1-4
5-8
9-12
13-16
17-20
21-24
25-28
29-32
33-36
37-40
41-44
45-48
49-52
53-56
57-60
61-64
65-68
69-72
73-76
77-80
81-84
85-86
1-4
5-8
9-12
13-16
17-20
21-24
25-28
29-32
33-36
37-40
41-44
45-48
49-52
53-56
57-60
61-64
65-68
69-72
73-76
77-80
81-84
85-86
ofBusiness ... Continued
Based Compensation. As permitted by this Standard, the Company will continue to measure
compensation cost using the intrinsic value-based method of accounting prescribed by the
Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees.
connection with its SCOR (small corporate offering registration) and other stock offerings. As of
December 31, 1998, $7,000 of prepaid stock issuance costs has been deducted from the proceeds
directly related to issuance of common stock. Management continues to actively pursue sales of
common stock. The remaining prepaid stock issuance costs will be deducted from future proceeds
related to stock issuance, or expensed against net income only to the extent that future proceeds
derived from issuing the stock do not exceed total prepaid stock issuance costs.
Balance Sheet as a reduction in stockholder’s equity. At December 31, 1998, the total amount of
these receivables is $33,500. Payments of $1,500 per month are made on $31,500 of this total
over a period of 24 months. The remaining $2,000 is paid in two installments during 1999.
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.
PartyTransactions
2028, monthly installments of $807
including interest at 8.90% at December 31, 1998.
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
788
771
1999
2000
2001
2002
2003
Thereafter
842
920
1,006
1,099
95,829
for monthly repayment at the rate of 1/20th of Mr. Palmer’s salary when Mr. Palmer starts to
receive a salary.
to-month basis throughout 1997 and 1998. Total occupancy related expense, including certain real
estate taxes, utilities and repairs paid to the officer was $2,354 in 1997 and $3,977 in 1998.
Equity
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
current market or sales price. No options have been granted as of December 31, 1998. The
incentive stock option plan matures in 2001.
options. At December 31, 1996, there were 850,000 options outstanding and exercisable. During
1997, options to purchase 100,000 shares were granted at an exercise price of $1.00 per share.
No options shares expired, were canceled, or exercised during 1997. At December 31, 1997 there
were 950,000 options outstanding and exercisable.
272,500 options expired at a weighted-average price of $.23 per share. No options were granted
during 1998. At December 31, 1998, there were 500,000 options outstanding and exercisable at a
weighted-average exercise price of $.52 per share and a weighted-average remaining contractual
life of 31 months; the outstanding options are comprised of 400,000 shares exercisable at $.40 per
share expiring December 31, 2000 and 100,000 shares exercisable at $1.00 per share expiring
December 31, 2003.
common stock issued. At December 31, 1996 there were 815,993 warrants outstanding and
exercisable. During 1997, 130,000 shares were exercised at a weighted-average exercise price of
$.20 per share. At December 31, 1997 there were 685,993 warrants outstanding and exercisable.
share, and the remaining 274,167 warrants expired at a weighted-average exercise price of $.21
per share. No warrants were granted during 1998, and there are no warrants outstanding at
December 31, 1998.
customer lists. The amount assigned to each transaction is based upon contractual agreements.
Accordingly, no compensation cost has been recognized for options granted. There are no charges
or credits to expense with respect to the granting or exercise of options since the options were
issued with exercise prices at or exceeding fair market value on their respective dates of grant.
However, using an option pricing model to determine the fair value of the options and considering
the expected option life, anticipation of no dividends, and the risk-free interest rate, determining
compensation cost for stock-based compensation plans consistent with SFAS 123 would not have
had a material impact on reported net income of the Company.
Taxes
1997 and 1998.
determined it is more likely than not that the deferred tax asset will not be realized. The
Company’s valuation allowance increased $59,700 from December 31, 1997 to December 31,
1998, due to net operating losses incurred during 1998. At December 31, 1998, for income tax
purposes, the Company had federal and state net operating loss carry forwards of approximately
$742,000 available that expire through the year 2013.
andContingencies
against product failure. In addition, the Company provides a warranty of its assembled product
workmanship. Management has determined that no warranty reserve was necessary as of
December 31, 1997 and 1998.
issues that would cause significant operational problems. However, due to external factors beyond
the Company’s control such as general economic conditions, it is uncertain as to whether the Year
2000 issue will impact the Company’s operations in any significant way.
Leases
expiring April 15, 1999. Under this agreement, the Company issued 124,110 shares of common
stock totaling $49,644. This was recorded as prepaid rent expense and is being amortized to rent
expense over the lease term. In addition to the common stock, the Company makes a monthly cash
payment for rent. As of the date of this report, management has entered into discussions to extend
this lease for a period of one year upon similar terms.
Less valuation allowance
Net deferred tax assets
Deferred tax liabilities
Total deferred income taxes
235,800
-
-
-
295,500
-
-
-
