SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                   FORM 10-KSB

/x/  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934.

/ / Transition  Report under Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934.

                  For the fiscal year ended December 31, 1999.

                             Commission File Number
                             ----------------------
                                    0-26351

                                   DIGS, INC.
                                   ----------
                 (Name of Small Business Issuer in its charter)

           DELAWARE                                             95-4603237
-------------------------------                             -------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization).                             Identification No.)


          17327 VENTURA BOULEVARD, SUITE 200, ENCINO, CALIFORNIA 91316
          -------------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                    Issuer's telephone number: (818) 995-3650

        Securities registered pursuant to Section 12 (b) of the Act: None

        Securities registered pursuant to Section 12 (g) of the Act: None

Check whether Issuer:  (1) has filed all reports required to be filed by section
13 or 15 (d) of the  Securities and Exchange Act of 1934 during the preceding 12
months and (2) has been  subject  to such  filing  requirements  for the past 90
days. Yes /X/ No / /

Indicate by check mark if disclosure of delinquent  filers  pursuant to Rule 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of  issuer's  knowledge,  in  definitive  proxy or  information  statements
incorporated by reference in Part III of this Form or any amendment to this Form
10-KSB.   / /

Issuer's Revenues for its most recent fiscal year:  $564,022.

As of February 29, 2000, the aggregate  market value of the voting stock held by
non-affiliates  of the Issuer,  5,043,131  shares,  was $44,283,733.  The market
value of Common Stock of the Issuer,  par value $.001 per share, was computed by
reference  to the average of the  closing  bid and asked  prices of one share on
such date which was $8.781.

The number of shares  outstanding of the Issuer's Common Stock,  par value $.001
per share, as of February 29, 2000, was 6,658,631 shares.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Documents  incorporated by reference:  The information required by Part III
of Form 10-KSB is  incorporated  by reference to the Issuer's  definitive  proxy
statement  relating to the 2000  Annual  Meeting of  Shareholders  which will be
filed with the Securities and Exchange Commission on or before April 29, 2000.

<PAGE>

                                     PART 1


ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

    DIGS, Inc. is a developer and producer of comprehensive  multimedia Internet
and CD-ROM communication software and other forms of digital media to businesses
who  want to  proactively  provide  information  to  their  clients,  investors,
employees,  the media, and the public at large. In this report, you will see our
company  referred  to as  "DIGS,"  or  simply  as  "we."  These  terms  are used
interchangeably, and unless otherwise noted, they include subsidiaries.

    We have achieved a substantial  reputation with several of our products that
are recognized as innovative and technologically  advanced. Our products include
investor relations CD-ROMs,  marketing CD-ROMs,  employee  orientation  CD-ROMs,
environment,  health  and  safety  CD-ROMs,  employee  recruitment  CD-ROMs  and
training CD-ROMs. We also provide Web Site design,  CD-ROM data base programming
and  graphic  design  services.  We intend to  introduce  to the market a highly
sophisticated  multiple video Internet player system in late 2000. DIGS consists
of three active subsidiaries: Digital Corporate Profiles, Inc., DXF Design, Inc.
and Digs Web Video Inc. Each subsidiary is wholly owned by DIGS.

Products.

     The  primary  product of Digital  Corporate  Profiles  (DCP) is an Investor
Relations  CD-ROM  (IRCD).   Each  IRCD  program  tells  a  corporate  story  by
integrating the traditional  printed annual report  information  with the latest
CD-ROM and  Internet  interactive  video,  audio,  and  animation  technologies.
Complete financial  information  including financial  statements,  schedules and
notes,  combined  with annual  comparison  graphs of revenues,  sales,  profits,
earnings per share,  etc., are all set forth in a colorful and creative  manner.
Each  presentation  includes  video and audio that not only  contains  music and
sound effects, but includes  conversations with company executives,  such as its
President,  Chief Financial  Officer or Chief  Scientist.  These video and audio
clips  explain the clients  business,  financial  success,  new products  and/or
inventions. This approach makes the "corporate story" come alive, and instead of
reading a dry annual report,  shareholders and other interested  parties view an
interesting,  colorful  and  entertaining  CD that brings them up to date on the
company's progress.

     To create our IRCD product,  we first accumulate and/or create a collection
of our client's videos,  pictures,  text,  financial  information or other data.
Then using our  proprietary  application  software,  we  produce an  interactive
digital Master CD-ROM of the client's  story.  In the case of the IRCD products,
the basic package  includes  filming three  corporate  executive  interviews,  a
10-page  corporate  profile  section,  a financial  bottom line  section  (which
includes charts and graphs illustrating the financial aspects of the company), a
products and services sections and a research  library.  Also included is a link
function   that   takes  the  viewer  to  a  specific   Internet   website   for
up-to-the-minute  information. This feature is available as long as the user has
Internet  capabilities  and the Internet  connection is  established at the same
time the IRCD is being  viewed.  This link  function  prevents  the CD-ROM  from
becoming  out-dated.  Once the  "Master"  CD-ROM is produced,  we contract  with
outside  replication  houses and  printers  to  produce  the final  product  for
distribution  to  shareholders,  the  investing  community  or other  interested
parties.

     In addition to  providing  corporate  information  in a highly  attractive,
entertaining  and  interactive  form,  DCP offers a variety  of custom  designed
packaging to further project a company's image. The  CD-ROM/packaging  combo can
offer substantial  savings to companies over traditional  written annual reports

<PAGE>


and investor  relation  materials in both  production and mailing  costs.  While
traditional  annual reports are still  required by law,  condensed IRCD versions
can be inserted into the jacket,  thereby slashing  printing costs and expensive
postage.  This  approach  to  disseminating  corporate  information  provides  a
substantial  economic  incentive to our  clients.  Large  companies  often spend
anywhere  from $6 to $12 to print  each  annual  report and  investor  relations
package.  In addition,  they incur postage costs upwards of $3 per  shareholder.
Our IRCD approach reduces the report costs to approximately $4 each, and postage
costs  plunge to an  average  of less than a $1 each.  With  volume  orders  and
economies of scale, we believe it may be possible to  substantially  reduce unit
report prices to the $1 to $2 range. Moreover, the IRCD is user-friendly, can be
linked to a company's  website and unlike  traditional  paper reports,  does not
require new paper,  packaging and postage for every  update.  Once a shareholder
has  received  an  IRCD,  additional  CD's  may  not  be  required  because  new
information  or updated  statistics  can be obtained  through  the website  link
feature.  The result is an easily updated  entertaining  and interactive  report
that reduces a company's printing, handling and mailing costs.

     Another DCP product is the Environmental  Health and Safety CD-ROM (EHSCD).
The EHSCD provides an interactive  format for corporate  clients to report their
environmental,  health and safety  accomplishments to shareholders,  governments
and interested  environmental  groups. The EHSCD uses text, graphics,  video and
audio in a  dynamic  manner to  describe  and  explain a clients  environmental,
health,  safety and natural  resource  preservation  efforts to their employees,
investors,  environmental groups,  media, the public and governmental  agencies.
DCP has produced an EHSCD for  Atlantic  Richfield  Corporation  ("ARCO") who is
using it primarily to provide environmental health and safety information to its
employees.

     Using a  format  similar  to its  IRCD  and  EHSCD  products,  DCP has also
developed  an  Employee   Orientation   CD-ROM   (EOCD)  for  internal  uses  by
corporations. This product serves as an orientation and recruiting piece that is
designed  to  familiarize  new  employees  with  their  company by  providing  a
comprehensive look at the company's people, products, services and policies. The
first two clients using the EOCD product are The  CheeseCake  Factory,  Inc. and
The Limited.

     In August 1999, DIGS formed DXF Design to provide Web Site design, Web Site
and CD-ROM graphic art design,  traditional  print design  services and artistic
support for our CD-ROM projects and the soon to be released iVideoNow!TM.

     During the fall of 1999, DXF not only redesigned all of our web sites,  but
provided  design  services  for  outside  companies  as well.  One of the  first
projects  taken on by DXF,  was the design of  www.ehsreports.com.  The  Website
helps  Internet  users  search an  international  corporate  database by company
and/or  industry,  for  environmental,  health and safety  reports  available in
print, online and interactive CD-ROM formats.  DXF also developed an interactive
Internet  investor  relations  data base  program to be used by a prominent  Los
Angeles Public  Relations  firm on their web site. As a support  partner to DCP,
DXF designed and produced the new Limited EOCD packaging in November 1999.

     DXF also offers its graphic  services in  traditional  advertising,  annual
reports,  corporate  identity  graphics,  entertainment,  and marketing  design.
Clients  using DXF design  services  during the  latter  half of 1999,  included
Paramount,  Universal Studios,  USA Studios,  Hearst-Argyle  Television and Merv
Griffin Productions.

     1999 also saw DIGS begin the initial  research and development of a new and
innovative  Internet  Video  technology.  This  effort led to the  formation  in
October  1999 of DIGS Web  Video,  Inc.  (DWV)  and the trade  marking  of a new

<PAGE>


business to business  (B2B)  product,  iVideoNow!TM.  In November 1999, we began
beta  testing  the  product  on the Web  Site  www.ivideonow.com  with  existing
clients, Victoria Secret, ARCO, and The CheeseCake Factory. In December we added
two new testing partners, Prosperity Pictures and Paramount TV.

     iVideoNow!TM is a real time Internet video screening application. Scheduled
for full  launch  in late  2000,  iVideoNow!TM  is  currently  in beta  testing.
iVideoNow!TM is designed to provide an Internet video presentation platform that
allows companies in the film, TV, music,  travel,  and retail  industries to use
their existing video and TV  presentations  to promote their image and products.
The  iVideoNow!TM  key features are its instant video library  screening  format
(currently  36  videos),   an  interactive  and  user  friendly   interface,   a
multi-screen  quality  viewing  function and our Internet video delivery  system
(iVNDS(TM)).  Currently,  iVideoNow!TM  supports both Apple's  QuickTime(TM) and
Microsoft's  MediaPlayer(TM)  on the Internet  Explorer(TM) and Netscape(TM) web
browsers. Support for Real Networks' Real Video will be added by the in the year
2000,  thus  making  iVideoNow!TM  functional  with all major web  browsers  and
streaming video technologies. Coupled with iVNDS(TM), the iVideoNow!TM system is
designed to  automatically  detect the video  technology  installed  on a user's
computer at the time of log on and uses that system  seamlessly,  thus  limiting
the need to download any additional software.

     The iVNDSTM is based on our  proprietary  Internet  server  infrastructure,
which has the ability to provide the best video quality  possible at the fastest
possible speeds.  Presently,  video presentations over the Internet are in their
infancy and require high speed  Internet  connections  to deliver good  quality.
However,  DWV can provide 4-star, near broadcast quality at the 56K-modem level,
the  connection  speed  used  by  most  households.   DWV  also  provides  video
digitization,   compression  and  server   storage.   We  intend  to  lease  the
iVideoNow!TM  player as a package with the iVNDSTM or offer it as a  stand-alone
product to be used on a client's own server.  DWV plans to offer two upgrades to
the system.  First,  an e-commerce  function is planned for  integration in late
2000.  Second,  by year-end the video  library  function of the player should be
expanded from the present 36 to 200 videos.

     We believe  our  principal  business  strengths  include  our  demonstrated
ability  to  supply  unique  CD-ROM  and  Internet   communication  products  to
companies,  our  reputation  for  experience,   competence,  integrity  and  our
knowledge of how to successfully  serve the market.  Amplifying our strengths is
the reality that any potential new competitor  would face the formidable task of
having to substantially duplicate our technology to successfully challenge us.

Overview of the Industry.

     Our  "Industry"  really is three  industries,  CD-ROM  production,  Website
Design and Streaming Video, all three in one way or another key off the Internet
Industry.  The number of Internet users around the world is constantly  growing.
The Computer  Industry  Almanac has projected that by year-end 2002, 490 million
people around the world will have Internet access. The United States has an over
whelming  lead in Internet  users with more than 110 million users at the end of
1999.  According to the December 1999 Harris  Interactive  Survey, a total of 69
percent of all adults use a computer at home, work, or some other location. This
is up from 50 percent in late 1995.  The same study  reported that 81 percent of
all computer users use the Internet compared to 27 percent three years ago.

     The Internet Video industry is in its infancy. PC Data Online reported that
as of the end of October  1999, 41 percent of  households  with Internet  access
used media players. It is estimated that less than 10 percent of households with
Internet access use media players for video playback. Internet video, whether it
be streaming or  download-and-watch  video, requires large bandwidth connections
(high speed Internet access) to perform acceptably.  Most businesses and schools

<PAGE>


have T-1 lines or higher  bandwidth  connections in use but as of November 1999,
only 5.9 percent (Nielson/ NetRatings) of home users were accessing the Internet
via  high-speed  connections.  High-speed  connections  are defined as ISDN, T-1
telephone  lines  satellite,  cable modem  service and various  types of digital
subscriber lines.

     As of  November  1999,  only  4,266,023  unique  audience  used  high-speed
bandwidth, but the number of high-speed users is projected by Computer Economics
to grow to 27 million by 2002.

The Market.

     The market for our  products  and  services is  extremely  widespread.  Any
mid-size or larger business can use our products.  Key products such as the IRCD
and graphic design services compete  directly with the print media.  Competition
in  the  financial  and  corporate   printing   industry  is  intense  and  well
established,  as most corporations  currently use printed matter as the means to
communicate  with  their  investors  and  market  makers.  We  believe  that the
significant cost advantages and the more  interesting,  entertaining  content as
compared  to printed  materials  gives our  products a  substantial  competitive
advantage to be successful in this marketplace.

     The  iVideoNow!TM  player has an  obvious  appeal to movie  studios  and TV
distribution companies and has applications for video retailers that may wish to
provide previews of popular new videos. There are also multiple  applications in
the travel industry and retail trade. In the travel  industry,  hotels can video
preview  their rooms and  facilities  to  potential  clients.  Cruise  lines can
display ship amenities,  on board entertainment and destinations.  Travel agents
can provide  visual and audio  information on resorts,  golf packages,  European
tours,  etc. Travel  industry  websites are the second most popular sites on the
Internet.  In the retail industry,  retailers can put on video fashion shows for
home computer  users.  Likewise,  the music industry can display music videos to
help  drive  record  sales.  There are  undoubtedly  many other  companies  with
products  and/or  services  where  videos  can be  designed  to tease the public
interest. While viewing these video presentations on the Internet, a quick click
can open a company's  e-commerce  site. The e-commerce  link will allow users to
reserve a hotel room, book a cruise,  rent or purchase a video,  buy a music CD,
or get the latest in fashion apparel.

     Yet another  application for iVideoNow!TM has emerged as a result of recent
discussions with a company that wants to place employee-training videos on their
Intranet.  The use of the  iVideoNow!TM  player in this capacity could replace a
company's use of videocassettes and VCR's. The benefit is with videocassettes an
employee  has to look at the  entire  videotape  to see what they need to learn,
while only  certain  sections  may be germane to them.  With  iVideoNow!TM,  the
employee easily can skip to the exact chapter or chapters of the presentation to
find and review the pertinent information they require.

     The market we operate in is characterized by rapidly changing technologies,
frequent new product and service introductions, and evolving industry standards.
The  future  success  of DIGS will  depend,  in large  part,  on how we adapt to
rapidly changing technologies. We plan to adapt to new technology by continually
improving the  performance  features and the  reliability  of our  services.  In
addition,  we have an active  commitment to research and development and believe
we will benefit greatly as new bandwidth technology develops.

     We believe we are now in a position to aggressively market our products and
services   to  a   wider   expansion   of   industries.   We   operate   in  the
business-to-business  (B2B)  marketplace,  and focus our sales efforts on mid to
large companies that are seeking a unique,  efficient and  inexpensive  means of

<PAGE>


disseminating  corporate  business  and  financial  information.  We market  our
products and services  through  personal  contacts  with  existing and potential
customers and investment  relations firms,  through a specially trained in-house
sales force and through direct marketing  techniques.  In addition to soliciting
business from existing and prospective customers, each sales person also acts as
the account service representative, ensuring that the Company's production staff
promptly responds to customer instructions and meets customer needs.

     DIGS is not  dependent on long-term  clientele and does not enter into long
term service or product  contracts with its clients.  We do have the opportunity
to provide  multiple  products and services to each client and actively  solicit
such  business.  The growth and  expansion  of our business is built on constant
recruitment of new accounts and the  maintenance of  relationships  with current
clients.

     Marketing of our products is through  contacts  made by its  President  and
marketing staff. Presentations are made to each prospective client demonstrating
the product capabilities and how each product can be customized to fit a clients
needs.  The company  promotes  its  products and  establishes  potential  client
contacts through various techniques including news releases,  mailers,  industry
networking, public relation firms and simply word of mouth.

Competition.

     Currently,  there  is  limited  direct  competition  in the  production  of
CD-ROM's for the investment  and corporate  communications  community.  Although
competitors can enter the field of CD-ROM production at any time, we believe our
early  entrance  into this  market and our  proprietary  instant-start  software
technology will allow us to continue to be a dominant  provider of this business
service. We face substantial competition in the area of financial Website design
and  maintenance.  However,  few,  if  any  competitors  combine  the  corporate
customer's  Website with a physical CD-ROM in the hands of its audience,  nor do
they provide for continuous outgoing updates.

     Key  design  services  offered by DXF  compete  with the print  media.  The
competition in the financial and corporate printing industry is intense and well
established,  as most corporations  currently use printed matter as the means to
communicate with their investors and market makers.

     At  the  present  time  video  on  the  Internet  is in  its  infancy,  and
competitive  offerings  are limited to single unit  players.  Real Player's Real
Video, Apple's QuickTime and Microsoft's Media Player make up the majority share
of  this  market.   These  players  could  be  considered   competition  to  the
iVideoNow!TM  system but since  iVideoNow!TM  supports all these players, a more
accurate description might be a system friendly  application  program.  Further,
iVideoNow!TM is the only player offering a multiple of videos, a "library" of up
to 36 videos.  It is also the only product on the market  providing the end user
control  of what  they  view and its  quality.  The  Company's  state-of-the-art
technology  puts it in a position to establish  itself strongly in this emerging
market,  and even a small  market  share could be worth  hundreds of millions of
dollars in the next few years.

      DIGS believes that the significant  cost advantages and more  interesting,
entertaining  content as compared  to printed  materials  and other  traditional
communication mediums gives our products a substantial  competitive advantage to
be successful in this marketplace.

Subsequent Event.

In  February  2000,  through  the May Davis  group we  raised  $2.5  million  in
additional  capital through a private placement of convertible  preferred stock.
This new funding  will be used for the  continuing  development  of  iVideoNow!,

<PAGE>


working capital, marketing purposes, pay short term loans and, principally,  the
addition of new sales and technical  support  personnel.  It is anticipated that
this interim financing will provide all the capital needed for our operations in
2000.

The  Company  sold 2,500  shares of Series A  Convertible  Preferred  Stock (the
"Preferred  Stock") and Warrants to purchase  100,000 shares of our Common Stock
at $10.0375  per share for  $2,500,000  to Calp II,  L.P.,  an offshore  venture
capital  limited  partnership  in  Hamilton,  Bermuda.  The  Preferred  Stock is
convertible  at 75% of the lowest  closing bid price of our Common  stock during
any three trading days during the twenty consecutive  trading days ending on the
date of the purchaser's determination to convert, or $9.125, whichever is lower.
We have also  agreed to register  the  underlying  Common  Stock  issuable  upon
conversion  of the Preferred  Stock and exercise of the Warrants.  In connection
with this private placement,  we paid May Davis $200,000 and issued a Warrant to
purchase 200,000 shares of our Common Stock at $10.0375 per share as a placement
agent fee.  We also paid  $50,000  to Thomson  Kernaghan  & Company,  Ltd.  as a
finders fee.

Employees.

     As of December 31, 1999, the Company has ten full time employees.


ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

     DIGS is leasing  from a third  party 6,153  square feet of office  space at
17327 Ventura Boulevard, Suite 200, Encino,  California,  91316. The lease calls
for  monthly  rent of $8,307  and  terminates  July 31,  2003.  The lease can be
renewed for an  additional  three or five years at our  discretion.  DIGS has no
plans to change its corporate  office  location or purchase any real property at
this time.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

     None.

ITEM 4. SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
--------------------------------------------------------

     The Company did not hold a security  holders  meeting in the fourth quarter
of its fiscal year ended  December  31,  1999.  A security  holders'  meeting is
scheduled to be held in June, 2000.


                                    PART II

ITEM 5. MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------

     (a) The  Company's  Common Stock has been  trading on the  over-the-counter
through the NASD's  electronic OTC Bulletin Board service.  The following  table
shows for the calendar periods  indicated the high and low closing bid quotation
for the Company's  Common Stock.  The quotations were obtained using an Internet
retrieval service.  These quotations reflect inter-dealer prices, without retail
mark-up,  mark-down or  commissions,  and may not necessarily  represent  actual
transactions.

                       1999              High Bid Low Bid
                       ----              -------- -------
     First Quarter                        $7.00    $3.00
     Second Quarter                       $8.50    $8.50
     Third Quarter                        $7.75    $7.75
     Fourth Quarter                       $8.25    $8.00

                       1998              High Bid Low Bid
                       ----              -------- -------
     First Quarter                        $0.09    $0.03
     Second Quarter                       $1.50    $0.04*
     Third Quarter                        $2.62    $0.25
     Fourth Quarter                       $6.87    $4.87**

-----------------------

*    Reflects a 1 for 50 reverse stock split.
**   Reflects a 1 for 20 reverse stock split.

<PAGE>

     (b) As of February 29 2000, there were approximately 305  record holders of
the  Company's  Common  Stock.  In  addition,   there  were   approximately  870
shareholders in street name whose shares are held in the name of other nominees.

     (c) There have been no  dividends  declared  or paid by the  Company on its
Common Stock during the past three years.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------

     The  information  included  in this  discussion  contains  forward  looking
statements  that are based on  current  expectations  and  beliefs  and  involve
numerous  risks and  uncertainties  that could  cause  actual  results to differ
materially.  Readers are cautioned not to place undue  reliance on these forward
looking statements, which speak only as of the date hereof.

Corporate History.

     On November 9, 1998, as a result of a reorganization agreement, DIGS issued
5,194,968 shares of its common stock in exchange for all the outstanding  common
stock of Digital Corporate Profiles,  Inc. (DCP). The stock exchange resulted in
DCP  becoming a wholly  owned  subsidiary  of the Company  based on a conversion
ratio of three shares of DIGS,  Inc. common stock for each share of DCP's common
stock. The reorganization was accounted for as a recapitalization of each entity
at their book values.

     Prior to the  reorganization,  DIGS was an inactive  shell called  Advanced
Laser Products. The shell corporation did not generate any revenue but did incur
minor administrative expenses.  Administration expenses were $300 and $4,730 for
the years ended December 31, 1998 and 1997  respectively.  On the reorganization
date there were 53,663  outstanding  shares  owned by former  shareholders.  All
share and per share  amounts have been adjusted to reflect an April 20, 1998 one
for ten reverse stock split and an October 16, 1998 one for twenty reverse stock
split. DIGS is currently comprised of the following three active entities:

     Digital Corporate  Profiles,  Inc. (DCP) provides  complete  multimedia and
internet  communication  solutions to its clients  allowing them to  proactively
tell their story to the world. DCP produces several CD-ROM products including an
Investor Relation CD (IRCD),  an Environmental  Health and Safety CD (EHSCD) and
an Employee  Orientation  CD (EOCD).  Each CD provides the client with a dynamic
medium  that  allows  them to  communicate  effectively  with  their  investors,
employees, the media and the public.

     During  1999,  DIGS formed a wholly  owned  subsidiary,  DXF  Design,  Inc.
("DXF"),  a digital and graphic  design  studio.  DXF offers a complete range of
Internet,  CD-ROM and  promotional  print design  services.  DXF  specializes in
designing  brochures,  corporate identity graphics,  corporate and entertainment
promotional   kits,  as  well  as  key  art  for   theatrical   and  home  video
advertisements.  DXF will not only  provide  artistic  support  to DCP but is an
additional  revenue  center.  DXF is actively  marketing its digital and graphic
design capabilities to the music, film and television industries.

     Digs Web Video, Inc. (DWV), another wholly owned subsidiary,  was formed in
1999 to develop  and market a real time  Internet  video  screening  application


<PAGE>

called  iVideoNow!TM.  The  iVideoNow!TM  player  currently  allows  a  user  to
instantly  view up to 36  separate  videos.  DWV  plans to  expand  the  viewing
capacity of the player to 200 videos.  The interface of the iVideoNow!TM  player
can be designed to a client's specification to maximize the video players use as
a  marketing  and  promotional  tool.  DWV also plans to  develop an  e-commerce
function that will allow the iVideoNow!TM player to act as both a marketing tool
and sales point for the client.

Operating Results for the Years Ended December 31, 1999 and 1998.

     Revenue increased over 200% to $564,022 for 1999 from $171,694 in 1998. The
increase is  primarily  due to  increased  sales of DCP's  CD-ROM  products  and
revenue generated from graphic design services provided by DXF.

     Gross  profit also  increased by over 200% to $283,953 in 1999 from $74,714
in 1998. As a percentage of revenue, gross profit percentages were approximately
50.4% in 1999,  up from 43.5% in 1998.  The  increased  gross profit  amount and
percentage is primarily due to labor efficiencies  associated with production of
CD-ROM products.

     Operating  expenses increased to $801,799 in 1999 from $535,231 in 1998. An
increase in marketing costs accounts for approximately 36% of the increase.  The
Company's  marketing  costs  increased to $109,005 in 1999 from $14,400 in 1998.
Increased marketing efforts resulted in an increase in sales volume and revenue.
Increases in  professional  services,  rent,  officer  salaries and  shareholder
expenses also  contributed to the overall increase in operating costs in 1999 as
compared to 1998.

     Other income and (expenses)  were $52,733 in 1999 as compared to ($113,761)
in 1998. This increase is the result of the selling of the  Stocknet-USA  domain
name and website for a gain of $38,722  and a decrease  in  financing  expenses.
Other income and (expenses)  included rental income,  interest income,  interest
expense and realized losses on sale of investments.

     Federal  income tax  provisions  for the years ended  December 31, 1999 and
1998 have not been recorded due to operating losses and the inability to benefit
from deferred tax assets. However, the minimum state income tax expense for DIGS
and its subsidiaries in the amounts of $6,364 and $800 were incurred in 1999 and
1998  respectively.  As of  December  31,  1999,  DIGS  has net  operating  loss
carryforwards  of $1,253,761  that may be used to offset future federal  taxable
income.  These net operating loss  carryforwards will begin to expire in 2011 if
not used.

Liquidity and Capital Resources.

     DIGS has funded its  operations  and met its capital  requirements  through
private sales of equity  securities,  short-term  loans and cash  generated from
sales.  Negative cash flows from  operating  activities  are a result of our net
operating losses. Net cash used for operations was $523,047 in 1999 and $383,158
in 1998.  Net cash flow used for investing  activities  was $156,220 in 1999 and
$88,042 in 1998. Cash used in 1999 for investing activities is primarily related
to the development of the iVideoNow!TM player technology.

     DIGS  anticipates  making capital  expenditures of  approximately  $200,000
during  the  year  ending  December  31,  2000.  The  majority  of  the  capital
expenditures  will be to remodel the corporate  offices and purchase  additional
hardware and software.  Remodeling  of the  corporate  offices began in February
2000  to  accommodate  a staff  of  programmers,  designers  and  marketers.  In
addition, DIGS anticipates it will require approximately  $450,000,  $80,000 and
$100,000 for salaries, outside services and marketing expenses respectively.  On
March 8, 2000,  DIGS secured  financing of $2,500,000  through a private sale of
equity  securities.  The  cash  from  this  financing  will  be  used to pay off
short-term debt, pay for capital  expenditures and pay operating expenses.  This
additional  capital  along  with  cash  generated  through  revenues  should  be

<PAGE>


sufficient  to fund  operations,  capital  expenditures  and  other  obligations
through  December 31, 2001.  Digs  anticipates  that it will  continue to report
operating  losses for at least 1 or 2 years as the Company  continues  to refine
its  projects  and  build  its  marketing,   production  and  management  teams.
Additional capital may be raised through public financing,  private financing or
some other  arrangement.  If additional capital were raised through the issuance
of equity securities,  the percentage of ownership held by current  shareholders
would be reduced.  Furthermore,  such  equity may have  rights,  preferences  or
privileges senior to the current common stock.

Year 2000 Issue.

     DIGS did not experience any disruptions to operations or any other problems
resulting  from the Y2K issue.  The Y2K issue  generally  refers to the problems
some computer  systems may have in determining the correct year for the century.
DIGS does not foresee any future problems resulting from the Y2K issue.

New Accounting Pronouncements.

     Statement of Financial Accounting Standards No. 131, "Disclosures about
Segments of an Enterprise and Related Information" (SFAS No. 131) was adopted in
1999 with the formation of DXF Design,  Inc. SFAS No. 131 establishes  standards
for the  reporting  of  operating  results  regarding  different  segments  of a
company. Segment operating results reported by DIGS for its subsidiaries Digital
Corporate Profiles (DCP) and DXF Design (DXF) in 1999 are summarized as follows:

<TABLE>
<S>                                      <C>                  <C>                 <C>
                                                DCP                  DXF              Consolidated
                                          -----------------    ----------------    --------------------

Net operating revenues                        $413,743            $150,279                $564,022
Operating income                              (589,211)             23,365                (565,846)
Operating assets                               449,591             100,090                 549,681
Capital expenditures                                 0                   0                       0
Depreciation/amortization                       47,080               1,306                  48,386

</TABLE>

     Adoption of SFAS No. 131 did not have a material effect on financial
statement presentations and disclosures for prior years.

     DIGS has elected to follow  Accounting  Principles Board Opinion (APBO) No.
25,  "Accounting for Stock Issued to Employees," and related  interpretations in
accounting for its stock-based compensation.  In electing to follow APBO No. 25,
we are obligated to provide the expanded disclosures required under Statement of
Financial   Accounting   Standards   No.  123,   "Accounting   for   Stock-Based
Compensation."  APBO No. 25 requires no recognition of compensation  expense for
stock-based  compensation agreements provided the exercise price is equal to the
market value on the date of grant.  APBO No. 25 does require the  recognition of
compensation  expense for variable award plans based on the current market value
over the vesting periods. In contrast,  SFAS No. 123 requires the recognition of
compensation  expense for grants of stock  options and other equity  instruments
over the  vesting  period of such  grants,  based on the  estimated  fair market
values of such grants on the grant-date. In 1999, DIGS granted 230,000 shares of
qualified  stock options and 65,000 shares of  nonqualified  stock options at an
average  exercise  price  of  $5.17  per  share.  DIGS  has not  recognized  any
compensation  expense  related to these  grants in 1999 because the options were
not  granted at a price below the fair  market  value on the date of grant.  For
additional  information,  please  see  Note  13 of the  1999  audited  financial
statements.

     In 1999, DIGS adopted  Accountants'  Statement of Position 98-5 (SOP 98-5),
"Reporting on the Costs of Start-Up  Activities." This statement  requires costs
related  to  start-up  activities  and  organizational  costs be  expensed  when
incurred. The cumulative effect of this change was $2,625 (net of $0 tax effect)

<PAGE>


or $0.00 per common share for the years prior to 1999.  The adoption of SOP 98-5
had no material effect on 1999 income.


ITEM 7.  FINANCIAL STATEMENTS
-----------------------------

     The financial  statement and supplementary  data listed in the accompanying
Index to Financial Statements are attached as part of this report.

<TABLE>
<S>                                                                                  <C>

List of Financial Statements.

The following financial statements of Digs, Inc. and Subsidiaries are included in Item 7:

Consolidated Balance Sheets                                                             F-3

Consolidated Statements of Operations                                                   F-4

Consolidated Statements of Stockholders' Equity                                         F-5

Consolidated Statements of Cash Flows                                                   F-6

Notes to Consolidated Financial Statements                                              F-8

</TABLE>

                                       10
<PAGE>


All other  schedules for which  provision is made in the  applicable accounting
regulation of the Securities and Exchange  Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.


ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE.
-----------------------------------------------------------------------------

     None.

                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
---------------------------------------------------------------------
        COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
        -------------------------------------------------

         Set forth  below is  information  with  respect  to our  directors  and
executive officers as of March 29, 2000.

         Name                      Position With                       Age
                                      Company
----------------------  ---------------------------------------   ------------
Peter B. Dunn           President and Director                         60
Allen Dunn              Chief Operating Officer and Director           32
David Fleming           Secretary and Director                         49

Peter B. Dunn founded  founded  Digital  Corporate  Profiles,  Inc.  ("DCP"),  a
-------------
wholly-owned  subsidiary of DIGS,  Inc., in July 1996.  Since that time Mr. Dunn
has served the Company in various  capacities  including  Chairman of the Board,
Chief Executive Officer, Chief Financial Officer and Treasurer.  His duties with
the Company have changed over time as the Company has grown and  additional  key
personnel have joined the Company.  Currently,  Mr. Dunn is CEO and President of
DIGS,  Inc., a position he has held since November 1998.  From 1987 to 1996, Mr.
Dunn was  President of Lucky Dog  Productions  where he  produced,  directed and
wrote golf television  shows/videos,  commercials,  cable television  pilots and
made for television movies.  Clients included Paramount Home Video, Classic Golf
International  and British  Broadcasting  Corp.  From 1980 to 1987, Mr. Dunn was
President of International  Special  Promotions (ISP), a special event marketing
company with a client base that included  Coca-Cola,  R.J.  Reynolds and Proctor
and Gamble.  From 1972 to 1980, Mr. Dunn was CEO of Western Corporate  Services,
Inc., which he founded in 1972.  Western Corporate Services is the owner of U.S.
Stock  Transfer,  the third largest  independent  stock  transfer  agency in the
United States.

Allen Dunn joined Digital Corporate Profiles, a wholly-owned subsidiary of DIGS,
----------
Inc.,  as a computer  programmer at DCP's  inception in July 1996.  Mr. Dunn has
been serving as Chief  Operating  Officer of the Company  since  November  1998.
Prior to becoming Chief Operating  Officer,  Mr. Dunn also served the Company as
Chief  Programmer as well as Director of Sales and Marketing.  From June 1994 to
June 1996,  Mr. Dunn was a freelance  computer  programmer.  Mr. Dunn received a


                                       11
<PAGE>


Bachelor of Arts in Economics from California  State University of Northridge in
1993. In addition,  Mr. Dunn is an alumnus of the University of Colorado  School
of Astrophysics  and  Atmospherics.  Mr. Dunn is currently  pursuing an advanced
degree in computer science.

David Fleming  joined the Board of Directors of Digital  Corporate  Profiles,  a
-------------
wholly-owned  subsidiary of DIGS,  Inc., in 1996. In November  1998, Mr. Fleming
became  Secretary  of DIGS,  Inc.,  and  Chief  Officer  of its  graphic  design
subsidiary,  DXF. Prior to joining DXF, Mr. Fleming was managing  partner of DGF
Design, a privately owned graphic arts company. Mr. Fleming was managing partner
of DGF Design from 1992 until the time he joined DXF.

Board Meetings and Committees
-----------------------------

The Board of  Directors of the Company held a total of two meetings and acted by
unanimous  consent on  approximately  two occasions during the fiscal year ended
December 31, 1999. No director  attended  fewer than 75% of the aggregate of all
meetings of the Board of Directors. The Board currently has no committee.

None of the Directors of the Company who are currently employed full time by the
Company are paid any compensation  for their services as a director.  Except for
Allen Dunn being the son of Peter B. Dunn, no family relationships exist between
any of the executive officers or directors of the Company.

Compliance with Section 16(s) of the Exchange Act
-------------------------------------------------

Section  16(a) of the  Securities  Exchange Act of 1934  requires the  Company's
officers and directors,  and persons who own more than ten percent of its Common
Stock, to file reports of ownership and changes of ownership with the Securities
and  Exchange  Commission  ("SEC")  and each  exchange  on which  the  Company's
securities  are  registered.  Officers,  directors  and greater than ten percent
stockholders  are required by SEC  regulation to furnish the Company with copies
of all ownership forms they file.

Based  solely on its  review  of the  copies of such  forms  received  by it, or
written  representations  from  certain  persons that no Form 5 was required for
those persons,  the Company  believes  that,  during the year ended December 31,
1999,  officers,  directors,  and  greater  than ten percent  beneficial  owners
complied with all applicable filing requirements.


ITEM 10.  EXECUTIVE COMPENSATION.
--------------------------------

The following table sets forth the compensation of the Company's Chief Executive
Officer during the last three complete fiscal years. No other officers  received
annual compensation in excess of $100,000 during the last completed fiscal year.


                                       12
<PAGE>
                           Summary Compensation Table
<TABLE>
<S>             <C>    <C>        <C>         <C>            <C>          <C>           <C>         <C>

                              Annual Compensation                           Long Term Compensation
                    ----------------------------------- -------------------------------------------------
                                           Other Annual   Restricted   Securities     LTIP      All Other
                                  Bonus    Compensation     Stock      Underlying    Payout   Compensation
                 Year   Salary     ($)         ($)        Awards ($)    Options (#)   ($)         ($)
                ----- ---------- -------- ------------- ------------ -------------- -------  -------------
Peter B. Dunn   1999    116,000     0          7,920         0            100,000       0           0
                1998     80,000     0          6,174         0               0          0           0
                1997      5,000     0            N/A         0               0          0           0
</TABLE>

On January 2, 1999,  pursuant to the 1999 Stock  Incentive  Plan,  stock options
were granted to Peter Dunn,  Allen Dunn and David  Fleming to purchase  100,000,
62,000 and 50,000  respectively.  The exercise price of Peter Dunn's options are
$5.50 per share and expire five years from the grant date. The exercise price of
Allen  Dunn's  and David  Fleming's  options  are $5.00 per share and expire ten
years from the grant date. As of March 31, 2000, no options have been exercised.


ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
------------------------------------------------------------------------

         The following table sets forth information  concerning ownership of the
Company's  Common  Stock as of March  29,  2000,  by (a)  each  director  of the
Company,  (b) each person known to the Company to be a beneficial  owner of more
than five percent (5%) of its Common Stock, (c) each person named in the Summary
Compensation  Table, and (d) all executive officers and directors of the Company
as a group.

                         Name and Title                    Number of     Percent
                                                             Shares     of Class
------------------------------------------------------     ---------    --------
Peter B. Dunn, President and Director                      1,330,500       20.0%
Allen Dunn, Vice President , COO and Director                165,000        2.5%
David Fleming, Director                                      120,000        1.8%
Allen Kelsey Grammar Trust                                   450,000        6.8%
Worldwide Insurance Consultants                              439,992        6.6%
First Capital Network 1                                      439,992        6.6%
Jamie Mazur 2                                                219,996        3.3%
Jennifer Mazur 2                                             219,996        3.3%
Emily Mazur 2                                                219,996        3.3%
Trent Mazur 2                                                219,996        3.3%
Officers and Directors as a Group (3 individuals)          1,615,500       24.3%

--------------------
1        First  Capital   Network  and  Worldwide   Insurance   Consultants  are
         subsidiaries of Corporate Financial  Enterprises.  Mr. Regis Possino is
         an officer and principal shareholder of Corporate Financial Enterprises
         and is deemed to be the beneficial owner of these shares.

                                       13
<PAGE>

2        Emily and Trent Mazur are minors.  Their  shares  are  held by Michelle
         Mazur, their mother, as custodian.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
--------------------------------------------------------

         Except as otherwise  indicated  below,  we have not been a party to any
transaction, proposed transaction, or series of transactions in which the amount
involved exceeds $60,000, and in which, to our knowledge,  any of our directors,
officers,  five  percent  beneficial  security  holder,  or  any  member  of the
immediate  family  of the  foregoing  persons  has had or will  have a direct or
indirect material interest.

         In 1997 and 1998,  the Company  borrowed  monies  from Peter Dunn,  its
President,  evidenced by a demand loan agreement with interest at 10% per annum.
In December  1998,  the Company  repaid  $47,321 to Mr. Dunn,  representing  all
amounts owed to Mr. Dunn,  including  interest.  In 1999, the Company received a
short-term  loan of $25,000 from Peter Dunn. The loan was repaid on November 30,
1999.

         In 1999, DXF loaned $30,000 to its President,  David Fleming.  The loan
bears an annual interest rate of 5% and is due on July 30, 2000. In addition, in
1998 and 1999, iVideoNow paid its Secretary,  David Fleming, $9,000 and $10,316,
respectively,  for professional  graphic art services provided by Mr. Fleming to
iVideoNow prior to the formation of DXF Design, Inc.


ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K.
------------------------------------------

(a)      Exhibits

         Item              Description

         2.            Plan  and   Agreement  of   Reorganization   between  the
                       Registrant  and Digital  Corporate  Profiles,  Inc. dated
                       October 3, 1998 - incorporated  by reference from Exhibit
                       2 to Registrant's Form 10-SB12G filed June 14, 1999.

         3.   (i)      Articles  of  Incorporation  and  Amendments   thereto  -
                       incorporated   by  reference   from   Exhibit   3.(i)  to
                       Registrant's form 10-SB12G filed June 14, 1999.

              (ii)     By-Laws of Registrant -  incorporated  by reference  from
                       Exhibit 3.(ii) to  Registrant's  Form 10-SB12G filed June
                       14, 1999.

         4.            Certificate of  Designations,  Preferences  and Rights of
                       Series A Convertible Preferred Stock of Digs, Inc., dated
                       March 14, 2000

         10.  (i)      Registrant's  1999 Stock Incentive Plan - incorporated by
                       reference  from  Exhibit  (10.(i)  to  Registrant's  Form
                       10-SB12G filed June 14, 1999.

              (ii)     Employment  Agreement between  Registrant's  wholly-owned
                       subsidiary and Peter Dunn  incorporated by reference from
                       Exhibit 10.(ii) to Registrant's  Form 10-SB12G filed June
                       14, 1999.


                                       14
<PAGE>

              (iii)    Placement  Agreement by and between Digs,  Inc.,  and May
                       Davis Group, Inc., dated March 14, 2000.

              (iv)     Securities  Purchase  Agreement by and between Digs, Inc.
                       and Calp II L.P., dated March 14, 2000.

              (v)      Warrant to Purchase  Common  Stock by and  between  Digs,
                       Inc., and May Davis Group, Inc., dated March 14, 2000.

              (vi)     Warrant to Purchase  Common  Shares by and between  Digs,
                       Inc. and Calp II, L.P., dated March 14, 2000.

(b) Reports on Form 8-K.

         None.



                                   SIGNATURES


Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                                       DIGS, INC.



                                                       By: /s/ PETER B. DUNN
                                                       -------------------------
                                                       Peter B. Dunn
                                                       President


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report has been signed below by the  following  persons on behalf of  registrant
and in the capacities indicated on the 10th day of October 2001.


Signatures                                                    Title


/s/ PETER DUNN                               President, Chief Financial Officer,
--------------                               Secretary and Director
    Peter Dunn



                                       15

<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999






<TABLE>
<S>                                                                                        <C>
                          INDEX TO FINANCIAL STATEMENTS

                                                                                                    Pages
                                                                                              ------------------

Independent Auditors' Report                                                                         F-2

Consolidated Balance Sheet as of December 31, 1999                                                   F-3

Consolidated Statements of Operations
   For the Years Ended December 31, 1999 and 1998                                                    F-4

Consolidated Statements of Stockholders' Equity
   For the Years Ended December 31, 1999 and 1998                                                    F-5

Consolidated Statements of Cash Flows
   For the Years Ended December 31, 1999 and 1998                                                 F-6 - F-7

Notes to Consolidated Financial Statements                                                        F-8 - F-19

Additional Information:
   Independent Auditors' Report on Additional Information                                            F-20

Schedule of Cost of Goods Sold and Operating Expenses                                                F-21
   For the Years Ended December 31, 1999 and 1998

</TABLE>
                                      F-1
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


February 24, 2000


To the Board of Directors and Shareholders of
DIGS, Inc. and Subsidiaries

We have audited the  accompanying  consolidated  balance sheet of DIGS,  Inc. (a
Delaware  corporation)  and Subsidiaries as of December 31, 1999 and the related
consolidated statements of operations,  stockholders' equity, and cash flows for
each of the two years in the period ended December 31, 1999. These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the 1999 consolidated  financial  statements  referred to above
present fairly, in all material  respects,  the financial position of DIGS, Inc.
and  subsidiaries  as of December 31, 1999, and the results of their  operations
and their cash flows for each of the two years in the period ended  December 31,
1999, in conformity with generally accepted accounting principles.

As discussed in Note 2 to the financial statements,  in 1999 the Company changed
its method of accounting for organizational and start-up costs.




CALDWELL, BECKER, DERVIN, PETRICK & CO., L. L. P.
Woodland Hills, California 91364
                                      F-2
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 1999


<TABLE>
<S>                                                                                       <C>

                                     ASSETS


CURRENT ASSETS
    Cash (Note 2)                                                                            $       106,095
    Marketable equity securities (Notes 2 and 3)                                                     116,875
    Accounts receivable - trade (Note 2 and 8)                                                        67,695
    Loan receivable - officer (Note 15)                                                               30,558
                                                                                            -----------------
             Total Current Assets                                                                    321,223
                                                                                            -----------------

PROPERTY AND EQUIPTMENT,
  net of accumulated depreciation (Notes 2 and 5)                                                    110,811

PROGRAM DEVELOPMENT COSTS,
  net of accumulated amortization (Notes 2 and 6)                                                    127,955

LONG-TERM ASSETS
    Deposit                                                                                              160
    Deferred tax assets (Note 4)                                                                          --
                                                                                            -----------------

             Total Assets                                                                    $       560,149
                                                                                            =================

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
    Accounts payable and accrued expenses                                                    $        72,164
    Income taxes payable                                                                               4,564
    Interest payable (Note 16)                                                                         2,346
    Short-term note payable (Note 16)                                                                300,000
    Sublease deposits                                                                                  2,400
    Deferred rent credit (Note 7)                                                                     11,667
                                                                                            -----------------

             Total Current Liabilities                                                               393,141
                                                                                            -----------------

CONCENTRATION AND COMMITMENT (Note 7 and 8)

STOCKHOLDERS' EQUITY
    Preferred stock, par value $.01 per share; 20,000,000 shares
      authorized, 0 shares issued and outstanding                                                         --
    Common stock, par value $.001 per share; 80,000,000 shares
      authorized, 6,658,631 shares issued and outstanding                                              6,659
    Additional paid-in capital                                                                     1,482,594
    Accumulated other comprehensive income (loss)                                                     (2,747)
    Retained (deficit)                                                                            (1,319,498)
                                                                                            -----------------

             Total Stockholders' Equity                                                              167,008
                                                                                            -----------------

             Total Liabilities and Stockholders' Equity                                      $       560,149
                                                                                            =================
</TABLE>


The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.
                                      F-3
<PAGE>



                           DIGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<S>                                                                    <C>                      <C>

                                                                               1999                   1998
                                                                        -----------------       ----------------

REVENUE
    CD-ROM design and development revenue                                $       414,145        $       166,564
    Graphic design revenue                                                       149,877                     --
    Stocknet-USA directories                                                          --                  5,130
                                                                        -----------------       ----------------
        Total Revenue                                                            564,022                171,694
                                                                        -----------------       ----------------
COST OF SALES (Page 21)                                                          280,069                 96,980
                                                                        -----------------       ----------------
        Gross Profit                                                             283,953                 74,714

OPERATING EXPENSES (Page 21)                                                     801,799                535,231
                                                                        -----------------       ----------------
        (Loss) from Operations                                                  (517,846)              (460,517)

OTHER INCOME (EXPENSE)
    Rental income (Note 7)                                                        22,300                 23,000
    Financing expense (Note 10)                                                       --               (134,930)
    Interest income                                                                  863                     --
    Miscellaneous income                                                           1,351                     --
    Gain on sale of asset (Note 18)                                               38,722                     --
     Realized loss on sale of securities                                          (7,850)                    --
     Interest expense                                                             (2,653)                (1,831)
                                                                        -----------------       ----------------
        Total Other Income                                                        52,733               (113,761)
                                                                        -----------------       ----------------

        (Loss) Before Income Taxes and Cumulative Effect of Accounting
         Change                                                                 (465,113)              (574,278)

PROVISION FOR INCOME TAX (Note 4)                                                 (5,364)                  (800)
                                                                        -----------------       ----------------
        Net (Loss) Before Cumulative Effect of Accounting Change                (470,477)              (575,078)

CUMULATIVE EFFECT OF ACCOUNTING CHANGE
    Organizational costs, net of income tax benefit of $0                         (2,625)                    --
                                                                        -----------------       ----------------
        Net (Loss)                                                              (473,102)              (575,078)

OTHER COMPREHENSIVE INCOME, net of tax:
    Unrealized holding (loss) arising during period, net of tax benefit
      of $0 and $0  (Notes 2 and 3)                                               (2,747)                (7,850)
    Add reclassification adjustment for (loss) included in net income              7,850                     --
                                                                        -----------------       ----------------

        Comprehensive Income (Loss)                                     $       (467,999)       $      (582,928)
                                                                        =================       ================
(Loss) per common share (Note 2 and 12)                                 $           (.07)       $          (.14)
                                                                        =================       ================

</TABLE>

The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.

                                      F-4
<PAGE>


                           DIGS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<S>                  <C>    <C>       <C>          <C>              <C>           <C>               <C>            <C>

                                                                                        Other
                     Preferred Stock         Common Stock             Additional    Comprehensive      Retained
                    --------------------------------------------       Paid-In         Income/         Earnings
                    Shares    Amount      Shares         Amount        Capital          (Loss)         (Deficit)       Total
                    -------  --------   -----------  -----------    ------------    -------------   -------------   -----------
Balance at
  Dec. 31, 1997        --         --     3,435,000   $    3,435     $  297,153      $       --       $ (271,318)    $   29,270

Stock sales
  Mar. 20, 1998
  (Note 10)            --         --     1,759,968        1,760        144,905              --               --        146,665

Reorganization
  with DIGS, Inc.
  Nov. 9, 1998
  (Note 9)             --         --        53,663           54            (54)             --               --             --

Stock sales
  Nov. 10, 1998
  (Note 11)            --         --     1,400,000        1,400        992,600              --               --        994,000

Net (loss) for the
  year ended
  Dec. 31, 1998        --         --            --           --             --              --         (575,078)      (575,078)

Unrealized holding
  (loss)
  Dec. 31, 1998
   (Notes 2 and 3)     --         --            --           --             --          (7,850)              --         (7,850)
                    -------  --------   -----------  -----------    ------------    -------------   -------------   -----------

Balance at
  Dec. 31, 1998        --         --     6,648,631        6,649      1,434,604          (7,850)        (846,396)       587,007


Shares issued for
  services
  Nov. 17, 1999
  (Note 17)            --         --        10,000           10         47,990              --               --         48,000

Net (loss) for the
  year ended
  Dec. 31, 1999        --         --            --           --             --              --         (473,102)      (473,102)

Net unrealized
  holding (loss) and
   reclassification
  Dec. 31, 1999
   (Notes 2 and 3)     --         --            --           --             --           5,103               --          5,103
                    -------  --------   -----------  -----------    ------------    -------------   -------------   -----------

Balance at
  Dec. 31, 1999        --    $    --     6,658,631   $    6,659     $1,482,594      $   (2,747)     $(1,319,498)    $  167,008
                    -------  --------   -----------  -----------    ------------    -------------   -------------   -----------

</TABLE>

The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.

                                      F-5
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

<TABLE>
<S>                                                                   <C>                     <C>

                                                                               1999                   1998
                                                                       ---------------------  -------------------
CASH FLOWS PROVIDED (USED) BY OPERATING ACTIVITIES:
  Net (loss)                                                            $        (473,102)     $        (575,078)
  Adjustments to reconcile net (loss) to net cash provided (used)
    by operating activities:
    Cumulative effect of accounting change-organizational costs                     2,625                     --
    Operating expenses paid by issuance of stock                                   48,000                134,930
    Equity securities received for payment of services                            (75,000)                    --
    Amortization and depreciation                                                  48,386                 31,607
    (Increase) in accounts receivable                                             (64,512)                (3,183)
    (Increase) in deposit                                                            (160)                    --
    (Decrease) increase in current liabilities and accrued expenses                35,278                 (6,101)
    Increase in income taxes payable                                                4,564                     --
    Increase in interest payable                                                    2,346                     --
     (Decrease) increase in deposits                                                 (600)                 3,000
     Increase (decrease) in deferred rent credit                                  (20,000)                31,667
     Gain on sale of asset                                                        (38,722)                    --
     Realized loss on sale of marketable equity securities                          7,850                     --
                                                                       -------------------    -------------------

        Net Cash Flows (Used) by Operating Activities                            (523,047)              (383,158)
                                                                       -------------------    -------------------

CASH FLOWS PROVIDED (USED) BY INVESTING ACTIVITIES:
    Acquisition of property and equipment                                         (48,550)               (79,042)
    (Increase) in program development cost                                       (108,820)                    --
    Proceeds from sale of marketable equity securities                              1,150                     --
    Acquisition of marketable equity securities                                        --                 (9,000)
                                                                       -------------------    -------------------

        Net Cash Flows (Used) by Investing Activities                            (156,220)               (88,042)
                                                                       -------------------    -------------------

CASH FLOWS PROVIDED (USED) BY FINANCING ACTIVITIES:
    Issuance of common stock (Notes 10 and 11)                                         --              1,005,735
    Proceeds from short-term loan                                                 325,000                600,000
    Principal payment on short-term loan                                          (25,000)              (600,000)
    (Increase) in loan receivable - officer                                       (30,558)                    --
    (Decrease) in note payable to stockholders                                         --                (47,321)
                                                                       -------------------    -------------------

        Net Cash Flows Provided by Financing Activities                           269,442                958,414
                                                                       -------------------    -------------------

NET INCREASE (DECREASE) IN CASH                                                  (409,825)               487,213

CASH AT THE BEGINNING OF THE YEAR                                                 515,920                 28,707
                                                                       -------------------    -------------------

CASH AT THE END OF THE YEAR                                             $         106,095      $         515,920
                                                                       ===================    ===================



The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.
                                      F-6
<PAGE>


                           DIGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998


                                                                               1999                   1998
                                                                       ---------------------  -------------------
ADDITIONAL DISCLOSURES:
    Cash paid during the year for:
    Interest                                                            $             307      $           1,831
                                                                       ===================    ===================

    Income Taxes                                                        $             800      $             800
                                                                       ===================    ===================

NON-CASH INVESTING AND FINANCING TRANSACTIONS:
    Common stock issued in exchange for subsidiary's common stock
                                                                        $              --      $         312,322
                                                                       ===================    ===================

    Disposal of asset in exchange for equity securities (Note 18)       $          44,622      $              --
                                                                       ===================    ===================

    Equity securities received for payment of services (Note 18)        $          75,000      $              --
                                                                       ===================    ===================

</TABLE>


The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.


                                      F-7
<PAGE>



                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


NOTE 1 - DESCRIPTION OF BUSINESS

DIGS,  Inc. (the Company),  formerly known as Advanced Laser  Products,  Inc., a
Delaware  corporation,  was  incorporated  on June 27,  1986,  as Skin  Research
Laboratories,  Ltd. On  September  25,  1990,  the  Company  changed its name to
Medipak  Corporation.  On  February  l, 1995,  the  Company  changed its name to
Advanced Laser Products,  Inc. In the late 1980's, the Company was attempting to
enter the medical  receivables  financing  business.  On  November 9, 1998,  the
Company acquired Digital Corporate Profiles,  Inc. (DCP). In connection with the
agreement of reorganization,  the "Reorganization," the Company issued 5,l94,968
shares of its common stock at $.001 par value per share,  in exchange for all of
the  outstanding  common  stock of DCP,  in  which  DCP  became  a wholly  owned
subsidiary  of the  Company  based on a  conversion  ratio  of 3  shares  of the
Company's   common  stock  for  each  share  of  DCP's   stock.   Prior  to  the
reorganization,  the  Company  was  considered  a  shell  organization  and  was
inactive.  The  merger  qualified  for a  tax-free  reorganization  and has been
accounted for as a recapitalization of Digital Corporate Profiles,  Inc. and the
acquisition  of DIGS at their book value.  As a result of the  recapitalization,
the Company's  consolidated  financial statements presented are those of Digital
Corporate  Profiles,  Inc.  (DCP)  whose  owners  maintained  control  after the
reorganization.  Please  see Note 9 for  additional  information.  In 1999,  the
Company formed two wholly owned  subsidiaries,  DXF Design,  Inc. (DXF) and DIGS
Web Video, Inc. (DWV).

DCP provides  complete  multimedia  and Internet  communications  solutions  for
public  companies to  proactively  tell their story to the worldwide  investment
community.  DCP produces  CD-ROM (IRCD)  packages for its corporate and investor
relations  clients.  DCP also offers an  environmental  health and safety CD-ROM
(EHSCD) to  dynamically  tell the  environmental,  health  and  safety  story to
investors,  environmental groups, media and the public. In addition, the Company
also produces an employee  orientation CD-ROM (EOCD) for the customers' internal
use. It is designed to familiarize  new employees with their new  environment by
providing  a  comprehensive  look at all  aspects of the  customers'  companies,
including: staff, products,  services, policies, and financial outlook. In 1999,
DCP ceased to provide  Stocknet-USA  directory  services  and sold  Stocknet-USA
Website  and domain  name to  non-related  parties  (see Note 18 for  additional
information).

DXF is a fully functional digital and graphic design studio providing a complete
range of Internet, CD-ROM and promotional print design services. DXF specializes
in designing brochures, corporate identity graphics, corporate and entertainment
promotional  kits,  as well as providing key art for  theatrical  and home video
advertisement.

DWV is developing and marketing a real time Internet Video screening application
known as iVideoNow!.  The  iVideoNow!  player has the capability of allowing the
user to instantly view up to 36 separate videos. This multi-screening technology
is currently being marketed to companies in the film, television, music, travel,
and retail  industries.  This  multi-screening  technology of iVideoNow!  can be
designed to a client's  specification and will provide companies new ways to use
Internet  video as a  promotional  tool.  DWV is also  developing  an e-commerce
technology  that will work with the  iVideoNow!  player,  allowing the viewer to
order products directly from the promotional videos.


                                      F-8
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation

The consolidated financial statements include the accounts of DIGS, Inc. and its
wholly owned subsidiaries,  Digital Corporate Profiles, Inc. (DCP), a California
corporation, Advanced Laser Products, Inc., a Nevada corporation (inactive), DXF
Design, Inc., a California  corporation,  and DIGS Web Video, Inc., a California
corporation.  All significant  intercompany  accounts and transactions have been
eliminated in consolidation.

Segment information

The  company  adopted  Statement  of  Financial  Accounting  Standards  No. 131,
"Disclosures  about Segments of an Enterprise and Related  Information" (SFAS No
131) in 1999. Prior to 1999, the Company only operated in one business  segment.
This statement  establishes  for the reporting of information  about a company's
operating  segments.   Operating  segments  are  defined  as  components  of  an
enterprise  for  which  separate  financial  information  is  available  that is
evaluated  regularly by the chief operating decision maker(s) in deciding how to
allocate  resources  and in assessing  performance.  SFAS No. 131 also  requires
disclosures  about products and services,  geographic areas and major customers.
The adoption of SFAS No. 131 did not affect  results of  operations or financial
position of prior reports. (See Note 14 for additional information)

Reclassifications

Certain prior year balances have been  reclassified  to conform with the current
year presentation.

Cash and Cash Equivalents

The Company and its subsidiaries consider cash on hand and cash in banks as cash
and cash equivalents.

Accounts Receivable

Uncollectible accounts receivable are written off as bad debt expense at the end
of the year.  For the year ended  December  31, 1999 and 1998,  there was no bad
debt expense.  The current  accounts  receivable is  considered  collectible  by
management.

Marketable Securities

Marketable securities consist of common stock.  Marketable securities are stated
at market value as determined by the most recently traded price of each security
at the balance sheet date,  with the  unrealized  gains and losses,  net of tax,
reported  as a  separate  component  of  stockholders'  equity.  All  marketable
securities  are defined as  available-for-sale  securities  under  provisions of
Statement of Financial  Accounting  Standards ("SFAS") No. 115,  "Accounting for
Certain  Investments in Debt and Equity  Securities." For purpose of determining
realized  gains and losses,  the cost of securities  sold was based on first-in,
first-out method.


                                      F-9
<PAGE>


                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Comprehensive Income

Statement  of  Financial   Accounting  Standards  ("SFAS")  No.  130,  Reporting
Comprehensive  Income,  establishes  a standard  for  reporting  and  displaying
comprehensive  income  and  its  components  within  the  financial  statements.
Comprehensive  income  includes  charges  and credits to equity that are not the
result of transactions with  shareholders.  Comprehensive  income is composed of
two  subsets - net  income and other  comprehensive  income.  Included  in other
comprehensive  income for the Company are  unrealized  losses and adjustment for
realized  losses of  available-for-sale  securities  as of December 31, 1999 and
1998.

Revenue Recognition

Design  and  development  of  CD-ROM  revenues  are  billed  in equal  one-third
installments  as the contract  progresses.  All payments are  nonrefundable  and
revenue is recognized when earned.  Revenue is deemed to be earned when there is
no future performance obligation.  Future performance obligation ceases when the
product is approved by the client and shipped.  The average length of a contract
is approximately  two months.  As of December 31, 1999 and 1998, the Company did
not have any open contracts.

Graphic design  revenue is billed when the project is completed.  As of December
31, 1999, the Company did not have any open contracts.

Earnings Per Share

In 1997, the Financial  Accounting  Standards Board issued  Statement (SFAS) No.
128,  "Earning Per Share." SFAS No. 128 established  standards for computing and
presenting  earnings per share  ("EPS") and requires  the  presentation  of both
basic and diluted  EPS.  Unlike  primary  EPS,  basic EPS  excludes any dilutive
effects of options,  warrants, and convertible securities and is computed on the
basis of the weighted  average  number of common shares  outstanding  during the
year. The diluted EPS  calculation is very similar to the previous fully diluted
EPS calculation method. The Company has adopted SFAS 128 since 1998. The Company
has a simple  capital  structure  and there were no  changes  under the SFAS 128
methodology to the previously  reported EPS amounts for any of the fiscal years.
Fully  diluted  per  share  data  is not  presented,  as the  effects  would  be
antidilutive. (See Note 12)

Property and Equipment

Depreciation  of  equipment  and  amortization  of  leasehold   improvements  is
calculated by the straight-line  and accelerated  methods based on the following
estimated useful lives:

                                                           Years
                                                         ---------
                Computer                                     5
                Furniture and fixtures                       7
                Computer software                            5
                Leasehold improvements                       10

In 1999, the Company changed its accounting policy for organization and start-up
costs. Please see accounting change.


                                      F-10
<PAGE>


                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Long-Lived Assets

In 1998,  the  Company  adopted  SFAS 121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed of." In accordance
with SFAS 121,  long-lived  assets held and used by the Company are reviewed for
impairment  when events or changes in  circumstances  indicate that the carrying
amount of an asset might not be fully  recoverable.  For purposes of  evaluating
the  recoverability  of  long-lived  assets,  the  estimated  future  cash flows
associated  with the asset would be compared to the asset's  carrying  amount to
determine  if a  write-down  to market  value or  discounted  cash flow value is
required.  The  adoption  of SFAS 121 had no impact on the  Company's  financial
position or on its results of operations.

Program Development Costs

In March 1998, the Company adopted  Statement of Position 98-1,  "Accounting for
Costs of Computer Software  Developed or Obtained for Internal Use." Capitalized
program  development  costs consist of consulting  and  programming  costs.  The
Company   capitalizes   internally   developed   software   costs   based  on  a
project-by-project  analysis of each project's  significance  to the Company and
its estimated  useful life.  All  capitalized  software costs are amortized on a
straight-line method over a period of five years.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion (APBO) No.
25,  "Accounting for Stock Issued to Employees," and related  interpretations in
accounting  for its  stock-based  compensation  and to provide  the  disclosures
required under Statement of Financial Standards (SFAS) No. 123,  "Accounting for
Stock-Based Compensation."

APBO No. 25  requires no  recognition  of  compensation  expense for most of the
stock-based  compensation  agreements provided by the Company where the exercise
price is equal to the market  value at the date of grant.  However,  APBO No. 25
requires  recognition of compensation  expense for variable award plans over the
vesting periods of such plans, based upon the then-current  market values of the
underlying stock. In contrast, SFAS No. 123 requires recognition of compensation
expense for grants of stock,  stock options,  and other equity  instruments over
the vesting  periods of such  grants,  based on the  estimated  grant-date  fair
values of those grants (see Note 13 for additional information).

Income Taxes

This  Company has adopted SFAS No. 109,  "Accounting  for Income  Taxes",  which
requires a liability  approach to financial  accounting and reporting for income
taxes.  The difference  between the financial  statement and tax basis of assets
and  liabilities  is  determined  annually.   Deferred  income  tax  assets  and
liabilities are computed for those differences that have future tax consequences
using the  currently  enacted  tax laws and rates that  apply to the  periods in
which they are  expected to affect  taxable  income.  Valuation  allowances  are
established,  if necessary, to reduce deferred tax asset accounts to the amounts
that will more  likely than not be  realized.  Income tax expense is the current
tax payable or  refundable  for the period,  plus or minus the net change in the
deferred tax asset and liability accounts.
                                      F-11
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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.

Year 2000 Compliance

In  general,  management  believes  its  computerized  systems  used  to  report
financial  information are year 2000 compliant.  Management does not foresee any
material year 2000 problems with the Company's vendors,  service  providers,  or
other third parties which affect the Company's financial information.  As of the
date of this report, the Company has not experienced any year 2000 problems.

Accounting Change

In 1999,  the Company  adopted  Accountants'  Statement of Position  (SOP) 98-5,
"Reporting on the Costs of Start-Up  Activities."  This statement  requires that
costs of start-up  activities and organizational  costs be expensed as incurred.
The cumulative  effect of this  accounting  change on years prior to 1999 was in
the amount of $2,625 (net of $0 tax  effect) or $0.00 per common  share that was
reflected in the first quarter of 1999. This new accounting  requirement did not
have a  significant  effect on 1999 income before the  cumulative  effect of the
accounting change.

NOTE 3 - MARKETABLE EQUITY SECURITIES

Cost and fair value of marketable  equity securities at December 31, 1999 are as
follows:

<TABLE>
<S>                                           <C>              <C>            <C>             <C>
                                                                   Gross            Gross
                                                                 Unrealized      Unrealized
                                                   Cost            Gains           Losses         Fair Value
                                             ---------------  ---------------  --------------- ---------------
December 31, 1999
Available for sale
     Equity securities                       $      119,622   $           --   $       (2,747)  $     116,875
                                             ===============  ===============  =============== ===============
</TABLE>

Net unrealized  losses from available for sale securities  during the year ended
December  31,  1999  and 1998  amounted  to  $2,747  and  $7,850,  respectively,
resulting  in  net  changes  of  $2,747  and  $7,850,  respectively,   to  Other
Comprehensive Income. For the year ended December 31, 1999, the Company received
proceeds of $1,510 as the result of sales of securities  available for sale. The
Company also recorded gross realized losses included in earnings of $7,850,  and
recorded losses  reclassified out of accumulated other  comprehensive  income as
the result of sales of securities  available for sale.  The tax benefit for each
component of comprehensive income, including reclassification  adjustments is $0
for the year ended  December  31,  1999 and 1998.  For  purpose  of  determining
realized  gains and losses,  the cost of securities  sold was based on first-in,
first-out method.


                                      F-12
<PAGE>

NOTE 4 - INCOME TAXES

The Company has available at December 31, 1999, net operating loss carryforwards
totaling  $1,253,761 that may be offset against future taxable. If not used, the
net operating loss carryforwards will expire as follows:

     Operating Losses

         Year 2011                                 $          81,269
         Year 2012                                           190,049
         Year 2018                                           470,148
         Year 2019                                           512,295
                                                   ------------------
                                                   $       1,253,761
                                                   ==================

The net deferred tax assets,  resulting from the net operating loss, included in
the  accompanying  balance sheet  include the following  amounts of deferred tax
assets and liabilities at December 31, 1999:

     Deferred Tax Asset - Current                $              --
     Deferred Tax Asset - Non-Current                      427,916
                                                 ------------------
                                                           427,916
     Valuation allowance                                  (427,916)
                                                 ------------------
                                                 $              --
                                                 ==================

For the year ended December 31, 1999 and 1998,  valuation allowance increased by
$203,679 and $156,530,  respectively.  Due to the uncertainty of the realization
of the net operating loss carryforwards, the Company has established a valuation
allowance against the carryforward benefits in the amount of $427,916.

The components of the provision for income taxes for  continuing  operations are
as follows:

                                             1999                1998
                                     -------------------  ------------------
Current
     State                            $           5,364   $             800
                                     ===================  ==================


NOTE 5 - PROPERTY AND EQUIPMENT

     Computer                                               $          89,510
     Furniture and fixtures                                             9,923
     Computer software                                                 21,180
     Leasehold improvements                                            44,365
                                                            ------------------
                                                                      164,978
     Less accumulated amortization and depreciation                   (54,167)
                                                            ------------------
                                                            $         110,811
                                                            ==================


Amortization and depreciation expenses for the years ended December 31, 1999 and
1998 were  $25,666  and  $18,356,  respectively.  In 1999 and 1998,  the Company
allocated  amortization  expense  to cost of sales in the  amount of $4,057  and
$3,639, respectively.

                                      F-13
<PAGE>

NOTE 5 - PROPERTY AND EQUIPMENT (CONTINUED)

In 1999,  the Company  adopted  Accountants'  Statement of Position  (SOP) 98-5,
"Reporting on the costs of Start up  Activities."  This statement  requires that
costs of start-up  activities and organizational  costs be expensed as incurred.

See Accounting Change in Note 2 for additional information.
NOTE 6 - PROGRAM DEVELOPMENT COSTS

     Program development costs                          $         160,931
     Less accumulated amortization                                (32,976)
                                                        ------------------
                                                        $         127,955
                                                        ==================

Amortization  expense for the years ended December 31, 1999 and 1998 was $22,720
and $13,251,  respectively. In 1999 and 1998, the Company allocated amortization
expense to cost of sales in an amount of $22,720 and $13,251,  respectively. For
the year ended December 31, 1999, the Company capitalized additional $108,820 of
program development costs.

NOTE 7 - COMMITMENTS

In August 1998, the Company entered in a two-year operating lease on its current
premises,  expiring July 31, 2000,  with a monthly lease payment of $7,691.  The
lease agreement  contains certain terms and conditions,  which include,  but are
not limited to, payment of property taxes,  insurance,  rent increases,  repairs
and  maintenance.  There is  currently  an  option  to renew  the  lease  for an
additional  three and five years.  On February 23, 2000, the Company renewed its
lease agreement for an additional  three years,  with a monthly lease payment of
$8,307.  The new lease will expire on July 31, 2003.

The following is a schedule of future minimum rental payments required under the
above operating lease as of December 31, 1999:

                Year Ending
                December 31,                                  Amount
           ------------------------                    ------------------
                    2000                               $          95,370
                    2001                                          99,679
                    2002                                          99,679
                    2003                                          58,146
                                                       ------------------
                                                       $         352,874
                                                       ==================

The above rental  expenses  will be offset by $7,000 in sublease  rental  income
through July 31, 2000.

For the years ended December 31, 1999 and 1998, rental expenses, net of deferred
rent credit,  were $70,277 and $44,445,  respectively.  Rental  income under the
subleases  amounted to $22,300 and $23,000 for the years ended December 31, 1999
and 1998, respectively.

In 1998,  the lessor  compensated  DCP in an amount of $40,000 for moving to its
current facility.  As of December 31, 1998, the above amount has been classified
as deferred rental credit and amortized on a straight-line  method over the term
of the lease.  In 1999 and 1998, the amortized  credit of $20,000 and $8,333 was
offset against rental expense, respectively.

                                      F-14
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

 NOTE 7 - COMMITMENTS (CONTINUED)

In 1999 the  Company  entered in a 36-month  operating  lease  agreement  with a
monthly  payment of $822.  For the year ended  December  31,  1999,  total lease
payment amounted to $5,015.  Future  obligation under the operating lease totals
$9,864, $9,864, and $4,932 for 2000, 2001, and 2002, respectively.

On March 1, 1998,  DCP  entered  into a  two-year  employment  contract  with an
officer  that  provides  for an  annual  salary  of  $96,000  as well as  annual
vacation,  sick pay, bonus,  and  miscellaneous  reimbursement  of out-of-pocket
costs. On February 28, 2000, the Company renewed the above  employment  contract
an additional  three years that provides an annual salary of $120,000 as well as
annual   vacation,   sick  pay,  bonus,  and   miscellaneous   reimbursement  of
out-of-pocket  costs.  The contract  expires on February 28, 2003. For the years
ended December 31, 2000,  2001,  2002, and 2003,  minimum  obligation under this
contract is  $116,000,  $120,000,  $120,000,  and $20,000,  respectively.  Total
compensation  to  all  officers  for  the  year  ended  December  31,  1999  was
approximately $242,000 including auto and miscellaneous expense  reimbursements.
During 1999, the total of approximately $20,000 was recorded as auto expense and
other  operating  expenses.  In  addition,  the  Company  allocated  $65,250  of
officers' salary to cost of goods sold during 1999.

NOTE 8 - CONCENTRATON

For the  years  ended  December  31,  1999 and  1998,  sales  to five and  three
customers   accounted  for   approximately   60%  and  96%  of  total   revenue,
respectively.  The total revenue  received from these customers in 1999 and 1998
was as follows:

<TABLE>
     <S>                            <C>            <C>         <C>              <C>

                                              For the Years Ended December 31,
                                     -------------------------------------------------
                                             1999                       1998
                                     ----------------------    -----------------------

       Customer A                    $         --       --%    $      29,045     16.9%
       Customer B                           1,500      0.3            27,541     16.0
       Customer C                              --       --           107,500     62.6
       Customer D                          60,118     10.6                --       --
       Customer E                          84,500     15.0                --       --
       Customer F                         130,680     23.2                --       --
       Customer G                          59,183     10.5                --       --
                                     ------------- --------    -------------- --------
                                     $    335,981     59.6%    $     164,086     95.5%
                                     ============= ========    ============== ========

</TABLE>


As of December 31, 1999,  receivables  from three  customers  account for 91% of
total accounts receivable.

The Company relies solely on the performance of DXF's officer,  Mr. Fleming,  to
generate revenue for its graphic design subsidiary, DXF Design, Inc. (DXF).

NOTE 9 - AGREEMENT OF REORGANIZATION

Effective  November 9, 1998, in connection with the agreement of reorganization,
the Company issued  5,l94,968  shares of its common stock at $.001 par value per
share, in exchange for all of the outstanding  common stock of Digital Corporate
Profiles,  Inc.  (DCP),  in which DCP became a wholly  owned  subsidiary  of the
Company,  based on a conversion  ratio of 3 shares of the Company's common stock
for  each  share  of  DCP's  stock.   The  merger   qualified   for  a  tax-free
reorganization  and has been  accounted  for as a  recapitalization  of  Digital
Corporate Profiles, Inc. and the acquisition of DIGS at their book values.

                                      F-15
<PAGE>


                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


NOTE 9 - AGREEMENT OF REORGANIZATION (CONTINUED)

Prior to the reorganization, the Company was considered a shell organization and
was inactive with no revenues and a minimal  administrative  expense of $300 and
$4,730 for the year ended December 31, 1998 and 1997, respectively.  As a result
of  the  recapitalization,   the  Company's  consolidated  financial  statements
presented  are those of Digital  Corporate  Profiles,  Inc.  (DCP) whose  owners
maintained control after the reorganization.

At the date of  reorganization,  there were 53,663 shares that were owned by the
former  DIGS,  Inc.  shareholders.  All share and per  share  amounts  have been
adjusted to reflect the 1 for 10 reverse stock split  effective  April 20, 1998,
and the 1 for 20 reverse stock split effective October 16, 1998.

NOTE 10 - SALE OF DCP'S STOCK

On March 20, 1998,  pursuant to a short-term  loan agreement of $600,000,  DCP's
Board of  Directors  authorized  the  issuance  of 586,656  shares of its common
stock,  an  equivalent  of 1,759,968  shares of the Company,  no par, to various
unrelated  individuals at the price of $.02 per share. All shares were issued on
September 15, 1998. The net proceeds were $11,735. These shares were outstanding
at the time of the  reorganization  with the Company  (see Note 9). In addition,
the Company  recorded a non-cash  financing  expense of $134,930 in  conjunction
with the  short-term  loan  agreement and the issuance of the above shares.  The
financing  expense is the difference  between the estimated fair market value of
DCP's stock on March 20,  1998,  which is $0.25 per share,  and the net proceeds
received.  Factors  used in  determining  the fair  market  value of DCP's stock
included the price of previously  sold stock and the financial  condition of the
Company on March 20, 1998.

NOTE 11 - SALE OF DIGS' STOCK

On November  10,  1998,  the Company  issued  1,400,000  shares of common  stock
through a 504 offering,  which is available to non-reporting and  non-investment
companies  for  offerings  of not more  than  $1,000,000  of  securities  in the
12-month  period  under  section  3(b) of the  (1933)  Securities  Act.  The net
proceeds of the offering  were  $994,000.  The Company used  $600,000 of the net
proceeds to repay outstanding short-term debts.

NOTE 12 - EARNINGS (LOSS) PER COMMON SHARE

The following table sets forth the computation of basic (loss) per share:

<TABLE>
     <S>                                               <C>                   <C>
                                                                1999                1998
                                                        -------------------  ------------------
     Basic EPS:
         (Loss) from continue operation                  $            (.07)  $            (.14)
         Cumulative effect of accounting change                       (.00)               (.00)
                                                        -------------------  ------------------
           Net (Loss) Per Common Share                   $            (.07)  $            (.14)
                                                        ===================  ==================
     Weight average shares outstanding                           6,649,864           4,220,188
                                                        ===================  ==================


</TABLE>


Fully  diluted  per  share  data  is not  presented,  as the  effects  would  be
antidilutive.


                                      F-16
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


NOTE 13 - STOCK OPTION PLANS

The  Company's  1999 stock  option plans  provide  incentive  stock  options and
nonqualified  stock options to purchase  common  stock.  These may be granted to
directors,  officers,  key  employees,  consultants,  and  subsidiaries  with an
exercise  price of up to 110% of market  price at the date of grant.  Generally,
options are exercisable in equal  installments over three years from the date of
grant,  and expire five to ten years from the date of grant.  As of December 31,
1999, the maximum of 750,000 shares was approved to be issued under the plan, of
which 455,000 shares were available for future grants.

For the year ended  December 31, 1999,  the Company  granted  230,000  shares of
qualified  stock  options and 65,000  shares of  nonqualified  stock  options to
various individuals at the average exercise price of $5.17 per share.

In  electing  to follow  Accounting  Principles  Board  Opinion  (APBO)  No. 25,
"Accounting  for  Stock  Issued  to  Employees,"   the  Company   recognizes  no
compensation expense related to employee stock options for the year December 31,
1999,  as no options are granted at a price below the market price on the day of
grant.

Presented below is a summary of stock option plan activity for the year shown:

<TABLE>
       <S>                                                  <C>                   <C>
                                                                                         Weight-
                                                                                         Average
                                                               Stock Options         Exercise Price
                                                             -------------------    ------------------

       Outstanding at December 31, 1998                                      --                    --
       Granted                                                          295,000                  5.17
       Exercised                                                             --                    --
       Forfeited                                                             --                    --
       Expired                                                               --                    --
                                                             -------------------    ------------------
       Outstanding at December 31, 1999                                 295,000                  5.17
                                                             ===================    ==================
       Shares exercisable at December 31, 1999                               --                    --
                                                             ===================    ==================


</TABLE>

Exercise prices for options outstanding as of December 31, 1999 range from $5.00
to $5.50. The following table summarizes information for options outstanding and
exercisable at December 31, 1999:

<TABLE>
          <S>               <C>         <C>             <C>               <C>           <C>


                                       Options Outstanding                     Options Exercisable
                            -------------------------------------------     ---------------------------
                                                            Weighted
                                            Weight-         Average                         Weight-
                               Stock        Average        Remaining           Stock        Average
            Exercise          Options       Exercise      Contractual         Options       Exercise
             Prices         Outstanding      Price            Life          Exercisable      Price
       -------------------- ------------- -------------   -------------     ------------- -------------
              $5.00           195,000        $5.00            2.0                --            --
              $5.50           100,000        $5.50            2.0                --            --
                            -------------                                   -------------
                              295,000                                            --

</TABLE>


In electing to continue to follow APBO No. 25 for expense recognition  purposes,
the Company is obliged to provide the expanded  disclosures  required under SFAS
No. 123 for stock-based  compensation  granted in 1999. This includes materially
different  information from reported  results,  such as pro forma net income and
earnings per share,  had  compensation  expense that  relating to the year ended
December 31, 1999 grants measured under the fair value recognition provisions of
SFAS No. 123.


                                      F-17
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999


NOTE 13 - STOCK OPTION PLANS (CONTINUED)

The  weight-average  fair values at date of grant for options granted during the
year ended December 31, 1999 were $5.00,  respectively  and were estimated using
the  Black-Scholes  option  valuation  model with the  following  weight-average
assumptions:
                                                              1999
                                                          -------------
       Expected life in years                                    5
       Interest Rate                                           5.0%
       Volatility                                             33.0%
       Dividend Yield                                            0%


NOTE 14 - SEGMENT INFORMATION

Information concerning operations in different lines of business at December 31,
1999 and for the year then ended is presented below.  Prior to 1999, the Company
only operated in one business  segment,  public  relation  CD-ROM.  In 1999, the
company  operated in the public  relation  CD-ROM  products  and graphic  design
within the United States.  Intercompany  transactions  between  segments are not
material.

<TABLE>
<S>                                                    <C>               <C>               <C>

                                                           CD-ROM
                                                         Design and          Graphic
                        1999                            Development          Design          Consolidated
------------------------------------------------------ ---------------    --------------   ---------------
Net Operating Revenues                                $       413,743    $      150,279   $       564,022
Operating Income                                             (589,211)           23,365          (565,846)
Identifiable Operating Assets                                 449,591           100,090           549,681
Capital Expenditures                                               --                --                --
Depreciation and Amortization                         $        47,080    $        1,306   $        48,386

</TABLE>


Identifiable operating assets include cash, available-for-sale securities, trade
accounts receivable, and fixed assets.

NOTE 15 - RELATED PARTY TRANSACTIONS

For the year ended  December 31, 1999 and 1998,  the Company paid its Secretary,
David Fleming,  approximately $10,500 and $9,000 as an independent contractor in
connection with the production of its products.  All payments were made prior to
Mr. Fleming taking the position of a full-time officer of DXF Design, Inc.

In 1999, the President  provided the Company an unsecured  non-interest  bearing
short-term loan of $25,000. The Company repaid this loan within one month.

For the year ended  December 31, 1998,  DCP repaid the  president of the Company
the  short-term  note in an amount of  $47,321.  This  amount was on DCP's books
since December 31, 1997.

For the year ended December 31, 1999, loan  receivable  from DXF's officer,  Mr.
Fleming,  totaled $30,558,  including $558 of accrued  interest.  The loan bears
interest at 5% per annum and is due on July 30, 2000.


                                      F-18
<PAGE>

                           DIGS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 1999

<TABLE>
<S>                                                                               <C>

NOTE 16 - SHORT-TERM NOTE

As of December 31, 1999, the Company has the following short-term notes:

       A  short-term  note  bears  interest  at 5% per annum,
         with  an  effective  interest  rate of  5.116%.  The
         note is due on January 1, 2000.                                          $           100,000

       Revolving  short-term  note  bears  interest  at 5% per  annum, with an
         effective interest rate of 5.116%.
         The note is due on January 1, 2000.                                                  200,000
                                                                                  --------------------
                                                                                              300,000
       Interest accrued for the above notes                                                     2,346
                                                                                  --------------------
                                                                                  $           302,346
                                                                                  ====================

</TABLE>

For the year ended  December 31, 1999,  interest  expense  accrued for the above
notes  totaled  $2,346.  The  maximum  funds  available  under the  second  note
agreement are $350,000. The Company,  under the note agreements,  is required to
provide  100,000 and 350,000  shares of its common stock as  collateral  for the
above notes, respectively. If the note is not repaid in full within 30 days from
the due date,  the note is deemed to be in  default,  which  shall give the note
holder  the right to  foreclose  on the  collateral  with no  further  action or
notice.  The notes have been  extended and is due April 1, 2000.  As of February
24, 2000, the Company borrowed an additional $150,000.

NOTE 17 - SHARES ISSUED FOR SERVICES

On November 17, 1999,  the Company  issued  10,000  restricted  shares of common
stock for services  rendered  relating to the listing of the Company's  stock on
Frankfurt  Stock  Exchange.  The Company  recorded a  shareholder  expense in an
amount  of  $48,000,  which  represents  50% of the  fair  market  value  of the
Company's  share  at  $9.60  per  share.  The 50%  value  is  deemed  reasonable
considering the inability of the shareholder to dispose of the restricted stock.

NOTE 18 - SALE OF ASSETS

On September 1999, the Company received from Monia Investment, Inc. (MII) 10,000
shares of Global  Electronics  Manufacturing,  Inc.  (ECSW)  common stock with a
market value of  $122,500.  In  exchange,  the Company gave MII,  Stocknet-USA's
domain  name  and  Website,   as  well  as   redesigning   the  Website  to  MII
specifications   and  providing  MII  with  a  lifetime  of  non-exclusive   and
non-transfereable  use of the Company  proprietary system. The net book value of
Stocknet-USA's domain name and Website was $5,900. The Company recorded an after
tax gain of $38,722 for the exchange of Stocknet-USA's  domain name and Website,
net of agent fee of $2,878.  The Company also recorded the redesigning  fees and
the non-exclusive use of the Company  proprietary system as revenue in an amount
of $75,000 for the year ended December 31, 1999.

NOTE 19 - SUBSEQUENT EVENTS

In February 2000, the Company  entered into  securities  purchase  agreements to
issue  and sell up to 2,500  shares  of the  Company's  Series  "A"  convertible
preferred  stock, par value $.01 per share and warrants to purchase 40 shares of
common  stock for each share of  preferred  stock at a price of $1,000 per share
for  an  aggregate  offering  price  of  $2,500,000.   In  connection  with  the
agreements, the Company will issue and sell 200,000 warrants to purchase 200,000
shares of the Company's common stock, $.001 par value.

                                      F-19
<PAGE>


             Independent Auditors' Report on Additional Information


To the Board of Directors and Stockholders of
DIGS, Inc. and Subsidiaries

Our report on our audit of the basic  financial  statements  of DIGS,  Inc.  and
Subsidiaries  for December 31, 1999 and 1998 appears on Page F-2. That audit was
conducted  for  the  purpose  of  forming  an  opinion  on the  basic  financial
statements  taken as a whole.  The schedules of cost of goods sold and operating
expenses on Page F-21 are presented for the purposes of additional  analysis and
are not a required part of the basic  financial  statements.  Such  information,
except for that portion marked "unaudited',  on which we express no opinion, has
been  subjected  to the  auditing  procedures  applied in the audit of the basic
financial  statements,  and, in our opinion, the information is fairly stated in
all material  respects in relation to the basic financial  statements taken as a
whole.



CALDWELL, BECKER, DERVIN, PETRICK & CO., L.L.P.
Woodland Hills, California 91364






                                      F-20
<PAGE>



                           DIGS, INC. AND SUBSIDIARIES
              SCHEDULE OF COST OF GOODS SOLD AND OPERATING EXPENSES
                 FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998



<TABLE>
<S>                                                <C>                   <C>

                                                        UNAUDITED
                                                          1999                 1998
                                                   ------------------    ----------------

COST OF GOODS SOLD
    IRCD production costs                           $         87,381     $        72,972
    Labor costs                                              124,380                  --
    Others                                                    68,308              24,008
                                                   ------------------    ----------------
        Total Cost of Sales                         $        280,069     $        96,980
                                                   ==================    ================


OPERATING EXPENSES
     Auto expense                                   $         28,001     $        18,282
     Commissions                                               5,931              17,974
     Marketing                                               109,005              14,400
     Outside services                                         22,867              43,817
     Printing                                                  1,611              19,824
     Professional services                                    66,022              33,126
     Rent (Note 7)                                            70,277              44,445
     Salaries - officers                                     156,725             121,989
     Salaries - other                                        107,247             113,257
    Shareholder expenses (Note 17)                            69,972               2,860
     Taxes - payroll                                          24,941              20,565
     Others                                                  139,200              84,692
                                                   ------------------    ----------------
        Total Operating Expenses                    $        801,799     $       535,231
                                                   ==================    ================

</TABLE>

The  Accompanying  Notes  are an  Integral  Part of the  Consolidated  Financial
Statements.