Toups Technology Licensing, Inc., (TTL)
Pro Forma Condensed Consolidated Financial Statements
(Unaudited)
The following pro forma condensed consolidated balance sheet as of
September 30, 1998 and the pro forma condensed consolidated statements of
operations for the nine month period ended September 30, 1998 and the period
ended December 31, 1997, give effect to the business combination of Brounley
Associates, Inc., (Brounley) and TTL . The pro forma financial statements are
based on the historical financial statements of TTL and Bruonley accounting for
the combination as a purchase and giving effect to the adjustments described in
the Notes to the pro forma financial statmenets.
The pro forma financial statements have been prepared based upon the
historical financial statements of TTL and Brounley. These pro forma financial
statements may not be indicative of the results that actually would have
occurred if the combination had been in effect on the dates indicated or which
may be obtained in the future. The pro forma financial statements should be read
in conjunction with the historical financial statements and notes of TTL and
Brounley.
Toups Technology Licensing, Inc.
Pro forma condensed consolidated Balance Sheet
for the nine-month period ended September 30, 1998
(Unaudited)
Pro forma Pro forma
Brounley TTL Adjustment Consolidated
Assets
Cash $10,895 $177,225 - $188,120
Inventory, at cost 163,577 160,479 - 324,056
Accounts receivable net
of allowance for
doubtful accounts of
$5,000 168,602 420,240 - 588,842
Prepaid expenses 0 104,000 - 104,000
Property and equipment
net of accumulated
depreciation of $113,394 15,114 276,369 13,474 291,483
Goodwill (Note 1) 0 0 391,942 391,942
Other assets 700 29,000 - 29,700
------- --------- ------ ---------
Total assets 358,888 1,167,313 405,416 1,931,617
======= ========= ======= =========
Liabilities
Accounts payable
and accrued 102,647 151,604 - 254,251
Other liabilities 22,657 7,500 - 30,157
Capital lease obligations 0 170,948 - 170,948
------- --------- ------ ---------
Total Liabilities 125,304 330,052 - 455,356
Stockholders' Equity (Note 2)
Common Stock 24,444 15,287 (23,544) 16,187
Treasury Stock (29,000) - 29,000 0
Additional paid-in captial 78,756 1,624,848 559,344 2,262,948
Retained Earnings 159,384 (802,874) (159,384) (802,874)
------- --------- ------ ---------
Total stockholders' equity 233,584 837,261 405,416 1,476,261
Total liabilties and
stockholders' equity 358,888 1,167,313 405,416 1,931,617
======= ========= ======= ========
Toups Technology Licensing, Inc.
Pro forma condensed consolidated Statement of Operations
for the nine-month period ended September 30, 1998
(Unaudited)
Pro forma Pro forma
Brounley TTL Adjustment Consolidated
Revenues $910,292 $790,692 - $1,700,984
Cost of Good Sold 588,972 463,753 - 1,052,725
Gross Profit 321,320 326,939 - 648,259
Gen & Administrative Exp 163,132 1,251,385 - 1,414,517
Amortization Expense (Note 4) - - 58,791 58,791
Other income 240 3,567 - 3,807
------- -------- ------- ----------
Income (loss) before taxes 158,428 (920,879) (58,791) (821,242)
Income tax provision 43,710 0 - 43,760
------- -------- ------- ----------
Net income (loss) 114,668 (920,879) (58,791) (865,002)
======= ======== ====== =========
Weighted average number of
shares outstanding (Note 3) 14,533,183
Pro forma net (loss) per share ($0.0595)
======
Toups Technology Licensing, Inc.
Pro forma condensed consolidated Statement of Operations
for the twelve-month period ended December 31, 1997
(Unaudited)
Pro forma Pro forma
Brounley TTL Adjustment Consolidated
Revenues $791,120 $344,149 - $1,135,269
Cost of Goods Sold 575,526 202,689 - 778,215
Gross Profit 215,594 141,460 - 357,054
Gen & Administrative Exp 189,262 126,631 - 315,893
Amortization Expense (Note 4) - - 78,388 78,388
Other income (exp) (1,377) 543 - (834)
------ ------ ------ --------
Income (loss) before taxes 24,955 15,372 (78,388) (38,061)
Income tax provision 4,700 0 - 4,700
------ ------ ------ --------
Net income (loss) 20,255 15,372 (78,388) (42,761)
====== ====== ===== =======
Weighted average number
of shares outstanding (Note 3) 9,781,751
Pro forma net income ($0.0044)
NOTE 1 - Acquisition by Toups Technology Licensing, Inc.
On September 30, 1998, a share exchange agreement was made by and among
Toups Technology Licensing, Inc and the owners at that time of Brounley
Associates, Inc.. Brounley became a wholly owned subsidiary of Toups Technology
through the exchange of 900,000 shares of Toups Technology common stock for all
the issued and outstanding common stock of Brounley. The transaction was
accounted for using the purchase method of accounting. Accordingly, the purchase
price was allocated to the net assets acquired based upon their carrying value
plus an adjustment increasing certain fixed assets of $13,474 which was
determined to be the estimated fair market value. The purchase price was
$639,000 for the acquisition based on 900,000 shares issued at $0.71 per share
(average cash price paid for the acquirer's common stock during the period). The
excess of the purchase price over the fair value of the net assets acquired
(goodwill) was $391,942 and is being amortized on a straight-line basis over
five years.
NOTE 2 - Adjustments
To reflect adjustment to common stock, additional paid-in capital and
retained earnings to conform to the purchase accounting method
Common Treasury Additional Retained
Stock Stock Paid-In Capital Earnings
Eliminate 24,444 (29,000) $78,756 $159,384
Additional (a) 900 29,000 (b)639,000 0
Pro forma adjustment 23,544 0 559,344 $(154,384)
NOTE 3 - Earnings per share
Pro forma earnings per share have been computed by dividing pro forma net
income by the equivalent number of shares of TTL that would have been
outstanding if the shares related to the business combination with Brounley
discused above had been issued during the historical periods presented.
Nine months December
ended 31
September 30, 1998 1997
Net income (loss) $(865,002) ($42,761)
Weighted average number of
shares outstanding 14,533,183 9,781,751
Net income (loss) per share $(0.06) $(0.004)
Note 4 - Amoritization Expense
The excess of the purchase price over the fair market value of the net
assets acquired (goodwill) was $391,942 and is being amortized on a
straight-line basis over five years. Accordingly, on a pro forma basis,
amortization expense for the nine-month period ended September 30, 1998 and the
fiscal year ended December 31, 1997 is $58,791 and $78,388, respectively.
The following is the unaudited Balance Sheet of Brounley Associates, Inc.,
and accompanying Statements of Operations, Stockholders' Eqiuty and Cash-Flows
and Notes thereto for the interim period ended September 30, 1998.
BROUNLEY ASSOCIATES, INC.
Balance Sheet (Unaudited)
September 30, 1998
ASSETS
CURRENT ASSETS
Cash $10,895
Accounts receivable 168,602
Inventory, at cost 163,577
Property and equipment, net of
accumulated depreciation of $33,354 15,114
Other assets 700
------
Total assets $358,888
========
Liabilities
Accounts payable and accrued liabiliteis $102,647
Notes Payable 4,600
Customer Security Deposits 18,057
-----
Total Liabilities 125,304
-------
Stockholders' Equity
Common Stock 24,444
Treasury Stock (29,000)
Additional paid-in capital 78,756
Retained Earnings 159,384
-------
Total stockholders' equity $ 233,584
---------
Total liabilities and
stockholders' equity $ 358,888
=========
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Operations
For the nine month period ended September 30, 1998 (Unaudited)
Sales $910,292
Cost of goods sold 588,972
--------
Gross profit 321,320
--------
Expenses
Salaries 41,584
Consulting fees 11,890
Other operating costs 109,658
--------
Total expenses 163,132
Net operating income 158,188
Other income
Interest Income 240
--------
Income before taxes 158,428
Income tax provision 43,760
--------
Net income $114,668
========
General and administrative expenses 189,262
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Stockholders' Equity
September 30, 1998 (Unaudited)
Additional Retained
Common Treasury Paid-In Earnings
Stock Stock Capital (Deficit) Total
Balance December 31, 1997 24,444 (29,000) 47,156 44,716 87,316
Additional (Subtraction)
for the year 0 31,600 (9,000) 31,600
Net Earnings for the year 114,668 114,668
------ ------ ------ ------- -------
Balance
September 30, 1998 24,444 (29,000) 78,756 159,384 233,584
====== ======== ====== ======= ========
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Cash Flows
September 30, 1998 (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $114,668
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 7,200
(Increase) Decrease in receivables (163,158)
(Increase) Decrease in inventory 74,105
(Increase) Decrease in other current assets 800
Increase in payables and accrued items (35,608)
--------
NET CASH PROVIDED BY
OPERATING ACTIVITIES (1,993)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of building, land & equipment (42,041)
--------
NET CASH (USED BY)
INVESTING ACTIVITIES (42,041)
CASH FLOWS FROM FINANCING ACTIVITIES
Prtoceeds from short-term debt 4,600
Issuance of Common Stock 34,200
Reissue of Treasury Sock 29,000
Repayment of debt to related party (42,815)
--------
NET CASH PROVIDED BY/(USED BY)
FINANCING ACTIVITIES 24,985
--------
NET INCREASE (DECREASE) IN CASH (19,049)
CASH AT BEGINNING OF YEAR 29,944
--------
CASH AT END OF YEAR $ 10,895
=========
NOTES TO
UNAUDITED FINANCIAL STATEMENTS
BROUNLEY ASSOCIATES, INC.
Notes to Financial Statements
September 30, 1998
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Brounley Associates, Inc. is located in Pinellas County, Florida. The
Company is engaged in the design, manufacture and sale of radio frequency (RF)
generators to customers located throughout the United States and abroad.
Substantially all sales are to nationally or internationally based concerns in
high technology industries.
Method of Accounting
The Company uses the accrual basis of accounting in accordance with
generally accepted accounting principles.
Fixed Assets
Major purchases of property and equipment having a life of more than one
year are stated at cost and capitalized. Repair and maintenance items are
charged against earnings. The Company uses tax depreciation lives and methods
for both financial reporting and tax purposes which does not differ materially
from generally accepted accounting principles and is calculated based on the
following:
Asset Category Method* Estimated Lives
Computer equipment SL/DDB 5 years
Furniture and fixtures SL/DDB 5 - 8 years
Machinery and equipment manufacturing SL/DDB 5 - 8 years
* SL - straight line
DDB - double declining balance
Cash Equivalents
For purposes of the statements of cash flows, cash equivalents consist of
money market and municipal bond funds with a maturity of three months or less
when purchased. The Company does not consider any of its assets to meet the
definition of cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Accounts Receivable
The company has not established an allowance for uncollectible accounts,
since all amounts are deemed collectible.
NOTE 2 -- ACCOUNTS RECEIVABLE
Details of accounts receivable are: September 30, 1998
Accounts receivable - trade $168,602
Allowance for doubtful accounts -0-
--------
Accounts receivable, net $168,602
========
NOTE 3 -- INVENTORIES
Details of inventories are: September 30, 1998
Raw materials $ 97,074
Work-in-process 11,150
Finished goods 55,353
Total inventories $163,577
Raw materials are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method, and market represents the lower of
replacement cost or estimated net realizable value.
Work-in-process valuation is based on a labor rate applied to the total
hours accumulated at December-31, 1997.
NOTE 4 -- FIXED ASSETS
Details of fixed assets are: September 30, 1998
Manufacturing equipment $40,824
Computer equipment 6,574
Office equipment 1,070
Accumulated depreciation (33,354)
--------
Fixed assets, net $15,114
========
Depreciation and amortization expense for the year ended December 31, 1997
was $11,131.
NOTE 5 -- Common Stock
The Company has 100,000 shares authorized, 22,222 shares issued and
outstanding of $1 par value common stock as of September 30, 1998.
NOTE 6 - Additional Paid-In Capital
A Brounley stockholder elected to capitalize $31,600 of a Note payable due
him. This constituted an increased additioanl paid-in capital for the Company
with no impact on the number of shares of common stock issued.
NOTE 6 - Acquisition by Toups Technology Licensing, Inc.
On September 30, 1998, a share exchange agreement was made by and among
Toups Technology Licensing, Inc and the owners at that time of Brounley
Associates, Inc.. Brounley became a wholly owned subsidiary of Toups Technology
through the exchange of 900,000 shares of Toups Technology common stock for all
the issued and outstanding common stock of Brounley.
Lacher McDonald & Co., CPA's
Certified Public Accountants, P.A.
INDEPENDENT AUDITORS' REPORT
Board of Directors
Brounley Associates, Inc.
Largo, Florida
We have audited the accompanying balance sheet of Brounley Associates, Inc.
as of December 31, 1997 and the related statements of earnings, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
Except as discussed in the following paragraph, we conducted our audit 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
audit provides a reasonable basis for our opinion.
We did not observe the taking of the physical inventory at December 31,
1997 (stated at $237,682), since this date was prior to the time we were
initially engaged as auditors for the Company. We were able to satisfy ourselves
about inventory quantities by means of other auditing procedures.
In our report dual dated October 19, 1998 and March 2, 1999, we expressed
an opinion that except for the effects of such adjustments, if any, as might
have been determined to be necessary had we been able to observe the physical
inventories taken as of December 31, 1997 and 1996, the 1997 financial
statements present fairly, in all material respects, the financial position as
of December 31, 1997 and the results of operations and cash flows for the year
then ended in conformity with generally accepted accounting principles. As
described in Note 10, we were able to satisfy ourselves about inventory
valuation by means of other auditing procedures. Accordingly, our present
opinion on the 1997 financial statements, as presented herein, is different from
that expressed in our previous report.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Brounley Associates, Inc. as
of December 31, 1997 and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
October 19, 1998
(Except for Note 9, as to which the date is
March 2, 1999 and Note 10 as to which the
date is July 17, 1999)
Lacher McDonald & Co., CPAs - Certified Public Accountants, P.A.
Member American Institute of Certified Public Accountants
BROUNLEY ASSOCIATES, INC.
Balance Sheet
December 31, 1997
ASSETS
CURRENT ASSETS
Cash $29,944
Accounts receivable, net 5,444
Inventories 237,68
Other current assets 800
Total current assets 273,870
FIXED ASSETS, NET 11,873
OTHER ASSETS 700
Total assets $286,443
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion long-term liabilities $15,325
Accounts payable - trade 63,607
Customer deposits 90,285
Other current liabilities 2,420
Total current liabilities 171,637
LONG-TERM LIABILITIES, less current portion 27,490
Total liabilities 199,127
STOCKHOLDERS' EQUITY
Common stock 24,444
Treasury stock (29,000)
Additional paid in capital 47,156
Retained earnings 44,716
Total stockholders' equity 87,316
Total liabilities and
stockholders' equity $286,443
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Earnings
December 31, 1997
Sales $791,120
Cost of goods sold 575,526
Gross profit 215,594
General and administrative expenses 189,262
Total operating earnings 26,332
Other income:
Other income 155
Total other income 155
Other expenses:
Other expense 325
Interest expense 1,207
Total other expenses 1,532
Earnings before income taxes 24,955
Income taxes 4,700
Net earnings $ 20,255
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Stockholders' Equity
December 31, 1997
Common Additional Retained
Number Stock Paid-In Earnings
Of Shares (At Par) Capital (Deficit) Total
Balance December 31, 1996 $24,444 $ -0- $47,156 $24,461 $96,061
Treasury Stock -0- (29,000) -0- -0- (29,000)
Net earnings for the year -0- -0- -0- 20,255 20,255
Balance December 31, 1997 $24,444 $(29,000) $47,156 $ 44,716 $87,316
The accompanying notes are an integral part of these statements.
BROUNLEY ASSOCIATES, INC.
Statement of Cash Flows
December 31, 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net earnings $ 20,255
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 11,131
Decrease in receivables and prepaid items 52,604
(Increase) in inventory (54,403)
Increase in payables and accrued items 23,856
Gain on sale of assets (155)
NET CASH PROVIDED BY
OPERATING ACTIVITIES 53,288
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of building, land & equipment (5,531)
Proceeds from sale of equipment 750
NET CASH (USED BY)
INVESTING ACTIVITIES (4,781)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of short-term debt (822)
Repayment of long-term debt (3,863)
Purchase of treasury stock (29,000)
NET CASH PROVIDED BY/(USED BY)
FINANCING ACTIVITIES (33,685)
NET INCREASE (DECREASE) IN CASH 14,822
CASH AT BEGINNING OF YEAR 15,122
CASH AT END OF YEAR $ 29,944
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest $ 1,207
Cash paid during the year for income taxes $ 4,481
The accompanying notes are an integral part of these statements.
NOTES TO
FINANCIAL STATEMENTS
BROUNLEY ASSOCIATES, INC.
Notes to Financial Statements
December 31, 1997
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Brounley Associates, Inc. is located in Pinellas County, Florida. The
Company is engaged in the design, manufacture and sale of radio frequency (RF)
generators to customers located throughout the United States and abroad.
Substantially all sales are to nationally or internationally based concerns in
high technology industries.
Method of Accounting
The Company uses the accrual basis of accounting in accordance with
generally accepted accounting principles.
Fixed Assets
Major purchases of property and equipment having a life of more than one
year are stated at cost and capitalized. Repair and maintenance items are
charged against earnings. The Company uses tax depreciation lives and methods
for both financial reporting and tax purposes which does not differ materially
from generally accepted accounting principles and is calculated based on the
following:
Asset Category Method* Estimated Lives
Computer equipment SL/DDB 5 years
Furniture and fixtures SL/DDB 5 - 8 years
Machinery and equipment manufacturing SL/DDB 5 - 8 years
* SL - straight line
DDB - double declining balance
Cash Equivalents
For purposes of the statements of cash flows, cash equivalents consist of
money market and municipal bond funds with a maturity of three months or less
when purchased. The Company does not consider any of its assets to meet the
definition of cash equivalents.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.
Accounts Receivable
The company has not established an allowance for uncollectible accounts,
since all amounts are deemed collectible.
NOTE 2 -- ACCOUNTS RECEIVABLE
Details of accounts receivable are:
Accounts receivable - trade $ 5,444
Allowance for doubtful accounts -0-
Accounts receivable, net $ 5,444
NOTE 3 -- INVENTORIES
Details of inventories are:
Raw materials $ 99,278
Work-in-process 131,554
Finished goods 6,850
Total inventories $237,682
Raw materials are stated at the lower of cost or market. Cost is determined
by the first-in, first-out method, and market represents the lower of
replacement cost or estimated net realizable value.
Work-in-process valuation is based on a labor rate applied to the total
hours accumulated at December-31, 1997.
NOTE 4 -- FIXED ASSETS
Details of fixed assets are:
Manufacturing equipment $30,434
Computer equipment 6,524
Office equipment 1,070
Accumulated depreciation (26,155)
Fixed assets, net $11,873
Depreciation and amortization expense for the year ended December 31, 1997
was $11,131.
NOTE 5 -- OTHER CURRENT LIABILITIES
Details of other current liabilities are:
Income taxes payable $ 2,300
Accrued expenses 120
Total other current liabilities $ 2,420
There has been no accrual of vacation benefits earned but unused as
employees are not allowed to carry this over from one year to the next and any
amounts due at December 31, 1997 were not material to the payroll expense as a
whole.
NOTE 6 -- LONG-TERM LIABILITIES
The balance reflected as long-term liabilities at December 31, 1997 relates
to a note payable with an original principal balance of $47,500 and interest
rate of 8% to a shareholder dating back to 1994 when the corporation was formed.
No payments were made on this note prior to 1997.
Maturities of this note are as follows:
Years Ending
December 31, Amount
1998 $15,325
1999 16,555
2000 10,935
Thereafter -0-
Total $42,815
NOTE 7 -- COMMON STOCK
The Company has 100,000 shares authorized, 24,444 shares issued and
outstanding of $1 par value common stock as of December 31, 1997.
During 1997 the Company purchased 2,222 shares from a shareholder. The
stock was valued at $29,000.
NOTE 8 -- SUBSEQUENT EVENTS
On September 30, 1998 a share exchange agreement was made by and among
Toups Technology Licensing, Inc. and the owners at that time of Brounley
Associates. Inc. Brounley Associates, Inc. combined with Toups Technology
Licensing, Inc. through the exchange of 900,000 shares of Toups Technology
Licensing, Inc. common stock for all the issued and outstanding common stock of
Brounley Associates, Inc.
NOTE 9 -- CORRECTION OF AN ERROR
On September 30, 1998, 2,222 shares valued at $31,600 of Brounley
Associates, Inc. common stock was issued to one of the principals of the
Company. These shares were issued to compensate the principal for providing
expertise, engineering services and the liberal use of his equipment and
reputation during the years of 1994 and 1995. This transaction was initially
recorded in 1998, but it was determined that in order to accurately reflect the
timing of this transaction, the statements needed to be corrected to reflect
these prior period transactions. The result of this transaction is to increase
the common stock and additional paid in capital account balances at December 31,
1997 and December 31, 1996 to $24,444 and $47,156, respectively.
NOTE 10 -- ADDITIONAL SUBSEQUENT EVENT
On July 16, 1999, Toups Technology Licensing, Inc. (the subsequent acquirer
of the Company) engaged the original auditors of the Company to perform
additional procedures regarding inventory. In the original audit, it was not
cost effective for the auditors to perform extensive alternative procedures
regarding inventory. During this subsequent engagement, the auditors performed
various alternative procedures which allowed them to express an unqualified
opinion.
Based on these extensive additional procedures, the auditors found that no
adjustment to inventory was necessary. However, it was discovered that the
reversal of a sales invoice had been recorded incorrectly. The correction of
this entry resulted in a decrease to sales of $61,000, a decrease to cost of
goods sold of $44,000 and an increase to current liabilities of $14,000 (net of
tax).
BROUNLEY ASSOCIATES, INC.
Additional Information
Analysis of Cost of Goods Sold
December 31, 1997
COST OF GOODS SOLD
Direct costs:
Beginning inventory $ 183,279
Materials 344,653
Labor 149,597
Subcontracted services 20,796
Ending inventory (237,682)
Total direct costs 460,643
Indirect costs:
Office expense 614
Depreciation 11,131
Discounts earned (436)
Freight 17,949
Repairs and maintenance 858
Supplies 29,375
Outside engineering services 55,392
Total indirect costs 114,883
Total cost of goods sold $575,526
GENERAL AND ADMINISTRATIVE EXPENSES
Advertising $ 1,104
Auto and truck 183
Bank charges 26
Compliance testing 22,241
Insurance - general 5,178
Insurance - group 9,890
Miscellaneous 839
Office/expense 2,059
Office salaries 3,248
Officers' salaries 53,883
Payroll taxes 16,683
Professional fees 3,171
Rent 24,434
Repairs and maintenance 710
Royalties 25,890
Taxes and license 1,724
Telephone 5,813
Trade show 3,361
Travel 5,366
Utilities 3,459
Total general and administrative expenses $189,262
See auditors' report on additional information.
INDEPENDENT AUDITORS' REPORT
ON ADDITIONAL INFORMATION
Board of Directors
Brounley Associates, Inc.
Largo, Florida
Our report on our audit of the basic financial statements of Brounley
Associates, Inc. for 1997 appears on page 3. That audit was conducted for the
purpose of forming an opinion on the basic financial statements taken as a
whole. The analysis of cost of goods sold and the analysis of general and
administrative expenses are presented for purposes of additional analysis and
are not required parts of the basic financial statements.
We did not observe the taking of the physical inventories at December 31,
1997 (stated at $237,682), since this date was prior to the time we were
initially engaged as auditors for the Company. We were able to satisfy ourselves
about inventory quantities by means of other auditing procedures.
The analysis of costs of goods sold and analysis of general and
administrative expenses has been subjected to the auditing procedures applied in
the audit of the basic financial statements and, in our opinion, are fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
October 19, 1998
Lacher McDonald & Co., CPAs - Certified Public Accountants, P.A.
Member American Institute of Certified Public Accountants