U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 - [Fee Required]
For the fiscal year ended DECEMBER 31, 1995, due on March 30, 1996, actually
filed on August 29, 1996.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
[No Fee Required]
For the transition period from to
Commission file number 33-76634
ENERGY CONSERVATION INTERNATIONAL, INC.
(Name of small business issuer in its charter)
Florida 59-3223766
(IRS Employer ID No.)
(State or other jurisdiction
of incorporation or organization)
503 Barnes Drive
Brandon, Florida 33511
(Address of principal executive offices)
Issuer's telephone number (813) 689 1041
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of the 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. [X]
State issuers' revenues for its most recent fiscal year: $2,505
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant. The aggregate market value shall be computed by reference to
the price at which the stock was sold, or the average bid and asked prices of
such stock, as of a specified date within the past 60 days. As of
August 15, 1996 - $4,093,998
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
As of August 15, 1996 - 2,540,834 shares of $0.01 par value common stock.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE>
PART I
Item 1. Description of Business.
See Plan of Operation, below.
Item 2. Description of Property.
None.
Item 3. Legal Proceedings.
The Company is not a party to any pending legal proceedings to the best of its'
knowledge.
Item 4. Submission of Matters to a Vote of Security Holders. The Company did not
submit any matters to a vote of security holders during the fourth quarter.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters.
There is currently no public trading market for the Company's common stock.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Results of Operations - Fiscal Years 1995 and 1994
Revenue for the year ended, December 31, 1995 decreased 94.2 % from 1994. The
Company had redirected it's focus from commission sales to direct product sales,
and did not seek out customers, products or sales in the commission only arena.
The Company's efforts in regard to pricing its line of cosmetics in the
marketplace was not very successful. The Company reported revenues of $12,240 in
the third quarter related to cosmetic sales, however, in the fourth quarter
there was a sales return of $10,240 leaving only a net revenue of $2,000.
Despite the Company's efforts and discussions to proceed with the test marketing
and sales of its automotive product line, the Company's inability to secure
bonding and/or funding as it awaited the proceeds from its offering, possible
available business could not be concluded. Also, the lack of funds had a large
impact on the marketing of its cosmetic products. In addition, the principal of
the Company, spend the majority of his time related to its initial public
offering, regarding preparation of the prospects attempting to secure syndicate
agreements and potential investors in Florida by phone, fax, mail and personal
visits.
During the fourth quarter the Company lost the underwriter (Executive
Securities, Inc.) for its initial public offering due to its inability to secure
investors for this type of offering. The Company, then during the fourth quarter
focused on locating acquisitions to build its asset and revenue base. It tried
to acquire and negotiated for the acquisition of European Cosmetics, Inc., the
manufacturer that produced the Company's Andre' Collard Line of cosmetics.
However, in January, 1996 these negotiations failed.
The Company's principal was the only employee and his time limited, this, along
with the lack of funds to properly proceed with marketing and sales resulted in
the minimal revenue for the year, 1995. Expenses decreased 56.3% in 1995 from
1994. A large portion of this decrease ($33,500) was due to the president not
drawing a salary as the Company did not have the funds and there were minimal
revenues. The president waived all rights to compensation for the year, 1995.
Other major decreases related to a $36,537 (100%) decrease of bad debts from
1994 compared to $0 for 1995. Advertising of $7,880 in 1994 decreased (100%) to
$0 for 1995. Various other expenses decreased with some minor increases in some
categories. The major increase of expenses was for professional fees $12,070 in
1995 compared to $1,278 in 1994 (a 1000 % increase) related to auditing costs
for the prospectus.
Plan of Operation
Management intends to use the net proceeds from its offering to further develop
and expand the Company's existing
2
<PAGE>
operations and markets. The Company currently markets two product lines, the
Slip brand of automotive products and a line of cosmetics sold under the brand
name Andree Collard. The Company intends to test market the one minute
commercial for the Slip products shortly after receipt of the net proceeds of
this offering. The Company intends to develop its 25 minute infomercial for the
Slip products upon completion of the one minute commercial test. The Company has
also been developing other channels of distribution for the Slip products, such
as new automobile dealerships, automobile manufacturers, fleet vehicle operators
and cable television shopping networks.
The Company has been marketing its cosmetics product line to several regional
and national retail department store chains. The Company also intends to develop
other channels of distribution for the cosmetics product line shortly after
receipt of the net proceeds of its offering. The Company also intends to hire
several additional key personnel shortly after receipt of the net proceeds of
its offering to include an Automotive National Sales Manager, a Cosmetics
National Sales Manager and a Plant Manager among others.
Liquidity and Capital Resources
The Company's lack of operating revenues has failed to provide sufficient cash
to meet the Company's ordinary and usual needs. The Company's liquidity was
severely affected by the events discussed in the results of operations. The
Company expects its liquidity to be constricted until either operating revenues
improve or the Company receives sufficient proceeds from its offering. The
Company is not expected to enter into any agreements or contracts for
expenditures beyond its current operating needs until sufficient proceeds from
the offering are available to meet those needs. There is no assurance that
sufficient funds will be received from the offering.
The Company's only known sources of capital are the proceeds from the sale of
the common stock and anticipated cash from operating revenues. The Company may
need to incur additional debt in the foreseeable future to fund operating
expenses.
The Company obtained a $15,000 line of credit from a bank, and the principal
repaid a portion of the note he owed the Company. These proceeds were utilized
to pay for operating expenses and to greatly reduce the payroll tax liability
owed to the I.R.S.
Item 7. Financial Statements.
Attached as Exhibit 1.
Item 8. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure. None.
PART III
Item 9. Directors and Executive Officers of the Registrant.
William E. Baker, Jr. - President, CEO and Chairman
Charles R. Nixon - Vice President and Director
Jose A. Alvarez, CPA - CFO
Dottie S. Baker - Secretary and Director
Harry W. Brooks, Jr. - Director
Edward Church - Director
Item 10. Management Remuneration and Transactions.
None
3
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
William E. and Dottie S. Baker own 2,051,833 shares
Charles R. and Helena Nixon own 60,000 shares
Jose A. Alvarez, CPA owns 100,000 shares
Item 12. Management Transactions.
None
PART IV
Item 13. Exhibits and Reports on Form 8-K and 8-K/A. During the last quarter of
the fiscal year ended December 31, 1995, the Company did not file any reports on
Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this amended registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: August 29, 1996
ENERGY CONSERVATION INTERNATIONAL, INC.
a Florida Corporation
By: /s/ Daniel S. Pena, Sr.
Daniel S. Pena, Sr.
Chairman of the Board
By: /s/ Jose A. Alvarez, CPA
Jose A. Alvarez, CPA
President, Chief Executive Officer, Chief
Financial Officer
By: /s/ Steven M. Alvarez
Steven M. Alvarez
Secretary
By: /s/ Lucinda A. Burke
Lucinda A. Burke
Director
By: /s/ David A. Reecher
David A. Reecher
Director
4
<PAGE>
EXHIBIT 1
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Certified Public Accountant ........................ F-2
Balance Sheets............................................................ F-3
Statements of Operations................................................. F-4
Statements of Stockholders' Equity....................................... F-5
Statements of Cash Flows................................................. F-6
Notes to Financial Statements............................................ F-7
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To: The Board of Directors
Energy Conservation International, Inc.
Brandon, Florida
We have audited the accompanying balance sheets of Energy Conservation
International, Inc., (the "Company")(f/k/a Vision Marketing Group, Inc.), as of
December 31, 1995, and the related statements of operations, stockholders'
equity and cash flows for the two years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Energy Conservation
International, Inc. at December 31, 1995, and the results of its operations and
its cash flows for each of the two years in the periods ended December 31, 1995,
in conformity with generally accepted accounting principles.
Durland & Company, CPAs, PA
Palm Beach, Florida
August 7, 1996
F-2
<PAGE>
<TABLE>
<CAPTION>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Balance Sheets
<S> <C> <C>
December 31, December 31,
1994 1995
ASSETS
CURRENT ASSETS
Cash ............................................... $ 10,797 (55)
Accounts receivable ................................ 0 0
-------- --------
Total Current Assets ............................ 10,797 (55)
-------- --------
PROPERTY AND EQUIPMENT (note 1b)
Vehicles ........................................... 16,000 16,000
Less - Accumulated depreciation .................... (13,235) (15,078)
-------- --------
Total Property and Equipment ................... 2,765 922
-------- --------
OTHER ASSETS
Note receivable from stockholder
(note 7) ........................................... 20,261 11,523
Intangible assets, net of
amortization (note 1c) ............................. 3,212 3,025
-------- --------
Total Other Assets .............................. 23,473 14,548
-------- --------
Total Assets ........................................... $ 37,035 15,415
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable ................................... $ 492 13,225
Accrued interest and expenses ...................... 0 523
Payroll taxes payable .............................. 6,433 1,842
Income and intangible taxes
payable ............................................ 2,120 2,642
-------- --------
Total Current Liabilities ....................... 9,045 18,232
-------- --------
LONG-TERM LIABILITIES
Note payable ....................................... 0 15,249
-------- --------
Total Long-Term Liabilities ..................... 0 15,249
-------- --------
Total Liabilities ...................................... 9,045 33,481
-------- --------
STOCKHOLDERS' EQUITY
Common stock, $0.01 par value;
Authorized 50,000,000 shares;
issued and issued and outstanding
2,505,833 (note 2) ................................ 25,058 25,058
Preferred stock, no par value;
Authorized 10,000,000 shares;
issued and outstanding 0 (none)
(note 2) .......................................... 0 0
Additional paid in capital ......................... 57,563 57,563
Retained earnings (deficit) ........................ (54,631) (100,687)
-------- --------
Total Stockholders' Equity ............................. 27,990 (18,066)
-------- --------
Total Liabilities and
Stockholders' Equity .................................. $ 37,035 (15,415)
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Operations
Years ended December 31,
1994 1995
<S> <C> <C>
REVENUES
Product sales .................................. $ 0 2,000
Commissions .................................... 43,522 500
Other .......................................... 17 5
----------- -----------
Total Revenue ............................... 43,539 2,505
----------- -----------
Cost of goods sold ............................. 700 650
----------- -----------
Gross profit ................................... 42,839 1,855
----------- -----------
EXPENSES
Advertising .................................... 7,880 0
Amortization ................................... 187 187
Automotive ..................................... 2,531 4,514
Bad debt (note 5) .............................. 36,537 0
Bank charges ................................... 213 356
Commissions .................................... 1,000 150
Contributions .................................. 500 0
Depreciation ................................... 1,843 1,843
Initial public offering costs .................. 1,448 4,450
Interest and loan expenses ..................... 0 771
Insurance ...................................... 1,005 620
Office supplies and expenses ................... 1,720 2,490
Professional fees .............................. 1,278 12,070
Rent ........................................... 910 910
Salaries ....................................... 33,500 0
Payroll taxes, penalties, interest, licenses ... 4,638 2,495
Samples ........................................ 7,929 57
Travel and entertainment ....................... 2,082 3,627
Telephone ...................................... 3,554 4,664
Utilities ...................................... 0 810
Miscellaneous .................................. 911 7,897
----------- -----------
Total expenses .............................. 109,666 47,911
----------- -----------
Net income (loss) before taxes ................. (66,827) (46,056)
----------- -----------
Provision for income tax expense (benefit) ..... 0 0
----------- -----------
Net income (loss) .............................. $ (66,827) (46,056)
=========== ===========
Net income per share ........................... $ (0.03) (0.02)
=========== ===========
Shares outstanding ............................. 2,505,833 2,505,833
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Stockholders' Equity
Additional Retained Total
Common Preferred Paid-In Earnings/ Stockholders'
Stock Stock Capital Deficit Equity
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1994 .... 25,058 0 57,563 (54,631) 27,990
Net loss ...................... 0 0 0 (46,056) (46,056)
---------------- -------- -------- -------- --------
BALANCE, December 31, 1995 ... $ 25,058 0 57,563 (100,687) (18,066)
(unaudited) ================ ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
<TABLE>
<CAPTION>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Statements of Cash Flows
Years ended December 31,
1994 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income/loss ...................................... $(66,827) (46,056)
Adjustments to reconcile net loss to
net cash used for operating activities:
Amortization ....................................... 187 187
Depreciation ....................................... 1,843 1,843
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable ......... 91,764 0
Increase in accounts payable ....................... (4,545) 12,734
Increase (decrease) in accrued interest and expenses 0 523
Increase (decrease) in payroll taxes payable ....... 6,433 (4,591)
Increase in income taxes payable ................... (722) 522
-------- --------
Net cash (used) provided by operating activities ..... 28,133 (34,838)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
None
CASH FLOWS FROM FINANCING ACTIVITIES:
Stockholder advance repayment ...................... 0 21,966
Funds advanced to stockholder ...................... (20,261) (13,229)
Funds advanced on third party debt ................. 0 15,249
-------- --------
Net cash provided (used) by financing activities ..... (20,261) 23,986
-------- --------
Net increase (decrease) in cash ...................... (7,872) (10,852)
-------- --------
CASH, beginning of period ............................ 2,925 10,797
-------- --------
CASH, end of period .................................. $ 10,797 (55)
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash ................................ $ 0 393
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements
(1) Summary of Significant Accounting Principles
The Company Energy Conservation International, Inc. ("the Company") was
chartered by the State of Florida on December 9, 1992 and conducts business from
its headquarters in Clearwater, Florida. Some of the Company's national accounts
are Home Shopping Network, QVC network, Fingerhut, Comb Liquidators and Damark.
The financial statements have been prepared in conformity with generally
accepted accounting principles. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the dates of the statements of
financial condition and revenues and expenses for the years then ended. Actual
results could differ significantly from those estimates. The following summarize
the more significant accounting and reporting policies and practices of the
Company:
a) Revenue recognition The Company currently has two distinctly different
revenue streams. These are:
1) Commission sales - The Company acts in the capacity of a manufacturers
representative by receiving orders for products supplied by the companies it
represents and receives commissions for these sales. The Company normally
receives a commission percentage of approximately 5% on sales of products sold
on a recurring basis. A higher percentage is received, approximately 8% to 10%
on one time sales, such as closeouts. The Company normally accrues commission
income at the time the customer accepts a shipment, as the customer reserves the
right to modify or cancel the order prior to acceptance of the shipment. Net
commission sales for the years ended December 31, 1994 and 1995 were
approximately $43,522 and $500.
2) Product sales - The Company recognizes the revenue on these sales when the
sales were invoiced, which was at delivery of goods to the purchasers. As these
sales were final with no right of return, no reserves were established. Current
sales of goods are FOB shipper dock and are invoiced at time of notification to
the Company of shipment by the manufacturer.
b) Fixed assets Fixed assets are stated at cost. Depreciation is computed by the
double declining balance method over the estimated useful lives of the assets,
generally five and seven years. Expenditures for maintenance and repairs are
charged to operations as incurred. Depreciation was $1,843 and $1,843 for the
years ended December 31, 1994 and 1995.
c) Intangible assets Intangible assets are composed of the rights to
commercialize US Patent 5,081,171 issued January 14, 1992. The Company purchased
these rights in February 1993 for 90,000 shares of stock valued at $3,586. These
rights are being amortized over their remaining 16 year life using the
straight-line method. Amortization amounted to $187 and $187 for the years ended
December 31, 1994 and 1995.
(2) Stockholders' equity The Company has authorized 50,000,000 shares of $0.01
par value common stock, and 10,000,000 of no par value preferred stock. On
November 10, 1992 the founder of the Company entered into an agreement to issue
200,000 shares of the then future company's common stock in exchange for certain
legal services related to the founding of the Company and the patent rights
negotiations. The founder valued these services at $200. On December 9, 1992 the
Company entered into an agreement with the owner of the Predecessor to exchange
55%, (2,200,000 shares), of the authorized shares of its common stock to the
owner to effect a tax-free reorganization from a sole proprietorship to a
corporation under the Internal Revenue Code
F-7
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements, Continued
(2) Stockholders' equity, continued Section 368(a)(1)(F). This transaction was
effected at close of business December 31, 1992, with a valuation of $43,835.
In February, 1993 the Company entered into two agreements to exchange 90,000
shares of the Company's common stock for the rights to commercialize US Patent
5,081,171, and for the recipient of the shares to terminate a then existing
joint-venture formed for the purpose of commercializing said patent. The rights
received by the Company were valued by the Board of Directors and the individual
at $3,586.
In March, 1993 the Company sold 3,333 shares of its' common stock for cash at a
price of $3.00 per share, for a total of $10,000. In September, 1993 the Company
sold 12,500 shares of its' common stock for cash at a price of $2.00 per share,
for a total of $25,000.
(3) Common stock public offering On November 10, 1992 the Board of Directors
authorized the Company to sell up to 400,000 shares of the Company's common
stock in a "self-underwritten" public offering pursuant to a Registration
Statement on Form SB-2 under the Securities Act of 1933. On December 16, 1993
the Board of Directors voted to increase the number of shares offered hereby to
700,000. This offering is being made with a 35,000 share minimum, and is
effective for one year from the effective date of the registration (June 7,
1995). The stock included in this offering is priced at $6.00 per share. This
offering price was determined in a completely arbitrary manner and bears no
relation to any recognized standard of value. The minimum required to be sold by
the Company before it has access to the funds is $210,000 at the offering price,
with a net to the Company of $182,700 after sales commissions and
unaccountables, assuming all 35,000 shares are sold through a NASD
broker/dealer. (No sales commissions and unaccountables will be paid to any
officer or director). The maximum proceeds of this offering are $4,200,000, or
$3,654,000 net of sales commissions and unaccountables, assuming all shares are
sold through NASD broker/dealers. In September 1994 the Company entered into a
Letter of Intent with Donnellan Haylett & Co., Inc. of Sarasota, FL to be the
Underwriter on a "best efforts" basis for this offering. The terms of this
Letter call for the Underwriter to receive commissions of 10% and a
non-accountable expense allowance of 3% for each share sold. The Company also
agreed to sell a warrant to the Underwriter, for $70, which allows the
Underwriter to purchase one share for every ten shares sold by the Underwriter
or certain dealers. The exercise price of the warrant is $7.20 per share, and is
exercisable until 5 PM, EST, September 1, 1999. In July 1994 the Company
terminated an agreement with another company which provided for marketing and
related services related the Company's self-underwriting of its offering. This
agreement was canceled due to the negotiations with Donnellan Haylett, which
resulted in the Letter of Intent. In January 1995 as a result of the merger
between Donnellan Haylett & Co., Inc. and Executive Securities, Inc. in which
Donnellan Haylett became a wholly owned subsidiary of Executive, a new
underwriting agreement was executed between the Company and Executive
Securities. This agreement bears exactly the same terms and conditions as the
previous agreement with Donnellan Haylett.
(4) Commitments In February, 1993 the Company entered into a sales agreement
with Pro-Tech Laboratories, Inc. of Reddington Beach, California for the sale of
various products based on US Patent 5,081,171. This agreement includes
provisions requiring minimum annual purchases, as well as limiting the market
available to Pro-Tech for such sales. In February, 1993 the Company entered into
an agreement with the owner of US, as described in note (2). Further, this
agreement includes payment of licensing royalties to said owner under Patent
5,081,171 the following schedule: for patented products - 9% of the first
$500,000 of sales, 6% of the next $1,500,000 of sales, 5% of the next $3,000,000
of sales and 4% of sales exceeding $5,000,000; for unpatented products the
percentages are 5%, 4%, 3% and 2% with exactly the same levels of sales. The
Company is also granted the right of first refusal for any other patents granted
to the inventor.
F-8
<PAGE>
Energy Conservation International, Inc.
(f/k/a Vision Marketing Group, Inc.)
Notes to Financial Statements, Continued
(4) Commitments, continued In July, 1993 the Company entered into a
manufacturing agreement with European Research Laboratories of Pompano Beach,
Florida for the production of a line of cosmetic, skin and hair care products
exclusively using the product label "Andree Collard". This agreement has no
minimum purchase requirements.
(5) Allowance for bad debts During October 1994 the Company evaluated the
accounts receivable balances of its three principal customers. In the course of
working with one of the customers it discovered two significant items. First,
this customer had been forced to close the business by a governmental regulatory
body. As a result it had canceled an order with the manufacturer on the day the
goods were being shipped. The manufacturer had failed to notify the Company,
which resulted in an overstatement of sales in the first two quarters of the
year by $59,400. The Company reflected this adjustment as a reduction of sales
in the third quarter.
The Company also established a reserve of $62,886 against the remaining balance
of this customer's account receivable at that time. The Company collected
$27,795 of this reserve. At year end the Company determined that the remaining
balance of $35,091 was uncollectible and wrote off this amount.
Also, there was a dispute between another customer (commission basis) and the
Company. The customer stated it owed the Company $14,488 less than the Company
believed was owed. Due to this disagreement, which relates to a June
transaction, the Company has established a reserve of $14,488 against this
account receivable. The Company recovered $13,042 of this amount. At year end
the Company determined that the remaining balance of $1,446 was uncollectible
and wrote off this amount.
As of December 31, 1994 the Company had recovered $40,837 of the amounts
reserved against accounts receivable, which originally totaled $77,374. The
Company believes that significant doubt exists as to the collectability of the
remaining balance, therefore the Company chose to write-off the $36,537 balance
remaining. As of December 31, 1995 the Company has not collected any additional
amounts of this balance. The Company intends to fully review all accounts
receivable on an at least quarterly basis in the future to determine the
necessity of establishing reserves.
(6) Industry Segment Information The Company has three distinct industry
segments, of which two make up Product sales, and the third is the sole segment
within the Commissions revenue stream. The Company sells household products
strictly on commission for third-party manufacturers. The Product sales revenue
stream is currently composed of its automotive products, but expects to sell its
cosmetics line beginning in early 1995.
<TABLE>
<CAPTION>
Household Products Automotive Products Cosmetics
Year ended December 31, 1994 1995 1994 1995 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Revenue ............ $43,522 500 0 0 0 0
Profitability ...... $42,522 350 0 0 0 0
Identifiable assets $ 0 0 3,586 3,586 0 0
Depreciation ....... $ 922 0 923 922 923 0
Capital expenditures $ 0 0 0 0 0 0
</TABLE>
(7) Note receivable from stockholder The Company has loaned the principal
stockholder, Mr. Baker, $14,759 at December 31, 1995. This loan has been made
without the benefit of collateral, nor does it carry a stated interest rate or
maturity date.
(8) Income taxes The Company had a deferred income tax asset of $0 at December
31, 1994 and $39,700 December 31, 1995 resulting from net operating loss
carryforwards totaling $100,687. The deferred tax asset is composed of $34,200
in federal carryforwards and $5,500 in state. These loss carryforwards expire in
2010. As the Company has had limited profitability, it has established a
valuation allowance of $39,700.
F-9
