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Previous: UNITED SHIELDS CORP/OH/, 10KSB40/A, 2000-05-18 |
Next: UNITED SHIELDS CORP/OH/, 10KSB40/A, 2000-05-18 |
United Shields Corporation
And Subsidiaries
Consolidated Financial Statements
Years Ended December 31,1999, December 25,1998 and December 31, 1997
United Shields Corporation
and Subsidiaries
Contents
Consolidated Financial Statements
| Report of Independent Certified Public Accountants | 3 |
| Consolidated Balance Sheets | 4 - 5 |
| Consolidated Statements of Operations | 6 |
| Consolidated Statements of Stockholders' Equity (Deficit) | 7 |
| Consolidated Statements of Cash Flows | 8 - 9 |
| Notes to Consolidated Financial Statements | 10 |
To the Board of Directors and Stockholders
United Shields Corporation
We have audited the accompanying consolidated balance sheets of United Shields Corporation (a Colorado corporation) and Subsidiaries as of December 31,1999 and December 25,1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 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 auditing standards generally accepted in the United States. 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 United Shields Corporation and Subsidiaries as of December 31,1999 and December 25,1998, and the results of its consolidated operations and its consolidated cash flows for each of the three years in the period ended December 31,1999 in conformity with accounting principles generally accepted in the United States.
GRANT THORNTON LLP
Cincinnati, Ohio
February 11, 2000
United Shields Corporation
and Subsidiaries
Consolidated Balance Sheets
| As of |
December 31, 1999 |
December 25, 1998 | |
| ------------------------------------------------------------------------------------------------------------------------------ | |||
| Assets | |||
| Current assets: | |||
| Cash | $ 544,980 | $ 191,609 | |
| Accounts receivable, net | 3,970,675 | 1,543,923 | |
| Other receivables | 20,387 | 14,447 | |
| Inventories | 2,215,560 | 1,321,168 | |
| Prepaid expenses | 43,517 | 20,947 | |
|
--------------- |
-------------- | ||
| Total current assets | 6,795,119 | 3,092,094 | |
|
-------------- |
-------------- | ||
| Property, plant and equipment, at cost: | |||
| Land | 776,638 | 399,838 | |
| Machinery and equipment | 6,900,321 | 3,485,620 | |
| Office furniture and fixtures | 150,552 | 75,620 | |
| Vehicles | 68,058 | 21,850 | |
| Building and leasehold improvements | 4,036,513 | 1,285,883 | |
| -------------- | -------------- | ||
| 11,932,082 | 5,268,811 | ||
| Less accumulated depreciation | (1,405,420) | (619,236) | |
| -------------- | ------------- | ||
| Net property, plant and equipment | 10,526,662 | 4,649,575 | |
| -------------- | ------------- | ||
| Other assets: | |||
| Deposits | 24,882 | 59,148 | |
| Restricted cash and short-term investments | 944,395 | - | |
| Cash surrender value of life insurance,
net of policy loans of $1,270,441 in 1998 |
- | 961,845 | |
| Goodwill, net | 5,887,773 | 4,990,379 | |
| Other | 18,523 | 6,438 | |
| ------------- | -------------- | ||
| Total other assets | 6,875,573 | 6,017,810 | |
| -------------- | -------------- | ||
|
|
$24,197,354 | $13,759,479 | |
| ======== | ======== | ||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
United Shields Corporation
and Subsidiaries
Consolidated Balance Sheets
(continued)
| As of | December 31, 1999 | December 25, 1998 | |
| ------------------------------------------------------------------------------------------------------------------------------------- | |||
| Liabilities and Stockholders' Equity | |||
| Current liabilities: | |||
| Revolving lines of credit - current | $2,397,432 | $ - | |
| Notes payable - related parties - current | 791,860 | 441,345 | |
| Notes payable - current | 642,606 | - | |
| Capital lease obligation - current | 57,396 | 140,895 | |
| Accounts payable | 2,402,657 | 1,318,041 | |
| Accrued expenses and other current liabilities | 893,323 | 1,001,410 | |
| ------------- | -------------- | ||
| Total current liabilities | 7,185,274 | 2,901,691 | |
| Revolving lines of credit | 3,859,455 | 3,971,547 | |
| Notes payable - related parties | 1,286,354 | 1,166,636 | |
| Notes payable | 5,601,177 | - | |
| Capital lease obligation | 180,369 | - | |
| Deferred compensation | 625,357 | 625,357 | |
| -------------- | -------------- | ||
| Total liabilities | 18,737,986 | 8,665,231 | |
| -------------- | -------------- | ||
| Stockholders' equity: | |||
|
Common stock - authorized 500,000,000 shares without par
value; stated value $0.01; issued and outstanding
19,454,875 and 16,604,875 at December 31,1999 and December 25,1998, respectively |
194,549 | 166,049 | |
| Additional paid in capital | 10,634,172 | 9,380,172 | |
| Accumulated deficit | (5,369,353) | (4,451,973) | |
| -------------- | -------------- | ||
| Total stockholders' equity | 5,459,368 | 5,094,248 | |
| -------------- | ------------- | ||
| $24,197,354 | $13,759,479 | ||
| ======== | ======== | ||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
United Shields Corporation
and Subsidiaries
Consolidated Statements of Operations
| For the years ended | December 31, 1999 | December 25, 1998 | December 31, 1997 | |||
| -------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net sales | $ | 16,209,848 | $ | 12,955,424 | $ | 632,664 |
| Cost of sales | 12,763,454 | 10,222,027 | 572,333 | |||
| --------------- | -------------- | ------------- | ||||
| Gross profit | 3,446,394 | 2,733,397 | 60,331 | |||
| --------------- | -------------- | ------------ | ||||
| Operating expenses: | ||||||
| Selling, general and administrative | 2,947,966 | 2,808,617 | 1,566,220 | |||
| Goodwill amortization | 379,012 | 357,561 | 15,418 | |||
| Write-off of investment in potential acquisitions | - | 530,075 | - | |||
| Reorganization and restructuring, net | - | 44,936 | - | |||
| -------------- | -------------- | ------------- | ||||
| Total operating expenses | 3,326,978 | 3,741,189 | 1,581,638 | |||
| -------------- | -------------- | ------------- | ||||
| Income (loss) from operations | 119,416 | (1,007,792) | (1,521,307) | |||
| -------------- | ------------- | ------------- | ||||
| Other (income) expense: | ||||||
| Interest expense, net | 1,090,455 | 1,439,928 | 74,287 | |||
| Loss (gain) on sale of property and equipment | (20,875) | 67,218 | - | |||
| Other | (32,784) | (8,789) | 239 | |||
| -------------- | ------------- | ------------- | ||||
| Total other expense | 1,036,796 | 1,498,357 | 74,526 | |||
| -------------- | ------------- | ------------- | ||||
| Loss before extraordinary item | (917,380) | (2,506,149) | (1,595,833) | |||
| Extraordinary item - gain on restructuring of debt | - | 62,500 | - | |||
| -------------- | ------------- | ------------- | ||||
| Net loss | $ | (917,380)
========== |
$ | (2,443,649)
======= |
$ | (1,595,833)
======== |
| ------------------------------------------------------------------------------------------------------------------------------------ | ||||||
| Weighted average shares outstanding: | ||||||
| Basic and diluted | 17,549,754 | 12,471,018 | 10,516,268 | |||
| ------------------------------------------------------------------------------------------------------------------------------------ | ||||||
| Loss before extraordinary item per common share - basic and diluted | $(0.05) | $(0.20) | $(0.15) | |||
| -------------- | ------------- | ------------- | ||||
| Extraordinary item per common share -basic and diluted | - | - | - | |||
| Net loss per common share - basic and diluted | $(0.05) | $(0.20) | $(0.15) | |||
| ========= | ======== | ======== | ||||
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
United Shields Corporation
and Subsidiaries
Consolidated Statements of Stockholders' Equity (Deficit)
| For the years ended December 31, 1997, December 25, 1998 and December 31,1999 | ||||||||||
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||||||
| Common stock | Additional paid in capital | Common stock paid for but not yet issued | Accumulated deficit | Total | ||||||
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||||||
| Balance at January 1, 1997 | $ | 63,102 | $ | - | $ | 133,000 | $ | (412,491) | $ | (216,389) |
| 324,360 shares of common stock issued in private offering | 407,965 | - | (133,000) | - | 274,965 | |||||
| 1,133,384 shares of common stock issued or to be issued for completed and potential acquisitions | 3,620,000 | - | 773,536 | - | 4,393,536 | |||||
| 1,050,100 shares of common stock issued in connection with reverse acquisition | - | - | - | - | - | |||||
| Common stock paid for but not yet issued - 221,792 shares of common stock | - | - | 820,630 | - | 820,630 | |||||
| 250,000 warrants issued in connection with capital lease transaction | - | 262,470 | - | - | 262,470 | |||||
| Adjust common stock to reflect stated value of $.01 per share | (3,975,766) | 3,975,766 | - | - | - | |||||
| Net loss | - | - | - | (1,595,833) | (1,595,833) | |||||
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||||||
| Balance at December 31,1997 | 115,301 | 4,238,236 | 1,594,166 | (2,008,324) | 3,939,379 | |||||
| 193,384 shares of common stock issued for completed acquisitions | 1,934 | 771,602 | (773,536) | - | - | |||||
| 378,742 shares of common stock issued in private offering | 3,787 | 1,396,738 | (820,630) | - | 579,895 | |||||
| 500,000 warrants issued to a related party in connection with debt restructuring | - | 1,059,500 | - | - | 1,059,500 | |||||
| 2,649 shares of common stock - other issuances | 27 | 2,083 | - | - | 2,110 | |||||
| 4,500,000 shares of common stock issued to a related party in connection with debt restructurings | 45,000 | 1,392,500 | - | - | 1,437,500 | |||||
| 6,000,000 warrants issued to a related party in connection with reorganization and restructuring | - | 515,545 | - | - | 515,545 | |||||
| 500,000 stock options issued to a related party in connection with sale of UNSC, Inc. | - | 3,968 | - | - | 3,968 | |||||
| Net loss | - | - | - | (2,443,649) | (2,443,649) | |||||
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||||||
| Balance at December 25, 1998 | $ | 166,049 | $ | 9,380,172 | $ | - | $ | (4,451,973) | $ | 5,094,248 |
| 2,850,000 shares of common stock issued in private offering | 28,500 | 1,254,000 | - | - | 1,282,500 | |||||
| Net loss | - | - | - | (917,380) | (917,380) | |||||
| --------------------------------------------------------------------------------------------------------------------------------------------- | ||||||||||
| Balance at December 31, 1999 | $ | 194,549
========= |
$ | 10,634,172
======== |
$ | -
======== |
$ | (5,369,353)
========= |
$ | 5,459,368
========= |
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
United Shields Corporation
and Subsidiaries
Consolidated Statements of Cash Flows
| For the years ended | December 31, 1999 |
December 25, 1998 |
December 31, 1997 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net cash flows provided by (used in) operating activities: | ||||||
| Net loss | $ (917,380) | $ (2,443,649) | $ (1,595,833) | |||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||
| Depreciation and amortization - property and equipment | 795,928 | 637,282 | 109,673 | |||
| Amortization of goodwill and warrants | 555,953 | 1,043,670 | 15,418 | |||
| Write-off of investment in potential acquisitions | - | 530,075 | - | |||
| Loss (gain) on sale of property and equipment | (20,875) | 67,218 | - | |||
| Reorganization and restructuring, net | - | 44,936 | - | |||
| Gain on restructuring of debt | - | (62,500) | - | |||
| Stock issued for compensation/naming rights | - | 2,110 | - | |||
| Changes in working capital accounts, net of effects of subsidiary companies purchased: | ||||||
| Accounts and other receivables | (570,343) | (137,648) | 259,185 | |||
| Inventories | (277,807) | 103,493 | (174,474) | |||
| Prepaid expenses | (22,291) | 80,754 | (33,762) | |||
| Income taxes | - | 123,440 | (9,687) | |||
| Deposits and other | 22,184 | (5,536) | (44,227) | |||
| Accounts payable | (7,019) | (178,124) | 438,748 | |||
| Accrued expenses and other current liabilities | (380,626) | 618,748 | 129,670 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net cash provided by (used in) operating activities | (822,276) | 424,269 | (905,289) | |||
| ------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Cash flows provided by (used in) investing activities: | ||||||
| Purchases of property and equipment | (345,651) | (180,382) | (28,051) | |||
| Proceeds from sale of property and equipment | 36,280 | 28,249 | - | |||
| (Investment) return of investment in potential acquisitions, net | - | 9,925 | (120,000) | |||
| Acquisition of subsidiary companies, net of cash acquired | (4,532,844) | - | (7,678,306) | |||
| Cash received from insurance policies | 961,845 | - | - | |||
| Increase in restricted cash and short-term investments | (944,395) | - | - | |||
| Proceeds from sale of equipment in connection with sale/leaseback | - | - | 500,000 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net cash used in investing activities | (4,824,765) | (142,208) | (7,326,357) | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Cash flows provided by (used in) financing activities: | ||||||
| Borrowings under revolving lines of credit | 2,328,244 | 91,487 | 4,551,000 | |||
| Payments on revolving lines of credit | (42,904) | (670,940) | - | |||
| Borrowings under notes payable - related parties | 390,515 | 441,345 | 3,935,162 | |||
| Payments on notes payable - related parties | (40,000) | (786,719) | (837,415) | |||
| Payments on notes payable | (2,311,223) | - | - | |||
| Borrowings on notes payable | 4,605,006 | - | - | |||
| Payments on capital lease obligation | (211,726) | (326,879) | - | |||
| Proceeds from borrowings on life insurance policies, net of increase in cash surrender value | - | 68,520 | - | |||
| Proceeds from issuance of common stock, net of expenses | 1,282,500 | 579,895 | 275,000 | |||
| Proceeds from common stock paid for, not yet issued | - | - | 820,631 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net cash provided by (used in) financing activities | 6,000,412 | (603,291) | 8,744,378 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net increase (decrease) in cash | 353,371 | (321,230) | 512,732 | |||
| Cash at beginning of period | 191,609 | 512,839 | 107 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Cash at end of period | $ 544,980 | $ 191,609 | $ 512,839 | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Interest paid | $ | 797,989 | $ | 501,705 | $ | - |
| Income taxes paid (refunds received) | - | (89,080) | - | |||
| Supplemental non-cash disclosures: | ||||||
| Increase in equipment under capital lease | - | - | 525,000 | |||
| Increase in capital lease obligation | - | - | 262,530 | |||
| Stock issued for investment in potential acquisitions | - | - | 420,000 | |||
| Increase in additional paid in capital - issuance of warrants | - | 1,059,500 | 262,470 | |||
| Increase in common stock and additional paid in capital - debt conversions | - | 1,437,500 | - | |||
| Acquisition of subsidiary companies: | ||||||
| Assets acquired, including goodwill | 10,098,388 | - | 14,691,276 | |||
| Liabilities assumed | (5,565,544) | - | (3,039,470) | |||
| Common stock issued | - | - | (3,973,500) | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
| Net cash paid | $ (4,532,844) | $ - | $(7,678,306) | |||
| --------------------------------------------------------------------------------------------------------------------------------------------------- | ||||||
The accompanying Notes to Consolidated Financial Statement are an integral part of these statements.
|
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