Exhibit 99.1
(i) | Audited Balance Sheet as of December 31, 2004; |
MACRO COMMUNICATIONS, INC. | ||||
BALANCE SHEET | ||||
DECEMBER 31, 2004 | ||||
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash | $ | 66,922 | ||
Accounts Receivable | 11,670 | |||
Total Current Assets | 78,592 | |||
PROPERTY AND EQUIPMENT: | ||||
Office Furniture | 1,592 | |||
Equipment (Notes B and H) | 4,153,418 | |||
4,155,010 | ||||
Less Accumulated Depreciation (Note H) | 2,645,634 | |||
Net Property and Equipment | 1,509,376 | |||
TOTAL ASSETS | $ | 1,587,968 | ||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||
CURRENT LIABILITIES: | ||||
Accounts Payable (Note I) | $ | 2,152,568 | ||
Accrued Expenses | 19,624 | |||
Cost of Unused Time on Phone Cards (Note G) | 179,296 | |||
Loan from Stockholder (Note C) | 255,534 | |||
Obligations Under Capital Leases (Note D) | 173,759 | |||
Line of Credit (Note E) | 471,692 | |||
Total Current Liabilities | 3,252,473 | |||
COMMITMENT AND CONTINGENCIES (Note I) | ||||
STOCKHOLDERS' DEFICIT: | ||||
Common Stock - $.50 Par Value; 10,000 Shares Authorized; | ||||
1,000 Shares Issued and Outstanding | 500 | |||
Accumulated Deficit (Note H) | (1,665,005 | ) | ||
Total Stockholders' Deficit | (1,664,505 | ) | ||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 1,587,968 | ||
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITORS' REPORT |
-1-
(ii) | Audited Statement of Operation for the year ended December 31, 2004; |
MACRO COMMUNICATIONS, INC. | ||||
STATEMENT OF OPERATIONS | ||||
YEAR ENDED DECEMBER 31, 2004 | ||||
REVENUE (Note G) | $ | 11,872,727 | ||
COST OF SERVICE | 11,004,756 | |||
GROSS PROFIT | 867,971 | |||
OPERATING EXPENSES | 1,410,353 | |||
LOSS FROM OPERATIONS | (542,382 | ) | ||
OTHER EXPENSES: | ||||
Interest | (44,615 | ) | ||
Depreciation | (960,937 | ) | ||
Total Other Expenses | (1,005,552 | ) | ||
NET LOSS | $ | (1,547,934 | ) | |
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITORS' REPORT |
-2-
MACRO COMMUNICATIONS, INC. | ||||
SCHEDULE OF OPERATING EXPENSES | ||||
YEAR ENDED DECEMBER 31, 2004 | ||||
OPERATING EXPENSES: | ||||
Salaries | $ | 607,598 | ||
Payroll Taxes | 53,559 | |||
Accounting Fees | 20,367 | |||
Auto Expense | 423 | |||
Bad Debt | 47,757 | |||
Bank Charges | 8,817 | |||
Cable Services | 1,327 | |||
Commissions | 61,363 | |||
Computer Maintenance | 87,688 | |||
Consulting | 246,750 | |||
Equipment Rental | 17,235 | |||
Insurance | 12,998 | |||
License Fees | 54,040 | |||
Miscellaneous | 31,349 | |||
Rent | 123,260 | |||
Shipping | 14,960 | |||
Telephone | 18,908 | |||
Travel and Entertainment | 1,954 | |||
TOTAL OPERATING EXPENSES | $ | 1,410,353 | ||
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITORS' REPORT |
-3-
(iii) | Audited Statement of Cash Flow for the year ended December 31, 2004; |
MACRO COMMUNICATIONS, INC. | ||||
STATEMENT OF CASH FLOWS | ||||
YEAR ENDED DECEMBER 31, 2004 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net Loss | $ (1,547,934) | |||
Adjustments to Reconcile Net Loss to Net Cash | ||||
Used in Operating Activities: | ||||
Depreciation | 960,937 | |||
Decrease in: | ||||
Accounts Receivable | 434,696 | |||
Prepaid Expenses | 75,631 | |||
(Decrease) in: | ||||
Accounts Payable | (337,675 | ) | ||
Accrued Expenses | (11,197 | ) | ||
Cost of Unused Time on Phone Cards | (70,045 | ) | ||
Net Cash Used in Operating Activities | (495,587 | ) | ||
CASH FLOWS FROM INVESTING ACTIVITIES - | ||||
Purchases of Property and Equipment | (2,931 | ) | ||
Net Cash Used in Investing Activities | (2,931 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Increase in Loan from Stockholder | 55,534 | |||
Borrowings on Line of Credit | 471,692 | |||
Principal Payments on Obligations under Capital Leases | (169,689 | ) | ||
Net Cash Provided by Financing Activities | 357,537 | |||
NET DECREASE IN CASH | (140,981 | ) | ||
CASH - BEGINNING OF YEAR | 207,903 | |||
CASH - END OF YEAR | $ | 66,922 | ||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | ||||
Cash Paid During the Year for Interest | $ | 31,536 | ||
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITORS' REPORT |
-4-
(iv) | Audited Statement of Stockholder’s Deficit for the year ended December 31, 2004; |
MACRO COMMUNICATIONS, INC. | ||||||||||||||||
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT | ||||||||||||||||
YEAR ENDED DECEMBER 31, 2004 | ||||||||||||||||
Additional | ||||||||||||||||
Common Stock | Paid-in | Accumulated | ||||||||||||||
Shares | Par | Capital | Deficit | Total | ||||||||||||
BALANCE - DECEMBER 31, 2003 | ||||||||||||||||
AS PREVIOUSLY REPORTED | 1,000 | $ | 500 | $ | 1,170,000 | $ | (1,287,071 | ) | $ | (116,571 | ) | |||||
ADJUSTMENTS FOR | ||||||||||||||||
UNDERSTATEMENT OF | ||||||||||||||||
EQUIPMENT SWITCHES | ||||||||||||||||
(NOTE H) | - | - | (1,170,000 | ) | 1,170,000 | - | ||||||||||
BALANCE - DECEMBER 31, 2003 | ||||||||||||||||
AS RESTATED | 1,000 | 500 | - | (117,071 | ) | (116,571 | ) | |||||||||
NET LOSS | - | - | - | (1,547,934 | ) | (1,547,934 | ) | |||||||||
BALANCE - DECEMBER 31, 2004 | 1,000 | $ | 500 | $ | - | $ | (1,665,005 | ) | $ | (1,664,505 | ) | |||||
SEE ACCOMPANYING NOTES AND INDEPENDENT AUDITORS' REPORT |
-5-
(v) | Notes to the Audited Financial Statements. |
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Macro Communications, Inc. (the Company) was incorporated under the laws of the state of Georgia on January 26, 2001, as a company formed for profit. The Company’s principal activity is to provide long distance calling services via prepaid phone cards.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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.
Property and Equipment
Property and equipment are stated at cost and are depreciated using declining balance methods over the estimated useful lives of the assets. Items of property and equipment which are sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses thereon are reflected in income.
Revenue Recognition
Revenue on the sales of prepaid phone cards are recorded upon activation of the card or purchase of the calling service.
NOTE B - EQUIPMENT
Included in the accompanying balance sheet is equipment of $2,340,000 which is unsubstantiated by adequate documentation (Note H).
NOTE C - LOAN FROM STOCKHOLDER
The Company has a non-interest bearing demand note with its major stockholder.
-6-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE D - OBLIGATIONS UNDER CAPITAL LEASES
The Company is obligated under various equipment lease agreements through 2005. Total obligations under these leases as of December 31, 2004 are undetermined. Pursuant to Statement of Financial Accounting Standards No. 13 “Accounting for Leases”, capital leases should be recorded as an asset and obligation equal to the present value at the beginning of the lease term of the minimum payments due during the lease term. Various leases have been treated as operating leases and expensed when paid. Due to inadequate records, the Company is unable to determine the cumulative effect of the adjustment that would be necessary to reclass these leases from operating leases to capital leases.
NOTE E - LINE OF CREDIT
The line of credit with First Citizens Bank allows for a maximum outstanding indebtedness of $471,692. The line bears interest at 6.5% and expires May 24, 2006. The line is collateralized by equipment and guaranteed by the stockholders of the Company. The lending officer of the bank is related to the stockholders of the Company.
NOTE F - INCOME TAXES
The Company utilizes the method of accounting for income taxes pursuant to Statement of Financial Accounting Standards “Accounting for Income Taxes” (SFAS No. 109), which requires deferred income taxes to reflect the tax consequences of temporary differences between the assets and liabilities recognized for financial reporting purpose and such amounts recognized for tax purposes. The significant temporary differences of the Company relate to net operating loss carryforwards and depreciation.
As of December 31, 2004, the tax effect of the Company’s cumulative temporary differences, relating primarily to the future benefit of net operating loss carryforwards, approximates $1,021,000, and is offset by a valuation allowance of an equal amount. The valuation allowance is required to the extent that it is probable that a future tax benefit will not be realized.
As of December 31, 2004, the Company has net operating loss carryforwards available to offset future taxable income of approximately $2,418,000, which expire at various dates through 2024.
-7-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE G - RELATED PARTY TRANSACTIONS
Included in revenue are sales of approximating $7,055,000 to W.L. Petrey Wholesale Co., Inc., a company related by common ownership. As of December 31, 2004 Petrey had an inventory of approximately $425,000 in activated prepaid phone cards (that were purchased from the Company) and the Company has accrued approximately $178,000 in third party carrier charges against this inventory.
NOTE H - PRIOR PERIOD ADJUSTMENT
During 2004, the Company performed an equipment inventory and discovered various accounting errors related to two equipment switches that were purchased in 2001 and 2002, respectively. The switches had a cost basis of $1,170,000 each (Note B). The 2001 purchase was never recorded by the Company. The 2002 purchase was recorded with a corresponding entry to additional paid-in capital, and never depreciated. The Company determined that the appropriate accounting treatment for these errors was to treat them as an accounting error in 2004 and restate the beginning deficit. The cumulative net effect of recording the additional equipment switches and accumulated depreciation was $1,170,000.
NOTE I - COMMITMENT AND CONTINGENCIES
Commitment
The Company leases its office facilities under an operating lease that expires in November 2006. Future minimum lease payments due under this lease are as follows:
Rent expense for 2004 was $123,260.
-8-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2004
NOTE I - COMMITMENT AND CONTINGENCIES (Continued)
Contingencies:
Going Concern
As shown in the accompanying financial statements, the Company incurred a net loss of $1,547,934 and its liabilities exceed its assets by $1,664,505. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
Sale of Company
In February 2005, the Company was offered for sale under an offer agreement in the amount of $1,360,000, subject to various targets. The purchase will provide the investor with an 80% investment in the Company. The closing is expected to occur late in 2005.
Litigation
Included in accounts payable are various pending and threatened lawsuits by vendors for delinquent payments, the exposure of which is undetermined (see Note B). Management believes that the ultimate disposition of these matters will not have a material adverse effect on the operations or financial condition of the Company taken as a whole.
-9-
(vi) | Report of Independent Auditor; |
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Macro Communications, Inc.
Duluth, Georgia
We have audited the accompanying balance sheet of Macro Communications, Inc. as of December 31, 2004, and the related statements of operations and changes in stockholders’ deficit and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
Except as discussed in the following paragraphs, we conducted our audit 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 audit provides a reasonable basis for our opinion.
The Company has excluded from property and equipment and debt in the accompanying balance sheet certain lease obligations that, in our opinion, should be capitalized in order to conform with accounting principles generally accepted in the United States of America.
We were unable to confirm accounts payable to certain vendors, and were unable to satisfy ourselves as to the exposure of pending or threatened litigation, as described in Note I, through alternative procedures.
The Company does not have adequate documentation to substantiate the historical cost of $2,340,000 of equipment included in the accompanying balance sheet as described in Note B.
In our opinion, except for the effects of not capitalizing certain lease obligations as discussed previously and such adjustments, if any, as might have been determined to be necessary had we been able to confirm the accounts payable to certain vendors and substantiate equipment cost as discussed above, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Macro Communications, Inc. as of December 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note I to the financial statements, the Company’s significant operating loss and accumulated deficit raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Birnbrey, Minsk & Minsk LLC
Atlanta, Georgia
June 9, 2005
INDEPENDENT AUDITORS’ REPORT
ON SUPPLEMENTARY INFORMATION
To the Board of Directors
Macro Communications, Inc.
Duluth, Georgia
Our report on our audit of the basic financial statements of Macro Communications, Inc. for 2004 appears on page 1. That audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of operating expenses is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has not been subjected to the auditing procedures applied in the audit of the basic financial statements and accordingly, we express no opinion on it.
/s/ Birnbrey, Minsk & Minsk LLC
Atlanta, Georgia
June 9, 2005
-10-
(vii) | Unaudited Balance Sheet for the six months ended June 30, 2005; |
MACRO COMMUNICATIONS, INC. | ||||
BALANCE SHEET | ||||
JUNE 30, 2005 | ||||
ASSETS | ||||
CURRENT ASSETS: | ||||
Cash | $ | 28,466 | ||
Accounts Receivable | 7,999 | |||
Total Current Assets | 36,465 | |||
PROPERTY AND EQUIPMENT: | ||||
Office Furniture | 1,592 | |||
Equipment (Notes B, D and I) | 4,153,418 | |||
4,155,010 | ||||
Less Accumulated Depreciation | 3,126,103 | |||
Net Property and Equipment | 1,028,907 | |||
TOTAL ASSETS | $ | 1,065,372 | ||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||
CURRENT LIABILITIES: | ||||
Accounts Payable (Notes H and I) | $ | 2,372,354 | ||
Accrued Expenses | 50,772 | |||
Loan from Stockholder (Note C) | 321,134 | |||
Obligations Under Capital Lease (Notes B and D) | 84,703 | |||
Line of Credit (Note E) | 471,692 | |||
Advances (Note I) | 40,000 | |||
Total Current Liabilities | 3,340,655 | |||
COMMITMENT AND CONTINGENCIES (Note H) | ||||
STOCKHOLDERS' DEFICIT: | ||||
Common Stock - $.50 Par Value 10,000 Shares Authorized; | ||||
1,000 Shares Issued | 500 | |||
Accumulated Deficit | (2,275,783 | ) | ||
Total Stockholders' Deficit | (2,275,283 | ) | ||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 1,065,372 | ||
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REVIEW REPORT |
-11-
(viii) | Unaudited Statement of Operations and Deficit for the six months ended June 30, 2005; |
MACRO COMMUNICATIONS, INC. | ||||
STATEMENT OF OPERATIONS AND DEFICIT | ||||
FOR THE SIX MONTHS ENDED JUNE 30, 2005 | ||||
REVENUE (Note G) | $ | 4,774,684 | ||
COST OF SERVICE | (3,999,923 | ) | ||
GROSS PROFIT | 774,761 | |||
OPERATING EXPENSES | 881,985 | |||
LOSS FROM OPERATIONS | (107,224 | ) | ||
OTHER EXPENSES: | ||||
Interest Expense | (23,085 | ) | ||
Depreciation | (480,469 | ) | ||
Total Other Expenses | (503,554 | ) | ||
NET LOSS | (610,778 | ) | ||
DEFICIT - BEGINNING OF PERIOD | (1,665,005 | ) | ||
DEFICIT - END OF PERIOD | $ | (2,275,783 | ) | |
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REVIEW REPORT |
-12-
MACRO COMMUNICATIONS, INC. | ||||
SCHEDULE OF OPERATING EXPENSES | ||||
SIX MONTHS ENDED JUNE 30, 2005 | ||||
OPERATING EXPENSES: | ||||
Salaries | $ | 260,387 | ||
Payroll Taxes | 39,012 | |||
Accounting Fees | 1,141 | |||
Auto Expense | 2,838 | |||
Bad Debt | 50,136 | |||
Bank Charges | 1,480 | |||
Cable Services | 0 | |||
Commissions | 7,267 | |||
Computer Maintenance | 10,898 | |||
Consulting | 174,939 | |||
Insurance | 8,333 | |||
Equipment Rental | 9,451 | |||
Legal Fees | 25,155 | |||
License Fees | 8,008 | |||
Miscellaneous | 11,479 | |||
Rent | 59,151 | |||
Postage | 20,567 | |||
Printing | 77,815 | |||
Shipping | 11,954 | |||
Telephone | 80,535 | |||
Travel and Entertainment | 21,439 | |||
TOTAL OPERATING EXPENSES | $ | 881,985 | ||
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REVIEW REPORT |
-13-
(ix) | Unaudited Statement of Cash Flow for the six months ended June 30, 2005; |
MACRO COMMUNICATIONS, INC. | ||||
STATEMENT OF CASH FLOWS | ||||
FOR THE SIX MONTHS ENDED JUNE 30, 2005 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net Loss | $ | (610,778 | ) | |
Adjustments to Reconcile Net Loss to Net Cash | ||||
Provided by Operating Activities: | ||||
Depreciation | 480,469 | |||
Decrease in: | ||||
Accounts Receivable | 3,671 | |||
Increase (Decrease) in: | ||||
Accounts Payable | 219,786 | |||
Accrued Expenses | 31,148 | |||
Cost of Unused Time on Phone Cards | (179,296 | ) | ||
Net Cash Used in Operating Activities | (55,000 | ) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Increse in Loan from Stockholder | 65,600 | |||
Advances | 40,000 | |||
Principal Payments on Capital Lease Obligations | (89,056 | ) | ||
Net Cash Provided by Financing Actvities | 16,544 | |||
NET DECREASE IN CASH | (38,456 | ) | ||
CASH - BEGINNING OF PERIOD | 66,922 | |||
CASH - END OF PERIOD | $ | 28,466 | ||
SEE ACCOMPANYING NOTES AND ACCOUNTANTS' REVIEW REPORT |
-14-
(x) | Notes to Unaudited Financial Statements; |
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Macro Communications, Inc. (the Company) was incorporated under the laws of the state of Georgia on January 26, 2001, as a company formed for profit. The Company’s principal activity is to provide long distance calling services via prepaid phone cards.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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.
Property and Equipment
Property and equipment are stated at cost and are depreciated using declining balance methods over the estimated useful lives of the assets. Items of property and equipment which are sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses thereon are reflected in income.
Revenue Recognition
Revenue on the sales of prepaid phone cards are recorded upon activation of the card or purchase of the calling service.
NOTE B - EQUIPMENT
Included in the accompanying balance sheet is equipment of $2,340,000 million which is unsubstantiated by adequate documentation.
NOTE C - LOAN FROM STOCKHOLDER
The Company has a non interest bearing demand note with its major stockholder.
-15-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE D - OBLIGATION UNDER CAPITAL LEASES
The Company is obligated under various equipment lease agreements. Total obligations under these leases as of June 30, 2005 are undetermined. Pursuant to Statement of Financial Accounting Standards No. 13 “Accounting for Leases”, capital leases should be recorded as an asset and an obligation equal to the present value at the beginning of the lease term of the minimum payments due during the lease term. Various leases have been treated as operating leases and expensed when paid. Due to inadequate records, the Company is unable to determine the cumulative effect of the adjustment that would be necessary to reclass these leases from operating leases to capital leases.
NOTE E - LINE OF CREDIT
The line of credit with First Citizens Bank allows for a maximum outstanding indebtedness of $471,692. The line bears interest at 6.5% and expires May 24, 2006. The line is collateralized by equipment and guaranteed by the stockholders of the Company. The lending officer of the bank is related to the stockholders of the Company.
NOTE F - INCOME TAXES
The Company utilizes the method of accounting for income taxes pursuant to Statement of Financial Accounting Standards “Accounting for Income Taxes” (SFAS No. 109), which requires deferred income taxes to reflect the tax consequences of temporary differences between the assets and liabilities recognized for financial reporting purpose and such amounts recognized for tax purposes. The significant temporary differences of the Company relate to net operating loss carryforwards and depreciation.
As of June 30, 2005, the tax effect of the Company’s cumulative temporary differences, relating primarily to the future benefit of net operating loss carryforwards is estimated at $1,240,481, and is offset by a valuation allowance of an equal amount. The valuation allowance is required to the extent that it is probable that a future tax benefit will not be realized.
-16-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE F - INCOME TAXES (Continued)
As of June 30, 2005, the Company has net operating loss carryforwards available to offset future taxable income of approximately $3,028,712, which expire at various dates through 2025.
NOTE G - RELATED PARTY TRANSACTIONS
Included in revenue are sales approximating $2,304,644 to W.L. Petrey Wholesale Co., Inc., a company related by common ownership.
NOTE H - COMMITMENT AND CONTINGENCIES
Commitment
The Company leases its office facilities under an operating lease that expires in November, 2006. Future minimum lease payments due under this lease are as follows:
Rent expense for the six months ending June 30, 2005 was $59,151.39.
Contingencies:
Going Concern
As shown in the accompanying financial statements, the Company incurred a net loss of $610,778 and its liabilities exceed its assets by $2,170,032. The financial statements do not include any adjustment that might be necessary if the Company is unable to continue as a going concern.
-17-
MACRO COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005
NOTE H - COMMITMENT AND CONTINGENCIES (Continued)
Litigation
Accounts payable consist of various pending and threatened litigation by vendors for delinquent payments the exposure of which is undetermined. Management believes that the ultimate disposition of these matters will not have a material adverse effect on operations or financial condition taken as a whole.
NOTE I - SUBSEQUENT EVENTS
Sale of Company
On September 13, 2005, Jupiter Global Holdings Corp. (“Jupiter”) entered into a definitive Agreement and Plan of Acquisition for the purchase of 80% of the outstanding common stock of the company for a total consideration of $2,000,000. An initial purchase consideration of $70,000 ($40,000 was recieved prior to June 30, 2005) is to be paid by Jupiter to Macro prior to the signing of the agreement with a subsequent issuance of a Promissory Note for $1,930,000. The Promissory Note shall be paid in monthly installments of varying amounts through July 2006 bearing interest of 8%. As of September 22, 2005, the above-referenced Agreement and Plan of acquisition was closed and the transaction described in the Agreement is now deemed to be consummated, binding and enforceable in accordance with the terms of the Agreement and Plan of Acquisition.
Forbearance Agreement
Included on the balance sheet as of June 30, 2005, is equipment with a net book value of $745,000 purchased from a major vendor of the Company and a corresponding liability of $619,973 payable to the same vendor. On June 21, 2005, the Company entered into a Forbearance agreement with this vendor whereby the vendor agreed to forgive part of the liability contingent on, (a) the Company shall make payments totaling $155,000 through June 30, 2006, and (b) the equipment shall be returned the later of July 7, 2005, or when the vendor supplies the Company with serial numbers for the specific equipment to be returned. The equipment was returned on August 28, 2005, as per the terms of the agreement, and as of October 21, 2005, the Company made payments totalling $67,500 against this agreement.