Compiled Statement GAAP Supplement

Page 3 of 4

of these receivables is $0.Payments of $29,000 were receivedonthetotalamountof$33,500
due.The remaining $4,500 was discounted during 1999.

Income taxes:

The Company has adopted FASB Statement No. 109,Accounting for Income Taxes,which
requires an asset and liability approach to financial accounting and reporting for income taxes.
Under the asset and liability method, deferred tax assets are recognized for deductible temporary
differences and operating loss or tax credit carry forwards and deferred tax liabilities are recognized
for taxable temporary differences.Temporary differences are the differences between the amounts
of assets and liabilities recorded for income tax and financial reporting purposes.Deferred tax
assets are reduced by a valuation allowance when management determines that it is more likely than
not that some portion or all of the deferred tax assets will not be realized.Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Note 3

Related Party Transactions

Note payable to officer at December 31, 1998 and 1999, consist of the following:

1998

1999

Unsecured note payable, maturing January 1,
2028, monthly installments of $952.76
including interest at 10.90% at December 31, 1999.
The rate adjusts every six months, based on the
6 month LIBOR rate plus 6.25%, with a 1.00%
maximum change every six months, and a minimum
and maximum interest rate of 7.90% and 13.90%
respectively.
Less current maturities

$

100,467
771

$

99,290
619

$

99,696

$

99,909

Future maturities are as follows:

2000
2001
2002
2003
2004
Thereafter

$

619
447
410
470
540
97,423

$

99,909

Interest expense for related parties was $22,378 in 1999. Amounts due from officer are unsecured
and non-interest bearing. Due from officer is scheduled for monthly repayment at the rate of
1/20th of Mr. Palmer’s salary when Mr. Palmer starts to receive a salary.

Note 4

Stockholders' Equity

Stock option plan:

The Company has reserved 1,000,000 shares of common stock for issuance under an incentive
stock option plan established in 1986.Under the plan, options are granted at prices determined by
the Board of Directors.It is the Company’s policy to not grant any options at a price less than the