-----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, CNOJLacYX0kdyrgjTK8aVxvJiAourUMryc7kFfqFRQe0G2cwBZhwX0NspfUYyVpp wnODUYToLhZ9r699NsU/LQ== 0000059544-99-000012.txt : 19991103 0000059544-99-000012.hdr.sgml : 19991103 ACCESSION NUMBER: 0000059544-99-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990731 FILED AS OF DATE: 19991101 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: 99739061 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, 1999 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 101, 2200 Greene Way Louisville, Kentucky 40243 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (502)671-0010 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) 7,972 DOCUMENTS INCORPORATED BY REFERENCE (1) Annual Report -- 1998-1999 (2) Information Statement -- 1999 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 rental of commercial office property in Louisville, Kentucky. On March 5, 1999 Lincoln International Corporation closed on the sale of the Bourbon Stock Yard real estate located at 1048 East Main to the Home of the Innocents, Inc. for a total purchase price of $3,377,991, net of sales expense. The first mortgage on the property, with Stock Yards Bank & Trust Co. of Louisville, Kentucky, was paid off in the amount $385,605. All proceeds of this sale were deposited with an intermediary as required under United States Code Section 1031 in order to effect a deferral of capital gains on the sale of proceeds. On May 3, 1999 Lincoln International Corporation purchased for $282,500 a 3500 square foot office condominium located at 11860 Capital Way as part of the USC Section 1031 transaction. On June 18, 1999 the company closed on the purchase of real estate located at 2200, 2211, and 2300 Greene Way, Jeffersontown, Kentucky for a purchase price of $2,800,000. With the purchase of 11860 Capital Way and 2200, 2211, 2300 Greene Way, Lincoln International Corporation, in effect, deferred all or substantially all of the capital gains that would have been incurred by the company from the sale of the Bourbon Stock Yards. On August 5, 1999 Articles of Dissolution for Farmers Friend Mineral Company, Inc. and Lincoln Finance Company, Inc. were filed with the Secretary of State for the Commonwealth of Kentucky thereby dissolving the two subsidiaries which have required consolidated financial reports. It is believed that the dissolution of these two corporations, which owned no assets nor were not operating in any way, will simplify the accounting and lower accounting costs for Lincoln International Corporation On January 4, 1999 an intrastate sale of Lincoln securities as a Unit Offering to Kentucky residents was completed and pursuant to authorization of and by the Board of Directors, all Units remaining after the close of the offer were made available for purchase by other existing shareholders as determined solely by the Board of Directors. The shares remaining after the close were made available and purchased as follows: 1. 600 Units shall be available for purchase by Pyramid Securities LTD, P.O. Box 2185,Georgetown, Grand Cayman, British West Indies; 2. 600 Units shall be available for purchase by Salina Investment LTD, P.O. Box 2185,Georgetown, Grand Cayman, British West Indies; 3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500, Louisville, Kentucky 40202; 4. 150 shares available to Richard A. Dolin, Director of Lincoln International Corporation,5502 Tecumseh Circle, Louisville, Kentucky 40207; 5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner, 1741 Kensington Pl.Lane, Louisville, Kentucky 40205-2748. 6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas, NV 89113; 7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059. Total capital raised from the Unit Offering was $597,900. EMPLOYEES: As of July 31, 1999, LINCOLN employed one 1) administrative personnel. ITEM 2: Properties The following are the various properties owned or leased by LINCOLN as of July 31, 1999. APPROXIMATE LEASE EXPI- TYPE OF SQUARE FEET RATION DATE LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS) LINCOLN ADMINISTRATIVE OFFICES Louisville, KY Offices 790 sq. ft. Owned RENTAL PROPERTIES Louisville, KY Office Spaces 16,210 sq. ft Owned Louisville, KY Office Spaces 15,800 sq. ft Owned Louisville, KY Office Spaces 15,120 sq. ft Owned Louisville, KY Office Spaces 3,500 sq. ft Owned * * * * * * * * * The properties listed above are suitable and adequate for the various needs they supply. ITEM 3: Legal Proceedings On March 23, 1999 two minority shareholders, Mr. Merle Brewer and Sarah Forree, filed a lawsuit in the United States District Court, Western District of Kentucky Louisville Division against Lincoln International Corporation, and individual directors Thurman L. Sisney, David Barhorst (who resigned June of 1998) and Mr. Richard A. Dolin (deceased in February of 1999). The case is styled: Civil Action No. 3: 99CV-178-S. On May 18, 1999 Lincoln International Corporation filed a Motion to Dismiss the complaint alleging that there are no questions of law nor facts substantiating the allegations in the complaint. A response to the Motion to Dismiss was filed by the plaintiffs on July 8, 1999. On June 30, 1999 the plaintiffs filed a Motion to Amend the complaint to substitute another plaintiff in place of one of the original plaintiffs, Sarah Forree. At this time, all Motions are either pending or further briefing will be required. In addition to replacing one of the original plaintiffs, defendants also raise in their Motion to Amend the complaint the allegation that notice of dissenters rights should have been provided in the reverse split that concluded on April 5, 1998. Legal counsel for the coporation gives little merit to the complaint or causes of actions raised by the plaintiffs. If the Company should be unsuccessful on its Motion to Dismiss, as well as its opposition to other Motions filed on behalf of the plaintiffs our answer will be filed to the complaint. 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 3rd day of December, 1999, are as follows: (1) Election of directors and (2) Transaction of any other business as may properly come before the meeting or any adjournment thereof. 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) On January 4, 1999 an intrastate sale of Lincoln securities as a Unit Offering to Kentucky residents was completed and pursuant to authorization of and by the Board of Directors, all Units remaining after the close of the offer were made available for purchase by other existing shareholders as determined solely by the Board of Directors. The shares remaining after the close were made available and purchased as follows: 1. 600 Units shall be available for purchase by Pyramid Securities LTD, P.O. Box 2185, Georgetown, Grand Cayman, British West Indies; 2. 600 Units shall be available for purchase by Salina Investment LTD, P.O. Box 2185, Georgetown, Grand Cayman, British West Indies; 3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500, Louisville, Kentucky 40202; 4. 150 shares available to Richard A. Dolin, Director of Lincoln International Corporation, 5502 Tecumseh Circle, Louisville, Kentucky 40207; 5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner, 1741 Kensington Pl.Lane, Louisville, Kentucky 40205-2748. 6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas, NV 89113; 7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059. Total capital raised from the Unit Offering was $597,900. ITEM 6: Selected Financial Data Years ending July 31 1999 1998 1997 1996 1995 Revenues 190050 297459 292719 301629 1362172 Income (loss) before extraordinary items 1474483 -72688 -154577 494735 -87968 Net income (loss) 1474483 -72688 -154577 494735 -87968 Earnings (loss) per common share: Income (loss) before extraordinary items 235.64 -17.16 -38.71 122.70 -21.68 Net income (loss) 235.64 -17.16 -38.71 122.70 -21.68 Cash dividends 0 0 0 0 0 Total assets 3690394 1147311 1236802 1358785 1623366 Long-term obligations 0 380205 385511 387250 733640 ITEM 7: Management's Discussion and Analysis of Financial Conditions and Results of Operations On February 16, 1999 Thurman L. Sisney resigned as Chairman of the Board of Lincoln International Corporation and the Board of Directors unanimously elected Mr. Richard J. Frockt as Chairman. On March 5, 1999 Lincoln International Corporation closed on the sale of the Bourbon Stock Yard real estate located at 1048 East Main to the Home of the Innocents, Inc. for a total purchase price of $3,400,000. The first mortgage on the property, with Stock Yards Bank & Trust Co. of Louisville, Kentucky, was paid off in the amount $385,605. All proceeds of this sale were deposited with an intermediary as required under United States Code Section 1031 in order to effect a deferral of capital gains taxes on the sale proceeds. On May 3, 1999 Lincoln International Corporation purchased for $282,500 a 3500 square foot office condominium located at 11860 Capital Way as part of the USC Section 1031 transaction. On June 18, 1999 the company closed on the purchase of real estate located at 2200, 2211, and 2300 Greene Way, Jeffersontown, Kentucky for a purchase price of $2,800,000. With the purchase of 11860 Capital Way and 2200, 2211, 2300 Greene Way, Lincoln International Corporation, in effect, deferred all or substantially all of the capital gains that would have been incurred by the company from the sale of the Bourbon Stock Yards. On August 1, 1999 Lincoln International Corporation moved its corporate offices to 2200 Greene Way, Suite 101, Jeffersontown, Kentucky 40220. Legal Proceedings: On March 23, 1999 two minority shareholders, Mr. Merle Brewer and Sarah Forree, filed a lawsuit in the United States District Court, Western District of Kentucky Louisville Division against Lincoln International Corporation, and individual directors Thurman L. Sisney, David Barhorst (who resigned June of 1998) and Mr. Richard A. Dolin (deceased in February of 1999). The case is styled: Civil Action No. 3: 99CV-178-S. On May 18, 1999 Lincoln International Corporation filed a Motion to Dismiss the complaint alleging that there are no questions of law nor facts substantiating the allegations in the complaint. A response to the Mothion to Dismiss was filed by the plaintiffs on July 8, 1999. On June 30, 1999 the plaintiffs filed a Motion to Amend the complaint to substitute anohter plaintiff in place of one of the original plaintiffs, Sarah Forree. At this time, all Motions are either pending or further briefing will be required. In addition to replacing one of the original plaintiffs, defendants also raise in their Motion to Amend the complaint the allegation that notice of dissenters rights should have been provided in the reverse split that concluded on April 5, 1998. Legal counsel for the corporation gives little merit to the complaint or causes of actions raised by the plaintiffs. If the Company should be unsuccessful on its Motion to Dismiss, as well as its opposition to other Motions filed on behalf of the plaintiffs our answer will be filed to the complaint. On August 5, 1999 Articles of Dissolution for Farmers Friend Mineral Company, Inc. and Lincoln Finance Company, Inc. were filed with the Secretary of State for the Commonwealth of Kentucky thereby dissolving the two subsidiaries which have required consolidated financial reports. It is believed that the dissolution of these two corporations, which owned no assets nor were not operating in any way, will simplify the accounting and lower accounting costs for Lincoln International Corporation. On August 6, 1999 the Board of Directors of the company approved the investment of 1.5 million dollars in Accounting Outsource Solutions, LLC a New Albany, IN limited liability corporation, owned and operated by Mr. Brian McDonald, MBA/CPA. Since establishing the company within the last 2 1/2 years it has grown it to a 350,000 gross revenue company. The company has agreed to form a new corporation by the name of Accounting USA, Inc. and to register it in the state of Nevada. The newly formed company will provide accounting and bookkeeping services for small businesses. Under a merger agreement Accounting Outsource Solutions, LLC will be merged with Accounting USA, Inc.; and in return for the 1.5 million dollar investment, Lincoln International Corporation will receive 75% of the equity of Accounting USA, Inc. It is anticipated that the first injection of capital in the newly formed corporation will occur in on or around September 30, 1999. The balance of the 1.5 million dollar investment will be made at such time as the newly formed corporation begins developing branch outlets. Thurman L. Sisney, Director and Richard J. Frockt, Director, will serve as two of the three Directors of Accounting USA, Inc. On August 7, 1999 Mr. Russell Roth was unanimously elected to serve as Secretary/Treasurer of Lincoln International Corporation until the next election of officers. Mr. Richard J. Frockt had been serving as Assistant/Secretary Treasurer following the death of Director Richard A. Dolin in February of 1999. On August 7, 1999 the Board of Directors of Lincoln International Corporation unanimously approved the retention of Potter & Company, 500 West Jefferson Street, Louisville, Kentucky 40202, as the auditor and accountant for Lincoln International Corporation for the upcoming fiscal year. On January 4, 1999 an intrastate sale of Lincoln securities as a Unit Offering to Kentucky residents was completed and pursuant to authorization of and by the Board of Directors, all Units remaining after the close of the offer were made available for purchase by other existing shareholders as determined solely by the Board of Directors. The shares remaining after the close were made available and purchased as follows: 1. 600 Units shall be available for purchase by Pyramid Securities LTD, P.O. Box 2185, Georgetown, Grand Cayman, British West Indies; 2. 600 Units shall be available for purchase by Salina Investment LTD, P.O. Box 2185, Georgetown, Grand Cayman, British West Indies; 3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500, Louisville, Kentucky 40202; 4. 150 shares available to Richard A. Dolin, Director of Lincoln International Corporation, 5502 Tecumseh Circle, Louisville, Kentucky 40207; 5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner, 1741 Kensington Pl. Lane, Louisville, Kentucky 40205-2748. 6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas, NV 89113; 7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059. Total capital raised from the Unit Offering was $597,900. 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 LINCOLN FOR LAST 5 YEARS SINCE AS OF 7/31/99 Thurman L. Sisney, President Director, Age 53 1994 2,893 (1) Richard Jay Fockt Chairman of the Board Director 1997 1,207 (2) Russell R. Roth Secretary/Treasurer Director 1997 150 Janet Clark Frockt Director 1997 1,206 (2) _______ Officers & Directors as a group 5,456 (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 the outstanding capital stock of Salina Investment LTD, the record holder of 1,207 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 the capital stock of Pyramid Securities LTD, the record holder of 1,206 shares. Mr. Frockt disclaims any beneficial ownership interest in thee shares to which Mr. Fockt is beneficiary. Further, Ryan Jeffrey Frockt Trust, Sheldon Gilman, Trustee, is the owner of 600 shares of Lincoln International Corporation stock. Ryan Jeffrey Frockt is the legally emancipated son of Richard Jay Frockt and Janet Clark Frockt, both of whom disclaim any beneficial ownership in the shares to which Ryan Jeffrey Frockt is beneficiary. BUSINESS HISTORY OF DIRECTORS Thurman L. Sisney-Mr. Sisney is President of Lincoln International Corporation. He has a masters degree in Business Administration and a law degree from the University of Louisville and has been in private practice since 1980. Mr. Sisney has served as general counsel to the Finance and Administration Cabinet as well as counsel and legislative liaison to the governor of Kentucky. He has also served as general counsel and Deputy Commissioner of the Department of Agriculture. Mr. Sisney is and has been active in numerous civic and charitable organizations, including the Board of Trustees of the United Methodist Church, founder and president of the International Association of Convention and Hospitality and Industry Attorneys Association. Janet Clark Frockt-Ms. Clark 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. Ms. 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 is Chairman of the Board of Lincoln International Corporation. 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. Russell R. Roth-Mr. Roth is Secretary-Treasurer of the Company. 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 Sotherby Art Auction Company in New York City. 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 1998-1999 was $4,025. 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, Thurman L. Sisney, and by its principal Financial Officer and principal Accounting Officer, Secretary and Treasurer, Russell R. Roth, as thereunto duly authorized in the City of Louisville, Commonwealth of Kentucky, on the 27th day of October, 1999. LINCOLN INTERNATIONAL CORPORATION ____________________________ By: Thurman L. Sisney, President Date: ____________________________ ___________________________ By: Russell R. Roth, 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 _____________________________ Richard Jay Frockt Chairman of the Board _____________________________ Russell R. Roth Secretary/Treasurer (2) Directors _____________________________ Thurman L. Sisney Director _____________________________ Richard Jay Frockt Director _____________________________ Janet Clark 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, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1999. 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 resonable 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, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1999, in conformity with generally accepted accounting principles. POTTER & COMPANY, LLP Louisville, Kentucky October 5, 1999 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, 1999 and 1998 Consolidated statements of operations - years ended July 31, 1999, 1998, and 1997 Consolidated statements of stockholders' equity - years ended July 31, 1999, 1998, and 1997 Consolidated statements of cash flows - years ended July 31, 1999, 1998, and 1997 Notes to consolidated financial statements Supporting schedules for the three years ended July 31, 1999, 1998, and 1997: 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, 1999 and 1998 1999 1998 A S S E T S Current assets: Cash and cash equivalents $ 396,466 $ 90,994 Other receivable, net 2,500 10,911 Prepaid expenses 0 3,141 Total current assets 398,966 105,046 Investments in subsidiaries 0 575,000 Net property, plant and equipment 3,105,922 1,042,265 Noncurrent assets: Deferred tax asset 185,506 0 Total assets $ 3,690,394 $ 1,722,311 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 $ 0 $ 5,849 Accounts payable 32,297 12,311 Deferred rent 0 18,810 Accrued expenses 18,750 21,559 Deposits 0 25,000 Total current liabilities 51,047 83,529 Noncurrent liabilities: Long-term debt, less current maturities 0 380,205 Deferred tax liability 883,387 0 Total noncurrent liabilities 883,387 380,205 Advances from subsidiaries 0 582,383 Total liabilities 934,434 1,046,117 Stockholders' equity: Common stock 1,879,898 1,281,998 Retained earnings (deficit) 876,062 (605,804) Total stockholders' equity 2,755,960 676,194 Total liabilities and Stockholders' equity $ 3,690,394 $ 1,722,311 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF OPERATIONS Years ended July 31, 1999, 1998, and 1997 1999 1998 1997 Revenues: Service and operating revenue $ 190,050 $ 297,459 $ 292,719 Gain (loss) on sale of assets 2,359,078 0 24,999 Interest and dividend income 48,606 Miscellaneous income 1,355 6,276 8,606 Total revenues 2,599,089 303,735 326,324 Costs and expenses: Cost of service and operating revenue 162,542 161,010 220,156 Operating, general and administrative expenses 241,571 179,813 225,383 Interest expense - other 20,312 35,061 35,138 Total costs and expenses 424,425 375,884 480,677 Income (loss) before provision for income taxes 2,174,664 (72,149) (154,353) Income tax 700,181 0 0 Income (loss) before equity in net losses of subsidiaries 1,474,483 (72,149) (154,353) Equity in net losses of Subsidiaries 0 (539) (224) Net income (loss) $ 1,474,483 $ (72,688) $ (154,577) See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS Years ended July 31, 1999, 1998, and 1997 1999 1998 1997 Cash flows from operating activities: Net income (loss) $ 1,474,483 $ (72,688) $ (154,577) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 37,126 40,750 44,943 Equity in net losses of consolidated subsidiaries 0 539 224 Gain on sale of property, equipment, and operating assets (2,359,078) 0 (24,999) Deferred income taxes 697,881 0 0 Stock bonus 0 0 50,000 Provision for losses on other Receivables 0 17,550 20,550 (Increase) decrease in: Other receivables 8,411 (18,729) (17,873) Prepaid expenses 3,141 (3,141) 0 Increase (decrease) in: Accounts payable 19,986 (16,282) 17,509 Accrued expenses (2,809) (21,409) (14,972) Income taxes payable 0 0 (14,366) Deferred rent (18,810) 18,810 0 Deposits (25,000) 25,000 0 Net cash used in operating activities (164,669) (29,600) (93,561) Cash flows from investing activities: Proceeds from sale of property, equipment, and operating assets 3,377,991 0 36,500 Purchase of property and equipment (3,119,696) (12,087) (5,740) Net cash provided by (used in) investing activities 258,295 (12,087) 30,760 Cash flows from financing activities: Proceeds from issuance of common stock 597,900 0 0 Decrease in advances from Subsididiaries 0 (539) (249) Proceeds from long-term debt 0 0 0 Principal payments on long-term debt (386,054) (4,900) (5,552) Purchase of common stock for the treasury 0 (18,021) 0 Net cash provided by (used in) financing activities $ 211,846 $(23,460) $(5,801) See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED Years ended July 31, 1999, 1998, and 1997 1999 1998 1997 Net increase (decrease) in cash equivalents $ 305,472 $(65,147) $(68,602) Cash and cash equivalents at beginning of year 90,994 156,141 224,743 Cash and cash equivalents at end of year $ 396,466 $ 90,994 $ 156,141 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 20,312 $ 35,121 $ 36,121 Cash paid during the year for income taxes $ 0 $ 0 $ 14,366 Supplemental schedule of non cash financing activities: Issuance of common stock for executive bonus $ 0 $ 0 $ 50,000 See accompanying notes. SCHEDULE I LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY) NOTES TO CONDENSED FINANCIAL STATEMENTS July 31, 1999 and 1998 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: 1999 1998 Mortgage note payable, interest at 8.75%, monthly payments of $3,283 including principal and interest. The entire note balance was paid off March, 1999. $ 0 $ 386,054 Less current maturities 0 5,849 Total $ 0 $ 380,205 3. Dividends Cash dividends paid to Lincoln International Corporation by its consolidated subsidiaries were $0 for the three fiscal years in the period ended July 31, 1999. SCHEDULE II LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS AND RESERVES Years ended July 31, 1999, 1998, and 1997 Column A Column B Column C Column D Column E Additions Balance Charged at to Charged to Balance Beginning Costs & Other Accts Deductions at End Description of Year Expenses Describe Describe of Year Year ended July 31, 1999 Reserves deducted from assets: Allowance for losses: Accounts Receivable: $ 0 $ 0 $ 0 $ 0 $ 0 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 * The allowance for losses on accounts receivable and 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, 1999, 1998, and 1997 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, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the three years in the period ended July 31, 1999. 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, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the three years in the period ended July 31, 1999, in conformity with generally accepted accounting principles. POTTER & COMPANY, LLP October 5, 1999 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED BALANCE SHEETS July 31, 1999 and 1998 A S S E T S 1999 1998 Current assets: Cash and cash equivalents $ 396,466 $ 90,994 Other receivables 2,500 10,911 Prepaid expenses 0 3,141 Total current assets 398,966 105,046 Net property, plant and equipment 3,105,922 1,042,265 Noncurrent assets: Deferred tax asset 185,506 0 Total assets $ 3,690,394 $ 1,147,311 L I A B I L I T I E S Current liabilities: Current maturities of long-term debt $ 0 $ 5,849 Accounts payable 32,297 12,311 Deferred rent 0 18,810 Accrued expenses 18,750 21,559 Deposits 0 25,000 Total current liabilities 51,047 83,529 Noncurrent liabilities: Long-term debt, less current maturities 0 380,205 Deferred tax liability 883,387 0 Total noncurrent liabilities 883,387 380,205 Total liabilities 934,434 463,734 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; 7,972 and 3,986 shares issued and outstanding in 1999 and 1998, respectively) 1,879,898 1,281,998 Retained earnings (deficit) 876,062 (598,421) Total stockholders' equity 2,755,960 683,577 Total liabilities and Stockholders' equity $ 3,690,394 $ 1,147,311 See accompanying notes. 2 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS Years ended July 31, 1999, 1998, and 1997 1999 1998 1997 Revenues $ 190,050 $ 297,459 $ 292,719 Costs and expenses: Cost of revenues 162,542 161,010 220,156 Operating, general and administrative expenses 241,571 180,352 225,607 Total costs and expenses 404,113 341,362 445,763 Loss from operations (214,063) (43,903) (153,044) Other income (expense): Gain on sale of property, equipment, and operating assets 2,359,078 0 24,999 Interest and dividend income 48,606 0 0 Miscellaneous income 1,355 6,276 8,606 Interest expense (20,312) (35,061) (35,138) Total other income (expense) 2,388,727 (28,785) (1,533) Income (loss) before income taxes 2,174,664 (72,688) (154,577) Provision for income taxes 700,181 0 0 Net income (loss) $ 1,474,483 $ (72,688) $ (154,577) Net income (loss) per common share $ 235.64 $ (17.16) $ (38.71) See accompanying notes. 3 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY Years ended July 31, 1999, 1998, and 1997 Additional Retained Total Common Stock Paid-in Earnings Stockholders' Voting Nonvoting Capital (Deficit) Equity 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 Issuance of common stock For cash 597,900 0 0 0 597,900 Net income 0 0 0 1,474,483 1,474,483 Balance at July 31, 1999 $1,879,898 $0 $0 $876,062 $2,755,960 See accompanying notes 4 LINCOLN INTERNATIONAL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended July 31, 1999, 1998, and 1997 1999 1998 1997 Cash flows from operating activities: Net income (loss) $ 1,474,483 $ (72,688) $ (154,577) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 37,126 40,750 44,943 Provision for losses on other receivables 0 17,550 20,550 Gain on sale of property, equipment, and operating assets -2,359,078 0 (24,999) Deferred income taxes 697,881 0 0 Stock bonus 0 0 50,000 (Increase) decrease in: Other receivables 8,411 (18,729) (17,873) Prepaid expenses 3,141 (3,141) 0 Increase (decrease) in: Accounts payable 19,986 (16,282) 17,509 Income taxes payable 0 0 (14,391) Accrued expenses (2,809) (21,409) (14,972) Deferred rent (18,810) 18,810 0 Deposits (25,000) 25,000 0 Net cash used in operating activities (164,669) (30,139) (93,810) Cash flows from investing activities: Proceeds from sale of property, equipment and operating assets 3,377,991 0 36,500 Purchase of property and equipment -3,119,696 (12,087) (5,740) Net cash provided by (used in) investing activities 258,295 (12,087) 30,760 Cash flows from financing activities: Proceeds from issuance of common stock 597,900 0 0 Principal payments on long-term debt (386,054) (4,900) (5,552) Purchase of common stock for the treasury 0 (18,021) 0 Net cash provided by (used in) financing activities 211,846 (22,921) (5,552) Net increase (decrease) in cash and cash equivalents 305,472 (65,147) (68,602) Cash and cash equivalents at beginning of year 90,994 156,141 224,743 Cash and cash equivalents at end of year $ 396,466 $ 90,994 $ 156,141 Supplemental disclosures of cash flow information: Cash paid during the year for interest $ 20,312 $ 35,121 $ 36,121 Cash paid during the year for income taxes $ 0 $ 0 $ 14,366 Supplemental schedule of non cash financing activities: Issuance of common stock for executive bonus $ 0 $ 0 $ 50,000 See accompanying notes. 5 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 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 owned property in Louisville, Kentucky which it leased to a stockyard operator. The plant, property and equipment of the stockyard were sold during fiscal year 1999. The proceeds from the sale were used to purchase commercial rental office buildings in Louisville, Kentucky. 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 at the date of the financial statements and the reported revenues and expenses during the period. 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. LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes: Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes result primarily from using different accounting methods for financial reporting from those used for income tax reporting. The deferred tax assets and liabilities represent future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. 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: 1999 1998 Accounts receivable $ 0 $ 10,911 Refundable deposits 2,500 0 Less allowance for doubtful accounts 0 0 Total $ 2,500 $ 10,911 7 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 NOTE 3 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following: 1999 1998 Land $ 310,054 $ 667,504 Building and improvements 2,790,483 68,250 Yard and administration building 0 2,143,569 Machinery and equipment 50,940 228,228 Leasehold improvements 2,800 2,800 3,154,277 3,110,351 Less accumulated depreciation 48,355 2,068,086 Net property, plant and equipment $ 3,105,922 $ 1,042,265 Depreciation expense for the years ended July 31, 1999, 1998 and 1997 was $37,126, $40,750 and $44,943, respectively. All plant, property, and equipment of Bourbon Stock Yards was sold on March 5, 1999 for $3,377,991, net of sales expense. The sale resulted in a gain of $2,359,078 for financial statement purposes. The proceeds were used to purchase commercial rental office buildings. Substantially all of the gain was deferred under Section 1031 for federal and state tax purposes. NOTE 4 - LONG-TERM DEBT Long-term debt consists of the following: 1999 1998 Mortgage note payable, interest at 8.75%, monthly payments of $3,283, including principal and interest. The entire note balance was paid off March, 1999. $ 0 $ 386, 054 Less current maturities 0 5,849 Total $ 0 $ 380, 205 8 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 NOTE 5 - INCOME TAXES A deferred tax asset has been recognized primarily for operating loss carryovers that are to offset future income taxes. A deferred tax liability has been recognized as the result of the deferred gain on the sale of property and plant for income tax purposes. The deferred tax (expense) benefit in the balance sheet as of July 31, 1999, 1998, and 1997 consisted of the following: 1999 1998 1997 Deferred tax asset $ 185,506 $ 0 $ 0 Deferred tax liability (883,387) 0 0 Net deferred tax expense $(697,881) $ 0 $ 0 The Company has available at July 31, 1999 operating loss carryforwards, which may provide future tax benefits. If not used, the carryforwards will expire as follows: Year of Operating Loss Expiration Carryforwards 2006 $ 175,187 2007 0 2008 72,982 2009 31,281 2010 31,281 2011 0 2012 84,103 2013 70,061 $ 464,895 The provision for income taxes consists of the following: 1999 1998 1997 Federal income taxes $ 18,719 $ 0 $ 0 State and local income taxes 7,708 0 0 Deferred taxes 697,881 0 0 Tax benefit of net operating loss carryforward (24,127) 0 0 Provision for income taxes $ 700,181 $ 0 $ 0 9 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 NOTE 6 - LEASE COMMITMENTS The Company leases equipment under written operating leases. Total rental expense amounted to $32,323 in 1999, $61,667 in 1998, and $74,765 in 1997. Future minimum rentals at July 31, 1999 are as follows: Year ending July 31: 2000 $ 4,796 2001 4,796 2002 4,796 Total $ 14,388 NOTE 7 - LEASE OF PROPERTY, PLANT AND EQUIPMENT The Company is the lessor of commercial rental office buildings under operating leases. Following is a summary of the Company's investment in property, plant and equipment under operating leases as of July 31, 1999: Land $ 310,054 Buildings and improvements 2,790,483 3,100,537 Less accumulated depreciation 12,469 $ 3,088,068 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. The minimum future rentals to be received on the leases at July 31, 1999 are as follows: Year ending July 31: 1999 $ 118,846 2000 81,151 2001 46,151 2002 44,147 2003 22,104 Thereafter 116,046 Total $ 428,445 10 LINCOLN INTERNATIONAL CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS July 31, 1999, 1998, and 1997 NOTE 8 - CONCENTRATION OF CREDIT RISK The Company maintains cash accounts in a commercial bank located in Louisville, Kentucky. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. The Company has an uninsured amount of $300,961 outstanding at July 31, 1999. NOTE 9 - CAPITAL STOCK During fiscal 1999, the Company issued an aggregate 3,986 shares of common stock to stockholders residing in the state of Kentucky. One option to acquire an additional share at $150 in the first year, $160 in the second year, or $170 in the third year after the issue was attached to each share issued. NOTE 10 - YEAR 2000 ISSUE The year 2000 issue is the result of shortcomings in many electronic data processing systems and other electronic equipment that may adversely affect the company's operations. The Company has assessed its various types of electronic equipment and does not believe the year 2000 issue will pose significant operational problems. Because of the unprecedented nature of the year 2000 issues, its effects and the success of related remediation efforts will not be fully determinable until the year 2000 and thereafter. Management cannot assure that the Company is or will be year 2000 ready, that the Company's remediation efforts will be successful in whole or in part, or that the parties with whom the Company does business will be year 2000 ready. The final impact on the Company, if any, cannot be determined NOTE 11 - SUBSEQUENT EVENTS On August 6, 1999, the Company's Board of Directors approved the investment of $1,500,000 in a company which provides accounting and bookkeeping services for small businesses. The Company will receive 75% of the equity of the company providing the accounting and bookkeeping services. 11 EX-27 2
5 YEAR JUL-31-1999 AUG-01-1998 JUL-31-1999 396466 0 2500 0 0 398966 3154277 48355 3690394 51047 0 1879898 0 0 876062 3690394 0 2599089 0 404113 0 0 20312 2174664 700181 1474483 0 0 0 1474483 235.64 235.64
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