<PAGE> 1
EXHIBIT 99.5
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED JUNE 30, 2000 AND
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Unaudited Consolidated Statement of Financial Position
at June 30, 2000 and December 31, 1999 and 1998 1-2
Unaudited Consolidated Statement of Operations for the
Period Ended June 30, 2000 and the Years Ended
December 31, 1999 and 1998 3-4
Unaudited Consolidated Statement of Cash Flows for the
Period Ended June 30, 2000 and the Years Ended
December 31, 1999 and 1998 5
Unaudited Consolidated Statement of Changes in
Stockholders' Equity for the Period Ended
June 30, 2000 and the Years Ended
December 31, 1999 and 1998 6-7
Notes to Consolidated Financial Statements 8-16
</TABLE>
-2-
<PAGE> 3
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
06/30/00 12/31/99 12/31/98
------------ ---------- ------------
<S> <C> <C> <C>
CURRENT ASSETS
Cash in Bank $ 5,866 $ 89 $ 50
Loan Receivable - Tropical
(Note 9) -0- 566,805 566,805
Less: Reserve For Bad Debt -0- (566,805) (566,805)
License Fee Receiv. - Tropical
(Note 10) -0- 499,091 499,091
Less: Reserve For Bad Debt -0- (499,091) (499,091)
Accounts Receivable 22,728 -0- -0-
Other Current Assets 171,729 -0- -0-
------------ ---------- ------------
Total Current Assets 200,323 89 50
FIXED ASSETS
Computer Equipment 6,102 -0- -0-
Office Furniture 7,949 -0- -0-
Leasehold Improvements 4,187 -0- -0-
SoloSearch Software 38,748 -0- -0-
Less: Accumulated Depreciation (4,709) -0- -0-
Gaming System-Hardware (Note 1) -0- 47,030 47,030
Less: Reserve For Bad Debt -0- (47,030) -0-
Gaming System-Software (Note 1) -0- 52,970 52,970
Less: Reserve For Bad Debt -0- (52,970) -0-
------------ ---------- ------------
Total Fixed Assets 52,277 -0- 100,000
OTHER ASSETS
Prepaid Expenses (Note 4) -0- 55,667 259,667
Settlement Agreement-principals -0- 360,000 360,000
Escrowed shares for debt,
Millard account -0- 125,448 125,448
Investment-Whitfield Holdings -0- -0- 3,200,000
Investment-Whitfield/Unearned -0- -0- (3,140,421)
Organizational Costs 8,702 -0- -0-
Less: Accumulated Amortization (870) -0- -0-
Refundable Deposits 264 -0- -0-
Goodwill-SoloSearch.com, Inc. 9,748,570 -0- -0-
Investment-SearchHound.com
2000 Ltd. 3,000,000 -0- -0-
Goodwill-SearchHound.com
2000 Ltd. 10,499,900 -0- -0-
Stock - Global Net 110,000 -0- -0-
------------ ---------- ------------
Total Other Assets 23,366,566 541,115 804,694
------------ ---------- ------------
TOTAL ASSETS $ 23,619,166 $ 541,204 $ 904,744
============ ========== ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-3-
<PAGE> 4
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
06/30/00 12/31/99 12/31/98
------------ ------------ ------------
<S> <C> <C> <C>
CURRENT LIABILITIES
Accounts Payable (Note 3) $ 57,072 $ 308,270 $ 250,883
Conv. Notes Payable (Note 8) -0- 395,250 395,250
Taxes payable (1,155) 18,795 18,795
Agreement Payable- Shareholders
SoloSearch.com, Inc. 300,000 -0- -0-
------------ ------------ ------------
Total Current Liabilities 355,917 722,315 664,298
LONG TERM LIABILITIES
Stipulation Payable-Roake
(Note 3) -0- 225,000 225,000
------------ ------------ ------------
Total Long-Term Liabilities -0- 225,000 225,000
OTHER LIABILITIES
Loan From Shareholder 206,192 -0- -0-
Deferred Income 140,000 -0- -0-
------------ ------------ ------------
Total Other Liabilities 346,192 -0- -0-
------------ ------------ ------------
Total Liabilities 702,109 947,315 889,928
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value;
50,000,000 shares authorized;
7,758,413 shares issued and
outstanding at December 31,
1998; 4,508,413 shares at
December 31, 1999; and
23,834,330 shares at June 30, 2000 23,834 4,508 7,758
Additional Paid in Capital 26,201,039 2,225,115 5,421,866
Common Stock-Unearned Escrow -0- -0- (3,140,421)
Accumulated Deficit (3,307,816) (2,635,734) (2,274,387)
------------ ------------ ------------
Total Stockholders' Equity 22,917,057 (406,111) 14,816
------------ ------------ ------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 23,619,166 $ 541,204 $ 904,744
============ ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-4-
<PAGE> 5
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
06/30/00 12/31/99 12/31/98
------------ ---------- ----------
<S> <C> <C> <C>
REVENUE
Gaming License Fees $ -0- $ -0- $ 499,091
Less: Bad Debt (Note 10) -0- -0- (499,091)
Revenue Sharing 15,250 -0- -0-
Traffic Revenues 6,183 -0- -0-
Monthly Service Fees 12,459 -0- -0-
License Fees 136,475 -0- -0-
-------- --------- ---------
Total Revenue 170,367 -0- -0-
-------- --------- ---------
GROSS PROFIT (LOSS) 170,367 -0- -0-
-------- --------- ---------
OPERATING EXPENSES
Accounting fees (Note 12) 1,934 14,000 14,000
Advertising and promotion 3,820 -0- -0-
Amortization 870 -0- -0-
Audit fees 2,500 -0- -0-
Bad Debt (Note 9) -0- 100,000 566,805
Bank charges 608 96 274
Consulting fees (Note 12) 125,000 -0- 51,753
Contract labor 14,166 -0- -0-
Computer expense 32,723 -0- -0-
Copy and printing expense 346 -0- -0-
Depreciation 4,709 -0- -0-
Dues and subscriptions 352 -0- -0-
Employee Benefits 2,650 -0- -0-
Insurance 2,096 -0- -0-
Interest -0- -0- 25,424
Internet & web site fees 8,261 1,175 12,445
Inv. relations exp (Note 12) 1,423 2,117 63,205
Inv. relations fees (Note 12) -0- 60,000 48,000
Legal fees 45,466 40,379 25,239
Licenses and permits 8,000 -0- -0-
Meals and entertainment 2,458 -0- -0-
Miscellaneous expense 6,143 -0- -0-
Office expense 1,944 742 455
Outside services 3,545 -0- -0-
Payroll taxes 8,947 -0- -0-
Postage and delivery 887 1,075 2,009
Professional fees -0- 3,745 1,610
Public relations 17,705 -0- -0-
Rent - office 13,833 -0- -0-
Rent - other 4,299 -0- -0-
Repairs and maintenance 310 -0- -0-
SEC electronic filing expense 7,588 7,769 16,584
Software expense 406 -0- -0-
Taxes and licenses 943 110 260
Telephone 5,134 -0- 1,450
Transfer Agent fees 6,500 1,005 3,095
Travel 24,413 2,729 8,443
Utilities 978 -0- -0-
Wages and salaries (Note 12) 565,683 130,000 65,000
-------- --------- ---------
Total Operating Expenses $926,640 $ 364,942 $ 906,051
======== ========= =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-5-
<PAGE> 6
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
06/30/00 12/31/99 12/31/98
------------ ---------- ----------
<S> <C> <C> <C>
(LOSS) FROM OPERATIONS (756,273) (364,942) (906,051)
--------- --------- ---------
INTEREST EXPENSE (2,714) -0-
OTHER EXPENSE (360,000) -0- (5,000)
OTHER INCOME 399,301 -0- 5,820
PROVISION FOR INCOME TAX -0- -0- -0-
========= ========= =========
NET INCOME (LOSS) $(719,686) $(364,942) $(905,231)
========= ========= =========
NET INCOME (LOSS) PER SHARE $ (.030) $ (.081) $ (.117)
========= ========= =========
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-6-
<PAGE> 7
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Period Ended Year Ended Year Ended
06/30/00 12/31/99 12/31/98
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From
Operating Activities:
Net Profit (Loss) $ (719,686) $ (364,942) $ (905,231)
------------ ------------ ------------
Adjustments to Reconcile
Net Loss to Net Cash
Provided by Operating Activities
Net Cash Provided by
Operating Expenses:
Increase (Decrease) In:
Accounts payable (251,198) 57,387 (197,362)
Taxes payable, accrued
wages, accrued interest (19,950) -0- -0-
Judgment payable -0- -0- (200,909)
Accrued judgment interest -0- -0- (94,902)
Stipulation payable (225,000) -0- 225,000
Adjustment to retained earnings
for subsidiary adjustment 53,470 3,595 229,518
Deferred income 140,000 -0- -0-
------------ ------------ ------------
Net Cash Provided by
Operating Activities: (302,678) 60,982 (38,655)
------------ ------------ ------------
Cash Flows From
Investing Activities:
(Increase) Decrease in current assets (200,323) -0- -0-
(Increase) Decrease in fixed assets (52,277) 100,000 (100,000)
(Increase) Decrease in other assets (22,825,451) 263,579 (219,694)
------------ ------------ ------------
Net Cash Used In
Investing Activities: (23,078,051) 363,579 (319,694)
------------ ------------ ------------
Cash Flows From
Financing Activities:
Proceeds from sale of common stock 19,326 (3,250) 4,570
Capital contribution from shareholders 23,975,924 (56,330) 863,810
Loans from officers 206,192 -0- -0-
(Payment of) proceeds from debt (95,250) -0- 395,250
------------ ------------ ------------
Net Cash Received From
Financing Activities: 24,106,192 (59,580) 1,263,630
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH 5,777 39 50
Cash Beginning of Periods 89 50 -0-
------------ ------------ ------------
Cash End of Periods 5,866 89 50
============ ============ ============
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-7-
<PAGE> 8
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
---------- ------ ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 3,188,163 3,188 1,417,635 (1,598,674) (177,851)
Common stock issued at $0.50
per share to consummate
settlement re: Williams
and Bickel 30,000 30 14,970 -0- 15,000
Adjustment to retained
earnings -0- -0- -0- 229,518 229,518
Common stock issued at
$1.00 per share into escrow
(earned portion only) for
acquisition of Whitfield
Holdings, Ltd. 3,200,000 3,200 156,380 -0- 159,580
Common stock issued for
services rendered incident
to the acquisition of
Whitfield Holdings, Ltd. 800,000 800 -0- -0- 800
Common stock issued at $0.50
per share in New York
private placement 50,000 50 24,950 -0- 25,000
Contribution of paid-in
capital from former Whitfield
shareholder and PAN escrow
shareholder (Note 8) -0- -0- 177,750 -0- 177,750
Common stock issued at
$1.00 per share pursuant to
S-8 Offering, December 1998 490,250 490 489,760 -0- 490,250
Net income (loss) for the
period ended
December 31, 1998 -0- -0- -0- (905,231) (905,231)
---------- ------ -------- - --------
BALANCE, DECEMBER 31, 1998 7,758,413 7,758 2,281,445 (2,274,387) 14,816
========== ====== ======== ========== ========
Cancellation of 3,200,000
shares for fraud and
failure of consideration
August 1999 (3,200,000) (3,200) (156,380) -0- (159,580)
Cancellation of 50,000
shares for fraud and
failure of consideration
August 1999 (50,000) (50) 50 -0- -0-
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-8-
<PAGE> 9
SEARCHHOUND.COM, INC., INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid In Accumulated
Shares Amount Capital Deficit Totals
---------- ------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net income (loss) for the
period ended
December 31, 1999 -0- -0- -0- (364,942) (364,942)
Adjustment to retained
earnings for subsidiary
adjustment -0- -0- -0- 115,596 115,596)
---------- ------ ---------- ---------- -----------
BALANCE, DECEMBER 31, 1999 4,508,413 4,508 2,125,115 (2,523,733) (394,110)
========== ====== ========== ========== ===========
500,000 shares of common
stock issued at $1.00 per
share pursuant to S-8
Offering, April 26, 2000 500,000 500 499,500 -0- 500,000
475,917 shares of
common stock issued at
for a $395,250 debt
settlement, May 4, 2000 475,917 476 394,774 -0- 395,250
13,500,000 shares of
common stock issued at
$1.00 per share for
purchase of SearchHound,
April 14, 2000 13,500,000 13,500 13,486,500 -0- 13,500,000
4,850,000 shares of
common stock issued at
$2.00 per share for
purchase of SoloSearch,
May 4, 2000 4,850,000 4,850 9,695,150 (64,397) 9,635,603
Net income (loss) for the
period ended
June 30, 2000 -0- -0- -0- (719,686) (719,686)
---------- ------ ---------- ---------- -----------
BALANCE, JUNE 30, 2000 23,834,330 23,834 26,201,039 (3,307,816) (22,917,057)
</TABLE>
The accompanying notes are an integral parts of these financial statements.
-9-
<PAGE> 10
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting
The Company was organized as Jilly Bear & Company, Inc., under the laws of the
State of Delaware on February 13, 1986, for the primary purpose of merchandising
a line of plush soft sculpture teddy bears, penguins, ducks and related motif
items. The Company closed its retail store, liquidated its remaining inventory
and ceased operations in March, 1988. On June 30, 1991, Nutec Transmission,
Ltd., and Jilly Bear merged into a resulting Texas corporation. Aster
Development Enterprises, Ltd., was organized as a private Texas corporation on
August 6, 1992. Following the rescission of the merger between Nutec and Jilly
Bear on June 1, 1992, Aster Development became the successor of Jilly Bear and
the vehicle for the continued corporate existence in Delaware of the former
Jilly Bear. Aster Development had been inactive from June 1, 1992, until March
1993.
On March 4, 1993, the name of the Company was changed from Aster Development
Enterprises, Ltd., to PAN Environmental Corporation and the Company acquired all
of the outstanding common stock of Northwest Specialties, Inc., a Minnesota
corporation; Advantage Parking Lot Service, Inc., a California corporation; and
MRR Construction Services, Inc., a California corporation. The Company issued a
total of 2,650,000 shares of common stock for the acquisition of these three
corporations in a reorganization accounted for as a reverse acquisition, whereby
the shareholders of a privately owned corporation or corporations obtained
controlling ownership interest in a previously inactive or dormant public
"shell" corporation. October 11, 1993, the directors of PAN Environmental
Corporation and its three affiliated companies agreed to reduce by 50% the
number of shares of common stock which was originally issued for the
acquisition. The net result of the shares of common stock issued in the business
combination was 1,325,000 shares. PAN Environmental Corporation changed its
fiscal year from January 31st to December 31st and reincorporated in the State
of Delaware.
PAN Environmental Corporation (PAN) was in the business of acquiring and
supervising the operations of businesses engaged in the reclamation, remediation
and recycling of industrial waste materials and by-products. PAN provided its
affiliated operating companies with financing and management services including
accounting, planning, budgeting, computer information systems, human resources
management, contract bonding and liability insurance. The Company also provided
technical environmental management support to its operating companies. PAN's
principal offices are in Shoreline, Washington.
Advantage Parking Lot Service, Inc. (incorporated in the State of California on
February 19, 1986) was engaged in the manufacturing and sale of asphalt-based
slurry sealants. Advantage applied the slurry sealants to asphalt surfaces,
primarily parking lots. Advantage also had a tank cleaning operation which
decontaminated portable commercial lubricant tanks. The slurry-sealer
manufacturing plant is located in Fontana, California. Advantage had ten
employees.
Northwest Specialties, Inc. (incorporated in 1993) reclaimed timber (poles,
ties, etc.) and commodity metals, primarily from obsolete railroad
telecommunications and signaling systems. The Company operated in the Midwest
and Rocky Mountain regions of the United States, and worked on active and
inactive railroad right-of-ways. The poles, other wood products, and wiring were
then sorted, graded and processed for resale.
MRR Construction Services, Inc. (incorporated in 1992, but inactive until 1993)
performed environmental construction management and related construction
activities, as well as soil remediation, in Southern California. MRR employed
its president and a project manager-superintendent. The majority of the contract
work was performed by subcontractors. Daily administrative support work was
provided by personnel at Advantage Parking Lot Service, Inc.
-10-
<PAGE> 11
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
PAN divested itself of its three subsidiaries, Advantage Parking Lot Service,
Inc., Northwest Specialties, Inc. and MRR Construction Services, Inc., effective
January 2, 1995.
In November and December 1995, the Company attempted to acquire oil and gas
properties in a business combination agreement with Maximum Resources, Inc., a
Vancouver Stock Exchange company, and two other companies, NP Energy
Corporation, a U. S. over the counter electronic bulletin board (OTC:BB)
company, and Polaris Equities, Inc., a U. S. private company.
The form of business combination agreement would have taken the following form:
each of the above three oil and gas companies would set up a U. S. subsidiary
into which they would vend in selected oil and gas properties. These three
subsidiaries would then be acquired in a reverse takeover transaction wherein
the Company would issue 4,000,000 new restricted Rule 144 common shares each to
Maximum, NP and Polaris in exchange for acquiring one hundred percent (100%) of
the issued and outstanding common shares of their three U. S. subsidiaries.
Since the Company did not have the necessary funds to do its accounting, audits,
10-Q's, 10-K's and legal work, Maximum, NP and Polaris agreed to advance the
necessary funds to complete the work. In March and April 1996, Maximum, NP and
Polaris defaulted on their obligations to advance the necessary funds and the
proposed business combination agreements were never consummated.
The Company raised $40,000 in December 1996 in a small private placement from
shareholders of the Company and proceeded to complete its accounting, audits,
10-Q's and 10-K's for December 31, 1994 through December 31, 1997, thus bringing
the Company into SEC compliance on February 22, 1998.
The Company in January 1998 sought to enter into a letter of intent to acquire
an Internet services company, but the letter of intent was never consummated.
On February 20, 1998 the Company reached an agreement in principle to acquire
Winner's Way, Inc., an offshore race and sports book, subject to review and
approval of the financial statements of Winner's Way, Inc. by the Board of
Directors of the Company. After careful consideration, the company's Directors
decided that such acquisition would not be in the Company's best interests.
On May 22, 1998 the Company acquired Whitfield Holdings, Ltd., an Antiguan
corporation, in the business of purchasing and licensing-back gaming systems
from legally licensed offshore race and sports books. Whitfield's initial
licensee is Tropical International Sports, Inc., an Antiguan corporation,
legally licensed as an Antiguan race and sports book. The gaming system license
agreement provided for a quarterly payment of 2.4% of gross betting volume.
(See Note 10.)
On June 30, 1998 the Company acquired and licensed-back the gaming system from
Way Communications Race and Sports Book and moved it to Antigua on July 17, 1998
to be operated by Tropical International Sports, Inc. The purchase price was
$380,000, the terms for which were $160,000 down and a non-interest bearing note
for the balance payable at $10,000 per month. The Company deducted this purchase
price from its loans receivable to Tropical International Sports, Inc. subject
to proof of payment. These amounts were never paid by Tropical and the loans
receivable account from Tropical have been increased accordingly. (See Note 9.)
-11-
<PAGE> 12
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
In conjunction with the acquisition of Whitfield Holdings, Ltd. and its on going
operations, the Company filed and has conducted a 506 Regulation D offering in
the State of New York. The offering consisted of convertible notes, of which
$391,250 had been received and convertible notes issued as of December 31, 1998.
In addition, the company received $177,750 from a former Whitfield shareholder
and current PAN escrow shareholder which was allocated as additional paid-in
capital. Substantially all of this money was loaned to Tropical International
Sports, Inc. in conjunction with Whitfield's gaming system license agreement
with Tropical.
As of December 31, 1998 it became evident that Tropical was going to default on
repayment of $566,805 of loans and on payment of an estimated $499,091 of
license fees to Whitfield.
On January 15, 1999 the Company announced legal action to collect monies due
from Tropical subsequent to a demand letter for payment of such amounts from
which the Company received no response. The Company retained attorneys in both
Antigua and Washington, DC to investigate and pursue the Company's claims
against Tropical. Tropical is in default on all agreements and PAN has filed a
lawsuit against Tropical, Whitfield Holdings, Ltd., Timothy S.
Shiah, and Thomas D. DiNola. (See Note 15.)
On May 4, 2000, PAN International Gaming, Inc. approved settlement agreements
which resulted in the Company issuing 475,917 shares in full satisfaction of
$395,250 in convertible notes. The Company also dismissed its case against
Tropical, Whitfield, Timothy S. Shiah and Thomas D. DiNola. Mutual releases were
executed by Shiah and the Company in conjunction with the dismissal.
Effective June 1, 2000, pursuant to an Agreement and Plan of Business
Combination dated as of April 14, 2000, PAN International Gaming, Inc.,
purchased all of the issued and outstanding capital stock of SearchHound.com
2000, Ltd., a Nevada corporation ("SearchHound"), for an aggregate of 13,500,000
shares of common stock. The foregoing transaction resulted in the issuance of
71% of the issued and outstanding shares of PAN International Gaming, Inc. to 22
record holders of SearchHound. The amount of consideration paid and received was
negotiated by the parties to the Plan of Business Combination and may have no
relationship to commercial, economic or fair market value of any tangible or
intangible assets. In evaluating the transaction, the company considered
criteria such as the value of the assets of SearchHound, SearchHound's ability
to compete in its markets and the current and anticipated business operations of
SearchHound. SearchHound.com is a 3-year old Internet property that brought the
Internet its first child content filtering search engine. SearchHound has
developed its brand name with the assistance of its logos "Let the Hounds Loose"
and "You show me your SearchHound I'll show you mine!" for searching the
Internet. Through its database of over 500,000 webmasters, SearchHound hopes to
become the search engine of choice for those seeking content over the Internet.
Effective July 11, 2000, pursuant to a Stock Purchase Agreement dated as of May
4, 2000, PAN International Gaming, Inc., a Nevada corporation, purchased all of
the issued and outstanding capital stock of SoloSearch.com, Inc., a Missouri
corporation ("SoloSearch), from Cohen Capital Technologies, L.L.C., a Missouri
limited liability company, Kirk C. Reivich, an individual, and October Capital,
L.L.C., a Missouri limited liability company, for an aggregate of 4,850,000
shares of common stock and an aggregate of $300,000 cash. The foregoing
transaction resulted in the issuance of 20.3% of the issued and outstanding
shares of PAN International Gaming, Inc. The amount of consideration paid and
received was negotiated by the parties to the Stock Purchase Agreement and may
have no relationship to commercial, economic or fair market value of any
tangible or intangible assets. In evaluating the transaction, the company
considered criteria such as the value of the assets of SoloSearch, SoloSearch's
ability
-12-
<PAGE> 13
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 1. Organization and Basis of Accounting - continued
to compete in its markets and the current and anticipated business operations of
SoloSearch. Founded in 1999, Kansas City-based SoloSearch.com is an intelligent
Internet search and content management tool.
Note 2. Summary of Significant Accounting Policies
This summary of significant accounting policies of PAN International Gaming,
Inc. (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 their integrity and objectivity. These
accounting policies conform to generally accepted accounting principles and have
been consistently applied in the preparation of the financial statements.
Plan of Operation
SearchHound.com is a three-year old community and search engine with a loyal
following, currently the site has over 500,000 community members, and is
generating over 5,000,000 (estimated) banner impressions per month across its
entire network. SearchHound targets its products and services to webmasters and
content-based websites and provides an array of revenue sharing opportunities
to this group. It is deployed via the SearchHound b2b2c website powered by the
SoloSearch Intelligent Search Engine.
Revenue for the company is generated on a multi-faceted internet b2b, b2c,
b2b2c, model of licensing, monthly service fees, revenue sharing, advertising,
marketing products and services, strategic marketing partnerships, affiliate
programs, and synergistic joint ventures and acquisitions.
The company currently licenses its SoloSearch customized search technology to
content-based websites who, by utilizing its Intelligent Research Management
Solution obtain advanced real time search results. In addition to the license
fee there is a monthly service fee component to host, support, monitor, and
report client activity. Advertising, products, and services revenue is
generated through the search process on each of the client's websites for the
company. In some instances, the company shares the revenue with its website
customers to encourage additional user traffic plus creating additional revenue
opportunities for the company. Virtually, every website on the Internet is a
potential client of the SoloSearch search engine application. SearchHound.com
is a public search engine that is accessible to every user of the Internet. As
such, revenue is generated when users purchase products and services advertised
on the search engine site. In addition, SearchHound.com has developed a revenue
model whereby; websites who have listed their URL (address) within the search
engine can schedule financial bids in order to have their URL ranked higher in
the response category of results. Competitive bidding and user "click throughs"
results in additional revenue to the company. Banner advertising is still a
viable revenue generating activity. SearchHound.com selects appropriate and
relevant banner advertisements to appear on its main site and all affiliate
sites that host the SearchHound.com link. Additionally, affiliate programs
generate revenue for the company. SearchHound.com has its own affiliate program
whereby websites and webmasters can link back to the SearchHound.com site by
promoting products and services that are marketed via the site. There is a
revenue sharing program, which compensates the Affiliate thus encouraging
additional traffic and additional revenue opportunity for the company.
SearchHound.com owns and maintains a proprietary list of webmasters who have
registered their URL and email addresses with the site. This list is now in
excess of 500,000 names representing more than one million URL addresses. The
company has developed the "HOWL Newsletter" which it communicates through to
this enormous community of webmasters. The company has the right to and intends
to market and advertise to this community on a frequent basis. The company has
contracted with a third-party advertising firm to secure direct advertising
campaigns and market directly to this community creating a significant revenue
opportunity for the company. Additionally, the company has the right to and
intends to market directly to this community, selected marketing campaigns for
relevant products and services.
Acquisition of SearchHound and SoloSearch
The acquisitions of SearchHound 2000, Ltd. and SoloSearch.com, Inc. were
accounted for on a purchase basis. All intercompany accounts have been
eliminated. The value of the stock paid for such acquisitions in excess of the
net book value of SearchHound and SoloSearch was booked as goodwill.
Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
short-term debt securities purchased with a maturity of three months or less to
be cash equivalents.
Property and Equipment
Property and equipment are stated at the lower of cost or fair market value.
Depreciation is computer for financial statement purposes as well as for federal
income tax purposes using the MACRS (Modified Accelerated Cost Recovery System)
method of depreciation. Furniture is depreciated over seven years; equipment is
depreciated over five years; software is amortized over three years and
leasehold improvements are depreciated over 39.5 years.
Income Taxes
The Company has not filed any tax returns since inception. It is anticipated
that if tax returns were filed, the company would have net operating losses. The
current deficit of $2,635,734 at December 31, 1999 would potentially create a
similar net operating loss. None of these losses would be available to the
Company because of the change in ownership of the Company.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
effect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
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<PAGE> 14
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 3. Judgments Payable
The Company also defaulted in a share repurchase agreement with a stockholder of
the Company, resulting in a default judgment in 1995 in the amount of $200,909.
The judgment bears interest at the rate of 25% per annum on $161,250 (principal
portion) and 18% per annum on $39,659 (interest, attorney fee and costs
portion). As of February 12, 1999, the $200,909 judgment was vacated in exchange
for a $225,000 stipulation bearing interest at the rate of 8-1/2% which shall be
due and payable January 31, 2000. The $94,902 of accrued judgment interest was
settled through the transfer of 189,804 shares held by Douglas Millard, Escrow
Agent.
The $225,000 stipulation payable was paid in May, 2000 from the sale of stock
held in escrow. A sale which paid off the stipulation was arranged incident to
but prior to the acquisition of SearchHound. The accrued interest was waived.
Kenneth Williams and Robert Bickel sued MRR, a former subsidiary of the Company,
and the Company in 1995 for alleged consulting fees owed for 1993 and 1994 and
obtained default judgments against the Company in the amounts of $121,809 and
$122,709 respectively. In a settlement agreement Williams and Bickel received
80,000 shares and an adjustment to retained earnings was made in the amount of
$229,518, the net settlement amount.
Note 4. Prepaid Expense
The Company accrued $32,500 of salaries payable in the three months ended
December 31, 1999 to the Company's officers, which was settled for stock
pursuant to the S-8 Registration Statement filed October 2, 1998. Stock
settlements for wages were accounted for as prepaid expense. (See Note 12.)
Note 5. Stockholders' Equity and Capital Stock
The Company issued 500,000 shares of common stock on May 9, 2000 for $500,000
for internet and other consulting services and salaries pursuant to an S-8
registration filed April 26, 2000.
The Company issued 475,917 shares of common stock in full satisfaction of the
Company's $395,250 convertible notes payable.
The Company issued 13,500,000 shares of its common stock for the 100%
acquisition of SearchHound 2000 Ltd.
The Company issued 4,850,000 shares of its common stock plus a 300,000 cash
payment agreement for the 100% acquisition of SoloSearch.com, Inc.
Earnings (losses) per share were calculated on the number of shares outstanding
at the end of the period and the end of prior years.
Note 6. Going Concern
Because of a deficiency in working capital and significant operating losses,
there is doubt about the ability of the Company to continue in existence unless
additional working capital is obtained. The Company currently has plans to raise
sufficient working capital through equity financing and through the acquisition
of companies having sufficient assets and cash flow to enable the Company to be
self-sufficient and profitable.
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<PAGE> 15
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 7. Other Expense
The Company advanced $5,000 to an Internet services company in the first quarter
of 1998 pursuant to a proposed letter of intent to acquire, but the letter of
intent was never consummated. The Company wrote off the $5,000, being unable to
recover the advance.
Note 8. Convertible Notes
The Company filed and conducted a private offering under Rule 506 of Regulation
D in the State of New York. The offering consisted of convertible notes, of
which $391,250 had been received and convertible notes issued as of December 31,
1998. The notes are all due December 31, 1999 and subject to a call by the
Noteholder for prepayment at any time subsequent to September 30, 1998; $85,000
of the notes are convertible into restricted Rule 144 common stock of the
Company at $0.50 per share, and $306,250 of the notes are convertible into
restricted Rule 144 common shares of the Company at $0.75 per share.
Substantially all of the $391,250 was loaned to Tropical International Sports,
Inc. and were part of the Company's claim against Tropical.
On May 4, 2000, PAN International Gaming, Inc. approved settlement agreements
which resulted in the Company issuing 475,917 shares in full satisfaction of
$395,250 in convertible notes. The Company also dismissed its case against
Tropical, Whitfield, Timothy S. Shiah and Thomas D. DiNola. Mutual releases were
executed by Shiah and the Company in conjunction with the dismissal. A further
provision of the debt settlement agreements provided a 90-day option for the
Company or someone selected by the company to purchase the 475,917 shares for
$395,250 provided that the assignee of the options also agrees to pay
approximately $14,000 in attorneys fees due Joe Paykin, the Company's attorney
for this matter. There being no one else available to undertake this obligation,
and pursuant to a resolution by the Company's Board of Directors, the Company
assigned the option and the obligation to pay for attorneys fees to Bristol
Media, Ltd., a British Columbia corporation owned by Jerry Cornwell, President
and Director of the Company.
Note 9. Loans Receivable - Tropical
The Company through its wholly owned subsidiary, Whitfield Holdings, Ltd., made
loans to Whitfield's race and sports book licensee, Tropical International
Sports, Inc., of $566,805 from which it deducted $380,000 for the acquisition of
the gaming system from Way Communications, Inc. subject to the actual proof of
payment from Tropical. Tropical took over operation of the Way Communications
race and sports book as of July 17, 1998. Tropical never paid Way
Communications, Inc. and therefore, as of December 31, 1998 the outstanding
balance was $566,805 after adding back in the $380,000. A reserve for bad debts
has been set up in the same amount, thus zeroing out this item as an asset.
Note 10. License Fees Receivable - Tropical
The Company is owed license fees receivable of $211,091 composed of $37,090 for
nine days operations in May 1998 which ended the first contract fiscal quarter
of operations; $174,001 for the three months operations in June, July and August
1998 which ended the second quarter of operations; and $288,000 in estimated
license fees receivable for the four months operations in September October,
November and December which ended the third quarter's and one month of the
fourth quarter's operations. These amounts totaling $499,091 have been accrued
on the Company's books and have not been paid as of December 31, 1998. A reserve
for bad debts has been set up in the same amount, thus zeroing out this item as
an asset.
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<PAGE> 16
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
Note 11. Gaming System Hardware and Software - Tropical
The Company cannot locate the $100,000 of gaming system hardware and software
and believes it was taken out of Antigua or sold. A reserve for bad debts has
been set up in the same amount, thus zeroing out this item as an asset.
Note 12. S-8 Offering
On October 2, 1998 the Company filed an S-8 Registration Statement with the SEC
registering the issuance of a total of 490,250 shares including 1) 50,000 shares
to Forte' Communications, Inc. for $50,000 of public relations; 2) 6,250 shares
to Kaufman & Associates, Inc. for $6,250 of finders fees incident to the Forte'
transaction; 3) 50,000 shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for
$50,000 of services rendered incident to the Whitfield acquisition; 4) 96,000
shares to TCKTS, L.L.C. dba Bristol Media, Ltd. for 24 months of investor
relations services at the rate of $4,000 per months which commenced January 1,
1998; 5) 120,000 shares to Jerry Cornwell, 100,000 shares to Clifford M.
Johnston and 40,000 shares to Judy Morton Johnston for 24 months of wages and
salaries commencing July 1, 1998 at the rate of $60,000 per year to Jerry
Cornwell, President, $50,000 per year to Clifford M. Johnston, Vice President,
and $20,000 per year to Judy Morton Johnston, Assistant Secretary/Assistant
Treasurer; and 6) 28,000 shares to Quality Tax Service, Inc. for two years of
quarterly administration and accounting services at the rate of $3,500 per
quarter commencing January 1, 1998. The shares were issued to prevent cash flow
drain to the Company until the Company has sufficient capital for pay for needed
services.
On April 26, 2000 the Company filed an S-8 Registration Statement with the SEC
registering the issuance of a total of 500,000 shares for services rendered or
services to be rendered on behalf of the company including 1) 100,000 shares to
Clifford M. Johnston through an employment agreement dated April 15,2000; 2)
125,000 shares to Jerry Cornwell through an employment agreement dated April 15,
2000; 3) 55,000 shares to Tony Zitko through an employment agreement; 4) 50,000
shares to John Young through an employment agreement; 5) 25,000 shares to Judy
Morton Johnston through an employment agreement; 6) 20,000 shares to Brad Cohen
through an employment agreement; 7) 75,000 shares to Naomi Hope through a
consulting agreement; 8)50,000 shares to Constance Swedberg through a consulting
agreement. The shares were issued to prevent cash flow drain to the Company
until the Company has sufficient capital for pay for needed services.
Note 13. Change of Name and Corporate Domicile by Way of Merger
In December 1998 the Company concluded a merger with PAN International Gaming,
Inc., a new Nevada corporation, on the basis of a one-for-one exchange of shares
which resulted in a change of name from PAN Environmental Corporation to PAN
International Gaming, Inc. along with a change of corporate domicile from
Delaware to Nevada.
In June 2000 the Company concluded the acquisition of SearchHound 2000, Ltd., a
new Nevada corporation which resulted in a change of name from PAN International
Gaming, Inc. to SearchHound.com, Inc.
Note 14. Certain Transactions
The Company had an investor relations contract for the period beginning January
1, 1998 through December 31, 1999 with TCKTS, L.L.C. dba Bristol Media, Ltd.,
which is owned by Jerry Cornwell, President and Director of the Company, and
Clifford M. Johnston, Vice President and Director of the Company. The contract
is on terms equal to or better than industry standards for such contracts.
The Company also had a consulting agreement for the period beginning January 1,
1998 through December 31, 1999 with Quality Tax Service, Inc., which is owned by
Clifford M. Johnston, Vice President and Director of the Company, and Judy
Morton Johnston, Assistant Secretary/Assistant Treasurer of the Company. The
contract is on terms equal to or better than industry standards
-16-
<PAGE> 17
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
for such contracts. On May 4, 2000, PAN International Gaming, Inc. approved
settlement agreements which resulted in the Company issuing 475,917 shares in
full satisfaction of $395,250 in convertible notes. The Company also dismissed
its case against Tropical, Whitfield, Timothy S. Shiah and Thomas D. DiNola.
Mutual releases were executed by Shiah and the Company in conjunction with the
dismissal. A further provision of the debt settlement agreements provided a
90-day option for the Company or someone selected by the company to purchase the
475,917 shares for $395,250 provided that the assignee of the options also
agrees to pay approximately $14,000 in attorneys fees due Joe Paykin, the
Company's attorney for this matter. There being no one else available to
undertake this obligation, and pursuant to a resolution by the Company's Board
of Directors, the Company assigned the option and the obligation to pay for
attorneys fees to Bristol Media, Ltd., a British Columbia corporation owned by
Jerry Cornwell, President and Director of the Company.
Note 15. Litigation - Tropical
On January 15, 1999 the company announced that the previously reported failure
to pay accrued amounts owed to its wholly owned subsidiary, Whitfield Holdings,
Ltd. by Tropical International Sports, Inc., its race and sports book licensee,
has continued and is now in default.
The Company sent a demand letter to Tropical for immediate payment of $566,805
in loans, more than $200,000 in license fees through August 31, 1998 and an
unverified amount of license fees and the related accounting for the period
ended November 30, 1998. The Company received no response to its demand for
payment.
On August 25, 1999 the Company filed a lawsuit in the United States District
Court, Southern District of New York, against Tropical, Whitfield Holdings,
Ltd., Timothy S. Shiah and Thomas D. DiNola alleging common law fraud,
securities fraud, conversion, breach of contract, tortious interference and
seeking $8,000,000 in damages from the various causes of action. Timothy S.
Shiah is counterclaiming against the Company for damages of$500,000 which the
Company believes is absolutely without merit.
The Company retained attorneys in both Antigua and Washington, DC to investigate
and pursue the Company's claims against Tropical.
In the meantime, the Company's accounting reflects that all loans receivable and
all license fees receivable have been written off as a bad debt.
In May 2000, the Company settled out the $395,250 in convertible notes for
475,917 shares of common stock. Concurrent with this settlement of convertible
notes, the Company also settled with Timothy S. Shiah dismissing with prejudice
both the Company's lawsuit and Shiah's $500,000 counterclaim.
Note 16. Executive Employment Agreement
In connection with the acquisition of SearchHound 2000 Ltd. and SoloSearch.com,
Inc. the Board of Directors on July 12, 2000 approved and adopted the employment
agreement between Dave L. Mullikin and SearchHound 2000 Ltd. retroactive to its
effective date of April 27, 2000 to SearchHound.com, Inc. making Dave L.
Mullikin the President and CEO of SearchHound.com, Inc. The agreement is
incorporated herein as an Exhibit.
Note 17. Subsequent Events
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<PAGE> 18
SEARCHHOUND.COM, INC.
(FORMERLY PAN INTERNATIONAL GAMING, INC.)
AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2000 AND DECEMBER 31, 1999 AND 1998
--------------------------------------------------------------------------------
On August 9, 2000, management of the Company learned of a claim by Mark Joyner
(the "Former Owners") against SearchHound.com 2000 Ltd. Pursuant to an Asset
Purchase Agreement and Amendment (collectively, the "Website Asset Agreement")
between the Former Owners and SearchHound 2000 Ltd., on June 1, 2000 the Former
Owners sold certain of the website assets now comprised within the Company's
Searchhound website to SearchHound.com 2000 Ltd. As discussed in Note 1, the
Company's predecessor, PAN International Gaming, Inc., purchased all of the
capital stock of SearchHound.com 2000. Ltd. effective June 1, 2000. The Company
currently uses and substantially depends upon these websites assets in the
operation of its business.
The Company understands that the claims pressed by the Former Owners under the
Website Asset Agreement arise over purported (i) non-payment of cash
installments aggregating $100,000 owed to them by SearchHound. com, 2000 Ltd.,
(ii) failure by SearchHound.com 2000 Ltd. to deliver to them collateral in the
form of 1,500,000 shares of unregistered common stock of the Company (as
successor to SearchHound.com 2000 Ltd.) to be held as security for the full
payment of obligations owed to them under the Website Asset Agreement and (iii)
failure by SearchHound.com 2000 Ltd. to deliver to them warrants to purchase
the equivalent of 200,000 shares of common stock of the Company (as successor
to SearchHound.com 2000 Ltd.) at $5.00 per share.
The Company has been informed by Max Herndl, a former stockholder of
SearchHound.com 2000 Ltd., that the former stockholders of SearchHound.com 2000
Ltd. have discussed the claims with the Former Owners, and have agreed in
principle that (i) the $100,000 payment would be paid by the former stockholders
of SearchHound.com 2000 Ltd. within 10 days of this Report and (ii) the former
stockholders of SearchHound.com 2000 Ltd. would deliver the 1,500,000 shares of
unregistered common stock of the Company (from shares issued to them by the
Company in connection with the Company's acquisition of SearchHound.com 2000
Ltd.), and (iii) warrants to purchase 200,000 shares within 10 days of this
Report.
The Company has been informed by Mark Joyner, but at this time it has no other
assurance, that the Former Owner's claims would be resolved upon receipt of the
timely deliveries referenced in the prior paragraph. The failure to make such
deliveries could have a material adverse impact to the Company's financial
condition and business to the extent that its liability as successor to
SearchHound.com 2000 Ltd. is not wholly indemnified by the former stockholders
of SearchHound.com 2000 Ltd. and/or the Former Owners are successful in
recovering the website assets conveyed as a remedy. The Company will monitor
this situation and intends to aggressively pursue its remedies against the
former stockholders of SearchHound.com 2000 Ltd. and other parties if
appropriate, should the Former Owner's claim not be resolved or satisfactorily
settled within the next 10 days.
-18-
