page 12
<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONTENTS
PAGE 1 - ACCOUNTANTS' REVIEW REPORT
PAGES 2 - 3 - CONSOLIDATED BALANCE SHEET AS
OF MARCH 31, 1999
PAGE 4 - CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' EQUITY FOR THE SIX MONTHS
ENDED MARCH 31, 1999
PAGE 5 - CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
PAGES 6 - 7 - CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
PAGES 8 - 19 - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
<PAGE>
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors of:
Kanakaris Communications, Inc.
We have reviewed the accompanying consolidated balance sheet of Kanakaris
Communications, Inc. and Subsidiary as of March 31, 1999 and the related
consolidated statements of operations, changes in stockholders' equity and
cash flows for the six months ended March 31, 1999 in accordance with
Statements on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. All information included
in these financial statements is the representation of management of
Kanakaris Communications, Inc. and Subsidiary.
A review consists principally of inquiries of company personnel and
analytical procedures applied to financial data. It is substantially less in
scope than an audit in accordance with generally accepted auditing standards,
the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express any
such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to the accompanying financial statements in order for them to
be in conformity with generally accepted accounting principles.
WEINBERG & COMPANY, P.A.
Boca Raton, Florida
June 30, 1999
<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 102,795
Accounts receivable 122,737
Inventory 5,493
Advances to suppliers 15,418
Current maturities of notes
receivable-shareholders and
related parties 36,280
Interest receivable 22,091
Prepaid expenses and other current assets 6,623
----------
Total Current Assets 311,437
----------
PROPERTY AND EQUIPMENT
Furniture and equipment 23,037
Less: Accumulated depreciation (9,229)
----------
Total Property and Equipment 13,808
----------
OTHER ASSETS
Notes receivable - shareholders and
related parties - non-current 210,753
Organization costs - net 1,750
Security deposits 700
Goodwill - net of amortization 328,050
----------
Total Other Assets 541,253
----------
TOTAL ASSETS $ 866,498
----------
----------
</TABLE>
See accompanying notes to financial statements.
2
<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
MARCH 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 525,812
Notes payable 22,474
Due to former shareholder of subsidiary 44,176
Royalties payable 29,028
Customer deposits 91,205
----------
Total Liabilities 712,695
----------
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value;
5,000,000 shares authorized;
1,000,000 issued and outstanding 10,000
Common stock, $0.001 par value;
100,000,000 shares authorized;
22,996,972 issued and outstanding 22,997
Common shares to be issued,
1,340,140 1,340
Additional paid-in capital 1,657,691
Accumulated deficit (1,335,045)
Less subscriptions receivable
(1,260,000 shares, common) (1,260)
----------
Total paid-in capital and
retained earnings 355,723
Less cost of treasury stock
(99,024 shares, common) (201,920)
----------
TOTAL STOCKHOLDERS' EQUITY 153,803
----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 866,498
----------
----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
COMMON STOCK TO BE ISSUED PREFERRED STOCK PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
---------- -------- --------- -------- --------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1998 19,179,636 $19,179 1,340,140 $1,340 1,000,000 $10,000 $1,250,019 $ (916,937)
Stock Issued For:
Consulting fees 150,000 150 - - - - - -
Advertising services 100,000 100 - - - - - -
504 offering 3,367,336 3,368 - - - - 407,672 -
Legal services 200,000 200 - - - - - -
Net loss for the six
months ended March 31, 1999 - - - - - - - (418,108)
---------- ------- --------- ------ --------- ------- ---------- -----------
BALANCE, MARCH 31, 1999 22,996,972 $22,997 1,340,140 $1,340 1,000,000 $10,000 $1,657,691 $(1,335,045)
---------- ------- --------- ------ --------- ------- ---------- -----------
---------- ------- --------- ------ --------- ------- ---------- -----------
<CAPTION>
TREASURY STOCK
STOCK SUBSCRIPTIONS
AMOUNT RECEIVABLE TOTAL
--------- ------------- ---------
<S> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1998 $(201,920) $(1,260) 160,421
Stock Issued For:
Consulting fees - - 150
Advertising services - - 100
504 offering - - 411,040
Legal services - - 200
Net loss for the six
months ended March 31, 1999 - - (418,108)
--------- ------- ---------
BALANCE, MARCH 31, 1999 $(201,920) $(1,260) $ 153,803
--------- ------- ---------
--------- ------- ---------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
<TABLE>
<S> <C>
NET SALES $ 356,199
COST OF SALES 202,842
----------
GROSS PROFIT 153,357
----------
OPERATING EXPENSES
Executive compensation 50,750
Salaries 22,704
Payroll taxes and employee benefits 6,998
Consulting fees 229,602
Professional fees 83,200
Investment costs 44,872
Office supplies and expense 24,526
Telephone and utilities 20,184
Subcontractor costs 17,660
Depreciation and amortization 15,461
Rent 14,196
Travel and entertainment 11,886
Other expenses 8,502
Royalties 8,275
Repairs and maintenance 4,734
Equipment rental and expense 2,268
Insurance 2,013
Bank charges 1,328
Taxes - other 214
----------
TOTAL OPERATING EXPENSES 569,373
LOSS BEFORE INTEREST AND OTHER INCOME (416,016)
----------
OTHER INCOME (EXPENSE)
Interest expense - net (2,092)
Settlement agreement - attorney,
net of allowance -
----------
TOTAL OTHER (EXPENSE) (2,092)
NET LOSS $ (418,108)
----------
----------
NET LOSS PER COMMON SHARE $ (.0201)
----------
----------
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 20,805,333
----------
----------
</TABLE>
See accompanying notes to financial statements.
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