MENLO ACQUISITION CORP
8-K, 1998-12-28
ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS
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<PAGE>

                          SECURITIES AND EXCHANGE COMMISSION

                                Washington, D.C. 20549


                                     ------------

                                       FORM 8-K

                                    CURRENT REPORT

                        Pursuant to Section 13 or 15(d) of the

                         Securities and Exchange Act of 1934

Date of Report (Date of earliest event reported)  November 30, 1998
                                                  ------------------

                   MENLO ACQUISITION CORP. FDBA FOCUS SURGERY, INC.
- --------------------------------------------------------------------------------
                  (Exact name of registrant as specified in charter)

          DELAWARE                 0-22136                  77-0332937
- --------------------------------------------------------------------------------
 (State or other jurisdiction   (Commission File           (IRS Employer
       of incorporation)             Number)             Identification No.)

   113 TYNAN WAY, PORTOLA VALLEY, CA                   94028
- --------------------------------------------------------------------------------
 (Address of principal executive offices)            (Zip Code)

Registrant's telephone number, including area code          (650) 529-0730
                                                        ------------------------

                                         N/A
- --------------------------------------------------------------------------------
            (Former name or former address, if changed since last report.)




<PAGE>

Item 3.   Bankruptcy or Receivership

          On February 9, 1996, the Registrant filed for protection under Chapter
11 of the federal bankruptcy laws in the United States Bankruptcy Court,
Northern District of California, Oakland Division. On October 28, 1998 the
Registrant's Plan of Reorganization was confirmed.


Item 7.   Financial Statements and Exhibits

<TABLE>
<CAPTION>
Exhibit No.                        Description
<S>                                <C>

99.27                              Summary of Financial Status of the Registrant
                                   for the month ended November 1998, as
                                   required by the United States Bankruptcy
                                   Court, Norther District of California,
                                   Oakland Division.
</TABLE>
<PAGE>

                                      SIGNATURES

     Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

                              Menlo Acquisition Corp. FDBA Focus Surgery, Inc.
                              -------------------------------------------------
                                             (Registrant)

Date: December 23, 1998       BY:       /s/ RICHARD J. REDETT
                                   --------------------------------------------
                              NAME:   Richard J. Redett
                              TITLE:  President and Chief Executive Officer


<PAGE>
                    UNITED STATES BANKRUPTCY COURT
                    NORTHERN DISTRICT OF CALIFORNIA
IN RE: MENLO ACQUISITION CORP.        CASE NO.  96-41107-N
      FDBA FOCUS SURGERY, INC.                  ---------
                                                
                                                CHAPTER 11
                                                MONTHLY OPERATING REPORT
                                                (GENERAL BUSINESS CASE)

- --------------------------------

                        SUMMARY OF FINANCIAL STATUS

MONTH ENDED      November, 1998
               -------------------

1.    Debtor in possession (or trustee) hereby submits this Monthly Operating   
      Report on the Accrual Basis of accounting (or if checked here ___ the
      Office of the U.S. Trustee or the Court has approved the Cash Basis of
      Accounting for the Debtor). Dollars reported in ($ _____).
<TABLE>
<CAPTION>
                                                                                END OF             END OF              AS OF
                                                                               CURRENT             PRIOR              PETITION
2.    ASSET/LIABILITY SUMMARY                                                   MONTH              MONTH               FILING
                                                                                -----              -----               ------
<S>                                                                        <C>                <C>                 <C>
        Current Assets (Market Value)                                              $103,839           $113,533            $502,204
                                                                           -----------------  -----------------   -----------------
        Total Assets (Market Value)                                                $103,839           $113,533          $2,152,204
                                                                           -----------------  -----------------   -----------------
        Current Liabilities                                                         $61,500            $26,500
                                                                           -----------------  -----------------   -----------------
        Total Liabilities                                                           $61,500            $26,500            $831,829
                                                                           -----------------  -----------------   -----------------

                                                                                                                      PETITION
<CAPTION>
                                                                               CURRENT             PRIOR              DATE TO
3.    STATEMENT OF CASH RECEIPTS & DISBURSEMENTS FOR MONTH                      MONTH              MONTH             MONTH END
                                                                                -----              -----             ---------
<S>                                                                        <C>                <C>                 <C>
        a.  Total Receipts                                                              $77                $76          $1,536,898
                                                                           -----------------  -----------------   -----------------
        b.  Total Disbursements                                                      $9,771             $3,389          $1,452,633
                                                                           -----------------  -----------------   -----------------
        c.  Excess (Deficiency) of Receipts Over Disbursements (a - b)              ($9,694)           ($3,313)              84265
                                                                           -----------------  -----------------   -----------------
                                                                                                                  -----------------
        d.  Cash Balance Beginning of Month                                        $113,533           $116,846
                                                                           -----------------  -----------------
        e.  Cash Balance End of Month (c + d)                                      $103,839           $113,533
                                                                           -----------------  -----------------
                                                                           -----------------  -----------------
<CAPTION>
4.    POST-PETITION LIABILITIES & RECEIVABLES                                RECEIVABLES                            LIABILITIES
<S>                                                                        <C>                                    <C>
        Balance at End of Previous Month                                                                                   $51,500
                                                                           -----------------                      -----------------
        Balance at End of Current Month                                                  $0                                $61,500
                                                                           -----------------                      -----------------
<CAPTION>
5.    PAST DUE POST-PETITION LIABILITIES 
<S>                                                                        <C>   
        Balance at End of Previous Month (over 30 days)
                                                                           -----------------
        Balance at End of Current Month (over 30 days)                                   $0
                                                                           -----------------
<CAPTION>
                                                                                                      YES                  NO
                                                                                                      ---                 ---
<S>                                                                                           <C>                 <C>
6.    Are all federal, state, and local taxes current? 
        (if no, attach schedule of unpaid items)                                              X
                                                                                              -----------------   -----------------
7.    Have any payments been made to pre-petition creditors, other than payments in
        the normal course to secured creditors or lessors? (if yes, attach listing 
        including date of payment, amount of payment and name of payee)                                           X
                                                                                              -----------------   -----------------
8.    Have any payments been made to officers, insiders, shareholders, relatives?
        (if yes, attach listing including date of
        payment, amount and reason for payment, and name of payee)                                                X
                                                                                              -----------------   -----------------
9.    Have any payments been made to professionals? (if yes, attach listing
        including date of payment, amount of payment and name of payee)                                           X
                                                                                              -----------------   -----------------
10.   If you answered yes to line 7,8, or 9, were all such payments approved by the court?    N/A
                                                                                              -----------------   -----------------
11.   Is the estate insured for replacement cost of assets and for general liability?         N/A
                                                                                              -----------------   -----------------
12.   Are U.S. Trustee quarterly fees current?                                                X
                                                                                              -----------------   -----------------
</TABLE>
      I declare under penalty of perjury that I have reviewed the above summary
      and attached financial statements, and after making reasonable inquiry
      believe that these documents are correct.

      Date:   December 17, 1998                      Richard J. Redett
              ------------------                 -----------------------------
                                                    Responsible Individual

<PAGE>
                         BALANCE SHEET
                    (GENERAL BUSINESS CASE)

           FOR THE MONTH ENDED           November, 1998
                                       -----------------

                         ($         )
                           --------

<TABLE>
<CAPTION>
        ASSETS

                                                                                      FROM SCHEDULES           MARKET VALUE
                                                                                     ---------------           -------------
<S>         <C>                                                                      <C>                  <C>
            CURRENT ASSETS

    1            Cash and cash equivalents - unrestricted                                                               $103,839
                                                                                                          -----------------------
    2            Cash and cash equivalents - restricted
                                                                                                          -----------------------
    3            Accounts receivable (net)                                                  A                                 $0
                                                                                                          -----------------------
    4            Inventory                                                                  B                                 $0
                                                                                                          -----------------------
    5            Prepaid expenses

                                                                                                          -----------------------
    6            Other:
                        ----------------------------------------------------                              -----------------------
    7
                 -----------------------------------------------------------                              -----------------------

    8                TOTAL CURRENT ASSETS                                                                               $103,839
                                                                                                          -----------------------


            PROPERTY AND EQUIPMENT (MARKET VALUE)

    9            Real property                                                              C                                 $0
                                                                                                          -----------------------
   10            Machinery and equipment                                                    D                                 $0
                                                                                                          -----------------------
   11            Furniture and fixtures                                                     D                                 $0
                                                                                                          -----------------------
   12            Office equipment                                                           D                                 $0
                                                                                                          -----------------------
   13            Leasehold improvements                                                     D                                 $0
                                                                                                          -----------------------
   14            Vehicles                                                                   D                                 $0
                                                                                                          -----------------------
   15            Other:                                                                     D
                        ----------------------------------------------------                              -----------------------
   16                                                                                       D
                 -----------------------------------------------------------                              -----------------------
   17                                                                                       D
                 -----------------------------------------------------------                              -----------------------
   18                                                                                       D
                 -----------------------------------------------------------                              -----------------------
   19                                                                                       D
                 -----------------------------------------------------------                              -----------------------

   20                TOTAL PROPERTY AND EQUIPMENT                                                                             $0
                                                                                                          -----------------------


            OTHER ASSETS
   21
                 -----------------------------------------------------------                              -----------------------
   22
                 -----------------------------------------------------------                              -----------------------
   23
                 -----------------------------------------------------------                              -----------------------
   24
                 -----------------------------------------------------------                              -----------------------

   25                TOTAL OTHER ASSETS                                                                                       $0
                                                                                                          -----------------------

   26                TOTAL ASSETS                                                                                       $103,839
                                                                                                          -----------------------
                                                                                                          -----------------------

</TABLE>


        NOTE:
                Indicate the method used to estimate the market value of assets
                (e.g., appraisals; familiarity with comparable market prices,
                etc.) and the date the value was determined.

               ---------------------------------------------------------------

               ---------------------------------------------------------------

               ---------------------------------------------------------------

               ---------------------------------------------------------------

               ---------------------------------------------------------------

               ---------------------------------------------------------------

<PAGE>


                               LIABILITIES AND EQUITY
                               (GENERAL BUSINESS CASE)

                                  ($         )
                                    --------

<TABLE>
<CAPTION>
        LIABILITIES                                                                  FROM SCHEDULES
            POST-PETITION                                                            ---------------
<S>         <C>                                                                      <C>                  <C>

            CURRENT LIABILITIES
   27            Salaries and wages
                                                                                                          -----------------------
   28            Payroll taxes
                                                                                                          -----------------------
   29            Real and personal property taxes
                                                                                                          -----------------------
   30            Income taxes
                                                                                                          -----------------------
   31            Notes payable (short term)
                                                                                                          -----------------------
   32            Accounts payable (trade)                                                    A                                 $0
                                                                                                          -----------------------
   33            Real property lease arrearage
                                                                                                          -----------------------
   34            Personal property lease arrearage
                                                                                                          -----------------------
   35            Accrued professional fees                                                                                $60,000
                                                                                                          -----------------------
   36            Current portion of long-term debt (due within 12 months)
                                                                                                          -----------------------
   37            Other:             Other general accruals                                                                 $1,500
                                   ------------------------------------------------                       -----------------------
   38
                   ----------------------------------------------------------------                       -----------------------
   39
                   ----------------------------------------------------------------                       -----------------------

   40            TOTAL CURRENT LIABILITIES                                                                               $61,500
                                                                                                          -----------------------

   41       LONG-TERM DEBT, NET OF CURRENT PORTION
                                                                                                          -----------------------

   42            TOTAL POST-PETITION LIABILITIES                                                                          $61,500
                                                                                                          -----------------------

            PRE-PETITION LIABILITIES (ALLOWED AMOUNT)

   43            Secured claims                                                             E                                 $0
                                                                                                          -----------------------
   44            Priority unsecured claims                                                  E

                                                                                                          -----------------------
   45            General unsecured claims                                                   E

                                                                                                          -----------------------

   46            TOTAL PRE-PETITION LIABILITIES                                                                                $0
                                                                                                          -----------------------

   47            TOTAL LIABILITIES                                                                                        $61,500
                                                                                                          -----------------------

        EQUITY (DEFICIT)

   48
                   ----------------------------------------------------------------                       -----------------------
   49
                   ----------------------------------------------------------------                       -----------------------
   50
                   ----------------------------------------------------------------                       -----------------------
   51
                   ----------------------------------------------------------------                       -----------------------
   52       Market value adjustment
                                                                                                          -----------------------
   53            TOTAL EQUITY (DEFICIT)                                                                                   $42,339
                                                                                                          -----------------------


   54            TOTAL LIABILITIES AND EQUITY (DEFICIT)                                                                  $103,839
                                                                                                          -----------------------
                                                                                                          -----------------------

</TABLE>

<PAGE>

                                    SCHEDULES
                              (GENERAL BUSINESS CASE)

                                    ($         )
                                      --------

                                    SCHEDULE A
                         ACCOUNTS RECEIVABLE(NET)/PAYABLE

<TABLE>
<CAPTION>
                                                                ACCOUNTS          ACCOUNTS PAYABLE                 PAST DUE
        Receivables and Payables Ageings                       RECEIVABLE          [POST PETITION]            POST PETITION DEBT
                                                               ----------          ---------------            -------------------
<S>                                                         <C>                  <C>                     <C>
            0 -30 Days

                                                            -----------------    --------------------
                                                                                                       --
            31-60 Days

                                                            -----------------    --------------------
            61-90 Days                                                                                                          $0

                                                            -----------------    --------------------    --------------------------
            91+ Days

                                                            -----------------    --------------------  --
            Total accounts receivable/payable                             $0                      $0
                                                            -----------------    --------------------
                                                                                 --------------------
            Allowance for doubtful accounts

                                                            -----------------
            Accounts receivable (net)                                     $0

                                                            -----------------
                                                            -----------------

</TABLE>


                                  SCHEDULE B
                        INVENTORY/COST OF GOODS SOLD
<TABLE>
<CAPTION>

        TYPES AND AMOUNT OF INVENTORY(IES)                             COST OF GOODS SOLD
        ----------------------------------                             ------------------
<S>                                                                    <C>
                                                 INVENTORY(IES)        Inventory Beginning of Month             ----------------
                                                   BALANCE AT
                                                  END OF MONTH         Add -
                                                  ------------
        Retail/Restaurants -                                                   Net purchases
                                                                                                                ----------------
            Product for resale                                                 Direct labor

                                              ---------------------                                             ----------------
                                                                               Manufacturing overhead

                                                                                                                ----------------
        Distribution -                                                         Freight in
                                                                                                                ----------------
            Product for resale                                                 Other:

                                              ---------------------
                                                                               ------------------------         ----------------
        Manufacturer -
                                                                               ------------------------         ----------------
            Raw materials
                                              ---------------------
            Work-in-progress                                           Less -
                                              ---------------------
            Finished goods                                                     Inventory End of Month
                                              ---------------------                                             ----------------
                                                                               Shrinkage
                                                                                                                ----------------
        Other -                                                                Personal Use
                                              ---------------------                                             ----------------
            Explain
                     --------------------
                                                                       Cost of Goods Sold                                    $0
            ------------------------------                                                                      ----------------
                                                                                                                ----------------
                 TOTAL                                          $0

                                              --------------------- 
                                              --------------------- 
<CAPTION>

        METHOD OF INVENTORY CONTROL                                    INVENTORY VALUATION METHODS
        ---------------------------                                    ----------------------------
<S>                                                                    <C>
        Do you have a functioning perpetual inventory system?          Indicate by a checkmark method of inventory valuation used.
                                Yes             No
                                    ----           ----
        How often do you take a complete physical inventory?           Valuation methods -
                                                                               FIFO cost
                                                                                                       --------------------
            Weekly                                                             LIFO cost
                                    ----                                                               --------------------
            Monthly                                                            Lower of cost or
                                    ----
            Quarterly                                                              market
                                    ----                                                               --------------------
            Semi-annually                                                      Retail method
                                    ----                                                               --------------------
            Annually
                                    ----
                                                                               Other -
                                                                                                       --------------------
        Date of last physical inventory was                  12/31/94              Explain

                                                       ---------------------

                                                                                           --------------------------------------
        Date of next physical inventory is                   N/A

                                                       ---------------------               --------------------------------------
</TABLE>

<PAGE>


                                        SCHEDULE C
                                      REAL PROPERTY

<TABLE>
<CAPTION>
            DESCRIPTION                                                                COST                   MARKET VALUE
            ----------                                                                 ----                   -------------
<S>                                                                             <C>                       <C>

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------

<CAPTION>
                                        SCHEDULE D
                                OTHER DEPRECIABLE ASSETS

            DESCRIPTION                                                                COST                   MARKET VALUE
            ----------                                                                 ----                   -------------
<S>                                                                             <C>                       <C>
            MACHINERY & EQUIPMENT -

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------

            FURNITURE & FIXTURES -

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------

            OFFICE EQUIPMENT -

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------

            LEASEHOLD IMPROVEMENTS -

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------

            VEHICLES -

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------

            ---------------------------------------------------------           --------------------      ----------------------
                 TOTAL                                                                           $0                          $0
                                                                                --------------------      ----------------------
                                                                                --------------------      ----------------------
</TABLE>


                                        SCHEDULE E
                                PRE-PETITION LIABILITIES
<TABLE>
<CAPTION>
                                                                                      CLAIMED                   ALLOWED
        LIST TOTAL CLAIMS FOR EACH CLASSIFICATION -                                   AMOUNT                   AMOUNT (B)
        -------------------------------------------                                   ------                   ----------
<S>                                                                             <C>                       <C>
            Secured claims  (a)                                                            $115,778
                                                                                --------------------      ----------------------
            Priority claims other than taxes
                                                                                --------------------      ----------------------
            Priority tax claims                                                                                         $20,000
                                                                                --------------------      ----------------------
            General unsecured claims                                                       $586,534                    $267,218
                                                                                --------------------      ----------------------

</TABLE>
            (a)    List total amount of claims even if under secured.

            (b)    Estimated amount of claim to be allowed after compromise or
                   litigation. As an example, you are a defendant in a lawsuit
                   alleging damage of $10,000,000 and a proof of claim is
                   filed in that amount. You believe that you can settle the
                   case for a claim of $3,000,000. For Schedule E reporting
                   purposes you should list $10,000,000 as the Claimed Amount
                   and $3,000,000 as the Allowed Amount.

                                        SCHEDULE F
                                RENTAL INCOME INFORMATION
                        Not Applicable to General Business Cases.


<PAGE>
                                 STATEMENT OF OPERATIONS
                                 (GENERAL BUSINESS CASE)

                        FOR THE MONTH ENDED    November, 1998
                                               ---------------
                                $
                                 ----------------
<TABLE>
<CAPTION>
                  CURRENT MONTH                                                                         CUMULATIVE     NEXT MONTH
- ------------------------------------------------                                                      (CASE TO DATE)    FORECAST
  ACTUAL            FORECAST         VARIANCE                                                         --------------    --------
<S>               <C>              <C>            <C>    <C>                                          <C>             <C>
                                                    REVENUES
                                                                                                                               
                                            $0    1      Gross Sales
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0    2      less: Sales Returns & Allowances
- --------------   -------------    -------------                                                        ------------   ------------
           $0              $0               $0    3      Net Sales                                              $0             $0
- --------------   -------------    -------------                                                        ------------   ------------
           $0                               $0    4      less: Cost of Goods Sold  (Schedule 'B')
- --------------   -------------    -------------                                                        ------------   ------------
           $0              $0               $0    5      Gross Profit                                           $0             $0
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0    6      Interest
- --------------   -------------    -------------                                                        ------------   ------------
                                                  7      Other Income:
                                            $0    8                                                        $25,565
- --------------   -------------    -------------          --------------------------------------        ------------   ------------
                                            $0    9
- --------------   -------------    -------------          --------------------------------------        ------------   ------------
           $0              $0               $0   10           TOTAL REVENUES                               $25,565             $0
- --------------   -------------    -------------                                                        ------------   ------------

<CAPTION>
                                                    EXPENSES
<S>               <C>              <C>            <C>    <C>                                          <C>             <C>
                                            $0   11      Compensation to Owner(s)/Officer(s)
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   12      Salaries/Commissions
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   13      Management Fees
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   14      Depreciation                                     $368,860
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   15      Taxes:
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   16           Employer Payroll Taxes
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   17           Real Property Taxes
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   18           Other Taxes
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   19      Other Selling
- --------------   -------------    -------------                                                        ------------   ------------
         $528                            ($528)  20      Other Administrative                              $49,815
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   21      Interest
- --------------   -------------    -------------                                                        ------------   ------------
                                                 22      Other Expenses:
                                            $0   23      Writedown Assets                                 $274,406
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   24      Reduction of Debt to Settlements                 ($455,184)
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   25
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   26
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   27
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   28
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   29
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   30
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
         $528              $0            ($528)  31           TOTAL EXPENSES                              $237,897             $0
- --------------   -------------    -------------                                                        ------------   ------------
        ($528)             $0            ($528)  32 SUBTOTAL                                             ($212,332)            $0
- --------------   -------------    -------------                                                        ------------   ------------

<CAPTION>
                                                    REORGANIZATION ITEMS
<S>               <C>              <C>            <C>    <C>                                          <C>             <C>
      $35,000                         ($35,000)  33      Professional Fees                                $320,086
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   34      Provisions for Rejected Executory Contracts
- --------------   -------------    -------------                                                        ------------   ------------
                                                         Interest Earned on Accumulated Cash
          $77                             ($77)  35           Resulting from Chp 11 Case                   $31,427
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   36      Gain or (Loss) from Sale of Equipment           ($450,000)
- --------------   -------------    -------------                                                        ------------   ------------
       $9,243                          ($9,243)  37      Miscellaneous                                     $48,947
- --------------   -------------    -------------          ---------------------------------------       ------------   ------------
                                            $0   38      Settlements                                      $682,500
- --------------   -------------    -------------          ---------------------------------------       -------------   ------------
      $44,166              $0         ($44,166)  39           TOTAL REORGANIZATION ITEMS                $1,470,106             $0
- --------------   -------------    -------------                                                        ------------   ------------
     ($44,694)             $0         ($44,694)  40 NET PROFIT (LOSS) BEFORE FEDERAL & STATE TAXES     ($1,682,438)            $0
- --------------   -------------    -------------                                                        ------------   ------------
                                            $0   41      Federal & State Income Taxes
- --------------   -------------    -------------                                                        ------------   ------------
     ($44,694)             $0         ($44,694)  42 NET PROFIT (LOSS)                                  ($1,682,438)            $0
- --------------   -------------    -------------                                                        ------------   ------------
- --------------   -------------    -------------                                                        ------------   ------------



EXPLANATION OF VARIANCE TO STATEMENT OF OPERATIONS

(FOR VARIANCES GREATER THAN +/- 10% ONLY)

- ----------------------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
                         SUMMARY OF CASH RECEIPTS AND DISBURSEMENTS
                                (GENERAL BUSINESS CASE)

                          FOR THE MONTH ENDED    Novemberr, 1998
                                               ----------------------




<TABLE>
<CAPTION>
<S>                                                  <C>                       <C>                      <C>
CASH BALANCE BEGINNING OF MONTH                                                                                     $113,533
                                                                                                        ---------------------

CASH RECEIPTS  (1)                                                                                                       $77
                                                                                                        ---------------------

CASH DISBURSEMENTS  (1)                                                                                               $9,771
                                                                                                        ---------------------

EXCESS (DEFICIENCY) OF RECEIPTS OVER DISBURSEMENTS                                                                   ($9,694)
                                                                                                        ---------------------

CASH BALANCE END OF MONTH                                                                                           $103,839
                                                                                                        ---------------------
                                                                                                        ---------------------
<CAPTION>

RECAPITULATION OF FUNDS HELD AT END OF MONTH
- ----------------------------------------------
                                                           ACCOUNT 1                ACCOUNT 2                ACCOUNT 3
                                                           ---------                ---------                ---------
<S>                                                  <C>                       <C>                      <C>
BANK                                                 Silcon Valley Bank       Bank of America
                                                     ----------------------   ----------------------    ---------------------
ACCOUNT TYPE                                         Checking                 Trust Account M&M
                                                     ----------------------   ----------------------    ---------------------
ACCOUNT NO.                                                     3300023699
                                                     ----------------------   ----------------------    ---------------------
ACCOUNT PURPOSE                                      General                  General                   Distribution
                                                     ----------------------   ----------------------    ---------------------
BALANCE, END OF MONTH                                              $62,476                  $40,581                     $782
                                                     ----------------------   ----------------------    ---------------------
TOTAL FUNDS ON HAND FOR ALL ACCOUNTS                              $103,839
                                                     ----------------------
                                                     ----------------------

</TABLE>



(1) Excluding bank transfers between your accounts.


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