##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-KSB
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2005
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission File Number: 000-28047
 DIVERSIFIED THERMAL SOLUTIONS, INC.
 
 (Name of Small Business Issuer in Its Charter)
 Nevada
    
    94-3342064(State or Other Jurisdiction of
    
    (IRS EmployerIncorporation or Organization)
    
    Identification No.)
 4126 Delp Street, Suite 200, Memphis, TN 38118
 
 (Address of Principal Executive Offices)
 Issuers telephone number, including area code (901) 365-7650
 Securities
registered pursuant to Section 12(b) of the Act:
    NoneSecurities registered pursuant to Section 12(g) of the Act:

    Common Stock par value, $0.0001
 o
 þ o
 þ
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
 o þ




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##### 



TABLE OF CONTENTS
 Page No.PART IITEM 1. DESCRIPTION OF BUSINESS
    
    
    1ITEM 2. DESCRIPTION OF PROPERTY
    
    
    3ITEM 3. LEGAL PROCEEDINGS
    
    
    3ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    4PART IIITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    4ITEM 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
    
    
    5ITEM 7. FINANCIAL STATEMENTS
    
    
    7ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    7ITEM 8A. CONTROLS AND PROCEDURES
    
    
    7PART IIIITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
    
    
    7ITEM 10. EXECUTIVE COMPENSATION
    
    
    8ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    10ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    11ITEM 13. EXHIBITS
    
    
    12ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    12SIGNATURES, POWER OF ATTORNEY, EXHIBIT INDEX
    
    
    13EX-31.1  SECTION 302 CEO CERTIFICATIONEX-31.2  SECTION 302 CFO CERTIFICATIONEX-32.1  SECTION 906 CEO CERTIFICATIONEX-32.2  SECTION 906 CFO CERTIFICATION




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##### Table of Contents



PART I.
 
 Item 1. DESCRIPTION OF BUSINESS
 General
      Refractory Industry
    1




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
    
    Monolithic a furnace lining without joints, formed of material which is rammed, cast,
gunned or sintered into place;
    
    Brick low grade, low alumina to high grade, high alumina straight and shaped brick;
or
    
    Pre-Cast Shapes special shapes designed to the customers specifications, such as a
doorjamb in a furnace.
   Strategy
     Purchasing
  2




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Competition
  Employees
  Additional Information
  
 Item 2. DESCRIPTION OF PROPERTY
  
 Item 3. LEGAL PROCEEDINGS
 
 3




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Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II.
 
 Item 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES
OF EQUITY SECURITIES
 Market Information
  Low
    
    HighQuarter ended March 31, 2005
    
    $
    0.25
    
    
    $
    0.25Quarter ended June 30, 2005
    
    
    0.23
    
    
    
    0.23Quarter ended September 30, 2005
    
    
    0.28
    
    
    
    0.28Quarter ended December 31, 2005
    
    
    0.24
    
    
    
    0.24Quarter ended March 31, 2004
    
    $
    0.22
    
    
    $
    0.22Quarter ended June 30, 2004
    
    
    0.41
    
    
    
    0.41Quarter ended September 30, 2004
    
    
    0.36
    
    
    
    0.37Quarter ended December 31, 2004
    
    
    0.25
    
    
    
    0.30
  Holders
  Dividends
  4




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##### Table of Contents



Equity Compensation Plan
  Number of securitiesremaining available forNumber of securities to be
    
    
    
    
    
    future issuance underissued upon exercise of
    
    Weighted-average exercise
    
    equity compensation plansoutstanding options,
    
    price of outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants and rights
    
    reflected in column (a))(a)
    
    (b)
    
    (c)Equity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    1,215,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    
    
    
    
    
    
    
    
    1,215,000
 
 Item 6. MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 The
following information specifies certain forward-looking statements that are not historical
facts. These statements represent our expectations or beliefs, including but not limited to,
statements concerning future acquisitions, future operating results, statements concerning industry
performance, capital expenditures, financings, as well as assumptions related to the foregoing.
Forward-looking statements may be identified by the use of forward-looking terminology such as
may, shall, will, could, expect, estimate, anticipate, predict, should,
continue or similar terms, variations of those terms or the negative of those terms.
Forward-looking statements are based on current expectations and involve various risks and
uncertainties that could cause actual results and outcomes for future periods to differ materially
from any forward-looking statement or view expressed herein. Our financial performance and the
forward-looking statements contained in this report are further qualified by other risks including
those set forth from time to time in documents filed by us with the SEC.
 Introduction
   5




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Balance Sheets
  Results of Operation
   Liquidity and Capital Resources
  Other Significant Events
   6




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Item 7. FINANCIAL STATEMENTS
  
 Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 Item 8A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART III
 
 Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION
16(A) OF THE EXCHANGE ACT
  Name
    
    Age
    
    PositionB. Grant Hunter
    
    
    42
    
    
    President, Chief Executive Officer, and DirectorJ. Terry Medovitch
    
    
    54
    
    
    Chief Financial OfficerMary Eubanks
    
    
    70
    
    
    Acting Chief Financial OfficerJohn F. Curry
    
    
    47
    
    
    Secretary/Treasurer and DirectorEd H. Gatlin
    
    
    65
    
    
    DirectorJerry W. Hunter
    
    
    68
    
    
    Director
 7




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B. Grant Hunter
 J. Terry Medovitch
 Mary Eubanks
 John F. Curry
 Ed Gatlin
 Jerry W. Hunter
 Audit Committee Financial Expert
  Section 16(a) Beneficial Ownership Reporting Compliance
  Code of Ethics
  
 Item 10. EXECUTIVE COMPENSATION
  Name and Principal Position
    
    Year
    
    
    Annual Salary1B. Grant Hunter
    
    
    2005
    
    
    $
    64,5032004
    
    
    $
    02003
    
    
    $
    0J. Terry Medovitch
    
    
    2005
    
    
    $
    108,195
    2
 
 1
    
    Salaries were paid by Refractory & Industrial Supply Group, Inc., one of
our wholly-owned subsidiaries.2
    
    Mr. Medovitch became a salaried employee of RISG as of February 1, 2005.
 8




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Benefit Plan
 2003 Equity Incentive Plan
  Share Reserve.
  Administration.
 Nonstatutory Stock Options.
    9




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Restricted Stock Awards.
 Stock Appreciation Rights.
  Phantom Stock Awards.
 Other Equity Awards.
 Changes in Control.
 
 Item 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  10




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Number of Shares of Common Stock
    
    PercentName and Address(1)
    
    Beneficially Owned as of December 31, 2005
    
    of ClassB. Grant Hunter(2)
    
    
    10,785,539
    
    
    
    39
    %John F. Curry
    
    
    3,697,197
    
    
    
    20
    %Mary Eubanks(3)
    
    
    159,828
    
    
    
    *Ed Gatlin
    
    
    131,452
    
    
    
    *Jerry W. Hunter(2)
    
    
    4,136,654
    
    
    
    4
    %J. Terry Medovitch(4)
    
    
    8,600
    
    
    
    *Named executive officers and
directors as a group (6
individuals)
    
    
    12,179,584
    
    
    
    65
    %
 
 (1)
    
    The address is 4126 Delp Street, Memphis, TN, 38118.(2)
    
    Includes 3,369,168 shares owned by Lynn Whitsett Corporation with those shares owned by
Messrs. Grant Hunter and Jerry Hunter.(3)
    
    Ms. Eubanks resigned as Acting Chief Financial Officer effective as of May 20, 2005.(4)
    
    Mr. Medovitch was appointed Chief Financial Officer effective as of May 20, 2005.*
    
    Less than 1% of the outstanding shares of our common stock.
  
 Item 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    11




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Item 13. EXHIBITS
  31.1
    
    Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer Pursuant to 18. U.S.C.
Section 1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
  
 Item 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
   Audit Fees
    
    Audit-Related Fees
    
    Tax Fees
    
    All Other Fees2005
    
    $
    71,578
    
    
    $
    0
    
    
    $
    0
    
    
    $
    02004
    
    $
    27,280
    
    
    $
    0
    
    
    $
    0
    
    
    $
    0
 12




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##### Table of Contents



SIGNATURES
  DIVERSIFIED THERMAL SOLUTIONS, INC.Date: April 14, 2006
    
    By:
    
    /s/ B. Grant HunterB. Grant HunterChief Executive Officer and Director
  Signature
    
    Title
    
    Date/s/ John F. Curry
    
    Secretary/Treasurer and Director
    
    April 14, 2006John F. Curry/s/ J. Terry Medovitch
    
    Chief Financial Officer
    
    April 14, 2006J. Terry Medovitch/s/ Ed H. Gatlin
    
    Director
    
    April 14, 2006Ed H. Gatlin/s/ Jerry W. Hunter
    
    Director
    
    April 14, 2006Jerry W. Hunter
 13




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Years ended December 31, 2005 and 2004
with Report of Independent Registered
Public Accounting Firm




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Report of Independent Registered Public Accounting Firm
    
    F-1Audited Consolidated Financial StatementsConsolidated Balance Sheets
    
    F-2Consolidated Statements of Operations
    
    F-4Consolidated Statements of Shareholders Deficit
    
    F-5Consolidated Statements of Cash Flows
    
    F-6Notes to Consolidated Financial Statements
    
    F-8




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##### Table of Contents



/s/ Coulter & Justus, P.C.
 
 F-1




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##### Table of Contents



December 312005
    
    2004AssetsCurrent assets:Accounts receivable:Trade, net of reserve for doubtful accounts of $5,000 in 2005
    
    $
    1,010,669
    
    
    $
    Related party
    
    
    55,110
    
    
    
    27,116Total accounts receivable
    
    
    1,065,779
    
    
    
    27,116Inventories, net
    
    
    3,396,590
    
    
    
    4,148Prepaid expenses
    
    
    92,252
    
    
    
    Total current assets
    
    
    4,554,621
    
    
    
    31,264Property, plant and equipment:Land
    
    
    104,498
    
    
    
    Buildings
    
    
    832,136
    
    
    
    Machinery and equipment
    
    
    731,935
    
    
    
    59,8431,668,569
    
    
    
    59,843Less accumulated depreciation
    
    
    151,880
    
    
    
    11,969Net property, plant and equipment
    
    
    1,516,689
    
    
    
    47,874Deferred acquisition costs
    
    
    
    
    
    
    100,568Total assets
    
    $
    6,071,310
    
    
    $
    179,706
 See accompanying Notes to Consolidated Financial Statements.
 F-2




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##### Table of Contents



December 312005
    
    2004Liabilities and shareholders deficitCurrent liabilities:Checks outstanding in excess of bank balance
    
    $
    3,450
    
    
    $
    1,049Line of credit
    
    
    2,235,773
    
    
    
    Accounts payable and accrued expenses
    
    
    1,300,808
    
    
    
    283,947Due to seller of business acquired
    
    
    150,000
    
    
    
    Current portion of long-term debt
    
    
    1,278,259
    
    
    
    Current portion of capital lease obligations
    
    
    29,880
    
    
    
    Total current liabilities
    
    
    4,998,170
    
    
    
    284,996Advances from shareholders
    
    
    39,899
    
    
    
    80,984Long-term debt, less current portion
    
    
    31,852
    
    
    
    Capital lease obligations, less current portion
    
    
    87,001
    
    
    
    Notes payable to related companies and affiliates
    
    
    1,600,000
    
    
    
    589,514Total liabilities
    
    
    6,756,922
    
    
    
    955,494Shareholders deficit:Common stock, par value $0.0001:Authorized100,000,000 shares Issued and
outstanding18,824,238 in 2005 and
17,467,571 shares in 2004
    
    
    1,883
    
    
    
    1,747Additional paid-in capital
    
    
    11,232,719
    
    
    
    10,966,587Accumulated deficit
    
    
    (11,920,214
    )
    
    
    (11,744,122
    )Net shareholders deficit
    
    
    (685,612
    )
    
    
    (775,788
    )Total liabilities and shareholders deficit
    
    $
    6,071,310
    
    
    $
    179,706
 See accompanying Notes to Consolidated Financial Statements.
 F-3




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Year ended December 312005
    
    2004Revenues:Unrelated companies
    
    $
    8,665,370
    
    
    $
    15,610Related companies
    
    
    68,169
    
    
    
    91,282Total revenues
    
    
    8,733,539
    
    
    
    106,892Costs of goods sold
    
    
    7,275,031
    
    
    
    85,092Gross profit
    
    
    1,458,508
    
    
    
    21,800Operating expenses:Professional and consulting services
    
    
    132,925
    
    
    
    111,885Selling
    
    
    342,335
    
    
    
    General and administrative
    
    
    827,297
    
    
    
    37,161Total operating expenses
    
    
    1,302,557
    
    
    
    149,046Operating income (loss)
    
    
    155,951
    
    
    
    (127,246
    )Other income (expenses):Miscellaneous income
    
    
    20,080
    
    
    
    Write-off of deferred loan and acquisition costs
    
    
    
    
    
    
    (415,656
    )Interest expense
    
    
    (352,123
    )
    
    
    (11,541
    )Net other expenses
    
    
    (332,043
    )
    
    
    (427,197
    )Net loss
    
    $
    (176,092
    )
    
    $
    (554,443
    )Basic loss per share
    
    $
    (0.01
    )
    
    $
    (0.03
    )
 See accompanying Notes to Consolidated Financial Statements.
 F-4




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Number ofShares
    
    
    
    
    
    Additional
    
    
    
    
    
    NetIssued and
    
    Common
    
    Paid-in
    
    Accumulated
    
    ShareholdersOutstanding
    
    Stock
    
    Capital
    
    Deficit
    
    DeficitBalance at January 1, 2004
    
    
    20,242,571
    
    
    $
    2,024
    
    
    $
    10,870,767
    
    
    $
    (11,189,679
    )
    
    $
    (316,888
    )Stock issued for services
    
    
    225,000
    
    
    
    23
    
    
    
    35,977
    
    
    
    
    
    
    
    36,000Equipment contributed
from shareholders
    
    
    
    
    
    
    
    
    
    
    59,843
    
    
    
    
    
    
    
    59,843Common stock repurchased
    
    
    (3,000,000
    )
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    (300
    )Net loss for 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (554,443
    )
    
    
    (554,443
    )Balance at December 31, 2004
    
    
    17,467,571
    
    
    
    1,747
    
    
    
    10,966,587
    
    
    
    (11,744,122
    )
    
    
    (775,788
    )Stock issued for services
    
    
    1,236,667
    
    
    
    124
    
    
    
    236,144
    
    
    
    
    
    
    
    236,268Sale of stock
    
    
    120,000
    
    
    
    12
    
    
    
    29,988
    
    
    
    
    
    
    
    30,000Net loss for 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176,092
    )
    
    
    (176,092
    )Balance at December 31, 2005
    
    
    18,824,238
    
    
    $
    1,883
    
    
    $
    11,232,719
    
    
    $
    (11,920,214
    )
    
    $
    (685,612
    )
 See accompanying Notes to Consolidated Financial Statements.
 F-5




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##### Table of Contents



Year ended December 312005
    
    2004Operating activitiesNet loss
    
    $
    (176,092
    )
    
    $
    (554,443
    )Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:Depreciation
    
    
    139,911
    
    
    
    11,969Write-off of deferred loan and acquisition costs
    
    
    
    
    
    
    415,656Stock issued for services
    
    
    25,600
    
    
    
    36,000Changes in operating assets and liabilities:Accounts receivable
    
    
    (31,631
    )
    
    
    (7,311
    )Unbilled revenue to related company
    
    
    
    
    
    
    926Inventories
    
    
    (96,406
    )
    
    
    Prepaid expenses
    
    
    (92,252
    )
    
    
    Checks outstanding in excess of cash
    
    
    2,401
    
    
    
    1,049Accounts payable and accrued expenses
    
    
    399,958
    
    
    
    (5,254
    )Net cash provided by (used in) operating activities
    
    
    171,489
    
    
    
    (101,408
    )Investing activitiesPurchases of property, plant, and equipment
    
    
    (287,786
    )
    
    
    Cash paid for deferred loan and acquisition costs
    
    
    
    
    
    
    (220,682
    )Acquisition of business, net of noncash transactions
related to amount owed to seller and stock issued for
acquisition
    
    
    (4,372,499
    )
    
    
    Net cash used in investing activities
    
    
    (4,660,285
    )
    
    
    (220,682
    )Financing activitiesNet borrowings on line of credit
    
    
    2,235,773
    
    
    
    Proceeds from borrowings of long-term debt
    
    
    1,500,000
    
    
    
    Net borrowings from related parties
    
    
    1,010,486
    
    
    
    317,922Proceeds from capital lease obligation
    
    
    24,126
    
    
    
    Net payments on advances from shareholders
    
    
    (11,085
    )
    
    
    Principal repayments on long-term debt
    
    
    (252,444
    )
    
    
    Principal repayments on capital lease obligations
    
    
    (18,060
    )
    
    
    Net cash provided by financing activities
    
    
    4,488,796
    
    
    
    317,922Net change in cash
    
    
    
    
    
    
    (4,168
    )Cash at beginning of year
    
    
    
    
    
    
    4,168Cash at end of year
    
    $
    
    
    
    $
    
 F-6




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Supplemental disclosure of cash flow information
 2005
    
    2004Cash paid during the year for interest
    
    $
    305,446
    
    
    $
    
 Supplemental disclosure of noncash activities
 2005
    
    2004Deferred loan and acquisition costs not paid and
included in accounts payable and accrued
expenses
    
    $
    
    
    
    $
    55,470Stock repurchased but not paid and included in
advances from shareholders
    
    
    
    
    
    
    300Contribution of equipment by Company shareholders
    
    
    
    
    
    
    59,843Common stock issued for services
    
    
    236,268
    
    
    
    36,000Common stock issued to a consultant via
reduction in advances from shareholders
    
    
    30,000
    
    
    
    Due to seller of business acquired
    
    
    150,000
    
    
    
    
 See accompanying Notes to Consolidated Financial Statements.
 F-7




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##### Table of Contents



1. Significant Accounting Policies
 Principles of Consolidation and Description of Business
   Revenue Recognition
  Business Concentrations and Credit Risks
     F-8




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##### Table of Contents



1. Significant Accounting Policies (continued)
 Business Concentrations and Credit Risks (continued)
  Advertising Costs
  Inventories
  Property, Plant and Equipment
  Offsetting of Accounts
  Estimates
  Reclassifications
  F-9




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##### Table of Contents



2. Business Acquisition
   Business Combinations
 Accounts receivable
    
    $
    1,007,032Inventories
    
    
    3,296,036Property, plant, and equipment
    
    
    1,320,940Assets acquired
    
    
    5,624,008Accounts payable
    
    
    616,903Long-term debt
    
    
    62,555Capital lease obligations
    
    
    110,815Liabilities assumed
    
    
    790,273Net assets acquired
    
    $
    4,833,735
 F-10




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##### Table of Contents



2. Business Acquisition (continued)
  Year ended December 312005
    
    2004Net revenues
    
    $
    9,366,549
    
    
    $
    8,917,550Net loss
    
    
    (264,789
    )
    
    
    (742,264
    )Net loss per share
    
    $
    (0.01
    )
    
    $
    (0.04
    )Weighted average shares used in computing net loss per share
    
    
    18,610,349
    
    
    
    20,114,446
 3. Inventories
  Raw materials
    
    $
    1,058,077Work-in-process
    
    
    313,840Finished goods
    
    
    2,471,217Less reserve for obsolete inventories
    
    
    (446,544
    )Net inventories
    
    $
    3,396,590
 4. Notes Payable and Long-Term Debt
   F-11




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4. Notes Payable and Long-Term Debt (continued)
      F-12




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##### Table of Contents



4. Notes Payable and Long-Term Debt (continued)
  2006
    
    $
    268,6152007
    
    
    315,5512008
    
    
    330,0052009
    
    
    341,2662010
    
    
    151,585Thereafter
    
    
    1,503,089$
    2,910,111
 5. Leases
  Equipment
    
    $
    60,199Less accumulated depreciation
    
    
    8,600Net assets under capital lease
    
    $
    51,599
  2006
    
    $
    35,7232007
    
    
    35,7232008
    
    
    35,7232009
    
    
    18,2582010
    
    
    4,337Total payments
    
    
    129,764Less amounts representing interest
    
    
    12,883Present value of minimum lease payments (including
$29,880 classified as current)
    
    $
    116,881
 F-13




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##### Table of Contents



6. Company Equity Matters
 2003 Diversified Thermal Solutions, Inc.
Equity Incentive Plan
     F-14




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##### Table of Contents



7. Income Taxes
  Federal
    
    
    StateYear
    
    Year of
    
    
    
    
    
    
    Year ofGenerated
    
    Expiration
    Amount
    
    
    Expiration
    Amount1997
    
    
    
    
    
    $
    
    
    
    
    2012
    
    
    $
    1031998
    
    
    
    
    
    
    
    
    
    
    2013
    
    
    
    1571999
    
    
    2019
    
    
    
    22,067
    
    
    
    2014
    
    
    
    40,0542000
    
    
    2020
    
    
    
    3,322
    
    
    
    2015
    
    
    
    3,3222001
    
    
    2021
    
    
    
    379
    
    
    
    2016
    
    
    
    3792002
    
    
    2022
    
    
    
    141,643
    
    
    
    2017
    
    
    
    12,8702003
    
    
    2023
    
    
    
    75,905
    
    
    
    2018
    
    
    
    108,7992004
    
    
    2024
    
    
    
    485,629
    
    
    
    2019
    
    
    
    520,5602005
    
    
    
    
    
    
    
    
    
    
    2020
    
    
    
    93,613$
    728,945
    
    
    
    
    
    
    $
    779,857
   2005
    
    2004Deferred tax assets:NOL carryovers
    
    $
    282,422
    
    
    $
    307,264Reserve for doubtful accounts
    
    
    2,030
    
    
    
    Book over tax depreciation
    
    
    1,425
    
    
    
    Capitalized inventory costs
    
    
    33,234
    
    
    
    Accrued expenses
    
    
    62,448
    
    
    
    Total deferred tax assets
    
    
    381,559
    
    
    
    307,264Less valuation allowance for deferred tax assets
    
    
    (381,559
    )
    
    
    (307,264
    )Net deferred tax asset
    
    $
    
    
    
    $
    
  F-15




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##### Table of Contents



7. Income Taxes (continued)
  2005
    
    2004Income tax benefit at U.S. statutory rates of 34%
    
    $
    59,871
    
    
    $
    188,511Impact of state income taxes
    
    
    7,554
    
    
    
    23,786Change in valuation allowance
    
    
    (74,295
    )
    
    
    (212,265
    )Other
    
    
    6,870
    
    
    
    32$
    
    
    
    $
    
 8. Contingent Liabilities
   9. Loss Per Share Data
   2005
    
    2004Average shares outstanding
    
    
    18,610,349
    
    
    
    20,114,446Net loss per share
    
    $
    (0.01
    )
    
    $
    (0.03
    )
 F-16




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##### Table of Contents



10. Other Related Party Transactions
  11. Employee Benefit Plan
  12. Fair Value of Financial Instruments
   13. Subsequent Event
  14. Going Concern
  F-17