Report
of Independent Registered Certified Public Accounting Firm
|
F-5
|
|
|
Balance
Sheets at December 31, 2006 and 2005
|
F-6
|
|
|
Statements
of Operations for the Years ended December 31, 2006 and
2005
|
F-7
|
|
|
Statements
of Members’ Equity for the Years ended December 31, 2006 and
2005
|
F-8
|
|
|
Statements
of Cash Flows for the Years ended December 31, 2006 and
2005
|
F-9
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|
|
Notes
to the Financial Statements
|
F-10
|
ASSETS
|
|||||||
2006
|
2005
|
||||||
CURRENT
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
19,758
|
$
|
24,704
|
|||
Accounts
receivable, net of allowance for doubtful accounts
|
574,868
|
374,602
|
|||||
Unbilled
revenue
|
-
|
77,368
|
|||||
Inventories
|
153,539
|
100,025
|
|||||
Current
maturities of notes receivable (Note C)
|
37,799
|
37,629
|
|||||
Due
from related parties (Note F)
|
30,088
|
12,406
|
|||||
Total
Current Assets
|
816,052
|
626,734
|
|||||
PROPERTY
AND EQUIPMENT, NET (Note B)
|
55,793
|
39,293
|
|||||
OTHER
ASSETS
|
|||||||
Lease
deposit
|
3,628
|
3,628
|
|||||
Notes
receivable, less current portion (Note C)
|
27,671
|
65,470
|
|||||
Total
Other Assets
|
31,299
|
69,098
|
|||||
TOTAL
ASSETS
|
$
|
903,144
|
$
|
735,125
|
|||
LIABILITIES
AND MEMBERS' EQUITY
|
|||||||
CURRENT
LIABILITIES
|
|||||||
Line
of credit (Note D)
|
$
|
197,320
|
$
|
197,320
|
|||
Current
maturities of capital lease obligation (Note E)
|
6,078
|
-
|
|||||
Accounts
payable and accrued expenses (Note G)
|
428,997
|
350,195
|
|||||
Deferred
revenue
|
73,188
|
-
|
|||||
Customer
deposits
|
50,719
|
14,531
|
|||||
Due
to members
|
13,766
|
36,189
|
|||||
Total
Current Liabilities
|
770,068
|
598,235
|
|||||
LONG-TERM
LIABILITIES
|
|||||||
Deferred
rent liability
|
10,002
|
-
|
|||||
Capital
lease obligation, net of current maturities (Note E)
|
11,843
|
-
|
|||||
Total
Long-Term Liabilities
|
21,845
|
-
|
|||||
Commitments
and contingencies (Note H)
|
-
|
-
|
|||||
MEMBERS'
EQUITY
|
|||||||
Capital
contributions
|
589,103
|
589,103
|
|||||
Retained
deficit
|
(477,872
|
)
|
(452,213
|
)
|
|||
Total
Members' Equity
|
111,231
|
136,890
|
|||||
TOTAL
LIABILITIES AND MEMBERS' EQUITY
|
$
|
903,144
|
$
|
735,125
|
|||
2006
|
2005
|
||||||
NET
SALES
|
$
|
3,315,730
|
$
|
2,808,306
|
|||
COST
OF SALES
|
2,098,612
|
1,713,177
|
|||||
Gross
Profit
|
1,217,118
|
1,095,129
|
|||||
OPERATING
EXPENSES
|
|
|
|||||
Operating
expenses
|
1,198,076
|
1,092,625
|
|||||
Depreciation
expense
|
19,428
|
8,237
|
|||||
Total
Operating Expenses
|
1,217,504
|
1,100,862
|
|||||
Operating
Loss
|
(386
|
)
|
(5,733
|
)
|
|||
OTHER
INCOME (EXPENSE)
|
|||||||
Interest
expense
|
(28,754
|
)
|
(24,438
|
)
|
|||
Interest
income
|
7,621
|
9,678
|
|||||
Officers'
life insurance
|
(4,140
|
)
|
(2,730
|
)
|
|||
Miscellaneous
income
|
-
|
879
|
|||||
Net
Other Income (Expense)
|
(25,273
|
)
|
(16,611
|
)
|
|||
NET
LOSS
|
$
|
(25,659
|
)
|
$
|
(22,344
|
)
|
Retained
|
Total
|
|||||||||
Capital
|
Earnings
|
Members'
|
||||||||
Contributions
|
(Deficit)
|
Equity
|
||||||||
BALANCES,
December 31, 2004
|
$
|
549,103
|
$
|
(409,441
|
)
|
$
|
139,662
|
|||
Capital
contributions
|
40,000
|
-
|
40,000
|
|||||||
2005
net loss
|
-
|
(22,344
|
)
|
(22,344
|
)
|
|||||
Distributions
|
-
|
(20,428
|
)
|
(20,428
|
)
|
|||||
BALANCES,
December
31, 2005
|
$
|
589,103
|
$
|
(452,213
|
)
|
$
|
136,890
|
|||
2006
net loss
|
-
|
(25,659
|
)
|
(25,659
|
)
|
|||||
BALANCES,
December 31, 2006
|
$
|
589,103
|
$
|
(477,872
|
)
|
$
|
111,231
|
2006
|
2005
|
||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
|||||||
Net
loss
|
$
|
(25,659
|
)
|
$
|
(22,344
|
)
|
|
Adjustments
to reconcile net loss to net
|
|||||||
cash
flows provided by operating activities
|
|||||||
Depreciation
|
19,428
|
8,237
|
|||||
(Gain)
loss on sale of property and equipment
|
1,896
|
-
|
|||||
Bad
debts and allowance for doubtful accounts
|
135,439
|
24,487
|
|||||
Changes
in operating assets and liabilities
|
|||||||
Accounts
receivable - trade
|
(335,705
|
)
|
(256,256
|
)
|
|||
Unbilled
revenue
|
77,368
|
(44,887
|
)
|
||||
Inventories
|
(53,514
|
)
|
67,573
|
||||
Lease
deposit
|
-
|
(3,628
|
)
|
||||
Accounts
payable and accrued expenses
|
78,802
|
279,854
|
|||||
Deferred
revenue
|
73,188
|
-
|
|||||
Customer
deposits
|
36,188
|
(2,156
|
)
|
||||
Deferred
rent liability
|
10,002
|
-
|
|||||
Net
Cash Flows Provided By Operating Activities
|
17,433
|
50,880
|
|||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||
Issuance
of notes receivable
|
-
|
(54,553
|
)
|
||||
Payments
received on notes receivable
|
37,629
|
33,810
|
|||||
Proceeds
from sale of property and equipment
|
2,000
|
-
|
|||||
Acquisition
of property and equipment
|
(39,824
|
)
|
(32,001
|
)
|
|||
Net
Cash Flows Used In Investing Activities
|
(195
|
)
|
(52,744
|
)
|
|||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||
Net
payments on line of credit
|
-
|
(1,475
|
)
|
||||
Proceeds
from capital lease obligation
|
22,681
|
-
|
|||||
Principal
payments on capital lease obligation
|
(4,760
|
)
|
-
|
||||
Net
payments from (advances to) members
|
(40,105
|
)
|
(11,314
|
)
|
|||
Capital
contributions from members
|
-
|
40,000
|
|||||
Distributions
paid to members
|
-
|
(20,428
|
)
|
||||
Net
Cash Flows (Used In)/ Provided From Financing Activities
|
(22,184
|
)
|
6,783
|
||||
Net
(Decrease)/Increase in Cash and Cash Equivalents
|
(4,946
|
)
|
4,919
|
||||
CASH
AND CASH EQUIVALENTS - BEGINNING OF YEAR
|
$
|
24,704
|
$
|
19,785
|
|||
CASH
AND CASH EQUIVALENTS - END OF YEAR
|
$
|
19,758
|
$
|
24,704
|
|||
Supplemental
cash flow disclosures
|
|||||||
Cash
transactions:
|
|||||||
Cash
paid during the year for interest
|
$
|
28,427
|
$
|
20,944
|
|||
Income
taxes paid
|
$
|
-
|
$
|
-
|
|
2006
|
2005
|
|||||
Leasehold
Improvements
|
$
|
10,898
|
$
|
10,898
|
|||
Computer
Equipment
|
26,258
|
1,156
|
|||||
Furniture,
Fixtures and Office Equipment
|
59,573
|
48,747
|
|||||
Vehicles
|
8,164
|
8,164
|
|||||
Total
|
104,893
|
68,965
|
|||||
Accumulated
Depreciation
|
(49,100
|
)
|
(29,672
|
)
|
|||
|
$
|
55,793
|
$
|
39,293
|
|
2006
|
2005
|
|||||
Total
Minimum Lease Payments to be Received
|
$
|
72,001
|
$
|
117,250
|
|||
Less:
Unearned Interest Income
|
(6,531
|
)
|
(14,151
|
)
|
|||
Net
Investment in Sales-Type Leases
|
65,470
|
103,099
|
|||||
Less:
Current Maturities
|
(37,799
|
)
|
(37,629
|
)
|
|||
Non-Current
Portion
|
$
|
27,671
|
$
|
65,470
|
2007
|
$ |
42,000
|
||
2008
|
18,291
|
|||
2009
|
10,798
|
|||
2010
|
912
|
|||
|
$
|
72,001
|
2007
|
$
|
8,520
|
||
2008
|
8,520
|
|||
2009
|
4,970
|
|||
Total
|
22,010
|
|||
Less:
Amount Representing Interest
|
4,089
|
|||
Present
Value of Future Minimum Lease Payments
|
17,921
|
|||
Less:
Current Portion
|
6,078
|
|||
Long-Term
Portion
|
$
|
11,843
|
|
2006
|
2005
|
|||||
Accounts
payable
|
$
|
111,884
|
$
|
140,948
|
|||
Accrued
sales tax payable
|
225,000
|
150,000
|
|||||
Accrued
interest
|
3,821
|
3,494
|
|||||
Accrued
payroll and payroll taxes
|
56,282
|
38,123
|
|||||
Hotel
use fees payable
|
14,600
|
13,800
|
|||||
Vendor
fees payable
|
13,462
|
0
|
|||||
Other
|
3,948
|
3,830
|
|||||
Total
|
$
|
428,997
|
$
|
350,195
|
2007
|
$
|
33,059
|
||
2008
|
36,525
|
|||
2009
|
37,553
|
|||
2010
|
38,581
|
|||
2011
|
18,008
|
|||
Total
|
$
|
163,726
|