programming and to interface with new technologies. In May 1995, the
company acquired certain rights and accounts receivables to distribute the film
assets of Communication Services International (CSI) for convertible debt, which
was then converted into common stock in 1995. In 1996, the Company's
relationship with CSI fell apart over the creditability of the acquired film
operation. In 1997, the President of CSI resigned and the Board rescinded the
common stock shares of CSI and four other employees. According to management by
the end of December 31, 1997, CSI transaction was rescinded and all of its
assets and liabilities were removed from the company's books. Also at the end of
December 1997, the company had no assets and was not a going concern. The
company filed a petition Chapter 11 (Debtor in Possession) with the Bankruptcy
court effective January 26, 1999.
Income Taxes
Income taxes are accounted for using the liability method in accordance
with SFAS No. 109, "Accounting for Income Taxes." Under this method, deferred
tax liabilities and assets are recognized for the expected future tax
consequences of temporary differences between the carrying amounts and the tax
bases of assets and liabilities.
Earnings Per Share
The company calculates earnings per share in accordance with SFAS No.
128, Earnings per share. Both earnings per share have been computed by dividing
net loss by the weighted average common shares outstanding. They are currently
no dilutive shares impacting earnings or losses.
F-8
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
2. Going Concern:
The bankruptcy court approved the purchase of DATA systems Information, Inc. on
February 9, 2000 even if the plan is not confirmed on the 18th of April, in the
opinion if its bankruptcy attorney, the Debtor will continue to operate and will
eventually obtain approval of the plan. According to recent unaudited financial
statements of Data Net Information's Systems, Inc., it has a positive cash flow.
The Debtor also received $310,000 by issuing Debtor notes. This will allow the
company to operate for at least twelve (12) months from the balance sheet date
and eliminate the going concern issue.
3. Summary of the Plan of Reorganization
Administrative Expenses
Debtor in possession expenses for the bankruptcy proceedings for services
rendered by a law firm and two other individuals shall receive a distribute of 4
units of the Reorganized Debtors securities for each dollar owed in full and
complete satisfactory of their allowed claims for fees. At December 31, 1999 the
accrued expenses owing to the above group was $127,293. Both individuals are
stockholders and related parties. It is estimated that this group will own
approximately 25.2% of the reorganized debtor.
Debtors common stock as follows:
Law firm 9.6%
Two individuals (own equal amounts) 15.6%
25.2%
Prepetition Liabilities:
Secured Claims
Secured claims are claims secured by liens on certain assets of the
company. The total of such loans payable by secured creditors totaled $28,900.
These claims will receive a distribution of 2 units of the Reorganized Debtors
securities for each dollar owed in full and final payment and in complete
satisfaction of their claims. It is estimated that this group will own
approximately 2% of the Reorganized Debtors common stock when issued.
General Unsecured Creditors
This group is owed approximately $536,649 and will receive a distribution
of one unit of the Reorganized Debtors securities for each dollar owed in full
and final payment and complete satisfaction of their claims.
F-9
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
3. Summary of the Plan of Reorganization (cont'd):
General Unsecured Creditors (cont'd)
It is estimated that this group will own approximately 21% of the
Reorganized Debtors common stock. Under the plan units of the Reorganized
Debtors securities means the securities of the company consisting of one share
of common stock of the Reorganized Debtor and one Class A warrant to purchase
the Reorganized Debtor's common stock. Also all three groups will receive their
respective pro rata distribution of 30% of the Data Net Information Systems,
Inc. Common stock when issued and 30% of the Digi Commerce Corporation common
stock when issued.
Units of Reorganized Debtor's Securities
Under the Plan "Unit(s) of Reorganized Debtor's Securities" means
securities of the Reorganized Debtor consisting of one share of common stock of
the Reorganized Debtor and one Class A warrant to purchase the Reorganized
Debtor's common stock. The Class A warrant shall allow the warrant holder to
purchase one share of common stock of the Reorganized Debtor at a price of $5.00
per share at any time within one year from the effective date. Upon the exercise
of the Class A warrant, the warrant holder also shall receive one Class B
warrant to purchase the Reorganized Debtor's common stock. The terms of the
Class B warrant shall be set by the board of directors of the Reorganized Debtor
at least ninety days subsequent to the effective date of the plan.
This pro rata distribution means that DATA common stock and the Digi common
stock will be disturbed on a pro rata basis to creditors and Interests Holders
based upon the number of Units such parties hold.
Purchase of Data Net Information Systems, Inc. (DATA)
Bankruptcy Court has already approved the Debtor's acquisition of 1,000,000
shares of DATA common stock which represents 100% of its outstanding shares in
exchange for the Debtor's Class A preferred stock. Each share of preferred stock
will equal ten shares of DATA common stock owned. The purchase of all DATA
common stock will result in DATA's shareholders owning 100,000 shares of Class A
preferred stock of Digital Technologies Media Group Inc. The acquisition of DATA
also requires a $100,000 capital contribution from the company to DATA for
working capital. Furthermore the company will provide Data with a commitment to
provide $1,000,000 in funding over the next two years. It is anticipated that
the $100,000 in working capital contribution will be funded from debtors notes
described below. The plan proposes that after registration with the SEC of the
Data Securities, the Reorganized Debtor will distribute 30% of the Data
securities owned by it to the shareholders who are to receive securities under
the plan on a pro-rata basis.
The Debtor has recently obtained court approval to borrow up to $310,000 by
issuing Debtor notes. The interest rates on such notes shall be 10% per annum
and the notes are one year notes.
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
3. Summary of the Plan of Reorganization (cont'd):
Purchase of Data Net Information Systems, Inc. (DATA) (cont'd):
The notes can be converted at the election of the holder of such notes upon
confirmation of the plan to Units of the Reorganized Debtor as defined in the
plan at a ratio of four (4) Units of the Reorganized Debtor's securities for
each one dollar ($1.00) owned. This financing provided Digital with sufficient
capital to purchase Data and fund the plan. The notes also provided working
capital to pay certain administrative claims that must be paid as of the
effective date of the plan and the cost of informing all creditors, stockholders
and other interested parties of the company. The debt financing also provided
working capital for the post-confirmation operation of the company.
Approximately $23,000 of the commitment to fund the notes comes from related
parties involved in the company in prior years. As of April 4, 2000, $310,000
was received for the Debtor's notes. Data Common Stock is owned by the following
entities:
NO. OF COMMON NO. OF
DATA OWNERSHIP DATA PREFERRED
SHAREHOLDERS INTEREST SHARES SHARES
------------ --------- ------------- --------
First Portland
Corporation 30% 300,000 30,000
Bernie Budney 55% 550,000 55,000
Jande International Holding
LLC, a related party 15% 150,000 15,000
--- --------- ------
100% 1,000,000 100,000
The Reorganized Debtor intends to distribute 30% or 300,000 of common stock
of DATA owned by it to shareholders who are to receive securities under the plan
on a pro rata basis based upon units held.
The Company intends to invest in a second company who will also distribute
30% of its common stock to Digital Technologies Media Corp, Inc. (the Debtor)
shareholders who are to receive securities under the plan on pro-rata basis
based upon units held.
4. Loan payable related party and related party transactions:
The $1000 loan payable was converted into a note for the commitment to raise up
to $310,000 of Debtor's notes. The related party is one of the individuals who
was approved by the bankruptcy court to provide debtors in possession
administrative services for 3,500 per month until the plan is confirmed. The
other individual who also earns $3,500 monthly for administrative services on
behalf of his company entered into a rent and equipment lease totaling $750 per
month with a year's terms and then payments month to month. As a result of the
Debtor's acquisition of DATA the above related party (Jande International
Holdings LLC) will own 15% of DATA common stock before the exchange into the
Reorganized Debtor class A preferred stock as described earlier. Both
individuals as a result of their administrative duties providing debtor in
possession's services to the company will receive 7.8% each in common stock in
exchange for the Bankruptcy court approved accrued compensation.
Remainder of page intentionally left blank.
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DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
FOR YEARS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
5. Commitment and Contingencies
Please see note 2 for contingencies related to the confirmation of the plan of
reorganization. The company at December 31, 1999 had no leases expiring in more
than one year. Rent paid to a related party covering utilities and telephone for
years ended December 31, 1999 and 1998 was $6,000 and $500 respectively. Prior
to December 1, 1998 there was no charge for rent. An office equipment lease was
also provided totaling $1750 for year ended December 31, 1999 and none in 1998.
The equipment lease started June 1, 1999.
The company may be involved in litigation and in legal matters from time to time
in the normal cause of business. However there are no material proceedings
pending or to the knowledge of management threatened against the company outside
of the plan of confirmation pursuant to Chapter 11 of the Bankruptcy Act.
6. Income Taxes
There was no income tax (benefit) for the years ended December 31, 1998 and 1999
as the company incurred losses during the two year period.
The effects of temporary differences has no net effect on deferred tax assets as
the losses incurred (tax loss carry forward) were cancelled out entirely by
deferred tax valuation reserves because of the inability to project taxable
income in future years.
At December 31, 1999, the company had a net operating loss carry forward of
approximately $159,000 for Federal Income Tax purposes available to offset
future taxable income expiring on various dates beginning in 2016 and 2018.
F-12
