UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
Amendment No. 2
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 9, 2007
WIFIMED HOLDINGS COMPANY, INC. |
(Exact name of registrant as specified in its charter) |
Nevada | 0-49707 | 58-2412118 | ||
(State or other jurisdiction | (Commission File Number) | (IRS Employer |
2000 River Edge Parkway, | 30328 | |
(Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: 770-919-7220
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 - Completion of Acquisition or Disposition of Assets
Acquisition of Assets of JMJ Technologies, Inc.
On October 9, 2007, WiFiMed Holdings Company, Inc. (the "Company") filed a Current Report on Form 8-K (the "Original 8-K") to report that it had substantially completed the acquisition of certain assets of JMJ Technologies, Inc. On January 10, 2008, the Company filed an amended Form 8-K (the "First Amended 8-K"), which omitted the unaudited JMJ financial statements as of and for the nine months ended September 30, 2006 and omitted pro forma financial information. The Original 8-K and the First Amended 8-K are incorporated herein by this reference.
This Amendment No. 2 is being filed to include the previously omitted unaudited financial statements of JMJ Technologies, Inc., as of and for the nine months ended September 30, 2006 and pro forma financial statements required by Item 9.01(b) of Form 8-K.
Item 9.01 - Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
The audited financial statements of JMJ Technologies, Inc. as of December 31, 2006 and December 31, 2005; and for the years ended December 31, 2006 and December 31, 2005; and the unaudited financial statements as of September 30, 2007 and September 30, 2006 and for the nine-month periods ending September 30, 2007 and September 30, 2006 appear following this Current Report on Form 8-K/A and are hereby incorporated by reference herein.
(b) Pro Forma Financial Information
Pro forma unaudited condensed consolidated balance sheets and statements of operations as of and for the fiscal year ended December 31, 2006 and the nine month interim period ended September 30, 2007 appear following this Current Report on Form 8-K/A and are hereby incorporated by reference herein.
(d) Exhibits
Exhibit | Description | |||
* | 2.1 | Asset Purchase Agreement, dated September 21, 2007, by and among JMJ Technologies, Inc., WiFiMed Holdings Company, Inc., and EncounterPRO Healthcare Resources, Inc. | ||
* Incorporated by reference to Current Report on Form 8-K filed by the Registrant on October 9, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: | February 5, 2008 | |
WiFiMed Holdings Company, Inc. | ||
Registrant | ||
By: | /s/ Gregory Vacca | |
President |
JMJ TECHNOLOGIES, INC.
AUDITED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2005
CONTENTS
Independent Auditor's Report | 2 | |||
| ||||
Financial Statements |
| |||
| ||||
Balance Sheet | 3 | |||
| ||||
Statement of Operations and Accumulated Deficit | 4 | |||
| ||||
Statement of Cash Flows | 5 | |||
Notes to Financial Statements | 6 - 14 |
Powers Farmer & Co., P.C.
Certified Public Accountants
Suite 1370
900 Circle 75 Parkway
Atlanta, Georgia 30339
Tel (770) 953-6866 Fax (770) 952-6921
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
JMJ Technologies, Inc.
We have audited the accompanying balance sheet of JMJ Technologies, Inc. as of December 31, 2005, and the related statements of operations, accumulated 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.
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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JMJ Technologies, Inc. as of December 31, 2005, 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. The Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Powers Farmer & Co., P.C.
Atlanta, Georgia
July 27, 2006
JMJ TECHNOLOGIES, INC. | |||
BALANCE SHEET | |||
December 31, 2005 | |||
ASSETS | |||
CURRENT ASSETS: | |||
Cash | $ | 94,000 | |
Accounts receivable - net | 317,989 | ||
Total current assets | 411,989 | ||
PROPERTY AND EQUIPMENT - net | 44,692 | ||
OTHER ASSETS: | |||
Deposit | 15,223 | ||
Total other assets | 15,223 | ||
TOTAL | $ | 471,904 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||
CURRENT LIABILITIES: | |||
Accounts payable | $ | 54,051 | |
Accrued rent | 6,485 | ||
Accrued salaries | 62,536 | ||
Accrued vacation | 37,210 | ||
Customer prepayments | 331,182 | ||
Credit cards and revolving lines of credit | 146,052 | ||
Payroll taxes payable | 1,051,726 | ||
Sales tax payable | 192,607 | ||
Notes payable | 447,107 | ||
Shareholders' loans | 154,105 | ||
Total current liabilities | 2,483,061 | ||
SHAREHOLDERS' DEFICIT: | |||
Common stock, $.01 par value, | |||
10,000,000 shares authorized, 6,914,064 shares issued | 69,141 | ||
Additional paid-in capital | 1,653,800 | ||
Accumulated deficit | (3,734,098 | ) | |
Treasury stock, 760,000 shares, at cost | 0 | ||
Total shareholders' deficit | (2,011,157 | ) | |
TOTAL | $ | 471,904 | |
JMJ TECHNOLOGIES, INC. | |||
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT | |||
For the Year Ended December 31, 2005 | |||
REVENUES | $ | 2,500,590 | |
COST OF REVENUES | 733,162 | ||
GROSS PROFIT | 1,767,428 | ||
GENERAL AND ADMINISTRATIVE EXPENSES | |||
Payroll expense | 1,495,604 | ||
Rent expense | 192,384 | ||
Penalties | 110,303 | ||
Employee benefits | 110,156 | ||
Professional fees | 59,436 | ||
Utilities and communications | 53,217 | ||
Marketing and advertising | 51,067 | ||
Bad debt expense | 22,814 | ||
Depreciation and amortization | 22,612 | ||
Office supplies | 20,715 | ||
Postage and shipping | 18,918 | ||
Insurance | 10,187 | ||
Dues and subscriptions | 6,976 | ||
Travel and entertainment | 2,146 | ||
Lease - van | 1,471 | ||
Other taxes | 573 | ||
Total general and administrative expenses | 2,178,579 | ||
LOSS FROM OPERATIONS | (411,151 | ) | |
OTHER INCOME (EXPENSE) | |||
Gain from sale of property and equipment | 6,762 | ||
Interest expense | (148,276 | ) | |
Total other income (expense) | (141,514 | ) | |
NET LOSS | (552,665 | ) | |
ACCUMULATED DEFICIT, BEGINNING OF YEAR | (3,181,433 | ) | |
ACCUMULATED DEFICIT, END OF YEAR | $ | (3,734,098 | ) |
JMJ TECHNOLOGIES, INC. | ||||
STATEMENT OF CASH FLOWS | ||||
For the Year Ended December 31, 2005 | ||||
OPERATING ACTIVITIES: | ||||
Net loss | $ | (552,665 | ) | |
Adjustments to reconcile net income to net cash | ||||
provided by operating activities: | ||||
Depreciation and amortization | 22,612 | |||
Gain on disposal of property and equipment | (6,762 | ) | ||
Changes in operating assets and liabilities: | ||||
Accounts receivable | (159,247 | ) | ||
Accounts payable | (91,381 | ) | ||
Accrued rent | (12,971 | ) | ||
Accrued salaries | 12,409 | |||
Accrued vacation | 8,412 | |||
Customer prepayments | 62,395 | |||
Payroll taxes payable | 543,546 | |||
Sales tax payable | 14,386 | |||
NET CASH FROM OPERATING ACTIVITIES | (159,266 | ) | ||
INVESTING ACTIVITIES: | ||||
Purchase of property and equipment | (4,084 | ) | ||
Proceeds from the sale of property and equipment | 6,922 | |||
NET CASH USED BY INVESTING ACTIVITIES | 2,838 | |||
FINANCING ACTIVITIES: | ||||
Net payments on shareholder loans | (45,369 | ) | ||
Net payments on credit cards and lines of credit | (10,503 | ) | ||
Payments on loans payable short-term | (21,778 | ) | ||
Net borrowings on line of credit | 247,584 | |||
Proceeds from issuance of stock | 5,469 | |||
NET CASH USED BY FINANCING ACTIVITIES | 175,403 | |||
NET INCREASE IN CASH AND EQUIVALENTS | 18,975 | |||
CASH AND EQUIVALENTS, BEGINNING OF YEAR | 75,025 | |||
CASH AND EQUIVALENTS, END OF YEAR | $ | 94,000 | ||
JMJ TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2005
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
JMJ Technologies, Inc. (the "Company") provides services to medical clients and resale suppliers throughout the United States. The primary service provided is the development, installation and customization of medical practice management software. This was the Company's eleventh year of operations.
B. Estimates
The preparation of 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, 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.
C. Revenues and Cost of Revenues Recognition
The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2 as amended by SOP 98-9. Revenue from software license agreements is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among elements based on the relative fair value of the elements.
License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence or fair value does not exist for all elements of a license agreement and post customer support (PCS) is the only undelivered element, then all revenue from the license arrangement is recognized ratably over the term of the agreement as license revenue. If evidence or fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.
Cost of license revenue, training, and support includes labor, facilities, and equipment costs.
D. Concentrations of Credit Risks
The Company grants credit to its customers during the normal course of business and performs ongoing credit evaluations of its customers' financial condition. The Company does not believe that it is exposed to any significant credit risk in connection with the extension of credit to its customers.
The Company maintains its cash balances at various financial institutions in Atlanta, Georgia. The balances at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2005, the Company did not have any uninsured cash balances.
E. Allowance for Bad Debts
The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in the collection of all receivables. The estimated losses are based on managements' evaluation of outstanding accounts receivables. Allowance for bad debts was $116,491 at December 31, 2005.
F. Property and Equipment
Property and equipment are recorded at cost. When assets are retired or otherwise disposed of, the related cost and the accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in the statement of operations and retained earnings/deficit. Depreciation and amortization for all classes of property and equipment are determined using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Life | ||
Furniture and fixtures | 10 years | |
Machinery and equipment | 5 years | |
Vehicles | 5 years |
G. Income Taxes
The Company recognizes income and expenses on the accrual method for financial reporting purposes and for income tax reporting purposes.
The effect of temporary differences giving rise to deferred tax assets are as follows:
Deferred tax assets: | ||||||
Net operating loss carry forwards | $ | 624,271 | ||||
Deferred tax liabilities: | ||||||
Excess of financial statement over tax basis | ||||||
of property and equipment | (8,741 | ) |
| |||
Valuation allowance for deferred tax assets | (615,530 | ) | ||||
Net deferred tax assets | $ | 0 |
| |||
There are no deferred tax assets listed in these financial statements. SFAS No. 109 specifies that deferred tax assets are to be reduced by valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to the Company's current economic condition, the valuation allowance has eliminated the deferred tax assets. The Company will continue to assess the valuation allowance and to the extent it is determined that such allowance is no longer required; the tax benefit of the remaining net deferred tax assets will be recognized in the future.
The Company has net operating losses to offset future taxable income of approximately $2,013,781. The carryover periods to utilize the net operating losses will expire between the years 2020 to 2025.
H. Cash Flow Information
The Company considers for purposes of the statement of cash flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt investments with original maturities of three months or less.
Net cash used by operating activities include cash payments for interest of $83,405.
2. COMMON STOCK AND TREASURY STOCK
The Company has 10,000,000 shares of $.01 par value common stock authorized, with 6,914,064 shares issued and 6,154,064 shares outstanding. On May 31, 2005 the Company exercised its rights under the shareholders' agreement and acquired 760,000 shares of common stock from a major shareholder. Under the terms of the shareholders' agreement the Company was not required to make any payment in consideration for acquisition of the 760,000 shares from the shareholder. The stock is held in treasury and recorded using the cost method.
3. RELATED PARTY TRANSACTIONS
The Company has the following loans from shareholders:
An unsecured demand loan with no stated rate of interest. | $ 87,029 | ||||
An unsecured demand loan with no stated rate of interest. | 1,340 | ||||
Exclusive use of a shareholder's credit card; total credit line | |||||
available is $12,000; and the annual percentage rate | |||||
of interest is 29.99%. | 10,997 | ||||
Exclusive use of a shareholder's credit card; total credit line | |||||
available is $5,400; and the annual percentage rate | |||||
of interest is 22.00%. | 3,604 | ||||
Exclusive use of a shareholder's line of credit; total credit line | |||||
available is $15,000; and the annual percentage rate | |||||
of interest is 28.90%. | 13,426 | ||||
Exclusive use of a shareholder's line of credit; total credit line | |||||
available is $0; and the annual percentage rate | |||||
of interest is 26.99%. | 865 | ||||
Exclusive use of a shareholder's line of credit; total credit line | |||||
available is $15,000; and the annual percentage rate | |||||
of interest is 26.898%. |
| 13,529 | |||
Exclusive use of a shareholder's line of credit; total credit line | |||||
available is $15,000; and the annual percentage rate | |||||
of interest is 26.898%. |
| 6,764 | |||
Exclusive use of a shareholder's credit card; total credit line | |||||
available is $0.00; and the annual percentage rate | |||||
of interest is 28.99%. | 11,986 | ||||
Exclusive use of a shareholder's credit card; total credit line | |||||
available is $6,600; and the annual percentage rate | |||||
of interest is 29.99%. | 4,565 | ||||
Total | $154,105 |
| |||
The Company leases a vehicle from a shareholder on a month to month basis. The rent expense from this lease totaled $1,471 for the year ending December 31, 2005.
4. NOTES PAYABLE
Notes payable consisted of the following at December 31, 2005:
Note payable to a financial institution is a $250,000 revolving line of | |||||
credit. Interest is payable monthly at an annual rate of prime | |||||
plus 1.50%. On December 31, 2005 the interest rate on this loan | |||||
was 8.75%. The loan is collateralized by the Company's accounts | |||||
receivable, property and equipment and the personal guaranties | |||||
of three officer/shareholders and real estate owned by an | |||||
officer/shareholder. | $ | 247,584 | |||
Note payable to an individual. Interest is accrued at the rate of | |||||
of $2.00 per day. The loan balance reflects principal of $5,000 | |||||
and accrued interest of $2,269. | 7,269 | ||||
An undocumented loan from an individual. Interest is accrued at | |||||
the rate of 10% annually. The loan balance reflects principal of | |||||
$31,000 and accrued interest of $1,791. | 32,791 | ||||
Note payable to an individual. Interest is accrued at the rate of | |||||
10% annually. The loan balance reflects principal of $20,000 | |||||
and accrued interest of $7,193. | 27,193 | ||||
An undocumented loan from an individual. Interest is accrued at | |||||
the rate of 10% annually. The loan balance reflects principal of | |||||
$10,000 and accrued interest of $702. | 10,702 | ||||
An undocumented loan from an individual. Interest is accrued at | |||||
the rate of 10% annually. The loan reflects principal of $12,000 and | |||||
accrued interest of $4,558. |
| 16,774 | |||
Note payable to an individual. Interest is accrued at the rate of | |||||
10% annually. The loan balance reflects principal of $75,000 and | |||||
accrued interest of $19,875. |
| 94,875 | |||
An undocumented loan from an individual. Interest is accrued at | |||||
the rate of 10% annually. The loan balance reflects principal of | |||||
$9,038 and accrued interest of $881. | 9,919 | ||||
Total | $ | 447,107 |
| ||
5. CREDIT CARDS AND REVOLVING LINES OF CREDIT
Credit card from a financial institution; credit limit is $15,500; | |||||
interest rate on purchases is 27.37%; and interest rate on | |||||
cash advances is 29.37%. | 12,729 | ||||
Credit card from a financial institution; there are no preset | |||||
credit limits; and balances are required to be paid in full. | 30,748 | ||||
Credit card from a financial institution; credit limit is $15,000; | |||||
and interest rate is 28.99%. | 1,497 | ||||
Credit card from a financial institution; credit limit is $1,900; | |||||
interest rate is 18.30%; and the ending balance reflects an | |||||
overpayment. | (68 | ) |
| ||
Credit card from a financial institution; credit limit is $12,000; | |||||
and interest rate is 28.99%. | 11,256 | ||||
�� | |||||
Credit card from a financial institution; credit limit is $8,000; | |||||
and interest rate is 16.99%. | 5,845 | ||||
Credit card from a financial institution; credit limit is $5,000; | |||||
and interest rate is 12.29%. | 2,665 | ||||
Revolving line of credit from a corporation to be utilized for | |||||
purchases of computers and related equipment; credit limit | |||||
is $0.00; and interest rate is 12.99% |
| 18,807 | |||
Revolving line of credit from a corporation to be utilized for | |||||
purchases of computers and related equipment; credit limit | |||||
is $25,000; and interest rate is 12.99%. | 21,239 | ||||
Credit card from a financial institution; credit limit is $9,400; | |||||
and interest rate is 23.98%. | 8,987 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $2,000; and | |||||
interest rate is 12.00%. | 765 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $4,000; and | |||||
interest rate is 20.80%. | 3,395 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $5,500; and | |||||
interest rate is 21.15%. | 5,052 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $5,500; and | |||||
interest rate is 21.15%. | 5,058 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $1,500; and | |||||
interest rate is 17.65%. | 916 | ||||
Credit card from a corporation to be utilized for purchases at | |||||
the corporation's retail locations; credit limit is $8,900; and | |||||
interest rate is 18.30%. | 7,560 | ||||
Credit card from a financial institution; credit limit is $0.00; and | |||||
interest rate is 14.65%. | 1,668 | ||||
Credit card from a financial institution; credit limit is $5,000; and | |||||
interest rate is 13.49% | 4,617 | ||||
Credit card from a financial institution; credit limit is $0.00; and | |||||
interest rate is 12.49%. | 1,674 | ||||
Revolving line of credit from a corporation to be utilized for | |||||
purchases of computers and related equipment; credit limit is | |||||
$0.00; and interest rate is 12.99%. |
| 692 | |||
Revolving line of credit from a corporation to be utilized for | |||||
purchases of computers and related equipment; credit limit is | |||||
$0.00; and interest rate is 12.99%. |
| 949 | |||
Total | $ | 146,051 | |||
6. ACCOUNTS RECEIVABLE - NET
Accounts receivable consisted of the following at December 31, 2005:
Accounts receivable | $ | 434,480 |
| |||||
Less allowance for doubtful accounts |
| 116,491 | ||||||
Accounts receivable - net |
| $ | 317,989 | |||||
7. PROPERTY AND EQUIPMENT - NET
Property and equipment consisted of the following at December 31, 2005:
Computer equipment | $ | 64,037 | ||||||||
Furniture and fixtures | 46,152 | |||||||||
Software | 38,554 |
| ||||||||
Total | 148,743 |
| ||||||||
Less accumulated depreciation and amortization |
| 104,051 | ||||||||
Property and equipment - net | $ | 44,692 | ||||||||
8. COMMITMENTS
The Company subleases office space under a non-cancellable operating lease agreement which terminates June 30, 2006. Future minimum lease payments are due as follows:
Year ending December 31, 2006 | $ 91,335 | ||
9. CONTINGENCIES
The Company was a defendant in 2005 and early 2006 in two related lawsuits seeking disclosure of financial information. One lawsuit was brought by a shareholder and the other by a former shareholder. Both lawsuits were voluntarily dismissed by the plaintiffs without prejudice in February of 2006.
The Company is aware of a former shareholder claiming that the acquisition of all his shares under provisions of the shareholders' agreement on May 31, 2005 was wrongful. The shareholder has not initiated a lawsuit as of the audit report date. No estimate has been reflected in the financial statements for this possible action.
10. STOCK OPTION PLAN
In 1998, the Company instituted a stock option plan for officers, employees, directors, advisors and consultants. Incentive stock options may be awarded to all employees of the Company who owns less than 10% of the outstanding common stock. The exercise price of an incentive stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Incentive stock options can not be exercised until the employee has completed a year of service with the Company.
Non-qualified stock options may be awarded to non-employees who own less than 10% of the outstanding common stock of the Company. The exercise price of a non-qualified stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Non-qualified stock options can not be exercised until the non-employee has maintained a one year relationship with the Company.
The maximum number of shares of common stock that can be issued under the plan is 3,000,000. As of December 31, 2005, 1,654,530 shares of common stock had been issued under the stock option plan.
No compensation expense was recorded on the income statement. There was no difference between the fair market value of the stock on the date the option was exercised and the exercise price.
Total stock options accrued, vested and unexpired as of 12/31/04 |
| 1,151,680 | |||||
Stock options exercised in 2005 | (546,898 | ) | |||||
Stock options that expired during 2005 | (57,717 | ) | |||||
Stock options that accrued and vested during 2005 |
| 253,156 | |||||
Total stock options accrued, vested and unexpired as of 12/31/05 |
| 800,221 | |||||
Effective June 30, 2006, no additional options will be issued under the stock option plan.
11. GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net loss of $552,665 during the year ended December 31, 2005, and as of that date the Company's current liabilities exceeded its current assets by $2,011,157. These factors raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to increase sales and reduce expenses.
Management of the Company believes that the following will assist the Company in overcoming the going concern issues:
The Company's lease for office space expired on June 30, 2006. The Company moved to new office space on June 29, 2006. The new lease is for thirty-eight months beginning July 1, 2006 and ending August 31, 2009. The new lease reduces the monthly office lease payment by approximately $7,000 and results in annual savings of approximately $84,000.
Maintenance fees attributed to systems installed during 2005 will produce significant increases in annual recurring revenue. In addition management anticipates an acceleration of sales to existing customers and enhanced sales to new customers as a consequence of new product offerings, including lab interfaces and prescription services that will contain adverse drug event warnings and electronic prescriptions. It is anticipated the Company's EncounterPRO® EHR software will receive certification from the Certification Commission for Healthcare Information Technology (CCHIT) in 2006.
Finally, management believes that the increased interest in electronic health records by government, health insurance companies, health care providers and patients will expand the market opportunities for the Company's products. The Company believes that these factors will provide greater financial stability for the Company in 2006 and thereafter.
12. SUBSEQUENT EVENTS
On June 28, 2006 the management of the Company accepted a letter of intent for the acquisition of all the outstanding stock of JMJ Technologies, Inc. by a publicly traded company. The acquisition will be accomplished through the utilization of a tax-free merger.
In March of 2006 the Company hired a new president. If his contract is terminated prior to its end, he is entitled to receive a severance payment that will equal two years of compensation. Upon signing his contract the president received 250,000 share of the Company's stock. If the Company is sold, he is entitled to receive 250,000 shares of stock. An additional 250,000 can be awarded if the sales price of the Company equaled or exceeded $1 per share.
JMJ TECHNOLOGIES, INC.
AUDITED FINANCIAL STATEMENTS
For the Year Ended December 31, 2006
Independent Auditor's Report | 2 | |||
| ||||
Financial Statements |
| |||
| ||||
Balance Sheet | 3 | |||
| ||||
Statement of Operations | 4 | |||
Statement of Change in Shareholders' Deficit | 5 | |||
| ||||
Statement of Cash Flows | 6 | |||
Notes to Financial Statements | 7 - 17 |
Powers Farmer & Co., P.C.
Certified Public Accountants
Suite 1370
900 Circle 75 Parkway
Atlanta, Georgia 30339
Tel (770) 953-6866 Fax (770) 952-6921
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
JMJ Technologies, Inc.
We have audited the accompanying balance sheet of JMJ Technologies, Inc. as of December 31, 2006, and the related statements of operations, changes in shareholders' 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.
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.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of JMJ Technologies, Inc. as of December 31, 2006 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. The Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 12. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Powers Farmer & Co., P.C.
Atlanta, Georgia
January 7, 2008
JMJ TECHNOLOGIES, INC. | ||||
BALANCE SHEET | ||||
December 31, 2006 | ||||
ASSETS | ||||
CURRENT ASSETS: | ||||
Accounts receivable - net | $ | 260,186 | ||
Total current assets | 260,186 | |||
PROPERTY AND EQUIPMENT - net | 18,117 | |||
OTHER ASSETS: | ||||
Deposit | 9,481 | |||
Total other assets | 9,481 | |||
TOTAL | $ | 287,784 | ||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||
CURRENT LIABILITIES: | ||||
Accounts payable | 269,217 | |||
Bank overdraft | 25,070 | |||
Accrued rent | 8,982 | |||
Accrued salaries | 49,430 | |||
Accrued vacation | 45,320 | |||
Customer prepayments | 453,159 | |||
Credit cards and revolving lines of credit | 189,792 | |||
Payroll taxes payable | 1,116,226 | |||
Sales tax payable | 142,779 | |||
Notes payable | 628,119 | |||
Notes payable officer | 69,158 | |||
Shareholder loans | 146,613 | |||
Total current liabilities | 3,143,865 | |||
LONG-TERM LIABILITIES: | ||||
Accrued rent | 14,969 | |||
Total long-term liabilities | 14,969 | |||
SHAREHOLDERS' DEFICIT: | ||||
Common stock, $.01 par value; 10,000,000 shares | ||||
authorized; 7,518,043 shares issued and outstanding | 75,180 | |||
Additional paid-in capital | 1,653,800 | |||
Accumulated deficit | (4,600,030 | ) | ||
Total shareholders' deficit | (2,871,050 | ) | ||
TOTAL | $ | 287,784 | ||
JMJ TECHNOLOGIES, INC. | |||
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT | |||
For the Year Ended December 31, 2006 | |||
REVENUES | $ | 2,134,715 | |
COST OF REVENUES | 682,941 | ||
GROSS PROFIT | 1,451,774 | ||
GENERAL AND ADMINISTRATIVE EXPENSES | |||
Payroll expense | 1,428,094 | ||
Rent expense | 128,729 | ||
Employee benefits | 121,072 | ||
Penalties | 88,803 | ||
Bad debt expense | 80,590 | ||
Travel and entertainment | 64,614 | ||
Professional fees | 58,316 | ||
Utilities and communications | 43,467 | ||
Conference and tradeshows | 38,564 | ||
Dues and subscriptions | 33,490 | ||
Office supplies | 27,395 | ||
Postage and shipping | 18,243 | ||
Depreciation and amortization | 14,356 | ||
Bank service charges | 11,666 | ||
Insurance | 7,730 | ||
Education and training | 2,126 | ||
Lease - van | 3,805 | ||
Other taxes | 928 | ||
Total general and administrative expenses | 2,171,988 | ||
LOSS FROM OPERATIONS | (720,214 | ) | |
OTHER INCOME (EXPENSE) | |||
Other income - Sales tax amnesty relief | 67,343 | ||
Loss from disposal of property and equipment | (15,692 | ) | |
Interest expense | (197,369 | ) | |
Total other income (expense) | (145,718 | ) | |
NET LOSS | $ | (865,932 | ) |
JMJ TECHNOLOGIES, INC. | ||||||||||||||
STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT | ||||||||||||||
For the Year Ended December 31, 2006 | ||||||||||||||
COMMON STOCK | ADDITIONAL PAID-IN CAPITAL | ACCUMULATED DEFICIT | TOTAL | |||||||||||
Balance at December 31, 2005 | $ | 69,141 | $ | 1,653,800 | $ | (3,734,098 | ) | $ | (2,011,157 | ) | ||||
Issuance of common stock | $ | 6,039 | - | - | $ | 6,039 | ||||||||
Net Loss | - | - | $ | (865,932 | ) | $ | (865,932 | ) | ||||||
Balance at December 31, 2006 | $ | 75,180 | $ | 1,653,800 | $ | (4,600,030 | ) | $ | (2,871,050 | ) | ||||
JMJ TECHNOLOGIES, INC. | |||
STATEMENT OF CASH FLOWS | |||
For the Year Ended December 31, 2006 | |||
OPERATING ACTIVITIES: | |||
Net loss | $ | (865,932 | ) |
Adjustments to reconcile net income to net cash | |||
provided (used) by operating activities: | |||
Depreciation and amortization | 14,356 | ||
Loss on disposal of property and equipment | 15,692 | ||
Changes in operating assets and liabilities: | |||
Deposits | 15,223 | ||
Accounts receivable | 57,803 | ||
Accounts payable | 215,166 | ||
Bank overdraft | 25,070 | ||
Accrued rent | 17,466 | ||
Accrued salaries | (13,106 | ) | |
Accrued vacation | 8,110 | ||
Customer prepayments | 121,977 | ||
Credit cards and revolving lines of credit | 43,741 | ||
Payroll taxes payable | 64,500 | ||
Sales tax payable | (49,829 | ) | |
Accrued interest included in notes payable | 11,838 | ||
NET CASH USED BY OPERATING ACTIVITIES | (317,925 | ) | |
INVESTING ACTIVITIES: | |||
Purchase of property and equipment | (3,473 | ) | |
Deposit on office lease | (9,481 | ) | |
NET CASH USED BY INVESTING ACTIVITIES | (12,954 | ) | |
FINANCING ACTIVITIES: | |||
Net payments on shareholder loans | (7,492 | ) | |
Proceeds from notes payable | 380,000 | ||
Payments on notes payable | (141,668 | ) | |
Proceeds from issuance of stock | 6,039 | ||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 236,879 | ||
NET DECREASE IN CASH AND EQUIVALENTS | (94,000 | ) | |
CASH AND EQUIVALENTS, BEGINNING OF YEAR | 94,000 | ||
CASH AND EQUIVALENTS, END OF YEAR | $ | - | |
JMJ TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Year Ended December 31, 2006
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
JMJ Technologies, Inc. (the "Company") provides services to medical clients and resale suppliers throughout the United States. The primary service provided is the development, installation and customization of medical practice management software. This was the Company's eleventh year of operations.
B. Estimates
The preparation of 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, 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.
C. Revenues and Cost of Revenues Recognition
The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2 as amended by SOP 98-9. Revenue from software license agreements is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among elements based on the relative fair value of the elements.
License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence or fair value does not exist for all elements of a license agreement and post customer support (PCS) is the only undelivered element, then all revenue from the license arrangement is recognized ratably over the term of the agreement as license revenue. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.
D. Concentrations of Credit Risks
The Company grants credit to its customers during the normal course of business and performs ongoing credit evaluations of its customers' financial condition. The Company does not believe that it is exposed to any significant credit risk in connection with the extension of credit to its customers.
The Company maintains its cash balances at a financial institution in Atlanta, Georgia. The balance at this institution is insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2006, the Company did not have any uninsured cash balances.
E. Allowance for Bad Debts
The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in the collection of all receivables. The estimated losses are based on managements' evaluation of outstanding accounts receivables. Allowance for bad debts was $48,247 at December 31, 2006.
F. Property and Equipment
Property and equipment are recorded at cost. When assets are retired or otherwise disposed of, the related cost and the accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in the statement of operations and retained earnings/deficit. Depreciation and amortization for all classes of property and equipment are determined using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Life | ||
Furniture and fixtures | 10 years | |
Machinery and equipment | 5 years | |
Vehicles | 5 years |
Depreciation expense was $14,356 for the year ended December 31, 2006.
G. Income Taxes
The Company recognizes income and expenses on the accrual method for financial reporting purposes and for income tax reporting purposes.
The effect of temporary differences giving rise to the deferred tax asset is as follows:
Deferred tax asset: | |||||||
Net operating loss carried forward | $ | 878,127 | |||||
Deferred tax liability: | |||||||
Excess of financial statement over tax basis | |||||||
Of property and equipment | (3,054 | ) |
| ||||
Valuation allowance for deferred tax asset |
| (875,073 | ) | ||||
Net deferred tax asset | $ | 0 |
| ||||
There is no deferred tax asset listed in these financial statements. SFAS No. 109 specifies that a deferred tax asset is to be reduced by valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Due to the Company's current economic condition, the valuation allowance has eliminated the deferred tax asset. The Company will continue to assess the valuation allowance and to the extent it is determined that such allowance is no longer required; the tax benefit of the remaining net deferred tax asset will be recognized in the future.
The Company has net operating losses to offset future taxable income of approximately $2,832,666. The carryover periods to utilize the net operating losses will expire between the years 2020 to 2026.
H. Cash Flow Information
The Company considers for purposes of the statement of cash flows, cash equivalents including time deposits, certificates of deposit, and all highly liquid debt investments with original maturities of three months or less.
Net cash used by operating activities include cash payments for interest of $132,911.
2. COMMON STOCK
The Company has 10,000,000 shares of $.01 par value common stock authorized, with 7,518,043 shares issued and 7,518,043 shares outstanding. The Company issued an additional 603,979 of common stock during the year ended December 31, 2006.
On May 31, 2005 the Company exercised its rights under the shareholders' agreement and acquired 760,000 shares of common stock from a major shareholder. Under the terms of the shareholders' agreement the Company was not required to make any payment in consideration for acquisition of the 760,000 shares from the shareholder. It was later determined that the Company did not have the right to acquire the 760,000 shares of common stock from the major shareholder. The stock was reissued to the major shareholder.
3. RELATED PARTY TRANSACTIONS
The Company has the following loans from a shareholder:
An unsecured demand loan with no stated rate of interest. |
| $ | 82,106 | |||||
Exclusive use of a shareholder's credit card; total credit line | ||||||||
available is $12,000; and the annual percentage rate | ||||||||
of interest is 29.99%. | 12,180 | |||||||
Exclusive use of a shareholder's credit card; total credit line | ||||||||
available is $0.00; and the annual percentage rate | ||||||||
of interest is 24.00%. | 2,209 | |||||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||||
available is $0.00; and the annual percentage rate | ||||||||
of interest is 25.90%. | 13,014 | |||||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||||
available is $0.00; and the annual percentage rate | ||||||||
of interest is 26.99%. | 231 | |||||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||||
available is $14,600; and the annual percentage rate | ||||||||
of interest is 28.90%. | 14,489 | |||||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||||
available is $5,750; and the annual percentage rate | ||||||||
of interest is 26.90%. | 5,731 | |||||||
Exclusive use of a shareholder's credit card; total credit line | ||||||||
available is $0.00; and the annual percentage rate | ||||||||
of interest is 30.24%. | 10,856 | |||||||
Exclusive use of a shareholder's credit card; total credit line | ||||||||
available is $7,100; and the annual percentage rate | ||||||||
of interest is 30.49%. | 5,797 | |||||||
Total |
| $ | 146,613 | |||||
The Company received the following loans from an officer:
Note payable to an officer of the Company. Interest is accrued | |||||
at the rate of 10% annually. The note was due on August 1, | |||||
2007. The loan balance reflects principal of $28,000 and accrued | |||||
interest of $1,787. | $ | 29,787 | |||
Note payable to an officer of the Company. Interest is accrued | |||||
at the rate of 10% annually. The note was due on August 1, | |||||
2007. The loan balance reflects principal of $32,500 and accrued | |||||
interest of $1,371. | 33,871 | ||||
Note payable to an officer of the Company. Interest is accrued | |||||
at the rate of 10% beginning February 20, 2007. |
| ||||
The note was due on August 1, 2007. | 5,500 | ||||
$ | 69,158 | ||||
The Company leases a vehicle from a shareholder on a month to month basis. The rent expense from this lease totaled $3,805 for the year ending December 31, 2006.
4. NOTES PAYABLE
Notes payable consisted of the following at December 31, 2006:
Note payable to a financial institution is a $247,584 revolving line | ||||||||
of credit. Interest is payable monthly at an annual rate of prime | ||||||||
plus 2.00%. On December 31, 2006 the interest rate on this loan | ||||||||
was 10.25%. As of December 31, 2006 the loan balance contained | ||||||||
accrued interest of $1,150. The loan is collateralized by the | ||||||||
Company's accounts receivable, property and equipment and | ||||||||
the personal guaranties of three officer/shareholders and real | ||||||||
estate owned by an officer/shareholder. |
| |||||||
See Note 13 for additional information. | $ | 248,734 |
| |||||
An undocumented loan with no stated rate of interest from | ||||||||
a Corporation with the intention to purchase JMJ. The | ||||||||
Corporation was unable to complete the purchase. On | ||||||||
December 18, 2007 a settlement was reached with the | ||||||||
Corporation on payment of the loan. See Note 13 for | ||||||||
additional information. | 199,000 |
| ||||||
Note payable to an individual. Interest is accrued at the rate of | ||||||||
of $2.00 per day. The loan balance reflects principal of $5,000 | ||||||||
and accrued interest of $2,999. | 7,999 |
| ||||||
An undocumented loan from an individual. The original | ||||||||
principal balance was $35,000. Interest is accrued at the rate | ||||||||
of 10% annually. | 24,025 |
| ||||||
Note payable to an individual. The original principal balance | ||||||||
was $20,000. Interest is accrued at the rate of 10% annually. |
| 9,603 | ||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||
the rate of 10% annually. The loan balance reflects principal of | ||||||||
$10,000 and accrued interest of $1,702. | 11,702 | |||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||
the rate of 10% annually. The loan reflects principal of $12,000 and | ||||||||
accrued interest of $6,074. | 18,074 |
| ||||||
Note payable to an individual. Interest is accrued at the rate of | ||||||||
10% annually. The loan balance reflects principal of $75,000 and | ||||||||
accrued interest of $24,375. | 99,375 |
| ||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||
the rate of 10% annually. The loan balance reflects principal of | ||||||||
$9,038 and accrued interest of $569. | 9,607 | |||||||
Total |
| $ | 628,119 | |||||
5. CREDIT CARDS AND REVOLVING LINES OF CREDIT
Credit card from a financial institution; credit limit is $15,500; | ||||||||
and interest rate is 31.43%. | 12,794 | |||||||
Credit card from a financial institution; there are no preset | ||||||||
credit limits; and balances are required to be paid in full. This | ||||||||
account was turned over to a collection agency for collection. | 77,283 | |||||||
Credit card from a financial institution; credit limit is $5,000; | ||||||||
and interest rate is 30.24%. | 2,014 | |||||||
Credit card from a financial institution; credit limit is $2,900; | ||||||||
and interest rate is 19.56%. | 3,356 | |||||||
Credit card from a financial institution; credit limit is $11,000; | ||||||||
and interest rate is 29.99%. | 10,730 | |||||||
Credit card from a financial institution; credit limit is $8,000; | ||||||||
and interest rate is 32.24%. | 7,987 | |||||||
Credit card from a financial institution; credit limit is $5,000; | ||||||||
and interest rate is 32.24%. | 5,203 | |||||||
Revolving line of credit from a corporation to be utilized for | ||||||||
purchases of computers and related equipment; credit limit | ||||||||
is $0.00; and interest rate is 12.99% |
| 12,857 | ||||||
Revolving line of credit from a corporation to be utilized for | ||||||||
purchases of computers and related equipment; credit limit | ||||||||
is $25,000; and interest rate is 16.99%. |
| 24,408 | ||||||
Credit card from a financial institution; credit limit is $9,400; | ||||||||
and interest rate is 23.98%. | 7,573 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $3,000; and | ||||||||
interest rate is 12.00%. | 1,775 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $4,000; and | ||||||||
interest rate is 20.80%. | 3,082 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||
interest rate is 26.65%. | 4,902 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||
interest rate is 26.65%. | 4,198 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||
interest rate is 23.15%. | 810 | |||||||
Credit card from a corporation to be utilized for purchases at | ||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||
interest rate is 19.80%. | 6,202 | |||||||
Credit card from a financial institution; credit limit is $0.00; and | ||||||||
interest rate is 16.15%. | 638 | |||||||
Credit card from a financial institution; credit limit is $2,900; and | ||||||||
interest rate is 35.18% | 2,787 | |||||||
Credit card from a financial institution; credit limit is $0.00; and | ||||||||
interest rate is 30.24%. | 1,193 | |||||||
Total |
| $ | 189,792 | |||||
6. ACCOUNTS RECEIVABLE - NET
Accounts receivable consisted of the following at December 31, 2006:
Accounts receivable | $ | 308,433 | |||||
Less allowance for doubtful accounts |
| 48,247 | |||||
Accounts receivable - net |
| $ | 260,186 | ||||
7. PROPERTY AND EQUIPMENT - NET
Property and equipment consisted of the following at December 31, 2006:
Computer equipment | $ | 67,509 | ||||
Furniture and fixtures | 544 | |||||
Software | 38,554 | |||||
Total |
| 106,607 | ||||
Less accumulated depreciation and amortization |
| 88,490 | ||||
Property and equipment - net |
| $ | 18,117 | |||
8. COMMITMENTS
The Company subleases office space under a non-cancellable operating lease agreement which commenced on July 1, 2006 and expires on August 31, 2009. Future minimum lease payments are due as follows:
Years ending: | December 31, 2007 | $ | 113,768 | |||||
December 31, 2008 | 113,768 |
| ||||||
December 31, 2009 | 75,845 |
| ||||||
Total | $ | 303,381 |
| |||||
9. CONTINGENCIES
The Company was a defendant in 2005 and early 2006 in two related lawsuits seeking disclosure of financial information by shareholders. Both lawsuits were voluntarily dismissed by the plaintiffs without prejudice in February of 2006.
On June 2, 2006 the Company filed a voluntary petition under chapter 11 of the United States Bankruptcy Code with the Court. The petition was filed to assist the Company with negotiating a payment plan with the Internal Revenue Service. After filing the petition the Internal Revenue Service agreed to an installment repayment plan. The Company then obtained the dismissal of the bankruptcy case on June 27, 2006. The Company made five $15,000 payments during 2006 to the Internal Revenue Service and four $15,000 payments during the first seven months of 2007. The Company then discontinued payments under the installment agreement. In October of 2007 a new installment agreement was allowed by the Internal Revenue Service. The new agreement requires monthly payments of $20,000. The Company made three $20,000 payments by the end of 2007.
On June 20, 2006, the Company's landlord filed a motion with the bankruptcy court for expedited and immediate relief from the automatic stay seeking relief from the automatic stay so that the landlord could proceed with its dispossessory proceeding in state court. The bankruptcy court granted the motion and the landlord then filed the dispossessory proceeding in the State Court of Cobb County, Georgia on June 28, 2006. The Company timely vacated the premises on June 30, 2006 pursuant to the terms of the lease and an oral agreement reached with the landlord in bankruptcy court that provided that the landlord would not seek and would forgive payment of any remaining sums due from the Company for unpaid rent after applying the security deposit if the Company timely vacated the premises. The landlord declined to provide documentation of the agreement, but has honored the agreement by not seeking approximately $16,150 in unpaid rent. The dispossessory proceeding was dismissed by the landlord voluntar ily without prejudice on July 5, 2006.
Employees of the Company represented the Company in the above legal matters.
10. STOCK OPTION PLAN
In 1998, the Company instituted a stock option plan for officers, employees, directors, advisors and consultants. Incentive stock options may be awarded to all employees of the Company who owns less than 10% of the outstanding common stock. The exercise price of an incentive stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Incentive stock options can not be exercised until the employee has completed a year of service with the Company.
Non-qualified stock options may be awarded to non-employees who own less than 10% of the outstanding common stock of the Company. The exercise price of a non-qualified stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Non-qualified stock options can not be exercised until the non-employee has maintained a one year relationship with the Company.
The maximum number of shares of common stock that can be issued under the plan is 3,000,000. As of December 31, 2006, 2,258,509 shares of common stock had been issued under the stock option plan.
Due to the Company's high volatility associated with going concern issues no compensation was recorded on the income statement for the issuance of options. FASB 123 (R) requires that companies must reflect as expense the fair market value of stock options used to compensate employees. Applying the lattice model it was determined that the amount of compensation expense per FASB 123 (R) was less than $1,000.
Total stock options accrued, vested and unexpired as of 12/31/05 |
| 800,221 | ||
Stock options exercised in 2006 | (603,979 | ) | ||
Stock options that expired during 2006 | (898,960 | ) | ||
Stock options that accrued and vested during 2006 | 800,691 | |||
Total stock options accrued, vested and unexpired as of 12/31/06 | 97,973 | |||
As of June 30, 2006, no additional options were issued under the plan.
11. OTHER INCOME
In 2006 the Company agreed to participate in the Streamlined Sales Tax Program. This program is designed to promote compliance of sellers in filing and paying sales tax to states who have joined the program. As a result of the Company's participation in the Streamline Sales Tax Program sales tax payable was reduced by $67,343. This reduction was recognized as other income.
12. GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net loss of $865,932 during the year ended December 31, 2006, and as of that date the Company's current liabilities exceeded its current assets by $2,883,679. These factors raise substantial doubt about its ability to continue as a going concern. Refer to Note 14 for additional information that impact the going concern issue.
13. SUBSEQUENT EVENTS
In June of 2006, the Company entered into a Letter of Intent to be acquired by a corporation. After several extensions of the time within which the parties were to have completed the contemplated merger, JMJ refused in March, 2007 to extend further the time within which the parties were to merge. From June of 2006 through March of 2007 JMJ received loans from its intended acquirer. In December of 2007 a settlement of loan was reached. The Company was required to pay $30,000 and assume a note for $105,164. This transaction resulted in JMJ recognizing additional income from the forgiveness of debt of $94,636.
In March of 2007, the Company entered into a Letter of Intent to be acquired by another corporation. Following the execution of the Letter of Intent, the acquiring corporation loaned the Company approximately $100,000 through early May, 2007. The Company and the acquiring corporation then negotiated a further loan of up to $1.25 million to the Company, but that loan was not funded. After the Company received approval (on July 10, 2007) from its shareholders to the proposed merger with the acquiring corporation (or its subsidiary), the acquiring corporation declined to consummate the merger. In September of 2007, the acquiring corporation proposed that it purchase the assets of the Company. The Company negotiated the terms of the asset sale and obtained the approval of its shareholders for such sale on September 30, 2007. The sale of assets, pursuant to the Asset Purchase Agreement and accompanying documents, was made effective October 1, 2007. In exchange for the as sets of the Company, the acquiring corporation and its newly-created subsidiary agreed to tender to the Company $25,000 in cash, a promissory note (secured by 500,000 restricted shares of the acquiring corporation) in the amount of $475,000 payable over the course of 10 months; restricted shares of the common stock of the acquiring corporation equal to 12.5 percent of the total outstanding shares of the acquiring corporation as of the effective date of the purchase (which amounts to 4,862,067 shares); 1.6 million warrants redeemable at the cost of a penny per share for common shares of the acquiring corporation; and an agreement to register the shares (including the shares underlying the warrants) within 180 days of the effective date of the purchase. Effective December 6, 2007, the Company agreed to lockup (that is, not offer for sale) its shares of the acquiring corporation for a period of 90 days following the registration of certain shares of acquiring corporation's common stock underlying the issu ance of $2,225,000 in debentures to third parties, which issuance occurred effective December 6, 2007. Accordingly, the Company now expects that it may be able to offer some of its shares of acquiring corporation for sale in or about June, 2008.
The Company disclosed the anticipated asset sale transaction to the financial institution in September of 2007 and converted its existing line of credit of $247,584 to a note due on or about April 1, 2008. This note was cosigned by acquiring corporation and secured by the personal guaranties of certain shareholders and former officers of the Company, certain real property owned by several of the same persons, and the assets of the Company.
The Company was unable to pay on August 1, 2007 the three loans listed under related party transactions as notes payable to an officer with principal amounts of $28,000, $32,500, and $5,500. The notes are continuing to accrue interest at the rate of 10% annually.
REVIEWED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2006
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Financial Statements |
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Powers Farmer & Co., P.C.
Certified Public Accountants
Suite 1370
900 Circle 75 Parkway
Atlanta, Georgia 30339
Tel (770) 953-6866 Fax (770) 952-6921
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
JMJ Technologies, Inc.
Atlanta, Georgia
We have reviewed the accompanying balance sheet of JMJ Technologies, Inc. as of September 30, 2006 and the related statement of operations and accumulated deficit and cash flows for the nine months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of the Company.
A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Powers Farmer & Co., P.C.
Atlanta, Georgia
January 28, 2008
JMJ TECHNOLOGIES, INC. | ||
BALANCE SHEET | ||
September 30, 2006 | ||
ASSETS | ||
CURRENT ASSETS: | ||
Accounts receivable - net | $ 346,256 | |
Prepaid rent | 9,481 | |
Total current assets | 355,737 | |
PROPERTY AND EQUIPMENT - net | 19,645 | |
OTHER ASSETS: | ||
Deposit | 9,481 | |
Employee advances | 985 | |
Total other assets | 10,466 | |
TOTAL | $ 385,848 | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||
CURRENT LIABILITIES: | ||
Accounts payable | $ 285,243 | |
Bank overdraft | 10,814 | |
Accrued rent | 8,982 | |
Accrued salaries | 50,801 | |
Accrued vacation | 33,990 | |
Customer prepayments | 478,654 | |
Credit cards and revolving lines of credit | 208,434 | |
Payroll taxes payable | 1,126,487 | |
Sales tax payable | 139,050 | |
Notes payable | 546,818 | |
Notes payable officer | 61,975 | |
Shareholder loans | 144,388 | |
Total current liabilities | 3,095,636 | |
LONG - TERM LIABILITIES: | ||
Long-term accrued rent | 17,215 | |
Total long-term liabilities | 17,215 | |
SHAREHOLDERS' DEFICIT: | ||
Common stock, $.01 par value; 10,000,000 shares | ||
authorized, 7,5180,043 shares issued and outstanding | 75,180 | |
Additional paid-in capital | 1,653,800 | |
Accumulated deficit | (4,455,983 | ) |
Total shareholders' deficit | (2,727,003 | ) |
TOTAL | $ 385,848 | |
JMJ TECHNOLOGIES, INC. | ||
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT | ||
For the Nine Months Ended September 30, 2006 | ||
REVENUES | $ 1,612,650 | |
COST OF REVENUES | 645,837 | |
GROSS PROFIT | 966,813 | |
GENERAL AND ADMINISTRATIVE EXPENSES | ||
Payroll expense | 1,010,303 | |
Rent expense | 99,532 | |
Employee benefits | 97,434 | |
Penalties | 66,915 | |
Bad debt expense | 59,945 | |
Travel and entertainment | 48,494 | |
Professional fees | 46,665 | |
Conferences and tradeshows | 38,042 | |
Dues and subscriptions | 37,531 | |
Utilities and communications | 37,292 | |
Office supplies | 17,078 | |
Postage and shipping | 14,857 | |
Depreciation and amortization | 12,828 | |
Insurance | 7,293 | |
Education and training | 2,716 | |
Lease - van | 2,716 | |
Equipment rental | 1,666 | |
Repairs and maintenance | 302 | |
Total general and administrative expenses | 1,601,609 | |
LOSS FROM OPERATIONS | (634,796 | ) |
OTHER INCOME (EXPENSE) | ||
Other income - Sales tax amnesty relief | 67,343 | |
Loss on disposal of property and equipment | (15,692 | ) |
Interest expense | (138,740 | ) |
Total other income (expense) | (87,089 | ) |
NET LOSS | (721,885 | ) |
ACCUMULATED DEFICIT, BEGINNING OF YEAR | (3,734,098 | ) |
ACCUMULATED DEFICIT, END OF YEAR | $ (4,455,983 | ) |
JMJ TECHNOLOGIES, INC. | ||
STATEMENT OF CASH FLOWS | ||
For the Nine Months Ended September 30, 2006 | ||
OPERATING ACTIVITIES: | ||
Net loss | $ (721,885 | ) |
Adjustments to reconcile net income to net cash | ||
provided (used) by operating activities: | ||
Depreciation and amortization | 12,828 | |
Loss on disposal of property and equipment | 15,692 | |
Changes in operating assets and liabilities: | ||
Accounts receivable | (28,267 | ) |
Employee advances | (985 | ) |
Prepaid rent | (9,481 | ) |
Deposit | 15,223 | |
Accounts payable | 231,192 | |
Bank overdraft | 10,814 | |
Accrued rent | 19,712 | |
Accrued salaries | (11,735 | ) |
Accrued vacation | (3,220 | ) |
Customer prepayments | 147,472 | |
Credit cards and revolving lines of credit | 62,383 | |
Payroll taxes payable | 74,761 | |
Sales tax payable | (53,558 | ) |
Accrued interest included in notes payable | 18,456 | |
NET CASH USED BY OPERATING ACTIVITIES | (220,598 | ) |
INVESTING ACTIVITIES: | ||
Purchase of property and equipment | (3,473 | ) |
Deposit on office lease | (9,481 | ) |
NET CASH USED BY INVESTING ACTIVITIES | (12,954 | ) |
FINANCING ACTIVITIES: | ||
Net payments on shareholder loans | (9,717 | ) |
Payments on notes payable | (92,770 | ) |
Proceeds from notes payable | 236,000 | |
Proceeds from issuance of stock | 6,039 | |
NET CASH PROVIDED BY FINANCING ACTIVITIES | 139,552 | |
NET DECREASE IN CASH AND EQUIVALENTS | (94,000 | ) |
CASH AND EQUIVALENTS, BEGINNING OF YEAR | 94,000 | |
CASH AND EQUIVALENTS, END OF YEAR | $ - | |
JMJ TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2006
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
JMJ Technologies, Inc. (the "Company") provides services to medical clients and resale suppliers throughout the United States. The primary service provided is the development, installation and customization of medical practice management software. This was the Company's eleventh year of operations.
B. Estimates
The preparation of 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, 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.
C. Revenues and Cost of Revenues Recognition
The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2 as amended by SOP 98-9. Revenue from software license agreements is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among elements based on the relative fair value of the elements.
License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence or fair value does not exist for all elements of a license agreement and post customer support (PCS) is the only undelivered element, then all revenue from the license arrangement is recognized ratably over the term of the agreement as license revenue. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
D. Concentrations of Credit Risks
The Company grants credit to its customers during the normal course of business and performs ongoing credit evaluations of its customers' financial condition. The Company does not believe that it is exposed to any significant credit risk in connection with the extension of credit to its customers.
The Company maintains its cash balances at a financial institution in Atlanta, Georgia. The balance at this institution is insured by the Federal Deposit Insurance Corporation up to $100,000. At September 30, 2006, the Company did not have any uninsured cash balances.
E. Allowance for Bad Debts
The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in the collection of all receivables. The estimated losses are based on managements' evaluation of outstanding accounts receivables. Allowance for bad debts was $65,953 at September 30, 2006.
F. Property and Equipment
Property and equipment are recorded at cost. When assets are retired or otherwise disposed of, the related cost and the accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in the statement of operations and retained earnings/deficit. Depreciation and amortization for all classes of property and equipment are determined using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Life | ||
Furniture and fixtures | 10 years | |
Machinery and equipment | 5 years | |
Vehicles | 5 years |
Depreciation expense was $12,828 for the nine months ended September 30, 2006.
G. Income Taxes
The Company recognizes income and expenses on the accrual method for financial reporting purposes and for income tax reporting purposes.
The effect of temporary differences giving rise to the deferred tax asset is as follows:
Deferred tax assets: | ||||||
Net operating loss carry forwards | $ | 837,036 | ||||
Deferred tax liability: | ||||||
Excess of financial statement over tax basis | ||||||
of property and equipment | (1,658 | ) |
| |||
Valuation allowance for deferred tax assets | (835,378 | ) | ||||
Net deferred tax assets | $ | 0 |
| |||
There is no deferred tax asset listed in these financial statements. SFAS No. 109 specifies that a deferred tax asset is to be reduced by valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Due to the Company's current economic condition, the valuation allowance has eliminated the deferred tax asset. The Company will continue to assess the valuation allowance and to the extent it is determined that such allowance is no longer required; the tax benefit of the remaining net deferred tax asset will be recognized in the future.
The Company has net operating losses to offset future taxable income of approximately $2,700,115. The carryover periods to utilize the net operating losses will expire between the years 2020 to 2026.
H. Cash Flow Information
The Company considers for purposes of the statement of cash flows, cash equivalents including time deposits, certificates of deposit, and all highly liquid debt investments with original maturities of three months or less.
Net cash used by operating activities include cash payments for interest of $57,187.
2. COMMON STOCK
The Company has 10,000,000 shares of $.01 par value common stock authorized, with 7,518,043 shares issued and 7,518,043 shares outstanding. The Company issued an additional 603,979 of common stock during the nine months end September 30, 2006.
On May 31, 2005 the Company exercised its rights under the shareholders' agreement and acquired 760,000 shares of common stock from a major shareholder. Under the terms of the shareholders' agreement the Company was not required to make any payment in consideration for acquisition of the 760,000 shares from the shareholder. It was later determined that the Company did not have the right to acquire the 760,000 shares of common stock from the major shareholder. The stock was reissued to the major shareholder.
3. RELATED PARTY TRANSACTIONS
The Company has the following loans from a shareholder:
| An unsecured demand loan with no stated rate of interest. |
| $ 82,106 | ||||
| Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $12,000; and the annual percentage rate | |||||||
of interest is 29.99%. | 11,424 | ||||||
| Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | |||||||
of interest is 24.00%. | 3,049 | ||||||
| Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $0.00; and the annual percentage rate | |||||||
of interest is 25.90%. | 12,639 | ||||||
| Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $0.00; and the annual percentage rate | |||||||
of interest is 26.99%. | 410 | ||||||
| Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $14,600; and the annual percentage rate | |||||||
of interest is 28.90%. | 12,923 | ||||||
| Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $5,750; and the annual percentage rate | |||||||
of interest is 26.90%. | 5,564 | ||||||
| Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | |||||||
of interest is 30.24%. | 10,480 | ||||||
| Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $7,100; and the annual percentage rate | |||||||
of interest is 30.49%. | 5,793 | ||||||
Total |
| $144,388 | |||||
The Company received the following loans from an officer:
Note payable to an officer of the Company. Interest is accrued | |||||||||||
at the rate of 10% annually. The note was due on August 1, | |||||||||||
2007. The loan balance reflects principal of $28,000 and accrued | |||||||||||
interest of $1,082. | $ 29,082 | ||||||||||
Note payable to an officer of the Company. Interest is accrued | |||||||||||
at the rate of 10% annually. The note was due on August 1, | |||||||||||
2007. The loan balance reflects principal of $32,500 and accrued | |||||||||||
interest of $393. | 32,893 | ||||||||||
$ 61,975 |
| ||||||||||
The Company leases a vehicle from a shareholder on a month to month basis. The rent expense from this lease totaled $2,716 for the year ending September 30, 2006.
4. NOTES PAYABLE
Notes payable consisted of the following at September 30, 2006:
Note payable to a financial institution is a $247,584 revolving line | ||||||||||
of credit. Interest is payable monthly at an annual rate of prime | ||||||||||
plus 2.00%. On September 30, 2006 the interest rate on this loan | ||||||||||
was 10.25%. As of September 30, 2006 the loan balance contained | ||||||||||
accrued interest of $11,135. The loan is collateralized by the | ||||||||||
Company's accounts receivable, property and equipment and | ||||||||||
the personal guaranties of three officer/shareholders and real | ||||||||||
estate owned by an officer/shareholder. |
| |||||||||
See Note 13 for additional information. | $258,719 |
| ||||||||
An undocumented loan with no stated rate of interest from | ||||||||||
a Corporation with the intention to purchase JMJ. The | ||||||||||
Corporation was unable to complete the purchase. On | ||||||||||
December 18, 2007 a settlement was reached with the | ||||||||||
Corporation on payment of the loan. See Note 13 for | ||||||||||
additional information. | 100,500 |
| ||||||||
Note payable to an individual. Interest is accrued at the rate of | ||||||||||
of $2.00 per day. The loan balance reflects principal of $5,000 | ||||||||||
and accrued interest of $2,815. | 7,815 |
| ||||||||
An undocumented loan from an individual. The original | ||||||||||
principal balance was $35,000. Interest is accrued at the rate | ||||||||||
of 10% annually. | 24,378 |
| ||||||||
Note payable to an individual. The original principal balance | ||||||||||
was $20,000. Interest is accrued at the rate of 10% annually. |
| 18,276 | ||||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||||
the rate of 10% annually. The loan balance reflects principal of | ||||||||||
$10,000 and accrued interest of $1,652. | 11,652 | |||||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||||
the rate of 10% annually. The loan reflects principal of $12,000 and | ||||||||||
accrued interest of $5,749. | 17,749 |
| ||||||||
Note payable to an individual. Interest is accrued at the rate of | ||||||||||
10% annually. The loan balance reflects principal of $75,000 and | ||||||||||
accrued interest of $23,250. | 98,250 |
| ||||||||
An undocumented loan from an individual. Interest is accrued at | ||||||||||
the rate of 10% annually. The loan balance reflects principal of | ||||||||||
$9,038 and accrued interest of $441. | 9,479 | |||||||||
Total |
| $ 546,818 |
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5. CREDIT CARDS AND REVOLVING LINES OF CREDIT
Credit card from a financial institution; credit limit is $15,500; | ||||||||||||
and interest rate is 31.43%. | 12,629 | |||||||||||
Credit card from a financial institution; there are no preset | ||||||||||||
credit limits; and balances are required to be paid in full. This | ||||||||||||
account was turned over to a collection agency for collection. | 94,895 | |||||||||||
Credit card from a financial institution; credit limit is $5,000; | ||||||||||||
and interest rate is 30.24%. | 2,143 | |||||||||||
Credit card from a financial institution; credit limit is $2,900; | ||||||||||||
and interest rate is 19.56%. | 1,026 | |||||||||||
Credit card from a financial institution; credit limit is $11,000; | ||||||||||||
and interest rate is 29.99%. | 10,393 | |||||||||||
Credit card from a financial institution; credit limit is $8,000; | ||||||||||||
and interest rate is 32.24%. | 7,470 | |||||||||||
Credit card from a financial institution; credit limit is $5,000; | ||||||||||||
and interest rate is 32.24%. | 5,008 | |||||||||||
Revolving line of credit from a corporation to be utilized for | ||||||||||||
purchases of computers and related equipment; credit limit | ||||||||||||
is $0.00; and interest rate is 12.99% |
| 13,848 | ||||||||||
Revolving line of credit from a corporation to be utilized for | ||||||||||||
purchases of computers and related equipment; credit limit | ||||||||||||
is $25,000; and interest rate is 16.99%. |
| 24,925 | ||||||||||
Credit card from a financial institution; credit limit is $9,400; | ||||||||||||
and interest rate is 23.98%. | 9,095 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $3,000; and | ||||||||||||
interest rate is 12.00%. | 543 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $4,000; and | ||||||||||||
interest rate is 20.80%. | 3,239 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||||||
interest rate is 26.65%. | 4,717 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||||||
interest rate is 26.65%. | 3,888 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||||||
interest rate is 23.15%. | 932 | |||||||||||
Credit card from a corporation to be utilized for purchases at | ||||||||||||
the corporation's retail locations; credit limit is $0.00; and | ||||||||||||
interest rate is 19.80%. | 6,727 | |||||||||||
Credit card from a financial institution; credit limit is $0.00; and | ||||||||||||
interest rate is 16.15%. | 772 | |||||||||||
Credit card from a financial institution; credit limit is $2,900; and | ||||||||||||
interest rate is 35.18% | 4,592 | |||||||||||
Credit card from a financial institution; credit limit is $0.00; and | ||||||||||||
interest rate is 30.24%. | 1,592 | |||||||||||
Total |
| $ 208,434 |
| |||||||||
6. ACCOUNTS RECEIVABLE - NET
Accounts receivable consisted of the following at September 30, 2006:
Accounts receivable | $ | 412,209 |
| |||||
Less allowance for doubtful accounts |
| 65,953 | ||||||
Accounts receivable - net |
| $ | 346,256 | |||||
7. PROPERTY AND EQUIPMENT - NET
Property and equipment consisted of the following at September 30, 2006:
Computer equipment | $ 67,509 | |||||
Furniture and fixtures | 544 | |||||
Software | 38,554 |
| ||||
Total | 106,607 |
| ||||
Less accumulated depreciation and amortization | 86,962 | |||||
Property and equipment - net |
| $ 19,645 | ||||
8. COMMITMENTS
The Company subleases office space under a non-cancellable operating lease agreement which commenced on July 1, 2006 and expires on August 31, 2009. Future minimum lease payments are due as follows:
Years ending: |
| December 31, 2006 |
| $ 28,442 | |||||||
December 31, 2007 | 113,768 | ||||||||||
December 31, 2008 | 113,768 | ||||||||||
December 31, 2009 | 75,845 | ||||||||||
Total | $ 331,823 |
| |||||||||
9. CONTINGENCIES
The Company was a defendant in 2005 and early 2006 in two related lawsuits seeking disclosure of financial information by shareholders. Both lawsuits were voluntarily dismissed by the plaintiffs without prejudice in February of 2006.
On June 2, 2006 the Company filed a voluntary petition under chapter 11 of the United States Bankruptcy Code with the Court. The petition was filed to assist the Company with negotiating a payment plan with the Internal Revenue Service. After filing the petition the Internal Revenue Service agreed to an installment repayment plan. The Company then obtained the dismissal of the bankruptcy case on June 27, 2006. The Company made five $15,000 payments during 2006 to the Internal Revenue Service and four $15,000 payments during the first seven months of 2007. The Company then discontinued payments under the installment agreement. In October of 2007 a new installment agreement was allowed by the Internal Revenue Service. The new agreement requires monthly payments of $20,000. The Company made three $20,000 payments by the end of 2007.
On June 20, 2006, the Company's landlord filed a motion with the bankruptcy court for expedited and immediate relief from the automatic stay seeking relief from the automatic stay so that the landlord could proceed with its dispossessory proceeding in state court. The bankruptcy court granted the motion and the landlord then filed the dispossessory proceeding in the State Court of Cobb County, Georgia on June 28, 2006. The Company timely vacated the premises on June 30, 2006 pursuant to the terms of the lease and an oral agreement reached with the landlord in bankruptcy court that provided that the landlord would not seek and would forgive payment of any remaining sums due from the Company for unpaid rent after applying the security deposit if the Company timely vacated the premises. The landlord declined to provide documentation of the agreement, but has honored the agreement by not seeking approximately $16,150 in unpaid rent. The dispossessory proceeding was dismissed by the landlord voluntar ily without prejudice on July 5, 2006.
Employees of the Company represented the Company in the above legal matters.
10. STOCK OPTION PLAN
In 1998, the Company instituted a stock option plan for officers, employees, directors, advisors and consultants. Incentive stock options may be awarded to all employees of the Company who owns less than 10% of the outstanding common stock. The exercise price of an incentive stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Incentive stock options can not be exercised until the employee has completed a year of service with the Company.
Non-qualified stock options may be awarded to non-employees who own less than 10% of the outstanding common stock of the Company. The exercise price of a non-qualified stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Non-qualified stock options can not be exercised until the non-employee has maintained a one year relationship with the Company.
The maximum number of shares of common stock that can be issued under the plan is 3,000,000. As of September 30, 2006, 2,258,509 shares of common stock had been issued under the stock option plan.
Due to the Company's high volatility associated with going concern issues no compensation was recorded on the income statement for the issuance of options. FASB 123 (R) requires that companies must reflect as expense the fair market value of stock options used to compensate employees. Applying the lattice model it was determined that the amount of compensation expense per FASB 123 (R) was less than $1,000.
Total stock options accrued, vested and unexpired as of 12/31/05 |
| 800,221 | |||
Stock options exercised for the nine months ended September 30, 2006 |
| (603,979 | ) | ||
Stock options that expired during the nine months ended | |||||
September 30, 2006 |
| (898,960 | ) | ||
Stock options that accrued and vested during the nine months | |||||
ended September 30, 2006 |
| 800,691 | |||
Total stock options accrued, vested and unexpired as of |
| ||||
September 30, 2006 |
| 97,973 |
| ||
As of June 30, 2006, no additional options were issued under the plan.
11. OTHER INCOME
In 2006 the Company agreed to participate in the Streamlined Sales Tax Program. This program is designed to promote compliance of sellers in filing and paying sales tax to states who have joined the program. As a result of the Company's participation in the Streamline Sales Tax Program sales tax payable was reduced by $67,343. This reduction was recognized as other income.
12. GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net loss of $721,885 during the nine months ended September 30, 2006, and as of that date the Company's current liabilities exceeded its current assets by $2,739,899. These factors raise substantial doubt about its ability to continue as a going concern. Refer to Note 13 for additional information that impacts the going concern issue.
13. SUBSEQUENT EVENTS
In June of 2006, the Company entered into a Letter of Intent to be acquired by a corporation. After several extensions of the time within which the parties were to have completed the contemplated merger, JMJ refused in March, 2007 to extend further the time within which the parties were to merge. From June of 2006 through March of 2007 JMJ received loans from its intended acquirer. In December of 2007 a settlement of loan was reached. The Company was required to pay $30,000 and assume a note for $105,164. This transaction resulted in JMJ recognizing additional income from the forgiveness of debt of $94,636.
In March of 2007, the Company entered into a Letter of Intent to be acquired by another corporation. Following the execution of the Letter of Intent, the acquiring corporation loaned the Company approximately $100,000 through early May, 2007. The Company and the acquiring corporation then negotiated a further loan of up to $1.25 million to the Company, but that loan was not funded. After the Company received approval (on July 10, 2007) from its shareholders to the proposed merger with the acquiring corporation (or its subsidiary), the acquiring corporation declined to consummate the merger. In September of 2007, the acquiring corporation proposed that it purchase the assets of the Company. The Company negotiated the terms of the asset sale and obtained the approval of its shareholders for such sale on September 30, 2007. The sale of assets, pursuant to the Asset Purchase Agreement and accompanying documents, was made effective October 1, 2007. In exchange for the as sets of the Company, the acquiring corporation and its newly-created subsidiary agreed to tender to the Company $25,000 in cash, a promissory note (secured by 500,000 restricted shares of the acquiring corporation) in the amount of $475,000 payable over the course of 10 months; restricted shares of the common stock of the acquiring corporation equal to 12.5 percent of the total outstanding shares of the acquiring corporation as of the effective date of the purchase (which amounts to 4,862,067 shares); 1.6 million warrants redeemable at the cost of a penny per share for common shares of the acquiring corporation; and an agreement to register the shares (including the shares underlying the warrants) within 180 days of the effective date of the purchase. Effective December 6, 2007, the Company agreed to lockup (that is, not offer for sale) its shares of the acquiring corporation for a period of 90 days following the registration of certain shares of acquiring corporation's common stock underlying the issu ance of $2,225,000 in debentures to third parties, which issuance occurred effective December 6, 2007. Accordingly, the Company now expects that it may be able to offer some of its shares of acquiring corporation for sale in or about June, 2008.
The Company disclosed the anticipated asset sale transaction to the financial institution in September of 2007 and converted its existing line of credit of $247,584 to a note due on or about April 1, 2008. This note was cosigned by acquiring corporation and secured by the personal guaranties of certain shareholders and former officers of the Company, certain real property owned by several of the same persons, and the assets of the Company.
The Company was unable to pay on August 1, 2007 the two loans listed under related party transactions as notes payable to an officer with principal amounts of $28,000, and $32,500. The notes are continuing to accrue interest at the rate of 10% annually.
JMJ TECHNOLOGIES, INC.
REVIEWED FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2007
Independent Auditor's Report | 2 | |||
| ||||
Financial Statements |
| |||
| ||||
Balance Sheet | 3 | |||
| ||||
Statement of Operations and Accumulated Deficit | 4 | |||
| ||||
Statement of Cash Flows | 5 | |||
Notes to Financial Statements | 6 - 15 |
Powers Farmer & Co., P.C.
Certified Public Accountants
Suite 1370
900 Circle 75 Parkway
Atlanta, Georgia 30339
Tel (770) 953-6866 Fax (770) 952-6921
ACCOUNTANTS' REVIEW REPORT
To the Board of Directors
JMJ Technologies, Inc.
Atlanta, Georgia
We have reviewed the accompanying balance sheet of JMJ Technologies, Inc. as of September 30, 2007 and the related statement of operations and accumulated deficit and cash flows for the nine months then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. All information included in these financial statements is the representation of the management of the Company.
A review consists principally of inquiries of Company personnel and analytical procedures applied to financial data. It is substantially less in scope than an audit in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses from operations and has a net capital deficiency, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ Powers Farmer & Co., P.C.
Atlanta, Georgia
January 9, 2008
JMJ TECHNOLOGIES, INC. | |||
BALANCE SHEET | |||
September 30, 2007 | |||
ASSETS | |||
CURRENT ASSETS: | |||
Cash | $ | 57,733 | |
Accounts receivable - net | 252,706 | ||
Total current assets | 310,439 | ||
PROPERTY AND EQUIPMENT - net | 9,990 | ||
OTHER ASSETS: | |||
Rent deposit | 9,481 | ||
TOTAL | $ | 329,910 | |
LIABILITIES AND SHAREHOLDERS' DEFICIT | |||
CURRENT LIABILITIES: | |||
Accounts payable | $ | 226,774 | |
Accrued rent | 8,982 | ||
Accrued salaries | 58,530 | ||
Accrued vacation | 37,820 | ||
Customer prepayments | 601,125 | ||
Credit cards and revolving lines of credit | 164,469 | ||
Payroll taxes payable | 1,156,333 | ||
Sales tax payable | 159,292 | ||
Notes payable | 773,128 | ||
Loans payable to officers | 83,340 | ||
Shareholder loans | 156,858 | ||
Total current liabilities | 3,426,651 | ||
LONG-TERM LIABILITIES: | |||
Accrued rent | 8,233 | ||
Total long-term liabilities | 8,233 | ||
SHAREHOLDERS' DEFICIT: | |||
Common stock, $.01 par value; 10,000,000 shares | |||
authorized; 7,616,016 shares issued and outstanding | 76,160 | ||
Additional paid-in capital | 1,653,800 | ||
Accumulated deficit | (4,834,934 | ) | |
Total shareholders' deficit | (3,104,974 | ) | |
TOTAL | $ | 329,910 | |
JMJ TECHNOLOGIES, INC. | |||
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT | |||
For the Nine Months Ended September 30, 2007 | |||
REVENUES | $ | 1,266,306 | |
COST OF REVENUES | 129,334 | ||
GROSS PROFIT | 1,136,972 | ||
GENERAL AND ADMINISTRATIVE EXPENSES | |||
Payroll expense | 827,687 | ||
Rent expense | 86,320 | ||
Employee benefits | 64,834 | ||
Penalties | 46,962 | ||
Travel and entertainment | 44,504 | ||
Professional fees | 41,941 | ||
Utilities and communications | 23,562 | ||
Office expense | 15,748 | ||
Bank service charges | 11,778 | ||
Conferences and tradeshows | 10,210 | ||
Dues and subscriptions | 9,282 | ||
Depreciation and amortization | 8,128 | ||
Postage and shipping | 6,367 | ||
Insurance | 5,284 | ||
Education and training | 4,334 | ||
Bad debt expense | 3,423 | ||
Lease - van | 3,269 | ||
Other taxes | 1,478 | ||
Total general and administrative expenses | 1,215,111 | ||
LOSS FROM OPERATIONS | (78,139 | ) | |
OTHER INCOME (EXPENSE) | |||
Interest expense | (156,765 | ) | |
NET LOSS | (234,904 | ) | |
ACCUMULATED DEFICIT, BEGINNING OF YEAR | (4,600,030 | ) | |
ACCUMULATED DEFICIT, END OF YEAR | $ | (4,834,934 | ) |
JMJ TECHNOLOGIES, INC. | |||
STATEMENT OF CASH FLOWS | |||
For the Nine Months Ended September 30, 2007 | |||
OPERATING ACTIVITIES: | |||
Net loss | $ | (234,904 | ) |
Adjustments to reconcile net income to net cash | |||
provided (used) by operating activities: | |||
Depreciation and amortization | 8,128 | ||
Changes in operating assets and liabilities: | |||
Accounts receivable | 7,479 | ||
Accounts payable | (42,443 | ) | |
Bank overdraft | (25,070 | ) | |
Accrued rent | (6,736 | ) | |
Accrued salaries | 9,100 | ||
Accrued vacation | (7,500 | ) | |
Customer prepayments | 147,966 | ||
Credit cards and revolving lines of credit | (25,323 | ) | |
Accrued interest included in notes payable | 13,739 | ||
Payroll taxes payable | 40,107 | ||
Sales tax payable | 16,513 | ||
NET CASH USED BY OPERATING ACTIVITIES | (98,944 | ) | |
INVESTING ACTIVITIES: | |||
- 0 - | |||
NET CASH USED BY INVESTING ACTIVITIES | - 0 - | ||
FINANCING ACTIVITIES: | |||
Net proceeds on shareholder loans | 10,245 | ||
Net proceeds on credit cards and lines of credit | 198,602 | ||
Payments on loans payable short-term | (53,150 | ) | |
Proceeds from issuance of stock | 980 | ||
NET CASH USED BY FINANCING ACTIVITIES | 156,677 | ||
NET INCREASE IN CASH AND EQUIVALENTS | 57,733 | ||
CASH AND EQUIVALENTS, BEGINNING OF YEAR | - 0 - | ||
CASH AND EQUIVALENTS, END OF YEAR | $ | 57,733 | |
JMJ TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
For the Nine Months Ended September 30, 2007
1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business
JMJ Technologies, Inc. (the "Company") provides services to medical clients and resale suppliers throughout the United States. The primary service provided is the development, installation and customization of medical practice management software. This was the Company's thirteenth year of operations.
B. Estimates
The preparation of 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, 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.
C. Revenues and Cost of Revenues Recognition
The Company recognizes revenues in accordance with Statement of Position (SOP) 97-2 as amended by SOP 98-9. Revenue from software license agreements is recognized when persuasive evidence of an agreement exists, delivery of the software has occurred, the fee is fixed or determinable, and collectibility is probable. In software arrangements that include more than one element, the Company allocates the total arrangement fee among elements based on the relative fair value of the elements.
License revenue allocated to software products generally is recognized upon delivery of the products or deferred and recognized in future periods to the extent that an arrangement includes one or more elements to be delivered at a future date and for which fair values have not been established. Revenue allocated to maintenance is recognized ratably over the maintenance term and revenue allocated to training and other service elements is recognized as the services are performed. If evidence or fair value does not exist for all elements of a license agreement and post customer support (PCS) is the only undelivered element, then all revenue from the license arrangement is recognized ratably over the term of the agreement as license revenue. If evidence of fair value of all undelivered elements exists but evidence does not exist for one or more delivered elements, then revenue is recognized using the residual method. Under the residual method, the fair value of the undelivered elements is deferred and the remaining portion of the arrangement fee is recognized as revenue.
D. Concentrations of Credit Risks
The Company grants credit to its customers during the normal course of business and performs ongoing credit evaluations of its customers' financial condition. The Company does not believe that it is exposed to any significant credit risk in connection with the extension of credit to its customers.
The Company maintains its cash balances at a financial institution in Atlanta, Georgia. The balance at this institution is insured by the Federal Deposit Insurance Corporation up to $100,000. At September 30, 2007, the Company did not have any uninsured cash balances.
E. Allowance for Bad Debts
The Company provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in the collection of all receivables. The estimated losses are based on managements' evaluation of outstanding accounts receivables. Allowance for bad debts was $47,304 at September 30, 2007.
F. Property and Equipment
Property and equipment are recorded at cost. When assets are retired or otherwise disposed of, the related cost and the accumulated depreciation and amortization are removed from the accounts, and any resulting gain or loss is reflected in the statement of operations and retained earnings/deficit. Depreciation and amortization for all classes of property and equipment are determined using the straight-line method over the estimated useful lives of the assets as follows:
Estimated Life | ||
Furniture and fixtures | 10 years | |
Machinery and equipment | 5 years | |
Vehicles | 5 years |
Depreciation expense was $8,128 for the nine months ended September 30, 2007.
G. Income Taxes
The Company recognizes income and expenses on the accrual method for financial reporting purposes and for income tax reporting purposes.
The effect of temporary differences giving rise to the deferred tax asset is as follows:
Deferred tax asset: | ||||||
Net operating loss carried forward | $ | 930,237 | ||||
Deferred tax liability: | ||||||
Excess of financial statement over tax basis | ||||||
Of property and equipment | (1,657 | ) | ||||
Valuation allowance for deferred tax asset |
| (928,580 | ) | |||
Net deferred tax asset | $ | 0 |
| |||
There is no deferred tax asset listed in these financial statements. SFAS No. 109 specifies that a deferred tax asset is to be reduced by valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. Due to the Company's current economic condition, the valuation allowance has eliminated the deferred tax asset. The Company will continue to assess the valuation allowance and to the extent it is determined that such allowance is no longer required; the tax benefit of the remaining net deferred tax asset will be recognized in the future.
The Company has net operating losses to offset future taxable income of approximately $3,000,766. The carryover periods to utilize the net operating losses will expire between the years 2020 to 2027.
H. Cash Flow Information
The Company considers for purposes of the statement of cash flows, cash equivalents including time deposits, certificates of deposit, and all highly liquid debt investments with original maturities of three months or less.
Net cash used by operating activities include cash payments for interest of $76,560.
2. COMMON STOCK
The Company has 10,000,000 shares of $.01 par value common stock authorized, with 7,616,016 shares issued and 7,616,016 shares outstanding. The Company issued an additional 97,973 of common stock during the nine months ended September 30, 2007.
3. RELATED PARTY TRANSACTIONS
The Company has the following loans from a shareholder:
An unsecured demand loan with no stated rate of interest. |
| $ | 82,106 | |||
Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 29.99%. | 14,514 | |||||
Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 24.00%. | 3,069 | |||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 25.90%. | 14,403 | |||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 28.90%. | 18,125 | |||||
Exclusive use of a shareholder's line of credit; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 26.90%. | 6,638 | |||||
Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 30.24%. | 10,856 | |||||
Exclusive use of a shareholder's credit card; total credit line | ||||||
available is $0.00; and the annual percentage rate | ||||||
of interest is 30.49%. | 7,147 | |||||
Total |
| $ | 156,858 | |||
The Company received the following loans from an officer:
Note payable to an officer of the Company. Interest is accrued | |||||||||
at the rate of 10% annually. The note was due on August 1, | |||||||||
2007. The loan balance reflects principal of $28,000 and accrued | |||||||||
interest of $3,874. | $ | 31,874 | |||||||
Note payable to an officer of the Company. Interest is accrued | |||||||||
at the rate of 10% annually. The note was due on August 1, | |||||||||
2007. The loan balance reflects principal of $32,500 and accrued | |||||||||
interest of $3,793. | 36,293 | ||||||||
Note payable to an officer of the Company. Interest is accrued | |||||||||
at the rate of 10% beginning February 20, 2007. The note was |
| ||||||||
due on August 1, 2007. The loan reflects principal of $5,500 | |||||||||
and accrued interest of $367. |
| 5,867 | |||||||
An undocumented loan from an officer of the Company accruing | |||||||||
interest at the rate of 18% annually. The loan reflects principal | |||||||||
of $8,301 and accrued interest of $1,005. |
| 9,306 | |||||||
$ | 83,340 | ||||||||
The Company leases a vehicle from a shareholder on a month to month basis. The rent expense from this lease totaled $3,269 for the nine months ended September 30, 2007.
4. NOTES PAYABLE
Notes payable consisted of the following at September 30, 2007:
Note payable to a financial institution is a $247,584 revolving | ||||
line of credit. Interest is payable monthly at an annual rate of | ||||
prime plus 2.00%. On September 30, 2007 the interest rate on | ||||
this loan was 10.25%. The maturity date of the loan is April 1, | ||||
2008. The loan is collateralized by the Company's accounts | ||||
receivable; property and equipment; the personal guaranties | ||||
of certain shareholders and current and former officers; real | ||||
estate owned by an officer/shareholder; and a publicly traded | ||||
company. | $ | 247,584 | ||
An undocumented loan with no stated rate of interest from | ||||
a corporation with the intention to purchase JMJ. The | ||||
corporation was unable to complete the purchase. On | ||||
December 18, 2007 a settlement was reached with the | ||||
corporation on payment of the loan. See Note 12 for | ||||
additional information. | 236,800 | |||
An undocumented loan with no stated rate of interest from | ||||
a corporation who acquired the assets of JMJ in October | ||||
of 2007. See Note 12 for additional information. | 100,500 | |||
Note payable to an individual. Interest is accrued at the rate of | ||||
of $2.00 per day. The loan balance reflects principal of $5,000 | ||||
and accrued interest of $3,546. |
| 8,546 | ||
An undocumented loan from an individual. The original principal | ||||
balance was $35,000. Interest is accrued at the rate of 10% | ||||
annually. The loan reflects principal of $24,024 and accrued | ||||
interest of $325. | 24,349 |
| ||
Note payable to an individual. The original principal balance | ||||
was $20,000. Interest is accrued at the rate of 10% annually. | ||||
The loan reflects principal of $9,603 and accrued interest of | ||||
$1,500. | 11,103 | |||
An undocumented loan from an individual. Interest is accrued at | ||||
the rate of 10% annually. The loan balance reflects principal of | ||||
$10,000 and accrued interest of $2,452. |
| 12,452 | ||
An undocumented loan from an individual. Interest is accrued at | ||||
the rate of 10% annually. The loan reflects principal of $12,000 and | ||||
accrued interest of $7,049. | 19,049 | |||
Note payable to an individual. Interest is accrued at the rate of | ||||
10% annually. The loan balance reflects principal of $75,000 and | ||||
accrued interest of $27,750. |
| 102,750 | ||
An undocumented loan from an individual. Interest is accrued at | ||||
the rate of 10% annually. The loan balance reflects principal of | ||||
$9,038 and accrued interest of $957. |
| 9,995 | ||
Total | $ | 773,128 | ||
5. CREDIT CARDS AND REVOLVING LINES OF CREDIT
Credit card from a financial institution; credit limit is $0.00; | ||||
and interest rate is 31.43%. | 14,541 | |||
Credit card from a financial institution; there are no preset | ||||
credit limits; and balances are required to be paid in full. This | ||||
account was turned over to a collection agency for collection. | 57,114 | |||
Credit card from a financial institution; credit limit is $2,900; | ||||
and interest rate is 19.56%. | 816 | |||
Credit card from a financial institution; credit limit is $0.00; | ||||
and interest rate is 29.99%. | 12,095 | |||
Credit card from a financial institution; credit limit is $8,000; | ||||
and interest rate is 32.24%. | 7,448 | |||
Credit card from a financial institution; credit limit is $5,000; | ||||
and interest rate is 32.24%. | 5,300 | |||
Revolving line of credit from a corporation to be utilized for | ||||
purchases of computers and related equipment; credit limit | ||||
is $0.00; and interest rate is 12.99% |
| 13,560 | ||
Revolving line of credit from a corporation to be utilized for | ||||
purchases of computers and related equipment; credit limit | ||||
is $0.00; and interest rate is 16.99%. |
| 24,182 | ||
Credit card from a financial institution; credit limit is $0.00; | ||||
and interest rate is 23.98%. | 9,412 | |||
Credit card from a corporation to be utilized for purchases at | ||||
the corporation's retail locations; credit limit is $0.00; and | ||||
interest rate is 12.00%. | 1,439 | |||
Credit card from a corporation to be utilized for purchases at | ||||
the corporation's retail locations; credit limit is $0.00; and | ||||
interest rate is 20.80%. | 3,488 | |||
Credit card from a corporation to be utilized for purchases at | ||||
the corporation's retail locations; credit limit is $0.00; and | ||||
interest rate is 26.65%. | 5,822 | |||
Credit card from a corporation to be utilized for purchases at | ||||
the corporation's retail locations; credit limit is $0.00; and | ||||
interest rate is 19.80%. | 5,464 | |||
Credit card from a financial institution; credit limit is $0.00; and | ||||
interest rate is 35.18% | 2,806 | |||
Credit card from a financial institution; credit limit is $0.00; and | ||||
interest rate is 30.24%. | 981 | |||
Total |
| $ | 164,469 | |
6. ACCOUNTS RECEIVABLE - NET
Accounts receivable consisted of the following at September 30, 2007: | ||||||||
Accounts receivable |
| $ | 300,010 |
| ||||
Less allowance for doubtful accounts |
| 47,304 | ||||||
Accounts receivable - net |
| $ | 252,706 | |||||
7. PROPERTY AND EQUIPMENT - NET
Property and equipment consisted of the following at September 30, 2007:
Computer equipment |
| $ | 67,509 | |||||||
Furniture and fixtures |
| 544 | ||||||||
Software | 38,554 | |||||||||
Total |
| 106,607 |
| |||||||
Less accumulated depreciation and amortization |
| 96,617 | ||||||||
Property and equipment - net |
|
| $ | 9,990 | ||||||
8. COMMITMENTS
The Company subleases office space under a non-cancellable operating lease agreement which commenced on July 1, 2006 and expires on August 31, 2009. Future minimum lease payments are due as follows:
Years ending: |
| December 31, 2007 |
| $ | 28,442 | ||||||
December 31, 2008 | 113,768 | ||||||||||
December 31, 2009 | 75,845 | ||||||||||
Total | $ | 218,055 |
| ||||||||
9. CONTINGENCIES
On June 2, 2006 the Company filed a voluntary petition under chapter 11 of the United States Bankruptcy Code with the Court. The petition was filed to assist the Company with negotiating a payment plan with the Internal Revenue Service. After filing the petition the Internal Revenue Service agreed to an installment repayment plan. The Company then obtained the dismissal of the bankruptcy case on June 27, 2006. The Company made five $15,000 payments during 2006 to the Internal Revenue Service and four $15,000 payments during the first seven months of 2007. The Company then discontinued payments under the installment agreement. In October of 2007 a new installment agreement was allowed by the Internal Revenue Service. The new agreement requires monthly payments of $20,000. The Company made three $20,000 payments by the end of 2007.
Employees of the Company represented the Company in the above legal matters.
10. STOCK OPTION PLAN
In 1998, the Company instituted a stock option plan for officers, employees, directors, advisors and consultants. Incentive stock options may be awarded to all employees of the Company who owns less than 10% of the outstanding common stock. The exercise price of an incentive stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Incentive stock options can not be exercised until the employee has completed a year of service with the Company.
Non-qualified stock options may be awarded to non-employees who own less than 10% of the outstanding common stock of the Company. The exercise price of a non-qualified stock option granted is the fair market value of the common stock as of the grant date. No option shall be granted for a term in excess of ten years from the date of the grant. Non-qualified stock options can not be exercised until the non-employee has maintained a one year relationship with the Company.
The maximum number of shares of common stock that can be issued under the plan is 3,000,000. As of September 30, 2007, 2,356,482 shares of common stock had been issued under the stock option plan.
As of June 30, 2006, no additional options were issued under the plan. | ||||
Total stock options accrued, vested and unexpired as of 12/31/06 |
| 97,973 | ||
Stock options exercised during the nine months ended September 30, 2007 |
| (97,973 | ) | |
Stock options that accrued and vested during the nine months ended | ||||
September 30, 2007 | 0.00 | |||
Total stock options accrued, vested and unexpired as of 9/30/07 |
| 0.00 | ||
11. GOING CONCERN
As shown in the accompanying financial statements, the Company incurred a net loss of $234,904 during the nine months ended September 30, 2007, and as of that date the Company's current liabilities exceeded its current assets by $3,116,212. These factors raise substantial doubt about its ability to continue as a going concern. Refer to Note 12 for additional information that impact the going concern issue.
12. SUBSEQUENT EVENTS
In June of 2006, the Company entered into a Letter of Intent to be acquired by a corporation. After several extensions of the time within which the parties were to have completed the contemplated merged, JMJ refused in March, 2007 to extend further the time within which the parties were to merge. From June of 2006 through March of 2007 JMJ received loans from its intended acquirer. In December of 2007 a settlement of loan was reached. The Company was required to pay $30,000 and assume a note for $105,164. This transaction will resulted in JMJ recognizing additional income from the forgiveness of debt of $94,636.
In March of 2007, the Company entered into a Letter of Intent to be acquired by another corporation. Following the execution of the Letter of Intent, the acquiring corporation loaned the Company $100,500 through early May, 2007. The Company and the acquiring corporation then negotiated a further loan of up to $1.25 million to the Company, but that loan was not funded. After the Company received approval (on July 10, 2007) from its shareholders to the proposed merger with the acquiring corporation (or its subsidiary), the acquiring corporation declined to consummate the merger. In September of 2007, the acquiring corporation proposed that it purchase the assets of the Company. The Company negotiated the terms of the asset sale and obtained the approval of its shareholders for such sale on September 30, 2007. The sale of assets, pursuant to the Asset Purchase Agreement and accompanying documents, was made effective October 1, 2007. In exchange for the assets of the Co mpany, the acquiring corporation and its newly-created subsidiary agreed to tender to the Company $25,000 in cash, a promissory note (secured by 500,000 restricted shares of the acquiring corporation) in the amount of $475,000 payable over the course of 10 months; restricted shares of the common stock of the acquiring corporation equal to 12.5 percent of the total outstanding shares of the acquiring corporation as of the effective date of the purchase (which amounts to 4,862,067 shares); 1.6 million warrants redeemable at the cost of a penny per share for common shares of the acquiring corporation; and an agreement to register the shares (including the shares underlying the warrants) within 180 days of the effective date of the purchase. Effective December 6, 2007, the Company agreed to lockup (that is, not offer for sale) its shares of the acquiring corporation for a period of 90 days following the registration of certain shares of acquiring corporation's common stock underlying the issuance of $2,225 ,000 in debentures to third parties, which issuance occurred effective December 6, 2007. Accordingly, the Company now expects that it may be able to offer some of its shares of acquiring corporation for sale in or about June, 2008.
The Company disclosed the anticipated asset sale transaction to the financial institution in September of 2007 and converted its existing line of credit of $247,584 to a note due on or about April 1, 2008. This note was cosigned by acquiring corporation and secured by the personal guaranties of certain shareholders and former officers of the Company, certain real property owned by several of the same persons, and the assets of the Company.
The Company was unable to pay on August 1, 2007 the three loans listed under related party transactions as notes payable to an officer with principal amounts of $28,000, $32,500, and $5,500. The notes are continuing to accrue interest at the rate of 10% annually.
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AS OF AND FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006 AND NINE MONTH INTERIM PERIOD ENDED SEPTEMBER 30, 2007
The following pro forma unaudited consolidated financial information gives effect to the purchase by WiFiMed Holdings Company, Inc. ("WifiMed Holdings") of the assets of JMJ Technologies, Inc. ("JMJ"), net of the assumption of certain liabilities. The periods presented are the Company's latest fiscal year ended December 31, 2006 and its most recent interim period for the nine months ended September 30, 2007. The Company's 2006 financial statements filed on Form 10-KSB were those of Bellacasa Productions, Inc. ("Bellacasa") prior to its March 7, 2007 recapitalization with WiFiMed, Inc. Accordingly, the historical financial statements for 2006 include the separate financial statements of those two entities while those of 2007 include those of the surviving entity, WiFiMed, Inc. The financial statements of Bellacasa have not been carried forward. The 2006 pro forma financial statements include an adjustment to eliminate the accounts of Bellacasa as though the March 7, 2007 recapitalization h ad occurred on January 1, 2006. The interim period ended September 30, 2007 reflects the effect of the March 7, 2007 recapitalization and, therefore, does not require a similar adjustment.
The pro forma balance sheet and statement of operations assumes the transactions occurred as of January 1, 2006. The pro forma unaudited consolidated financial information is presented for illustrative purposes only. It is not necessarily indicative of the operating results or financial position that would have occurred if the asset sale and share exchange had been consummated at the beginning of the period indicated, nor is such information indicative of the future results or financial position of WiFiMed Holdings after the asset sale and share exchange. Material nonrecurring charges or credits and related tax effects which result directly from the transactions and may be included in the income of the registrant within the twelve months succeeding the transaction are not reflected in the condensed pro forma income statements. Pro forma weighted average shares have been calculated as though the transactions had occurred on January 1, 2006. The Company does not contemplate the adoption of a change in a ccounting principle from those contained and disclosed in the historical financial statements.
Adjustment 1
Recapitalization: On March 7, 2007, Bellacasa, now known as WiFiMed Holdings Company, Inc., consummated a merger transaction with WiFiMed, Inc. Pursuant to the merger, WiFiMed, Inc. merged with and into a subsidiary of Bellacasa. For financial reporting purposes, WiFiMed, Inc. was treated as the acquiring company and the transaction was accounted for as a recapitalization. At the date of recapitalization, March 7, 2007, Bellacasa was a public shell company, defined as an inactive, publicly-quoted company with nominal assets and liabilities. On March 7, 2007 pursuant to a stock exchange agreement and share exchange between Bellacasa, and the shareholders of WiFiMed, Inc., Bellacasa purchased all of the outstanding shares of WiFiMed, Inc. in exchange for the issuance of 17,619,672 shares of its common stock directly to the WiFiMed, Inc. shareholders. Bellacasa was the legal acquirer in the combination. WiFiMed, Inc. had substantially more assets (Bellacasa had virtually no assets, tangible or intangible, or operating revenue). The pro forma financial statements have been adjusted to reflect the recapitalization and are those of WiFiMed, Inc. carried forward at historical cost. The pro forma consolidated financial statements for the year ended December 31, 2006 include WiFiMed, Inc.'s results of operations. The results of operations of Bellacasa are not carried forward.
Adjustment 2
Purchase of net assets of JMJ: On October 1, 2007, WiFiMed Holdings purchased the assets of JMJ. In exchange for the assets, WiFiMed Holdings advanced $25,000 in cash; issued a promissory note in the amount of $475,000 payable over ten months; issued restricted shares of its common stock equal to 12.5 percent of the total outstanding shares of the acquiring corporation as of the effective date of the purchase (which amounts to 4,862,067 shares); and issued 1.6 million warrants exercisable at a $0.01 per share. In addition, WiFiMed Holdings also assumed liabilities such as customer deposits and accrued rent. A summary of the calculations resulting in the adjustment is as follows:
Consideration: | Shares | Value | |||
Common stock (1) | 4,862,067 | $3,986,895 | |||
Warrants (2) | 1,600,000 | 1,296,000 | |||
Total non-cash consideration | 5,282,895 | ||||
Other consideration: | |||||
Note payable | 475,000 | ||||
Assumption of certain liabilities: | |||||
Customer deposits | 601,125 | ||||
Accrued rent | 8,233 | ||||
Total consideration | 6,367,253 | ||||
Assets received in exchange: | |||||
Cash | 25,000 | ||||
Accounts receivable | 252,706 | ||||
Property & equipment | 9,990 | ||||
Rent security deposit | 9,481 | ||||
Total identifiable assets | 297,177 | ||||
Consideration in excess of identifiable assets | $6,070,076 | ||||
Valuation Notes: | |||||
(1) common stock valued at market quote of $0.82 per share | |||||
(2) warrants valued at $0.81 using Black-Scholes pricing model and assumptions as follows: | |||||
Exercise price | $0.01 | ||||
Stock price at date of grant | $0.82 | ||||
Risk free interest rate | 4.59% | ||||
Volatility | 12.00% | ||||
Life (in years) | 5 | ||||
Dividend rate | 0.00% | ||||
Adjustment 3
Effect on interest expense as a result of loans not assumed and replaced with $475,000 of acquisition debt: Interest expense reflected on the historical financial statements of JMJ are charges for notes, loans and accrued payroll taxes that were not assumed through the asset purchase agreement. Pro forma interest expense was reduced by the interest related to those items and correspondingly increased to reflect interest of 10% on the purchase note of $475,000. A summary of the adjustment is as follows:
2006 | 2007 | |||
Penalties-IRS | $ 88,803 | $ 46,962 | ||
Interest | 197,369 | 156,765 | ||
Total expense reported in historical results of operations | 286,172 | 203,727 | ||
Estimated interest a 10% on note payable | 47,500 | 35,625 | ||
Pro Forma adjustment | $(238,672) | $(168,102) | ||
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET SEPTEMBER 30, 2007
Historical Condensed Balance | Pro Forma | |||||||||||||||
Issuer | Business | Combined | Pro Forma | |||||||||||||
Purchase of | ||||||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash | $ 0 | $ 57,733 | $ 57,733 | $(32,733) | $ 25,000 | |||||||||||
Accounts receivable, net | 360,237 | 252,706 | 612,943 | 0 | 612,943 | |||||||||||
Deferred cost of revenue | 85,365 | 0 | 85,365 | 0 | 85,365 | |||||||||||
Notes receivable | 105,359 | 0 | 105,359 | 0 | 105,359 | |||||||||||
Prepaid expenses | 21,531 | 0 | 21,531 | 0 | 21,531 | |||||||||||
Total current assets | 572,492 | 310,439 | 882,931 | (32,733) | 850,198 | |||||||||||
Property and equipment, net | 46,835 | 9,990 | 56,825 | 0 | 56,825 | |||||||||||
Security deposits | 0 | 9,481 | 9,481 | 0 | 9,481 | |||||||||||
Excess purchase price over identifiable assets | 6,070,076 | 6,070,076 | ||||||||||||||
619,327 | 329,910 | 949,237 | 6,037,343 | 6,986,580 | ||||||||||||
LIABILITIES & STOCKHOLDERS' EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Trade accounts payable | 704,835 | 226,774 | 931,609 | (226,774) | 704,835 | |||||||||||
Accrued expenses | 390,704 | 264,624 | 655,328 | (264,624) | 390,704 | |||||||||||
Accrued payroll taxes | 1,156,333 | 1,156,333 | (1,156,333) | 0 | ||||||||||||
Deferred revenue | 444,635 | 601,125 | 1,045,760 | 0 | 1,045,760 | |||||||||||
Short terms notes and revolving credit lines | 367,617 | 937,597 | 1,305,214 | (937,597) | 367,617 | |||||||||||
Loans and notes payable | 0 | 0 | 0 | 475,000 | 475,000 | |||||||||||
Loans and notes payable related parties | 169,117 | 240,198 | 409,315 | (240,198) | 169,117 | |||||||||||
Other current liabilities | 7,204 | 8,233 | 15,437 | 0 | 15,437 | |||||||||||
Total current liabilities | 2,084,112 | 3,434,884 | 5,518,996 | (2,350,526) | 3,168,470 | |||||||||||
Long-term liabilities: | ||||||||||||||||
Deferred compensation | 12,175 | 0 | 12,175 | 0 | 12,175 | |||||||||||
Stockholders' equity: | ||||||||||||||||
Common stock, $0.0001 par value | 2,502 | 76,160 | 78,662 | (75,674) | 2,988 | |||||||||||
Additional paid in capital | 4,686,205 | 1,653,800 | 6,340,005 | 3,628,609 | 9,968,614 | |||||||||||
Retained deficit | (6,165,667) | (4,834,934) | (11,000,601) | 4,834,934 | (6,165,667) | |||||||||||
Total stockholders' equity | (1,476,960) | (3,104,974) | (4,581,934) | 8,387,869 | 3,805,935 | |||||||||||
$619,327 | $329,910 | $949,237 | $6,037,343 | $6,986,580 | ||||||||||||
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTH INTERIM PERIOD ENDED SEPTEMBER 30, 2007
(excludes all nonrecurring items)
Historical Condensed | Pro Forma | Nine Months | |||||||||||||||
Issuer | Business | Combined | Adjustment ( 3) | ||||||||||||||
Replacement | |||||||||||||||||
Revenue | $ 0 | $1,266,306 | $1,266,306 | $2,499,879 | |||||||||||||
Cost of revenue | 6,766 | 129,334 | 136,100 | 265,434 | |||||||||||||
Gross margin | (6,766) | 1,136,972 | 1,130,206 | 2,234,445 | |||||||||||||
Costs and expenses: | |||||||||||||||||
General & administrative | 1,787,735 | 1,206,983 | 2,994,718 | 4,201,701 | |||||||||||||
Research & development | 179,559 | 0 | 179,559 | 179,559 | |||||||||||||
Depreciation | 14,955 | 8,128 | 23,083 | 31,211 | |||||||||||||
Interest, net of interest income | 21,336 | 156,765 | 178,101 | (168,102) | 166,764 | ||||||||||||
Total costs and expenses | 2,003,585 | 1,371,876 | 3,375,461 | (168,102) | 4,579,235 | ||||||||||||
Other income / (expense) | 0 | 0 | 0 | 0 | |||||||||||||
Loss from continuing operations before income taxes | (2,010,351) | (234,904) | (2,245,255) | 168,102 | (2,344,790) | ||||||||||||
Income taxes | 0 | 0 | 0 | 0 | |||||||||||||
Net loss from continuing operations | $(2,010,351) | $(234,904) | $(2,245,255) | $168,102 | $(2,344,790) | ||||||||||||
Basic and diluted loss per share from continuing operations | $ (0.09) | $ (0.03) | $ (0.07) | $ (0.08) | |||||||||||||
Weighted average number of shares outstanding | 22,836,886 | 7,616,016 | 30,452,902 | 28,644,574 | |||||||||||||
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET DECEMBER 31, 2006
Historical Condensed | Pro Forma Adjustments | Dec. 31, 2006 | |||||||||||||||||||||
Adjustment 1 | Adjustment 2 | ||||||||||||||||||||||
Effect of | Purchase of net | ||||||||||||||||||||||
Issuer | Businesses to be Acquired | ||||||||||||||||||||||
Bellacasa | WiFIMed, Inc | JMJ | Combined | ||||||||||||||||||||
ASSETS | |||||||||||||||||||||||
Current assets: | |||||||||||||||||||||||
Cash | $ 5,822 | $ 0 | $ 0 | $ 5,822 | $ (5,822) | $(32,733) | $(32,733) | ||||||||||||||||
Accounts receivable, net | 0 | 360,237 | 260,186 | 620,423 | 0 | 620,423 | |||||||||||||||||
Deferred cost of revenue | 0 | 37,730 | 0 | 37,730 | 0 | 37,730 | |||||||||||||||||
Prepayments under product supply agreement | 140,000 | 0 | 0 | 140,000 | (140,000) | 0 | 0 | ||||||||||||||||
Prepaid expenses | 34,754 | 24,838 | 0 | 59,592 | (34,754) | 0 | 24,838 | ||||||||||||||||
Total current assets | 180,576 | 422,805 | 260,186 | 863,567 | (180,576) | (32,733) | 650,258 | ||||||||||||||||
Property and equipment, net | 0 | 38,617 | 18,117 | 56,734 | 0 | 56,734 | |||||||||||||||||
Security deposits | 0 | 0 | 9,481 | 9,481 | 0 | 9,481 | |||||||||||||||||
Excess purchase price over identifiable assets | 6,070,076 | 6,070,076 | |||||||||||||||||||||
180,576 | 461,422 | 287,784 | 929,782 | (180,576) | 6,037,343 | 6,786,549 | |||||||||||||||||
LIABILITIES & STOCKHOLDERS' EQUITY | |||||||||||||||||||||||
Current liabilities: | |||||||||||||||||||||||
Trade accounts payable | 46,980 | 400,089 | 294,287 | 741,356 | (46,980) | (226,774) | 467,602 | ||||||||||||||||
Accrued expenses | 20,850 | 237,169 | 246,511 | 504,530 | (20,850) | (264,624) | 219,056 | ||||||||||||||||
Accrued payroll taxes | 1,116,226 | 1,116,226 | (1,156,333) | (40,107) | |||||||||||||||||||
Customer deposits | 0 | 444,635 | 453,159 | 897,794 | 0 | 897,794 | |||||||||||||||||
Short term notes and revolving credit lines | 0 | 169,916 | 817,911 | 987,827 | (937,597) | 50,230 | |||||||||||||||||
Loans and notes payable | 0 | 0 | 0 | 475,000 | 475,000 | ||||||||||||||||||
Loans and notes payable related parties | 50,000 | 38,000 | 215,771 | 303,771 | (240,198) | 63,573 | |||||||||||||||||
Other current liabilities | 0 | 14,969 | 14,969 | 0 | 14,969 | ||||||||||||||||||
Total current liabilities | 117,830 | 1,289,809 | 3,158,834 | 4,566,473 | (67,830) | (2,350,526) | 2,148,117 | ||||||||||||||||
Stockholders' equity: | |||||||||||||||||||||||
Preferred stock, $0.01 par value | 0 | 38,919 | 38,919 | (38,919) | 0 | ||||||||||||||||||
Common stock, $0.0001 par value | 3,948 | 39,495 | 75,180 | 118,623 | (115,680) | 2,943 | |||||||||||||||||
Additional paid in capital | 796,803 | 3,248,506 | 1,653,800 | 5,699,109 | (850,751) | 3,707,534 | 8,555,892 | ||||||||||||||||
Retained deficit | (738,005) | (4,155,307) | (4,600,030) | (9,493,342) | 738,005 | 4,834,934 | (3,920,403) | ||||||||||||||||
Total stockholders' equity | 62,746 | (828,387) | (2,871,050) | (3,636,691) | (112,746) | 8,387,869 | 4,638,432 | ||||||||||||||||
$180,576 | $461,422 | $287,784 | $929,782 | ($180,576) | $6,037,343 | $6,786,549 | |||||||||||||||||
PRO FORMA UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2006
(excludes all nonrecurring items)
Historical Condensed | Pro Forma Adjustments | Pro Forma | |||||||||||||||||
Adjustment 1 | Adjustment 3 | ||||||||||||||||||
Effect of | Replacement of | ||||||||||||||||||
Issuer | Businesses to be Acquired | ||||||||||||||||||
Bellacasa | WiFIMed, Inc. | JMJ | Combined | ||||||||||||||||
Revenue | $ 0 | $0 | $2,134,715 | $2,134,715 | $0 | $2,134,715 | |||||||||||||
Cost of revenue | 0 | 0 | 682,941 | 682,941 | 0 | 682,941 | |||||||||||||
Gross margin | 0 | 0 | 1,451,774 | 1,451,774 | 0 | 1,451,774 | |||||||||||||
Costs and expenses: | |||||||||||||||||||
General & administrative | 159,213 | 1,372,690 | 2,105,981 | 3,637,884 | (159,213) | 3,478,671 | |||||||||||||
Research & development | 0 | 219,259 | 0 | 219,259 | 219,259 | ||||||||||||||
Depreciation | 569 | 16,965 | 14,356 | 31,890 | (569) | 31,321 | |||||||||||||
Interest, net of interest income | 2,940 | 30,260 | 197,369 | 230,569 | (2,940) | (238,672) | (11,043) | ||||||||||||
Total costs and expenses | 162,722 | 1,639,174 | 2,317,706 | 4,119,602 | (162,722) | (238,672) | 3,718,208 | ||||||||||||
Other income / (expense) | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
Loss from continuing operations before income taxes | (162,722) | (1,639,174) | (865,932) | (2,667,828) | 162,722 | 238,672 | (2,266,434) | ||||||||||||
Income taxes | 0 | 0 | 0 | 0 | 0 | ||||||||||||||
Net loss from continuing operations | $(162,722) | $(1,639,174) | $(865,932) | $(2,667,828) | $162,722 | $238,672 | $(2,266,434) | ||||||||||||
Basic and diluted loss per share | $ (0.04) | $ (0.09) | $ (0.12) | $ (0.09) | $ (0.09) | ||||||||||||||
Weighted average number of shares outstanding | 3,933,400 | 17,619,672 | 7,518,043 | 29,071,115 | 26,429,704 | ||||||||||||||