Common use of Certain Risk Factors Clause in Contracts

Certain Risk Factors. The securities being offered hereby are speculative and subject to a high degree of risk of loss of the investment. Persons who cannot afford to lose their investment should not purchase the securities offered hereby. Prospective investors should consider carefully, among other factors described herein, the following matters: HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; DEFICIENCY IN STOCKHOLDERS' EQUITY; DEFICIT IN WORKING CAPITAL; AUDITOR'S QUALIFICATION; PROPOSED JOINT VENTURE The Company commenced operations in September 1987, was required to seek the protection of Chapter 11 of the U.S. Bankruptcy Act in 1992, and has not operated on a profitable basis. Net losses before extraordinary items were $1,121,000 and $372,000 for the fiscal years ended June 30, 1996 and 1995, respectively, and $604,000 for the nine months ended March 31, 1997. At March 31, 1997, the Company had an accumulated deficit from operations since its inception of $3,331,000 and a $701,000 deficiency in its stockholders' equity. Excluding the effect of commitment and continent liabilities, if any, total liabilities at March 31, 1997 were $946,000 and there were also redeemable Series A preferred stock outstanding of $136,000 which require mandatory redemption from future net income, if any. At March 31, 1997, the Company had limited cash resources of $26,000 and a deficiency in working capital of $386,000; included in current liabilities, however, is a contingent liability of $169,000 due the Company's former President under a settlement agreement that is required to be paid only from 5% of proceeds realized from subsequent financings by the Company. There can be no assurance that the Company will obtain additional financing. THE REPORT OF XXXXXXXX XXXX XXXX & XXXXXXX, PC, ON THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1996 CONTAINS A PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT CONCERNING THE ABILITY OF THE COMPANY TO CONTINUE AS A GOING CONCERN. Management's plan to address these matters has been to dispose of its software media duplication and distribution business and close all operations in Colorado. The Company, now headquartered in Santa Ana, California, is focusing its available resources and personnel on the development of a quartz glass business and sale of quartz glass products. Initial sales have been obtained, with manufacturing temporarily being contracted to third parties. The Company has negotiated a joint venture agreement to acquire a minority interest in a quartz glass manufacturing business based in Northern California, but will be unable to participate in that venture unless it receives proceeds from the sale of all securities included in the Offerings. Historical operations of the business in Northern California have not been profitable and the proposed joint venture will be largely dependent upon increases in sales stimulated by the participation of a foreign company, which future sales increases have not been committed. There can be no assurance that the Company will be able to successfully complete its minority participation in the joint venture or that, if completed, that the joint venture will become profitable. In addition, the Company will own a minority equity position in the joint venture if it is able to complete the proposed transaction, and may have only a limited influence in control of the business operations and policies of the joint venture. Further information in writing as to the proposed joint venture may be obtained on a confidential basis by the Accredited Investor from the President of the Company. Although increases in revenues are required for the Company to absorb existing overhead, in view of historical losses from operations, negative working capital and the Company's debt service obligations, the Company has not been able to invest significantly in sales and marketing and accordingly has generally limited these activities to telemarketing and selected trade shows. Results of operations in the future will be influenced by numerous factors, including the ability of the Company to successfully expand its products and services and/or to negotiate the acquisition of another business enterprise, the development and implementation of sales and marketing programs, competitive factors and the ability of the Company to control costs. As a result of these factors, the forecast of future business operations is subject to numerous uncertainties. There can be no assurance that revenue growth or profitability on a quarterly or annual basis will be attained. The Company therefore is subject to all the risks incident to a business with a limited history of operations including, among others, the possibility of unforeseen expenses, difficulties, complications and delays, and it may be difficult or impossible to obtain additional financing if required for the Company's business.

Certain Risk Factors. The securities being offered hereby are speculative and subject to a high degree of risk of loss of the investment. Persons who cannot afford to lose their investment should not purchase the securities offered hereby. Prospective investors should consider carefully, among other factors described herein, the following matters: HISTORY OF OPERATING LOSSES; ACCUMULATED DEFICIT; DEFICIENCY IN STOCKHOLDERS' EQUITY; DEFICIT IN WORKING CAPITAL; AUDITOR'S QUALIFICATION; PROPOSED JOINT VENTURE The Company commenced operations in September 1987, was required to seek the protection of Chapter 11 of the U.S. Bankruptcy Act in 1992, and has not operated on a profitable basis. Net losses before extraordinary items were $1,121,000 and $372,000 for the fiscal years ended June 30, 1996 and 1995, respectively, and $604,000 for the nine months ended March 31, 1997. At March 31, 1997, the Company had an accumulated deficit from operations since its inception of $3,331,000 and a $701,000 deficiency in its stockholders' equity. Excluding the effect of commitment and continent liabilities, if any, total liabilities at March 31, 1997 were $946,000 and there were also redeemable Series A preferred stock outstanding of $136,000 which require mandatory redemption from future net income, if any. At March 31, 1997, the Company had limited cash resources of $26,000 and a deficiency in working capital of $386,000; included in current liabilities, however, is a contingent liability of $169,000 due the Company's former President under a settlement agreement that is required to be paid only from 5% of proceeds realized from subsequent financings by the Company. There can be no assurance that the Company will obtain additional financing. THE REPORT OF XXXXXXXX XXXX XXXX & XXXXXXX, PC, ON THE FINANCIAL STATEMENTS OF THE COMPANY FOR THE FISCAL YEAR ENDED JUNE 30, 1996 CONTAINS A PARAGRAPH EXPRESSING SUBSTANTIAL DOUBT CONCERNING THE ABILITY OF THE COMPANY TO CONTINUE AS A GOING CONCERN. Management's plan to address these matters has been to dispose of its software media duplication and distribution business and close all operations in Colorado. The Company, now headquartered in Santa Ana, California, is focusing its available resources and personnel on the development of a quartz glass business and sale of quartz glass products. Initial sales have been obtained, with manufacturing temporarily being contracted to third parties. The Company has negotiated a joint venture agreement to acquire a minority interest in a quartz glass manufacturing business based in Northern California, but will be unable to participate in that venture unless it receives proceeds from the sale of all securities included in the Offerings. Historical operations of the business in Northern California have not been profitable and the proposed joint venture will be largely dependent upon increases in sales stimulated by the participation of a foreign company, which future sales increases have not been committed. There can be no assurance that the Company will be able to successfully complete its minority participation in the joint venture or that, if completed, that the joint venture will become profitable. In addition, since the Company will own only a minority equity position in the joint venture if it is able to complete the proposed transaction, and the Company may have only a limited influence in control of the business operations and policies of the joint venture. Further information in writing as to the proposed joint venture may be obtained on a confidential basis by the Accredited Investor from the President of the Company. Although increases in revenues are required for the Company to absorb existing overhead, in view of historical losses from operations, negative working capital and the Company's debt service obligations, the Company has not been able to invest significantly in sales and marketing and accordingly has generally limited these activities to telemarketing and selected trade shows. Results of operations in the future will be influenced by numerous factors, including the ability of the Company to successfully expand its products and services and/or to negotiate the acquisition of another business enterprise, the development and implementation of sales and marketing programs, competitive factors and the ability of the Company to control costs. As a result of these factors, the forecast of future business operations is subject to numerous uncertainties. There can be no assurance that revenue growth or profitability on a quarterly or annual basis will be attained. The Company therefore is subject to all the risks incident to a business with a limited history of operations including, among others, the possibility of unforeseen expenses, difficulties, complications and delays, and it may be difficult or impossible to obtain additional financing if required for the Company's business.