My concerns Rob Re SEC Please read Don.
The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in Note
1 to the consolidated financial statements, the Company has incurred recurring
losses from operations and has an accumulated deficit that raises substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
n April 1997, the Company loaned certain officers, directors and employees an
aggregate of $184,000 in order to purchase 92,000 shares of the Company's common
stock in a private transaction. The loans are secured by the common stock, bear
interest at 5.9% and are due April 30, 2000. At December 31, 1997, amounts
outstanding under these loans total $172,354 in principal and $6,831 in accrued
interest receivable.
he Company retained the consulting services of Corstone Corporation which
previously employed the current Chief Executive Officer and Chief Financial
Officer. The current Chief Executive Office and Chief Financial Officer have no
direct or indirect ownership interest in Corstone Corporation. These consulting
services included financial, legal and administrative services. The consulting
services had been provided to the Company during the twelve months ended
December 31, 1997, the seven month period ended December 31, 1996 and the year
ended May 31, 1996 both prior to and after the appointment of the current Chief
Executive Officer on May 15, 1996. Consulting fees paid to this entity were
$26,750, $150,000, and $329,000 during the twelve months ended December 31,
1997, the seven months ended December 31, 1996 and the year ended May 31, 1996,
respectively. Additionally, a finder's fee of $150,000 was paid to this
consulting firm in conjunction with the acquisition of XLCC in the year ended
May 31, 1996.
This is from the auditors this si substanial concern not going concern.
there are approximately 330,000 public safety vehicles in approximately 17,000
local police, sheriff and special police agencies.
ts resellers cover approximately all fifty states, including
Washington, DC, and its foreign distributors operate in ten countries, including
England, France, Japan, Germany, South Korea and Portugal.
The Company has reseller agreements with
Dulles Networking, Office Solutions, EDS Ltd., Bedriftssystemer, Boeing and GTE
for its secure computers. The loss of certain of such resellers may have a
material negative effect on the Company's business.
nder such contracts, the
distributor is granted either an exclusive or non-exclusive territorial and
product representation as well as discounts based on the list price ranging from
20% to 30%, depending on the type or annual amount of products sold.
The Company and its agents are also governed by the restrictions of the
Foreign Corrupt Practices Act of 1977, as amended ("FCPA"), which prohibits the
promise or payments of any money, remuneration or other items of value to
foreign government officials, public office holders, political parties and
others with regard to the obtaining or preserving of commercial contracts or
orders. These restrictions may hamper the Company in its marketing efforts
abroad.
To date, the Company has been able to comply with all governmental
requirements without incurring significant costs. However, the Company cannot
determine the extent to which future earnings may be affected by new legislation
or regulations affecting its industry.
Certain large manufacturers of commercial notebook computers such as
Panasonic and IBM have introduced commercial
<PAGE> 17
notebooks that have been sealed and ruggedized to some extent. These companies
are presently offering such products at prices from approximately one-third to
one-half the Company's more rugged versions. |
