<PAGE> 1
SFG CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JULY 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
ASSETS:
Cash ............................................................... $ 38,373 $ (2,215)
Due from officers .................................................. 0 560
Equipment on operating leases, net of accumulated depreciation ..... 0 0
Furniture and equipment, net of accumulated depreciation ........... 0 0
----------- -----------
Total ...................................................... $ 38,373 $ (1,655)
=========== ===========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY:
Liabilities:
Notes payable .................................................. $ -- $ 270,144
Accounts payable and accrued expenses .......................... 113,784 109,333
Advance rentals ................................................ 0 9,174
Due to officers ................................................ 2,049 2,987
Sales tax payable .............................................. 221,787 222,006
----------- -----------
Total liabilities .......................................... 337,620 613,644
Shareholders' Deficiency:
Common stock -$.001 par value, 100,000,000 shares authorized;
3,406,856 and 2,955,856 shares issued and outstanding at
July 31, 2000 and 1999, respectively ........................ 3,407 2,956
Capital in excess of par ....................................... 2,209,769 1,793,350
Accumulated deficit ............................................ (2,512,423) (2,411,605)
----------- -----------
Total shareholders' deficiency ............................ (299,247) (615,299)
----------- -----------
Total ................................................. $ 38,373 $ (1,655)
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the financial statements
1
<PAGE> 2
SFG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JULY 31, 2000 AND 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Revenues:
Rental income .............................. $ 5,741 $ 64,163
Residual income ............................ -- --
Sale of equipment and other income ......... -- 10,689
----------- -----------
Total revenues .......................... 5,741 74,852
Expenses:
Professional fees .......................... 105,739 118,500
Administrative expenses .................... 42,259 32,182
Salaries ................................... 9,500 27,186
Interest ................................... 0 12,928
Leasing expense ............................ 0 6,584
----------- -----------
Total expenses ......................... 157,498 197,380
----------- -----------
Loss Before Income Taxes ....................... (151,757) (122,528)
Provision For Income Taxes ..................... 0 0
----------- -----------
Net Loss ....................................... $ (151,757) $ (122,528)
=========== ===========
Net Loss Per Common Share ...................... $ 0.05 $ 0.04
=========== ===========
Weighted Number of Common Shares Outstanding ... 3,316,856 2,922,522
=========== ===========
</TABLE>
The accompanying notes are an integral
part of the financial statements
2
<PAGE> 3
SFG CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
July 31,
2000 1999
---------- ---------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss .............................................................. $ (151,757) $(122,528)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Gain on sale of assets .......................................... (10,689)
Common stock issued for services ................................ 22,783 100,000
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable
Due from officers
Increase (decrease) in liabilities:
Accounts payable and accrued expenses ........................ 1,991 12,087
Advance rentals
Due to officers .............................................. (662)
Sales tax payable............................................. (155)
Total adjustments ..................................................... 23,957 101,398
---------- ---------
Net cash provided by (used in) operating activities ............. $ (127,800) $ (21,130)
Cash Flows Provided By Investing Activities:
Proceeds from sale of operating lease equipment ....................... 10,689
Proceeds from sale of Common stock .................................... 125,000
Cash Flows Used In Financing Activities:
Payments on long term debt ............................................ (1,007)
--------- ----------
Net Increase (Decrease) in Cash .......................................... $ (2,800) $ (11,448)
Cash - February 1 ........................................................ 41,173 9,233
--------- ----------
Cash - April 30 .......................................................... $ 38,373 $ (2,215)
========= ==========
Supplemental Disclosure of Cash Flows Information:
Cash paid during the period for:
Interest ........................................................... -- $ 12,928
========= ==========
Income taxes ....................................................... -- --
========= ==========
Supplemental Schedule of Noncash Financing Activities:
Common Stock issued services .......................................... $ 22,783 $ 100,000
========= ==========
Common stock issued to retire debt .................................... -- --
========= ==========
</TABLE>
The accompanying notes are an integral
part of the financial statements.
3
<PAGE> 4
SFG CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31,
2000 AND 1999
Note #1 - Organization and Significant Accounting Policies.
Summary of Accounting Policies.
This summary of accounting policies of SFG Corporation and Subsidiaries
(the Company) is presented to assist in understanding the Company's financial
statements. The financial statements and notes are representations of the
Company's management who is responsible for the integrity and objectivity of the
financial statements. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the presentation of
the financial statements.
Basis of Consolidation.
The consolidated financial statements include the accounts of SFG
Corporation and its wholly owned subsidiaries. All significant inter company
accounts and transactions have been eliminated in consolidation.
Leasing Arrangements.
The Company's leasing operations consist of operating leases of
computers and peripheral equipment. The company recognizes rental income, as
earned, over the lives of the leases.
Equipment Under Operating Leases and Furniture and Equipment.
Equipment under operating leases and furniture and equipment are stated
at cost. Expenditures for major renewals and betterments that extend the useful
lives of property and equipment are capitalized. Expenditures for maintenance
and repairs are charged to expense as incurred.
July 31,
2000 1999
--------- ---------
Equipment under operating leases $ 335,907 $ 445,057
Furniture and equipment 1,655 1,655
--------- ---------
337,562 446,712
Accumulated depreciation (337,562) (446,712)
--------- ---------
Net $ 0 $ 0
--------- ---------
4
<PAGE> 5
Note #1 - Organization and Significant Accounting Policies. (continued)
Net Income (Loss) Per Common Share.
Net income (loss) per common share is computed using the weighted
average number of common shares outstanding during each period.
Cash and Cash Equivalents.
For purposes of reporting the statements of cash flows, cash and cash
equivalents include money market accounts and all highly liquid debt instruments
purchased with a maturity of three months or less.
Income Taxes.
Income taxes are provided for the tax effects of transactions reported
in the financial statements and consist primarily of taxes currently due.
Use of Estimates.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
5
