Common use of Notes to Financial Statements Clause in Contracts

Notes to Financial Statements. .... 7 (ERNST & YOUNG LOGO) - ERNST & YOUNG LLP - Phone:(612)343-1000 220 South Sixth Street, Ste 1400 xxx.xx.xom Xxxxxxxxxxx, XX 00000-0000 Report of Indepenxxxx Xxxxxxxx Xxx Xxxxx xf Directors Jasc Software, Inc. We have audited the accompanying balance sheets of Jasc Software, Inc. as of December 31, 2003 and 2002, and the related statements of income, changes in stockholders' equity, 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. 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 Jasc Software, Inc. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP January 30, 2004 A Member Practice of Ernst & Young Global Jasc Software, Inc. Balance Sheets DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 867,667 $ 802,375 Accounts receivable (less allowances for uncollectible accounts and product returns totaling $2,033,000 in 2003 and $613,000 in 2002) 7,935,331 7,055,901 Note receivable 60,000 -- Inventories 1,161,846 460,392 Prepaid expenses 1,139,067 335,234 ----------- ----------- Total current assets 11,163,911 8,653,902 Property and equipment: Equipment and software 3,545,408 3,218,391 Leasehold improvements 236,019 236,019 ----------- ----------- 3,781,427 3,454,410 Less accumulated depreciation and amortization (3,046,287) (2,581,881) ----------- ----------- 735,140 872,529 Restricted cash -- 30,000 Deposits 43,324 55,113 Other assets, net 52,150 73,009 Acquired technology, net 588,547 663,042 ----------- ----------- Total assets $12,583,072 $10,347,595 =========== =========== DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,359,889 $ 802,949 Accrued compensation and withholdings 1,054,531 619,390 Accrued profit sharing -- 257,159 Accrued distributor discounts 812,759 538,892 Accrued royalties 574,608 466,082 Accrued rebates 784,039 514,451 Other accrued liabilities 576,804 832,426 Customer deposits 100,666 225,895 Current portion of capital lease obligation 2,500 -- ----------- ----------- Total current liabilities 6,265,796 4,257,244 Capital lease obligation, less current portion 4,146 -- Stockholders' equity: Preferred stock, $0.01 par value: Authorized shares - 5,000,000 Issued and outstanding - none -- -- Common stock, $0.01 par value: Authorized shares - 10,000,000 Issued and outstanding shares - 4,405,000 44,050 44,050 Additional paid-in capital 1,511,700 1,511,700 Retained earnings 4,757,380 4,534,601 ----------- ----------- Total stockholders' equity 6,313,130 6,090,351 ----------- ----------- Total liabilities and stockholders' equity $12,583,072 $10,347,595 =========== =========== See accompanying notes. Jasc Software, Inc. Statements of Income YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- Net sales $32,841,317 $27,292,756 Cost of goods sold 6,736,000 5,076,938 ----------- ----------- Gross profit 26,105,317 22,215,818 Operating expenses: General and administrative 5,078,809 4,282,741 Marketing and selling 10,497,309 8,203,931 Product development 6,797,173 7,501,652 Profit sharing compensation 727,584 777,525 ----------- ----------- 23,100,875 20,765,849 ----------- ----------- Income from operations 3,004,442 1,449,969 Interest expense (755) (36,716) Interest income 12,240 3,514 Other (expense) income (34,804) 84,329 Foreign currency gain 389,623 350,218 ----------- ----------- 366,304 401,345 ----------- ----------- Net income $ 3,370,746 $ 1,851,314 =========== =========== See accompanying notes. Jasc Software, Inc. Statement of Changes in Stockholders' Equity COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED SHARES AMOUNTS CAPITAL EARNINGS TOTAL --------- ------- ---------- ----------- ----------- Balance, December 31, 2001 4,405,000 $44,050 $1,511,700 $ 4,284,778 $ 5,840,528 Distribution to stockholders -- -- -- (1,601,491) (1,601,491) Net income -- -- -- 1,851,314 1,851,314 --------- ------- ---------- ----------- ----------- Balance, December 31, 2002 4,405,000 44,050 1,511,700 4,534,601 6,090,351 Distribution to stockholders -- -- -- (3,147,967) (3,147,967) Net income -- -- -- 3,370,746 3,370,746 --------- ------- ---------- ----------- ----------- Balance, December 31, 2003 4,405,000 $44,050 $1,511,700 $ 4,757,380 $ 6,313,130 ========= ======= ========== =========== =========== See accompanying notes. Jasc Software, Inc. Statements of Cash Flows YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,370,746 $ 1,851,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 655,443 888,125 Loss (gain) on sale of property and equipment 351 (388) Changes in operating assets and liabilities: Accounts receivable (939,430) (2,049,782) Inventories (701,454) 133,058 Prepaid expenses (803,833) (204,602) Restricted cash 30,000 30,000 Deposits 11,789 43,099 Accounts payable 1,556,940 145,378 Accrued liabilities 574,341 1,547,278 Customer deposits (125,229) 68,350 ----------- ----------- Net cash provided by operating activities 3,629,664 2,451,830 INVESTING ACTIVITIES Purchases of property and equipment (324,631) (181,192) Acquisition of technology (90,000) (52,821) Proceeds from sale of property and equipment 100 -- ----------- ----------- Net cash used in investing activities (414,531) (234,013) FINANCING ACTIVITIES Net payments under line of credit -- (670,702) Distributions to stockholders (3,147,967) (1,601,491) Payments on obligation under capital lease (1,874) (189,243) ----------- ----------- Net cash used in financing activities (3,149,841) (2,461,436) ----------- ----------- Net increase (decrease) in cash 65,292 (243,619) Cash and cash equivalents at beginning of year 802,375 1,045,994 ----------- ----------- Cash and cash equivalents at end of year $ 867,667 $ 802,375 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $ 755 $ 36,716 =========== =========== Property and equipment acquired through capital lease obligation $ 8,520 $ -- =========== =========== See accompanying notes. Jasc Software, Inc. Notes to Financial Statements December 31, 2003

Notes to Financial Statements. .... 5-7 (ERNST [LETTERHEAD OF XXXXXXX & YOUNG LOGO) - ERNST & YOUNG LLP - Phone:(612)343-1000 220 South Sixth Street, Ste 1400 xxx.xx.xom Xxxxxxxxxxx, XX 00000-0000 Report XXXXXXX] INDEPENDENT AUDITORS' REPORT Board of Indepenxxxx Xxxxxxxx Xxx Xxxxx xf Directors Jasc SoftwareInternational Information Technology, Inc. Coral Gables, Florida We have audited the accompanying balance sheets of Jasc SoftwareInternational Information Technology, Inc. as of at December 31, 2003 1997 and 20021996, and the related statements of income, changes in stockholders' equityoperations and retained earnings, 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 combined financial statements based on our auditsaudit. We conducted our audits audit in accordance with auditing standards generally accepted in the United Statesauditing standards. 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 audit provides 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 Jasc SoftwareInternational Information Technology, Inc. as of at December 31, 2003 1997 and 20021996, and the results of its operations and its cash flows for the years then ended, ended in conformity with accounting principles generally accepted in the United Statesaccounting principles. /s/ Ernst Xxxxxxx & Young LLP January 30Xxxxxxx CERTIFIED PUBLIC ACCOUNTANTS Coral Gables, 2004 A Member Practice of Ernst & Young Global Jasc SoftwareFlorida July 22, Inc. Balance Sheets DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- 1998 ASSETS Current assets: December 31, 1997 1996 ---- ---- CURRENT ASSETS Cash and cash equivalents $ 867,667 9,520 $ 802,375 12,379 Accounts receivable (less allowances for uncollectible accounts and product returns totaling $2,033,000 590,246 153,769 Due from related company in 2003 and $613,000 in 2002) 7,935,331 7,055,901 Note receivable 60,000 Venezuela 186,030 -- Inventories 1,161,846 460,392 Prepaid expenses 1,139,067 335,234 ----------- ----------- Total Other current assets 11,163,911 8,653,902 Property and equipment: Equipment and software 3,545,408 3,218,391 Leasehold improvements 236,019 236,019 ----------- ----------- 3,781,427 3,454,410 17,690 470 -------- -------- TOTAL CURRENT ASSETS 803,486 166,618 PROPERTY AND EQUIPMENT Computer equipment 43,954 21,578 Vehicles 45,119 45,119 -------- -------- 89,073 66,697 Less accumulated depreciation and amortization (3,046,28746,547) (2,581,88125,650) ----------- ----------- 735,140 872,529 Restricted cash -- 30,000 Deposits 43,324 55,113 Other assets, net 52,150 73,009 Acquired technology, net 588,547 663,042 ----------- ----------- Total assets -------- -------- 42,526 41,047 -------- -------- $12,583,072 846,012 $10,347,595 =========== =========== DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- 207,665 -------- -------- -------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: CURRENT LIABILITIES Cash overdraft $187,121 $ -- Accounts payable $ 2,359,889 $ 802,949 Accrued compensation and withholdings 1,054,531 619,390 Accrued profit sharing accrued expenses 311,935 75,740 Income taxes payable 11,000 -- 257,159 Accrued distributor discounts 812,759 538,892 Accrued royalties 574,608 466,082 Accrued rebates 784,039 514,451 Other accrued liabilities 576,804 832,426 Customer deposits 100,666 225,895 Current portion of capital lease obligation 2,500 Unsecured loan payable to stockholder, non-interest bearing 30,060 60,061 Deferred income taxes 78,890 -- ----------- ----------- Total current liabilities 6,265,796 4,257,244 -------- -------- TOTAL CURRENT LIABILITIES 619,006 135,801 STOCKHOLDERS' EQUITY Capital lease obligation, less current portion 4,146 -- Stockholders' equity: Preferred stock, $0.01 1 par value: Authorized shares - 5,000,000 Issued value per share, authorized issued and outstanding - none -- -- Common stock, 1,000 shares 1,000 1,000 Retained Earnings 226,006 70,864 -------- -------- 227,006 71,864 -------- -------- $0.01 par value: Authorized shares - 10,000,000 Issued and outstanding shares - 4,405,000 44,050 44,050 Additional paid-in capital 1,511,700 1,511,700 Retained earnings 4,757,380 4,534,601 ----------- ----------- Total stockholders' equity 6,313,130 6,090,351 ----------- ----------- Total liabilities and stockholders' equity 846,012 $12,583,072 $10,347,595 =========== =========== See 207,665 -------- -------- -------- -------- The accompanying notes. Jasc Software, Inc. Statements notes are an integral part of Income YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- Net sales $32,841,317 $27,292,756 Cost of goods sold 6,736,000 5,076,938 ----------- ----------- Gross profit 26,105,317 22,215,818 Operating expenses: General and administrative 5,078,809 4,282,741 Marketing and selling 10,497,309 8,203,931 Product development 6,797,173 7,501,652 Profit sharing compensation 727,584 777,525 ----------- ----------- 23,100,875 20,765,849 ----------- ----------- Income from operations 3,004,442 1,449,969 Interest expense (755) (36,716) Interest income 12,240 3,514 Other (expense) income (34,804) 84,329 Foreign currency gain 389,623 350,218 ----------- ----------- 366,304 401,345 ----------- ----------- Net income $ 3,370,746 $ 1,851,314 =========== =========== See accompanying notes. Jasc Software, Inc. Statement of Changes in Stockholders' Equity COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED SHARES AMOUNTS CAPITAL EARNINGS TOTAL --------- ------- ---------- ----------- ----------- Balance, December 31, 2001 4,405,000 $44,050 $1,511,700 $ 4,284,778 $ 5,840,528 Distribution to stockholders -- -- -- (1,601,491) (1,601,491) Net income -- -- -- 1,851,314 1,851,314 --------- ------- ---------- ----------- ----------- Balance, December 31, 2002 4,405,000 44,050 1,511,700 4,534,601 6,090,351 Distribution to stockholders -- -- -- (3,147,967) (3,147,967) Net income -- -- -- 3,370,746 3,370,746 --------- ------- ---------- ----------- ----------- Balance, December 31, 2003 4,405,000 $44,050 $1,511,700 $ 4,757,380 $ 6,313,130 ========= ======= ========== =========== =========== See accompanying notes. Jasc Software, Inc. Statements of Cash Flows YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,370,746 $ 1,851,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 655,443 888,125 Loss (gain) on sale of property and equipment 351 (388) Changes in operating assets and liabilities: Accounts receivable (939,430) (2,049,782) Inventories (701,454) 133,058 Prepaid expenses (803,833) (204,602) Restricted cash 30,000 30,000 Deposits 11,789 43,099 Accounts payable 1,556,940 145,378 Accrued liabilities 574,341 1,547,278 Customer deposits (125,229) 68,350 ----------- ----------- Net cash provided by operating activities 3,629,664 2,451,830 INVESTING ACTIVITIES Purchases of property and equipment (324,631) (181,192) Acquisition of technology (90,000) (52,821) Proceeds from sale of property and equipment 100 -- ----------- ----------- Net cash used in investing activities (414,531) (234,013) FINANCING ACTIVITIES Net payments under line of credit -- (670,702) Distributions to stockholders (3,147,967) (1,601,491) Payments on obligation under capital lease (1,874) (189,243) ----------- ----------- Net cash used in financing activities (3,149,841) (2,461,436) ----------- ----------- Net increase (decrease) in cash 65,292 (243,619) Cash and cash equivalents at beginning of year 802,375 1,045,994 ----------- ----------- Cash and cash equivalents at end of year $ 867,667 $ 802,375 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $ 755 $ 36,716 =========== =========== Property and equipment acquired through capital lease obligation $ 8,520 $ -- =========== =========== See accompanying notes. Jasc Software, Inc. Notes to Financial Statements December 31, 2003these financial statements.

Notes to Financial Statements. .... 7 (ERNST & YOUNG LOGO) - ERNST & YOUNG LLP - Phone:(612)343-1000 220 South Sixth Street, Ste 1400 xxx.xx.xom Xxxxxxxxxxx, XX 00000-0000 Report 8 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Indepenxxxx Xxxxxxxx Xxx Xxxxx xf Directors Jasc SoftwarePark City Group, Inc. We have audited the accompanying balance sheets of Jasc SoftwarePark City Group, Inc. (a majority-owned subsidiary of Riverview Financial Corporation) as of December 31, 2003 2000 and 20021999, and the related statements of income, 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. Those standards require that we plan and perform the audit audits 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 Jasc SoftwarePark City Group, Inc. as of December 31, 2003 2000 and 20021999, and the results of its operations and its cash flows for the years then ended, ended in conformity with accounting principles generally accepted in the United States. /s/ Ernst Sorensen, Vance & Young LLP January 30Coxxxxx, 2004 A Member Practice of Ernst X.X. /x/ Sorensen, Vance & Young Global Jasc SoftwareCoxxxxx PARK CITY GROUP, Inc. Balance Sheets INC. BALANCE SHEETS DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- ASSETS 31, 2000 AND 1999 Assets 2000 1999 ---------- ---------- Current assets: Cash and cash equivalents $ 867,667 1,099,242 $ 802,375 Accounts receivable (less allowances 247,442 Receivables: Trade accounts, net of allowance for uncollectible doubtful accounts and product returns totaling of $2,033,000 in 2003 160,758 for 2000 and $613,000 in 2002) 7,935,331 7,055,901 Note receivable 4,054 for 1999 272,137 758,446 Related parties 558,643 86,789 Deferred tax asset 120,000 60,000 -- Inventories 1,161,846 460,392 Prepaid expenses 1,139,067 335,234 ----------- ----------- and other current assets 20,335 28,429 ------------- ------------- Total current assets 11,163,911 8,653,902 2,070,357 1,181,106 ----------- ----------- Property and equipment, at cost: Computer equipment 868,586 799,945 Furniture and equipment 172,486 172,486 Equipment and software 3,545,408 3,218,391 under capital leases 171,304 154,954 Leasehold improvements 236,019 236,019 ----------- ----------- 3,781,427 3,454,410 85,795 85,795 ------------- ------------- 1,298,171 1,213,180 Less accumulated depreciation and amortization (3,046,2871,120,674) (2,581,881937,236) ----------- ----------- 735,140 872,529 Restricted cash -- 30,000 Deposits 43,324 55,113 ------------ Net property and equipment 177,497 275,944 ------------ ------------ Other assets: Deferred tax asset, net 52,150 73,009 Acquired technology, net 588,547 663,042 of valuation allowance of $2,239,656 for 2000 and $2,230,328 for 1999 1,280,000 2,280,000 Deposits 33,802 34,150 ------------- ------------ Total other assets 1,313,802 2,314,150 ----------- ----------- Total assets $12,583,072 $10,347,595 $ 3,561,656 $ 3,771,200 =========== =========== Continued - next page The accompanying notes are an integral part of the financial statements. PARK CITY GROUP, INC. BALANCE SHEETS DECEMBER 31 ------------------------- 2003 2002 31, 2000 AND 1999 Continued from prior page - Liabilities and Stockholders' Deficit 2000 1999 ------------------------------------- ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Line of credit $ 150,000 $ 137,000 Note payable 250,000 250,000 Accrued interest on note payable 36,956 21,971 Accounts payable $ 2,359,889 $ 802,949 192,607 193,118 Accrued compensation payroll and withholdings 1,054,531 619,390 related liabilities 198,756 189,989 Sales tax payable 23,212 41,313 Accrued profit sharing litigation settlements, current portion 54,944 125,333 Capital lease obligations, current portion 33,293 90,736 Deferred revenue 1,294,773 2,659,736 Accrued contingency -- 257,159 267,495 Income taxes payable 67,912 9,713 ----------- -------------- Total current liabilities 2,302,453 3,986,404 ----------- ----------- Long-term liabilities: Notes payable to parent corporation 2,150,000 2,150,000 Accrued distributor discounts 812,759 538,892 interest on notes to parent corporation 267,203 151,394 Accrued royalties 574,608 466,082 Accrued rebates 784,039 514,451 Other accrued litigation settlements, net of current portion -- 14,444 Capital lease obligations, net of current portion 6,642 28,006 ------------- ------------ Total long-term liabilities 576,804 832,426 Customer deposits 100,666 225,895 Current portion of capital lease obligation 2,500 -- 2,423,845 2,343,844 ----------- ----------- Total current liabilities 6,265,796 4,257,244 Capital lease obligation, less current portion 4,146 -- 4,726,298 6,330,248 ----------- ----------- Stockholders' equitydeficit: Preferred stock, $0.01 par value: Authorized , 10,000,000 shares - 5,000,000 Issued authorized, no shares issued and outstanding - none -- -- Common stock, $0.01 0.00002 par value: Authorized , 40,000,000 shares - 10,000,000 Issued authorized, 25,130,136 shares issued and outstanding shares - 4,405,000 44,050 44,050 503 503 Additional paid-in in-capital 1,511,700 1,511,700 Retained earnings 4,757,380 4,534,601 6,294,031 6,294,031 Accumulated (deficit) (7,459,176) (8,853,582) ----------- ----------- Total stockholders' equity 6,313,130 6,090,351 deficit (1,164,642) (2,559,048) ----------- ----------- ------------ Total liabilities and stockholders' equity $12,583,072 $10,347,595 deficit $ 3,561,656 $ 3,771,200 =========== =========== See The accompanying notesnotes are an integral part of the financial statements. Jasc SoftwarePARK CITY GROUP, Inc. Statements of Income YEAR INC. STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31 ------------------------- 2003 2002 31, 2000 AND 1999 Revenues: 2000 1999 ----------- ----------- Net sales $32,841,317 $27,292,756 ------------- Software licenses $ 2,115,545 $ 2,321,655 Maintenance and support 2,066,523 2,403,287 Consulting and other 769,074 506,155 Development and software enhancement 1,562,000 -- ------------ ------------ 6,513,142 5,231,097 Cost of goods sold 6,736,000 5,076,938 ----------- ----------- revenues 1,013,930 1,021,526 ------------- ------------ Gross profit 26,105,317 22,215,818 5,499,212 4,209,571 ------------ ------------ Operating expenses: Research and development 1,035,926 878,064 Sales and marketing 912,109 1,115,543 General and administrative 5,078,809 4,282,741 Marketing and selling 10,497,309 8,203,931 Product development 6,797,173 7,501,652 Profit sharing compensation 727,584 777,525 ----------- ----------- 23,100,875 20,765,849 ----------- ----------- Income from operations 3,004,442 1,449,969 expenses 970,792 1,339,282 ------------- ------------ 2,918,827 3,332,889 ------------ ------------ Operating income 2,580,385 876,682 ------------ ------------- Other income (expense): Interest expense (755225,579) (36,716190,665) Interest income 12,240 3,514 Other 31,535 12,373 -------------- -------------- (expense194,044) (178,292) -------------- -------------- Income before income (34,804) 84,329 Foreign currency gain 389,623 350,218 ----------- ----------- 366,304 401,345 ----------- ----------- taxes 2,386,341 698,390 Income tax expense 991,935 324,699 -------------- -------------- Net income $ 3,370,746 1,394,406 $ 1,851,314 373,691 =========== ============ See The accompanying notesnotes are an integral part of the financial statements. Jasc SoftwarePARK CITY GROUP, Inc. Statement of Changes in StockholdersINC. STATEMENTS OF CHANGES IN STOCKHOLDERS' Equity COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED SHARES AMOUNTS CAPITAL EARNINGS TOTAL --------- ------- ---------- ----------- ----------- BalanceEQUITY FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 Additional Common Stock Paid Accumulated Shares Amount In Capital (Deficit) Total Balances: December 31, 2001 4,405,000 $44,050 $1,511,700 1998 25,120,414 $ 4,284,778 502 $ 5,840,528 Distribution to stockholders 6,293,606 $ (9,227,273) $ (2,933,165) Common stock issued upon exercise of stock options 9,722 1 425 -- 426 Net income -- -- -- 373,691 373,691 -------------- ----------- ------------ ------------ ------------- Balances: December 31, 1999 25,130,126 503 6,294,031 (1,601,4918,853,582) (1,601,4912,559,048) Net income -- -- -- 1,851,314 1,851,314 --------- ------- ---------- 1,394,406 1,394,406 -------------- ----------- ----------- Balance, ------------- ------------ -------------- Balances: December 31, 2002 4,405,000 44,050 1,511,700 4,534,601 6,090,351 Distribution to stockholders -- -- -- 2000 25,130,136 $ 503 $ 6,294,031 $ (3,147,9677,459,176) $ (3,147,9671,164,462) Net income -- -- -- 3,370,746 3,370,746 --------- ------- ---------- ----------- ----------- Balance, December 31, 2003 4,405,000 $44,050 $1,511,700 $ 4,757,380 $ 6,313,130 ========= ======= ========== =========== ============ See accompanying notes. Jasc Software, Inc. Statements of Cash Flows YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,370,746 $ 1,851,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 655,443 888,125 Loss (gain) on sale of property and equipment 351 (388) Changes in operating assets and liabilities: Accounts receivable (939,430) (2,049,782) Inventories (701,454) 133,058 Prepaid expenses (803,833) (204,602) Restricted cash 30,000 30,000 Deposits 11,789 43,099 Accounts payable 1,556,940 145,378 Accrued liabilities 574,341 1,547,278 Customer deposits (125,229) 68,350 ----------- ----------- Net cash provided by operating activities 3,629,664 2,451,830 INVESTING ACTIVITIES Purchases of property and equipment (324,631) (181,192) Acquisition of technology (90,000) (52,821) Proceeds from sale of property and equipment 100 -- ----------- ----------- Net cash used in investing activities (414,531) (234,013) FINANCING ACTIVITIES Net payments under line of credit -- (670,702) Distributions to stockholders (3,147,967) (1,601,491) Payments on obligation under capital lease (1,874) (189,243) ----------- ----------- Net cash used in financing activities (3,149,841) (2,461,436) ----------- ----------- Net increase (decrease) in cash 65,292 (243,619) Cash and cash equivalents at beginning of year 802,375 1,045,994 ----------- ----------- Cash and cash equivalents at end of year $ 867,667 $ 802,375 ============= ============== SUPPLEMENTAL DISCLOSURES ============== The accompanying notes are an integral part of the financial statements. PARK CITY GROUP, INC. STATEMENTS OF CASH FLOW INFORMATION FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 -------------- -------------- Cash paid during Flows From Operating Activities: Net income $ 1,394,406 $ 373,691 -------------- -------------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 183,437 255,920 Provision for doubtful accounts 182,154 116,959 Recognition of year 2000 contingency (267,495) (511,432) Decrease in deferred tax asset 940,000 310,000 (Increase) decrease in accounts receivable 304,155 (163,335) (Increase) in receivable from related parties (471,854) (86,789) (Increase) decrease in prepaid expenses and other current assets 8,094 (4,383) Decrease in deposits 348 -- Increase in accrued interest to parent corporation 115,809 151,394 (Decrease) in bank overdraft -- (67,922) (Decrease) in accounts payable (511) (155,185) Increase in accrued payroll and related liabilities 8,767 13,128 Increase in accrued interest 14,985 14,203 (Decrease) in sales tax payable (18,101) (11,086) Increase (decrease) in accrued litigation settlements (84,833) 139,777 (Decrease) in deferred revenue (1,364,963) (541,337) (Decrease) in payable to related party -- (9,021) Increase in income taxes payable 58,199 9,713 --------------- -------------- Total adjustments (391,809) (539,396) --------------- -------------- Net cash provided by (used in) operating activities 1,002,597 (165,705) --------------- -------------- Cash Flows From Investing Activities: Purchase of equipment (68,641) (60,150) --------------- ------------- Net cash (used in) investing activities (68,641) (60,150) --------------- ------------- Continued - next page The accompanying notes are an integral part of the financial statements. PARK CITY GROUP, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 Continued from prior page - 2000 1999 ------------ -------------- Cash Flows From Financing Activities: Proceeds from sale of equipment -- 50,000 Proceeds from issuance of common -- 426 Net proceeds from borrowing on line of credit 13,000 137,000 Proceeds from borrowing from parent corporation -- 505,000 Principal payments on capital leases (95,156) (79,129) Principal payments on note payable with parent corporation -- (140,000) ------------ -------------- Net cash provided by (used in) financing activities (82,156) 473,297 ------------ -------------- Net increase in cash and cash equivalents 851,800 247,442 Cash and cash equivalents, beginning of year for interest 247,442 -- ---------------- -------------- Cash and cash equivalents, end of year $ 755 1,099,242 $ 36,716 247,442 ================= =============== Property and equipment acquired through capital lease obligation SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 8,520 94,784 $ -- 25,068 =============== ============= See accompanying notesIncome taxes $ 1,731 $ 2,323 ================== ================ Non-Cash Transactions: Prior to 1999, the Company accrued a loss contingency related to the year 2000 issue for necessary changes to the software code. Jasc Software, Inc. Notes to Financial Statements During the years ended December 31, 20032000 and 1999, the Company recognized $267,495 and $511,432, respectively, as an offset to related costs in the statement of income. In 1999, long-term debt to a bank in the amount of $1,675,000 was assumed by the parent company in exchange for an equivalent note payable to the parent corporation. In 1999, the Company sold equipment with a cost of $68,000 to a related party. The related party paid cash of $50,000 and assumed the remaining liability on the equipment in the amount of $18,000. In 1999, several capital leases were renegotiated and combined into a new lease obligation for $186,000 which, also, included additional equipment purchased with a cost of $29,128. In 2000, the Company entered into a capital lease obligation for the acquisition of equipment with a cost of $16,350. The accompanying notes are an integral part of the financial statements. PARK CITY GROUP, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999

Notes to Financial Statements. .... 7 (ERNST & YOUNG LOGO) - ERNST & YOUNG LLP - Phone:(612)343-1000 220 South Sixth Street, Ste 1400 xxx.xx.xom Xxxxxxxxxxx, XX 00000-0000 61 Report of Indepenxxxx Xxxxxxxx Xxx Xxxxx xf Independent Auditors The Board of Directors Jasc SoftwareSomerset Automation, Inc. We have audited the accompanying balance sheets of Jasc SoftwareSomerset Automation, Inc. as of December September 30, 1997 and January 31, 2003 1997 and 20021996, and the related statements of income, changes in stockholdersshareholders' equity, equity and cash flows for the eight months ended September 30, 1997 and the years then endedended January 31, 1997 and 1996. 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 Statesauditing standards. 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 Jasc SoftwareSomerset Automation, Inc. as of December at September 30, 1997 and January 31, 2003 1997 and 20021996, and the results of its operations and its cash flows for the eight months ended September 30, 1997 and the years then endedended January 31, 1997 and 1996, in conformity with accounting principles generally accepted in the United Statesaccounting principles. /s/ Ernst & Young LLP January 30December 3, 2004 A Member Practice of Ernst & Young Global Jasc Software1997 Somerset Automation, Inc. Balance Sheets DECEMBER September 30 January 31 ------------------------- 2003 2002 ----------- ----------- ASSETS 1997 1997 1996 ----------------------------------------------- Assets Current assets: Cash and cash equivalents $ 867,667 860,938 $ 802,375 583,648 $ 183,767 Accounts receivable (less allowances for uncollectible accounts and product returns totaling receivable, net of allowance of $2,033,000 in 2003 19,000, $19,000 and $613,000 in 2002) 7,935,331 7,055,901 Note receivable 60,000 -- Inventories 1,161,846 460,392 16,700 at September 30, 1997 and January 31, 1997 and 1996, respectively 698,588 462,761 368,964 Prepaid expenses 1,139,067 335,234 ----------- ----------- and other current assets 41,329 23,841 28,676 ----------------------------------------------- Total current assets 11,163,911 8,653,902 1,600,855 1,070,250 581,407 Property and equipment, at cost: Equipment Computer equipment 215,557 183,760 137,929 Office equipment 74,680 74,680 72,275 Furniture and fixtures 72,538 38,377 42,632 Computer software 3,545,408 3,218,391 Leasehold improvements 236,019 236,019 ----------- ----------- 3,781,427 3,454,410 51,287 44,002 32,233 ----------------------------------------------- 414,062 340,819 285,069 Less accumulated depreciation and amortization (3,046,287) (2,581,881) ----------- ----------- 735,140 872,529 Restricted cash -- 30,000 Deposits 43,324 55,113 Other assets225,568 183,158 119,938 ----------------------------------------------- 188,494 157,661 165,131 Software development costs, net 52,150 73,009 Acquired technologyof accumulated amortization of $200,181, net 588,547 663,042 ----------- ----------- $170,534 and $126,063 at September 30,1997 and January 31, 1997 and 1996, respectively 22,174 51,821 96,292 Deferred income taxes -- -- 28,262 ----------------------------------------------- Total assets $12,583,072 $10,347,595 $ 1,811,523 $ 1,279,732 $ 871,092 =============================================== Liabilities and shareholders' equity Current liabilities: Line of credit $ 14,211 $ 14,211 $ 14,211 Accounts payable 151,451 178,445 45,486 Income taxes payable 164,607 88,000 -- Other accrued liabilities 82,559 62,685 44,240 Deferred revenue 60,000 -- -- Deferred income taxes 172,262 99,262 121,262 Note payable to officer -- -- 50,000 Current portion of long-term debt 47,446 29,713 29,932 ----------------------------------------------- Total current liabilities 692,536 472,316 305,131 Long-term debt, net of current portion 5,031 22,942 52,421 Deferred income taxes 50,738 41,738 -- Commitments Shareholders' equity: Common stock, no par value: Authorized shares - 25,000,000 Issued and outstanding shares - 1,711,780, 1,711,780 and 1,743,030 at September 30, 1997 and January 31, 1997 and 1996, respectively 198,471 198,471 226,596 Note receivable (31,739) (31,739) (31,739) Retained earnings 896,486 576,004 318,683 ----------------------------------------------- Total shareholders' equity 1,063,218 742,736 513,540 ----------------------------------------------- Total liabilities and shareholders' equity $ 1,811,523 $ 1,279,732 $ 871,092 =========== DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,359,889 $ 802,949 Accrued compensation and withholdings 1,054,531 619,390 Accrued profit sharing -- 257,159 Accrued distributor discounts 812,759 538,892 Accrued royalties 574,608 466,082 Accrued rebates 784,039 514,451 Other accrued liabilities 576,804 832,426 Customer deposits 100,666 225,895 Current portion of capital lease obligation 2,500 -- ----------- ----------- Total current liabilities 6,265,796 4,257,244 Capital lease obligation, less current portion 4,146 -- Stockholders' equity: Preferred stock, $0.01 par value: Authorized shares - 5,000,000 Issued and outstanding - none -- -- Common stock, $0.01 par value: Authorized shares - 10,000,000 Issued and outstanding shares - 4,405,000 44,050 44,050 Additional paid-in capital 1,511,700 1,511,700 Retained earnings 4,757,380 4,534,601 ----------- ----------- Total stockholders' equity 6,313,130 6,090,351 ----------- ----------- Total liabilities and stockholders' equity $12,583,072 $10,347,595 =========== =========================== See accompanying notes. Jasc SoftwareSomerset Automation, Inc. Statements of Income YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- Net Eight months ended September 30, Year ended January 31, 1997 1997 1996 --------------------------------------- Revenues: Systems integration and consulting services $ 2,458,210 $ 2,601,479 $ 1,195,223 Hardware sales $32,841,317 $27,292,756 81,359 306,089 795,265 Licensing fees 375,600 650,000 670,325 --------------------------------------- Total revenues 2,915,169 3,557,568 2,660,813 Costs and operating expenses: Cost of goods sold 6,736,000 5,076,938 ----------- ----------- Gross profit 26,105,317 22,215,818 Operating expensesrevenues: General Consulting and integration services 1,318,978 1,847,246 1,017,895 Hardware 65,601 207,035 577,083 Selling, general and administrative 5,078,809 4,282,741 Marketing expense 981,638 1,126,739 1,052,858 --------------------------------------- Total costs and selling 10,497,309 8,203,931 Product development 6,797,173 7,501,652 Profit sharing compensation 727,584 777,525 ----------- ----------- 23,100,875 20,765,849 ----------- ----------- operating expenses 2,366,217 3,181,020 2,647,836 --------------------------------------- Operating income 548,952 376,548 12,977 Interest income, net of interest expense of $3,741, $10,469 and $7,139 for the eight months ended September 30, 1997 and the years ended January 31, 1997 and 1996, respectively 11,530 17,773 9,934 --------------------------------------- Income from operations 3,004,442 1,449,969 Interest expense before provision for income taxes 560,482 394,321 22,911 Provision (755benefit) for income taxes 240,000 137,000 (36,71638,000) Interest income 12,240 3,514 Other (expense) income (34,804) 84,329 Foreign currency gain 389,623 350,218 ----------- ----------- 366,304 401,345 ----------- ----------- --------------------------------------- Net income $ 3,370,746 320,482 $ 1,851,314 257,321 $ 60,911 =========== ============================= See accompanying notes. Jasc SoftwareSomerset Automation, Inc. Statement of Changes in Stockholders' Equity COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED SHARES AMOUNTS CAPITAL EARNINGS TOTAL --------- ------- ---------- ----------- ----------- Balance, December 31, 2001 4,405,000 $44,050 $1,511,700 $ 4,284,778 $ 5,840,528 Distribution to stockholders -- -- -- (1,601,491) (1,601,491) Net income -- -- -- 1,851,314 1,851,314 --------- ------- ---------- ----------- ----------- Balance, December 31, 2002 4,405,000 44,050 1,511,700 4,534,601 6,090,351 Distribution to stockholders -- -- -- (3,147,967) (3,147,967) Net income -- -- -- 3,370,746 3,370,746 --------- ------- ---------- ----------- ----------- Balance, December 31, 2003 4,405,000 $44,050 $1,511,700 $ 4,757,380 $ 6,313,130 ========= ======= ========== =========== =========== See accompanying notes. Jasc Software, Inc. Statements of Cash Flows YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,370,746 $ 1,851,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 655,443 888,125 Loss (gain) on sale of property and equipment 351 (388) Changes in operating assets and liabilities: Accounts receivable (939,430) (2,049,782) Inventories (701,454) 133,058 Prepaid expenses (803,833) (204,602) Restricted cash 30,000 30,000 Deposits 11,789 43,099 Accounts payable 1,556,940 145,378 Accrued liabilities 574,341 1,547,278 Customer deposits (125,229) 68,350 ----------- ----------- Net cash provided by operating activities 3,629,664 2,451,830 INVESTING ACTIVITIES Purchases of property and equipment (324,631) (181,192) Acquisition of technology (90,000) (52,821) Proceeds from sale of property and equipment 100 -- ----------- ----------- Net cash used in investing activities (414,531) (234,013) FINANCING ACTIVITIES Net payments under line of credit -- (670,702) Distributions to stockholders (3,147,967) (1,601,491) Payments on obligation under capital lease (1,874) (189,243) ----------- ----------- Net cash used in financing activities (3,149,841) (2,461,436) ----------- ----------- Net increase (decrease) in cash 65,292 (243,619) Cash and cash equivalents at beginning of year 802,375 1,045,994 ----------- ----------- Cash and cash equivalents at end of year $ 867,667 $ 802,375 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $ 755 $ 36,716 =========== =========== Property and equipment acquired through capital lease obligation $ 8,520 $ -- =========== =========== See accompanying notes. Jasc Software, Inc. Notes to Financial Statements December 31, 2003Inc.

Notes to Financial Statements. .... 7 (ERNST & YOUNG LOGO) - 8 88 [ERNST & YOUNG LLP - Phone:(612)343-1000 220 South Sixth Street, Ste 1400 xxx.xx.xom Xxxxxxxxxxx, XX 00000-0000 LETTERHEAD] Report of Indepenxxxx Xxxxxxxx Xxx Xxxxx xf Independent Auditors Board of Directors Jasc SoftwareLet's Talk Cellular of America, Inc. We have audited the accompanying balance sheets sheet of Jasc SoftwareLet's Talk Cellular of America, Inc. as of December July 31, 2003 and 20021996, and the related statements of income, changes in income and stockholders' equity, and cash flows for the years year 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 auditsaudit. The financial statements of Let's Talk Cellular of America, Inc. for the year ended July 31, 1995, were audited by other auditors whose report dated October 31, 1995, expressed an unqualified opinion on those statements. We conducted our audits audit in accordance with auditing standards generally accepted in the United Statesauditing standards. 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 audit provides a reasonable basis for our opinion. In our opinion, the 1996 financial statements referred to above present fairly, in all material respects, the financial position of Jasc SoftwareLet's Talk Cellular of America, Inc. as of December at July 31, 2003 and 20021996, and the results of its operations and its cash flows for the years year then ended, ended in conformity with accounting principles generally accepted in the United Statesaccounting principles. /s/ Ernst & Young LLP January 30September 26, 2004 A Member Practice 1996 89 Let's Talk Cellular of Ernst & Young Global Jasc SoftwareAmerica, Inc. Balance Sheets DECEMBER JULY 31 ------------------------- 2003 2002 ----------- ----------- 1996 1995 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $1,357,172 $ 867,667 $ 802,375 241,820 Accounts receivable (less allowances receivable, net of allowance for uncollectible doubtful accounts and product returns totaling of $2,033,000 15,638 in 2003 and $613,000 in 2002) 7,935,331 7,055,901 Note receivable 60,000 -- Inventories 1,161,846 460,392 1996 620,521 510,643 Inventory 1,210,159 1,191,352 Prepaid expenses 1,139,067 335,234 ----------- ----------- and other current assets 73,735 298,705 Deferred tax asset 17,174 -- ---------- ---------- Total current assets 11,163,911 8,653,902 3,278,761 2,242,520 Cash held in escrow 2,009,194 -- Property and equipment: Equipment and software 3,545,408 3,218,391 Leasehold improvements 236,019 236,019 ----------- ----------- 3,781,427 3,454,410 Less accumulated depreciation and amortization (3,046,287) (2,581,881) ----------- ----------- 735,140 872,529 Restricted cash -- 30,000 Deposits 43,324 55,113 , net 1,324,852 1,058,430 Other assets, net 52,150 73,009 Acquired technology, net 588,547 663,042 ----------- ----------- 69,243 73,945 ---------- ---------- Total assets $12,583,072 6,682,050 $10,347,595 =3,374,895 ========== =========== DECEMBER JULY 31 ------------------------- 2003 2002 ----------- ----------- 1996 1995 ----------------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts Trade accounts payable $ 2,359,889 $ 802,949 841,490 $1,231,606 Bank lines of credit 827,000 462,493 Accrued compensation expenses and withholdings 1,054,531 619,390 Accrued profit sharing -- 257,159 Accrued distributor discounts 812,759 538,892 Accrued royalties 574,608 466,082 Accrued rebates 784,039 514,451 Other accrued other current liabilities 576,804 832,426 Customer deposits 100,666 225,895 512,486 365,845 Current portion of loans from shareholders -- 100,000 Current portion of bank term loan and obligations under capital lease obligation 2,500 leases 115,236 47,880 Income tax payable 60,761 -- ----------- ----------- Deferred revenues 79,886 97,903 Customer deposits 64,616 46,878 ----------------------- Total current liabilities 6,265,796 4,257,244 Capital lease obligation2,501,475 2,352,605 Bank term loan, less current portion 4,146 190,000 -- Loans from shareholders, less current portion 258,100 258,997 Obligations under capital leases, less current portion 26,226 69,071 Other liabilities 35,565 2,711 Deferred tax liability 19,293 35,264 Commitments and contingencies Stockholders' equity: Preferred Redeemable, convertible preferred stock, $0.01 30 par value: Authorized , 150,000 shares - 5,000,000 Issued authorized, 100,000 issued and outstanding - none -- 3,000,000 -- Common stockStock, $0.01 .001 par value: Authorized , 50,000,000 shares - 10,000,000 Issued authorized, 650,000 issued and outstanding shares - 4,405,000 44,050 44,050 650 650 Additional paid-in capital 1,511,700 1,511,700 201,166 257,600 Retained earnings 4,757,380 4,534,601 ----------- ----------- 449,575 397,997 ----------------------- Total stockholders' equity 6,313,130 6,090,351 ----------- ----------- 3,651,391 656,247 ----------------------- Total liabilities and stockholders' equity $12,583,072 6,682,050 $10,347,595 3,374,895 =========== ============= See accompanying notes. Jasc Software3 91 Let's Talk Cellular of America, Inc. Statements of Income YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- Years ended July 31, 1996 and 1995 1996 1995 ------------------------ Net sales revenues: Sales $ 8,151,904 $32,841,317 $27,292,756 6,119,990 Usage commissions 4,833,635 1,872,406 Other 607,743 311,185 ------------------------ Total net revenues 13,593,282 8,303,581 Cost of goods sold 6,736,000 5,076,938 ----------- ----------- sales 6,509,282 4,259,814 ------------------------ Gross profit 26,105,317 22,215,818 7,084,000 4,043,767 Operating expenses: General Selling, general and administrative 5,078,809 4,282,741 Marketing 6,568,078 3,822,491 Depreciation and selling 10,497,309 8,203,931 Product development 6,797,173 7,501,652 Profit sharing compensation 727,584 777,525 ----------- ----------- 23,100,875 20,765,849 ----------- ----------- amortization 272,578 122,811 ------------------------ Total operating expenses 6,840,656 3,945,302 ------------------------ Income from operations 3,004,442 1,449,969 243,344 98,465 Interest expense (755) (36,716) Interest expense, net 152,827 39,898 ------------------------ Income before provision for income 12,240 3,514 Other (expense) income (34,804) 84,329 Foreign currency gain 389,623 350,218 ----------- ----------- 366,304 401,345 ----------- ----------- taxes 90,517 58,567 Income tax provision 38,939 14,810 ------------------------ Net income $ 3,370,746 51,578 $ 1,851,314 43,757 =========== ============== See accompanying notes. Jasc Software, Inc. Statement of Changes in Stockholders' Equity COMMON STOCK ADDITIONAL ------------------- PAID-IN RETAINED SHARES AMOUNTS CAPITAL EARNINGS TOTAL --------- ------- ---------- ----------- ----------- Balance, December 31, 2001 4,405,000 $44,050 $1,511,700 $ 4,284,778 $ 5,840,528 Distribution to stockholders -- -- -- (1,601,491) (1,601,491) Net income -- -- -- 1,851,314 1,851,314 --------- ------- ---------- ----------- ----------- Balance, December 31, 2002 4,405,000 44,050 1,511,700 4,534,601 6,090,351 Distribution to stockholders -- -- -- (3,147,967) (3,147,967) Net income -- -- -- 3,370,746 3,370,746 --------- ------- ---------- ----------- ----------- Balance, December 31, 2003 4,405,000 $44,050 $1,511,700 $ 4,757,380 $ 6,313,130 ========= ======= ========== =========== =========== See accompanying notes. Jasc Software, Inc. Statements of Cash Flows YEAR ENDED DECEMBER 31 ------------------------- 2003 2002 ----------- ----------- OPERATING ACTIVITIES Net income $ 3,370,746 $ 1,851,314 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 655,443 888,125 Loss (gain) on sale of property and equipment 351 (388) Changes in operating assets and liabilities: Accounts receivable (939,430) (2,049,782) Inventories (701,454) 133,058 Prepaid expenses (803,833) (204,602) Restricted cash 30,000 30,000 Deposits 11,789 43,099 Accounts payable 1,556,940 145,378 Accrued liabilities 574,341 1,547,278 Customer deposits (125,229) 68,350 ----------- ----------- Net cash provided by operating activities 3,629,664 2,451,830 INVESTING ACTIVITIES Purchases of property and equipment (324,631) (181,192) Acquisition of technology (90,000) (52,821) Proceeds from sale of property and equipment 100 -- ----------- ----------- Net cash used in investing activities (414,531) (234,013) FINANCING ACTIVITIES Net payments under line of credit -- (670,702) Distributions to stockholders (3,147,967) (1,601,491) Payments on obligation under capital lease (1,874) (189,243) ----------- ----------- Net cash used in financing activities (3,149,841) (2,461,436) ----------- ----------- Net increase (decrease) in cash 65,292 (243,619) Cash and cash equivalents at beginning of year 802,375 1,045,994 ----------- ----------- Cash and cash equivalents at end of year $ 867,667 $ 802,375 =========== =========== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $ 755 $ 36,716 =========== =========== Property and equipment acquired through capital lease obligation $ 8,520 $ -- =========== =========== See accompanying notes. Jasc Software, Inc. Notes to Financial Statements December 31, 2003.