NET-TRONICS
COMMUNICATIONS
CORPORATION
(a wholly-owned subsidiary of
Universal Media Holdings, Inc.)
Financial Statements
and
Auditor's Report
March 31, 2000 and 1999
S. W. HATFIELD, CPA
certified public accountants
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NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
CONTENTS
Page
----
Accountant's Review Report F-3
Financial Statements
Balance Sheets
as of March 31, 2000 and 1999 F-4
Statements of Operations and Comprehensive Income
for the three months ended March 31, 2000 and 1999 F-5
Statements of Cash Flows
for the three months ended March 31, 2000 and 1999 F-7
Notes to Financial Statements F-8
F-2
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
ACCOUNTANT'S REVIEW REPORT
--------------------------
Board of Directors and Stockholder
Net-Tronics Communications Corporation
We have reviewed the accompanying balance sheets of Net-Tronics Communications
Corporation (a Delaware corporation) as of March 31, 2000 and 1999 and the
accompanying statement of operations and comprehensive income and statements of
cash flows for the three months ended March 31, 2000 and 1999. These financial
statements are prepared in accordance with the instructions for Form 10-QSB, as
issued by the U. S. Securities and Exchange Commission, and are the sole
responsibility of the company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression on an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the accompanying consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
S. W. HATFIELD, CPA
Dallas, Texas
May 3, 2000
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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 SWHCPA@aol.com
F-3
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
BALANCE SHEETS
March 31, 2000 and 1999
(Unaudited)
2000 1999
------- -------
ASSETS
------
Current Assets
Cash on hand and in bank $ -- $ --
------- -------
Total Assets $ -- $ --
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current Liabilities
Due to parent company $ -- $ 223
------- -------
Commitments and Contingencies
Stockholder's Equity
Common stock - $0.00001 par value
100,000,000 shares authorized
1,000,000 issued and outstanding 10 10
Additional paid-in capital 1,589 990
Accumulated deficit (1,599) (777)
------- -------
Total stockholder's equity -- 223
------- -------
Total Liabilities and Stockholder's Equity $ -- $ 223
======= =======
See Accountant's Review Report.
The accompanying notes are an integral part of these financial statements.
F-4
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
----------- -----------
Revenues $ -- $ --
----------- -----------
Expenses
General and administrative expenses 577 --
----------- -----------
Loss from operations (577) --
Provision for income taxes -- --
----------- -----------
Net Loss (577) --
Other Comprehensive Income -- --
----------- -----------
Comprehensive Income $ (577) $ --
=========== ===========
Net loss per weighted-average
share of common stock
outstanding, calculated on
Net Loss - basic and fully diluted nil nil
=========== ===========
Weighted-average number of shares
of common stock outstanding 1,000,000 1,000,000
=========== ===========
See Accountant's Review Report.
The accompanying notes are an integral part of these financial statements.
F-5
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
STATEMENTS OF CASH FLOWS
Three months ended March 31, 2000 and 1999
(Unaudited)
Three months Three months
ended ended
March 31, March 31,
2000 1999
------------ ------------
Cash Flows from Operating Activities
Net loss for the period $ (577) $ --
Adjustments to reconcile net loss to
net cash provided by operating activities -- --
------------ ------------
Net cash used in operating activities (577) --
------------ ------------
Cash Flows from Investing Activities -- --
------------ ------------
Cash Flows from Financing Activities
Cash advanced by (to) parent 577 (223)
------------ ------------
Net cash used in financing activities 577 (223)
------------ ------------
Decrease in Cash -- (223)
Cash at beginning of year -- 223
------------ ------------
Cash at end of year $ -- $ --
============ ============
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period $ -- $ --
============ ============
Income taxes paid for the period $ -- $ --
============ ============
Supplemental Disclosure of
Investing and Financing Activities
Forgiveness of amounts due to shareholder
as additional paid-in capital $ 22 $ --
============ ============
See Accountant's Review Report.
The accompanying notes are an integral part of these financial statements.
F-6
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
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.
On December 10, 1999, the Company filed a Form 10-SB, General Form for
Registration of Securities of Small Business Issuers on a voluntary basis in
order to make the company's financial information equally available to all
parties, including potential investors, and to meet certain listing requirements
for publicly traded securities.
On April 13, 2000, a change in control of the Company occurred in conjunction
with closing under an Agreement and Plan of Reorganization (the "Reorganization
Agreement") between the Company and Universal Media Holdings, Inc., a Delaware
corporation. The closing under the Reorganization Agreement consisted of a stock
for stock exchange in which the Company acquired all of the issued and
outstanding common stock of Universal Media Holdings, Inc. in exchange for the
issuance of 1,000,000 shares of its common stock. As a result of this
transaction, the Company became a wholly-owned subsidiary of the Company. The
Reorganization was approved by the unanimous consent of the Board of Directors
of Universal Media Holdings, Inc. on March 27, 2000. The Reorganization is
intended to qualify as a reorganization within the meaning of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Prior to the
Agreement, Universal Media Group had 11,209,346 shares of common stock issued
and outstanding. Following the Agreement, the Company had 11,459,346 shares of
common stock outstanding. Universal Media Holdings, Inc., was incorporated in
the State of Delaware on August 23, 1995. Upon effectiveness of the
Reorganization Agreement, pursuant to Rule 12g-3(a) of the General Rules and
Regulations of the Securities and Exchange Commission, Universal Media Holdings,
Inc. became the successor issuer to Net-Tronics Communications Corporation, Inc.
for reporting purposes under The Securities Exchange Act of 1934 and elected to
continue reporting under the Act, effective April 10, 2000.
Universal Media Holdings, Inc. has a September 30 fiscal year end. The fiscal
year of Net-Tronics Communications Corporation is December 31. As a result of
the Reorganization, as discussed above, the Company anticipates changing its
year-end to September 30 at a future date, prior to September 30, 2000. The
accompanying financial statements are presented using the Company's initial
year-end of December 31, as previously reported and included in the initial Form
10-SB filing with the U. S. Securities and Exchange Commission.
The Company is fully dependent upon its current parent company to provide
sufficient working capital to preserve the integrity of the corporate entity and
support all operating expenses. It is the intent of the parent company to
provide sufficient working capital necessary to support and preserve the
integrity of the corporate entity.
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-7
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
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 March 31,
2000 and 1999, respectively, the deferred tax asset and deferred tax
liability accounts, where applicable, were not material to the financial
statements and any deferred tax asset was fully reserved with an offsetting
valuation allowance.
Through December 31, 1998, the Company filed 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. Effective
December 31, 1999, the Company filed a separate company income tax return.
Due to the provisions of Section 338 of the Internal Revenue Code of 1986,
as amended, and the aforementioned April 2000 change in control, there are
no net operating loss carryforwards to offset future taxable income.
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 March 31, 2000 and 1999, 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 December 31, 1999, the Company's parent company had advanced funds
totaling approximately $22 for operating capital. The advances were due upon
demand and were non-interest bearing. As of March 31, 2000, the Company's former
parent contributed these advances to additional paid-in capital and had paid
operating expenses of approximately $577 on the Company's behalf, which have
also been recorded as additional paid-in capital by the Company.
F-8
NET-TRONICS COMMUNICATIONS CORPORATION
(a wholly-owned subsidiary of Universal Media Holdings, Inc.)
NOTES TO FINANCIAL STATEMENTS - CONTINUED
NOTE E - Common Stock Transactions
On December 10, 1999, the Company's Board of Directors approved a change in the
authorized number of shares which can be issued from 10,000,000 shares of
$0.00001 par value common stock and 5,000,000 shares of $0.00001 par value
preferred stock to a single class consisting of 100,000,000 shares of $0.00001
par value common stock. Further, the Board of Directors caused a 10 for 1
forward split of the issued and outstanding common stock. The effect of these
changes are reflected in the accompanying financial statements as of the first
day of the first period presented.
F-9