DYNATEC INTERNATIONAL, INC
NOTES TO CONSOLIDATED FINANCIAL STAEMENTS
(10) STOCKHOLDERS' EQUITY (Continued)
cancelled, which are still pending. The Company has named various third party
defendants to whom it believes the shares may have been improperly issued and is
seeking either recovery of the shares or the recovery of damages. At present,
the Company is engaged in negotiations with representatives of various of the
third parties and Canaccord, and believes that a resolution of the outstanding
claims, in whole or in part, will be reached.
Related to the Canaccord litigation, a claim for an additional 125,000
shares of the stock of the Company had been made by Katori Consultants, Ltd., a
Philippines corporation. The answer and third party complaint of Dynatec named
Katori Consultants, Ltd. as a third party defendant so that such additional
claim could be addressed as part of the Canaccord legal action. On October 21,
1998, Katori Consultants, Ltd. gave written notice to Dynatec that it
relinquished any claim to additional shares of common stock of the Company.
In March 1998, the Company received $580,000 as a nonrefundable payment
under an agreement with a third party pursuant to which the third party acquired
nonexclusive rights to market certain of the Company's products internationally.
The cash paid to the Company was obtained from the sale of the Company's common
stock by such third party. The Company is therefore of the opinion that the
proceeds of such transaction were not attributable to the culmination of an
earnings process. Consequently, such proceeds have been accounted for as an
addition to capital in the accompanying consolidated financial statements.
(11) BUSINESS SEGMENT INFORMATION
During the year ended December 31, 1998 the Company adopted SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for reporting information about operating segments
in annual financial statements and requires selected information about operating
segments in interim financial reports issued to stockholders. It also
established standards for related disclosures about products and services, and
geographic areas. Operating segments are defined as components of an enterprise
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision making group, in
deciding how to allocate resources and in assessing performance.
Information as to the operations of the Company in different business
segments is set forth below based on the nature of the products and services
offered. Management evaluates performance based on several factors, of which the
primary financial measure is business segment operating income before noncash
amortization of intangible assets ("EBITDA"). The accounting policies of the
business segments are the same as those described in the summary of significant
accounting policies. |
