1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported)
August 15, 1996
PROLOGIC MANAGEMENT SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Arizona 1-13704 86-0498857
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
2030 East Speedway Blvd.
Tucson, Arizona 85719
(Address of principal executive offices)(Zip Code)
(520) 320-1000
(Registrant's telephone number, including area code)
2731 East Elvira
Suite 151
Tucson, Arizona 85706-7124
(Former name or former address if changed since last report)
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Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired
Audited financial statements of BASIS Incorporated as of and for the
year ended December 31, 1995.
(b) Pro Forma Financial Information
On August 15, 1996, upon the acceptance of the Articles of Merger by
the Arizona Corporate Commission, Prologic Management Systems, Inc.
acquired BASIS Inc., a systems integration firm located in Emeryville
California, through the merger of BASIS into a wholly owned subsidiary
of Prologic, BASIS Acquisition Corp. BASIS will continue to exist as a
wholly owned subsidiary.
The aggregate cost of acquiring BASIS was approximately $2,169,000. The
purchase price included $500,000 in cash and 337,325 shares of Prologic
common stock valued at $1,400,000. The Company incurred direct
transaction cost of approximately $269,000 associated with the
acquisition. In addition the Company will issue, to BASIS shareholders,
an additional amount of common stock valued up to $1,600,000 if certain
post-merger earn-out targets in the Agreement are met during the
Company's fiscal periods ending June 30, 1997 and 1998.
The following presents the pro forma condensed combined balance sheet
(unaudited) as of June 30, 1996, as if the acquisition had occurred at
that date, and pro forma condensed combined statement of operations
(unaudited) for the three months ended June 30, 1996 and the statement
of operations (audited) for the fiscal year ended March 31, 1996, as if
the acquisition had occurred at the beginning of the period, after
giving effect to certain adjustments including amortization of the
amount by which the purchase price and related direct cost exceed the
net assets acquired over a seven year period.
These pro forma statements do not necessarily reflect the results of
operations that would have been achieved had the company and BASIS been
combined during such periods, or which may be obtained in the future.
The pro forma condensed combined financial statements should be read in
conjunction with the audited financial statements and notes thereto of
BASIS and PROLOGIC.
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PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the year ended March 31, 1996 and for the three months ended June 30, 1996
(1) Basis of Accounting
On August 15, 1996, the Company completed the acquisition of BASIS,
Inc. a regional systems integration firm based in Emeryville, California. All of
the outstanding stock was acquired for $500,000 in cash and 337,325 shares of
common stock of the company valued at $1,400,000.
The pro forma unaudited combined statements of operations are presented
using PROLOGIC's audited fiscal year ended March 31, 1996 and the unaudited
three months ended June 30, 1996 combined with BASIS audited twelve months ended
December 31, 1995 and the unaudited three months ended March 31, 1996 giving
effect to the acquisition of BASIS, Inc. as if the transaction had taken place
on April 1, 1995.
The pro forma unauditd combined balance sheet gives effect to the
acquisition as if the transaction had taken place on June 30, 1996 and combines
PROLOGIC's June 30, 1996 amounts with BASIS's March 31, 1996 amounts.
The following pro forma consolidated statements of operations are not
necessarily indicitive of the future results of operations of the Company or the
results of operations which would have resulted had the Company and BASIS been
combined during the periods presented. In addition, the pro forma results are
not intended to be a projection of future results.
(2) Pro Forma Condensed Combined Statements of Operations and Pro Forma
Consolidated Balance Sheet
The accompanying pro forma adjustments reflect adjustments for the
items described in note 1 above and the following adjustments:
a. To reflect the amortization of the amount by which the
purchase price and related acquisition costs exceed the net
assets acquired over 7 years.
b. To record the amount of the cash portion of the purchase
price and related acquisition costs.
c. To record the common stock of Prologic paid to the holders
of BASIS stock.
d. To write off the equity of BASIS Inc.
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4
BASIS, INC.
Financial Statements
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
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5
Independent Auditors' Report
The Board of Directors
BASIS, Inc.:
We have audited the accompanying balance sheet of BASIS, Inc. as of December 31,
1995, and the related statements of income, shareholders' equity, and cash flows
for each of the years in the two-year period ended December 31, 1995. 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 generally accepted auditing
standards. 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 BASIS, Inc. as of December 31,
1995, and the results of its operations and its cash flows for each of the years
in the two-year period ended December 31, 1995, in conformity with generally
accepted accounting principles.
San Jose, California
July 2, 1996
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6
BASIS, INC.
Balance Sheet
December 31, 1995
Assets
------
Current assets:
Cash $ 639,519
Trade accounts receivable (Notes 4 and 9) 1,496,229
Other receivables 62,133
Inventories (Note 4) 61,829
Prepaid expenses 28,565
-----------
Total current assets 2,288,275
Property and equipment, net (Note 2) 147,191
Other assets 8,470
-----------
$ 2,443,936
===========
Liabilities and Shareholders' Equity
Current liabilities:
Line of credit (Note 4) $ 486,000
Accounts payable 576,554
Accrued expenses (Note 3) 227,998
Deferred revenue 24,687
-----------
Total current liabilities 1,315,239
-----------
Commitments (Notes 10 and 11)
Shareholders' equity:
Common stock, $1 par value; 2,000,000 shares authorized;
1,309,500 shares issued and outstanding (Note 6) 1,309,500
Accumulated deficit (180,803)
-----------
Total shareholders' equity 1,128,697
-----------
$ 2,443,936
===========
See accompanying notes to financial statements.
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BASIS, INC.
Statements of Income
Years ended December 31, 1995 and 1994
1995 1994
----------- ----------
Net sales (Note 9):
Hardware $11,750,827 7,100,073
Software 1,652,606 1,933,808
Services and maintenance 1,537,715 1,122,116
----------- ----------
14,941,148 10,155,997
----------- ----------
Cost of sales (Note 9):
Hardware 10,497,069 6,264,270
Software 1,539,483 1,671,974
Services and maintenance 1,318,166 840,853
----------- ----------
13,354,718 8,777,097
----------- ----------
Gross margin 1,586,430 1,378,900
----------- ----------
Operating expenses:
Sales and marketing 816,392 700,090
General and administrative 522,538 541,249
----------- ----------
Total operating expenses 1,338,930 1,241,339
----------- ----------
Income from operations 247,500 137,561
Interest expense, net 24,494 43,124
----------- ----------
Income before income taxes 223,006 94,437
Income taxes (Note 5) 12,500 800
----------- ----------
Net income $ 210,506 93,637
=========== ==========
Pro forma net income data (unaudited):
Income before taxes, as reported $ 223,006
Pro forma income taxes 89,500
-----------
Pro forma net income (unaudited) $ 133,506
===========
See accompanying notes to financial statements.
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BASIS, INC.
Statements of Shareholders' Equity
Years ended December 31, 1995 and 1994
Common stock Total
----------------------------- Accumulated shareholders'
Shares Amount deficit equity
--------- ---------- -------- ---------
Balances as of December 31, 1993 1,077,500 $1,077,500 (484,946) 592,554
Proceeds from issuance of common
stock 228,000 228,000 -- 228,000
Net income -- -- 93,637 93,637
--------- ---------- -------- ---------
Balances as of December 31, 1994 1,305,500 1,305,500 (391,309) 914,191
Issuance of common stock in
exchange for services 4,000 4,000 -- 4,000
Net income -- -- 210,506 210,506
--------- ---------- -------- ---------
Balances as of December 31, 1995 1,309,500 $1,309,500 (180,803) 1,128,697
========= ========== ======== =========
See accompanying notes to financial statements.
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BASIS, INC.
Statements of Cash Flows
Years ended December 31, 1995 and 1994
1995 1994
--------- ----------
Cash flows from operating activities:
Net income $ 210,506 93,637
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation 85,963 59,568
Common stock issued for services rendered 4,000 --
Changes in operating assets and liabilities:
Trade accounts receivable 568,004 (1,259,453)
Other receivables 95,086 (69,688)
Inventories 95,333 (31,224)
Prepaid expenses 9,465 58,641
Accounts payable (397,372) 342,451
Accrued expenses (60,221) (130,901)
Deferred revenue 24,687 --
--------- ----------
Net cash provided by (used in) operating activities 635,451 (936,969)
--------- ----------
Cash flows from investing activities:
Purchases of software and equipment (117,816) (42,312)
Deposits refunded (paid) 10,543 (18,843)
--------- ----------
Net cash used in investing activities (107,273) (61,155)
--------- ----------
Cash flows from financing activities:
Proceeds from common stock issuance -- 228,000
Payments on capital lease obligations (14,296) (24,881)
Proceeds from (payments on) line of credit, net 30,293 (449,282)
--------- ----------
Net cash provided by (used in) financing activities 15,997 (246,163)
--------- ----------
Net increase (decrease) in cash 544,175 (1,244,287)
Cash at beginning of year 95,344 1,339,631
--------- ----------
Cash at end of year $ 639,519 95,344
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the year:
Income taxes $ 800 800
========= ==========
Interest $ 25,000 43,000
========= ==========
See accompanying notes to financial statements.
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BASIS, INC.
Notes to Financial Statements
December 31, 1995 and 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
BASIS, Inc. (the Company) is a California corporation operating as a
Women Business Entity (WBE) engaged in the value-added resale of
computer hardware and software and the design and integration of
computer systems. The Company is also engaged in the implementation of
relational databases, automated data collection, and Internet and World
Wide Web technologies. The Company's customer base is largely comprised
of Fortune 1000 companies located in the Western United States,
principally California.
Revenue Recognition
The Company recognizes revenue from sales of hardware and software when
the products have been shipped, all significant obligations have been
satisfied, and collection of the resulting receivable is probable. The
Company purchases and sells maintenance agreements on behalf of the
original equipment manufacturers and maintains no further obligation
under these contracts. As such, revenue related to such contracts is
recognized upon sale of the contract. Revenue from professional
services is recognized when performed.
Inventories
Inventories, consisting of finished goods, are stated at the lower of
cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are stated at cost. Computer equipment and
furniture and fixtures are depreciated using the double declining
balance method over the estimated useful lives of the assets, generally
five to seven years. Purchased computer software is depreciated using
the straight-line method over the estimated useful life of five years.
Income Taxes
The Company has elected under the Internal Revenue Code (IRC) to be an
S corporation for federal tax purposes. In lieu of corporate income
taxes, the shareholders of an S corporation are taxed on their
proportionate share of the Company's taxable income. In the event of a
loss, the shareholders include their respective shares of the Company's
net operating loss in their individual income tax returns.
For California purposes, the Company has retained its status as
subchapter C corporation, paying its California taxes based on the
Company's taxable income.
(Continued)
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BASIS, INC.
Notes to Financial Statements
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax basis and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and 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 these estimates.
(2) PROPERTY AND EQUIPMENT
Property and equipment as of December 31, 1995, consisted of the
following:
Computer equipment $ 393,063
Furniture and fixtures 80,634
Purchased computer software 62,095
------------
535,792
Less accumulated depreciation 388,601
------------
$ 147,191
============
(3) ACCRUED EXPENSES
Accrued expenses as of December 31, 1995, consisted of the following:
State sales taxes $ 80,041
Commissions 60,642
Vacation 44,872
Other 42,443
------------
$ 227,998
============
(Continued)
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BASIS, INC.
Notes to Financial Statements
(4) FINANCING ARRANGEMENTS
The Company has a $5 million line of credit arrangement with Deutsche
Financial Services (DFS). The line of credit permits borrowings of up
to the lesser of 80% of eligible accounts receivable, excluding the
assigned accounts receivable discussed below, or $2 million. In
addition, the line of credit permits borrowings of up to $3 million for
inventory purchases. Draws secured by eligible accounts receivable
accrue interest at the prime rate (8.50% as of December 31, 1995) plus
1%, with a minimum rate of 7%. Draws for inventory purchases do not
accrue interest as long as the draws are paid down within the vendor's
standard terms. Otherwise, such draws accrue interest at a variable
rate determined by DFS on a daily basis (24% annual rate as of December
31, 1995). The carrying amount of the line of credit approximates fair
value because of the short maturity of the instrument.
The line of credit is secured by substantially all of the assets of the
Company and is guaranteed by the Company's President and Chief
Executive Officer and a significant shareholder. The line of credit
automatically renews annually until terminated by either party. The
line also contains certain financial covenants, with which the Company
was in compliance as of December 31, 1995. As of December 31, 1995,
there was no outstanding balance on the accounts receivable credit line
and the outstanding balance on the inventory credit line was $486,000.
During 1995, the Company entered into a financing agreement with AT&T
Corporation (AT&T) and Chase Manhattan Corporation (Chase Manhattan).
Under this agreement, Chase Manhattan serves as an agent for the
Company to collect on assigned accounts receivables and distribute
payments to AT&T for merchandise purchased by the Company. As of
December 31, 1995, assigned accounts receivable covered by the
agreement totaled $554,006.
(5) INCOME TAXES
The provision for income taxes for the year ended December 31, 1995 of
$12,500 consisted of a California franchise tax of approximately
$18,000 partially offset by an employee child care tax credit of
approximately $5,500. The provision for income taxes for the year ended
December 31, 1994 consisted of the minimum California franchise tax of
$800 due to utilization of a California net operating loss carryforward
not previously benefited against California taxable income.
The pro forma provision for income taxes of $89,500 (unaudited)
reflects the income tax expense that would have been reported if the
Company had been a C corporation for federal and state income tax
purposes. The components of pro forma income taxes (unaudited) for the
year ended December 31, 1995 are as follows:
Pro forma income taxes (unaudited):
Current:
Federal $ 77,000
State 12,500
---------
Total pro forma income taxes (unaudited) $ 89,500
===========
(Continued)
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BASIS, INC.
Notes to Financial Statements
The difference between the statutory tax rate of 34% and the Company's
effective 1995 pro forma tax rate relates principally to state income
taxes. The deferred tax assets and liabilities as of December 31, 1995,
on a pro forma basis (unaudited) are not material.
The deferred tax asset as of January 1, 1995, on a pro forma basis
would have been approximately $58,000 (unaudited) consisting
principally of federal and state not operating losses and credit
carryforwards. Due to the future profitability of the Company, a
valuation allowance as of January 1, 1995 was not considered necessary.
(6) STOCK OPTIONS
The Company has granted nonqualified stock options under agreements
with certain key employees. These options enable the employees to
purchase shares of authorized, unissued common stock, at the fair
market value of the common stock on the date of grant. The options are
exercisable upon grant and expire at the earlier of (a) five years from
the date of grant; or (b) the expiration of three calendar months from
the date on which an optionee's continuous employment with the Company
is terminated. During 1995, the Company granted options for 53,500
shares of common stock at an exercise price of $1.00 per share; no
options were granted in 1994. As of December 31, 1995 and 1994, there
were 103,500 and 50,000 options outstanding, respectively, at an
exercise price of $1.00 per share. No options were exercised during
1995 or 1994.
(7) RELATED PARTY TRANSACTIONS
During 1995 and 1994, the Company leased computer equipment, software,
and office equipment from the Company's President and Chief Executive
Officer under two long-term capital leases. The leases accrued interest
at 13.2% and 11.7%, respectively. The Company made payments on the
leases of $14,296 and $31,581 during 1995 and 1994, respectively.
The Company exercised purchase options to acquire the assets upon
expiration of the leases in 1995 and 1994.
(8) EMPLOYEE BENEFIT PLAN
The Company has a savings plan for all active employees, qualified
under Section 401(k) of the IRC. The plan provides that the Company
will match 50% of the first 3% of participant contributions. During
1995 and 1994, the Company made contributions to the plan of $12,566
and $13,516, respectively.
(9) CREDIT AND SUPPLIER CONCENTRATIONS
In 1995, three customers accounted for approximately 42%, 7%, and 5%,
respectively, of total revenues. As of December 31, 1995, trade
accounts receivable from these customers accounted for 69%, 4%, and 5%,
respectively, of total accounts receivable. In 1994, three customers
accounted for approximately 25%, 24%, and 8%, respectively, of total
revenues.
(Continued)
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BASIS, INC.
Notes to Financial Statements
The Company performs ongoing credit evaluations of its customers and,
when appropriate, requires either prepayment or payment upon delivery
by cashier's check. Bad debts of the Company have been immaterial
during the past two years.
In 1995, three suppliers accounted for approximately 28%, 24%, and 7%,
respectively, of total purchases. In 1994, three suppliers accounted
for approximately 31%, 10%, and 5%, respectively, of total purchases.
(10) LEASE OBLIGATIONS
The Company leases its operating facilities under a five-year
noncancelable operating lease that expires in March 1998. Under the
lease agreement, real estate, taxes, utilities, and maintenance are
obligations of the Company. The lease contains a five-year renewal
option at expiration.
In addition, the Company leases executive office space in Oregon under
a one-year operating lease that expires in September 1996.
During 1994, the Company was also obligated under a noncancelable
operating lease for facilities it occupied prior to moving to its
current location. The Company entered into a sublease agreement for the
facility which terminated concurrently with the facility lease. The
Company recorded sublease income of $49,000 in 1994.
Total rent expense, net of sublease income, was approximately $125,000
and $155,000 for the years ended December 31, 1995 and 1994,
respectively.
Future minimum lease commitments as of December 31, 1995 are as
follows: 1996, $124,230; 1997, $100,000; and 1998, $17,000.
(11) SUBSEQUENT EVENT
In June 1996, the Company entered into an Agreement and Plan of
Reorganization (the Agreement) to sell 100% of its outstanding shares
of common stock. Under terms of the Agreement, the Company will receive
$1,900,000 in common stock and cash of the acquiring company. The
Company will also receive up to $1,600,000 in additional common stock
and cash, contingent upon the achievement of specified pretax earning
levels for the 12-month period ending June 1997. The transaction is
intended to be structured as an IRC qualified reorganization.
Upon consummation of the transaction, the Company will lose its WBE
status, which could adversely impact future revenues.
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PROLOGIC MANAGEMENT SYSTEMS, INC.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1996
---HISTORICAL (UNAUDITED)--- PRO FORMA (UNAUDITED)
PROLOGIC BASIS ADJUSTMENTS COMBINED
Assets
Current assets
Cash and cash equivalents $2,370,582 $ 682,772 $ (769,000) b. $2,284,354
Trade accounts receivable, net 417,176 1,751,231 2,168,407
Inventory 52,991 118,726 171,717
Prepaid expenses 91,082 69,066 160,148
---------- ---------- ----------- ----------
Total current assets 2,931,831 2,621,795 (769,000) 4,784,626
Property and equipment, net 204,950 148,224 353,174
Software costs, net 530,810 -- 530,810
Goodwill, net 225,306 -- 769,000 b. 1,358,719
1,400,000 c.
(1,035,587) d.
Other assets 147,899 -- 147,899
---------- ---------- ---------- ----------
Total assets $4,040,796 $2,770,019 $ 364,413 $7,175,228
========== ========== ========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Line of credit $ 895,007 $ -- $ 895,007
Current installments of long term debt 109,669 -- 109,669
Accounts payable 213,274 1,596,826 1,810,100
Accrued expenses 315,781 137,606 453,387
Deferred maintenance revenue 126,587 -- 126,587
---------- ----------- ---------- ----------
Total current liabilities 1,660,318 1,734,432 -- 3,394,750
Long term debt, excluding current installments 21,550 -- 21,550
Shareholders' equity
Net shareholders' equity 2,358,928 1,035,587 1,400,000 c. 3,758,928
(1,035,587) d.
---------- ---------- ---------- ----------
Total liabilities and shareholders' equity $4,040,796 $2,770,019 $ 364,413 $7,175,228
========== ========== ========== ==========
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PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 1996
-------HISTORICAL (AUDITED) ------- PRO FORMA (UNAUDITED)
PROLOGIC BASIS ADJUSTMENTS COMBINED
Net Sales
Hardware $ 1,350,172 $ 11,750,827 $ 13,100,999
Licenses 726,501 1,652,606 2,379,107
Service and other 547,187 1,537,715 2,084,902
------------ ------------ ------------ ------------
2,623,860 14,941,148 -- 17,565,008
Cost of Sales
Hardware 1,124,479 10,497,069 11,621,548
Licenses 453,226 1,539,483 1,992,709
Service and other 166,686 1,318,166 1,484,852
------------ ------------ ------------ ------------
1,744,391 13,354,718 -- 15,099,109
Gross profit 879,469 1,586,430 -- 2,465,899
Operating expenses
Selling and Marketing 650,207 816,392 1,466,599
General and Administrative 662,107 522,538 $178,584 a. 1,363,229
Research and development 169,677 -- 169,677
Write off of software cost 325,818 -- 325,818
Expenses associated with raising capital 32,715 -- 32,715
------------ ------------ ------------ ------------
Total operating expenses 1,840,524 1,338,930 178,584 3,358,038
Operating loss (961,055) 247,500 (178,584) (892,139)
Other income (expense)
Interest expense (803,230) (24,494) (827,724)
Other 990 -- 990
------------ ------------ ------------ ------------
Total other expense (802,240) (24,494) -- (826,734)
Loss before income taxes (1,763,295) 223,006 (178,584) (1,718,873)
Income taxes -- -- --
------------ ------------ ------------ ------------
Net loss $ (1,763,295) $ 223,006 $ (178,584) $ (1,718,873)
============ ============ ============ ============
Net loss per common share $ (0.76) $ (0.64)
============ ============
Shares used in per share calculation 2,330,219 2,667,567
============ ============
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PROLOGIC MANAGEMENT SYSTEMS, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996
----HISTORICAL (UNAUDITED) ---- PRO FORMA (UNAUDITED)
PROLOGIC BASIS ADJUSTMENTS COMBINED
Net Sales
Hardware $ 397,323 $ 1,861,172 $ 2,258,495
Licenses 92,879 448,642 541,521
Service and other 256,068 270,143 526,211
----------- ----------- ----------- -----------
746,270 2,579,957 -- 3,326,227
Cost of Sales
Hardware 315,687 1,612,318 1,928,005
Licenses 105,654 402,964 508,618
Service and other 150,803 160,962 311,765
----------- ----------- ----------- -----------
572,144 2,176,244 -- 2,748,388
Gross profit 174,126 403,713 -- 577,839
Operating expenses
Selling and Marketing 149,648 51,973 201,621
General and Administrative 373,505 563,120 $44,646 a. 981,271
Research and development 82,411 -- 82,411
----------- ----------- ----------- -----------
Total operating expenses 605,564 615,093 44,646 1,265,303
Operating loss (431,438) (211,380) (44,646) (687,464)
Other income (expense)
Interest expense (356,641) (2,049) (358,690)
Other 24,497 -- 24,497
----------- ----------- ----------- -----------
Total other expense (332,144) (2,049) -- (334,193)
Loss before income taxes (763,582) (213,429) (44,646) (1,021,657)
Income taxes -- -- -- --
----------- ----------- ----------- -----------
Net loss $ (763,582) $ (213,429) $ (44,646) $(1,021,657)
=========== =========== =========== ===========
Net loss per common share $ (0.23) $ (0.28)
=========== ===========
Shares used in per share calculation 3,328,070 3,665,418
=========== ===========
17