Brooks Engineering Inc. started operations on 5 January 2016 with a $80 common share issue of 500,000 shares. Jonathan Barnett and Dr. Julia Brooks are the sole proprietors of Brooks Engineering Inc., who formed Brooks Engineering Inc. to create new flu vaccine. Dr Brooks believes that the flu vaccine that is reaching the final stage of development will protect persons against 90% of the medically known flu strains. Brooks Engineering Inc. requires $25,000,000 of extra funding to finish the project. The local banks were not prepared to provide the cash due to the company's lack of adequate collateral and risk.

The discussion between Jonathan Barnett, CEO of Brooks Engineering Inc. and Julia Brooks, the senior researcher, is as follows:

Beard: Beard: What will we do? What will we do? The banks would not lend us further money and we must have $25 million to finish the project. We are so dose! We are so dose! It would be a catastrophe to stop now. I can only think about issuing new stocks. Have you any suggestions?

Julia: Julia You're correct, I think. But if the banks are not going to lend us additional money, how do you think we can find investors to purchase stock?

Beard: Beard: What if we offer the investors to pay them 5 percent of their sales until they have collected a sum equal to what they bought for the stock?

Julia: Julia What happens if we repay 25 million dollars? Are investors able to maintain the stock? If they do, our shareholding will dilute.

Beard: Beard: How about, if we make them turn on their shares for $120 per share after paying back $25 million? That's a half times what they've paid for, as well as getting all their money back. For investors, that's a profit of $120 per share.

Julia: It may work. Julia: We get our money, but we do not have to pay any interest, dividends or $80 per share until we start sales. The investors may at the same time retrieve their money plus $120 per share profit

Jonathan: For the new investors, we'll need fresh financial statements. I will ask our accountant to work with them and call our lawyer to set out a new investor's legally enforceable contract. Yes, that may work.

The new stock offer was authorized by the lawyer and the different regulatory agencies at the end of 2016 and 312,500 common stock shares have been sold privately to new investors on the stock pairs of 80 dollars.

Jonathan Barnett and Dan Fisher, controller for Brooks Engineering Inc., talk to you in producing the 2016 financial statements:

Dan: I have an issue, Jonathan.

Jonathan: What's Dan like?

Dan: Dan: The creation of common stocks to raise $25 million more was a terrific idea. But... But

Jonathan: What, however?

Dan: Dan: I have to create the yearly financial accounts for 2016 and I'm not sure what the common stock is like.

Beard: Beard: What do you mean? What do you mean? It's the ordinary stuff.

Dan: Dan: I'm not so sure. I'm not so sure. I phoned the auditors and explained how we are obliged to pay 5% of the sales of new stock holders until $80 is paid per share. Then we may have to pay $120 each share.

Jonathan: Well...

Dan: Dan: The auditor thus believes that we should treat the extra $25 million as not stock debt We will be in violationof our existing loan arrangements with the banks if we place the $25 million on the balance sheet as a debt. And if these agreements are broken, the banks may immediately invoke all of our debt. If you do, we're in severe danger. Probably for bankruptcy, we'll have to. We don't have the money to pay the banks.