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KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (418,108)
Adjustments to reconcile net loss
to net cash used in
operating activities:
Amortization of goodwill 12,117
Depreciation and amortization 3,344
Consulting, legal and advertising fees
incurred in exchange for common stock 450
Changes in assets and liabilities
(Increase) decrease in:
Accounts receivable (4,264)
Inventory 4,629
Prepaid expenses and other current assets (6,623)
Advances to suppliers (7,579)
Interest receivable (5,408)
Increase (decrease) in:
Accounts payable and accrued expenses 33,408
Due to former shareholder of subsidiary 13,239
Customer deposits 61,778
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Net cash used in operating activities (313,017)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (406)
Decrease in notes receivable -
shareholders and related parties 2,288
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Net cash provided by in investing activities 1,882
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</TABLE>
See accompanying notes to financial statements.
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KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED MARCH 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable $ (2,526)
Proceeds from sale of common stock 3,369
Proceeds from additional paid in capital 407,672
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Net cash provided by financing
activities 408,515
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INCREASE IN CASH AND
CASH EQUIVALENTS 97,380
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD 5,415
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CASH AND CASH EQUIVALENTS -
END OF PERIOD $ 102,795
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SUPPLEMENTAL INFORMATION:
Interest Paid $ 5,000
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</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the six months ended March 31, 1999 the Company issued 450,000 shares
of common stock for consulting, legal and advertising services.
See accompanying notes to financial statements.
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KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) BUSINESS ORGANIZATION AND ACTIVITY
Kanakaris Communications, Inc. (Formerly Kanakaris Internetworks,
Inc.) (the "Company") was incorporated in the State of Delaware on
February 25, 1997. The Company develops and supplies internet
products, on line products and online commerce.
(B) BUSINESS COMBINATIONS
On October 10, 1997 (the "Acquisition Date"), the Company
consummated a Stock Purchase Agreement (the "Purchase Agreement")
with the shareholder (the "Seller") of Desience Corporation
("Desience") to purchase 10,000 common shares representing 100% of
its issued and outstanding common stock in exchange for a 4%
royalty on the gross sales (after collection) of Desience
subsequent to the Acquisition Date, to be paid monthly for as long
as Desience remains in business or its products are sold. In
addition, the Seller shall receive five percent of funds which are
to be allocated to Desience arising from the Company's next
securities offering as a non-refundable advance on the royalty. The
Company will hold harmless the Seller from any claims, causes of
action, costs, expenses, liabilities and prior shareholder
advances. Immediately following the exchange, Desience became a
wholly owned subsidiary of the Company. Desience designs and
installs specialized business furniture for a variety of industries.
On November 25, 1997, the Company and its shareholders (the
("Shareholders") consummated an acquisition agreement with Big Tex
Enterprises, Inc. ("Big Tex"), a public shell, whereby the
shareholders sold all of their preferred and common stock, which
represented 100% of the Company's issued and outstanding capital
stock, to Big Tex in exchange for 7,000,000 shares (6,000,000
common, 1,000,000 preferred) of Big Tex's restricted stock,
representing 66.67% of the issued and outstanding common stock and
100% of the issued and outstanding preferred stock of Big Tex,
aggregating 75% of the total voting rights (the "Exchange"). Big
Tex was founded in 1991 for the purpose of lawful business or
enterprise, but had been inactive since 1991. Immediately following
the exchange, all shares of Kanakaris Internetworks, Inc. were
canceled and Kanakaris Internetworks, Inc. was merged into Big Tex
at which time the Company changed its name to Kanakaris
Communications, Inc.
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KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(C) PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the
accounts of the Company and Desience, a wholly owned subsidiary.
All significant intercompany balances and transactions have been
eliminated in consolidation.
(D) USE OF ESTIMATES
The accompanying financial statements have been prepared in
accordance with generally accepted accounting principles. The
preparation of financial statements in accordance 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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
(E) CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers
all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
(F) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated using the
declining balance method over the estimated economic useful life of
5 to 7 years. Maintenance and repairs are charged to expense as
incurred. Major improvements are capitalized. Depreciation expense
for the six months ended March 31, 1999 was $3,045.
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<PAGE>
KANAKARIS COMMUNICATIONS, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
(G) INVENTORIES
Inventories consisting of parts, finished goods, and collectibles
are recorded at the lower of cost or market, cost being determined
using the first-in, first-out method.
(H) ORGANIZATION COSTS
Organization costs, which are included in other assets, are being
amortized over 60 months on a straight line basis. Amortization
expense for the six months ended March 31, 1999 was $300.
(I) GOODWILL
Goodwill arising from the acquisition of Desience, as discussed in
Note 1 (B) - Business Combinations, is being amortized on a
straight-line basis over 15 years. Amortization expense for the six
months ended March 31, 1999 was $11,676.
(J) INCOME TAXES
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future
tax consequences, SFAS 109 generally considers all expected future
events other than enactments of changes in the tax law or rates.
Any available deferred tax assets arising from net operating loss
carryforwards, which approximate $1,300,000, have been offset by a
deferred tax valuation allowance on the entire amount.
(K) EARNINGS PER SHARE
Earnings per share are computed using the weighted average of
common shares outstanding as defined by Financial Accounting
Standards No. 128, "Earnings per Share".
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