Form 10-Q
SECURITIES AND EXCHANGE COMMISION
WASHINGTON, D.C.
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QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the Quarter ended October 31, 2000 Commission file No. 0-0767
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LINCOLN INTERNATIONAL CORPORATION
(Exact Name of Registrant as specified in its charter)
Kentucky 61-0575092
(State of other Jurisdiction (I.R.S. Employer
incorporation or organization) Identification Number)
2200 Greene Way, Suite 101 40220
Louisville, Kentucky (Zip Code)
(Address or principal executive offices)
(Registrants Telephone Number, Including Area Code) (502) 671-0010
Indicate by check whether the registrant (1) has filed reports required to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or of such shorter period that the registrant was required
to file such reports) and has been subject to such filing requirements for the
past 90 days.
YES |X| NO
Indicate the numbers of shares outstanding of each of the issuer' classes of
common stock, as of the close of the period covered by this report: 7972 of the
(no-par) voting common stock.
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LINCOLN INTERNATIONAL CORPORATION
INDEX
Pages
Part I: Financial Information
Item 1. Financial Statements:
Consolidated Balance Sheet as of October 31, 2000
and July 31, 2000 3
Consolidated Statement of Income for the quarters
and year-to-date periods ended October 31, 2000
and October 31, 1999 4 - 5
Consolidated Statement of Cash Flows for the
year-to-date periods ended October 31, 2000
and October 31, 1999 6
Notes to the Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8 - 10
Part II: Other Information
Item 6 11
Signature 12
Selected Financial Data 13
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<TABLE>
<CAPTION>
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
(Unaudited)
10/31/00 7/31/00
-------- -------
ASSETS
Current assets:
<S> <C> <C>
Cash $ 54,550 $ 86,802
Other receivables 131,339 99,998
Prepaid expenses 60,157 50,819
------ ------
Total current assets 246,046 237,619
Net property, plant and equipment 3,061,401 3,091,224
Noncurrent asset: Deferred tax asset 497,779 385,590
Noncurrent asset: Net deferred cost 13,983 13,983
------ ------
Total assets $3,819,209 $3,728,416
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 800,000 $ 500,000
Current maturities of long-term debt 23,732 29,640
Obligation under capital lease 2,322 3,048
Accounts payable 74,875 78,592
Accrued expenses 32,528 47,995
------ ------
Total current liabilities 933,457 659,275
Long-term debt, less current maturities 69,575 70,784
Obligation under capital lease 14,542 14,727
Deferred Income Taxes - Noncurrent 776,245 776,245
Stockholders' equity
Common Stock
Voting 7972 shares O/S 1,879,898 1,879,898
Retained earnings 341,247 487,611
Less minority interest in subsidiary (195,755) (160,124)
-------- --------
Total stockholders' equity 2,025,390 2,207,385
--------- ---------
Total liabilities and stockholders' equity $3,819,209 $3,728,416
========= =========
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
3
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<TABLE>
<CAPTION>
LINCOLN INTERNATIONAL CORPORATION
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED OCTOBER 31
(UNAUDITED)
10/31/00 10/31/99
-------- --------
Revenues:
<S> <C> <C>
Net service and operating revenues $ 224,982 $ 117,174
--------- ---------
224,982 117,174
Cost and expenses:
Cost of service and operating revenues 346,787 91,571
Operating, general and administrative expenses 157,742 113,340
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504,529 204,911
------- -------
Income - Loss from operations (279,547) (87,737)
------- -------
Other income - expense:
Interest expense (14,636) 4,609
Miscellaneous 0 3,200
------- -------
(14,636) 7,809
Minority Interest in net loss of subsidiary 35,631 6,361
------- -------
Loss before income taxes (258,552) (73,567)
Provision for income taxes 112,189 21,042
------- -------
Net loss $ (146,363) $ (52,525)
========== =========
Net income - loss per common share $ (18.36) $ (6.59)
======== =======
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
4
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<TABLE>
<CAPTION>
LINCOLN INTERNATIONAL CORPORATION
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED OCTOBER 31
(UNAUDITED)
10/31/00 10/31/99
-------- --------
Revenues:
<S> <C> <C>
Net service and operating revenues $ 224,982 $ 117,174
--------- ---------
224,982 117,174
Cost and expenses:
Cost of service and operating revenues 346,787 91,571
Operating, general and administrative expenses 157,742 113,340
------- -------
504,529 204,911
------- -------
Income - Loss from operations (279,547) (87,737)
------- -------
Other income - expense:
Interest expense (14,636) 4,609
Miscellaneous 0 3,200
------- -------
(14,636) 7,809
Minority Interest in net loss of subsidiary 35,631 6,361
------- -------
Loss before income taxes (258,552) (73,567)
Provision for income taxes 112,189 21,042
------- -------
Net loss $ (146,363) $ (52,525)
========== =========
Net income - loss per common share $ (18.36) $ (6.59)
======== =======
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
5
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<TABLE>
<CAPTION>
LINCOLN INTERNATIONAL CORPORATION
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED TO OCTOBER 31
(Unaudited)
2000 1999
---- ----
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) $ (146,364) $ (52,525)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 38,298 18,857
Minority interest in net loss of subsidiary (35,631)
Other receivables (31,340) 0
Prepaid expenses (9,338) 0
Accounts payable (3,717) (3,312)
Accrued expenses (15,467) (6,170)
Income Taxes (112,189) 0
-------- -------
Total adjustments (169,384) 9,375
-------- -----
Net cash used in operating activities (315,748) (43,150)
Cash flows from investing activities:
(Purchases of) Sales of property and equipment (8,475) 0
(Purchases of) Sale of Investment in a Company 0 (200,000)
------ --------
Net cash used in investing activities (8,475) (200,000)
Cash flows from financing activities:
Net borrowings (repayments) under
short term notes payable 300,000 0
Proceeds from the issuance of common stock 0 0
Principal payments on long-term debt (8,029) 0
------ -------
Net cash provided by financing activities 291,971 0
------- -------
Net decrease in cash (32,252) (243,150)
Cash, beginning of year 86,802 396,465
------ -------
Cash, end of period $ 54,550 $ 153,315
======== =========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest $ 14,636 $ 0
======== =========
</TABLE>
The accompanying notes are an integral part
of the Consolidated Financial Statements.
6
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LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - MANAGEMENT'S STATEMENT
-------------------------------
In the opinion of management the accompanying unaudited financial statements
contain all adjustments (all of which are normal and recurring in nature)
necessary to present fairly the financial position of Lincoln International
Corporation at October 31, 2000 and July 31, 2000 and the results of operations
for the quarters and year to date periods ended October 31, 2000 and October 31,
1999. The notes to the consolidated financial statements contained in the 2000
Annual Report to Shareholders and incorporated by reference into the 2000 Form
10-K should be read in conjunction with these consolidated financial statements.
NOTE 2 - SUBSEQUENT EVENTS
--------------------------
On November 2, 2000, Lincoln International Corporation acquired the assets of
Vena Marks & Associates, LLC, a Louisville, Kentucky bookkeeping operation. The
approved purchase price of the assets of Vena Marks & Associates, LLC was
$180,000, with $100,000 payable in cash and 200 shares of Lincoln International
Corporation Common Stock. Lincoln International Corporation hired the employees
of Vena Marks & Associates, LLC.
On December 1, 2000, Lincoln International Corporation merged with Accounting
USA, Inc., of which Lincoln International Corporation owns 75%. In exchange for
the remaining 25%, the minority interest was given 600 shares of Lincoln
International Corporation common stock.
7
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LINCOLN INTERNATIONAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OCTOBER 31, 2000
Real Estate Business:
Net revenue from the real estate rentals increased by approximately $10,775, or
12.5% during the quarter ended October 31, 2000 as compared to the quarter ended
October 31, 1999.
Total operating costs for the quarter ended October 31, 2000 decreased by
approximately $2,781, or 1.9% as compared to the quarter ended October 31, 1999.
No significant cost variances were noted.
Proposed Sale of Real Estate:
The real estate owned by Lincoln International Corporation located at 2300
Greene Way, 2200 Greene Way, and 2211 Greene Way, Louisville, Kentucky had been
purchased under IRS Section 1031 subsequent to the sale of the Bourbon Stock
Yard property in order to defer capital gains on the sales proceeds. On November
2, 2000 Lincoln International Corporation entered into a contract to sell 2300
Greene Way to Winebrenner Capital Partners, LLC a tenant in building 2300, Suite
200, for a sale price of $85.00 per square foot for a total sale price of One
Million Sixty-Two Thousand Five Hundred Dollars ($1,062,500). As a part of the
transaction Lincoln International Corporation will purchase Two Hundred Fifty
Thousand Dollars ($250,000) stock in Winebrenner Capital Partners, LLC which is
being offered under an intrastate offering at $5 per share and representing one
percent (1%) of the company. Lincoln International Corporation paid slightly
less than Sixty-Three Dollars ($63.00) per square foot for the 12,500 sq ft
building for a total of Seven Hundred Eighty-Seven Thousand Five Hundred Dollars
($787,500). The expected capital gain from the sale of 2300 Greene Way would be
off-set by operating losses of the company reducing or eliminating any potential
tax liability. The sale is conditioned upon obtaining satisfactory financing,
appraisals, environmental studies, etc. If the sale of 2300 Greene Way is
consummated, it is the intent of management to finance the real estate at 2200
Greene Way and 2211 Greene Way under a long term fixed rate mortgage and to use
the proceeds of that mortgage loan to eliminate the existing line of credit
which has been used to capitalize Accounting USA, Inc. The sale proceeds from
the sale of 2300 Greene Way could be used for other investments and/or
operations.
Consolidated Operations:
On August 6, 1999, the Company's Board of Directors approved the investment of
$1,500,000 in Accounting USA, Inc. for 75% of its common stock. Accounting USA,
Inc. is a company that provides accounting services for small businesses. The
Company has invested $1,150,000 as of October 31, 2000.
Net revenue from Accounting USA's operations increased by approximately $97,034,
or 314% during the quarter ended October 31, 2000 as compared to the quarter
ended October 31, 1999.
8
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LINCOLN INTERNATIONAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OCTOBER 31, 2000
Total operating costs for the quarter ended October 31, 2000 increased by
approximately $302,399, or 535% as compared to the quarter ended October 31,
1999. Significant investments in computer systems, marketing programs and
personnel were the major cost areas noted having a significant increase.
The Company had no other capital commitments at October 31, 2000 except as
otherwise noted in this financial statement report.
Litigation Report:
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 Thurman L. Sisney, David Barhorst (who resigned June of 1998) and Mr.
Richard 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. On December 23, 1999
the Court granted the plaintiffs Motion and allowed Terry Kennedy to be
substituted for Sarah Forree. On February 18, 2000 the company filed an Amended
Motion to Dismiss. Defendants have also raised 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, our answer will be filed to the complaint. On March 31, 2000 the
Plaintiffs filed their Response to Defendants Motion to Dismiss. At this time,
the court has not ruled on the motions before it.
Merger Of Accounting USA, Inc. With And Into Lincoln International Corporation:
On October 30, 2000 the Board of Directors of Lincoln International Corporation
approved a Plan of Merger whereby Accounting USA, Inc., a Nevada corporation
operating out of Louisville, Kentucky of which Lincoln International Corporation
owns Seventy-five (75%), would be merged with and into Lincoln International
Corporation. Accounting USA, Inc. would continue to do business under the name
Accounting USA Inc. Mr. Brian McDonald, President, under the Plan of Merger,
would receive 600 shares of Lincoln International Corporation stock in exchange
for his 25% ownership of Accounting USA, Inc. As part of the transaction, Mr.
Brian McDonald would be given an option for an additional 200 shares of Lincoln
International Corporation common stock as part of an employment contract to be
negotiated subsequent to the merger being effected. The following Resolution was
adopted by the Lincoln International Corporation Board of Directors on October
30, 2000.
WHEREAS Lincoln International Corporation (the "corporation") owns seventy- five
percent (75%) of Accounting USA, Inc.; and
9
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LINCOLN INTERNATIONAL CORPORATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OCTOBER 31, 2000
WHEREAS Directors of both Accounting USA, Inc. and the corporation believe that
the merger of Accounting USA with and into Lincoln International Corporation
would be an advantageous and beneficial to the shareholders of both companies;
NOW THEREFORE, BE IT RESOLVED
That Accounting USA, Inc., a seventy-five percent (75%) owned subsidiary of
Lincoln International Corporation be merged into Lincoln International
Corporation according to the terms and conditions of the Plan of Merger. On
November 1, 2000 the Board of Directors of Accounting USA, Inc. and all
Shareholders of Accounting USA, Inc. unanimously approved the Plan of Merger.
The merger was complete upon appropriate filings with the Secretaries of State
in the Commonwealth of Kentucky and the state of Nevada. On November 28, 2000
the Plan of Merger and Articles of Merger were filed with the Secretary of State
for the Commonwealth of Kentucky; and on December 1, 2000 the Plan of Merger and
Articles of Merger were filed with the Secretary of State for the state of
Nevada. The merger, therefore, became effective on December 1, 2000.
Acquisition Of Assets Of Vena Marks And Associates, LLC:
On October 30, 2000 the Board of Directors of Lincoln International Corporation
unanimously approved the acquisition of the assets of Vena Marks & Associates,
LLC a Louisville, Kentucky bookkeeping operation having approximately $260,000
in annual billings and servicing approximately 30 clients. The approved purchase
price of the assets of Vena Marks & Associates, LLC was One Hundred Eighty
Thousand Dollars ($180,000) with One Hundred Thousand Dollars ($100,000) payable
in cash, and 200 shares of Lincoln International Corporation Common Stock. The
purchase price of Vena Marks & Associates, LLC assets equates to approximately
seventy-five cents ($.75) for each dollar in revenue. The employees of Vena
Marks & Associates, LLC would be terminated and then re-hired by Accounting USA,
Inc. for a trial period. On November 2, 2000 acquisition by Lincoln
International Corporation of the assets of Vena Marks & Associates, LLC was
completed, and the employees of Vena Marks & Associates, LLC were hired by
Accounting USA, Inc. Bookkeeping and payroll clients of Vena Marks & Associates,
LLC will provide the opportunity to cross sell Accounting USA, Inc.'s
bookkeeping services to payroll clients and the opportunity of management to
evaluate acquisition as a way of future growth for Accounting USA, Inc.
10
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LINCOLN INTERNATIONAL CORPORATION
PART II: Other Information
Item 6.
NO DIVIDENDS WERE PAID BY THE COMPANY DURING THE INTERIM PERIOD.
Lincoln International Corporation was not required to file a Form 8K during the
current quarter.
11
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LINCOLN INTERNATONAL CORPORATION
/s/ LEE SISNEY
----------------------------------------
Lee Sisney, President
/s/ RICHARD J. FROCKT
----------------------------------------
Richard J. Frockt, Treasurer
Dated this 13th day of December, 2000
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