<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
July 16, 1997
Commission File Number: 0-9969
Century Industries, Inc.
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
District of Columbia 54-1100941
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.)
</TABLE>
<TABLE>
<S> <C>
45034 Underwood Lane
Sterling, Va. 20166
(Mail) P.O. Box 319
Sterling, Va. 20167
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
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
<TABLE>
<S> <C>
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Voting Stock NASDAQ Bulletin Board
</TABLE>
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 is filing audited consolidated financial statements of one
of the Registrant's subsidiary companies, DC Partners, Ltd., Inc., at September
30, 1996.
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.
July 16, 1997
Century Industries, Inc.
---------------------------------------------
Theodore L. Schwartzbeck, President & CEO
-2-
<PAGE> 3
D.C. PARTNERS, LTD, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
<PAGE> 4
D.C. PARTNERS, LTD., 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 Income and Retained Earnings 3
Consolidated Statement of Cash Flows 4
Notes to Financial Statements 5 - 11
</TABLE>
<PAGE> 5
[COHEN, FRIEDMAN, DORMAN, SPECTOR & CO. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
To the Stockholders
D.C. Partners, Ltd., Inc. and Subsidiary
Route 9 and Mays Landing Road
Somers Point, New Jersey
We have audited the accompanying consolidated balance sheet of D.C. Partners,
Ltd., Inc. and Subsidiary (a New Jersey corporation) as of September 30, 1996
and the related statements of income, 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 D.C.
Partners, Ltd., Inc. and Subsidiary as of September 30, 1996, and the results
of its operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ COHEN, FRIEDMAN, DORMAN, SPECTOR & CO.
COHEN, FRIEDMAN, DORMAN, SPECTOR & CO.
Certified Public Accountants
Union, New Jersey
April 13, 1997
<PAGE> 6
D.C. PARTNERS, LTD., INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash $ 199,259
Accounts receivable 926,218
Work in process 188,486
Marketable securities 307,371
Prepaid expenses 22,445
----------
Total Current Assets $1,643,779
PROPERTY AND EQUIPMENT
Building improvements 54,459
Furniture and equipment 910,014
Software 749,830
Equipment held under capital leases 438,739
Vehicles 66,051
----------
2,219,093
Less: Accumulated depreciation (557,241)
----------
1,661,852
OTHER ASSETS
Investments 102,500
Due from related parties 357,036
Due from stockholders 161,931
Security deposits 54,914
Other assets 59,270
Deferred tax asset 132,000
----------
867,651
----------
$4,173,282
==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Line of credit $ 100,000
Current maturities of long term debt 176,931
Current maturities of capital lease obligations 144,302
Accounts payable 1,201,641
Deferred revenue 266,194
Accrued liabilities 557,735
----------
$2,446,803
LONG TERM DEBT
Notes payable, less current maturities 563,569
Capital lease obligations, less current maturities 192,506
----------
756,075
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock
Class "A" - 5,000 shares authorized,
2,500 shares issued, $1 par value 2,500
Class "B" - 5,000 shares authorized,
1,290 issued, $1.862 par value 2,402
Paid in capital 672,216
Retained earnings 293,286
----------
970,404
----------
$4,173,282
==========
</TABLE>
See auditors' report and notes to financial statements.
2.
<PAGE> 7
D.C. PARTNERS, LTD., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C>
REVENUES $10,718,163
COST OF SERVICES PROVIDED $5,414,967
OPERATING EXPENSES 4,686,316
----------
10,101,283
-----------
INCOME FROM OPERATIONS 616,880
OTHER INCOME (EXPENSE) (575,342)
-----------
INCOME BEFORE PROVISION FOR INCOME TAXES 41,538
PROVISION FOR INCOME TAXES 15,000
-----------
NET INCOME 26,538
RETAINED EARNINGS - BEGINNING OF YEAR 573,479
LESS: PRIOR PERIOD ADJUSTMENT (306,731)
-----------
RETAINED EARNINGS - END OF YEAR $293,286
===========
</TABLE>
See auditors' report and notes to financial statements.
3.
<PAGE> 8
D.C. PARTNERS, LTD., INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
<TABLE>
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 26,538
Adjustment to Reconcile Net Income to Net Cash
Provided by Operations:
Depreciation and amortization $ 187,381
Decrease in deferred tax asset 15,000
Loss on sale of fixed assets 36,040
Increase in accounts receivable (400,940)
Decrease in work in process 6,864
Increase in prepaid expenses (12,298)
Increase in security deposits (20,426)
Increase in other assets (59,270)
Increase in accounts payable 742,349
Increase in deferred revenue 266,194
Increase in accrued liabilities 29,624
-----------
Total adjustments 790,518
-----------
Net Cash Provided by Operations 817,056
INVESTING ACTIVITIES
Decrease in investments 65,682
Purchase of available-for-sale securities (307,371)
Decrease in mortgage receivable 128,866
Proceeds from sale of property and equipment 319,000
Additions to property and equipment (960,492)
-----------
Net Cash Used by Investing Activities (754,315)
FINANCING ACTIVITIES
Net decrease in line of credit (393,000)
Payments on notes payable (248,531)
New borrowings 740,500
Payments on capital leases (101,931)
Proceeds on issuance of common stock 700,000
Repurchase of common stock (123,000)
Decrease in due from stockholders 12,289
Increase in due from related parties (238,663)
Prior period adjustment (306,731)
-----------
Net Cash Provided by Financing Activities 40,933
-----------
NET INCREASE IN CASH 103,674
CASH - BEGINNING OF YEAR 95,585
-----------
CASH - END OF YEAR $ 199,259
===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for taxes $ 2,600
===========
Cash paid for interest $ 74,306
===========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Acquisitions computer equipment under capital leases $ 438,739
===========
</TABLE>
See auditors' report and notes to financial statements.
4.
<PAGE> 9
D.C. PARTNERS, LTD., INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
GENERAL
D.C. Partners Ltd., Inc. was incorporated June 1996 in the
State of New Jersey. As part of a plan of reorganization and
capitalization dated June 30, 1996, the controlling
stockholders of Scibal Associates, Inc. tendered their shares
to D.C. Partners Ltd., Inc. in return for equity.
Pursuant to the Plan and Agreement of Reorganization and
Capitalization between Century Industries, Inc., U.S.
Insurance Brokers, Inc. and D.C. Partners Ltd., Inc., U.S.
Insurance Brokers, Inc. purchased for $700,000 in cash as an
investment in D.C. Partners Ltd., Inc. forty-nine percent
(49%)of the equity (Class "A" common) of D.C. Partners Ltd.,
Inc. and four and nine-tenths percent (4.9%) of the voting
right (Class "B" common) of D.C. Partners Ltd., Inc.
Subsequent to the balance sheet date, the equity in the
Company was transferred to U.S. Insurance Brokers, Inc. by the
individual shareholders. U.S. Insurance Brokers, Inc. is a
wholly owned subsidiary of century industries, Inc.
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.
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.
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. Bad debt
expense for the year ended September 30, 1996 was
approximately $23,000.
5.
<PAGE> 10
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
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 carryforwards.
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
and software 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.
REVENUE RECOGNITION
The Company contracts with its clients to process various
types of casualty claims. Generally, the contracts provide
that for an agreed upon annual fee, the Company will
administer up to a specified number of claims. The Company
recognizes this revenue on a pro rata basis throughout the
billing year. If fewer than the estimated number of claims
are administered, the Company 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, on a per file type, per state basis.
Additionally, if a file remains open for more than two years,
the Company 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.
In addition, certain revenues are billed in advance and these
advance charges are recorded and presented in the financial
statements as deferred revenue until earned.
6.
<PAGE> 11
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
ESTIMATES AND ASSUMPTIONS
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that effect 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.
CASH
From time to time during the year ended September 30, 1996,
the Company maintained cash balances in excess of Federally
insured limits.
MAJOR CUSTOMER
The Company derived approximately 27% of its total revenues
for the year ended September 30, 1996 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,
1996, the Company elected not to match payment of certain
"before tax contributions" made by employees.
NOTE 3. INCOME TAXES
At September 30, 1996, the Company had available to it
approximately $330,000 of net operating loss carryforwards.
The provisions for income taxes consist of the following:
<TABLE>
<S> <C>
Currently payable $ -
Current deferred -
Noncurrent deferred 15,000
--------
$ 15,000
========
</TABLE>
Deferred income taxes consisted of the following at September
30, 1996:
<TABLE>
<S> <C>
Deferred tax asset due to net
operating loss carryforward $132,000
========
</TABLE>
NOTE 4. MARKETABLE SECURITIES
This represents approximately 102,000 shares of common stock
of Century Industries, Inc. which was valued at $3.00 per
share as of September 30, 1996.
7.
<PAGE> 12
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 5. INVESTMENTS
The Company has interests in certain long term investments.
These investments are carried at cost. As of September 30,
1996, the Company is attempting to liquidate these
investments.
NOTE 6. DUE FROM RELATED PARTIES
This represents advances made to various related parties.
These advances are non-interest bearing and have no specific
repayment terms.
NOTE 7. DUE FROM STOCKHOLDERS
The Company has non-interest bearing unsecured loans with its
stockholders with no specific repayment terms. Subsequent to
the balance sheet date, these loans were repaid.
NOTE 8. LINE OF CREDIT
The Company maintains a $200,000 credit line with a bank in
order to meet seasonal working capital requirements and other
financing needs as they arise. At September 30, 1996, short
term borrowings on this line totaled $100,000 which is due on
demand with interest at prime plus 1%.
NOTE 9. LONG-TERM DEBT
Long-term debt at September 30, 1996 consisted
of the following:
<TABLE>
<S> <C>
$500,000 note payable, due in equal monthly
payments of $8,333 plus interest at prime
plus 1% for sixty (60) months due through
August 2001, secured by all assets of the
Company $500,000
$250,000 guidance note to finance new capital
expenditures, due in equal monthly installments
plus interest at prime plus 1% for
thirty-six (36) months, secured by all assets
of the Company 213,000
$27,500 note payable due in monthly installments
of $691 including interest at a rate
of 9.5% per annum for forty-eight (48) months
through August 2000 27,500
--------
740,500
Less: Current maturities 176,931
--------
$563,569
========
</TABLE>
8.
<PAGE> 13
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 9. LONG-TERM DEBT (CONTINUED)
Future minimum payments on long-term debts is as follows:
<TABLE>
<S> <C>
1997 $176,931
1998 177,521
1999 178,168
2000 107,880
2001 and thereafter 100,000
--------
$740,500
========
</TABLE>
NOTE 10. OBLIGATIONS UNDER CAPITAL LEASES
The Company is the lessee of computer equipment under capital
leases expiring in 1999. The assets and liabilities under
capital leases are recorded at the lower of the present value
of the minimum lease payments or the fair value of the asset.
The assets are depreciated over their estimated productive
lives. Depreciation of assets under capital leases is
included in depreciation expense for 1996.
Depreciation on assets under capital leases charged to expense
in 1996 was $76,779.
Following is a summary of property held under capital leases:
<TABLE>
<S> <C>
Computer equipment $438,739
Less: Accumulated depreciation (76,779)
--------
$361,960
========
</TABLE>
Minimum future lease payments under capital leases as of
September 30, 1996 for each of the next five years and in the
aggregate are:
<TABLE>
<CAPTION>
YEAR/MONTHS ENDED SEPTEMBER 30,
-------------------------------
<S> <C>
1997 $163,212
1998 163,212
1999 38,313
--------
Total minimum lease payments 364,737
Less: Amount representing interest (27,929)
--------
Present value of net minimum lease payment $336,808
========
</TABLE>
The interest rate on capitalized leases range from 5.5% to
12.5% and is imputed based on the lower of company's
incremental borrowing rate at the inception of each lease or
the lessor's implicit rate of return.
9.
<PAGE> 14
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 11. CAPITAL STOCK TRANSACTIONS
For the year ended September 30, 1996, the Company had the
following capital stock transactions;
<TABLE>
<CAPTION>
COMMON PAID-IN
STOCK CAPITAL
------ -------
<S> <C> <C>
Beginning balance - October 1, 1995 $ 950 $ 99,168
Additions:
Issuance of 2,500 shares Common "A" 2,500 -
Issuance of 1,290 shares Common "B" 2,402 -
Additional paid in capital - 695,098
--------- ---------
5,852 794,266
Repurchase of 8 shares of common stock (80) (122,920)
Adjustment pursuant to plan of
reorganization (870) 870
--------- ---------
Ending balance - September 30, 1996 $ 4,902 $ 672,216
========= =========
</TABLE>
NOTE 12. COMMITMENTS AND CONTINGENCIES
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, 1996, 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.
BUILDING LEASES
The company and its subsidiary lease office space under
various operating leases expiring
Future minimum payments under these leases are as follows:
<TABLE>
<S> <C>
1997 $ 314,275
1998 231,314
1999 197,420
Thereafter 263,227
----------
$1,006,236
==========
</TABLE>
10.
<PAGE> 15
D.C. PARTNERS, LTD., AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
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.
NOTE 13. SUBSEQUENT EVENTS
Subsequent to the balance sheet the following transactions
took place;
Due from stockholder in the amount of $161,931 was repaid
with options to purchase additional shares of common stock in
Century Industries, Inc.
$200,000 was advanced from a stockholder to the company
as a loan for working capital.
NOTE 14. PRIOR PERIOD ADJUSTMENT
Retained earnings at the beginning of fiscal 1996 has been
adjusted to correct errors in the recognition of income billed
but not earned (deferred revenue) during 1995.
11.
