ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITORS' REPORT
DECEMBER 31, 2002 AND 2001
INDEPENDENT AUDITORS' REPORT
Board of Directors
Econo-Comm, Inc.
D/B/A Mobile Communications
Lauderhill, Florida
We have audited the accompanying balance sheets of Econo-Comm, Inc. as of
December 31, 2002 and 2001, and the related statements of income and retained
earnings, and cash flows, for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Econo-Comm, Inc. as of December
31, 2002 and 2001, and the results of its operations and cash flows for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules of costs and expenses are
presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
SHELDON, RIBOTSKY & LEVINE, P.A.
Certified Public Accountants
February 14, 2003
North Miami, Florida
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
A S S E T S
2002 2001
----------- -----------
CURRENT ASSETS:
Cash $ 33,285 $ 28,275
Receivables:
Trade (net of allowance for bad debts of $25,000 in
2002 and $30,000 in 2001) 572,457 398,750
Escrow deposit 5,978 8,412
Inventory 143,167 75,427
Prepaid expenses 7,111 --
----------- -----------
TOTAL CURRENT ASSETS 761,998 510,864
----------- -----------
PROPERTY AND EQUIPMENT:
Equipment and furnishings 367,714 364,873
Building and improvements 786,840 752,412
Land 123,000 123,000
----------- -----------
1,277,554 1,240,285
Less accumulated depreciation (384,030) (353,320)
----------- -----------
893,524 886,965
----------- -----------
OTHER ASSETS:
Loan fees (net of accumulated amortization of $885 in
2002 and $402 in 2001 8,765 9,248
Deposit 300 300
----------- -----------
9,065 9,548
----------- -----------
$ 1,664,587 $ 1,407,377
=========== ===========
(Continued)
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
BALANCE SHEETS
DECEMBER 31, 2002 AND 2001
LIABILITIES AND SHAREHOLDER'S EQUITY
2002 2001
---------- -----------
CURRENT LIABILITIES:
Accounts payable $ 224,944 $ 107,682
Note payable - bank 145,322 148,807
Current maturities of long-term debt 19,300 20,589
Accrued expenses 14,746 711
Tenant security deposit 2,500 2,500
Accrued warranty payable 6,134 5,361
---------- ----------
TOTAL CURRENT LIABILITIES 412,946 285,650
---------- ----------
LONG-TERM DEBT, less current maturities above 571,105 590,082
---------- ----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDER'S EQUITY:
Common stock, $1 par value, 100 shares authorized,
issued and outstanding 100 100
Additional paid-in capital 33,978 33,978
Retained earnings 646,458 497,567
---------- ----------
TOTAL SHAREHOLDER'S EQUITY 680,536 531,645
---------- ----------
$1,664,587 $1,407,377
========== ==========
The accompanying notes are an integral part
of these financial statements.
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
STATEMENTS OF INCOME AND RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
----------- -----------
REVENUES $ 2,321,085 $ 2,495,618
COST OF GOODS SOLD (Schedule) 1,593,130 1,592,722
----------- -----------
GROSS PROFIT 727,955 902,896
----------- -----------
OPERATING EXPENSES:
Selling (Schedule) 140,446 181,929
General and administrative (Schedule) 352,222 254,500
Interest 46,575 36,775
----------- -----------
539,243 473,204
----------- -----------
OTHER INCOME (LOSS):
Rental income 61,458 44,330
Loss on disposal of assets -- (30,718)
----------- -----------
61,458 13,612
----------- -----------
NET INCOME 250,170 443,304
LESS: SHAREHOLDER DISTRIBUTIONS (101,279) (113,383)
RETAINED EARNINGS BEGINNING OF YEAR 497,567 167,646
----------- -----------
RETAINED EARNINGS END OF YEAR $ 646,458 $ 497,567
=========== ===========
The accompanying notes are an integral
part of these financial statements.
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31, 2002 AND 2001
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 250,170 $ 443,304
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 31,193 15,221
Loss on disposal of fixed assets -- 30,718
Allowance for bad debts (5,000) (29,803)
(Increase) decrease in:
Receivables (168,707) 8,854
Inventories (67,740) (5,792)
Prepaid expenses (7,111) --
Deposits 2,434 1,588
Increase(decrease) in:
Accounts payable 117,262 (186,335)
Accrued expenses 14,808 4,834
Tenant deposits -- 2,500
--------- ---------
Net cash provided by operating activities 167,309 285,089
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (37,269) (898,998)
--------- ---------
Net cash (used) by investing activities (37,269) (898,998)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in current maturities of long-term debt (4,774) 66,960
Increase (decrease) in long-term debt (18,977) 577,609
Decrease in loan fees -- (9,650)
Shareholder distributions (101,279) (113,383)
--------- ---------
Net cash (used) provided by financing activities (125,030) 521,536
--------- ---------
NET INCREASE (DECREASE) IN CASH 5,010 (92,373)
CASH - BEGINNING OF YEAR 28,275 120,648
--------- ---------
CASH - END OF YEAR $ 33,285 $ 28,275
========= =========
SUPPLEMENTAL DATA:
Interest paid $ 46,575 $ 36,775
========= =========
The accompanying notes are an integral part
of these financial statements.
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 AND 2001
NOTE 1 -DESCRIPTION OF BUSINESS
Econo-Comm, Inc. ("The Company") is principally engaged in the repair
and manufacturing of communication devices. The company sells and
repairs cell phones, two-way radios, and other communication devices
for individuals, businesses and government agencies. The company
manufactures emergency call boxes which are used primarily by colleges
and universities, state departments of transportation and golf
courses.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INVENTORY - Inventory consists primarily of electronic parts and
cellular phones. Inventory is stated at the lower of cost (first-in,
first-out) or market.
PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost
and depreciated using various depreciation methods over their
approximate useful life.
INCOME TAXES - Effective January 1, 1990, the Company has elected to
be taxed as an S Corporation, therefore the Corporation is not liable
for income taxes since all income, losses and credits will be passed
through to the shareholders.
ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those
estimates.
CONCENTRATION OF CREDIT RISK - The Company is exposed to credit risks
in the event of default by financial institutions in which balances
are maintained in excess of insured limits.
The Company's sales are primarily provided to customers throughout the
United States. Historically, credit losses have not been significant.
NOTE 3 - PROPERTY AND EQUIPMENT
As of December 31, 2002 and 2001 the company's property and equipment
were as follows:
Estimated
2002 2001 Useful Lives
---------- ---------- -------------
Equipment and furnishings $ 367,714 $ 364,873 7 Years
Buildings and improvements 786,840 752,412 30 Years
Land 123,000 123,000 30 Years
---------- ----------
Total 1,277,554 1,240,285
Less accumulated depreciation (384,030) (353,320)
---------- ----------
$ 893,524 $ 886,965
========== ==========
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 AND 2001
NOTE 4 -NOTE PAYABLE - BANK
LINE OF CREDIT - BANK - Due on demand, or if no demand is made, due in
one payment on March 16, 2004. Interest payments are due monthly,
which are calculated at 1% above the Wall Street Journal Prime Rate.
Collateralized by accounts receivable, inventory, equipment, and all
other assets of the company. Outstanding balance as of December 31,
2002 and 2001 are $145,322 and $148,807 respectively.
NOTE 5 - LONG-TERM DEBT
Long-term debt at December 31, is summarized as follows:
2002 2001
------------------------- ------------------------
Due Within Due After Due Within Due After
One Year One Year One Year One Year
----------- --------- ---------- ----------
Loan Payable - Dave Batzer - no interest
and no due date for repayment $ -- $ 70,000 $ -- $ 70,000
Installment loans on vehicles with interest
rates varying from 5.90% to 11.95% with
payments due through May 2002 -- -- 2,589 --
Note payable-Bank-interest 8% with payments due through April
2016, collateralized by land, building improvements, fixtures and
insurance
proceeds 12,300 269,004 11,400 280,997
Note payable -SBA-interest 6.423% with payments
due through May 2021, collateralized by land,
building and improvements 7,000 232,101 6,600 239,085
----------- -------- -------- --------
$ 19,300 $571,105 $ 20,589 $590,082
=========== ======== ======== ========
As of December 31, 2002, long-term debt matures as follows:
2003 $ 19,300
2004 20,900
2005 22,300
2006 25,000
2007 26,000
Thereafter 476,905
---------
$ 590,405
=========
NOTE 6 - MAJOR CUSTOMERS
Sales to the companies four major customers were approximately
$1,658,156 and $1,498,159 during the year ended December 31, 2002 and
2001 respectfully, representing 71% of the total revenue for 2002 and
57% of the total revenue for 2001.
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 AND 2001
NOTE 7 - TRANSACTIONS WITH DISTRIBUTOR
The Company sells its wireless call boxes to Connectivity, Inc. a
company which has an exclusive distribution agreement with the
Company. (This distribution company signed a letter of intent to be
acquired by Career Engine Network (See Note 8)). During the years
ended December 31, 2002 and 2001 the Company sold wireless call boxes
to Connectivity totaling $656,535 and $477,000 respectively. (See Note
6). In addition, included in accounts receivable was $394,951 and
$200,442 due from Connectivity, Inc. at December 31, 2002 and 2001.
NOTE 8 - SALE OF COMPANY
The Company is in negotiations to be acquired by Career Engine
Network, Inc. (a publicly held Company) in which the Company would
become a 100% wholly owned subsidiary.
ECONO-COMM, INC.
D/B/A MOBILE COMMUNICATIONS
SCHEDULES OF COSTS AND EXPENSES
YEARS ENDED DECEMBER 31, 2002 AND 2001
2002 2001
---------- ----------
COST OF SALES:
Depreciation and amortization $ 31,194 $ 15,221
Equipment rental 9,998 12,732
Freight 22,927 31,795
Insurance 19,978 10,463
Job labor and employee leasing 520,315 681,910
Materials and parts 647,096 570,530
Payroll taxes 45,605 --
Rent 500 13,431
Shop supplies 243 9,470
Subcontract costs 192,289 139,471
Tools and supplies 25,604 14,919
Vehicle expenses 76,608 87,419
Warranty expense 773 5,361
---------- ----------
$1,593,130 $1,592,722
========== ==========
SELLING:
Advertising $ 7,703 $ 20,369
Telephone 16,017 9,564
Travel and entertainment 116,726 151,996
---------- ----------
$ 140,446 $ 181,929
========== ==========
GENERAL AND ADMINISTRATIVE:
Bad debts $ 32,721 $ 53,553
Bank charges 5,620 6,423
Donations 267 505
Dues and subscriptions 4,241 4,803
Employee benefits 13,695 --
Insurance 13,319 7,581
Licenses and taxes 37,826 24,240
Miscellaneous 2,911 4,015
Moving 131 3,000
Office 74,638 42,786
Officer salary 52,515 --
Penalties 266 1,041
Professional fees 21,491 25,769
Rent 500 13,431
Repairs and maintenance 30,119 22,482
Telephone 48,052 28,693
Uniforms 3,788 3,942
Utilities 10,122 12,236
---------- ----------
$ 352,222 $ 254,500
========== ==========
SCHEDULE