-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Sf3I0WGZ4uSbeWCI6sgUZGlVhS3gIGLBJoORbbBoofQIoSgyr8tQ7sHZQCA0PBxN IQ5qFJRHDeuX/RMOKbubkg== 0000059544-98-000002.txt : 19981105 0000059544-98-000002.hdr.sgml : 19981105 ACCESSION NUMBER: 0000059544-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980731 FILED AS OF DATE: 19981104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LINCOLN INTERNATIONAL CORP CENTRAL INDEX KEY: 0000059544 STANDARD INDUSTRIAL CLASSIFICATION: TRANSPORTATION SERVICES [4700] IRS NUMBER: 61057092 STATE OF INCORPORATION: KY FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-05767 FILM NUMBER: 98737637 BUSINESS ADDRESS: STREET 1: 120 VILLAGE SQUARE STREET 2: SUITE 6 CITY: LOUISVILLE STATE: KY ZIP: 40243 BUSINESS PHONE: 5022458814 MAIL ADDRESS: STREET 1: 120 VILLAGE SQUARE STREET 2: SUITE 6 CITY: LOUISVILLE STATE: KY ZIP: 40253 10-K 1 FORM 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For fiscal year ended July 31, 1998 Commission File No. 0-5767 LINCOLN INTERNATIONAL CORPORATION (Exact name of registrant as specified in its charter) Kentucky # 61-0575092 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Suite No. 6, 120 Village Square Louisville, Kentucky 40243 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (502)245-8814 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered none none Securities registered pursuant to Section 12(g) of the Act: Common Stock (no-par) voting Title of class Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO State the aggregate market value of the voting stock held by non-affiliates of the Registrant. The aggregate market value shall be computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within 60 days prior to the date of filing. No regular market exists for the stock. Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the July 31, 1998. Common (no-par) 3,986 DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report -- 1997-1998 (2) Information Statement -- 1998 Portions of the above Annual Report and Information Statement to be issued are hereby incorporated by reference into Parts II and III. PART I ITEM 1: BUSINESS LINCOLN INTERNATIONAL CORPORATION (LINCOLN), incorporated in 1960, is engaged in the management of agricultural properties BOURBON STOCK YARDS (Bourbon) located in Louisville, Kentucky. BOURBON has been in continuous operation for 165 years and was merged into LINCOLN in 1978. The following resolution was passed by the Board of Directors at the October 18, 1997 meeting: Be it Hereby Resolved, that the voting common stock of Lincoln International Corporation (the only class of common stock presently outstanding) is reverse split such that for every 400 shares outstanding prior to the reverse split, 1 (one) new share shall be issued. There shall be no change in the total number of shares authorized, which shall remain at 3,000,000. However, the existing stock certificates shall be canceled and new ones issued evidencing a new ownership position based on the 400 for 1 ratio. For holdings or partial holdings of common stock numbering less than the required 400 shares, scrip shall be issued as evidence of the number of shares so held. Holders of said scrip shall have a period of 120 days from date of issuance to either (1) accumulate sufficient scrip from other holders thereof to acquire new shares at the prescribed ratio of 400 for 1 or (2) present the scrip to the Company to be redeemed at a price of $.30 per share represented by the scrip. These options must be exercised during the 120-day life of the scrip, the holder of said scrip shall have no further claim against the Company, all rights having been expunged by the expiration of the life of the scrip. As of April 5, 1998, the reverse split was completed resulting in Lincoln International having 3,986 shares issued and outstanding with a total of 3,000,000 shares authorized and a total number of 412 shareholders. At the May 4, 1998 board meeting, the Board of Directors approved an offering limited to existing Kentucky shareholders in order to raise a minimum of $400,000 to begin possible construction projects on the perimeter of the Bourbon Stock Yard property as well as to meet other capital expenditure needs. At the time of this filing, plans to effect the offering have been put on temporary hold. Lincoln International Corporation has received an unsolicited offer from Home of the Innocents, Inc. to purchase the Bourbon Stock Yards property. This offer contains the customary contingencies related to such a sale so management of Lincoln International Corporation has continued to assume that operations will continue at Bourbon Stock Yards into the foreseeable future. In the event the sale should be consummated, efforts have been undertaken to find an alternative site to which the livestock auction could be moved. BOURBON is subject to the rules and regulations of and must file (publicly available) reports with, the Interstate Commerce Commission (ICC) and the United States Department of Agriculture (USDA). BOURBON'S disposal of its waste materials is in compliance with federal, state and local environmental laws. EMPLOYEES: As of July 31, 1998, LINCOLN employed one (1) administrative personnel. ITEM 2: Properties The following are the various properties owned or leased by LINCOLN as of July 31, 1998. APPROXIMATE LEASE EXPI- TYPE OF SQUARE FEET RATION DATE LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS) LINCOLN ADMINISTRATIVE OFFICES Louisville, KY Offices 300 sq. ft. 03/01/99 * * * * * * * * * BOURBON STOCK YARDS Louisville, KY Stock yard 20.5 acres Owned real estate & buildings Stock yard offices 10,460 sq. ft. 2/1/2001 Louisville, KY Right-of-way NA 1997 (1) for stock yard Louisville, KY Warehouse 4,000 sq. ft. Owned Louisville, KY Warehouse 9,000 sq. ft. Owned * * * * * * * * * (1) The right-of-way is not essential to Bourbon's operations but does provide an easier access and egress from the facility. * * * * * * * * * The properties listed above are suitable and adequate for the various needs they supply. The total fixed annual rental for all of the above leased facilities (exclusive of taxes and other charges) was $53,095. ITEM 3: Legal Proceedings The litigation against Michigan Livestock Exchange (MLE) has been settled resulting in a smaller income stream from the Bourbon Stock Yards but a significantly reduced capital expenditure exposure from the maintenance of the property. The underlying assumption resulting from the settlement of this litigation is that now Lincoln International Corporation can work to assure a positive working relationship with MLE during the remaining 7 to 8 years under the lease of the stock yard facilities. ITEM 4: Submission of Matters to a Vote of Security Holders The items to be voted on at the annual meeting which will be held on the 4th day of December, 1998, are as follows: (1) Election of directors and (2) Approval of sale of the Bourbon Stock Yards and continuing in business after the sale, seeking a new location from which to operate the livestock auction business and continuing efforts to find merger and acquisition candidates. PART II ITEM 5: Market for Registrant's Common Stock and Related Stockholder Matters (1) There does not exist at the present time any regular market for any common stock of the Registrant. (2) The Registrant has never paid or declared any dividends. (3) The reverse split of stock was complete on April 5, 1998. (4) On May 4, 1998, the Board of Directors approved a secondary stock offering limited to only Kentucky residents allowing each shareholder to purchase one share of stock, accompanied by a warrant to purchase one additional share of common stock for the amount of one hundred dollars ($100). Directors of the Company were to be allowed to exercise any purchase rights not exercised by shareholders in a manner or amount to be subsequently decided by the Board. The purpose of the limited offering was to raise funds to begin construction and cleanup at the Bourbon property in order to make the property more income productive along with other necessary capital expenditures. Any action on the offering was put on temporary hold pending further clarification of the direction the Company must take. ITEM 6: Selected Financial Data Years ending July 31 1998 1997 1996 1995 1994 Revenues 297,459 292719 301629 1362172 1507258 Income (loss) before extraordinary items -72,688 -154577 494735 -87968 -73394 Net income (loss) -72,688 -154577 494735 -87968 -73394 Earnings (loss) per common share: Income (loss) before extraordinary items -17.16 -38.71 122.70 -21.68 -18.09 Net income (loss) -17.16 -38.71 122.70 -21.68 -18.09 Cash dividends 0 0 0 0 0 Total assets 1147311 1236802 1358785 1623366 1959569 Long-term obligations 380205 385511 387250 733640 819788 ITEM 7: Management's Discussion and Analysis of Financial Conditions and Results of Operations Agri-Business BOURBON STOCKYARD During July, 1995, Lincoln International Corporation leased the Bourbon Stockyard operations to Michigan Livestock Exchange. Net revenue from stock yard operations increased by approximately $11,000 or 4% during the year ended July 31, 1998 as compared to the year ended July 31, 1997. The increase resulted from additional space that was rented at the stock yards. Operating costs for the year ended July 31, 1998 increased by approximately $29,000 as compared to the year ended July 31, 1997. There were no accounts payable or capital commitments at July 31, 1998. All funds in excess of expenses are available to the parent. CONSOLIDATED OPERATIONS As of April 5, 1998, the reverse split was completed resulting in Lincoln International having 3,986 shares issued and outstanding with a total of 3,000,000 shares authorized and a total number of 412 shareholders. Operating costs for consolidated operations for the year ended July 31, 1998 were down approximately $80,700 or 21% as compared to the year ended July 31, 1997. Professional fees were decreased by $25,000 and salaries were decreased by $52,000. There were no capital commitments at July 31, 1998. ITEM 8: Consolidated Financial Statements and Supplementary Data The response to this item is contained within a separate section of this report. ITEM 9: Changes in and Disagreements with Accountants None. ITEM 10: NAME, PRINCIPAL OCCUPATION AND OTHER POSITIONS WITH DIRECTORS SHARES OWNED AS OF 07/31/97 LINCOLN FOR LAST 5 YEARS SINCE Thurman L. Sisney, Chairman of the Board, President and CEO Director, Age 52 1994 1,273 (1) Richard Dolin Secretary/Treasurer Director, Age 53 1996 0 Janet Clark Frockt Director 1997 574 (2) Richard Jay Frockt Director 1997 574 (2) Russell R. Roth Director 1997 0 _______ Officers & Directors as a group 2,421 (1) Includes shares held in names of Drivers and Drovers Diversified, Inc., a Kentucky corporation of which 2/3 is owned by Thurman L. Sisney. (2) Richard Frockt, a director of the Company, is the beneficiary of a tax-deferred annuity which in turn is the owner of all of the outstanding capital stock of Salina Investment LTD, the record holder of 574 shares. In addition, Janet Frockt, the wife of Richard Frockt and a director of the Company, is the beneficiary of a tax-deferred annuity which in turn is the owner of all of the capital stock of Pyramid Securities LTD, the record holder of 574 shares. Mr. Frockt disclaims any beneficial ownership interest in the shares which Mrs. Frockt is the beneficiary. Mrs. Frockt disclaims any beneficial ownership in the shares to which Mr. Frockt is the beneficiary. BUSINESS HISTORY OF DIRECTORS Thurman L. Sisney - Mr. Sisney is President, Chairman of the Board and Chief Executive Officer of Lincoln International Corporation. Mr. Sisney has a masters degree in business administration and a law degree from the University of Louisville and has been in private practice since 1980. He has served as general counsel to the Kentucky Finance and Administration Cabinet as well as counsel and legislative liaison to the governor of Kentucky. Mr. Sisney has also served as General Counsel and Deputy Commissioner of the Kentucky Department of Agriculture. Mr. Sisney is active in numerous civic and charitable organizations in the community including the board of trustees of the United Methodist Church, founder and President of the International Association of Convention and Hospitality and Industry Attorney's Association. Richard Dolin - Mr. Dolin has a juris doctorate degree from the University of Louisville law school and is a graduate of Louisville Presbyterian Theological Seminary where he earned a double competency degree in law and theology. He has a masters degree in Business Administration from Bellarmine College and has done doctoral work in business administration at the University of Kentucky. Mr. Dolin is associate pastor for the Harvey Browne Memorial Presbyterian Church in Louisville, Kentucky, and is responsible for adult education programs and out-reach activities and also serves as president of Nomos, Ltd., which provides consultation to small and medium sized organizations regarding strategic planning, accounting, budgeting, and related matters. Mr. Dolin is involved in many community activities including work for building homes for developmentally disabled adults. Janet Clark Frockt - Mrs. Frockt has a B.A. in Dramatic Arts from the University of California at Santa Barbara. She has performed with the Wand'ring Minstrels Theatrical Group and Theatre A La Carte in Louisville, Kentucky. Mrs. Frockt is also the author, Assistant Director and Producer of the film "Dominant Positions", an original screenplay filmed for PBS. Richard Jay Frockt - Mr. Frockt has a B.S. in History from Western Kentucky University and a juris doctorate from the University of Louisville Law School. He was a capital partner with the law firm Barnett and Alagia in Louisville until 1986, when he became the Chief Operating Officer of TMC Communications, a regional long distance telephone company in Santa Barbara, California. Mr. Frockt founded WCT Communications, Inc. in 1989. He served as Chairman of the Board and Chief Executive Officer of that company until 1995, seeing revenues grow to an annualized $150,000,000 and managing an IPO (initial public offering) and NASDAQ National Market Listing in 1993. Russell R. Roth - Mr. Roth earned a B.S. in Economics from the University of Kansas and an MBA in Finance from the University of Michigan. He has served as Chief Financial Officer of Cessna Aircraft Company which merged into General Dynamics Corporation in 1986. He then became Chief Financial Officer of Sotheby Art Auction Company in New York City, spearheading that company's IPO (initial public offering) in 1988. Mr. Roth founded Las Vegas Investment Report in 1993. This publication reports upon and analyzes the gaming industry. ITEM 11: The directors received compensation of Three Hundred ($300.00) Dollars per meeting and travel expenses. The directors fees and travel expense for 1997-1998 was $3,106. ITEM 12 and ITEM 13: LINCOLN intends to file an Information Statement pursuant to Regulation 14(c) which contains all of the information required by Part III which information is incorporated herein by reference. PART IV ITEM 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K Part IV which relates to Item 14 concerning exhibits, financial statement schedules and reports is hereby amended to include the following items by reference. (3) Articles of Incorporation and By-Laws: The articles and by- laws of Lincoln International Corporation were filed as a part of its Form 10 filing in September of 1971. (4) Form 8-K filed September, 1991, reporting sale and disposition of assets of Lincoln Finance Company, Inc. to Kentucky Finance Co., Inc. of three (3) of the four (4) finance companies operated by Registrant. (5) Articles of Merger of majority held subsidiary, Professional Services, Inc., into Registrant as filed on Form 10K for fiscal year 1991- 1992. (6) Form 10-K - 1995 (1) A copy of the lease agreement dated July 15, 1995, between LINCOLN INTERNATIONAL CORPORATION and Kentucky Livestock Exchange (BOURBON STOCKYARDS OPERATIONS) a division of Michigan Livestock Exchange, et al. (7) Form 8-K - 1997 (1) A copy of the amendment to the Articles of Incorporation eliminating classes of stock. Financial data and schedules are submitted separately as a separate schedule and are attached hereto. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Lincoln International Corporation has duly caused this report to be signed on its behalf, by the undersigned, President and Chief Executive Officer, Thurman L. Sisney, and by its principal Financial Officer and principal Accounting Officer, Secretary and Treasurer, Richard Dolin, as thereunto duly authorized in the City of Louisville, Commonwealth of Kentucky, on the 29th day of October, 1998. LINCOLN INTERNATIONAL CORPORATION ____________________________ By: Thurman L. Sisney, President Date: ____________________________ ___________________________ By: Richard Dolin, Sec./Treas. Date: ___________________________ Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of LINCOLN INTERNATIONAL CORPORATION in the capacities and on the date indicated. SIGNATURE TITLE (1) Principal Executive Officers ______________________________ Thurman L. Sisney President & Chairman of the Board ______________________________ Richard Dolin Secretary/Treasurer (2) Directors _____________________________ Thurman L. Sisney Director _____________________________ Richard Dolin Director _____________________________ Janet Clark Frockt Director _____________________________ Richard J. Frockt Director _____________________________ Russell R. Roth Director LINCOLN INTERNATIONAL CORPORATION ANNUAL REPORT FORM 10-K INDEPENDENT AUDITOR'S REPORT The Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the consolidated balance sheets of Lincoln International Corporation listed in the accompanying index to Financial Statements (Item 14(a)) as of July 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1998. 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 generally accepted auditing 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 listed in the accompanying Index to Financial Statements (Item 14(a)) present fairly, in all material respects, the consolidated financial position of Lincoln International Corporation as of July 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1998, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 4 to the financial statements, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. POTTER & COMPANY, LLP Louisville, Kentucky September 30, 1998 LINCOLN INTERNATIONAL CORPORATION Index to Financial Statements Item 14(a) The following consolidated financial statements of Lincoln International Corporation and subsidiaries are incorporated by reference in Item 8: Consolidated balance sheets - July 31, 1998 and 1997 Consolidated statements of operations - years ended July 31, 1998, 1997, and 1996 Consolidated statements of stockholders' equity - years ended July 31, 1998, 1997, and 1996 Consolidated statements of cash flows - years ended July 31, 1998, 1997, and 1996 Notes to consolidated financial statements Supporting schedules for the three years ended July 31, 1998, 1997, and 1996: I - Condensed financial information (parent company only) II - Valuation and qualifying accounts and reserves All other schedules are omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED BALANCE SHEETS July 31, 1998 and 1997 1998 1997 A S S E T S Current assets: Cash and cash equivalents $ 90,994 $ 156,141 Accounts receivable, net 10,911 9,732 Prepaid expenses 3,141 0 Total current assets 105,046 165,873 Investments in subsidiaries 575,000 575,000 Net property, plant and equipment 1,042,265 1,070,929 Total assets $1,722,311 $1,811,802 L I A B I L I T I E S A N D S T O C K H O L D E R S' E Q U I T Y Current liabilities: Current maturities of long-term debt $ 5,849 $ 5,443 Accounts payable 12,311 28,594 Deferred rent 18,810 0 Accrued expenses 21,559 42,968 Deposits 25,000 0 Total current liabilities 83,529 77,005 Long-term debt, less current maturities 380,205 385,511 Advances from subsidiaries 582,383 582,921 Stockholders' equity: Common stock 1,281,998 1,300,019 Retained earnings (deficit) -605,804 -533,654 Total stockholders' equity 676,194 766,365 Total liabilities and stockholders' equity $1,722,311 $1,811,802 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Revenues: Net service and operating revenues $ 297,459 $ 292,719 $300,199 Gain (loss) on sale of assets 0 24,999 715,210 Miscellaneous income 6,276 8,606 570,834 303,735 326,324 1,586,243 Costs and expenses: Cost of service and operating revenues 161,010 220,156 230,009 Operating, general and administrative expenses 179,813 225,383 211,365 Interest expense - other 35,061 35,138 70,932 375,884 480,677 512,306 Income (loss) before provision for income tax -72,149 -154,353 1,073,937 Income tax 0 0 14,366 Income (loss) before equity in net earnings (losses) of subsidiaries -72,149 -154,353 1,059,571 Equity in net earnings (losses) of subsidiaries -539 -224 -7,232 Net income (loss) $ -72,688 $-154,577$1,052,339 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Cash flows from operating activities: Net income (loss) $ -72,688 $-154,577$1,052,339 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 40,750 44,943 56,034 Equity in net (earnings) losses of consolidated subsidiaries 538 224 7,232 (Gain) loss on sale of property, equipment, and operating assets 0 -24,999 -715,210 Stock bonus 0 50,000 0 Provision for losses on other receivables 17,550 20,550 19,032 Change in assets and liabilities: Increase in accounts receivables -18,729 -17,873 -10,190 Decrease in other current assets -3,141 0 7,091 Increase (decrease) in accounts payable -16,282 17,509 -49,285 Decrease in accrued expenses -21,409 -14,972 -25,892 Increase (decrease) in income taxes payable 0 -14,366 14,366 Increase in deferred rent 18,810 0 0 Increase in deposits 25,000 0 0 Net cash provided by (used in) operating activities -29,601 -93,561 355,517 Cash flows from investing activities: Proceeds from disposal of property, equipment, and operating assets 0 36,500 807,426 Purchases of property and equipment -12,087 -5,740 -8,998 Net cash provided by investing activities -12,087 30,760 798,428 Cash flows from financing activities: Increase (decrease) in advances from subsidiaries -538 -249 -729,387 Proceeds from long-term debt 0 0 757 Principal payments on long-term debt -4,900 -5,552 505,449 Purchase of common stock for the treasury -18,021 0 -26,570 Net cash provided by (used in) financing activities -23,459 -5,801-1,260,649 Net increase (decrease) in cash and cash equivalents -65,147 -68,602 -106,704 Cash and cash equivalents at beginning of year 156,141 224,743 331,447 Cash and cash equivalents at end of year $ 90,994 $156,141 $224,743 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Supplemental disclosures of cash flow information: Cash paid during the year for interest $35,121 $36,121 $73,164 Cash paid during the year for income taxes $ 0 $14,366 $0 Supplemental schedule of noncash financing activities: Issuance of common stock for executive bonus $ 0 $50,000 $0 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1998 and 1997 1. Basis of Presentation In accordance with the requirements of Regulation S-X of the Securities and Exchange Commission, the financial statements of the registrant are condensed and omit many disclosures presented in the consolidated financial statements and the notes thereto. 2. Long-term debt Long-term debt consists of the following: 1998 1997 Mortgage note payable, interest at 8.75%, monthly payments of $3,283 including principal and interest, balloon payment due February 2001, secured by real property. Prior to October 1, 1996, interest was at 9.875% and monthly payments of principal and interest were $4,000. $386,054 $390,954 Less current maturities 5,849 5,443 Totals $380,205 $385,511 Scheduled maturities of long-term debt during the five years subsequent to July 31, 1998 are as follows: 1999 $ 5,849 2000 6,382 2001 373,823 Total $ 386,054 3. Dividends Cash dividends paid to Lincoln International Corporation by its consolidated subsidiaries were $0, $0, and $557,605 for the three fiscal years ended July 31, 1998, 1997 and 1996, respectively. The amounts are included in miscellaneous income. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1998 and 1997 4. Going Concern As shown in the accompanying financial statements, the Company incurred losses from operations. The ability of the Company to continue as a going concern is dependent upon future profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. SCHEDULE II LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years ended July 31, 1998, 1997, and 1996 Column Column Column Column Column A B C D E Additions Balance Charged Charged Balance at to to Other at Beginning Costs & Accounts Deductions End Description of Year Expenses Describe Describe of Year Year ended July 31, 1998 Reserves deducted from assets: Allowance for losses: Accounts receivable * 40,332 17,550 0 -57,882 0 Year ended July 31, 1997 Reserves deducted from assets: Allowance for losses: Accounts receivable 19,782 20,550 0 0 40,332 Year ended July 31, 1996 Reserves deducted from assets: Allowance for losses: Accounts receivable 750 19,032 0 0 19,782 * The allowances for losses on accounts receivable were reduced by $57,882 per a settlement agreement dated August 18, 1998. LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT July 31, 1998, 1997, and 1996 INDEPENDENT AUDITOR'S REPORT To the Board of Directors and Stockholders Lincoln International Corporation Louisville, Kentucky We have audited the accompanying consolidated balance sheets of Lincoln International Corporation as of July 31, 1998 and 1997, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1998. 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 generally accepted auditing 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 consolidated financial position of Lincoln International Corporation as of July 31, 1998 and 1997, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1998, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, there is substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. POTTER & COMPANY, LLP September 30, 1998 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS July 31, 1998 and 1997 A S S E T S 1998 1997 Current assets: Cash and cash equivalents $ 90,994 $ 156,141 Other receivables 10,911 9,732 Prepaid expenses 3,141 0 Total current assets 105,046 165,873 Net property, plant and equipment 1,042,265 1,070,929 Total assets $1,147,311 $1,236,802 L I A B I L I T I E S Current liabilities: Current maturities of long-term debt $ 5,849 $ 5,443 Accounts payable 12,311 28,594 Deferred rent 18,810 0 Accrued expenses 21,559 42,968 Deposits 25,000 0 Total current liabilities 83,529 77,005 Long-term debt, less current maturities 380,205 385,511 Total liabilities 463,734 462,516 Commitments S T O C K H O L D E R S' E Q U I T Y Stockholders' equity: Common stock, no par value, (3,000,000 shares authorized; 3,986 and 4,403 shares issued and outstanding in 1998 and 1997, respectively) 1,281,998 1,300,019 Retained earnings (deficit) -598,421 -525,733 Total stockholders' equity 683,577 774,286 Total liabilities and stockholders' equity $1,147,311 $1,236,802 See accompanying notes. 2 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Revenues: Net service and operating revenues $297,459 $292,719 $301,629 Costs and expenses: Cost of service and operating revenues 161,010 220,156 230,009 Operating, general and administrative expenses 180,352 225,607 214,585 Total costs and expenses 341,362 445,763 444,594 Loss from operations -43,903 -153,044 -142,965 Other income (expense): Gain on sale of property, equipment, and operating assets 0 24,999 715,210 Interest expense -35,061 -35,138 -80,405 Miscellaneous income 6,276 8,606 17,286 Total other income (expense) -28,785 -1,533 652,091 Income (loss) before income taxes -72,688 -154,577 509,126 Provision for income taxes 0 0 14,391 Net income (loss) $-72,688 $-154,577 $494,735 Net income (loss) per common share $ -17.16 $ -38.71 $ 122.70 See accompanying notes. 3 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended July 31, 1998, 1997, and 1996 Total Common Common Additional Retained Stock- Stock Stock Paid-in Earnings holders' Voting Nonvoting Capital (Deficit) Equity Balance at July 31, 1995 $50,000 $761,537 $465,052 $-865,891 $410,698 Purchase of common stock for the treasury 0 -30,964 4,394 0 -26,570 Net income 0 0 0 494,735 494,735 Balance at July 31, 1996 50,000 730,573 469,446 -371,156 878,863 Issuance of common stock for executive bonus 0 50,000 0 0 50,000 Exchange to a single class of stock, no par value 1,250,019 -780,573 -469,446 0 0 Net loss 0 0 0 -154,577 -154,577 Balance at July 31, 1997 1,300,019 0 0 -525,733 774,286 Purchase of common stock for the treasury -18,021 0 0 0 -18,021 Net loss 0 0 0 -72,688 -72,688 Balance at July 31, 1998 $1,281,998 $0 $0 $-598,421 $683,577 See accompanying notes. 4 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Cash flows from operating activities: Net income (loss) $-72,688 $-154,577 $494,735 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 40,750 44,943 56,034 Provision for losses on other receivables 17,550 20,550 19,032 Gain on sale of property, equipment, and operating assets 0 -24,999 -715,210 Stock bonus 0 50,000 0 Change in assets and liabilities: Increase in other receivables -18,729 -17,873 -8,733 (Increase) decrease in prepaid expenses -3,141 0 7,091 Increase (decrease) in accounts payable -16,282 17,509 -49,285 Increase (decrease) in income taxes payable 0 -14,391 8,151 Decrease in accrued expenses -21,409 -14,972 -35,669 Increase in deferred rent 18,810 0 0 Increase in deposits 25,000 0 0 Net cash used in operating activities -30,139 -93,810 -223,854 Cash flows from investing activities: Proceeds from disposal of property, equipment and operating assets 0 36,500 807,426 Purchases of property and equipment -12,087 -5,740 -8,998 Net cash provided by (used in) investing activities -12,087 30,760 798,428 See accompanying notes. 5 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1998, 1997, and 1996 1998 1997 1996 Cash flows from financing activities: Proceeds from long-term debt $0 $0 $757 Principal payments on long-term debt -4,900 -5,552 -656,700 Purchase of common stock for the treasury -18,021 0 -26,570 Net cash used in financing activities -22,921 -5,552 -682,513 Net increase (decrease) in cash and cash equivalents -65,147 -68,602 -107,939 Cash and cash equivalents at beginning of year 156,141 224,743 332,682 Cash and cash equivalents at end of year $90,994 $156,141 $224,743 Supplemental disclosures of cash flow information: Cash paid during the year for interest $35,121 $36,121 $84,924 Cash paid during the year for income taxes $0 $14,366 $6,240 Supplemental schedule of noncash financing activities: Issuance of common stock for executive bonus $0 $50,000 $0 See accompanying notes. 6 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of Lincoln International Corporation (the Company) is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Company's Activities: Lincoln International Corporation owns property in the state of Kentucky which is leased to a stock yard operator. Use of Estimates: Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Principles of Consolidation: The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Cash and Cash Equivalents: For purposes of reporting cash flows, the Company considers all money market funds with a maturity of three months or less to be cash equivalents. Property, Plant and Equipment: Property, plant and equipment are recorded at cost. Depreciation is provided over the following estimated useful lives: Buildings and improvements 20-40 years Yard and administration building 10-55 years Leasehold improvements 3-5 years Machinery and equipment 3-12 years The Company uses the straight-line method of computing depreciation for financial statement purposes and accelerated methods for income tax purposes. Leasehold improvements are amortized using the straight-line method over the lease term. 7 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes: The Company files a consolidated federal income tax return. Investment tax credits are treated as a reduction of the tax provision in the year in which the benefit is earned (flow-through method). Separate state income tax returns are filed for the Company and each subsidiary. Earnings Per Share: Earnings per share are based on the weighted average number of shares outstanding during each year. NOTE 2 - OTHER RECEIVABLES Other receivables consist of the following: 1998 1997 Accounts receivable $10,911 $50,064 Less allowance for doubtful accounts 0 40,332 Totals $10,911 $ 9,732 NOTE 3 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: 1998 1997 Land $ 667,504 $ 667,504 Building and improvements 68,250 68,250 Yard and administration building 2,143,569 2,133,365 Machinery and equipment 228,228 226,346 Leasehold improvements 2,800 2,800 3,110,351 3,098,265 Less accumulated depreciation 2,068,086 2,027,336 Net property, plant and equipment $1,042,265 $1,070,929 Depreciation expense for the years ended July 31, 1998, 1997 and 1996 was $40,750 $44,943, and $56,034, respectively. 8 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following: 1998 1997 Mortgage note payable, interest at 8.75%, monthly payments of $3,283, including principal and interest, balloon payment due February 2001, secured by real property. Prior to October 1, 1996, interest was at 9.875% and monthly payments of principal and interest were $4,000. $386,054 $390,954 Less current maturities 5,849 5,443 Totals $380,205 $385,511 Aggregate maturities required on long-term debt at July 31, 1998 are as follows: 1999 $ 5,849 2000 6,382 2001 373,823 Total $386,054 NOTE 5 - INCOME TAXES The provision for income taxes consists of the following: 1998 1997 1996 Federal income taxes $ 0 $ 0 $ 2,310 State and local income taxes 0 0 12,081 Provision for income taxes $ 0 $ 0 $14,391 9 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 5 - INCOME TAXES (CONTINUED) The Company has available at July 31, 1998 operating loss carryforwards, which may provide future tax benefits. If not used, the carryforwards will expire as follows: Year of Operating Loss Expiration Carryforwards 2005 $ 60,774 2006 216,677 2008 89,623 2009 76,331 2010 59,836 2012 106,248 2013 11,855 Total $621,344 10 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 5 - INCOME TAXES (CONTINUED) The difference between the statutory income tax rate and the Company's effective tax rate is reconciled as follows: 1998 1997 1996 Amount Percent Amount Percent Amount Percent Federal taxes (benefit) at statutory rate $0 0% $0 0% $173,100 34.0% Surtax exemption 0 0% 0 0% 0 .0% Tax effect of current operating loss available for carryover 0 0% 0 0% 0 0.0% Benefit due to operating loss carryforward 0 0% 0 0% -158,323 -31.1% Temporary differences 0 0% 0 0% -11,770 -2.3% State and local income taxes, net of federal benefit 0 0% 0 0% 11,384 2.2% $0 0% $0 0% $14,391 2.8% A deferred tax asset due to the operating loss carryforwards has not been recognized because it is more likely than not that it will not be realized based on current circumstances. 11 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 6 - LEASE COMMITMENTS The Company and its subsidiaries lease facilities and equipment under written operating leases. Total rental expense amounted to $61,667 in 1998, $74,765 in 1997, and $51,483 in 1996. Future minimum rentals at July 31, 1998 are as follows: Year ending July 31: 1999 $ 45,082 2000 38,878 2001 18,843 Totals $102,803 NOTE 7 - LEASE OF PROPERTY On July 15, 1995, the Company leased the property associated with the operation of its stock yard to another stock yard operator. The agreement was amended effective August 12, 1998. Under the agreement, the Company will receive rent of $13,500 a month. The agreement expires July 31, 2005, but may be terminated by the company upon six months notice to the lessee. The lessee is responsible at its expense, for most repairs, insurance, utilities and property taxes associated with the property. 12 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 8 - LEASE OF PROPERTY, PLANT AND EQUIPMENT The company is the lessor of property under operating leases. Following is a summary of the Company's investment in property, plant and equipment on operating leases as of July 31, 1998: Land $ 667,504 Buildings and Improvements 68,250 Yard building 2,133,365 2,869,119 Less accumulated depreciation 1,834,261 $1,034,858 Under the operating method of accounting for leases, the cost of the property, plant and equipment is recorded as an asset and is depreciated over its estimated useful life and the rental income is recognized as the lease rental payments are earned. All of the leases, except for the lease described in Note 7, are month-to- month. The minimum future rentals to be received on that lease at July 31, 1998 are as follows: Year ending July 31: 1998 $ 163,597 1999 162,000 2000 162,000 2001 162,000 2002 162,000 Thereafter 486,000 $1,297,597 13 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1998, 1997, and 1996 NOTE 9 - ECONOMIC DEPENDENCY For the year ended July 31, 1998, the Company recognized $216,000, approximately 72.6% of its operating revenues, from the lessee of the stock yard. NOTE 10 - GOING CONCERN As shown in the accompanying financial statements, the Company incurred losses from operations for the three years ended July 31, 1998. The ability of the Company to continue as a going concern is dependent upon future profitable operations. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. NOTE 11 - CAPITAL STOCK During the year ending July 31, 1997 the company amended the articles of incorporation and resolved that the corporate capital structure consist of 3,000,000 shares of class A common voting stock, all of no par value. This replaces 100,000 shares of voting common stock and 2,900,000 shares of nonvoting common stock, each with $.50 stated value. On December 5, 1997, a resolution was approved by a majority of the stockholders to amend the Articles of Incorporation to reflect a reverse split of the Company's common stock in the ratio of four hundred old shares for one new share (400 to 1). The stockholders were notified and issued scrip for each holding of stock of less than 400 shares. The stockholders could request their holding of old stock be exchanged for new stock in blocks of 400 shares of old stock, or request payment of thirty cents ($.30) per share for old stock. The stockholders were further notified if neither action was taken by April 5, 1998, the scrip would expire and represent no further legal right. All references in the accompanying financial statements to the number of common shares and per-share amounts for prior years have been restated to reflect the stock split. NOTE 12 - SUBSEQUENT EVENTS On May 29, 1998, the Company entered into an agreement to sell the real estate on which the stockyard is located for approximately $3,400,000. If completed, the transaction will result in a gain of approximately $2,400,000 before income taxes, which will be included in operations during 1999. 14 EX-27 2
5 YEAR JUL-31-1998 AUG-01-1997 JUL-31-1998 90994 0 68793 57882 0 105046 3502355 2460090 1147311 83529 380205 1281998 0 0 (598421) 1147311 0 303735 0 341362 0 0 35061 (72688) 0 (72688) 0 0 0 (72688) (17.16) (17.16)
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