UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-KSB/A
AMENDMENT NO. 1
ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1999
ACCORD ADVANCED TECHNOLOGIES, INC.
(Formally known as Investment Book Publishers, Inc)
---------------------------------------------------
(Name of Small Business Registrant)
0-27187
----------------------
Commission File Number
NEVADA 88-0361127
- ------------------------ ---------------------------------------
(State of Incorporation) (I.R.S. Employer Identification Number.)
5002 South Ash Avenue, Tempe, Arizona 85282
--------------------------------------------------------
(Address of Principal Executive Offices Including Zip Code)
(480) 820 1400
------------------------------
(Registrants Telephone Number)
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.0001 par value
-----------------------------
(Title of Class)
Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or such
shorter period that the registrant was required to file such reports), and (2)
has been subject to filing requirements for the past 90 days. YES [X] NO [ ]
Check if there is no disclosure of delinquent filers in response to item
405 of Regulation S-B in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
The registrant's revenues for its most recent fiscal year were
$5,917,470.00
Number of shares outstanding of each of the registrant's classes of
common equity, (par value $.0001) as of March 1, 2000 is 39,568,638. The closing
price of the shares on March 1, 2000 was $.687. The market value of the Common
Shares held by non-affiliates was $7,848,039.
Transitional Small Business Disclosure Format: ( ) Yes (X) No
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
The Consolidated Financial Statement of t he Company are filed as a
part of this Annual Report. See index to the financial statements on Page F-1.
ITEMS 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2 Agreement for Exchange of Stock and Plan of Reorganization.
Incorporated by reference to the Form 10SB filed with the
Commission on August 30, 1999.
3 Articles of Incorporation with Amendments.Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
3.1 By-Laws of the corporation. Incorporated by reference to the
Form 10SB filed with the Commission on August 30, 1999.
4.1 Long-term loan Union Bank (SBA).Incorporated by reference to
the Form 10SB filed with the Commission on August 30, 1999.
10.1 Subscription Agreements for the Sale of Stock.Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.2 Contract Between Two Directors and the Issuer. Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.3 Lease on premises of Issuer. Incorporated by reference to the
Form 10SB filed with the Commission on August 30, 1999.
10.4 Convertible Debenture Purchase Agreement. Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.5 Convertible Debenture. Incorporated by reference to the Form
10SB filed with the Commission on August 30, 1999.
10.6 Escrow Agreement. Incorporated by reference to the Form 10SB
filed with the Commission on August 30, 1999.
10.7 Warrant to Purchase Common Stock. Incorporated by reference to
the Form 10SB filed with the Commission on August 30, 1999.
10.8 Computation of per share earnings in financial statements.
Incorporated by reference to the Form 10SB filed with the
Commission on August 30, 1999, and the 10Q-SB filed on
November 15, 1999
13 The 10Q-SB filed on November 15, 1999
21 Subsidiary is Accord SEG and is Incorporated in Arizona
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company filed two reports on Form 8-K during fiscal year
1999 to the date of this report.
September 3, 1999 advising that the Company's securities had
been deleted from trading on the OTC BB.
November 4, 1999 advising that the Company has been reinstated
to trade it securities on the OTC BB.
2
<PAGE>
SIGNATURE
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ACCORD ADVANCED TECHNOLOGIES, INC.
April 4, 2000 /s/ Travis Wilson
----------------------------------------
Travis Wilson, Director and President
/s/ Carl P. Ranno
----------------------------------------
Carl P. Ranno, Director and Sec/Treas.
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the capacity and on
the dates indicated.
April 4, 2000 /s/ Travis Wilson
----------------------------------------
Travis Wilson, Director and President
April 4, 2000 /s/ Carl P. Ranno
----------------------------------------
Carl P. Ranno, Director and Sec/Treas.
April 4, 2000 /s/ Gerald Flanagan
----------------------------------------
Gerald Flanagan, Director
3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
2 Agreement for Exchange of Stock and Plan of Reorganization.
Incorporated by reference to the Form 10SB filed with the
Commission on August 30, 1999.
3 Articles of Incorporation with Amendments.Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
3.1 By-Laws of the corporation. Incorporated by reference to the
Form 10SB filed with the Commission on August 30, 1999.
4.1 Long-term loan Union Bank (SBA).Incorporated by reference to
the Form 10SB filed with the Commission on August 30, 1999.
10.1 Subscription Agreements for the Sale of Stock.Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.2 Contract Between Two Directors and the Issuer. Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.3 Lease on premises of Issuer. Incorporated by reference to the
Form 10SB filed with the Commission on August 30, 1999.
10.4 Convertible Debenture Purchase Agreement. Incorporated by
reference to the Form 10SB filed with the Commission on August
30, 1999.
10.5 Convertible Debenture. Incorporated by reference to the Form
10SB filed with the Commission on August 30, 1999.
10.6 Escrow Agreement. Incorporated by reference to the Form 10SB
filed with the Commission on August 30, 1999.
10.7 Warrant to Purchase Common Stock. Incorporated by reference to
the Form 10SB filed with the Commission on August 30, 1999.
10.8 Computation of per share earnings in financial statements.
Incorporated by reference to the Form 10SB filed with the
Commission on August 30, 1999, and the 10Q-SB filed on
November 15, 1999
13 The 10Q-SB filed on November 15, 1999
21 Subsidiary is Accord SEG and is Incorporated in Arizona
27 Financial Data Schedule*
- ----------
* Filed herewith.
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
----
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED
DECEMBER 31, 1999 AND 1998:
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Stockholders' (Deficit) Equity F-6
Consolidated Statements of Cash Flows F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-9
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Accord Advanced Technologies, Inc.:
Tempe, Arizona
We have audited the accompanying consolidated balance sheets of Accord Advanced
Technologies, Inc. (the "Company"), as of December 31, 1999 and 1998, and the
related statements of operations, stockholders' (deficit) equity and cash flows
for each of the years then ended. 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated 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 our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Accord
Advanced Technologies, Inc. at December 31, 1999 and 1998, and the consolidated
results of its operations and its cash flows for the years then ended in
conformity with generally accepted accounting principles.
As discussed in Note 11 to the financial statements, third parties have made
material claims against the Company.
KING, WEBER & ASSOCIATES, P.C.
Tempe, Arizona
March 10, 2000
F-2
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 13,315 $ 157,078
Accounts receivable 759,046 6,347
Inventories 826,383 1,056,732
Prepaid expenses and other assets 43,977 22,134
Income tax refund receivable -- 6,032
Deferred income taxes 79,410 457,045
----------- -----------
Total current assets 1,722,131 1,705,368
PROPERTY, MACHINERY AND EQUIPMENT, net 1,960,709 1,998,302
DEFERRED INCOME TAXES 82,659 83,200
DEFERRED FINANCING COSTS 28,520 --
OTHER ASSETS 43,683 36,184
----------- -----------
TOTAL ASSETS $ 3,837,702 $ 3,823,054
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Bank line of credit $ 148,750 $ --
Accounts payable 673,889 639,141
Accrued liabilities 328,086 387,079
Income taxes payable 53,348 --
Accrued warranty and installation expense 136,787 --
Customer deposits 421,853 777,602
Capital lease obligations - current portion 17,090 46,430
Note payable - current portion 187,901 102,693
----------- -----------
Total current liabilites 1,967,704 1,952,945
CAPITAL LEASE OBLIGATIONS - long-term portion 47,139 1,757,285
NOTE PAYABLE - long-term portion 988,618 205,703
----------- -----------
Total liabilities 3,003,461 3,915,933
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIT):
Preferred stock, $.0001 par value, 3,000,000 shares
authorized, none issued
Common stock, $.0001 par value, 47,000,000 share
authorized, 39,568,638 and 39,548,638 issued
and outstanding 3,957 3,955
Paid in capital 965,973 963,390
Accumulated deficit (135,689) (1,060,224)
----------- -----------
Total stockholders' equity (deficit) 834,241 (92,879)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ 3,837,702 $ 3,823,054
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
F-3
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
SALES $ 5,917,470 $ 3,940,234
COST OF SALES 3,683,453 2,865,641
----------- -----------
Gross profit 2,234,017 1,074,593
----------- -----------
OTHER (INCOME) AND EXPENSES
General and administrative expense 1,177,132 1,224,661
Selling and marketing expense 809,584 480,736
Interest expense 117,980 442,431
Impairment loss 75,000 250,000
Settlement expense -- 320,000
Other income (252,611) (7,444)
----------- -----------
Total other expense 1,927,085 2,710,384
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM 306,932 (1,635,791)
INCOME TAX (PROVISION) BENEFIT (99,047) 544,080
----------- -----------
NET INCOME LOSS BEFORE EXTRAORDINARY ITEM 207,885 (1,091,711)
EXTRAORDINARY ITEM - DEBT FORGIVENESS INCOME
(net of income taxes of $341,484 and $12,047) 716,650 45,320
----------- -----------
NET INCOME (LOSS) $ 924,535 $(1,046,391)
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
F-4
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
NET INCOME (LOSS) PER COMMON SHARE
Basic:
Before extraordinary item $ * $ (0.03)
Extraordinary item 0.02 *
----------- -----------
Total $ 0.02 $ (0.03)
=========== ===========
Diluted:
Before extraordinary item $ * $ (0.03)
Extraordinary item 0.02 *
----------- -----------
Total $ 0.02 $ (0.03)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 39,555,912 33,584,038
=========== ===========
Diluted 39,597,346 33,584,038
=========== ===========
- ----------
* Less than $0.01 per share.
The accompanying notes are an integral part of
these consolidated financial statements.
F-5
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
---------- ------ --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE JANUARY 1, 1998 12,445,000 $1,245 $ 73,701 $ (13,833) $ 61,113
Stock split (3 for 1) 24,890,000 2,489 (2,489) 0
Stock issued for cash at $1.32 313,638 31 414,968 414,999
Stock issued for cash at $0.25 1,900,000 190 477,210 477,400
Net loss (1,046,391) (1,046,391)
---------- ------ --------- ----------- -----------
BALANCE DECEMBER 31, 1998 39,548,638 3,955 963,390 (1,060,224) (92,879)
Stock issued as payment for legal fees 15,000 1 934 935
Stock issued for as payment for employee
compensation 5,000 1 1,649 1,650
Net income 924,535 924,535
---------- ------ --------- ----------- -----------
BALANCE DECEMBER 31, 1999 39,568,638 $3,957 $ 965,973 $ (135,689) $ 834,241
========== ====== ========= =========== ===========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
F-6
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 924,535 $(1,046,391)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 55,993 58,211
Loss on disposal of equipment -- 4,122
Deferred income taxes 374,927 (526,001)
Issuance of stock for compensation and
services rendered 2,585 --
Impairment expense on equipment 75,000 250,000
Litigation settlement expense -- 320,000
Forgiveness of long-term debt (1,058,134) (57,367)
Changes in assets and liabilities:
Accounts receivable (752,699) 957,886
Inventory 230,349 (142,520)
Income tax payable/receivable 59,380 --
Other current assets (21,843) (11,317)
Deferred financing costs (28,520) --
Other assets (7,499) (2,990)
Accounts payable 34,748 427,536
Accrued liabilities 240,426 (41,637)
Accrued warranty and installation expense 136,787 (67,215)
Customer deposits (355,749) 69,369
----------- -----------
Net cash (used in) provided by
operating activities (89,714) 191,686
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loan to officer -- (7,846)
Purchase of property, machinery and equipment (22,903) (19,569)
---------- ----------
Net cash (used in) investing activities (22,903) (27,415)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings on bank line of credit 148,750 --
Repayment of short-term debt -- (881,592)
Borrowings on long-term debt 950,000 --
Principal payments on long-term debt (131,877) (76,258)
Payments on capital lease obligations (1,001,268) --
Proceeds from sale of common stock -- 892,399
----------- -----------
Net cash (used in) financing activities (34,395) (65,451)
----------- -----------
(DECREASE) INCREASE IN CASH (147,012) 98,820
CASH, BEGINNING OF YEAR 157,078 58,258
----------- -----------
CASH, END OF YEAR $ 13,315 $ 157,078
=========== ===========
The accompanying notes are an integral part of
these consolidated financial statements.
F-7
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1999 1998
-------- --------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $113,719 $346,442
======== ========
Income taxes paid $ -- $ 6,032
======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Debt incurred related to legal settlement $330,000
========
Equipment acquired under capital leases $ 70,497
========
The accompanying notes are an integral part of
these consolidated financial statements.
F-8
<PAGE>
ACCORD ADVANCED TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
- --------------------------------------------------------------------------------
1. ORGANIZATION AND BASIS OF PRESENTATION
Accord Advanced Technologies, Inc. (the "Company"), formally known as
Investment Book Publishing, Inc. ("IBP") was formed in 1996 and was a
development stage enterprise and had no significant operations until its
acquisition of Accord Semiconductor Equipment Group, Inc. ("Accord SEG") on
December 11, 1997. Accord SEG services, reconditions and modifies
multi-chamber semiconductor equipment. The Company's customers include many
of the major silicon wafer manufacturers in the United States and overseas.
Accord SEG became a wholly-owned subsidiary of Accord Advanced Technologies,
Inc., by the Company exchanging 9,500,000 shares of its common stock for 100%
of the common stock of Accord SEG resulting in the shareholders of Accord SEG
owning approximately 95% of Accord Advanced Technologies, Inc. The
accompanying financial statements represent the consolidated financial
position and results of operations of Accord Advanced Technologies, Inc. and
includes the accounts and results of operations of the Company and its wholly
owned subsidiary for the years ended December 31, 1999 and December 31, 1998.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash includes all short-term highly liquid investments that are readily
convertible to known amounts of cash and have original maturities of three
months or less.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of the Company and its wholly owned subsidiary, Accord SEG. All
significant intercompany accounts and transactions are eliminated.
INVENTORIES consist primarily of used equipment and wafer chambers and are
stated at the lower of cost (specific identification) or market.
Work-in-process is stated at the cost for raw materials and direct labor.
PROPERTY, MACHINERY AND EQUIPMENT is recorded at cost and depreciated on a
straight-line basis over the estimated useful lives of the assets ranging
from 3 to 10 years. Depreciation expense is not recorded for equipment
acquired but not yet to placed in service.
REVENUE RECOGNITION - The Company recognizes revenue when the product is
shipped and there are no remaining significant obligations on the part of the
Company. Costs for installation, warranty and commissions are accrued when
the corresponding sales revenues are recognized. Payments from customers
prior to shipment are recorded as customer deposits. Revenues for service
contracts are recognized ratably over the term of the contracts.
INCOME TAXES - The Company provides for income taxes based on the provisions
of Statement of Financial Accounting Standards No. 109, ACCOUNTING FOR INCOME
TAXES, which among other things, requires that recognition of deferred income
taxes be measured by the provisions of enacted tax laws in effect at the date
of financial statements.
FINANCIAL INSTRUMENTS - Financial instruments consist primarily of cash,
accounts receivable, and obligations under accounts payable, accrued
expenses, notes payable and capital lease instruments. The carrying amounts
of cash, accounts receivable, accounts payable, accrued expenses and
short-term debt approximate fair value because of the short maturity of those
instruments. The carrying value of the Company's capital lease arrangements
approximates fair value because the instruments were valued at the retail
cost of the equipment at the time the Company entered into the arrangements.
F-9
<PAGE>
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.
3. INVENTORIES
Inventories at December 31 consist of the following:
1999 1998
-------- ----------
Raw materials $299,839 $ 290,122
Work in process 351,544 591,610
Finished goods 175,000 175,000
-------- ----------
Total inventory $826,383 $1,056,732
======== ==========
The Company wrote off approximately $193,000 in inventories in the year ended
December 31, 1998 because of uncertainties about the ability of the Company
to utilize or liquidate the related items.
4. PROPERTY, MACHINERY AND EQUIPMENT
Property, machinery and equipment at December 31 consist of the following:
1999 1998
---------- ----------
Test, research and demonstration equipment $ -- $1,566,354
Equipment held for sale 1,741,058 250,000
Shop equipment and tools 138,628 104,900
Computer hardware and software 142,561 81,320
Office furniture and equipment 25,355 26,628
Vehicles 7,500
7,500
Leasehold improvements 114,434 114,434
---------- ----------
Total 2,169,536 2,151,136
Less accumulated depreciation and
amortization 208,827 152,834
---------- ----------
Property, machinery and equipment - net $1,960,709 $1,998,302
========== ==========
Depreciation expense for the years ended December 31, 1999 and 1998 was $
55,993 and $58,211, respectively.
As of December 31, 1998 two assets capitalized under leases totalled
approximately $1,816,000, representing the estimated fair value of the assets
at the inception date of the leases. Management had intended to use one of
the assets, valued at $1,566,000, for a separate product line that has not
yet commenced. The other asset was originally valued at $500,000. The Company
incurred an impairment loss on this asset for the years ended December 31,
1999 and 1998 of $75,000 and $250,000, respectively. The fair value was
F-10
<PAGE>
estimated on the basis of comparable sales less costs to put the equipment in
working condition, discounted for liquidity issues. Both assets have been
idle since acquisition. As such, no depreciation has been recognized. The net
book value of these assets was $1,641,000 at December 31, 1999. The Company
intends to dispose of both assets and is seeking buyers. As discussed in Note
12, in March 1999, the Company entered into an agreement with the lessors to
purchase these two pieces of equipment under lease. The obligation under the
capital lease was restructured, reduced and refinanced with another financial
institution.
5. BANK LINE OF CREDIT
The Company obtained a $150,000 revolving line of credit with a financial
institution in 1999, of which $148,750 was drawn upon at December 31, 1999.
Interest is at the prime rate plus 2%. The rate at Deember 31, 1999 was
10.5%. The line of credit expires May 15, 2000.
6. INCOME TAXES
The Company recognizes deferred income taxes for the differences between
financial accounting and tax bases of assets and liabilities. Income taxes
for the years ended December 31, consisted of the following:
1999 1998
--------- ---------
Current tax provision (benefit)
Before extraordinary item $ 14,433 $ (6,032)
Extraordinary item 51,171 --
--------- ---------
$ 65,604 $ (6,032)
--------- ---------
Deferred tax provision (benefit)
Before extraordinary item 83,616 (538,048)
Extraordinary item 290,313 12,047
--------- ---------
Total deferred provision (benefit) 374,927 (526,001)
--------- ---------
Total income tax provision (benefit) $ 440,531 $(532,033)
========= =========
Approximately $134,000, $83,000 and $67,000 of the deferred tax asset at
December 31, 1999 relates to a contingent liability, equipment book and tax
bases differences for accruals and reserves, respectively. Deferred tax
assets of $674,000 less a valuation allowance of $134,000 at December 31,
1998 relate primarily to net operating loss carryforwards of $1,356,015 at
December 31, 1998 which were fully utilized in 1999.
F-11
<PAGE>
The deferred income tax benefit for the year ended December 31, 1999 relates
to the utilization of the net operating loss carryforward and the recognition
of deferred tax assets for the warranty reserve and the contingency for legal
settlement. Deferred income taxes for the year ended December 31, 1998 relate
to temporary differences for the net operating loss carryforward, net of the
establishment of a valuation allowance of $134,000, and book and tax
differences for the impairment loss
The differences between the statutory and effective tax rates is as follows:
1999 1998
----------------- -----------------
Federal statutory rates $ 464,122 34% $(556,169) (34)%
State income taxes 109,205 8% (130,863) (8)%
Utilization of operating loss
carryforwards (133,876) (13)%
Valuation allowance for operating
loss carryforwards 134,000 8%
Other 973 1% 20,999 1%
--------- ---- --------- ----
Effective rate $ 440,531 30% $(532,033) (33)%
========= ==== ========= ====
7. LEASES
Operating Leases
The Company leases its facilities under long-term operating lease that expire
in 2004. Rent expense under this lease was approximately $114,400 and $97,544
for the years ended December 31, 1999 and 1998. Minimum annual lease payments
under this agreement are as follows for years ended December 31:
2000 $102,760
2001 106,120
2002 109,480
2003 112,840
2004 106,260
--------
Total minimum lease payments $537,460
========
CAPITAL LEASES
Accord SEG entered into two capital leases for equipment in 1996. In March,
1999, the Company purchased the leased assets and was released from all
related encumbrances. This transaction resulted in a forgiveness of lease
debt of $808,715. The purchase was financed with a 10-year bank loan for
$1,000,000 guaranteed by the Small Business Administration and personally
guaranteed by the majority stockholder and spouse.
The Company entered into two capital leases for computer equipment and
software in 1999. As of December 31, 1999 assets capitalized under these
leases total approximately $70,497. Related depreciation expense and
accumulated depreciation was $3,070.
F-12
<PAGE>
The following represents principal payments due on these leases:
Year ended December 31:
2000 $ 28,844
2001 28,844
2002 28,228
--------
Total minimum lease payments 85,916
Less amount representing interest (21,687)
--------
Present value of minimum lease payments 64,229
Current portion 17,090
--------
Long-term portion $ 47,139
========
8. NOTES PAYABLE
Notes payable at December 31 are comprised of the following:
1999 1998
--------- ---------
Settlement of legal claim. Legal
settlement requires the full award of
$320,000 to be paid at $10,000 per month
plus interest at 10% per annum $ 211,036 $ 308,396
Note payable to bank due March 19, 2009
Original principal $1,000,000 payable in
120 monthly payments of $13,065. Interest
at prime plus 2% collateralized by
virtually all assets of the Company and
guaranteed by the Small Business
Administration and the majority 965,483 --
shareholder and spouse ---------- ---------
1,176,519 308,396
Totals
Less current portion (187,901) (102,693)
---------- ---------
Long-term portion $ 988,618 $ 205,703
========== =========
Principal payments due in years ended December 31:
2000 $ 187,901
2001 160,925
2002 81,104
2003 89,375
2004 98,489
Thereafter 558,725
----------
Total $1,176,519
==========
F-13
<PAGE>
9. EARNINGS PER SHARE
Net income (loss) per share is calculated using the weighted average number
of shares of common stock outstanding during the year. The effect of the
extraordinary item on the loss per share was $0.02 per share for the ended
December 31, 1999 and less than $0.01 for the year ended December 31, 1998.
The following presents the computation of basic and diluted earnings per
share from continuing operations:
<TABLE>
<CAPTION>
Income (Loss) Shares Per Share
----------------------- -------------------- --------------
1999 1998 1999 1998 1999 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss) $ 924,535 $(1,046,391)
Extraordinary income (716,650) (45,320)
--------- -----------
Income from continuing operations 207,885 (1,091,711)
BASIC EARNINGS (LOSS) PER SHARE
Loss available to Common Shareholders $ 207,885 $(1,091,711) 39,555,912 33,584,038 $ * $(0.03)
EFFECT OF DILUTIVE SECURITIES
EMPLOYEE STOCK OPTIONS 41,434
DILUTED EARNINGS (LOSS) PER SHARE $ 207,885 $(1,091,711) 39,597,346 33,584,038 $ * $(0.03)
</TABLE>
- ----------
* less than $0.01 per share
The effect of dilutive securities for the year ended December 31, 1999,
includes stock options assumed exercised for which the market value exceeds
the exercise price less shares which would have been purchased by the
Company with the related proceeds. The effect of dilutive securities in the
year ended December 31, 1999 is less than $0.01 per share. Excluded from the
total earnings per share calculation for the year ended Decemebr 31, 1999
are 110,000 options for which the option exercise price exceeds the market
value of the stock. There were no dilutive securities outstanding at
December 31, 1998.
10. COMMON STOCK ISSUED AND GRANTED
The Company periodically issues common stock for services rendered by
consultants and for compensation to employees. The value of the stock issued
during the year ended December 31, 1999, was valued at fair market value at
date of granting. The value of stock that was granted but not issued has
been netted in additional paid-in-capital.
11. CONTINGENCIES
A complaint was filed against the Company in October 1999 by certain
debenture holders alleging breach of a Debenture Purchase Agreement (the
"agreement"). The plaintiffs have pleaded a three-count action alleging 1)
breach of contract, 2) breach based on delisting from the OTC bulletin
board, and 3) unjust enrichment. The Complaint seeks damages of
approximately $372,000. The Company has denied the allegation and has filed
a counterclaim alleging that the plaintiffs intentionally breached the terms
of the agreement by taking actions with the intent to drive down the stock
price thereby allowing the plaintiffs to acquire additional shares based on
the floating conversion price set forth in the agreement. The shares
associated with the debenture agreement were issued in 1998. The Company
seeks damages in an amount not less than $1,000,000 for the plaintiffs
actions.
F-14
<PAGE>
The Company has offered to settle this matter, which was refused by the
plaintiffs. The Company is preparing for discovery to vigorously defend this
case and prosecute its counterclaim. Because of the third party's refusal of
the settlement offer, the Company intends to aggressively pursue its
counterclaim. The Company, on advice of its counsel, believes that
sufficient evidence exists in its favor, and that there is a reasonable
probability of success on the counter claim in an amount at least to what is
claimed by the third party. Therefore, no accrual has been made regarding
this matter.
The Company has entered into a dispute with a customer whereby the customer
has claimed damages of approximately $133,000. The Company disagrees with
the claims and intends to vigorously defend its position in regard to this
matter. The Company believes that it will be successful in defending this
claim.
In the year ended December 31, 1999, the Company recognized income of
approximately $210,000 related to an estimated liability for a customer
deposit. The amount is included in other income in the accompanying
statement of operations. The liability arose in 1996 on a deposit of
equipment made by a customer. Certain credits were made against the deposit
on orders made by the customer. There were uncertainties between the Company
and the customer relative to the remaining balance of the deposit. The
Company conitinues to make sales to that customer and and that customer has
made no formal claim for credit on a deposit. It is the Company's position
that it has fulfilled all obligations due the customer and has written off
the remaing $210,000 deposit balance. The Company and its counsel believe
that due to numerous issues involving this matter, the probability of the
customer sustaining any claim for that deposit is unlikely.
On August 19, 1997, Comdisco, Inc. ("Comdisco") filed a complaint with the
Court attempting to enforce a Purchase and Remarketing Agreement with the
Company. The complaint also attempted to enforce a Sale Agreement for the
purchase of certain chambers. The Company filed an Answer and Counterclaim
claiming that it paid the amounts due under the agreements. The Company
settled the claim in the year ended December 31, 1998 for $320,000 that is
to be paid over 32 months (Note 8).
12. EXTRAORDINARY ITEM - DEBT FORGIVENESS INCOME
In March, 1999, the Company negotiated with certain lessors wherein it
purchased the leased assets using proceeds from a refinancing agreement with
a third party lender, resulting in debt forgiveness of $808,715 and
forgiveness of the related interest accrued of $249,419. The lease buyout
was financed with a $1,000,000 bank loan, guaranteed by the Small Business
Administration, as disclosed in Note 8.
For the year ended December 31,1998, an equipment vendor loan was converted
from trade accounts payable. The Company settled with the vendor for a
$65,000 cash. Debt forgiveness income of $57,367 was recognized in 1998, and
is classified as an extraordinary item at $45,320, net of tax.
F-15
<PAGE>
13. RELATED PARTY TRANSACTIONS
On March 1, 1998 the Company entered into an agreement with two members of
its board of directors to provide assistance in raising debt or equity
capital. The fees were 10% of the amounts raised and were payable only upon
success. The agreement expired September 1, 1999. In addition, one of these
individuals was paid legal fees. Fees paid or accrued to these individuals
were $10,000 and $73,000 for the years ended December 31, 1999 and 1998
respectively. Balances due to these individuals were $7,102 and $52,704 at
December 31, 1999 and 1998 respectively.
14. CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations
of credit risk are primarily accounts receivable. Approximately 63% of the
total accounts receivable balance at December 31, 1999 consists of a
receivable from one customer, which was received in full subsequent to
December 31, 1999.
15. EMPLOYEE BENEFIT PLAN
The Company provides benefits through 401(k) and SEP profit sharing plans
for all full time employees who have completed six months of service and are
at least 21 years of age. Contributions to SEP plan are at the discretion of
the Board of Directors. The Company contributes 25% of elective employee
contributions up to 6% of the individual's compensation for the 401(k) plan.
The Company's expense for plan contributions was $31,302 and $34,500 for
years ended December 31, 1999 and 1998, respectively.
16. EMPLOYEE STOCK OPTIONS
The Company issues stock options from time to time to executives and key
employees. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," and continues to account for stock based
compensation using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
Accordingly, no compensation cost has been recognized for the stock options
granted. Had compensation cost for the Company's stock options been
determined based on the fair value at the grant date for awards in 1999 and
1998, consistent with the provisions of SFAS No. 123, the Company's net
income (loss) and income (loss) per share would have been increased to the
pro forma amounts indicated below:
1999 1998
-------- ------------
Net income (loss) - as reported $720,610 $(1,046,391)
Net income (loss) - pro forma $607,827 $(1,101,791)
Income (loss) per share - as reported $ 0.02 $ (0.03)
Income (loss) per share - pro forma $ 0.02 $ (0.03)
Under the provisions of SFAS No. 123, there were 60,000 fully vested options
and 55,833 proportionately vested options for the year ended December 31,
1999, used to determine net earnings and earnings per share under a pro
forma basis. There were no fully vested options and 20,000 proportionately
vested options for the year ended December 31, 1998, used to determine net
earnings and earnings per share under a pro forma basis.
F-16
<PAGE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions for
years ended December 31, 1999 and 1998:
1999 1998
---- ----
Dividend yield None None
Volatility 2.109 2.042
Risk free interest rate 6.00% 5.25%
Expected asset life 4 years 3 years
The summary of activity for the Company's stock options at December 31, 1999
and 1998 is presented below:
<TABLE>
<CAPTION>
Weighted Weighted
Average Average
Exercise Exercise
1999 Price 1998 Price
---- ----- ---- -----
<S> <C> <C> <C> <C>
Options outstanding at beginning of year 60,000 $4.00 0 N/A
Granted 530,000 $0.15 60,000 $4.00
Exercised 0 N/A 0 N/A
Terminated/Expired 0 N/A 0 N/A
Options outstanding at end of year 590,000 $0.55 60,000 $4.00
Options exercisable at end of year 60,000 $4.00 0 N/A
Options available for grant at end of year N/A N/A
Price per share of options outstanding $0.10-4.00 $ 4.00
Weighted average remaining contractual lives 3.5 years 3 years
Weighted Average fair value of options
granted during the year $0.10 $2.77
</TABLE>
17. MAJOR CUSTOMERS
Due to the nature of the Company's business being associated with few but
large sales transactions, significant concentrations exist. Approximately
41%, 11% and 11% of the Company's revenues were generated from three
different customers in 1999. Approximately 69% and 16% of the Company's
revenues were generated from two customers in 1998.
* * * * * *
F-17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31,
1999 AND 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 13,315
<SECURITIES> 0
<RECEIVABLES> 759,046
<ALLOWANCES> 0
<INVENTORY> 826,383
<CURRENT-ASSETS> 1,853,206
<PP&E> 2,169,536
<DEPRECIATION> (208,827)
<TOTAL-ASSETS> 3,968,777
<CURRENT-LIABILITIES> 2,302,704
<BONDS> 1,240,748
0
0
<COMMON> 3,957
<OTHER-SE> 626,359
<TOTAL-LIABILITY-AND-EQUITY> 3,968,777
<SALES> 5,917,470
<TOTAL-REVENUES> 5,917,470
<CGS> 3,683,453
<TOTAL-COSTS> 3,683,453
<OTHER-EXPENSES> 2,262,085
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117,980
<INCOME-PRETAX> (28,068)
<INCOME-TAX> 8,432
<INCOME-CONTINUING> (19,636)
<DISCONTINUED> 0
<EXTRAORDINARY> 740,246
<CHANGES> 0
<NET-INCOME> 720,610
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
