6-Month Financial Report for Period Ending 31 December 2003 and 2002

INTERNET CORPORATION FOR
ASSIGNED NAMES AND NUMBERS
COMPILED FINANCIAL STATEMENTS
Six months ended December 31, 2003 and 2002

Bremer & Hockenberg
Certified Public Accountants

6100 Center Drive, Suite #600
Los Angeles, California 90045
Telephone: 310 342-6900
Facsimile: 310 342-6901

The Board of Directors
Internet Corporation for Assigned Names and Numbers
Los Angeles, California

We have compiled the accompanying statement of financial position of Internet Corporation for Assigned Names and Numbers (a non-profit organization) as of December 31, 2003 and 2002, and the related statements of activities and cash flows for the six months then ended in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them.

As described in Note C, it is the Company's stated policy to reserve for invoices remaining unpaid for more than 180 days. Management believes that it is appropriate to make an exception to this policy for certain accounts. Had a reserve been established in accordance with the stated policy, the net assets in the accompanying financial statements would have been reduced by approximately $1,211,000 and $676,000 as of December 31, 2003 and 2002, respectively.

Bremer & Hockenberg

January 23, 2004

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INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS STATEMENTS OF FINANCIAL POSITION December 31,
ASSETS
		2003	2002
Cash and cash equivalents		$1,824,295	$1,418,158
Accounts receivable (less allowance for doubtful accounts of $302,505 in 2003 and $179,112 in 2002)		3,325,761	2,333,775
Other assets		34,348	489
Property and equipment (less accumulated depreciation of $396,580 in 2003 and $321,102 in 2002)		82,364	167,850
Equipment not yet placed in service		190,701	-
TOTAL ASSETS		$5,457,469	$3,920,272
LIABILITIES AND NET ASSETS
Accounts payable and accrued liabilities		$ 1,118,898	$ 353,173
Deferred revenue		576,411	541,239
Loans payable		-	12,702
Total Liabilities		1,695,309	907,114
Net assets:
Unrestricted		3,641,608	2,810,646
Temporarily restricted		120,552	202,512
Total Net Assets		3,762,160	3,013,158
TOTAL LIABILITIES AND NET ASSETS		$5,457,469	$3,920,272
INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS STATEMENTS OF ACTIVITIES Six months ended December 31,
		2003	2002
Changes in unrestricted net assets:
Support and revenue:
Domain name registry and registrar fees		$3,222,420	$2,281,749
Accreditation fees		573,970	485,660
Application fees		67,500	37,500
Contributed services		-	87,500
Interest income		5,248	11,880
Net assets released from restrictions		17,000	62,060
Total Support and Revenue		3,886,138	2,966,349
Expenses:
Personnel		1,361,885	1,077,393
Board and public meetings		333,388	397,440
Other meetings and travel		249,162	141,990
Professional services		1,398,310	768,415
General and administrative		637,647	574,845
Total Expenses		3,980,392	2,960,083
(Decrease) Increase In Unrestricted Net Assets		(94,254)	6,266
Changes in temporarily restricted net assets:
Contributions and grants		137,552	21,765
Net assets released from restriction		(17,000)	(62,060)
Increase (Decrease) In Temporarily Restricted Net Assets		120,552	(40,295)
INCREASE (DECREASE) IN NET ASSETS		26,298	(34,029)
Net assets at July 1,		3,735,862	3,047,187
NET ASSETS AT DECEMBER 31,		$3,762,160	$3,013,158
INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS STATEMENTS OF CASH FLOWS Six months ended December 31,
		2003	2002
Cash Flows From Operating Activities:
Increase (decrease) in net assets		$ 26,298	$ (34,029)
Adjustments to reconcile change in net assets to net cash     provided by (used in) operating activities:
Depreciation		30,340	53,423
Increase in allowance for doubtful accounts		100,477	25,763
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(67,339)	(205,887)
Decrease in other assets		49,004	-
Increase (decrease) in accounts payable      and accrued liabilities		546,566	(272,990)
(Decrease) increase in deferred revenue		(23,061)	44,770
Net Cash Provided By (Used In) Operating Activities		662,285	(388,950)
Cash Flows Used In Investing Activities -   Purchases of property and equipment		(190,701)	-
Cash Flows Used In Financing Activities -   Principal payments on loans payable		(3,705)	(11,990)
Net Increase (Decrease) In Cash and Cash Equivalents		467,879	(400,940)
Cash and cash equivalents at July 1,		1,356,416	1,819,098
CASH AND CASH EQUIVALENTS         AT DECEMBER 31,		$1,824,295	$1,418,158
Supplemental Cash Flow Information:
Cash paid during the year for interest		$46	$1,139

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INTERNET CORPORATION FOR ASSIGNED NAMES AND NUMBERS
NOTES TO THE FINANCIAL STATEMENTS
December 31, 2003 and 2002

NOTE A - ORGANIZATION

Internet Corporation for Assigned Names and Numbers (ICANN) was established in September 1998 under the laws of the state of California as a non-profit organization. ICANN coordinates a select set of the Internet's technical management functions such as the assignment of protocol parameters, the management of the domain name system, the allocation of Internet protocol (IP) address space, and the management of the root server system. Categories of Internet domains include Generic Top Level Domains (gTLDs) which include the .com, .net, .org, and .edu domains and Country Code Top Level Domains (ccTLDs) examples of which are .us, .uk, and .fr. ICANN generates income from fees received from domain name registrars and related accreditation activities. Its primary sources of revenue are as follows:

Domain name registry and registrar fees - Amounts contributed by organizations responsible for the registration and administration of Internet Domain Names.

Address registry fees - Amounts contributed by organizations responsible for the assignment and administration of Internet addresses.

Accreditation fees - Amounts paid in connection with initial and renewal accreditation of organizations engaged in the registration and administration of domain names in the .com, .net, .biz, .info, .museum, .name, and .org Internet domains.

Application fees - Amounts paid in connection with processing of applications to become accredited domain name registrars.

ICANN also receives contributions and grants from other organizations.

ICANN has three supporting organizations which serve as advisory bodies to the ICANN board of directors with respect to internet policy issues and structure within three specialized areas, including the system of IP addresses and the domain name system. The supporting organizations are the primary source of substantive policy recommendations for matters lying within their respective specialized areas. The three supporting organizations are the Address Supporting Organization (ASO), Generic Domain Name Supporting Organization (GNSO), and the Country Code Domain Name Supporting Organization (CCNSO) (under formation). The supporting organizations are not separately incorporated entities. The accounts of the supporting organization formerly known as DNSO (now GNSO) are included in the accompanying financial statements. In the prior period ICANN, on behalf of GNSO, received and processed the contributions that GNSO received from its constituencies. ASO was formed through a memorandum of understanding wherein neither the Secretary nor the Council members for the organization shall be entitled to any compensation or reimbursement of expense from ICANN.

NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation - The financial statements of ICANN have been prepared on the accrual basis of accounting.

ICANN recognizes contributions, including unconditional promises to give, as revenue in the period received. Contributions and net assets are classified based on the existence or absence of donor-imposed restrictions. As such, the net assets of ICANN and the changes therein are classified and reported as follows:

• Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations and that may be expendable for any purpose in performing the objectives of ICANN.
• Temporarily restricted assets - Net assets subject to donor-imposed stipulations that may or will be met either by actions of ICANN and/or the passage of time. As the restrictions are satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying financial statements as net assets released from restrictions.
• Permanently restricted net assets - Net assets subject to donor-imposed stipulations that resources be maintained in perpetuity. Investment income generated from these funds is available for general support of ICANN's programs and operations unless otherwise stipulated by the donor.

As of December 31, 2003, ICANN has no permanently restricted net assets.

Functional allocation of expenses - Expenses that can be identified with a specific program or supporting service are charged directly to the related program or supporting service. Expenses that are associated with more than one program or supporting service are allocated based on methods determined by management. As of and for the six months ended December 31, 2003 and 2002, respectively, ICANN's expenses are classified as follows:

		2003	2002
Program services		$2,697,251	2,042,457
Supporting services -   management and general		1,211,808	917,626
TOTAL		$3,909,059	$2,960,083

Cash and cash equivalents - Cash and cash equivalents include deposits in bank, money market accounts, and marketable commercial paper.

Concentration of credit risk - All of ICANN's cash and cash equivalents are maintained at one commercial bank. At December 31, 2003, ICANN had cash in the bank in excess of Federal Deposit Insurance Corporation (FDIC) insurance limits of approximately $1,700,000, which includes approximately $1,045,000 on deposit in a money market fund.

The accompanying financial statements include certain IP Address registry accounts receivable balances totaling approximately $1,211,000 and $676,000 as of December 31, 2003 and 2002, respectively. The inclusion of these receivables is based primarily on verbal understandings between ICANN and the participating registries. Such receivables and revenues are not supported by written agreements nor has any valuation allowance for collectibility been established relating to these accounts.

It is the policy of management to reserve against all invoices that remain unpaid for more than 180 days (see NOTE C).

Property and equipment - Property and equipment are stated at cost or, for contributed items, at fair market value at date of contribution. The equipment, furniture and fixtures are being depreciated using the accelerated method over estimated useful lives of five to seven years. Leasehold improvements are being depreciated using the straight-line method over the useful life or the remaining lease term, whichever is shorter.

Deferred revenue/Accreditation fees - Accreditation fees attributable to future activities are included in cash and cash equivalents or accounts receivable and reflected as deferred revenue until earned.

Promises to give - Unconditional promises to give that are expected to be collected within one year are recorded at estimated net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of the estimated future cash flows. Conditional promises to give are not included as support until the conditions are substantially met.

Contributed services - Contributed services are recognized only if the services (a) create or enhance long-lived assets, or (b) require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. For the six months ended December 31, 2002, contributed legal services totaling $87,500 are included in the statement of activities as contributed services and professional services expense. There were no contributed services for the six months ended December 31, 2003.

Income taxes - ICANN is exempt from federal and state income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements.

Use of estimates - The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

NOTE C - ACCOUNTS RECEIVABLE

Accounts receivable is comprised of the following constituencies for various registry and accreditation fees at December 31,:

			2003	2002
	ccTLDs		$ 158,260	$ 9,000
	gTLDs		2,155,551	1,724,068
	IP address registries		1,211,010	676,000
	GNSO constituencies		103,445	103,819
			3,628,266	2,512,887
Less: allowance for doubtful accounts			302,505	179,112
			$3,325,761	$2,333,775

As described in NOTE B, it is the policy of the Company to establish a reserve for all invoices that remain unpaid for more than 180 days. Management has deemed it appropriate to make an exception to this policy for accounts totaling $1,211,000 and $676,000 as of December 31, 2003 and 2002, respectively. Written agreements have not yet been obtained from the name and address registry operators from whom these balances are due.

NOTE D - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31,:

		2003	2002
Computer equipment		$322,434	$332,443
Furniture and fixtures		44,195	44,195
Leasehold improvements		112,315	112,315
		478,944	488,953
Less: accumulated depreciation		396,580	321,103
		$ 82,364	$167,850

At December 31, 2003 an additional amount of $190,701 has been spent on computer equipment that has not yet been placed in service.

NOTE E - LOANS PAYABLE

		2003	2002
Note payable to USC/ISI for construction of leasehold improvements, dated April 1999, bearing interest at 8.0%, principal and interest payable in equal monthly installments of $647 through August 1, 2003.		$ -	$ 4,409
Note payable to USC/ISI for construction of leasehold improvements, dated July 28, 2000, bearing interest at 11%; principal and interest payable in equal monthly installments of $1,229 through September 1, 2003.		-	8,293
		-	$12,702

NOTE F - COMMITMENTS AND CONTINGENCIES

Lease commitment - In January 1999, ICANN entered into a five-year sublease agreement for an office facility. This lease was renewed effective January 1, 2003, and expires September 30, 2005. The base rent is $21,515 per month, including administration and participation fees. Future minimum lease payments for the remaining term under the operating lease, including addendums, as of December 31, 2003 are as follows:

	Period or year
ended June 30
	2004		$129,087
	2005		280,525
	2006		70,131
			$479,743

Rent and other facilities costs totaled $122,357 and $116,574 for the six months ended December 31, 2003 and 2002, respectively.

Legal matters - In the ordinary course of business, ICANN is subject to lawsuits and other potential legal actions. Management is unable at this time to determine the probable outcome or the effect, if any, that these actions may have on the financial position and the ongoing operations of the Company. Accordingly, the accompanying financial statements do not include a provision for any losses that may result from the Company's current involvement in legal matters.

NOTE G - TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets totaling $120,552 and $202,512 at December 31, 2003 and 2002 were restricted by donors for specific activities and projects pertaining to the Generic Domain Name Supporting Organization.

NOTE H - RELATED PARTY TRANSACTIONS

The services of ICANN's president and chief operating officer are provided to ICANN through a professional services agreement with a company that is owned by the president. Total payments for the six months ended December 31, 2003, including fees for professional services and reimbursed expenses, were $236,931.

Included in accounts payable and accrued liabilities is approximately $15,000 of reimbursable expenses payable to the affiliated company.

In addition, the Company has prepaid a portion of the first year management fees. As of December 31, 2003 the unamortized portion of such prepaid fees included in the accompanying financial statements is approximately $25,000.

During the period ended December 31, 2003, various directors have been reimbursed approximately $93,000 for expenses pertaining to Company matters including fees for professional services and travel and other position related expenses.