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TOUCHTOP TECHNOLOGIES, INC.
Summary of Significant Assumptions and Accounting Policies Employed in Preparation of Projected Financial Statements
Assuming Equity Financing of Approximately $2.3 Million on January 1, 1997 For Each Year in the Five -Year Period Ending December 31, 2001 This financial projection of financial position, results of operations, and cash flow, assuming equity financing of approximately $2.3 Million on January 1, 1997,
represents to the best of management's belief, the expected results of operations and cash flow for the projection period if said alternative were to commence on or about January 1, 1997. Accordingly, the
projection reflects management's judgment as of August 15, 1996, the date of this projection, of the expected conditions and its expected course of action. The assumptions disclosed herein are those that
management believes are significant to the projection. There will usually be differences between projected and actual results, because events and circumstances frequently do not occur as expected, and those
differences may be material. a. Summary of Significant Accounting Policies Basis of Accounting The projection has been prepared using generally accepted accounting
principles that the Company expects to use when preparing its historical financial statements. Hypothetical Assumption – Equity Financing of Approximately $2.3 Million in the Form of Convertible
Preferred Stock b. Sales. The Company's revenue projection by class is as follows:
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Projected Number of Units |
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Average (000's) |
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December 31 (ooo's ommitted)* |
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Revenue Classification |
Revenue per Unit |
1997 |
1998 |
1999 |
2000 |
2001 |
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License 1 revenue |
$20,000/Lic. |
0 |
1 |
2 |
0 |
0 |
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License 2 revenue |
$50,000/Lic. |
0 |
0 |
0 |
1 |
1 |
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Royalty revenue |
$0.25/Sq. Inch |
0 |
0 |
12,041 |
63,432 |
134,122 |
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Service revenue |
$250/Hour |
0 |
11 |
37 |
27 |
20 |
*except licenses
The Company's revenues will be derived from license fees, royalties and charges for services, including consulting and maintenance support. For all prospective periods
presented, the Company has projected revenue recognition in accordance with Statement of Position 91-1 entitled "Software Revenue Recognition," dated
December 12, 1991, issued by the American Institute of Certified Public Accountants. License fee revenues consist of revenues from initial licenses for the
Company's products, sales of licenses to existing customers for additional users of the Company's products, product documentation and fees from sublicenses of third-party
software products. The Company will recognize initial license fee revenues only after delivery and installation of software products and if there are no remaining significant
post-installation obligations. If significant post-installation obligations exist or if a product is subject to customer acceptance, revenues will be deferred until no
significant obligations remain or until acceptance has occurred. Service revenues will consist primarily of maintenance support and consulting revenues. Maintenance
support revenues will be recognized ratably over the term of the support period, which will typically be a twelve month period. Consulting revenues will be recognized when the services are performed.
Failure of these assumptions to materialize will likely have a material adverse effect on actual results. Therefore, the prospective results of the company are sensitive
to differences between actual and projected sales. Specifically, a 1% drop in actual sales will result in a 0.57%, and a 0.41% drop in pretax earnings for years ending 1998 and 1999 respectively. 
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