<PAGE> 1
EXHIBIT 13
CINTECH
TELE-MANAGEMENT
SYSTEMS, INC.
Financial Statements for the Years Ended
June 30, 2000 and 1999 and Independent
Auditors' Report
<PAGE> 2
Deloitte & Touche LLP
250 East Fifth Street
P.O. Box 5340
Cincinnati, Ohio 45201-5340
Tel:(513) 784-7100
www.us.deloitte.com
DELOITTE
& TOUCHE
INDEPENDENT AUDITORS' REPORT
To the Stockholders of
Cintech Tele-Management Systems, Inc.
We have audited the accompanying balance sheets of Cintech Tele-Management
Systems, Inc. (the "Company") as of June 30, 2000 and 1999 and the related
statements of income, stockholders' equity and cash flows for the years then
ended (all expressed in U.S. dollars) which, as described in Note 1, have been
prepared on the basis of accounting principles generally accepted in the United
States of America. 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 audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. 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 audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company as of June 30, 2000 and 1999 and
the results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.
/s/ Deloitte & Touche LLP
August 25, 2000
DELOITTE
TOUCHE
TOHMATSU
<PAGE> 3
<TABLE>
<CAPTION>
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
BALANCE SHEETS
JUNE 30, 2000 AND 1999
------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS 2000 1999
CURRENT ASSETS:
Cash and cash equivalents (Note 1) $ 2,521,039 $1,500,081
Marketable securities (Note 2) 5,828,194 4,864,847
Accounts receivable, trade - (net of
allowance of $24,509 and $50,601
in 2000 and 1999, respectively) (Note 1) 869,435 1,022,153
Inventory (Note 1) 45,969 25,781
Prepaid expenses 31,131 30,172
Deferred income taxes (Note 6) 584,067 298,960
----------- ----------
Total current assets 9,879,835 7,741,994
----------- ----------
FIXED ASSETS (Note 1):
Equipment 1,178,783 757,190
Furniture and fixtures 288,773 151,433
----------- ----------
Total 1,467,556 908,623
Less accumulated depreciation (974,166) (786,988)
----------- ----------
Total fixed assets - net 493,390 121,635
----------- ----------
SOFTWARE DEVELOPMENT COSTS-
Net (Note 1) 1,250,148 578,156
DEFERRED INCOME TAXES (Note 6) 274,996
----------- ----------
Total other assets 1,250,148 853,152
----------- ----------
TOTAL $ 11,623,373 $8,716,781
============ ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY 2000 1999
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 347,664 $ 270,434
Accrued liabilities:
Accrued wages and compensation 660,074 755,715
Accrued income taxes 75,678 58,340
Warranty reserve 126,323 119,078
Other 171,558 182,610
Deferred maintenance revenue (Note 1) 832,528 728,678
---------- -----------
Total current liabilities 2,213,825 2,114,855
---------- -----------
DEFERRED INCOME TAXES (Note 6) 83,822
---------- -----------
STOCKHOLDERS' EQUITY (Notes 1,4,5):
Common stock 9,005,433 8,993,777
Contributed capital 675,757 675,757
Treasury stock (2,290) (2,290)
Accumulated deficit (353,174) (3,065,318)
---------- ----------
Total stockholders' equity 9,325,726 6,601,926
---------- -----------
TOTAL $ 11,623,373 $ 8,716,781
============ ===========
</TABLE>
See notes to financial statements.
- 2 -
<PAGE> 4
<TABLE>
<CAPTION>
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
NET SALES (Note 1):
Product sales $ 9,915,210 $ 10,449,635
Services and other sales 2,704,293 1,938,222
----------- ------------
Total net sales 12,619,503 12,387,857
----------- ------------
COST OF PRODUCTS SOLD AND SERVICES PROVIDED (Note 1):
Cost of products sold 2,428,894 2,937,497
Cost of services and other sales 788,173 621,433
----------- ------------
Total cost of products sold and services provided 3,217,067 3,558,930
----------- ------------
GROSS PROFIT 9,402,436 8,828,927
RESEARCH AND DEVELOPMENT 672,847 415,657
SELLING, GENERAL AND ADMINISTRATIVE (Notes 1,3) 5,761,836 4,949,538
----------- ------------
INCOME FROM OPERATIONS 2,967,753 3,463,732
OTHER INCOME 327,218 121,776
----------- ------------
INCOME BEFORE INCOME TAX PROVISION/(BENEFIT) 3,294,971 3,585,508
INCOME TAX PROVISION/(BENEFIT) (Note 6) 582,827 (467,211)
----------- ------------
NET INCOME $ 2,712,144 $ 4,052,719
============ ============
BASIC EARNINGS PER COMMON SHARE (Note 4) $ 0.22 $ 0.33
============ ============
DILUTED EARNINGS PER COMMON SHARE (Note 4) $ 0.21 $ 0.32
============ ============
</TABLE>
See notes to financial statements.
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<PAGE> 5
<TABLE>
<CAPTION>
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
-----------------------------------------------------------------------------------------------------------------------------
COMMON TOTAL
STOCK CONTRIBUTED TREASURY ACCUMULATED STOCKHOLDERS'
NO PAR VALUE CAPITAL STOCK DEFICIT EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT JUNE 30, 1998 $8,982,842 $675,757 $ (2,290) $(7,118,037) $ 2,538,272
STOCK OPTIONS EXERCISED (21,434 shares) 10,935 10,935
NET INCOME 4,052,719 4,052,719
---------- -------- --------- ----------- -----------
BALANCE AT JUNE 30, 1999 8,993,777 675,757 (2,290) (3,065,318) 6,601,926
STOCK OPTIONS EXERCISED (20,143 shares) 11,656 11,656
NET INCOME 2,712,144 2,712,144
---------- -------- --------- ----------- -----------
BALANCE AT JUNE 30, 2000 $9,005,433 $675,757 $ (2,290) $ (353,174) $9,325,726
========== ======== ========= ============ ==========
</TABLE>
See notes to financial statements.
- 4 -
<PAGE> 6
<TABLE>
<CAPTION>
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
------------------------------------------------------------------------------------------------------------------------
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,712,144 $ 4,052,719
------------ -----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation 207,219 85,394
Amortization of software development costs 121,815 157,189
Deferred income taxes 73,711 (573,956)
Provision for doubtful accounts (26,092) 22,204
Changes in assets and liabilities:
Decrease in accounts receivable 178,810 478,701
(Increase) decrease in inventory (20,188) 61,692
Increase in other assets (959) (1,722)
Increase in accounts payable 77,230 69,141
Increase (decrease) in accrued expenses (82,110) 492,437
Increase in deferred maintenance revenue 103,850 286,067
------------ -----------
Total adjustments 633,286 1,077,147
------------ -----------
Net cash provided by operating activities 3,345,430 5,129,866
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of marketable securities (963,347) (3,948,015)
Purchase of fixed assets (578,974) (96,176)
Expenditures for software development costs (793,807) (510,228)
------------ -----------
Net cash used in investing activities (2,336,128) (4,554,419)
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES-
Proceeds from exercise of stock options 11,656 10,935
------------ -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,020,958 586,382
CASH AND CASH EQUIVALENTS:
Beginning of year 1,500,081 913,699
------------ -----------
End of year $ 2,521,039 $ 1,500,081
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION-Taxes paid $ 491,778 $ 62,747
============ ===========
</TABLE>
See notes to financial statements.
- 5 -
<PAGE> 7
CINTECH TELE-MANAGEMENT SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED JUNE 30, 2000 AND 1999
-------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS - The Company develops and markets Internet technology
solutions exclusively for small to mid-size entities within the Fortune
1000 and small businesses to manage and analyze interactions with their
customers, partners, and associates for improved relationships and
informed decisions. In concert with the Internet technology solutions, the
Company also provides services, such as installation, training, project
management, consulting and maintenance support.
FINANCIAL STATEMENT PRESENTATION - These financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America and are expressed in United States dollars.
The differences in accounting principles generally accepted in the United
States of America and Canada are described in Note 7.
USE OF ESTIMATES - The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America 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.
REVENUE - Generally, the Company records product and service revenue when
the product is shipped and the service is provided. Also, the Company
records an estimate of potential future returns of product sold at the
time of sale.
DEFERRED MAINTENANCE REVENUE - The Company sells product maintenance
agreements which provide for no-cost upgrade of software. These agreements
normally cover periods ranging from 1-5 years with revenue being
recognized on a straight-line basis over the maintenance period.
WARRANTY RESERVE - At the time of sale, the Company accrues for warranty
costs relating to software replacement or on site support to be provided
during the first twelve months following the sale. Costs associated with
supporting product under warranty are charged to the reserve instead of
current period cost. The reserve is adjusted periodically based upon
actual experience.
DEPRECIATION - Fixed assets are carried at cost. Depreciation is computed
using an accelerated method over the following useful lives:
Equipment 3-5 years
Furniture and fixtures and leasehold improvements 2-7 years
- 6 -
<PAGE> 8
INVENTORY - Inventories are valued at the lower of cost or market, with cost
being computed using the first-in, first-out method. Inventories consist of:
2000 1999
Literature and other documentation $ 40,318 $14,309
Computer hardware 9,068 21,621
Allowance for obsolete inventory (3,417) (10,149)
-------- -------
Total inventory $ 45,969 $25,781
======== =======
SIGNIFICANT CUSTOMERS - Most of the Company's sales are to distributors in the
telephony industry. The Company had sales to major distributors, as follows:
SALES FOR THE YEARS ENDED JUNE 30,
2000 1999
---------------------- -------------------------
AMOUNT % AMOUNT %
Distributor A $8,548,116 68 % $ 8,779,085 71 %
Distributor B 1,234,124 10 % 1,022,011 8 %
---------- ---- ----------- ---
Total $9,782,240 78 % $ 9,801,096 79 %
========== ==== =========== ===
The Company had gross accounts receivable from major distributors, each of which
was in excess of 10% of the Company's total accounts receivable, as follows:
PERCENT OF
GROSS
ACCOUNTS
DISTRIBUTORS RECEIVABLE
June 30, 2000 1 74 %
June 30, 1999 2 83 %
INTERNATIONAL SALES - The Company had international sales as follows:
SALES FOR THE YEARS ENDED JUNE 30,
2000 1999
------------------------- --------------------------
AMOUNT % AMOUNT %
Canada $134,648 1 % $ 99,996 1 %
Other 7,089
-------- --- -------- ---
Total $134,648 1 % $107,085 1 %
========= === ========= ===
SOFTWARE DEVELOPMENT COSTS - Costs incurred internally for creation of the
computer software product are charged to research and development expense when
incurred until technological feasibility has been established for the product.
Thereafter, until general release, all software production costs are capitalized
and subsequently reported at the lower of amortized cost or net realizable
value. The capitalized costs are amortized on a straight-line basis over the
estimated economic life of the product.
- 7 -
<PAGE> 9
Costs capitalized were $793,807 and $510,228 and related amortization was
$121,815 and $157,189 for 2000 and 1999, respectively. The Company
periodically evaluates the capitalized cost relative to potential sales
and accelerates the write-off when appropriate.
LICENSING FEE - The Company has agreements with distributors which require
the payment of a license fee on certain software sales made by the
distributors. This license fee is for the distribution of the Company's
products. License fee expense was $1,977,347 and $2,281,314 for 2000 and
1999, respectively.
FAIR VALUE OF FINANCIAL INSTRUMENTS - The carrying value of certain of the
Company's financial instruments, such as cash, trade accounts receivable
and trade accounts payable, approximate their fair values.
ACCOUNTING PRONOUNCEMENTS - In 1999, the Securities and Exchange
Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition
in Financial Statements." The bulletin had no impact on the Company's
financial statements.
In 1998, the Financial Accounting Standards Board (FASB) issued Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
This statement, as amended, which is effective for fiscal year 2001, will
have no impact on the Company's reported financial position, results of
operations or cash flows.
CASH AND CASH EQUIVALENTS - For purposes of reporting cash flows, the
Company considers all money market instruments to be cash equivalents.
RECLASSIFICATION - Certain fiscal 1999 amounts have been reclassified in
order to conform to fiscal 2000 presentation.
2. MARKETABLE SECURITIES
The Company maintains various investments in federal agency notes which
are classified as held-to-maturity and are reported at amortized cost in
accordance with FASB Statement No. 115 "Accounting for Certain Investments
in Debt and Equity Securities". All items mature within one year. The cost
and market value of the investments are summarized below:
<TABLE>
<CAPTION>
NET
AMORTIZED UNREALIZED
DESCRIPTION COST MARKET GAIN (LOSS)
<S> <C> <C> <C>
June 30, 2000 - Federal Agency Notes $5,828,194 $ 5,831,140 $ 2,946
=========== ============ =======
June 30, 1999 - Federal Agency Notes $4,864,847 $ 4,858,395 $(6,452)
=========== ============ =======
</TABLE>
3. OPERATING LEASES
OPERATING LEASES - The Company leases its office facility in Norwood,
Ohio. This operating lease, which began in March 1995 and expires in April
2002, calls for escalating lease payments over the term of the lease. The
Company records lease expense on a straight-line basis over the life of
the lease.
- 8 -
<PAGE> 10
The annual minimum rent to be paid under the operating lease agreement for
the facility in Norwood, Ohio is as follows:
Year Ending June 30:
2001 $233,816
2002 175,365
Rent expense for the leased office space was $308,729 and $293,105 for
2000 and 1999, respectively.
4. CAPITAL STOCK AND INCOME PER SHARE
The following schedule is a summary of the Company's shares of capital
stock.
<TABLE>
<CAPTION>
COMMON IN
AUTHORIZED ISSUED OUTSTANDING TREASURY
<S> <C> <C> <C> <C>
Balance at June 30, 2000 15,000,000 12,323,328 12,321,328 2,000
=========== =========== =========== =====
Balance at June 30, 1999 15,000,000 12,303,185 12,301,185 2,000
=========== =========== =========== =====
</TABLE>
Income per common share was based on the weighted average number of common
shares outstanding during each period.
The Company's basic and diluted earnings per share were determined as
follows:
<TABLE>
<CAPTION>
2000 1999
--------------------------------------- ---------------------------------------
INCOME SHARES PER SHARE INCOME SHARES PER SHARE
BASIC EPS (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT
<S> <C> <C> <C> <C> <C> <C>
Income available to
common stockholders $ 2,712,144 12,311,524 $ 0.22 $ 4,052,719 12,292,802 $ 0.33
EFFECT OF DILUTIVE SECURITIES
Stock options 697,899 339,608
----------- --------- ------ ----------- --------- ------
DILUTED EPS
Income available to
common stockholders
and assumed conversions $ 2,712,144 13,009,423 $ 0.21 $ 4,052,719 12,632,410 $ 0.32
=========== ========== ====== =========== ========== ======
</TABLE>
Stock options representing 20,000 shares in 2000 and 145,000 shares in
1999 were not included in computing diluted earnings per share because
their effects were antidilutive.
5. STOCK OPTION PLAN
During 1994, the Board of Directors approved a plan providing for the
granting, to employees, options for the purchase of a maximum of 1,500,000
shares of common stock. In 1996, the plan was amended to provide for
non-employee eligibility. In 2000, the plan was amended and restated to
include in one document all previous amendments and other non-material
changes designed to improve the operation
- 9 -
<PAGE> 11
of the plan and to reserve an additional 1,000,000 shares for issuance
under the plan. Excluding the options granted in February 1994, all
options have been granted at an exercise price equal to the fair market
value at the date of grant and become exercisable equally over a period
ranging from one to four years. The February 1994 options were granted at
a price below fair market value at the date of grant and were subsequently
adjusted to market. The 1994 options granted become exercisable equally
over a two-year period. All options expire at the end of ten years from
the date of grant or are subject to the performance provisions of specific
grants.
The Company has adopted the disclosure only provision of SFAS No. 123 and
applies APB Opinion No. 25 in accounting for its stock options. Had
compensation cost for stock option grants made in fiscal years 2000 and
1999 been determined using the fair value method consistent with SFAS No.
123, the Company's net income and net income per share would have been
effected as follows:
2000 1999
For the year ended June 30:
Net income - as reported $2,712,144 $ 4,052,179
Net income - proforma 2,653,137 4,000,985
Basic earnings per share - as reported 0.22 0.33
Basic earnings per share - proforma 0.22 0.33
Diluted earnings per share - as reported 0.21 0.32
Diluted earnings per share - proforma 0.20 0.32
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:
2000 1999
Expected volatility 223 % 232 %
Risk-free interest rate 6.18 % 6.16 %
Expected term of options 5 years 5 years
Expected dividend yield 0% 0%
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<PAGE> 12
Information regarding the Company's stock option plan for the years ended
June 30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
2000 1999
-------------------------------- ------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE
----------------- -------------- ---------------- ------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 900,623 $ 0.82 921,649 $0.68
Granted 242,190 1.71 207,000 1.28
Forfeited (43,207) 1.29 (206,592) 0.68
Exercised (20,143) 0.58 (21,434) 0.44
--------- ------ --------
Outstanding at end of year 1,079,463 $ 1.01 900,623 $0.82
========= ========
Options exercisable at end of year 539,649 $ 0.81 361,154 $0.80
========= ========
Weighted average fair value of options
granting during year $ 0.45 $ 0.34
</TABLE>
<TABLE>
<CAPTION>
OUTSTANDING EXERCISABLE
------------------------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
CONTRACTUAL EXERCISE EXERCISE
OPTIONS LIFE (YEARS) PRICE OPTIONS PRICE
<S> <C> <C> <C> <C> <C>
Range of exercise price
.29 -.69 249,003 6.98 $ 0.40 151,543 $ 0.46
.71 - .80 267,280 8.04 0.72 148,801 0.72
.88 - 1.47 329,305 6.43 1.20 239,305 1.09
1.50 - 3.90 233,875 9.12 1.71
--------- -------
1,079,463 7.54 $ 1.01 539,649 $ 0.81
========= =======
</TABLE>
6. INCOME TAXES
Deferred income tax assets and liabilities are computed for differences
between the financial statement and tax basis of assets and liabilities
that will result in taxable or deductible amounts in the future based on
enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances
are established when necessary to reduce deferred tax assets to the amount
expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
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<PAGE> 13
Deferred taxes consist of the following:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
<S> <C> <C>
Current deferred tax asset:
Deferred revenue $ 333,011 $ 247,751
Accrued expenses 126,674 30,554
Reserves and allowances 114,163 20,655
State taxes 10,219
--------- ---------
Net current asset $ 584,067 $ 298,960
========= =========
Non-current deferred tax asset:
Net operating loss carryforward $ 815,977
Research and development credits $ 284,418 201,125
Alternative minimum tax credit 96,545 63,581
Fixed assets 35,274
--------- ---------
Total 416,237 1,080,683
Non-current deferred tax liability:
Deferred software development costs (500,059) (196,573)
--------- ---------
Net non-current deferred tax asset (liability) (83,822) 884,110
Less valuation allowance (609,114)
--------- ---------
Net non-current asset (liability) $ (83,822) $ 274,996
=========== =========
</TABLE>
The provision (benefit) for income taxes for the year ended June 30, 2000
and 1999 consists of the following:
<TABLE>
<CAPTION>
2000 1999
<S> <C> <C>
Current provision $ 509,116 $ 106,745
Deferred provision 682,825 1,439,028
-------- ---------
Total 1,191,941 1,545,773
Decrease in the valuation allowance (609,114) (2,012,984)
--------- ----------
Income tax provision (benefit) $ 582,827 $ (467,211)
========== ===========
</TABLE>
The primary differences between the statutory rate for federal income tax
and the effective income tax rate are the utilization of net operating
losses to offset current income and the change in the valuation allowance.
At June 30, 2000, the Company has utilized all available net operating
loss carryforwards for U.S. Federal tax purposes. Also at June 30, 2000,
for U.S. Federal tax purposes, the Company has research and development
credit carryforwards available to offset future income taxes of
approximately $284,000 which will begin to expire in 2009.
7. RECONCILIATION OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("CANADIAN GAAP AND U.S. GAAP")
These financial statements have been prepared in accordance with
accounting principles generally accepted in the United States.
- 12 -
<PAGE> 14
During the years ended June 30, 2000 and 1999, differences between
Canadian GAAP and U.S. GAAP arose as a result of depreciation. For U.S.
GAAP purposes, furniture and fixtures, equipment, leasehold improvements,
and computer equipment are depreciated over useful lives of seven, five,
two, and three years, respectively, using an accelerated method. For
Canadian GAAP purposes, furniture and fixtures, equipment, leasehold
improvements, and computer equipment are to be depreciated over useful
lives of five, three, two, and three years, respectively, using a
straight-line method. The difference in methodology results in a reported
U.S. GAAP net income in excess of Canadian GAAP of $68,240 and $4,446 for
the years ended June 30, 2000 and 1999, respectively. The difference does
not have a material effect on the earnings per share calculation for
either year.
8. SIGNIFICANT FOURTH QUARTER ADJUSTMENTS
The Company's fiscal 1999 results are inclusive of significant adjustments
recorded in the fourth quarter. In 1999, the Company reduced the deferred
income tax valuation allowance to $609,114 based on present and expected
future profitability of the Company (see Note 6). The effect of the
adjustment on income and related per share amount was $510,375, or $0.04
per share.
* * * * * *
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