<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
March 3, 1997
Commission File Number: 0-9969
Century Industries, Inc.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
District of Columbia 54-1100941
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
45034 Underwood Lane
Sterling, Va. 20166
(Mail) P.O. Box 319
Sterling, Va. 20167
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703) 471-7606.
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act: Common
Stock, par value $.001 per share
Title of each class Name of each exchange on
------------------- which registered
Common Voting Stock -------------------------
NASDAQ Bulletin Board
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (Par Value $.001 per share)
----------------------------------------
(Title of Stock)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 of 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.
(1) Yes X No
----- -----
(2) Yes X No
----- -----
<PAGE> 2
ITEM 5. Other Events
The registrant effected the completion of its acquisition of 100% of DC
Partners, Ltd. at September 30, 1996. The predecessor of DC Partners, Ltd.,
and still a wholly owned subsidiary of DC Partners, Ltd. is Scibal and
Associates, Inc. Registrant has previously filed the Scibal Associates, Inc.
audit at 9-30-95, which included a scope limitation as to Scibal's imprest
funds. Scibal has an average of $3,000,000 of insurers' and clients'
imprest funds on hand at any given time.
The Scibal Associates, Inc. auditors have completed their 1995 audit of
the imprest funds, and have signed off on the attached 1995 audit of Scibal
and Associates, inc., which now includes the completed audit of the imprest
funds. The scope limitation has been removed at 9-30-95, for Scibal Associates
at 9-30-95.
The Registrant now has two years successive audit trails on Scibal
Associates, Inc., its wholly owned subsidiary.
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
March 3, 1997
Century Industries, Inc.
---------------------------------------------
Ted L. Schwartzbeck, President & CEO
-2-
<PAGE> 3
SCIBAL ASSOCIATES, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
<PAGE> 4
SCIBAL ASSOCIATES, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
I N D E X
<TABLE>
<CAPTION>
Page
<S> <C>
Independent Auditors' Report 1
Financial Statements
Consolidated Balance Sheet 2
Consolidated Statement of Operations and Retained Earnings 3
Consolidated Statement of Cash Flows 4
Notes to Financial Statements 5 - 10
</TABLE>
<PAGE> 5
[COHEN, FRIEDMAN, DORMAN, SPECTOR & CO. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders
Scibal Associates, Inc. and Subsidiary
Route 9 and Mays Landing Road
Somers Point, New Jersey
We have audited the accompanying consolidated balance sheet of Scibal
Associates, Inc. and Subsidiary (a New Jersey corporation) as of September 30,
1995 and the related statement of operations, retained earnings and cash flows
for the year then ended. The financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to in the first paragraph
present fairly, in all material respects, the financial position of Scibal
Associates, Inc. and Subsidiary as of September 30, 1995, and the results of
its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
In our report dated November 12, 1996, we qualified our opinion due to a scope
limitation arising from inadequate accounting records related to the imprest
cash balances described in note 10. Subsequent to that date, the Company was
able to reconstruct the necessary records and provide adequate supporting
documentation to enable us to audit this area.
/s/ COHEN, FRIEDMAN, DORMAN, SPECTOR & CO.
------------------------------------------
COHEN, FRIEDMAN, DORMAN, SPECTOR & CO.
Certified Public Accountants
Union, New Jersey
November 12, 1996
(January 24, 1997 with respect to imprest cash)
<PAGE> 6
SCIBAL ASSOCIATES, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
ASSETS
------
CURRENT ASSETS
Cash $ 95,585
Accounts receivable 525,278
Work in process 195,350
Prepaid expenses 10,147
Current portion of mortgage receivable 1,165
-----------
Total Current Assets $ 827,525
PROPERTY AND EQUIPMENT
Land and building 404,638
Furniture and equipment 753,811
Vehicles 66,051
-----------
1,224,500
Less: Accumulated depreciation (419,458)
-----------
805,042
OTHER ASSETS
Investments 168,182
Due from related parties 118,373
Due from stockholders 174,220
Mortgage receivable, less current portion 127,701
Security deposits 34,488
Deferred tax asset 147,000
-----------
769,964
----------
$2,402,531
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES
Line of credit $ 493,000
Current portion of long term debt 8,856
Accounts payable 459,292
Accrued liabilities 528,111
-----------
$1,489,259
LONG TERM DEBT
Notes payable, less current portion 239,675
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock, 95 shares authorized,
issued and outstanding 950
Additional paid in capital 99,168
Retained earnings 573,479
-----------
673,597
----------
$2,402,531
==========
</TABLE>
See auditors' report and notes to financial statements.
2.
<PAGE> 7
SCIBAL ASSOCIATES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
REVENUES $10,253,410
COST OF SERVICES PROVIDED $5,127,634
OPERATING EXPENSES 5,000,650
----------
10,128,284
-----------
INCOME FROM OPERATIONS 125,126
OTHER INCOME (EXPENSE) (216,598)
-----------
LOSS BEFORE PROVISION FOR INCOME TAXES (91,472)
PROVISION FOR INCOME TAXES 16,700
-----------
NET LOSS (108,172)
RETAINED EARNINGS - BEGINNING OF YEAR $ 969,574
PRIOR PERIOD ADJUSTMENT (287,923)
----------
RETAINED EARNINGS - BEGINNING OF YEAR
AS ADJUSTED 681,651
-----------
RETAINED EARNINGS - END OF YEAR $ 573,479
===========
</TABLE>
See auditors' report and notes to financial statements.
3.
<PAGE> 8
SCIBAL ASSOCIATES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1995
<TABLE>
<S> <C> <C>
Net loss $(108,172)
Adjustment to Reconcile Net Loss to Net Cash
Used in Operations:
Depreciation and amortization $ 107,578
Decrease in deferred tax asset 16,700
Loss on sale of fixed assets 48,694
Decrease in accounts receivable 195,250
Increase in work in process (116,377)
Increase in prepaid expenses (3,496)
Decrease in security deposits 9,142
Decrease in accounts payable (301,505)
Increase in accrued liabilities 25,685
---------
Total adjustments (18,329)
---------
Net Cash Used in Operations (126,501)
INVESTING ACTIVITIES
Decrease in investments 186,577
Decrease in mortgage receivable 551
Proceeds from sale of property and equipment 271,600
Additions to property and equipment (217,042)
---------
Net Cash Provided by Investing Activities 241,686
FINANCING ACTIVITIES
Net increase in line of credit 343,000
Payments on notes payable (251,612)
Increase in due from stockholders (130,021)
Decrease in due from related parties 19,033
---------
Net Cash Used in Financing Activities (19,600)
---------
NET INCREASE IN CASH 95,585
CASH - BEGINNING OF YEAR -
---------
CASH - END OF YEAR $ 95,585
=========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for taxes $ -
=========
Cash paid for interest $ 58,365
=========
</TABLE>
See auditors' report and notes to financial statements.
4.
<PAGE> 9
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
The Company
The Company operates as a third party claims administrator processing
a wide range of claim types including medical, workers compensation,
general liability, product liability, professional malpractice and
other insurance claims for its clients throughout the United States.
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiary after elimination of all
significant intercompany transactions.
Cash Flows
The Company generally considers all highly liquid investments
purchased with a maturity of three months or less to be cash
equivalents for purposes of the statements of cash flows.
Accounts Receivable
The Company has elected to use the direct write-off method of
accounting for bad debts and, accordingly, an allowance for doubtful
accounts has not been recorded. The difference between the two methods
has been deemed immaterial.
Income Taxes
The Company accounts for certain income and expense items differently
for financial reporting and income tax purposes. Provisions for
deferred taxes are made in recognition of these temporary differences.
The most significant difference results from the net operating loss.
Property and Depreciation
The Company depreciates the cost of property and equipment over the
estimated useful lives of the related assets. The estimated useful
lives and depreciation methods for the principal property and
equipment classifications are as follows:
<TABLE>
<CAPTION>
Estimated
Classification Useful Lives Method
-------------- ------------ ------
<S> <C> <C>
Furniture and fixtures 7 Years Double-declining balance
Data processing equipment 5-7 Years Straight-line, double
declining balance
Automobiles 3-5 Years Straight-line
Building and improvements 27 Years Straight-line
</TABLE>
Maintenance and repairs are charged to expense as incurred. Renewals
and betterments are capitalized. The cost of property retired or sold
and the related accumulated depreciation are removed from the
applicable accounts, and the resulting gains and losses are reflected
in the consolidated statements of income.
5.
<PAGE> 10
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
Revenue Recognition
Scibal Associates contracts with its clients to process various types
of casualty claims. Generally, the contracts provide that for an
agreed upon annual fee, Scibal will administer up to a specified
number of claims. Scibal recognizes this revenue on a pro rata basis
throughout the billing year. If fewer than the estimated number of
claims are administered, Scibal is entitled to the full amount of the
billing. In the event more claims than estimated are administered, the
client will be billed on a predetermined amount per file, per file
type, per state basis. Additionally, if a file remains open for more
than two years, Scibal is entitled to an additional billing for the
file on a one-time basis. Both of these situations are captured in
"overage billings" from an analysis of Work in Process. This analysis
compares the total number of files processed in a completed contract
year with the total contracted files to determine if an overage
billing is appropriate.
Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Major Customer
The Company derived approximately 18% of its total revenues for the
year ended September 30, 1995, from one customer.
NOTE 2. RETIREMENT PLAN
The Company has in effect a 401K plan covering substantially all
eligible employees. For the year ended September 30, 1995, the Company
elected not to match payment of certain "before tax contributions"
made by employees.
NOTE 3. INCOME TAXES
At September 30, 1995, the Company had available to it approximately
$360,000 of net operating loss carryforwards.
The provisions for income taxes consist of the following:
<TABLE>
<S> <C> <C>
Currently payable $ -
Current deferred -
Noncurrent deferred 16,700
--------
$ 16,700
========
</TABLE>
Effective October 1, 1994, the Company adopted FAS No. 109,
"Accounting for Income Taxes," which changed the manner of accounting
for income taxes.
Deferred income taxes consisted of the following at September 30,
1995:
Deferred tax asset due to net
operating loss carryforward $147,000
========
6.
<PAGE> 11
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 4. MORTGAGE RECEIVABLE
<TABLE>
<S> <C> <C>
Mortgage receivable due in 59 equal monthly
payments of $1,056 including interest at 9%
with a balloon payment due in September 1997
and secured by the related property $128,866
Less: Current portion 1,165
--------
Non-current $127,701
========
</TABLE>
Subsequent to the balance sheet date this mortgage receivable was paid
off.
NOTE 5. INVESTMENTS
The Company has interests in certain long term investments. These
investments are carried at cost. As of September 30, 1995, the Company
is attempting to liquidate these investments.
NOTE 6. RELATED PARTIES
The Company has non-interest bearing unsecured loans with various
related parties. As of September 30, 1995, the Company is negotiating
specific repayment terms with all related parties.
NOTE 7. DUE FROM STOCKHOLDERS
Included in due from stockholders at September 30, 1995, is $86,437
due from a minority stockholder. This amount is interest bearing and
is secured by the stockholder's five shares of Scibal Associates, Inc.
stock. All other amounts due from stockholders are unsecured and
non-interest bearing.
NOTE 8. LINE OF CREDIT
The Company maintains a $500,000 credit line with a bank in order to
meet seasonal working capital requirements and other financing needs
as they arise. At September 30, 1995, short term borrowings on this
line totaled $493,000 which is due on demand with interest at prime
(8.75% at September 30, 1995).
Subsequent to the balance sheet date, the Company has entered into a
financing arrangement with a new bank to restructure their existing
debt and obtain additional financing for future growth. The total
amount of the facility is $950,000.
7.
<PAGE> 12
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 9. NOTES PAYABLE
<TABLE>
<S> <C> <C>
Mortgage payable bank, due in equal monthly
payments of $1,124 including interest at
10.13%. Secured by related property and
maturing February, 2020 $122,388
Mortgage payable bank, due in equal monthly
Payments of $637 plus interest at 10%.
Secured by related property and maturing
March 2012 126,143
--------
248,531
Less: Current portion 8,856
--------
Non-current portion $239,675
========
Future minimum payments on these notes are as follows:
1996 $ 8,856
1997 8,964
1998 9,126
1999 9,283
2000 and thereafter 212,282
-------
$248,531
========
</TABLE>
Subsequent to the balance sheet date, these mortgage payables were
paid off as the related propreties were sold.
NOTE 10. COMMITMENTS AND CONTINGENCIES
GUARANTEE
In September, 1995 the Company entered into an agreement with a
minority stockholder of the company to purchase the four shares held
by that stockholder for a total of $48,000. This amount has been
guaranteed by the Company. Subsequent to the balance sheet date, this
Treasury Stock transaction has been paid off.
COMPUTER LEASE
In November 1986, the Company entered into a lease agreement with
XL/Datacomp (XLD), a computer consultant, for certain computer
equipment. At various times from November 1986 through March, 1994
additions and other changes were made to the equipment and lease.
Under the current terms of the lease, as of March, 1994, the company
is obligated to pay $14,215 per month for a sixty month term
commencing in March of 1994.
On August 17, 1995, the company filed suit in the Superior Court of
New Jersey against XL/Datacomp (XLD) and its assignees maintaining
that XLD knowingly leased them obsolete, substandard equipment which
XLD knew to be inadequate for the company's needs. In addition, the
company claims that XLD has knowingly and substantially overcharged
for this equipment. The company is seeking to recover damages and
costs related to this lease and to be relieved of any future
obligations under this lease. As of the date of these financial
statements, corporate counsel is not able to express an opinion as to
the possible outcome of the suit.
8.
<PAGE> 13
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 10. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Building Leases
The company and its subsidiary lease office space under various
operating leases expiring from June 1996 through January 2001.
Future minimum payments under these leases are as follows:
<TABLE>
<S> <C> <C>
1996 $ 337,440
1997 314,275
1998 231,314
1999 197,420
2000 and thereafter 263,227
----------
$1,343,676
==========
</TABLE>
Subcontract
The Company contracts with other Third Party Administrators to process
certain claims in other states. In states with an unknown, low volume
of expected claims, these Associate offices are paid on a per-claim
basis as incurred. For states with an expected high volume of claims,
the Associate offices are paid a fixed monthly amount for up to the
estimated number of claims to be processed annually. For Fiscal 1995
the contractual amounts paid out to these Associate offices was
$773,530. The estimated contractual payments for fiscal 1996 are
$708,788.
Imprest Funds
As a third party administrator, the Company's clients deposit funds
with the Company to administer the clients' claims. The Company places
these funds in various accounts set up solely for the purpose of
paying that client's claims. As of September 30, 1995, there was
approximately $4,500,000 on hand in these imprest accounts. For the
year ended September 30, 1995, approximately $70 million flowed
through these accounts of which less than one percent (1%) was
unreconciled as of September 30, 1995.
NOTE 11. PRIOR PERIOD ADJUSTMENT
Retained earnings at the beginning of fiscal 1995 has been adjusted to
correct errors in the recognition of income and certain expenses
related to income earned but unbilled during 1994 and prior years. Had
the errors not been made, net income for the year ended September 30,
1994 would have been decreased by $287,923 net of taxes of $163,700.
9.
<PAGE> 14
SCIBAL ASSOCIATES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 12. SUBSEQUENT EVENTS
Mortgage Receivable - In February 1996, the mortgage receivable of
$128,866 was sold at a discount for a net amount of $109,780.
Land, Building and Related Mortgages Payable - In December 1995, the
Company sold its interest in real property located in Pennsylvania for
$123,000. In May 1996, the Company sold its interest in land and
building located in Wildwood, New Jersey for $196,000.
As described in Note 9, the related mortgages payable were paid off
when these assets were sold.
Plan of Reorganization - As part of a plan of reorganization and
capitalization dated June 30, 1996, the controlling shareholder of the
Company tendered his shares to D.C. Partners Ltd., Inc. in return for
equity. Subsequent to that transaction D.C. Partners Ltd., Inc.
infused $700,000 in equity cash to the Company.
Concurrent with this transaction, D.C. Partners Ltd., Inc. will
surrender 49 percent of its common equity, representing 4.9 percent of
the voting shares to US Insurance Brokers, Inc. ("USIB"), a wholly
owned subsidiary of Century Industries, Inc.
Pursuant to the terms of the reorganization, once these transactions
are completed DC Partners Ltd., Inc. will be merged into "USIB" and
"USIB" will be the surviving company.
10.
