Exhibit 99.1
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
TABLE OF CONTENTS
Independent Accountant's Report 1
Financial Statements:
Combined Balance Sheets 2-3
Combined Statements of Income 4
Combined Schedules of Selling and Administrative Expenses 5
Combined Statements At Retained Earnings 6
Combined Statements of Cash Flows 7
Notes to the Financial Statements 8-15
Supplementary Information:
Independent Auditor's Report On Supplementary Information 16
Combined 2006 Balance Sheets 17-18
Combined 2006 Statements of Income and Retained Earnings 19
Combined 2006 Schedules of Selling and Administrative Expenses 20
Combined 2005 Balance Sheets 21-22
Combined 2005 Statements of Income and Retained Earnings 23
Combined 2005 Schedules of Selling and Administrative Expenses 24
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
INDEPENDENT ACCOUNTANT'S REPORT
To the Stockholders and Board of Directors
Instant Technologies, Inc. and Affiliates
Norfolk, Virginia
We have audited the accompanying combined balance sheets of Instant
Technologies, Inc. and Affiliates (hereafter referred to as "the Companies") as
of December 31, 2006 and 2005, and the related combined statements of income,
selling and administrative expenses, retained earnings and members' equity and
cash flows for the years then ended. Those combined financial statements are the
responsibility of the companies 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 combined financial statements referred to above present
fairly, in all material respects, the financial position of the Companies as of
December 31, 2006 and 2005, and the results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.
/s/ COLBY & COMPANY, PLC
- -------------------------------------
COLBY & COMPANY, PLC
Chesapeake, Virginia
March 1, 2007
2121 Old Greenbrier Road, Chesapeake, VA 23320, (757) 523-2700, FAX 523-0536
1
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
ASSETS
2006 2005
----------- ----------
CURRENT ASSETS:
Cash $ 302,416 $ 142,317
Accounts receivable:
Trade, less allowance for doubtful accounts
of $39,751 at 2006 and $34,754 at 2005 2,461,632 1,754,605
Employee 101,696 2,000
Business taxes 23,066 --
Prepaid expenses 23,722 37,760
Inventory 5,839,445 2,436,352
----------- ----------
Total current assets $ 8,751,977 $4,373,034
----------- ----------
PROPERTY AND EQUIPMENT:
Buildings $ 1,268,816 $ 849,255
Vehicles 56,476 29,110
Land 457,378 314,703
Leasehold improvements 201,770 159,450
Office furniture and equipment 244,565 226,878
----------- ----------
Total $ 2,229,005 $1,579,396
Less - accumulated depreciation 197,908 124,001
----------- ----------
Property and equipment - net $ 2,031,097 $1,455,395
----------- ----------
OTHER ASSETS:
Deposits $ 2,100 $ 2,500
Goodwill 68,648 --
Acquisition intangibles, net of accumulated
amortization of $17,410 at 2006 199,561 --
Organizational costs, net of amortization 547 690
----------- ----------
Total other assets $ 270,856 $ 3,190
----------- ----------
TOTAL ASSETS $11,053,930 $5,831,619
=========== ==========
See notes to the financial statements.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
2
LIABILITIES AND STOCKHOLDERS' AND MEMBERS' EQUITY
2006 2005
----------- ----------
CURRENT LIABILITIES:
Notes payable:
Demand $ 2,106,000 $ 208,161
Current portion of long-term debt 1,119,787 10,367
Accounts payable:
Bank overdraft -- 108,000
Trade 2,981,124 797,976
Accrued expenses 354,270 252,623
Accrued profit sharing -- 111,500
----------- ----------
Total current liabilities $ 6,561,181 $1,488,627
----------- ----------
OTHER LIABILITIES - Security deposit $ -- $ 10,000
----------- ----------
LONG-TERM DEBT;
Notes payable:
Term note $ 6,368,309 $ 998,716
Shareholder notes payable 75,000 --
----------- ----------
Notes payable $ 6,443,309 $ 998,716
Less - current portion above 1,119,787 10,367
----------- ----------
Net long-term debt $ 5,323,522 $ 988,349
----------- ----------
Total liabilities $11,884,703 $2,486,976
----------- ----------
STOCKHOLDERS' AND MEMBERS' EQUITY (DEFICIT):
Common stock 7,000 and 2,000 shares authorized,
1,100 and 1,000 shares issued and
outstanding at December 31, 2006 and 2005 $ 8,600 $ 8,600
Additional Paid-in Capital 24,900 24,900
Retained earnings and members' equity (deficit) (840,773) 3,334,643
Less cost of treasury stock (23,500) (23,500)
----------- ----------
Total stockholders' equity (deficit) $ (830,773) $3,344,643
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
AND MEMBERS' EQUITY (DEFICIT) $11,053,930 $5,831,619
=========== ==========
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
3
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
----------- -----------
Sales - net of discounts $23,840,118 $17,372,659
----------- -----------
COSTS OF SALES:
Inventory - beginning of the year $ 2,436,352 $ 1,969,138
Purchases 15,393,301 8,144,202
Other costs 191,580 162,974
----------- -----------
$18,021,233 $10,276,314
Less inventory - end of the year 5,839,445 2,436,352
----------- -----------
Total costs of sales $12,181,788 $ 7,839,962
----------- -----------
GROSS PROFIT $11,658,330 $ 9,532,697
SELLING AND ADMINSTRATIVE EXPENSES 6,810,084 5,037,980
----------- -----------
INCOME FROM OPERATIONS $ 4,848,246 $ 4,494,717
----------- -----------
OTHER INCOME (EXPENSES):
Interest expense $ (261,595) $ (71,528)
Interest income 858 1,096
Rental income 65,633 15,667
Terminated acquisition costs (273,043) (297,757)
Loss on disposition of property
and equipment (7,798) (21,591)
----------- -----------
Other income (expenses) - net $ (475,945) $ (374,113)
----------- -----------
NET INCOME $ 4,372,301 $ 4,120,604
=========== ===========
See notes to the financial statements.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
4
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED SCHEDULES OF SELLING AND ADMINSTRATIVE EXPENSES
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
---------- ----------
SELLING AND ADMINISTRATIVE EXPENSES:
Advertising $ 523,551 $ 394,552
Auto expenses 35,920 75,825
Bank charges 187,497 105,151
Consulting fees 222,115 --
Contributions 850 --
Depreciation and amortization 108,927 81,678
Dues and subscriptions 47,825 17,347
Insurance 232,894 146,558
Meals and entertainment 12,582 16,868
Miscellaneous 11,684 2,626
Office expense 342,545 157,566
Office supplies 69,648 112,834
Penalties 3,753 19,125
Postage, and deliveries 714,022 634,722
Professional fees 316,275 129,087
Profit sharing contribution 3,407 111,500
Provisions for Bad debts 32,957 77,146
Rents 63,087 78,270
Repairs and maintenance 120,374 145,614
Research and development expense 12,687 27,777
Retirement plan administration expense 2,150 3,150
Retirement plan matching contribution 46,032 6,556
Salaries and wages 2,639,372 2,296,252
Security 4,422 795
Taxes and licenses 204,337 179,849
Telephone 146,477 78,906
Training 10,082 9,737
Travel 654,268 91,468
Utilities 40,344 37,021
---------- ----------
Total selling and administrative expenses $6,810,084 $5,037,980
========== ==========
See notes to the financial statements.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
5
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF RETAINED EARNINGS AND MEMBERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
----------- -----------
ACCUMULATED ADJUSTMENTS ACCOUNT:
Balance, beginning of year $ 3,193,199 $ 1,094,519
Taxable Income 4,430,443 4,291,862
Nondeductible expenses (10,044) (27,559)
Shareholders' distributions (8,547,717) (2,143,579)
Shareholders' pass through items (66,186) (22,044)
----------- -----------
Balance (distribution gain), end of year $(1,000,305) $ 3,193,199
----------- -----------
TEMPORARY TAX ADJUSTMENTS:
Balance, beginning of year $ 141,444 $ 263,099
Tax deferred income resulting
from different accounting methods 18,088 (121,655)
----------- -----------
Balance, end of year $ 159,532 $ 141,444
----------- -----------
TOTAL RETAINED EARNINGS AND MEMBERS' EQUITY $ (840,773) $ 3,334,643
=========== ===========
See notes to the financial statements.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
6
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005
2006 2005
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Cash received from customers $ 23,198,724 $ 16,915,231
Cash paid to suppliers and employees (20,612,110) (14,257,020)
Interest Income 858 1,096
Interest paid (261,595) (71,528)
------------ ------------
Net cash provided by operating activities $ 2,325,877 $ 2,587,779
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment $ (676,254) $ (651,287)
Proceeds from sale of property and equipment 1,380 54,058
Acquisition of subsidiary (285,619)
------------ ------------
Net cash used by investing activities $ (960,493) $ (597,229)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from (repayments of) short-term debt $ 1,897,839 $ (285,718)
Proceeds from long-term debt and leases 6,578,832 440,000
Repayment of long-term debt and leases (1,209,239) (93,243)
Paid-in Capital -- 25,000
Shareholders' distributions (8,547,717) (2,143,579)
Loans from shareholders 75,000 --
------------ ------------
Net cash used by financing activities $ (1,205,285) $ (2,057,540)
------------ ------------
NET INCREASE (DECREASE) IN CASH $ 160,099 $ (66,990)
CASH - Beginning of the year 142,317 209,307
------------ ------------
CASH - End of the year $ 302,416 $ 142,317
------------ ------------
RECONCILIATION OF NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 4,372,301 $ 4,120,604
------------ ------------
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
Depreciation and amortization $ 108,927 $ 81,678
Allowance for bad debt 4,997 34,754
Loss or disposition of property and equipment 7,798 21,591
(Increase) decrease in accounts receivable (834,786) (499,543)
(Increase) decrease in prepaid expenses 14,038 (37,760)
(Increase) decrease in inventory (3,403,093) (467,215)
(Increase) decrease in deposits 400 (200)
Increase (decrease) in accounts payable and
accrued expenses 2,065,295 (676,130)
Increase (decrease) in security deposits (10,000) 10,000
------------ ------------
Net adjustments $ (2,046,424) $ (1,532,825)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,325,877 $ 2,587,779
============ ============
See notes to the financial statements.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
7
INSTANT TECHNOLOGIES, INC. AND AFFILIATES
NOTES TO THE FINANCIAL STATEMENTS
DECEMBER 31, 2006 AND 2005
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(A) Combination Policy:
The accompanying combined balance sheets and combined statements
of income, selling and administration expenses, retained earnings and
cash flows include the accounts of Instant Technologies, Inc. and
wholly owned subsidiary Instant OTC, Inc. (ITI), Instant Systems, Inc.
(ISI) and Ramsey, LLC, hereafter jointly referred to as "the
Companies", These companies are under common ownership and management.
All material Inter-company accounts and transactions have been
eliminated.
(B) Company's Activities:
The Companies, with the exception of Instant OTC, Inc., are
incorporated or formed under the laws of the Commonwealth of Virginia.
Instant OTC, Inc. is incorporated under the laws of the State of
California.
ITI is primarily engaged in the development and brokerage sales
of medical diagnostic tests for drugs of abuse and clinical
applications from inventory warehoused at its Norfolk facilities and
direct drop-shipments from manufactures. These tests are sold in the
United States to national distributors, clinics, laboratories,
hospitals, government agencies, Fortune 500 companies, small
companies, nursing homes, employment agencies, amusement parks,
manufacturing facilities, construction firms, farms, non-regulated
transportation, schools, banks, casinos and service industries.
ISI began operations in July 2005. The Company is primarily
engaged in the design, development and manufacturing of Cryo - system
storage technology for human organ, tissue and other biohazard
specimens.
Ramsey, LLC is primarily engaged in the leasing of real estate in
Norfolk, Virginia, including the building and warehouse for ITI and
ISI.
(C) Method of Accounting:
The Companies recognize income and expenses under the accrual
method of accounting. Under this method, income is recognized when
earned and expenses when incurred.
(D) Property and Equipment:
Property and equipment are recorded at cost. Expenditures for
maintenance and repairs are expensed as incurred while renewals and
betterments are capitalized. The gain or loss on items traded is
applied to the asset account, and that on items otherwise disposed of
is reflected in income.
Depreciation has been provided for using the straight-line method
over the estimated useful lives of the assets for financial statement
reporting. The estimated useful lives of the assets are as follows:
Buildings and leasehold improvements 10 - 40 years
Vehicles 5 years
Office furniture and equipment 5 - 7 years
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
8
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(E) Income Taxes:
For Income tax reporting, ITI and ISI use the accrual method.
Ramsey, LLC recognizes income and expenses using the cash method
of accounting for income tax reporting. Under this method income is
recognized when cash is received and expenses when paid.
Depreciation has been provided for using the modified accelerated
cost recovery system (MACRS) for tax reporting.
ITI and ISI have elected by unanimous consent of their
shareholders to be taxed under the provisions of Subchapter "S" of the
Internal Revenue Code. Under those provisions, income and expenses are
not taxed to the Companies; instead, the shareholders include their
respective shares of the Companies net operating income or loss in
their individual income tax returns.
Under the provisions of the Internal Revenue Code and applicable
state laws, Ramsey, LLC is treated as a partnership and is not
directly Subject to income taxes: the results of its operations are
included in the income tax returns of its members.
As a result of the above, no provision for income tax expense has
been included in the accompanying financial statements.
(F) Estimates:
Management uses estimates and assumptions in preparing financial
statements. Those estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets
and liabilities, and reported sales and expenses. It is at least
reasonably possible that the significant estimates used will change
within the next year.
(G) Inventory:
ITI's inventories consist of diagnostic tests and supplies held
for resale and are stated at the lower of cost or market value using
the First-in First-out (FIFO) method. At December 31, 2006 and 2005,
the Company held inventories of diagnostic supplies amounting to
$5,783,279 and $2,418,849, respectively.
ISI's inventory consists primarily of raw materials used for the
manufacture of Cryo systems. The Company held inventory of raw
materials amounting to $56,166 and $17,503 at December 31, 2006 and
2005, respectively.
(H) Revenue Recognition:
Revenues from product sales are recognized FOB shipping point net
of an allowance for estimated returns. When shipment occurs, the sales
price is fixed and determinable, and collection of the resulting
receivable is reasonably assured.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
9
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(I) Research and Development:
Research and development expenditures are charged to expense as
incurred.
(J) Concentrations of Credit Risk:
Financial Instruments, which potentially expose the Companies to
concentrations of credit risk, as defined by FASB Statement No. 105,
consist primarily of temporary cash investments and trade accounts
receivable.
The Companies place their temporary cash investments with high
credit quality financial institutions, although at times some amounts
may be in excess of the FDIC insurance limits. As of December 31, 2006
and 2005, the Companies had demand deposits in financial institutions,
which exceeded depositor's insurance provided by the applicable
guaranty agency, by $124,536 and $88,700, respectively.
The Companies review a customer's credit history before extending
credit, and evaluate the credit risks of specific customers. The
Companies had no customers that accounted for more than 10% of
combined revenues in 2006 or 2005. The Companies had an open account
from one customer that represented 11% of the total accounts
receivable at December 31, 2006.
(K) Advertising:
Advertising costs are expensed in the year the promotion takes
place. The Companies incurred advertising costs of $523,551 and
$394,552 during the years ended December 31, 2006 and 2005,
respectively.
(L) Statement of Cash Flows:
For purposes of the statement of cash flows, the Companies
consider all highly liquid debt Instruments purchased with a maturity
of three months or less to be cash equivalents. At December 31, 2006
and 2005, the Companies did not consider any of their assets to be
cash equivalents.
(M) Accounts receivable:
The Companies perform ongoing credit evaluations of customers and
adjust credit limits based upon payment history and the customers'
current credit worthiness, as determined by management's review of
current credit information.
Accounts receivable have been reduced by an allowance for amounts
that may become uncollectible in the future. This estimated allowance
is based primarily on management's evaluation of specific balances as
the balances become past due, the financial condition of customers and
historical experience of write-offs.
(N) Prior period balances:
Certain prior period balances have been reclassified to conform
to current year presentation.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
10
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
(O) Prepaid expenses:
Prepaid expenses consist of amounts paid in advance for insurance
and dues to various organizations. These amounts are expensed ratably
throughout the year. Prepaid expense for the years ended December 31,
2006 and 2005 amounted to $23,722 and $36,760.
NOTE 2 - LINE OF CREDIT:
ITI has available a $3,000,000 working capital line of credit,
which is secured by certain combined Company assets and guaranteed by
the shareholders. Interest is stated at libor plus 1.65%. As of
December 31, 2006 and 2005, the draws against this line were
$2,106,000 and $208,161, respectively. This line expires June 13,
2007.
NOTE 3 - RETIREMENT BENEFITS:
ITI maintains a 401(k) profit sharing plan which covers
substantially all full time employees. Employees may elect to
contribute a portion of their compensation to the plan, up to the
maximum amount permitted under Section 401(k) of the Internal Revenue
Code. The Company matches participants' contributions according to the
safe harbor provisions of pension regulations. The Company's matching
contribution was $46,032 and $6,556 for December 31, 2006 and 2005,
respectively.
ITI's policy is to fund the profit sharing plan from current
operations. The Company's profit sharing contributions amounted to
$3,407 and $111,500 for the years ended December 31, 2006 and 2005.
NOTE 4 - VARIABLE INTEREST ENTITY:
In December 2003, the FASB issued revised FASB interpretation 46
(FIN 46) "Consolidation of Variable Interest Entities." FIN 46
requires certain variable interest entities to be combined by the
primary beneficiary of the entity if the equity investors in the
entity do no have the characteristics of a controlling financial
interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial
support. The consolidation requirements of FIN 46 apply to variable
interest entities for fiscal years beginning after December 15, 2005,
unless the variable interest entity was created after December 31,
2003, in which case FIN 46 is immediately effective for that entity.
ITI has adopted FIN 46 for all periods presented in these financial
statements and has determined that ISI and Ramsey, LLC are variable
interest entities. ITI has also determined it is not the primary
beneficiary of ISI or Ramsey, LLC. The Company does not have any other
material variable interest entities.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
11
NOTE 5 - OPERATING LEASE:
In September 2006, ITI began leasing its office facility and
warehouse under a five year renewable lease agreement with Ramsey, LLC, a
company with common ownership. Total rent expense under this operating
lease amounted to $99,767 and $76,400 for the years ended December 31, 2006
and 2005. However, this amount was eliminated through the combination with
Ramsey, LLC for the year-ending December 31, 2006.
NOTE 6 - LONG-TERM DEBT:
2006 20O5
---------- --------
7.5% installment note payable in 360 monthly
installments of $4,684 (including interest and
principal) secured by real property located in
Norfolk, VA. -- 561,140
7.0% installment note payable in 360 monthly
Installments of $3,304 (including Interest and
principal) secured by real property located in
Norfolk, VA -- 437,576
(Related Party) Shareholder loan with Interest
stated at the mid-term Applicable Federal Rate
issued by the IRS. 75,000 --
Libor plus 1.5% installment note payable with
monthly installments of $8,771 plus interest
with a final payment due on June 1, 2010,
secured by real property located in Norfolk, VA,
and guaranteed by the shareholders. 1,534,976 --
Libor plus 1.65% installment note payable with
monthly Installments of $83,333 plus
Interest through May 1, 2010, and one final
payment of $1,500,000 due on June 1, 2010,
secured by real property located in Norfolk, VA
and guaranteed by the shareholders, 4,833,333 --
---------- --------
Total long-term debt $6,443,309 $998,716
Less - current portion 1,119,787 10,367
---------- --------
Net long-term debt $5,323,522 $988,349
========== ========
The current maturities of the long-term debt are as follows:
For the Year Ended
December 31,
- ------------------
2007 $1,119,787
2008 1,165,709
2009 1,105,248
2010 3,052,565
----------
Total $6,443,309
==========
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
12
NOTE 7 - TERMINATED ACQUISTION COSTS:
During 2006 and 2005, ITI was Involved in various merger and
acquisition activities. The Company terminated these agreements prior to
closing, but incurred professional, broker and consultant fees of $273,043
and $297,757 for the years ended 2006 and 2005, respectively.
NOTE 8 - ACCOUNTS PAYABLE:
Accounts payable include amounts due to vendors, totaling $2,981,124
and $797,976 at December 31, 2006 and 2005, respectively, for the purchase
of inventory and supplies.
Accounts payable of ITI at December 31, 2006 includes $2,044,075 due
to one vendor, which amounts to 80% of total accounts payable. Two
manufacturers accounted for approximately 93% of all ITI purchases during
the year ended December 31, 2006.
NOTE 9 - RECENT ACCOUNTING PRONOUNCEMENTS:
In November 2004, the FASB issued SFAS No. 151, "Inventory Costs, an
amendment of ARB No. 43, Chapter 4." SFAS No. 151 requires that abnormal
amounts of idle capacity and spoilage costs should be excluded from the
cost of inventory and expensed when incurred. SFAS No. 151 is effective for
years beginning after June 15, 2006, with early adoption permitted. The
Companies do not expect the adoption of this statement to have a material
impact on its results of operations or financial position.
NOTE 10 - PURCHASE COMMITMENTS:
As of December 31, 2006, ITI had outstanding noncancelable purchase
commitments in the amount of $1,514,613 related to inventory to be
manufactured and delivered in 2006. Title to this inventory had not passed
from the manufacturer to ITI as of December 31, 2006.
ITI has entered into long-term purchase commitments with its major
manufacturer supplier to receive price-concessions into the future.
NOTE 11 - LITIGATION:
From time-to-time, the companies are involved in certain legal actions
arising in the ordinary course of business. In management's opinion, based
upon the advice of counsel, the outcome of such actions is not expected to
have a material adverse effect on the future financial position or results
of operations.
NOTE 12 - INVENTORY ADJUSTMENT:
In 2004 an injunction from selling certain clinical testing inventory
resulted from a patent lawsuit against a supplier. During the year ended
December 31, 2004, ITI wrote-down all clinical inventory on hand, which
amounted to $706,260. During 2005, the injunction was lifted and the
inventory was subsequently sold.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
13
NOTE 13 - GOODWILL AND OTHER ACQUISITION INTANGIBLE ASSETS:
The Companies account for acquisitions using the purchase method of
accounting. As a result, goodwill and other acquisition Intangibles are
recorded at the time of purchase based on internal evaluations that are
subject to change based on the financial resolutions of acquired asset
valuations.
Other acquisition intangibles, excluding trade names, are being
amortized on a straight-line basis over eight years for customer
relationships, five years for non-compete agreements and fifteen years for
over-the-counter clearance filings with the FDA.
The Financial Accounting Standards Board Statement No. 142, "Goodwill and
Other Intangible Assets" requires an annual evaluation of impairment losses
for goodwill. Cash flow projections prepared as of December 31, 2006
support a fair value that does not result in an Impairment loss of
goodwill.
NOTE 14 - ACQUISITIONS:
On February 2, 2006, ITI acquired the stock of Instant Technologies
OTC, Inc. The acquisition was accounted for as a purchase and the results
of operations from this acquisition are included in consolidated results
from the date acquired. The following table summarizes the fair values of
assets acquired and liabilities assumed:
Current assets $ 41,229
Property and equipment, net 5,758
Goodwill 68,648
Other acquisition intangible assets 216,971
--------
Total assets acquired $332,606
========
NOTE 15 - SEGMENT DISCLOSURES:
During 2006, ITI reorganized its product lines into two reportable
segments, because of the acquisition of Instant Technologies OTC, Inc. The
two segments are Brokerage Wholesale and Over-the-Counter. The accounting
policies of the segments are the same as those described in Note 1. For ISI
information, refer to the supplemental combined schedules.
Brokerage Over the
Wholesale Counter
----------- ---------
Sales - net of discounts $23,283,336 $ 311,167
=========== =========
Income (loss) from operations $ 5,000,323 $(123,588)
=========== =========
Total assets $ 9,366,713 $ 107,723
=========== =========
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
14
NOTE 16 - SUBSEQUENT EVENT:
On March 12, 2007, 75% of ITI'S outstanding stock was purchased from
the shareholders by Inverness Medical Innovations, Inc., the Company's main
supplier of diagnostic tests. Inverness Medical Innovations, Inc. accounts
for 80% of the Company's total accounts payable and 93% of the Company's
purchases for the year ending December 31, 2006.
Immediately following this transaction, all Company debt was retired
releasing the Company's shareholders and related party Companies from
guarantees (See Note 6). This eliminates all variable interest entities at
March 12, 2007.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
15
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
INDEPENDENT AUDITOR'S REPORT
ON SUPPLEMENTARY INFORMATION
To The Stockholders and Board of Directors
Instant Technologies, Inc. and Affiliates
Norfolk, Virginia
Our report on our audits of the basic combined financial statements of
Instant Technologies, Inc. and Affiliates for December 31, 2006 and 2005 appears
on page 1. Those audits were conducted for the purpose of forming an opinion on
the basic financial statements taken as a whole. The Information included in the
accompanying Combined Balance Sheets of Instant Technologies, Inc. and
Affiliates as of December 31, 2006 and 2005, and the related combined statements
of Income and retained earnings and selling and administrative expenses for the
years then ended is 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.
/s/ COLBY & COMPANY, PLC
March 1, 2007
2121 Old Greenbrier Road, Chesapeake, VA 23320, (757) 523-2700, FAX 523-0536
16
INSTANT TECHNOLOGIES, INC. AND SUBSIDIARY,
INSTANT SYSTEM, INC.
AND
RAMSEY, LLC.
COMBINED BALANCE SHEETS
DECEMBER 31, 2006
ASSETS
INSTANT
TECHNOLOGIES INSTANT
AND OTC SYSTEM, RAMSEY,
CONSOLIDATED INC. LLC. ELIMINATIONS COMBINED
------------ -------- ---------- ------------ -----------
CURRENT ASSETS:
CASH $ 265,968 $ 30,597 $ 5,851 $ -- $ 302,416
ACCOUNTS RECEIVABLE:
TRADE, NET OF ALLOWANCE
FOR DOUBTFUL ACCOUNTS 2,437,513 24,119 14,800 (14,800) 2,461,632
EMPLOYEE 101,696 -- -- -- 101,696
AFFILIATE 417,346 -- -- (417,346) --
BUSINESS TAXES 23,066 -- -- -- 23,066
PREPAID EXPENSES 23,722 -- -- -- 23,722
INVENTORY 5,783,279 56,166 -- -- 5,839,445
---------- -------- ---------- --------- -----------
TOTAL CURRENT ASSETS $9,052,590 $110,882 $ 20,651 $(432,146) $ 8,751,977
---------- -------- ---------- --------- -----------
PROPERTY AND EQUIPMENT:
BUILDINGS $ -- $ -- $1,268,816 $ -- $ 1,268,816
VEHICLES 56,476 -- -- -- 56,476
LAND -- -- 457,378 -- 457,378
LEASEHOLD IMPROVEMENTS 5,225 -- 196,545 -- 201,770
OFFICE FURNITURE AND EQUIPMENT 221,912 22,653 -- -- 244,565
---------- -------- ---------- --------- -----------
TOTAL $ 283,613 $ 22,653 $1,922,739 $ -- $ 2,229,005
LESS - ACCUMULATED DEPRECIATION 132,076 6,795 59,037 -- 197,908
---------- -------- ---------- --------- -----------
PROPERTY AND EQUIPMENT - NET $ 151,537 $ 15,858 $1,863,702 $ -- $ 2,031,097
---------- -------- ---------- --------- -----------
OTHER ASSETS:
DEPOSITS $ 2,100 $ -- $ -- $ -- $ 2,100
GOODWILL 68,648 -- -- -- 68,648
ACQUISITION INTANGIBLE ASSETS, NET
OF ACCUMULATED AMORTIZATION 199,561 -- -- -- 199,561
ORGANIZATIONAL COSTS, NET OF
AMORTIZATION -- 547 -- -- 547
---------- -------- ---------- --------- -----------
$ 270,309 $ 547 $ -- $ -- $ 270,856
---------- -------- ---------- --------- -----------
TOTAL ASSETS $9,474,436 $127,287 $1,884,353 $(432,146) $11,053,930
========== ======== ========== ========= ===========
SEE AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
17
LIABILITIES AND STOCKHOLDERS' EQUITY
INSTANT
TECHNOLOGIES INSTANT
AND OTC SYSTEM, RAMSEY,
CONSOLIDATED INC. LLC ELIMINATIONS COMBINED
------------ --------- ---------- ------------ -----------
CURRENT LIABILITIES:
NOTES PAYABLE:
DEMAND $ 2,106,000 $ -- $ -- $ -- $ 2,106,000
CURRENT PORTION OF LONG-TERM DEBT 999,996 -- 119,791 -- 1,119,787
ACCOUNTS PAYABLE: --
AFFILIATE -- 93,189 324,157 (417,346) --
TRADE 2,946,605 40,083 9,236 (14,800) 2,981,124
ACCRUED EXPENSES 344,270 -- 10,000 -- 354,270
----------- --------- ---------- --------- -----------
TOTAL CURRENT LIABILITIES $ 6,396,871 $ 133,272 $ 463,184 $(432,146) $ 6,561,181
----------- --------- ---------- --------- -----------
LONG-TERM DEBT:
NOTES PAYABLE:
TERM LOANS $ 4,833,333 $ -- $1,534,976 $ -- $ 6,368,309
SHAREHOLDER LOANS -- 75,000 -- -- 75,000
----------- --------- ---------- --------- -----------
TOTAL NOTES PAYABLE $ 4,833,333 $ 75,000 $1,534,976 $ -- $ 6,443,309
LESS CURRENT PORTION ABOVE 999,996 -- 119,791 -- 1,119,787
----------- --------- ---------- --------- -----------
LONG-TERM DEBT - NET $ 3,833,337 $ 75,000 $1,415,185 $ -- $ 5,323,522
----------- --------- ---------- --------- -----------
TOTAL LIABILITIES $10,230,208 $ 208,272 $1,878,369 $(432,146) $11,884,703
----------- --------- ---------- --------- -----------
STOCKHOLDERS' EQUITY:
COMMON STOCK $ 8,500 $ 100 $ -- $ -- $ 8,600
ADDITIONAL PAID-IN CAPITAL -- 24,900 -- -- 24,900
RETAINED EARNINGS (DEFICIT) (740,772) (105,985) 5,984 -- (840,773)
LESS COST OF TREASURY STOCK (23,500) -- -- -- (23,500)
----------- --------- ---------- --------- -----------
TOTAL STOCKHOLDERS' EQUITY $ (755,772) $ (80,985) $ 5,984 $ -- $ (830,773)
----------- --------- ---------- --------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 9,474,436 $ 127,287 $1,884,353 $(432,146) $11,053,930
=========== ========= ========== ========= ===========
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
18
INSTANT TECHNOLOGIES, INC. AND SUBSIDIARY,
INSTANT SYSTEM, INC.
AND
RAMSEY, LLC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2006
INSTANT
TECHNOLOGIES
AND OTC INSTANT RAMSEY,
CONSOLIDATED SYSTEM LLC ELIMINATIONS COMBINED
------------ --------- -------- ------------ -----------
SALES - NET OF DISCOUNTS $ 23,594,503 $ 245,615 $ -- $ -- $23,840,118
------------ --------- -------- -------- -----------
COSTS OF SALES:
INVENTORY - BEGINNING OF THE YEAR $ 2,418,849 $ 17,503 $ -- $ -- $ 2,436,352
PURCHASES 15,264,609 128,692 -- -- 15,393,301
OTHER COSTS 191,580 -- -- -- 191,580
------------ --------- -------- -------- -----------
$ 17,875,038 $ 146,195 $ -- $ -- $18,021,233
LESS INVENTORY - END OF THE YEAR 5,783,279 56,166 -- -- 5,839,445
------------ --------- -------- -------- -----------
TOTAL COST OF SALES $ 12,091,759 $ 90,029 $ -- $ -- $12,181,788
------------ --------- -------- -------- -----------
GROSS PROFIT $ 11,502,744 $ 155,586 $ -- $ -- $11,658,330
SELLING AND ADMINISTRATIVE EXPENSES 6,626,009 208,429 75,413 (99,767) 6,810,084
------------ --------- -------- -------- -----------
INCOME (LOSS) FROM OPERATIONS $ 4,876,735 $ (52,843) $(75,413) $ 99,767 $ 4,848,246
------------ --------- -------- -------- -----------
OTHER INCOME (EXPENSES):
INTEREST EXPENSE $ (169,558) $ -- $(92,037) $ -- $ (261,595)
INTEREST INCOME 858 -- -- -- 858
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT (7,798) -- -- -- (7,798)
RENT INCOME -- -- 165,400 (99,767) 65,633
TERMINATED ACQUISITION AND
BUSINESS DEVELOPMENT COSTS (273,043) -- -- -- (273,043)
------------ --------- -------- -------- -----------
TOTAL OTHER INCOME (EXPENSES) $ (449,541) $ -- $ 73,363 $(99,767) $ (475,945)
------------ --------- -------- -------- -----------
NET INCOME (LOSS) $ 4,427,194 $ (52,843) $ (2,050) $ -- $ 4,372,301
RETAINED EARNINGS AND EQUITY (DEFICIT)
BEGINNING OF YEAR 3,379,751 (53,142) 8,034 -- 3,334,643
DISTRIBUTIONS (8,547,717) -- -- -- (8,547,717)
------------ --------- -------- -------- -----------
RETAINED EARNINGS (EQUITY)
END OF THE YEAR $ (740,772) $(105,985) $ 5,984 $ -- $ (840,773)
============ ========= ======== ======== ===========
See auditor's report on supplementary information.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
19
INSTANT TECHNOLOGIES, INC. AND SUBSIDIARY,
INSTANT SYSTEMS, INC.
AND
RAMSEY, LLC
COMBINED SCHEDULES OF SELLING AND ADMINISTRATIVE EXPENSES
DECEMBER 31, 2006
INSTANT
TECHNOLOGIES INSTANT
AND OTC SYSTEM, RAMSEY
CONSOLIDATED INC. LLC ELIMINATIONS COMBINED
------------ -------- ------- ------------ ----------
ADVERTISING $ 519,014 $ 4,537 $ -- $ -- $ 523,551
AUTO EXPENSE 33,790 2,130 -- -- 35,920
BANK CHARGES 186,447 872 178 -- 187,497
CONSULTING FEES 222,115 -- -- -- 222,115
CONTRIBUTIONS 850 -- -- -- 850
DEPRECIATION AND AMORTIZATION 69,019 4,673 35,235 -- 108,927
DUES AND SUBSCRIPTIONS 47,825 -- -- -- 47,825
INSURANCE 227,184 3,176 2,534 -- 232,894
MEALS AND ENTERTAINMENT 11,454 1,128 -- -- 12,582
MISCELLANEOUS -- -- 11,684 11,684
OFFICE EXPENSE 331,636 10,909 -- -- 342,545
OFFICE SUPPLIES 69,648 -- -- -- 69,648
PENALTIES 3,753 -- -- -- 3,753
POSTAGE AND DELIVERIES 713,738 284 -- -- 714,022
PROFESSIONAL FEES 140,699 157,977 17,599 -- 316,275
PROFIT SHARING CONTRIBUTION 3,407 -- -- -- 3,407
PROVISION FOR BAD DEBTS 32,957 -- -- -- 32,957
RENT 153,554 9,300 -- (99,767) 63,087
REPAIRS AND MAINTENANCE 115,530 1,384 3,460 -- 120,374
RESEARCH AND DEVELOPMENT EXPENSE 9,797 2,890 -- -- 12,687
RETIREMENT PLAN ADMINISTRATION 2,150 -- -- -- 2,150
RETIREMENT PLAN MATCHING CONTRIBUTIONS 46,032 -- -- -- 46,032
SALARIES AND WAGES 2,639,372 -- -- -- 2,639,372
SECURITY 4,422 -- -- -- 4,422
TAXES AND LICENSES 199,600 100 4,637 -- 204,337
TELEPHONE 143,021 3,456 -- -- 146,477
TRAINING 10,082 -- -- -- 10,082
TRAVEL 648,655 5,613 -- -- 654,268
UTILITIES 40,258 -- 86 -- 40,344
---------- -------- ------- -------- ----------
SELLING & ADMINISTRATIVE EXPENSES $6,626,009 $208,429 $75,413 $(99,767) $6,810,084
========== ======== ======= ======== ==========
See auditor's report on supplementary information.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
20
INSTANT TECHNOLOGIES, INC.,
INSTANT SYSTEM, INC.
AND
RAMSEY, LLC.
COMBINED BALANCE SHEETS
DECEMBER 31, 2005
ASSETS
INSTANT INSTANT
TECHNOLOGIES, SYSTEM, RAMSEY,
INC. INC. LLC. ELIMINATIONS COMBINED
------------- ------- ---------- ------------ ----------
CURRENT ASSETS:
CASH $ 98,905 $15,832 $ 27,580 $ -- $ 142,317
ACCOUNTS RECEIVABLE:
TRADE, NET OF ALLOWANCE
FOR DOUBTFUL ACCOUNTS 1,750,550 2,039 4,330 (2,314) 1,754,605
EMPLOYEE 2,000 -- -- -- 2,000
SHAREHOLDER 75,000 -- -- (75,000) --
AFFILIATE 305,839 -- -- (305,839) --
PREPAID EXPENSES 36,712 -- 1,048 -- 37,760
INVENTORY 2,418,849 17,503 -- -- 2,436,352
---------- ------- ---------- --------- ----------
TOTAL CURRENT ASSETS $4,687,855 $35,374 $ 32,958 $(383,153) $4,373,034
---------- ------- ---------- --------- ----------
PROPERTY AND EQUIPMENT:
BUILDINGS $ -- $ -- $ 849,255 $ -- $ 849,255
VEHICLES 29,110 -- -- -- 29,110
LAND -- -- 314,703 -- 314,703
LEASEHOLD IMPROVEMENTS 5,225 -- 154,225 -- 159,450
OFFICE FURNITURE AND EQUIPMENT 204,225 22,653 -- -- 226,878
---------- ------- ---------- --------- ----------
TOTAL $ 238,560 $22,653 $1,318,183 $ -- $1,579,396
LESS - ACCUMULATED DEPRECIATION 97,933 2,266 23,802 -- 124,001
---------- ------- ---------- --------- ----------
PROPERTY AND EQUIPMENT - NET $ 140,627 $20,387 $1,294,381 $ -- $1,455,395
---------- ------- ---------- --------- ----------
OTHER ASSETS:
DEPOSITS $ 2,500 $ -- $ -- $ -- $ 2,500
ORGANIZATIONAL COSTS, NET OF AMORTIZATION -- 690 -- -- 690
---------- ------- ---------- --------- ----------
$ 2,500 $ 690 $ -- $ -- $ 3,190
---------- ------- ---------- --------- ----------
TOTAL ASSETS $4,830,982 $56,451 $1,327,339 $(383,153) $5,831,619
========== ======= ========== ========= ==========
SEE AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION.
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
21
LIABILITIES AND STOCKHOLDERS' EQUITY
INSTANT INSTANT
TECHNOLOGIES, SYSTEM, RAMSEY,
INC. INC. LLC ELIMINATIONS COMBINED
------------- -------- ---------- ------------ ----------
CURRENT LIABILITIES:
NOTE PAYABLE:
DEMAND $ 208,161 $ -- $ -- $ -- $ 208,161
CURRENT PORTION OF LONG-TERM DEBT -- -- 10,367 -- 10,367
ACCOUNTS PAYABLE: --
AFFILIATE -- -- 305,839 (305,839) --
BANK OVERDRAFT 108,000 -- -- -- 108,000
TRADE 786,993 8,613 4,684 (2,314) 797,976
ACCRUED EXPENSES 251,577 980 66 -- 252,623
ACCRUED PROFIT SHARING 111,500 -- -- -- 111,500
---------- -------- ---------- --------- ----------
TOTAL CURRENT LIABILITIES $1,466,231 $ 9,593 $ 320,956 $(308,153) $1,488,627
---------- -------- ---------- --------- ----------
OTHER LIABILITIES - DEPOSITS $ -- $ -- $ 10,000 $ -- $ 10,000
---------- -------- ---------- --------- ----------
LONG-TERM DEBT:
NOTES PAYABLE:
TERM LOANS $ -- $ -- $ 998,716 $ -- $ 998,716
SHAREHOLDER LOANS -- 75,000 -- (75,000) --
---------- -------- ---------- --------- ----------
TOTAL NOTES PAYABLE $ -- $ 75,000 $ 998,716 $ (75,000) $ 998,716
LESS CURRENT PORTION ABOVE -- -- 10,357 -- 10,367
---------- -------- ---------- --------- ----------
LONG-TERM DEBT - NET $ -- $ 75,000 $ 988,349 $ (75,000) $ 988,349
---------- -------- ---------- --------- ----------
TOTAL LIABILITIES $1,466,231 $ 84,593 $1,319,305 $(383,153) $2,486,976
---------- -------- ---------- --------- ----------
STOCKHOLDERS' EQUITY:
COMMON STOCK $ 8,500 $ 100 $ -- $ -- $ 8,600
ADDITIONAL PAID-IN CAPITAL -- 24,900 -- 24,900
RETAINED EARNINGS (DEFICIT) 3,379,751 (53,142) 8,034 -- 3,334,643
LESS COST OF TREASURY STOCK (23,500) -- -- -- (23,500)
---------- -------- ---------- --------- ----------
TOTAL STOCKHOLDERS' EQUITY $3,364,751 $(28,142) $ 8,034 $ -- $3,344,643
---------- -------- ---------- --------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,830,982 $ 56,451 $1,327,339 $(383,153) $5,831,619
========== ======== ========== ========= ==========
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
22
INSTANT TECHNOLOGIES, INC.,
INSTANT SYSTEM, INC.
AND
RAMSEY, LLC.
COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2005
INSTANT
TECHNOLOGIES, INSTANT RAMSEY,
INC. SYSTEM LLC ELIMINATIONS COMBINED
------------- -------- -------- ------------ -----------
SALES - NET OF DISCOUNTS $17,335,225 $ 37,434 $ -- $ -- $17,372,659
----------- -------- -------- --------- -----------
COSTS OF SALES:
INVENTORY - BEGINNING OF THE YEAR $ 1,969,138 $ -- $ -- $ -- $ 1,969,138
PURCHASES 8,087,493 56,709 -- -- 8,144,202
OTHER COSTS 162,974 -- -- -- 162,974
----------- -------- -------- --------- -----------
$10,219,605 $ 56,709 $ -- $ -- $10,276,314
LESS INVENTORY - END OF THE YEAR 2,418,849 17,503 -- -- 2,436,352
----------- -------- -------- --------- -----------
TOTAL COST OF SALES $ 7,800,756 $ 39,206 $ -- $ -- $ 7,839,962
----------- -------- -------- --------- -----------
GROSS PROFIT $ 9,534,469 $ (1,772) $ -- $ -- $ 9,532,697
SELLING AND ADMINISTRATIVE EXPENSES 5,067,908 51,070 34,364 (115,362) 5,037,980
----------- -------- -------- --------- -----------
INCOME (LOSS) FROM OPERATIONS $ 4,466,561 $(52,842) $(34,364) $ 115,362 $ 4,494,717
----------- -------- -------- --------- -----------
OTHER INCOME (EXPENSES):
INTEREST EXPENSE $ (23,796) $ -- $(47,732) $ -- $ (71,528)
INTEREST INCOME 1,096 -- -- -- 1,096
LOSS ON DISPOSITION OF PROPERTY
AND EQUIPMENT (21,591) -- -- -- (21,591)
MANAGEMENT FEE 38,962 -- -- (38,962) --
RENT INCOME -- (300) 92,367 (76,400) 15,667
TERMINATED ACQUISITION AND
BUSINESS DEVELOPMENT COSTS (297,757) -- -- -- (297,757)
----------- -------- -------- --------- -----------
TOTAL OTHER INCOME (EXPENSES) $ (303,086) $ (300) $ 44,635 $(115,362) $ (374,113)
----------- -------- -------- --------- -----------
NET INCOME (LOSS) $ 4,163,475 $(53,142) $ 10,271 $ -- $ 4,120,604
RETAINED EARNINGS AND EQUITY (DEFICIT)
BEGINNING OF YEAR 1,359,855 -- (2,237) -- 1,357,618
DISTRIBUTIONS (2,143,579) -- -- -- (2,143,579)
----------- -------- -------- --------- -----------
RETAINED EARNINGS (EQUITY)
END OF THE YEAR $ 3,379,751 $(53,142) $ 8,034 $ -- $ 3,334,643
=========== ======== ======== ========= ===========
SEE AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
23
INSTANT TECHNOLOGIES, INC.,
INSTANT SYSTEMS, INC.
AND
RAMSEY, LLC
COMBINED SCHEDULE OF SELLING AND ADMINISTRATIVE EXPENSES
DECEMBER 31, 2005
INSTANT INSTANT
TECHNOLOGIES, SYSTEM, RAMSEY
INC. INC. LLC ELIMINATIONS COMBINED
------------- ------- ------- ------------ ----------
ADVERTISING $ 391,460 $ 3,092 $ -- $ -- $ 394,552
AUTO EXPENSE 75,583 242 -- -- 75,825
BANK CHARGES 105,039 108 4 -- 105,151
DEPRECIATION AND AMORTIZATION 57,254 2,289 22,135 -- 81,678
DUES AND SUBSCRIPTIONS 17,347 -- -- -- 17,347
INSURANCE 146,023 -- 535 -- 146,558
MANAGEMENT FEE -- 38,962 -- (38,962) --
MEALS AND ENTERTAINMENT 16,732 136 -- -- 16,868
MISCELLANEOUS -- -- 2,626 -- 2,626
OFFICE EXPENSE 157,566 -- -- -- 157,566
OFFICE SUPPLIES 109,704 3,046 84 -- 112,834
PENALTIES 19,125 -- -- -- 19,125
POSTAGE AND DELIVERIES 634,469 253 -- -- 634,722
PROFESSIONAL FEES 126,499 975 1,613 -- 129,087
PROFIT SHARING CONTRIBUTION 111,500 -- -- -- 111,500
PROVISION FOR BAD DEBTS 77,146 -- -- -- 77,146
RENT 154,670 -- -- (76,400) 78,270
REPAIRS AND MAINTENANCE 141,820 1,189 2,605 -- 145,614
RESEARCH AND DEVELOPMENT EXPENSE 27,777 -- -- -- 27,777
RETIREMENT PLAN ADMINISTRATION 3,150 -- -- -- 3,150
RETIREMENT PLAN MATCHING CONTRIBUTIONS 6,556 -- -- -- 6,556
SALARIES AND WAGES 2,296,252 -- -- -- 2,296,252
SECURITY 795 -- -- -- 795
TAXES AND LICENSES 175,154 -- 4,695 -- 179,849
TELEPHONE 78,626 280 -- -- 78,906
TRAINING 9,737 -- -- -- 9,737
TRAVEL 90,970 498 -- -- 91,468
UTILITIES 36,954 -- 67 -- 37,021
---------- ------- ------- --------- ----------
SELLING & ADMINISTRATIVE EXPENSES $5,067,908 $51,070 $34,364 $(115,362) $5,037,980
========== ======= ======= ========= ==========
SEE AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION
(COLBY & COMPANY PLC LOGO)
Certified Public Accountants
24