ABLE ELECTRONICS CORPORATION
AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
APRIL 3, 2005 AND APRIL 4, 2004
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.
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TABLE OF CONTENTS
Page No.
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Independent Auditors' Report 1
Consolidated Balance Sheets 2 - 3
Consolidated Statements of Income 4
Consolidated Statements of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7 - 16
ARMANINO McKENNA LLP
Certified Public Accountants & Consultants
12667 Alcosta Blvd., Suite 500
San Ramon, CA 94583-4427
ph: 925.790.2600
fx: 925.790.2601
www.amllp.com
INDEPENDENT AUDITORS' REPORT
To the Stockholders and Board of Directors
Able Electronics Corporation and Subsidiary
Hayward, California
We have audited the accompanying consolidated balance sheets of Able Electronics
Corporation and Subsidiary as of April 3, 2005 and April 4, 2004, and the
related consolidated statements of income, changes in stockholders' equity, and
cash flows for the periods 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 audits to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Able Electronics
Corporation and Subsidiary as of April 3, 2005 and April 4, 2004, and the
results of their operations and their cash flows for the periods then ended, in
conformity with accounting principles generally accepted in the United States of
America.
/s/ ARMANINO McKENNA LLP
ARMANINO McKENNA LLP
April 19, 2005
SAN RAMON *SAN LEANDRO
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
April 3, 2005 and April 4, 2004
ASSETS
2004
2005 Restated
(52 week (53 week
period) period)
----------- -----------
Current assets
Cash $ 57,066 $ 10,964
Investments, trading, at fair value 8,309 8,031
Receivables
Trade receivables (net of allowance for doubtful
accounts of $10,674 in 2005 and $12,544 in 2004) 3,663,665 3,920,468
Related party 67,339 -
Income tax receivable 74,765 82,826
VAT taxes receivable 49,345 48,968
Note receivable, trade (net of discount of $48,462 in 2005) 460,462 -
Inventory (net of reserve of $60,864 in 2005 and $57,927 in 2004) 3,879,832 3,857,704
Prepaid expenses 89,650 135,266
Deferred tax asset, current portion 106,100 138,000
----------- -----------
Total current assets 8,456,533 8,202,227
Property and equipment, net of accumulated
depreciation and amortization 1,672,225 2,147,264
Deferred tax asset, less current portion 111,000 160,100
Intangible asset, net - 30,652
Deposits 184,592 125,820
----------- -----------
Total assets $10,424,350 $10,666,063
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Balance Sheets
April 3, 2005 and April 4, 2004
LIABILITIES AND STOCKHOLDERS' EQUITY
2004
2005 Restated
(52 week (53 week
period) period)
----------- -----------
Current liabilities
Accounts payable $ 2,273,410 $ 2,764,042
Accrued liabilities 248,676 271,172
Line of credit 3,156,642 3,468,549
Income taxes payable 438,272 166,000
Note payable, current portion 416,333 416,666
Capital lease obligations, current portion 209,965 194,582
Notes payable to stockholders 1,000,000 1,000,000
----------- -----------
Total current liabilities 7,743,298 8,281,011
Deferred income tax liability - 79,000
Note payable, less current portion - 520,834
Capital lease obligations, less current portion 187,684 397,649
Deferred rent 394,183 357,449
----------- -----------
Total liabilities 8,325,165 9,635,943
----------- -----------
Stockholders' equity
Common stock 500,000 500,000
Retained earnings 1,599,185 530,120
----------- -----------
Total stockholders' equity 2,099,185 1,030,120
----------- -----------
Total liabilities and stockholders' equity $10,424,350 $10,666,063
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
-3-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Income
For the Periods Ended April 3, 2005 and April 4, 2004
2004
2005 Restated
(52 week (53 week
period) period)
----------- -----------
Net sales $28,595,528 $26,662,601
Cost of sales 23,452,331 21,614,280
----------- -----------
Gross profit 5,143,197 5,048,321
Selling, general, and administrative expenses 3,019,069 3,547,061
Depreciation and amortization 87,044 122,519
----------- -----------
Income from operations 2,037,084 1,378,741
----------- -----------
Other income (expense)
Interest income 589 237
Interest expense (345,608) (358,296)
Write-off of intangible asset - (300,000)
----------- -----------
Total other expense (345,019) (658,059)
----------- -----------
Income before provision for income taxes 1,692,065 720,682
Income tax expense (623,000) (192,448)
----------- -----------
Net income $ 1,069,065 $ 528,234
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
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ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Changes in Stockholders' Equity
For the Periods Ended April 3, 2005 and April 4, 2004
Common Retained
Stock Earnings Total
--------- ---------- ----------
Balance at March 30, 2003, as previously reported $ 500,000 $ 162,403 $ 662,403
Prior period adjustment, net of tax effect - (160,517) (160,517)
--------- ---------- ----------
Balance at March 30, 2003, as restated 500,000 1,886 501,886
Net income, as restated - 528,234 528,234
--------- ---------- ----------
Balance at April 4, 2004, as restated 500,000 530,120 1,030,120
Net income - 1,069,065 1,069,065
--------- ---------- ----------
Balance at April 3, 2005 $ 500,000 $1,599,185 $2,099,185
========= ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
-5-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the Periods Ended April 3, 2005 and April 4, 2004
2004
2005 Restated
(52 week (53 week
period) period)
----------- -----------
Cash flows from operating activities
Net income $ 1,069,065 $ 528,234
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization of property and equipment 738,449 738,393
Amortization of intangible asset 30,652 30,652
Write-off of intangible asset - 300,000
Loss on disposal of property and equipment - 139,936
Deferred income taxes 2,000 25,648
Changes in operating assets and liabilities
Investments (278) 1,318
Trade receivables, net 256,803 (322,958)
Related party receivable (67,339) 4,122
Income and VAT taxes receivable 7,684 79,282
Note receivable, trade, net (460,462) -
Inventory, net (22,128) (1,610,531)
Prepaid expenses 45,616 (38,930)
Deposits (58,772) 19,296
Accounts payable (490,632) 899,459
Accrued liabilities (22,496) (49,779)
Accrued interest to stockholders - (133,333)
Income taxes payable 272,272 166,000
Deferred rent 36,734 67,184
----------- -----------
Net cash provided by operating activities 1,337,168 843,993
----------- -----------
Cash flows from investing activities
Purchase of intangible asset - (300,000)
Purchase of property and equipment (263,410) (146,104)
Proceeds from sale of property and equipment - 900
----------- -----------
Net cash used in investing activities (263,410) (445,204)
----------- -----------
Cash flows from financing activities
Net repayments on line of credit (311,907) (598,248)
Borrowings on note payable - 625,000
Repayments on note payable (521,167) (364,583)
Principal payments on capital lease obligations (194,582) (80,697)
----------- -----------
Net cash used in financing activities (1,027,656) (418,528)
----------- -----------
Net increase (decrease) in cash 46,102 (19,739)
Cash at beginning of year 10,964 30,703
----------- -----------
Cash at end of year $ 57,066 $ 10,964
=========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
-6-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
1. Nature of Operations and Summary of Significant Accounting Policies
Nature of operations
Able Electronics Corporation and Subsidiary (the "Company") was
incorporated on November 11, 1999 under the laws of the State of
California. The Company manufactures circuit boards for the
telecommunications, networking, semiconductor testing, medical instruments,
computer peripherals, industrial controls and genetic research industries.
The Company's headquarters and main manufacturing facility are located in
Hayward, California. The Company also has a manufacturing facility located
in Tijuana, Mexico. The Company sells to customers located throughout the
United States.
Principles of consolidation
The accompanying consolidated financial statements include the accounts of
Able Electronics Corporation and its wholly owned subsidiary: Able Mex.
Significant intercompany transactions and accounts have been eliminated in
the consolidation. The United States dollar is the functional currency for
the Company's Mexico operations. The effect on the consolidated statements
of income of transaction and translation gains and losses is insignificant
for all years presented.
Fiscal year
The Company's fiscal year ends on the Sunday after March 31st. The
accompanying consolidated financial statements are presented for the 52-
and 53-week periods ended April 3, 2005 and April 4, 2004, respectively.
Revenue and cost recognition
Revenue from sales of products and the related cost of products sold are
recognized when the product is shipped and title and risk of loss have
passed to the customer. Sales are reduced for estimated sales returns and
discounts provided to customers.
Cash
The Company maintains a single U.S. bank account for its Hayward operations
and separate operating accounts in Mexico for its Tijuana operations. The
U.S. bank account is maintained daily at a zero balance through an
automatic sweep process. Under this process, deposits to the account
automatically reduce borrowings under the Company's operating line of
credit while checks presented to the bank for payment increase borrowings
under the line of credit. Checks which have been issued by the Company in
payment of obligations but which have not yet been presented to the bank
for payment are reported as a component of accounts payable in the
accompanying financial statements.
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ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
1. Nature of Operations and Summary of Significant Accounting Policies
(continued)
Cash (continued)
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents.
The Company's cash not federally insured at April 3, 2005 amounted to
approximately $70,000.
Investments
Investments, consisting of marketable equity securities, are accounted for
as trading securities and are stated at fair value. Unrealized gains and
losses are included in income from operations.
Allowance for doubtful accounts
Based on historical write-offs, overall economic conditions and the
current aging status of its customers, the Company has established an
allowance for doubtful accounts at a level considered adequate to cover
anticipated credit losses on outstanding trade accounts and notes
receivable.
Accounts and notes receivable consists of trade receivables stated net of
an allowance for doubtful accounts.
Inventory
Inventory consists of raw materials, work-in-process, and finished goods,
which are stated at the lower of cost or market, net of a reserve for
obsolete or slow-moving inventory. Cost is determined by the first-in,
first-out method. Manufacturing overhead and general and administrative
costs have been allocated to inventory. The reserve for obsolete or
slow-moving inventory was $60,864 and $57,927 as of April 3, 2005 and April
4, 2004, respectively.
Shipping and handling costs
Shipping and handling costs are included in cost of sales.
-8-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
1. Nature of Operations and Summary of Significant Accounting policies
(continued)
Property and equipment
Property and equipment is stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
which range from three to ten years. Leasehold improvements are amortized
over the shorter of the useful life of the improvement or the term of the
lease. Maintenance and repairs are charged to expense in the period
incurred; major replacements and improvements are capitalized. When assets
are retired or disposed of, the cost and accumulated depreciation are
removed from the accounts, and any resulting gains or losses are included
in income for the period. Whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recovered, the
Company, using its best estimates and projections, reviews the carrying
value of long-lived identifiable assets for impairment. When impairment is
identified, the loss is recognized and the asset's carrying value is
reduced to its estimated fair value.
Intangible asset
The Company acquired an intangible asset through the purchase of an
exclusive right to manufacture products of Astec America Corporation in
March 2002. This intangible asset is amortized over its estimated useful
life of 3 years using the straight-line method. Amortization expense for
the years ended April 3, 2005 and April 4, 2004 was $30,652.
In June 2003, the Company acquired an intangible asset through the purchase
of an exclusive right to perform repair, warranty and related services with
ACE, a company commonly controlled by the majority stockholders of the
Company. In March 2004, management determined that this asset was impaired
and wrote-off the remaining intangible asset balance of $300,000.
Warranty
Warranty costs are expensed as incurred and have not been material to date.
Deferred rent
The Company computes rent expense on a straight-line basis for operating
leases that contain certain provisions for scheduled rent increases over
the lease term. The difference between rent expense and rent payments over
the lease term is recorded as a deferred rent liability.
Income taxes
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due or refundable,
plus deferred taxes.
-9
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
1. Nature of Operations and Summary of Significant Accounting policies
(continued)
Income taxes (continued)
Deferred tax assets and liabilities are recognized for the future tax
consequences of temporary differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities, at
the currently enacted statutory rates. The effect on deferred taxes of a
change in tax rates is recognized in the period that includes the enactment
date.
Use of estimates
The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and revenue and expenses for the
reporting periods. Accordingly, actual results could differ from those
estimates.
Uses of estimates include, but are not limited to, standard inventory
costs, inventory valuation reserves, allocation of overhead costs to
inventory, estimates for allowances for doubtful receivables, valuation and
amortization of intangible assets, and depreciation. Because of the
inherent uncertainties in estimating, it is at least reasonably possible
that the Company's estimates will change in the near term.
Reclassifications
Certain 2004 balances have been reclassified to conform to the 2005
presentation.
2. Note Receivable, Trade
Note receivable, trade reflects an agreement between the Company and a
customer under which the customer will make 52 weekly payments to repay the
full balance of trade receivables. The agreement requires the customer to
make principal only payments, without interest charges. The fair value of
the note receivable is estimated as the value of the discounted future cash
flows of the loan, using an interest rate of 20%.
Current shipments to this customer are being made on a cash-on-delivery
basis. The customer filed its Form 10-K to the Securities and Exchange
Commission for the year ended December 31, 2004 on March 23, 2005, which
included a going concern emphasis paragraph in the independent auditor's
opinion. In this Form 10-K, the customer indicated their cash reserves
would be exhausted by or near the end of the March 31, 2005 quarter and
further indicated it had no formal, committed financing arrangements
available, other than a highly-restricted bank line of credit, to mitigate
this projected cash shortfall. On March 28, 2005, the customer announced it
had received a $250,000 loan in the form of a promissory note.
-10-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
2. Note Receivable, Trade (continued)
The Company has not provided an allowance for uncollectible amounts for
the note receivable as it believes the full balance of the note will be
collected. The Company's estimate of collectibility could change
materially during fiscal 2006, requiring a charge to bad debt expense.
3. Inventory
The components of inventory are as follows:
2005 2004
--------- ----------
Finished goods $ 464,275 $ 403,789
Work-in-process 778,113 988,518
Raw materials 2,698,308 2,523,324
---------- ---------
3,940,696 3,915,631
Less: inventory reserve (60,864) (57,927)
---------- ---------
$3,879,832 $3,857,704
========== ==========
4. Property and Equipment
Property and equipment consists of the following:
2005 2004
--------- ----------
Computer hardware and software $ 548,648 $ 502,311
Machinery and equipment 2,762,010 2,695,955
Furniture and fixtures 70,924 70,924
Leasehold improvements 682,737 610,701
Equipment under capital leases 651,927 649,144
Automobile 50,174 50,174
Construction in process 76,199 -
---------- -----------
4,842,619 4,579,209
Less: accumulated depreciation and amortization (3,170,394) (2,431,945)
---------- -----------
$1,672,225 $ 2,147,264
========== ===========
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ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
4. Property and Equipment (continued)
Depreciation totaled $738,449 and $738,393 for the periods ended April 3,
2005 and April 4, 2004, respectively. Assets under capital lease
obligations, net of the related accumulated amortization totaled $499,903
and $657,506, respectively, at April 3, 2005 and April 4, 2004.
5. Line of Credit
The Company maintains a $3,750,000 line of credit with a financial
institution, which incurs interest on borrowings under the line at the
financial institution's base rate plus 0.75%. The effective rate was 6.5%
and 4.75% at April 3, 2005 and April 4, 2004, respectively. The
outstanding principal was $3,156,642 and $3,468,549 at April 3, 2005 and
April 4, 2004, respectively. Under the credit agreement, the Company is
required to maintain certain financial ratios and other covenants. The
Company was not in compliance with these financial ratios at April 3, 2005
and April 4, 2004 and has obtained a waiver of such covenants from the
lender. The line is collateralized by substantially all of the assets of
the Company.
6. Notes Payable
The Company has a note payable to a financial institution. The principal
balance was $416,333 and $937,500 at April 3, 2005 and April 4, 2004,
respectively. The note expires in May 2006 and requires monthly payments
of $34,722 plus accrued interest at the financial institution's base rate
plus 2%. The effective rate was 7.25% and 6.0% at April 3, 2005 and April
4, 2004, respectively. Under the loan agreement, the Company is required
to maintain certain financial ratios and other covenants. The Company was
not in compliance with these financial ratios at April 3, 2005 and April
4, 2004 and has obtained a waiver of such covenants from the lender.
The Company has notes payable due to its stockholders in the amount of
$1,000,000 at April 3, 2005 and April 4, 2004, respectively. The notes
accrue interest on the unpaid principal at a rate of 10% per annum.
Interest is paid quarterly. Unpaid principal is due in 2006. There was no
accrued interest to stockholders at April 3, 2005 and April 4, 2004,
respectively.
7. Lease Obligations
Certain equipment is financed under capital leases, which expire in 2007.
The Company also leases equipment, office and warehouse space under
operating lease agreements expiring at various dates through 2010.
-12-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
7. Lease Obligations (continued)
The following is a schedule of future minimum lease payments under
noncancelable capital and operating leases at April 3, 2005, together with
the present value of minimum lease payments:
Capital Operating
Leases Leases
-------- ---------
2006 $ 233,265 $ 937,100
2007 194,387 970,000
2008 - 999,000
2009 - 926,000
2010 - 963,100
--------- ----------
Total minimum lease payments 427,652 $4,795,200
Less: amounts representing interest (30 003) ==========
---------
Present value of minimum lease payments 397,649
Less: current maturities (209 965)
---------
Long term capital lease obligations $ 187,684
=========
Operating lease commitments include amounts due under a three-year lease
agreement signed after year end, but commencing April 1, 2005 for the
Company's Mexico manufacturing facility. The agreement requires monthly
payments of approximately $9,000.
The Company subleases a portion of its Hayward office on a month-to-month
basis. Rental expense under operating lease agreements, net of sublease
income, totaled $877,019 and $808,353 for the periods ended April 3, 2005
and April 4, 2004, respectively.
8. Income Taxes
The provision for income tax expense presented in the consolidated
financial statements consists of the following:
2005 2004
-------- --------
Federal current $506,000 $118,000
State current 109,000 48,000
Federal and state deferred 8,000 26,448
-------- --------
$623,000 $192,448
======== ========
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ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
8. Income Taxes (continued)
Deferred income taxes result from temporary differences in the recognition
of certain income and expense items for tax and financial reporting
purposes.
These differences are as follows:
2005 2004
---- ----
Allowance for doubtful accounts $ 4,000 $ 17,000
State income tax 19,000 (4,000)
Accrued vacation expense 56,000 65,000
Inventory reserve 26,000 25,000
Depreciation (89,000) (93,000)
Amortization 32,000 21,000
State net operating loss - 35,000
Deferred rent 169,000 153,000
--------- ---------
$ 217,000 $ 219,000
========= =========
The effective income tax rate for the periods ended April 3, 2005 and April
4, 2004 was 37% and 28%. The difference between the statutory U.S. federal
income tax rate of 34% and the Company's effective tax rate is due to
revenue generated from the Tijuana facility, which is taxed by the
government of Mexico.
9. Retirement Plan
The Company offers a 401(k) plan to all eligible employees. Employees are
permitted to make tax-deferred contributions into the 401(k) plan up to
limits established by the Internal Revenue Service. Additionally, the
Company may elect to make discretionary contributions to the Plan. The
Company did not make a discretionary contribution to the Plan for the
periods ended April 3, 2005 and April 4, 2004, respectively.
10. Related Party Transactions
The Company leases its Hayward facility from an entity that is commonly
controlled by the majority stockholders of the Company. The lease requires
monthly payments ranging from $62,183 to $81,829 through 2010. Rental
charges paid to related parties are comparable to market rate rents. The
future minimum lease payments due under this lease are included in the
disclosures in Note 7.
-14-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
10. Related Party Transactions (continued)
The Company has notes payable to its stockholders in the amount of
$1,000,000 (see Note 6).
In June 2003, the Company acquired an intangible asset through the purchase
of an exclusive right to perform repair, warranty and related services with
ACE, a company commonly controlled by the majority stockholders of the
Company. In March 2004, management determined that this asset was impaired
and wrote-off the remaining intangible asset balance of $300,000.
11. Supplemental Disclosures of Cash Flow Information
2005 2004
---- ----
Cash paid during the year for
Interest $345,886 $491,629
Income taxes $342,728 $ 800
In 2004 the Company acquired $627,230 in property and equipment through
capital lease financing.
12. Concentration
During 2005, three customers accounted for 41% of the Company's revenues
and 42% of the Company's accounts receivable balance at April 3, 2005.
During 2004, three customers accounted for 36% of the Company's revenues
and 43% of the Company's accounts receivable balance at April 4, 2004. As
described in footnote No. 2, one of the Company's customers which accounted
for 18% of 2005 revenue has been placed on cash-on-delivery terms and has
disclosed liquidity issues in its Form 10-K filing for the year ended
December 31, 2004 which was filed on March 23, 2005.
Due to the large volume of sales to these customers, the Company's revenue
base and the recoverability of a significant portion of its receivables
depend to some extent on the economic condition of the industries in which
each customer operates. These customers operate in the medical, health and
fitness, networking and electronics industries.
13. Commitments and Contingencies
On March 17, 2005, the stockholders of the Company entered into a
memorandum of terms for investment to sell 100% of their respective
interests in the Company.
-15-
ABLE ELECTRONICS CORPORATION AND SUBSIDIARY
Notes to Consolidated Financial Statements
April 3, 2005 and April 4, 2004
14. Prior Period Adjustment
The Company's previously reported 2004 net income and stockholders' equity
at April 4, 2004 was adjusted to record previously unrecorded deferred
rent. This adjustment, net of related income tax, reduced previously
reported net income and stockholders' equity by $160,517.
15. Subsequent Event
Subsequent to year-end, the Company entered into a capital lease of
machinery and equipment. The lease calls for monthly payments of
approximately $11,000 and expires in 2010.
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