UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): November 22, 1999
(September 10, 1999)
FACTUAL DATA CORP.
-------------------
(Exact name of registrant as specified in its charter)
COLORADO 0-24205 84-1449911
- ----------------------------- ------------------------ --------------------
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
5200 Hahns Peak Drive
FORT COLLINS, COLORADO 80538
----------------------------------------
(Address of principal executive offices)
(970) 663-5700
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) The registrant is filing the required financial statements in
connection with its acquisition of Data Power Information Systems, LLC
on September 10, 1999 on this amendment to Form 8-K.
(b) The registrant is also filing the required pro forma information in
connection with the acquisition described in Item 7a above on this
amendment to Form 8-K.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FACTUAL DATA CORP.
DATE: NOVEMBER 22, 1999 BY: /S/JERALD H. DONNAN
____________________________
Jerald H. Donnan
Chief Executive Officer
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENTS OF
INCOME (LOSS) AND UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
The following unaudited pro forma combined statements of income for the year
ended December 31, 1998 and the six month period ended June 30, 1999 and the
unaudited pro forma combined balance sheet as of December 31, 1998 and June 30,
1999 give effect to the business combination of Factual Data Corp. and Data
Power Information Systems, LLC. The transaction between Factual Data Corp. and
Data Power Information Systems, LLC has been accounted for as a combination of
companies under the purchase method. The unaudited pro forma statements of
income have been prepared as if the proposed transaction occurred on January 1,
1998. The unaudited pro forma balance sheets have been prepared as if the
proposed transaction occurred December 31, 1998 and June 30, 1999, respectively.
These pro forma statements are not necessarily indicative of the results of
operations or the financial position as they may be in the future or as they
might have been had the transactions become effective on the above mentioned
date.
The unaudited pro forma combined statements of income for the year ended
December 31, 1998 and the six month period ended June 30, 1999 includes the
results of operations of Factual Data Corp., Data Power Information Systems, LLC
and previous acquisitions reported on amendments to Form 8-K during 1999.
The unaudited pro forma combined statements of income and the unaudited pro
forma combined balance sheets should be read in conjunction with the separate
historical financial statements and notes thereto of Factual Data Corp., Data
Power Information Systems, LLC and those previous acquisitions in 1999 reported
on as amendments to Form 8-K.
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following notes and adjustments are related to the business combination
between Factual Data Corp. (FDC) and Data Power Information Systems, LLC (DPIS).
1. Reflects the pro forma amounts contained in Form 8-K/A2 filed on October
15, 1999 which gives effect to FDC's acquisition of F.D.D., Inc. and
F.D.S.C., Inc. and previous 1999 acquisitions.
2. Reflects the June 30, 1999 unaudited balance sheet and statement of income
for the six months ended June 30, 1999 of FDC as filed on Form 10-QSB on
August 13, 1999.
3. Eliminates assets and liabilities not acquired by FDC in connection with
its acquisition of DPIS.
4. Records the acquisition of DPIS for $3,193,000. To finance the acquisition,
FDC paid $1,993,000 in cash at closing and issued a $1,200,000 note payable
bearing interest at 8% per annum. The purchase price has been allocated as
follows:
ASSET CATEGORY
Property and equipment ....................... $ 90,000
Intangible Assets ............................ 3,103,000
----------
$3,193,000
==========
The $1,993,000 paid in cash has been reflected as a payable at December 31,
1998 as cash balances reflected based on Note 1 above was not sufficient to
cover the $1,993,000 payment.
5. To eliminate depreciation and interest expense which will not continue
following the business combination.
6. To record depreciation and amortization of fixed assets and intangibles
acquired. Fixed assets are depreciated over a five year life, non-compete
agreements over the life of the agreements and customer lists over fifteen
years.
7. To record interest expense on acquisition debt at 8% per annum.
8. Pro forma income tax adjustment at the combined statutory rate of 37% for
federal and state income taxes.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1999
<TABLE>
Pro Forma Adjustments
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------
FDC(2) DPIS Total Debit Credit Combined
----------- -------- ----------- ---------- ----------- -----------
Cash $ 7,293,843 $ 81,150 $ 7,374,993 $ - $ (81,150) (3) $ 5,300,843
(1,993,000) (4)
Prepaid expenses and
other 634,862 1,065 635,927 - (1,065) (3) 634,862
Accounts receivable, net 4,296,692 394,226 4,690,918 - (394,226) (3) 4,296,692
----------- -------- ----------- ---------- ----------- -----------
Total current assets 12,225,397 476,441 12,701,838 - (2,469,441) 10,232,397
---------- -------- ----------- ---------- ----------- -----------
Property and equipment,
net 4,613,362 62,581 4,675,943 90,000 (4) (62,581) (3) 4,703,362
Other assets 19,925,863 85,587 20,011,450 3,103,000 (4) (85,587) (3) 23,028,863
----------- -------- ----------- ---------- ----------- -----------
$36,764,622 $624,609 $37,389,231 $3,193,000 $(2,617,609) $37,964,622
=========== ======== =========== ========== =========== ===========
Current portion of
long-term debt $ 2,596,673 $ 34,054 $ 2,630,727 $ 34,054 (3) $ (381,493) (4) $ 2,978,166
Accounts payable 3,256,561 179,917 3,436,478 179,917 (3) - 3,256,561
Accrued payroll and
expenses 621,197 136,401 757,598 136,401 (3) - 621,197
Income taxes payable - - - - - -
Deferred income taxes 59,291 - 59,291 - - 59,291
----------- -------- ----------- ---------- ----------- -----------
Total current
liabilities 6,533,722 350,372 6,884,094 350,372 (381,493) 6,915,215
----------- -------- ----------- ---------- ----------- -----------
Long-term debt 4,157,288 49,570 4,206,858 49,570 (3) (818,507) (4) 4,975,795
Deferred income taxes 320,418 - 320,418 - - 320,418
Shareholders' equity
Common stock 22,600,129 - 22,600,129 - - 22,600,129
Retained earnings 3,153,065 - 3,153,065 - - 3,153,065
Partners' capital - 224,667 224,667 224,667 (3) - -
----------- -------- ----------- ---------- ----------- -----------
25,753,194 224,667 25,977,861 224,667 - 25,753,194
----------- -------- ----------- ---------- ----------- -----------
$36,764,622 $624,609 $37,389,231 $ 624,609 $(1,200,000) $37,964,622
=========== ======== =========== ========== =========== ===========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
Pro Forma Adjustments
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------
FDC(1) DPIS Total Debit Credit Combined
----------- -------- ----------- ---------- ----------- -----------
Cash $ (94,319) $195,320 $ 101,001 $ - $ (195,320) (3) $ (94,319)
Prepaid expenses and
other 105,964 2,663 108,627 - (2,663) (3) 105,964
Accounts receivable, net 2,919,578 526,448 3,446,026 - (526,448) (3) 2,919,578
----------- -------- ----------- ---------- ----------- -----------
Total current assets 2,931,223 724,431 3,655,654 - (724,431) 2,931,223
---------- -------- ----------- ---------- ----------- -----------
Property and equipment,
net 3,031,119 54,252 3,085,371 90,000 (4) (54,252) (3) 3,121,119
Other assets 15,994,559 85,587 16,080,146 3,103,000 (4) (85,587) (3) 19,097,559
----------- -------- ----------- ---------- ----------- -----------
$21,956,901 $864,270 $22,821,171 $3,193,000 $ (864,270) $25,149,901
=========== ======== =========== ========== =========== ===========
Current portion of
long-term debt $ 3,806,620 $ 32,805 $ 3,839,425 $ 32,805 (3) $ (196,338) (4) $ 5,995,958
(1,993,000)
Accounts payable 2,225,685 233,223 2,458,908 233,223 (3) - 2,225,685
Accrued payroll and
expenses 431,441 96,396 527,837 96,396 (3) - 431,441
Income taxes payable 524,186 - 524,186 - - 524,186
Deferred income taxes 59,291 - 59,291 - - 59,291
----------- -------- ----------- ---------- ----------- -----------
Total current
liabilities 7,047,223 362,424 7,409,647 362,424 (2,189,338) 9,236,561
----------- -------- ----------- ---------- ----------- -----------
Long-term debt 3,770,904 66,897 3,837,801 66,897 (1,003,662) (4) 4,774,566
Deferred income taxes 302,762 - 302,762 - - 302,762
Shareholders' equity
Common stock 8,614,705 - 8,614,705 - - 8,614,705
Retained earnings 2,221,307 - 2,221,307 - - 2,221,307
Partners' capital - 434,949 434,949 434,949 (3) - -
----------- -------- ----------- ---------- ----------- -----------
Total shareholders'
equity 10,836,012 434,949 11,270,961 434,949 - 10,836,012
----------- -------- ----------- ---------- ----------- -----------
Total liabilities and
shareholders' equity $21,956,901 $864,270 $22,821,171 $ 864,270 $(3,193,000) $25,149,901
=========== ======== =========== ========== =========== ===========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
Pro Forma Adjustments
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------
FDC(2) DPIS Total Debit Credit Combined
----------- ---------- ----------- ---------- ----------- -----------
Information systems $10,417,585 $1,538,199 $11,955,784 $ - $ - $11,955,784
Ancillary income 1,007,196 - 1,007,196 - - 1,007,196
System affiliates 924,148 - 924,148 - - 924,148
----------- ---------- ----------- ---------- ----------- -----------
Total revenue 12,348,929 1,538,199 13,887,128 - - 13,887,128
----------- ---------- ----------- ---------- ----------- -----------
Operating expenses
Cost of services provided 7,678,506 768,306 8,446,812 - - 8,446,812
Selling, general and
administration 3,137,006 606,112 3,743,118 116,433 (6) (24,750) (5) 3,834,801
----------- ---------- ----------- ---------- ----------- -----------
Total operating
expenses 10,815,512 1,374,418 12,189,930 116,433 (24,750) 12,281,613
----------- ---------- ----------- ---------- ----------- -----------
Income from opertions 1,533,417 163,781 1,697,198 116,433 (24,750) 1,605,515
----------- ---------- ----------- ---------- ----------- -----------
Other income 224,104 - 224,104 - - 224,104
Interest expense (223,230) (3,506) (226,736) 48,000 (7) (3,506) (5) (271,230)
----------- ---------- ----------- ---------- ----------- -----------
Income before taxes 1,534,291 160,275 1,694,566 164,433 (28,256) 1,558,389
Income tax expense
(benefit) 602,533 59,302 661,835 - (50,386) (8) 611,449
----------- ---------- ----------- ---------- ----------- -----------
Net income $ 931,758 $ 100,973 $ 1,032,731 $ 164,433 $ (78,642) $ 946,940
=========== ========== =========== ========== =========== ===========
Basic earnings per
share $ .21 $ .21
=========== ===========
Weighted average
pro forma shares
outstanding - basic 4,441,971 4,441,971
=========== ===========
Diluted earnings
per share $ .19 $ .20
=========== ===========
Weighted average
pro forma shares
outstanding - diluted 4,790,637 4,790,637
=========== ===========
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
Pro Forma Adjustments
<S> <C> <C> <C> <C> <C> <C> <C> <C>
------------------------------
FDC(1) DPIS Total Debit Credit Combined
----------- ---------- ----------- ---------- ----------- -----------
Information systems $16,812,585 $3,477,837 $20,290,422 $ - $ - $20,290,422
Ancillary income 1,314,761 - 1,314,761 - - 1,314,761
System affiliates 1,862,934 - 1,862,934 - - 1,862,934
Training, license and
other 58,578 - 58,578 - - 58,578
----------- ---------- ----------- ---------- ----------- -----------
Total revenue 20,048,858 3,477,837 23,526,695 - - 23,526,695
----------- ---------- ----------- ---------- ----------- -----------
Operating expenses
Cost of services provided 10,469,412 1,542,468 12,011,880 - - 12,011,880
Selling, general and
administration 4,910,432 1,244,314 6,154,746 232,867 (6) (49,498) (5) 6,338,115
----------- ---------- ----------- ---------- ----------- -----------
Total operating
expenses 15,379,844 2,786,782 18,166,626 232,867 (49,498) 18,349,995
----------- ---------- ----------- ---------- ----------- -----------
Income from opertions 4,669,014 691,055 5,360,069 232,867 (49,498) 5,176,700
----------- ---------- ----------- ---------- ----------- -----------
Other income 217,241 12,954 230,195 - - 230,195
Interest expense (294,821) (15,094) (309,915) 96,000 (7) (15,094) (5) (390,821)
----------- ---------- ----------- ---------- ----------- -----------
Income before taxes 4,591,434 688,915 5,280,349 328,867 (64,592) 5,016,074
Income tax expense
(benefit) 1,625,739 254,899 1,880,638 - (8) (97,782) (8) 1,782,856
----------- ---------- ----------- ---------- ----------- -----------
Net income $ 2,965,695 $ 434,016 $ 3,399,711 $ 328,867 $ (162,374) $ 3,233,218
=========== ========== =========== ========== =========== ===========
Basic earnings per
share $ 1.11 $ 1.21
=========== ===========
Weighted average
pro forma shares
outstanding - basic 2,680,753 2,680,753
=========== ===========
Diluted earnings
per share $ 1.07 $ 1.17
=========== ===========
Weighted average
pro forma shares
outstanding - diluted 2,769,214 2,769,214
=========== ===========
</TABLE>
<PAGE>
DATAPOWER INFORMATION
SYSTEMS, LLC
FINANCIAL STATEMENTS
DECEMBER 31, 1998
<PAGE>
TABLE OF CONTENTS
Independent Auditors' Report.............................F - 1
Financial Statements
Balance Sheets.......................................F - 2
Statements of Income.................................F - 3
Statements of Changes in Members' Equity.............F - 4
Statements of Cash Flows.............................F - 5
Notes to Financial Statements............................F - 6
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Partners
Datapower Information Systems, LLC
San Francisco, California
We have audited the accompanying balance sheet of Datapower Information Systems,
LLC as of December 31, 1998, and the related statements of income, changes in
members' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Datapower Information Systems,
LLC as of December 31, 1998 and the results of its operations and its cash flows
for the year then ended, in conformity with generally accepted accounting
principles.
Ehrhardt Keefe Steiner & Hottman PC
October 22, 1999
Denver, Colorado
<PAGE>
BALANCE SHEETS
December 31, June 30,
1998 1999
(Unaudited)
----------- ------------
ASSETS
Current assets
Cash $195,320 $ 81,150
Accounts receivable - trade (net of
allowance for doubtful accounts of
$23,754 (1998) and $28,759 (1999) 526,448 394,226
Prepaids 2,663 1,065
-------- --------
Total current assets 724,431 476,441
Property and equipment, net (Note 2) 54,252 62,581
Other assets 85,587 78,931
-------- --------
$864,270 $617,953
======== ========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities
Accounts payable $233,223 $179,917
Accrued expenses 96,396 136,401
Current portion of long-term debt
(Note 3) 32,805 34,054
-------- --------
Total current liabilities 362,424 350,372
-------- --------
Long-term debt (Note 3) 66,897 49,570
Commitments (Notes 4 and 5)
Members' equity 434,949 218,011
-------- --------
$864,270 $617,953
======== ========
<PAGE>
STATEMENTS OF INCOME
For the
Year For the Six Months Ended
Ended June 30,
December 31, --------------------------
1998 1998 1999
------------ ----------- -----------
(Unaudited)
Revenues $ 3,477,837 $ 1,669,994 $ 1,538,199
Costs of services provided 1,542,468 714,078 768,306
----------- ----------- -----------
Gross margin 1,935,369 955,916 769,893
Selling, general and administrative
expenses 1,244,314 647,782 606,112
----------- ----------- -----------
Operating income 691,055 308,134 163,781
Other income 12,954 - -
Interest expense (15,094) (9,569) (3,506)
----------- ----------- -----------
(2,140) (9,569) (3,506)
----------- ----------- -----------
Net income 688,915 298,565 160,275
Pro forma adjustment - provision
for income taxes (Note 1) (254,899) (110,469) (59,302)
----------- ----------- -----------
Pro forma net income $ 434,016 $ 188,096 $ 100,973
=========== =========== ===========
<PAGE>
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998
AND THE SIX MONTHS ENDED JUNE 30, 1999 (UNAUDITED)
Total
Partners'
Capital
--------
Balance at December 31, 1997 $158,220
Distributions (412,186)
Net income for the year 688,915
--------
Balance at December 31, 1998 434,949
Distributions (unaudited) (377,213)
Net income for the period (unaudited) 160,275
--------
Balance at June 30, 1999 (unaudited) $218,011
========
<PAGE>
STATEMENTS OF CASH FLOWS
For the For the
Year Six Months Ended
Ended June 30,
December 31, -----------------------
1998 1998 1999
---------- --------- ----------
(Unaudited)
Cash flows from operating
activities
Net income $ 688,915 $ 298,565 $ 160,275
--------- --------- ---------
Adjustments to reconcile net
income to net cash provided by
operating activities
Allowance for doubtful accounts 15,422 20,748 5,005
Depreciation and amortization 49,498 24,750 24,750
Changes in operating assets and
liabilities
Accounts receivable (146,671) (199,564) 127,217
Prepaids and other assets (10,666) (805) 1,598
Accounts payable 95,676 38,385 (53,306)
Accrued liabilities (3,065) (4,334) 40,005
--------- --------- ---------
194 (120,820) 145,269
--------- --------- ---------
Net cash provided by
operating activities 689,109 177,745 305,544
--------- --------- ---------
Cash flows from investing
activities
Purchase of property and
equipment (41,296) (22,271) (26,423)
--------- --------- ---------
Net cash used in investing
activities (41,296) (22,271) (26,423)
--------- --------- ---------
Cash flows from financing
activities
Repayment on advances from
owners, net (44,644) (20,000) --
Notes payable, net (36,216) (20,710) (16,078)
Distributions to owners (412,186) (60,018) (377,213)
--------- --------- ---------
Net cash used in financing
activities (493,046) (100,728) (393,291)
--------- --------- ---------
Net increase (decrease) in cash 154,767 54,746 (114,170)
Cash, at beginning of period 40,553 40,553 195,320
--------- --------- ---------
Cash, at end of period $ 195,320 $ 95,299 $ 81,150
========= ========= =========
Supplemental disclosure of cash flow information:
Interest paid on borrowings for the year ended December 31, 1998 was $15,094.
Interest paid for the unaudited six months ended June 30, 1999 and 1998 was
$3,506 and $9,569, respectively.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
- ------------
Datapower Information Systems, LLC (the Company) was incorporated in the state
of California in 1997. The Company was established for the purpose of providing
information services to financial lending institutions primarily in the mortgage
lending industry. The Company provides these services predominately in
California.
Interim Financial Statements (Unaudited)
- ---------------------------------------
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position of the Company at June 30, 1999 and the
results of its operations and changes in cash flows for the six months ended
June 30, 1999 and 1998. The results of operations for the six months ended June
30, 1999 and 1998 are not necessarily indicative of the results to be expected
for a full year.
Concentration of Credit Risk
- ----------------------------
In the normal course of business, the Company extends unsecured credit to
virtually all of its customers related to providing information services. The
Company's customers are located predominately in California. Additionally, the
Company's cash balances exceeded FDIC limits by approximately $164,000 and
$7,500 at December 31, 1998 and June 30, 1999 (unaudited).
Cash and Cash Equivalents
- -------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid short-term investments with an original maturity of three months or less
to be cash equivalents. The Company held no cash equivalents at December 31,
1998 or June 30, 1999 (unaudited)
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method based on the estimated useful lives of the assets which
range from three to seven years.
Advertising Costs
- -----------------
Advertising costs are expensed as incurred. Advertising expense was $21,907,
$3,147 and $2,873 for the year ended December 31, 1998 and the unaudited six
month periods ended June 30, 1999 and 1998, respectively.
Income Taxes
- ------------
The Company has elected to be taxed as a limited liability corporation. Under
these provisions, the Company is not subject to income taxes as a separate
entity. Income or loss of the Company is required to be included in the income
tax returns of the members'.
Included in the statement of operations are pro forma income tax adjustments
computed using the statutory rates in effect, which represent the federal and
state tax provisions that would have been required had the Company been taxed as
a C-Corporation. The Company's assumed effective statutory rate based on pretax
income was 37% for the year ended December 31, 1998 and the six month periods
ended June 30, 1999 and 1998.
<PAGE>
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Revenue Recognition
- -------------------
The Company recognizes revenue generated from mortgage credit reports and other
information services when the information has been provided to the customer, as
substantially all required services have been performed.
Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Fair Value of Financial Instruments
- -----------------------------------
The carrying amounts of financial instruments including cash, receivables,
accounts payable and accrued liabilities approximate their fair values as of
December 31, 1998 and June 30, 1999 because of the relatively short maturity of
these instruments.
The carrying amount of the long-term debt outstanding approximates its fair
value as of December 31, 1998 and June 30, 1999 (unaudited) because the interest
rates approximate the interest rates on debt with similar terms available to the
Company.
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
December 31, June 30,
1998 1999
----------- -----------
(Unaudited)
Equipment $259,283 $277,002
Furniture and fixtures 67,963 68,191
Software 72,858 81,334
-------- --------
400,104 426,527
Less accumulated depreciation (345,852) (363,946)
-------- --------
$ 54,252 $ 62,581
======== ========
<PAGE>
NOTE 3 - NOTES PAYABLE
December 31, June 30,
1998 1999
----------- -----------
(Unaudited)
Unsecured note payable to an individual,
interest at 7.5%, monthly principal and
interest payments of $3,264 through
October 2001. The note is unsecured. $ 99,702 $ 83,624
Less current portion (32,805) (34,054)
---------- ---------
$ 66,897 $ 49,570
========== =========
At June 30, 1999, future maturities of long-term debt are as follows:
Year Ending June 30,
--------------------
2000 $ 34,054
2001 32,243
2002 17,327
--------
$ 83,674
========
NOTE 4 - COMMITMENTS
The Company leases office space under an operating lease agreement which
provides for monthly payments of $6,750 increasing to $7,000 per month in March
2000. The lease expires in February 2001.
In addition, the Company leases various office equipment which calls for monthly
payments of approximately $1,726 and expiring through May 2003. Subsequent to
June 30, 1999, the Company bought out the remaining commitment on all of the
office equipment leases.
Rent expense under these operating leases totaled $29,123, $17,182 and $12,049
for the year ended December 31, 1998 and the unaudited six month period ended
June 30, 1999 and 1998, respectively.
<PAGE>
NOTE 4 - COMMITMENTS (CONTINUED)
Future minimum annual office space lease payments are as follows:
Year Ended December 31,
-----------------------
1999 $ 80,500
2000 83,500
2001 14,000
--------
$178,000
========
NOTE 5 - PROFIT SHARING PLAN
The Company has implemented a profit sharing plan. All employees of age 21 or
older who have been employed for one year are eligible for the plan. The Company
makes contributions to the plan at its discretion. Contributions vest according
to the terms of the plan. The Company's contributions to the plan totaled
$22,149 for the year ended December 31, 1998. Contributions for the unaudited
six month periods ended June 30, 1999 and 1998 were $0 and $0, respectively.
