SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): November 2, 2004
TRYCERA FINANCIAL, INC.
(Exact Name of Registrant as Specified in Charter)
NEVADA 000-30872 33-0910363
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
170 Newport Center Drive, Suite 210, Newport Beach, CA 92660
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (949) 273-4300
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities
Act
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange
Act
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under
the Exchange Act
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under
the Exchange Act
Item 1.01 Entry into a Material Definitive Agreement
On November 2, 2004, Trycera Financial Corporation (the "Company")
entered into an Asset Purchase Agreement dated November 2, 2004, with
Signature Credit Corporation, a California corporation ("Signature"). The
agreement evidenced the acquisition of virtually all of the assets of
Signature, except its cash on hand and certain rights under excluded
agreements. In addition, the Company assumed Signature's obligations under
certain agreements. Signature distributed financial products and services,
including its Classic Advantage Cards and the stored value MasterCards, and
sold general merchandise on credit to holders of these cards. The Company
intends to incorporate the ongoing business of Signature into its own
business.
The terms of the asset acquisition agreement provide for a purchase
price of up to $100,000 payable in part over time and subject to certain
offsets, 150,000 shares of common stock of the Company issuable in part
over time, and 95% of the cash receipts, less certain offsets, received by
the Company from product mailings made by Signature prior to the date of
the agreement.
In connection with the purchase of the assets of Signature, the
Company entered into a ninety-day consulting agreement with Dave Margolin,
the sole shareholder, officer, and director of Signature, to provide the
Company access to Mr. Margolin's experience in regard to continuation of
the business of Signature by the Company. Mr. Margolin has agreed to
provide a maximum of 125 hours of consulting services per month. The
agreement provides for a monthly fee to Mr. Margolin of $6,000 and a
performance bonus equal to 20% of the monthly net profit received by the
Company from inquiries by potential customers into the Signature website
acquired by the Company or from active direct marketing solicitations by
the Company, excluding direct sales at retail locations and sales to third
party distributors. The consulting agreement may be extended for an
additional ninety days by mutual consent of the parties.
Also in connection with the asset purchase agreement, the Company
entered into a software agreement with Mr. Margolin and Daryl Rice, the
joint developers of the Signet Software System. The software agreement
provides that each of the parties will have a perpetual, fully-paid,
non-exclusive, transferable license to the software. The software
agreement does not grant rights to Mr. Rice to share in any modifications
of, or upgrades to, the software. It also does not grant rights to the
Company or Mr. Margolin to share in any modifications of, or upgrades to,
the software.
Item 2.01 Completion of Acquisition of Assets
The transaction to acquire the assets of Signature, as well as the
consulting agreement with Mr. Margolin, and the software agreement with Mr.
Margolin and Mr. Rice were completed on November 2, 2004. The assets
acquired in this transaction included a Signet customized direct mail
account management and billing software system and office equipment and
furniture used by Signature in its business. In addition, the Company
acquired Signature's rights to the corporate name and all other computer
software, copyrights, customer lists, domain names, URL addresses,
fictitious business names, trade names, trademarks, service marks,
telephone numbers,
2
transferable permits and licenses, goodwill and other intellectual property
rights and intangible assets used in or related to the business of
Signature. The Company acquired the rights of Signature under existing
contracts and receivables under agreements with customers relating to its
past sales and distribution of Classic Advantage Cards. The Company
further acquired all of the books, records, data, information, and
documents relating to the business of Signature or its assets.
Upon execution of the asset purchase agreement, the Company paid
$85,000 to Signature and $5,000 to a business broker. The Company also
delivered 33,750 shares of common stock of the Company to Signature and
3,750 shares to Victor Lee, an advisor of Signature, and granted piggyback
registration rights for these shares. Signature further agreed to issue
75,000 shares to Mr. Margolin six months after November 2, 2004, and 37,500
to him one year after such date. On the 61st day after November 2,
2004,the Company will also pay to Signature up to $10,000 and up to 95% of
the cash receipts received by the Company from Signature's mailings,
excluding Company funded mailings, made before November 2, 2004, subject to
certain offsets. This cash payment will be offset by 95% of all refunds
paid or owed by virtue of the mailings made by Signature before November 2,
2004, by the accrued vacation pay owed to Signature's employees other than
Mr. Margolin on account of their ceasing to be employees on or about the
date of the agreement, and by the amounts of any other refunds as of the
date of the agreement which are not attributable to the aforementioned
mailings.
In connection with the closing of the asset purchase agreement, the
Company issued a press release on November 8, 2004, a copy of which is
attached hereto as Exhibit 99.1.
Item 3.02 Unregistered Sales of Equity Securities
From June until October, 2004, the Company sold 1,832,168 of its
common shares in its $0.75 offering. Gross proceeds from the offering were
$1,374,125. The shares were sold to 27 accredited and 4 non-accredited
investors. These shares were issued without registration under the
Securities Act by reason of the exemption from registration afforded by the
provisions of Section 4 (2) thereof, and Rule 506 promulgated thereunder,
as a transaction by an issuer not involving any public offering. Each of
the investors received a private offering memorandum containing information
similar to that required in a prospectus. Each investor also delivered
appropriate investment representations with respect to these stock sales
and consented to the imposition of restrictive legends upon the stock
certificates representing the shares. Each person represented that he had
not purchased the shares as a result of or subsequent to any advertisement,
article, notice, or other communication published in any newspaper,
magazine, or similar media or broadcast on television or radio, or
presented at any seminar or meeting. Each of the investors further
represented that he had been afforded the opportunity to ask questions of
management of the Company and to receive answers concerning the terms and
conditions of the stock issuance. No underwriting discounts or commissions
were paid in connection with the sales of these shares.
On November 2, 2004, the Company issued 33,750 shares to Signature
Credit Corporation, an entity controlled by Dave Margolin, and agreed to
issue an additional 112,500 shares to Mr. Margolin, in connection with the
asset purchase agreement. These shares were issued without registration
under the Securities Act by reason of the exemption from registration
afforded by the provisions of Section 4(6) and/or Section 4(2) thereof, and
Rule 506 promulgated
3
thereunder, as a transaction by an issuer not involving any public
offering. Mr. Margolin represented that he was an accredited investor as
defined in Rule 501 of Regulation D at the time of the issuance. He
delivered appropriate investment representations with respect to this
issuance and consented to the imposition of restrictive legends upon the
stock certificates representing the shares. Mr. Margolin represented that
he had not entered into the transaction with the Company as a result of or
subsequent to any advertisement, article, notice, or other communication
published in any newspaper, magazine, or similar media or broadcast on
television or radio, or presented at any seminar or meeting. He
represented that he had been afforded the opportunity to ask questions of
management of the Company and to receive answers concerning the terms and
conditions of the stock issuance. No underwriting discounts or commissions
were paid in connection with the transaction.
On November 2, 2004, the Company issued 3,750 shares to Victor Lee in
connection with the asset purchase agreement. These shares were issued
without registration under the Securities Act by reason of the exemption
from registration afforded by the provisions of Section 4(6) and/or Section
4(2) thereof, and Rule 506 promulgated thereunder, as a transaction by an
issuer not involving any public offering. Mr. Lee represented that he was
an accredited investor as defined in Rule 501 of Regulation D at the time
of the issuance. He delivered appropriate investment representations with
respect to this issuance and consented to the imposition of restrictive
legends upon the stock certificates representing the shares. Mr. Lee
represented that he had not entered into the transaction with the Company
as a result of or subsequent to any advertisement, article, notice, or
other communication published in any newspaper, magazine, or similar media
or broadcast on television or radio, or presented at any seminar or
meeting. He represented that he had been afforded the opportunity to ask
questions of management of the Company and to receive answers concerning
the terms and conditions of the stock issuance. No underwriting discounts
or commissions were paid in connection with the transaction.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
The financial statements of Signature Credit Corporation required by
this item are included with this filing.
(b) Pro Forma Financial Information.
The pro forma financial information required by this item in
connection with the acquisition of Signature Credit Corporation is not
included with this filing. The pro forma information will be filed with
an amendment to this report as soon as practicable, but not later than 71
calendar days after the date this initial report must be filed.
(c) Exhibits.
The following exhibits are included with this filing:
4.3 Stock Acquisition Agreement dated November 2, 2004,
with Dave Margolin, as amended
4.4 Stock Acquisition Agreement dated November 2, 2004,
with Victor Lee
4
10.9 Asset Purchase Agreement dated November 2, 2004, with
Signature Credit Corporation
10.10 Consulting Agreement dated November 2, 2004, with Dave
Margolin
10.11 Signet Software Agreement dated November 2, 2004, with
Dave Margolin and Daryl Rice
99.1 Press Release dated November 8, 2004
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Trycera Financial, Inc.
Date: November 8, 2004 By /s/ Matthew S. Kerper
Matthew S. Kerper, President
5
Signature Credit Corporation
Financial Statements
(In U.S. Dollars)
September 30, 2004 (Unaudited)
and December 31, 2003 and 2002
Independent Auditor's Report
To the Board of Directors
Signature Credit Corporation
We have audited the accompanying balance sheets of Signature Credit
Corporation as of December 31, 2003 and 2002, and the related statements of
income, retained earnings and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audit.
We conducted our audit in accordance with the Standards of the Public
Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatements.
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 the significant
estimates made by management, as well as evaluating the overall financial
statements presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the aforementioned financial statements present fairly, in
all material respects, the financial position of Signature Credit
Corporation as of December 31, 2003 and 2002, and the results of its
operations and its cash flows for the years then ended, in conformity with
the Standards of the Public Company Accounting Oversight Board (United
States).
/s/ Chisholm, Bierwolf & Nilson, LLC
Chisholm, Bierwolf & Nilson, LLC
Bountiful, Utah
October 15, 2004
F-1
Signature Credit Corporation
Balance Sheets
September December December
30, 2004 30, 2003 30, 2002
----------- ---------- ----------
(Unaudited)
Assets
Current Assets
Cash & Cash Equivalents $ 46,307 $ 21,125 $ 69,735
Inventory 9,804 2,214 7,899
--------- --------- ---------
Total Current Assets 56,111 23,339 77,634
Property & Equipment, (Net) (Note 5) 7,628 9,593 4,245
--------- --------- ---------
Total Assets $ 63,739 $ 32,932 $ 81,879
========= ========= =========
Liabilities & Stockholders' Equity
Current Liabilities
Accounts Payable $ - $ - $ 3,334
Accrued Expenses 7,179 7,179 -
Unearned Revenue 52,607 73,254 31,609
Notes Payable - Related Party - 38,916 76,980
--------- --------- ---------
Total Current Liabilities 59,786 119,349 111,923
Stockholders' Equity (Note 8)
Common Stock; 100,000 Shares Authorized
at No Par Value; 2,000 Shares Issued
and Outstanding 2,000 2,000 2,000
Accumulated (Deficit) Earnings 2,953 (88,417) (32,044)
--------- --------- ---------
Total Current Liabilities 3,953 (86,417) (30,044)
--------- --------- ---------
Total Liabilities &
Stockholders' Equity $ 63,739 $ 32,932 $ 81,879
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-2
Signature Credit Corporation
Statements of Income
For the Period Ended September 30, 2004 and
for the Years Ended December 31, 2003 and 2002
September December December
30, 2004 31, 2003 31, 2002
----------- ---------- ----------
(Unaudited)
Revenues $ 438,122 $ 522,203 $ 241,007
Cost of Sales 266,576 455,746 229,933
--------- --------- ---------
Gross Profit 171,546 66,457 11,074
Expenses
Depreciation 3,587 3,554 480
Salaries: Wages 42,876 49,936 3,719
Professional Fees 4,369 5,438 12,619
Rent & Office Expenses 5,957 24,686 11,678
General & Administrative 22,587 38,616 14,622
--------- --------- ---------
Total Expenses 79,376 122,230 43,118
--------- --------- ---------
Income (Loss) from Operations 92,170 (55,773) (32,044)
Other Income (Expenses)
Interest Expense - (600) -
Interest Income - - -
--------- --------- ---------
Total Other Income (Expense) - (600) -
Income (Loss) Before Taxes 92,170 (56,373) (32,044)
Tax Expense (800) - -
--------- --------- ---------
Net Income (Loss) $ 91,370 $ (56,373) $ (32,044)
========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-3
Signature Credit Corporation
Statement of Stockholders' Equity
From January 1, 2002 to September 30, 2004
Accumulated
Common Stock Paid In Earnings
Shares Amount Capital (Deficit)
--------- --------- --------- ---------
Balance, January 1, 2002 - $ - $ - $ -
Shares Issued for Services 2,000 2,000 - -
Net (Loss) for the Year Ended
December 31, 2002 - - - (32,044)
--------- --------- --------- ---------
Balance, December 31, 2002 2,000 2,000 - (32,044)
Net (Loss) for the Year Ended
December 31, 2003 - - - (56,373)
--------- --------- --------- ---------
Balance, December 31, 2002 2,000 2,000 - (88,417)
Net Income for the Period Ended
September 30, 2004 (Unaudited) - - - 91,370
--------- --------- --------- ---------
Balance, September 30, 2004
(Unaudited) 2,000 $ 2,000 $ - $ 2,953
========= ========= ========= =========
The accompanying notes are an integral part of these financial statements.
F-4
Signature Credit Corporation
Statements of Income
For the Period Ended September 30, 2004 and
for the Years Ended December 31, 2003 and 2002
<CAPTION?
September December December
30, 2004 31, 2003 31, 2002
----------- ---------- ----------
(Unaudited)
Cash Flows from Operating Activities
Net Income (Loss) $ 91,370 $ (56,373) $ (32,044)
Adjustments to Reconcile Net Income
(Loss) to Net Cash:
Depreciation 3,587 3,554 480
Shares Issued for Services - - 2,000
Changes in Operating Assets & Liabilities
(Increase) Decrease in Inventory (7,590) 5,685 (7,899)
Increase (Decrease) in Accounts Payable - (3,334) 3,334
Increase (Decrease) in Accrued Expenses - 7,179 -
Increase (Decrease) in Unearned Revenues (20,647) 41,645 31,609
--------- --------- ---------
Net Cash Provided (Used)
by Operating Activities 66,720 (1,644) (2,520)
Cash Flows from Investing Activities
Purchase of Software Programming (1,622) (8,902) (3,614)
Purchase of Furniture & Fixtures - - (1,111)
--------- --------- ---------
Net Cash Provided (Used)
by Investing Activities (1,622) (8,902) (4,725)
Cash Flows from Financing Activities
Proceeds from Related Party Notes Payable - - 76,980
Payments on Related Party Notes Payable (39,916) (38,064) -
--------- --------- ---------
Net Cash Provided (Used)
by Financing Activities (39,916) (38,064) 76,980
--------- --------- ---------
Increase (Decrease) in Cash 25,182 (48,610) 69,735
Cash at Beginning of Period 21,125 69,735 -
--------- --------- ---------
Cash at End of Period $ 46,307 $ 21,125 $ 69,735
========= ========= =========
Supplemental Cash Flow Information
Interest $ - $ - $ -
Taxes 800 - -
The accompanying notes are an integral part of these financial statements.
F-5
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
NOTE 1 - Corporate History
Signature Credit Corporation, (the "Company") was incorporated under the
laws of the state of California on January 1, 2002.
The Company is a direct mail and online advertising company. Under the
current operations, the Company markets catalog shopping cards to targeted
consumer bases. Consumers who accept pre-approved card offers from the
Company pay a membership acceptance fee and receive a private name brand
catalog shopping card along with the catalog or catalogs and/or website
from which the individual can purchase products. In addition, the Company
actively manages the direct mail and customer solicitation process,
including fulfillment, printing and payment processing.
Currently, the Company is authorized to issue 100,000 shares of common
stock with 2,000 shares issued and outstanding.
NOTE 2 - Significant Accounting Policies
A. Basis of Accounting
The Company uses the accrual method of accounting.
B. Revenue Recognition
The Company applies the provisions of SEC Staff Accounting Bulletin
("SAB") No. 104, Revenue Recognition in Financial Statements ("SAB
104"), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. The
SAB 104 outlines the basic criteria that must be met to recognize
revenue and provides guidance for disclosure related to revenue
recognition policies. In general, the Company recognizes revenue
related to monthly accepted offer amounts for services provided when
(i) persuasive evidence of an arrangement exists, (ii) delivery has
occurred or services have been rendered, (iii) the fee is fixed or
determinable and (iv) collectibility is reasonably assured.
Membership fee revenues are recognized in the period in which fees are
fixed or determinable and the related services are provided to the
subscriber.
The Company's members generally pay in advance for their membership by
check or electronic check payment, and revenue is then recognized
ratably over the period in which the related services are provided.
Advance payments from members are recorded on the balance sheet as
deferred revenue. In circumstances where payment is not received in
advance, revenue is only recognized if collectibility is reasonably
assured. The Company has a thirty day money back guarantee.
Accordingly, the Company accrues approximately 15% of the funds
received to satisfy any refunds during the period.
F-6
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
C. Cash Equivalents
The Company considers all short term, highly liquid investments that
are readily convertible, within three months, to known amounts as cash
equivalents. The Company currently has no cash equivalents.
D. Net Earnings (Loss) Per Share
The computation of net earnings (loss) per share of common stock is
based on the weighted average number of shares outstanding during each
period presented. The Company utilizes the treasury stock method to
calculate net earnings (loss) per share.
The following is the calculation for a weighted average common shares
used in basic and dilutive net earnings (loss) per share:
Period Ended Years Ended
September 30, December 31,
2004 2003 2002
------------ -------- --------
(Unaudited)
Basic Earning Per Share:
Income (Loss) (Numerator) $ 91,370 $(56,373) $(32,044)
Shares (Denominator) 2,000 2,000 2,000
-------- -------- --------
Per Share Amount $ 45.69 $ (28.19) $ (16.02)
======== ======== ========
Fully Diluted Earnings Per Share:
Income (Loss) (Numerator) $ 91,370 $(56,373) $(32,044)
Shares (Denominator) 2,000 2,000 2,000
-------- -------- --------
Per Share Amount $ 45.69 $ (28.19) $ (16.02)
======== ======== ========
E. Depreciation
The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed on the
straight line method.
F. Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles, in the United States of
America, require management to make estimates and assumptions that
affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
F-7
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
G. Fair Value of Financial Instruments
The fair value of the Company's cash and cash equivalents,
receivables, accounts payable and accrued liabilities approximate
carrying value based on their effective interest rates compared to
current market prices.
H. General and Administrative Costs
General and administrative expenses include telephone, utilities,
travel and entertainment expenses.
I. Income Taxes
The Company utilizes the liability method of accounting of income
taxes. Under the liability method, deferred income tax assets and
liabilities are provided based on the difference between the financial
statements and tax basis of assets and liabilities measured by the
currently enacted tax rates in effect for the years in which these
differences are expected to reverse. Deferred tax expense or benefit
is the result of changes in deferred tax assets and liabilities.
NOTE 3 - New Technical Pronouncements
In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation Transition and Disclosure an amendment of FAS 123. SFAS
No. 148 amends SFAS No. 123, Accounting for Stock-Based Compensation, to
provide alternative methods of transition for an entity that voluntarily
changes to the fair value based method of accounting for stock-based
employee compensation. It also amends the disclosure provisions of SFAS
No. 123 to require prominent disclosure about the effects on reported net
income of an entity's accounting policy decisions with respect to
stock-based employee compensation. This Statement also amends APB Opinion
No. 28, Interim Financial Reporting, to require disclosure about those
effects in interim financial information. SFAS No. 148 is effective for
annual and interim periods beginning after December 15, 2002. The adoption
of the interim disclosure provisions of SFAS No. 148 did not have an impact
on the Company's financial position, results of operations or cash flows.
The Company is currently evaluating whether to adopt the fair value based
method of accounting for stock-based employee compensation in accordance
with SFAS No. 148 and its resulting impact on the Company's financial
statements.
In January 2003, the Emerging Issues Task Force ("EITF") issued EITF Issue
No. 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
This consensus addresses certain aspects of accounting by a vendor for
arrangements under which it will perform multiple revenue-generating
activities, specifically, how to determine whether an arrangement involving
multiple deliverables contains more than one unit of accounting. EITF
Issue No. 00-21 is effective for revenue arrangements entered into in
fiscal periods beginning after June 15, 2003, or entities may elect to
report the change in accounting as a cumulative-effect adjustment. The
adoption of EITF Issue No. 00-21 did not have a material impact on the
Company's financial statements.
F-8
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
NOTE 3 - New Technical Pronouncements (continued)
In January 2003, the FASB issued Interpretation ("FIN") No. 46,
Consolidation of Variable Interest Entities. Until this interpretation, a
company generally included another entity in its consolidated financial
statements only if it controlled the entity through voting interests. FIN
No. 46 requires a variable interest entity, as defined, to be consolidated
by a company if that company is subject to a majority of the risk of loss
from the variable interest entity's activities or entitled to receive a
majority of the entity's residual returns. FIN No. 46 is effective for
reporting periods ending after December 15, 2003. The adoption of FIN
No. 46 did not have an impact on the Company's financial statements.
In April 2003, the FASB issued SFAS No. 149, Amendment of Statement 133 on
Derivative Instruments and Hedging Activities, which amends and clarifies
accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under
SFAS No. 133. SFAS No. 149 is effective for contracts entered into or
modified after June 30, 2003 and for hedging relationships designated after
June 30, 2003. The adoption of SFAS No. 149 will not have an impact on the
Company's financial statements.
In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. SFAS
No. 150 changes the accounting guidance for certain financial instruments
that, under previous guidance, could be classified as equity or "mezzanine"
equity by now requiring those instruments to be reported as liabilities.
SFAS No. 150 also requires disclosure relating to the terms of those
instruments and settlement alternatives. SFAS No. 150 is generally
effective for all financial instruments entered into or modified after
May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. The adoption of SFAS No. 150 did not
have an impact on the Company's financial statements.
In December 2003, the SEC issued SAB No. 104. SAB No. 104 revises or
rescinds portions of the interpretative guidance included in Topic 13 of
the codification of staff accounting bulletins in order to make this
interpretive guidance consistent with current authoritative accounting and
auditing guidance and SEC rules and regulations. It also rescinds the
Revenue Recognition in Financial Statements Frequently Asked Questions and
Answers document issued in conjunction with Topic 13. Selected portions of
that document have been incorporated into Topic 13. The adoption of SAB
No. 104 in December 2003 did not have an impact on the Company's financial
position, results of operations or cash flows.
F-9
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
NOTE 4 - Related Party
During 2002 the owners of the Company, (Dave Margolen and Kenneth M.
Schone) advanced the Company funds to pay for operating costs. The loans
bear no interest, and are due and payable on demand. The total amount
advanced to the Company during 2002 was $76,980.
On March 25, 2003, Mr. Margolin and Mr. Schone executed an agreement
wherein Mr. Margolin would purchase the common stock shares of Mr. Schone
at a price of $5,000. The Company would also pay off the remaining balance
due Mr. Schone on the loans advaced to the Company. The pay-off of the
loan amounted to $33,545.
NOTE 5 - Fixed Assets
The Company capitalizes the purchase of equipment and fixtures for major
purchases in excess of $1,000 per item. Capitalized amounts are
depreciated over the useful life of the assets using the straight line
method of depreciation. Scheduled below are the assets, costs and
accumulated depreciation at September 30, 2004 (unaudited), December 31,
2003 and 2002.
Cost
---------------------------------------
September December December
Assets 30, 2004 31, 2003 31, 2002
- -------- ----------- ---------- ----------
(Unaudited)
Office Equipment $ 5,798 $ 4,725 $ 4,725
Software Programming 9,452 8,902 -
-------- -------- --------
Totals $ 15,250 $ 13,627 $ 4,725
======== ======== ========
Depreciation Expense
---------------------------------------
September December December
Assets 30, 2004 31, 2003 31, 2002
- -------- ----------- ---------- ----------
(Unaudited)
Office Equipment $ 1,301 $ 1,576 $ 480
Software Programming 2,286 1,978 -
-------- -------- --------
Totals $ 3,587 $ 3,554 $ 480
======== ======== ========
Accumulated Depreciation
---------------------------------------
September December December
Assets 30, 2004 31, 2003 31, 2002
- -------- ----------- ---------- ----------
(Unaudited)
Office Equipment $ 3,356 $ 2,056 $ 480
Software Programming 4,266 1,978 -
-------- -------- --------
Totals $ 7,622 $ 4,034 $ 480
======== ======== ========
NOTE 6 - Income Taxes
The Company has adopted FASB 109 to account for income taxes. The Company
currently has no issues that create timing differences that would mandate
deferred tax expense. Net operating losses would create possible tax
assets in future years. Due to the uncertainty as to the utilization of
net operating loss carryforwards an evaluation allowance has been made to
the extent of any tax benefit that net operating losses may generate.
The Company has incurred losses that can be carried forward to offset
future earnings if conditions of the Internal Revenue Codes are met. These
losses are as follows:
Year of Loss Amount Expiration Date
------------ -------- ---------------
2002 $ 32,044 2022
2003 56,373 2023
2004 - -
(Unaudited)
F-10
Signature Credit Corporation
Notes to Financial Statements
For the Period Ended September 30, 2004
NOTE 6 - Income Taxes (continued)
December 31, December 31,
2003 2002
------------ ------------
Current Tax Asset Value of Net Operating
Loss Carryforwards at Current Prevailing
Federal Tax Rate $ 32,714 $ 11,856
Evaluation Allowance (32,714) (11,856)
--------- ---------
Net Tax Asset $ - $ -
========= =========
Current Income Tax Expense $ - $ -
Deferred Income Tax Benefit - -
The Company has remaining cumulative net operating loss carryforwards at
December 31, 2003 of $88,417 to be offset against future earnings.
NOTE 7 - Operating Lease
During 2002, the Company entered into a month-to-month operating lease with
HQ Global Workplaces for approximately $250 per month. In 2003, the
Company moved locations and entered into a verbal month-to-month rental
agreement, wherein the Company would pay $2,000 per month. In September
2003, the Company again moved locations to where they are currently located
at 1523 South Grand Avenue, Santa Ana, California 92868, where they entered
into a verbal month-to-month agreement in the amount of $500.
Rent expense for the period ended September 30, 2004 and the years ended
December 31, 2003 and 2002 was $3,290, $13,844 and $1,828, respectively.
NOTE 8 - Unaudited Information
The financial statements for the nine months ended September 30, 2004 was
taken from the books and records of the Company without audit. However,
such information reflects all adjustments which are in the opinion of
management, necessary to properly reflect the results of the nine months
ended September 30, 2004, and are of a normal, recurring nature. The
information presented is not necessarily indicative of the results from
operations expected for the full fiscal year.
F-11