Independent Auditors' Report and Financial Statements of Advanced Acoustical Concepts, Inc. (2000 and 1999)

Summary

This document contains the independent auditors' report and audited financial statements for Advanced Acoustical Concepts, Inc. for the years ended December 31, 2000 and 1999. Prepared by BDO Seidman, LLP, the report confirms that the financial statements fairly present the company's financial position and results in accordance with U.S. generally accepted accounting principles. The statements include balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with accompanying notes. The report is addressed to the company's Board of Directors and is intended to provide an accurate financial overview for stakeholders.

View More
EX-2.2 4 d27071_ex2-2.txt FINANCIAL STATEMENTS Exhibit 2.2 Advanced Acoustical Concepts, Inc. Contents Independent auditors' report 3 Financial statements: Balance sheets 4 Statements of operations and comprehensive loss 5 Statements of changes in stockholders' equity (deficit) 6 Statements of cash flows 7 Notes to financial statements 8-16 Financial statements (unaudited) Balance sheet 17 Statements of operations 18 Statements of cash flows 19 Notes to financial statements 20 Independent Auditors' Report To the Board of Directors Advanced Acoustical Concepts, Inc. Dayton, OH 45414 We have audited the accompanying balance sheets of Advanced Acoustical Concepts, Inc. as of December 31, 2000 and 1999, and the related statements of operations and comprehensive loss, changes in stockholders' equity (deficit) 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the 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 Advanced Acoustical Concepts, Inc. at December 31, 2000 and 1999, and the results of its operations and comprehensive loss, and its cash flows for the years then ended in conformity with generally accepted accounting principles in the United States of America. BDO Seidman, LLP Woodbridge, New Jersey September 14, 2001 3 Advanced Acoustical Concepts, Inc. Balance Sheets --------------------------------------------------------------------------------
December 31, 2000 1999 -------------------------------------------------------------------------------------------- ----------- ----------- Assets Current: Cash $ -- $ 18,780 Accounts receivable, net of allowance for doubtful accounts of $58,000 and $32,000, respectively 1,906,448 1,333,069 Costs and estimated earnings in excess of billings on uncompleted contracts 693,795 272,987 Inventories 377,063 400,884 Due from stockholder 34,614 -- Prepaid expenses and other current assets 54,961 18,189 -------------------------------------------------------------------------------------------- ----------- ----------- Total current assets 3,066,881 2,043,909 -------------------------------------------------------------------------------------------- ----------- ----------- Property and equipment, net 394,221 426,475 Other assets 14,451 15,888 -------------------------------------------------------------------------------------------- ----------- ----------- $ 3,475,553 $ 2,486,272 ============================================================================================ =========== =========== Liabilities and Stockholders' Equity (Deficit) Current liabilities: Cash overdraft $ 2,469 $ -- Current portion of long-term debt and capital lease obligations 285,210 62,546 Accounts payable and accrued expenses 2,177,529 884,604 Billings in excess of cost and estimated earnings on uncompleted contracts 1,024,719 513,666 Deferred maintenance contract revenue 390,709 181,923 Short-term borrowings 543,945 745,282 Due to stockholders -- 86,267 -------------------------------------------------------------------------------------------- ----------- ----------- Total current liabilities 4,424,581 2,474,288 Long-term debt and capital lease obligations 35,471 3,571 -------------------------------------------------------------------------------------------- ----------- ----------- Total liabilities 4,460,052 2,477,859 -------------------------------------------------------------------------------------------- ----------- ----------- Commitments and contingencies Stockholders' equity (deficit): Common stock, no par value, 10,000,000 shares authorized; 1,110,000 shares issued and outstanding 50,000 50,000 Additional paid-in capital 143,581 8,581 Accumulated other comprehensive income 6,719 -- Retained deficit (1,184,799) (50,168) -------------------------------------------------------------------------------------------- ----------- ----------- Total stockholders' equity (deficit) (984,499) 8,413 -------------------------------------------------------------------------------------------- ----------- ----------- $ 3,475,553 $ 2,486,272 ============================================================================================ =========== ===========
See accompanying notes to financial statements. 4 Advanced Acoustical Concepts, Inc. Statements of Operations and Comprehensive Loss --------------------------------------------------------------------------------
Year ended December 31, 2000 1999 ------------------------------------------------------------ ------------ ----------- Revenue $ 10,199,099 $ 9,027,456 Cost of revenues 7,436,456 7,366,479 ------------------------------------------------------------ ------------ ----------- Gross margin 2,762,643 1,660,977 Selling, general and administrative expenses 3,513,315 2,309,520 ------------------------------------------------------------ ------------ ----------- Loss from operations (750,672) (648,543) ------------------------------------------------------------ ------------ ----------- Other income (expense): Interest expense, net (369,860) (126,431) Exchange gain on foreign currency 9,435 -- Loss on sale of assets (875) (585) Other income (expense) (22,659) 7,398 ------------------------------------------------------------ ------------ ----------- Total other expense (383,959) (119,618) ------------------------------------------------------------ ------------ ----------- Net loss (1,134,631) (768,161) Other comprehensive income: Foreign currency translation adjustments 6,719 -- ------------------------------------------------------------ ------------ ----------- Comprehensive loss $ (1,127,912) $ (768,161) ============================================================ ============ ===========
See accompanying notes to financial statements. 5 Advanced Acoustical Concepts, Inc. Statements of Changes in Stockholders' Equity (Deficit) --------------------------------------------------------------------------------
Accumulated Other Additional Paid-In Comprehensive Retained Earnings Common Stock Capital Income (Deficit) Total --------------------------------------- ------------- ------------------ -------------- ------------------- ------------- Balance, December 31, 1998 $50,000 $ 8,581 $ -- $ 746,313 $ 804,894 Net loss -- -- -- (768,161) (768,161) Distributions -- -- -- (28,320) (28,320) --------------------------------------- ------------- ------------------ -------------- ------------------- ------------- Balance, December 31, 1999 50,000 8,581 - (50,168) 8,413 Foreign currency translation adjustment -- -- 6,719 -- 6,719 Capital contribution -- 135,000 -- -- 135,000 Net loss -- -- -- (1,134,631) (1,134,631) --------------------------------------- ------------- ------------------ -------------- ------------------- ------------- Balance, December 31, 2000 $50,000 $143,581 $6,719 $(1,184,799) $ (984,499) ======================================== ============= ================== ============== =================== =============
See accompanying notes to financial statements. 6 Advanced Acoustical Concepts, Inc. Statements of Cash Flows --------------------------------------------------------------------------------
Year ended December 31, 2000 1999 ------------------------------------------------------------------------------------------------ ----------- --------- Cash flows from operating activities: Net loss $(1,134,631) $(768,161) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 155,920 173,533 Provision for bad debts 26,000 32,000 Provision for inventory obsolescence -- 270,000 Loss on sale of assets 875 585 Changes in operating assets and liabilities: Accounts receivable (599,379) 992,337 Cost and estimated earnings in excess of billings on uncompleted contracts (420,808) 426,263 Inventory 23,821 25,922 Prepaid expenses and other current assets (36,772) 20,045 Accounts payable and accrued expenses 1,516,818 (514,871) Billings in excess of costs and estimated earnings on uncompleted contracts 511,053 361,760 Deferred maintenance contract revenue 208,786 (35,809) Other assets 1,437 777 ------------------------------------------------------------------------------------------------ ----------- --------- Net cash provided by operating activities 253,120 984,381 ------------------------------------------------------------------------------------------------ ----------- --------- Cash flows from investing activities: Proceeds from sale of property and equipment 2,593 500 Purchase of property and equipment (72,847) (160,645) ------------------------------------------------------------------------------------------------ ----------- --------- Net cash used in investing activities (70,254) (160,145) ------------------------------------------------------------------------------------------------ ----------- --------- Cash flows from financing activities: Payments on short-term borrowings (201,337) (802,150) Payments on long-term debt (62,115) (155,245) Proceeds on notes payable 125,000 -- Payments on notes payable (82,007) -- Payments/proceeds to stockholders (120,881) 86,267 Payments on capital leases (4,494) -- Capital contribution 135,000 -- Distributions -- (28,320) ------------------------------------------------------------------------------------------------ ----------- --------- Net cash used in financing activities (210,834) (899,448) ------------------------------------------------------------------------------------------------ ----------- --------- Effect of exchange rate changes on cash 6,719 -- ------------------------------------------------------------------------------------------------ ----------- --------- Decrease in cash and cash equivalents (21,249) (75,212) Cash, at beginning of year 18,780 93,992 ------------------------------------------------------------------------------------------------ ----------- --------- Cash, at end of year $ (2,469) $ 18,780 ================================================================================================ =========== ========= Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 370,546 $ 134,343 Non-cash investing and financing activities: Acquisition of equipment through capital leases $ 54,287 $ -- Issuance of notes for accounts payable $ 223,893 $ -- ================================================================================================ =========== =========
See accompanying notes to financial statements. 7 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- 1. Summary of Significant Nature of Operations Accounting Policies Advanced Acoustical Concepts, Inc. (the "Company") was incorporated in the state of Washington on June 1, 1998. The Company's main office is located in Dayton, Ohio. The Company contracts with private companies, government agencies and the military to provide video conferencing installation and maintenance services, audio/video engineering, media room construction and other electronic communication services. The Company's customers are located throughout the United States. 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 disclosures 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 those estimates. Revenue and Cost Recognition Revenues from fixed-price construction contracts are recognized on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. This method is used because management considers total cost to be the best available measure of progress on the contracts. Because of the inherent uncertainties in estimated costs, it is at least reasonably possible that estimates used will change within the near term. As these contracts extend over one or more periods, revisions in costs and profit estimated during the course of the work are reflected in the accounting period in which the facts that require the revision become known. 8 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- Contract costs include all direct materials, labor and subcontracting costs and those indirect costs relating to contract performance, such as indirect labor, supplies, tools, repairs and depreciation. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability, including those arising from final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined. The asset, "Costs and estimated earnings in excess of billings on uncompleted contracts", represents revenues recognized in excess of amounts billed. The liability, "Billings in excess of costs and estimated earnings on uncompleted contracts," represents billings in excess of revenues recognized. Revenues on maintenance contracts are recognized ratably over the life of the contract using the straight-line method. Deferred revenue is recorded for the excess of maintenance contract billings over revenues recognized. Contract costs are recognized as incurred. Provisions of estimated losses on uncompleted maintenance contracts are made in the period in which such losses are determined. Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate fair value because of the current maturity of these items. Inventories Inventories, consisting of finished goods and spare parts, is valued at the lower of cost (determined on a first in, first out basis) or market. Property and Equipment Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the assets, generally 3-10 years. The cost of maintenance and repairs is charged to operations as incurred. 9 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents. Income Taxes The Company, with the consent of its stockholders, has elected under the Internal Revenue Code to be an "S" corporation. The election was effective for federal and Ohio State income tax purposes, but was not effective in two other states. Accordingly, the Company may incur income tax obligations relating to those states only, and the financial statements may include a provision for those taxes. Earnings and losses for federal income tax purposes are reported on the individual income tax returns of the stockholders based upon their proportionate share. Therefore, no provision or liability for Federal income taxes has been included in these financial statements. Foreign Currency Translation Foreign currency exchange gains or losses arising from transactions denominated in foreign currencies are translated at average exchange rates. The effects of these exchange adjustments are included in operations. Foreign currency denominated cash accounts are translated at year-end exchange rates. The effects of the translation adjustments are recognized as a separate component of stockholders' deficit. 10 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- Long-Lived Assets The Company follows SFAS No. 121 "Accounting for Impairment of Long-Lived Assets to be Disposed Of" ("SFAS 121"). In accordance with SFAS 121 the Company periodically reviews the carrying value of certain of its assets in relation to historical results, current business conditions and trends to identify potential situations in which the carrying value of assets may not be recoverable. If such reviews indicate that the carrying value of such assets may not be recoverable, the Company would determine whether the estimated amounts recoverable through future operations and sale of a property on an undiscounted basis are below the property's carrying value. If the property is determined to be impaired, it must be written down to fair value. As of December 31, 2000, no write-downs were required. 2. Property, Plant Property, plant and equipment consists of the and Equipment following:
December 31, 2000 1999 -------------------------------------------- ---------------- --------------- Technical and demonstration equipment $ 548,262 $ 496,968 Office furniture and equipment 538,469 523,320 Transportation equipment 14,555 14,555 Leasehold improvements 38,977 38,977 Equipment under capital leases 54,287 -- -------------------------------------------- ---------------- --------------- 1,194,550 1,073,820 Less: accumulated depreciation and amortization (800,329) (647,345) -------------------------------------------- ---------------- --------------- $ 394,221 $ 426,475 ============================================ ================ ===============
11 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- 3. Costs and Estimated Information with respect to Earnings on Uncompleted contracts-in-progress at December 31, 2000 and Contracts 1999 is as follows:
2000 1999 -------------------------------------------- ---------------- --------------- Costs incurred on uncompleted contracts $3,844,697 $2,770,426 Estimated gross profit 1,503,886 955,725 -------------------------------------------- ---------------- --------------- 5,348,583 3,726,151 Less: billings to date 5,679,507 3,966,830 -------------------------------------------- ---------------- --------------- $ (330,924) $(240,679) ============================================ ================ =============== Included in accompanying balance sheets under the following captions: 2000 1999 -------------------------------------------- ---------------- --------------- Costs and estimated earnings in excess of $ 693,795 $ 272,987 billings on uncompleted contracts Billings in excess of costs and estimated earnings on uncompleted contracts (1,024,719) (513,666) -------------------------------------------- ---------------- --------------- Total $(330,924) $(240,679) ============================================ ================ ===============
4. Short-Term Borrowings The Company had a line of credit with a financial institution during 1999. Balances under the line are due on demand. Interest is payable monthly at the bank's reference rate plus 1.25%. Total borrowings under the line are limited to the lesser of 80% of eligible accounts receivable plus 40% of stock inventory (maximum $200,000) or the unused portion of the line of credit up to $2,500,000. The line is collateralized by contract receivables, inventory and equipment and is guaranteed by the Company's stockholders. Total amounts outstanding at December 31, 1999 was $745,282. This line was paid in full and terminated during 2000. 12 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- In February 2000, the Company entered into an Agreement with a financial institution whereby the Company factors certain of its accounts receivables with recourse. The Company receives up to 80% of the aggregate net face value of the receivables. The Company is required to pay fees on the gross face value of the accounts sold based upon the number of days elapsed between the date the account is purchased and collection of each account occurs. The fees range from 2.5% to 13%. At December 31, 2000 borrowings under this agreement totaled $339,475. In March 2000, the Company added an addendum to the Agreement. Under this addendum, the Company, in addition to financing certain of its accounts receivables, can also finance its irrevocable purchase orders from their customers. An initial discount is charged based on the gross amount of each purchase order. The discount varies based upon the ratio of the sum of all advances, payments, guarantees and letters of credit made to the total of all gross receivables. The discount ranges from 3.99% to 5.99%. At December 31, 2000 borrowings under the addendum totaled $204,470. 13 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- 5. Long-Term Debt and Long-term debt and capital lease obligations Capital Lease consisted of the following: Obligations
December 31, 2000 1999 ----------------------------------------------- ------------- ------------- Note payable - National City Bank, interest at prime plus 1-1/2%, monthly payments of $9,723 plus interest, final payment due April 2000, collateralized by receivables and equipment, guaranteed by stockholders $ -- $38,864 Note payable - National City Bank, interest at 9.25%, monthly payments of $3,125 including interest, final payment due June 2000, collateralized by receivables and equipment, guaranteed by stockholders -- 18,700 Note payable - GMAC, interest at 8.734%, monthly payments of $461 including interest, final payment due September 2001, collateralized by vehicle 4,002 8,553 Note payable - Broad Street Financial Company, interest at 10%, principal and interest due 2001 125,000 -- Note payable - Picture Tel Corporation, interest at 11.25%, monthly payments of $29,180, due 2001 141,886 -- Obligations under six capital leases with Dell Financial Services payable in monthly installments ranging from $89 - $163 with implicit interest at rates ranging from 16.9 to 19.4 per annum 17,026 -- Obligations under eight capital leases with Vision Financial Group, Inc., payable in monthly installments ranging from $61 - $172 with implicit interest at rates ranging from 19.5 - 21.3 per annum 32,767 -- ----------------------------------------------- ------------- ------------- 320,681 66,117 Less: current maturities 285,210 62,546 ----------------------------------------------- ------------- ------------- $ 35,471 $ 3,571 =============================================== ============= =============
14 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- Maturities of long-term debt and capital lease obligations in each of the years ending December 31, are as follows:
----------------------------------------------- ------------- 2001 $285 ###-###-#### 17 ###-###-#### 18,019 ----------------------------------------------- ------------- $320,681 ----------------------------------------------- -------------
6. Due to Stockholders In September 1999, the Company entered into unsecured loans with two stockholders for $100,000. The loans call for optional partial payments or one balloon payment to be made on or before December 31, 1999, plus interest at 8%. These notes were paid off during 2000. 7. Profit Sharing Plan The Company provides a qualified profit sharing plan and trust for substantially all of its employees. Contributions are at the discretion of the Board of Directors, and are limited to 15% of the aggregate compensation of all plan participants. There were no contributions for the years ended December 31, 2000 and 1999. This plan was terminated in April 2000. 8. Leases The Company leases its main office in Ohio on a month-to-month operating lease. Rent expense for the years ended December 31, 2000 and 1999 were $88,027 and $117,928, respectively. Future minimum lease payments required under capital leases in each of the years ending December 31, are as follows:
----------------------------------------------- ------------- 2001 $23,006 2002 23,006 2003 19,794 ----------------------------------------------- ------------- Total future minimum lease payments 65,806 Less amount representing interest 16,013 ----------------------------------------------- ------------- $49,793 =============================================== =============
15 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- 9. Commitments and Some of the Company's contracts contain Contingencies warranty clauses which obligate the Company to perform repairs of installed equipment for various periods of time after completion of the initial contracts. The Company has not experienced significant costs relating to these clauses through December 31, 2000, and management believes future warranty costs will be immaterial. Accordingly, no accrual for these future costs is included in the accompanying financial statements. The Company has also entered into maintenance contracts which obligate the Company to perform maintenance services on an "as needed" basis during the contractual period. The Company records revenues and costs under the contracts as described in Note 1. The Company is involved in litigation with a former employee. The employee has brought suit against the Company alleging that the Company failed to pay sales commissions to him over a three year period. The Company has accrued $50,000 related to this suit which represents its best estimate of the exposure from this matter. 10. Concentration of Credit The Company maintains its cash balances in one Risk financial institution. The balances are insured by the FDIC up to $100,000. At December 31, 2000, the Company had no uninsured balances. 11. Subsequent Events On July 17, 2001, Wire One Technologies, Inc. acquired the assets and certain liabilities of the Company. The total consideration was $794,000, which was paid in the form of 145,429 shares of Wire One common stock valued at the time of the acquisition. 16 Advanced Acoustical Concepts, Inc. Balance Sheet --------------------------------------------------------------------------------
June 30, 2001 (unaudited) ---------------------------------------------------------------------------------------------- ----------- Assets Current: Cash $ 64,270 Accounts receivable, net of allowance for doubtful accounts of $58,000 493,112 Costs and estimated earnings in excess of billings on uncompleted contracts 179,972 Inventories 413,289 Due from stockholder 53,893 Prepaid expenses and other current assets 118,431 ---------------------------------------------------------------------------------------------- ----------- Total current assets 1,322,967 ---------------------------------------------------------------------------------------------- ----------- Property and equipment, net 362,039 Other assets 4,409 ---------------------------------------------------------------------------------------------- ----------- $ 1,689,415 ============================================================================================== =========== Liabilities and Stockholders' Deficit Current liabilities: Current portion of long-term debt and capital lease obligations $ 225,766 Accounts payable and accrued expenses 2,527,642 Billings in excess of cost and estimated earnings on uncompleted contracts 220,254 Deferred maintenance contract revenue 312,897 ---------------------------------------------------------------------------------------------- ----------- Total current liabilities 3,286,559 Long-term debt and capital lease obligations 28,663 ---------------------------------------------------------------------------------------------- ----------- Total liabilities 3,315,222 ---------------------------------------------------------------------------------------------- ----------- Stockholders' deficit: Common stock, no par value, 10,000,000 shares authorized; 1,110,000 shares issued and outstanding 50,000 Additional paid-in capital 143,581 Cumulative foreign currency translation adjustment 6,719 Retained deficit (1,826,107) ---------------------------------------------------------------------------------------------- ----------- Total stockholders' deficit (1,625,807) ---------------------------------------------------------------------------------------------- ----------- $ 1,689,415 ============================================================================================== ===========
See accompanying notes to financial statements. 17 Advanced Acoustical Concepts, Inc. Statements of Operations (Unaudited) --------------------------------------------------------------------------------
Six months ended June 30, 2001 2000 ---------------------------------------------------------------------------------- ----------- ----------- Revenue $ 4,287,328 $ 4,928,683 Cost of revenues 3,157,541 3,623,436 ---------------------------------------------------------------------------------- ----------- ----------- Gross margin 1,129,787 1,305,247 Selling, general and administrative expenses 1,483,608 1,476,833 ---------------------------------------------------------------------------------- ----------- ----------- Loss from operations (353,821) (171,586) ---------------------------------------------------------------------------------- ----------- ----------- Other expense: Interest expense, net 285,928 123,516 Other 1,559 56,247 ---------------------------------------------------------------------------------- ----------- ----------- Total other expense 287,487 179,763 ---------------------------------------------------------------------------------- ----------- ----------- Net loss $ (641,308) $ (351,349) ================================================================================== =========== ===========
See accompanying notes to financial statements. 18 Advanced Acoustical Concepts, Inc. Statements of Cash Flows (Unaudited) --------------------------------------------------------------------------------
Six months ended June 30, 2001 2000 ---------------------------------------------------------------------------------------------------- ----------- ----------- Cash flows from operating activities: Net loss $ (641,308) $ (351,349) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 74,736 73,985 Changes in operating assets and liabilities: Accounts receivable 1,413,336 667,971 Cost and estimated earnings in excess of billings on uncompleted contracts 513,823 (54,296) Inventories (36,226) 23,821 Prepaid expenses and other current assets (63,470) (88) Accounts payable and accrued expenses 350,113 610,932 Billings in excess of costs and estimated earnings on uncompleted contracts (804,465) (460,950) Deferred maintenance contract revenue (77,812) 240,855 Other assets 10,042 333 ---------------------------------------------------------------------------------------------------- ----------- ----------- Net cash provided by operating activities 738,769 751,214 ---------------------------------------------------------------------------------------------------- ----------- ----------- Cash flows from investing activities: Purchase of property and equipment (42,554) (25,516) ---------------------------------------------------------------------------------------------------- ----------- ----------- Net cash used in investing activities (42,554) (25,516) ---------------------------------------------------------------------------------------------------- ----------- ----------- Cash flows from financing activities: Payments on short-term borrowings (543,945) (345,156) Payments on long-term debt (59,444) (62,546) Payments on notes payable -- (79,349) Payments/proceeds to stockholders (19,279) (97,378) Payments on capital leases (6,808) -- Capital contribution -- 135,000 ---------------------------------------------------------------------------------------------------- ----------- ----------- Net cash used in financing activities (629,476) (449,429) ---------------------------------------------------------------------------------------------------- ----------- ----------- (Increase) in cash and cash equivalents 66,739 276,269 Cash, at beginning of year (2,469) 18,780 ---------------------------------------------------------------------------------------------------- ----------- ----------- Cash, at end of year $ 64,270 $ 295,049 ---------------------------------------------------------------------------------------------------- ----------- ----------- Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ 280,930 $ 129,806 Non-cash investing and financing activities: Issuance of notes for accounts payable $ -- $ 223,893 ==================================================================================================== =========== ===========
See accompanying notes to financial statements 19 Advanced Acoustical Concepts, Inc. Notes to Financial Statements -------------------------------------------------------------------------------- 1. Nature of Operations Advanced Acoustical Concepts, Inc. (the "Company") was incorporated in the state of Washington on June 1, 1998. The Company's main office is located in Dayton, Ohio. The Company contracts with private companies, government agencies and the military to provide video conferencing installation and maintenance services, audio/video engineering, media room construction and other electronic communication services. The Company's customers are located throughout the United States. 2. Basis of Presentation The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the financial statements and footnotes for the fiscal year ended December 31, 2000 included in Section 2.2, on pages 1 through 16. 3. Subsequent Events On July 17, 2001, Wire One Technologies, Inc. acquired the assets and certain liabilities of the Company. The total consideration was $794,000, which was paid in the form of 145,429 shares of Wire One common stock valued at the time of the acquisition. 20