INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Alfa International Corp.
We have audited the accompanying consolidated balance
sheets of Alfa International Corp. and subsidiary as
of December 31, 1995 and 1994 and the related consolidated
statements of operations, changes in stockholders' equity
(deficiency) and cash flows for the years then ended.
These consolidated 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 required
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 consolidated financial statements
referred to above present fairly, in all material respects,
the consolidated financial position of Alfa International
Corp. and subsidiary at December 31, 1995 and 1994, and the
results of their operations and their cash flows for the
years then ended in conformity with generally accepted
accounting principles.
The accompanying consolidated financial statements have
been prepared assuming that the Company will continue as a
going concern. As discussed in Note 3 to the consolidated
financial statements, the Company has no operations.
Management's plans in regard to these matters are also
described in Note 3. The consolidated financial statements
do not include any adjustments that might result from the
outcome of this uncertainty.
/s/ WISS & COMPANY, LLP
WISS & COMPANY, LLP
Livingston, New Jersey
October 10, 1996
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
1995 1994
___________ ____________
<S> <C> <C>
Cash $ - $ 14
Other Assets - 4,674
___________ ____________
$ - $ 4,688
LIABILITIES AND STOCKHOLDERS
EQUITY (DEFICIENCY)
LIABILITIES NOT SUBJECT TO
COMPROMISE -
Accounts payable $ 27,669 $ 26,085
PRE PETITION LIABILITIES SUBJECT
TO COMPROMISE -
Accounts payable-trade and
other miscellaneous claims - 522,757
___________ ____________
27,669 548,842
STOCKHOLDERS' EQUITY (DEFICIENCY):
Common stock $.01 par value;
Authorized 15,000,000 shares;
issued and outstanding 1,085,313
shares in 1995 and 261,800 shares
in 1994 10,853 2,618
Series A preferred stock, par value
$.01 per share; Authorized, issued
and outstanding 21,600 shares at
stated and liquidation value - 648,000
Capital in excess of par value 3,053,721 2,105,302
Retained earnings (deficit) (3,092,243) (3,300,074)
___________ ____________
Total Stockholders Equity
(Deficiency) (27,669) (544,154)
___________ ____________
$ - $ 4,688
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended December 31,
1995 1994
______________________
<S> <C> <C>
EXPENSES:
Selling, operating and
administrative $ (648) $ (5,347)
__________ __________
LOSS BEFORE REORGANIZATION ITEM (648) (5,347)
REORGANIZATION ITEM - LEGAL FEES 10,606 9,185
__________ __________
LOSS BEFORE EXTRAORDINARY ITEM (11,254) (14,532)
EXTRAORDINARY GAIN ON EXTINGUISHMENT
OF DEBT 219,085 -
__________ __________
NET INCOME (LOSS) $ 207,831 $ (14,532)
INCOME (LOSS) PER SHARE OF
COMMON STOCK:
Loss from operations before
extraordinary gain $ (.02) $ (.06)
Extraordinary gain .37 -
__________ __________
Net income (loss) $ .35 $ (.06)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 597,974 261,800
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S
EQUITY (DEFICIENCY)
<CAPTION>
Preferred Stock Common Stock Capital in Retained
Stated Par Excess of Earnings
Shares Value Shares Value Par Value (Deficit)
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993 21,600 $648,000 261,800 $ 65,450 $2,042,470 $(3,285,542)
YEAR ENDED
DECEMBER 31, 1994:
Reclassification for
one for twenty five
reverse stock split - - - (62,832) 62,832 -
Net loss - - - - - (14,532)
______ ________ _______ __________ _________ __________
BALANCE AT
DECEMBER 31, 1994 21,600 648,000 261,800 2,618 2,105,302 (3,300,074)
YEAR ENDED
DECEMBER 31, 1995:
Issuance of common
stock per court
confirmed plan of
reorganization to
preferred share-
holders in exchange
for preferred stock (21,600)(648,000) 21,600 216 647,784 -
To creditors in
exchange for
prepetition debt - - 303,672 3,037 300,635 -
To the president in
exchange for
postpetition debt - - 498,241 4,982 - -
Net income - - - - - 207,831
________ _________ _______ _______ _________ ________
YEAR ENDED
DECEMBER 31, 1995 - $ - 1,085,313 $ 10,853 $3,053,721 $(3,092,243)
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
ALFA INTERNATIONAL AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31,
1995 1994
___________ ___________
<S> <C> <C>
OPERATING CASH FLOWS FROM
REORGANIZATION ITEMS:
Professionals fees for services
rendered in connection with the
Chapter 11 proceeding $ 10,606 $ 9,185
Net cash flows from operating
activities (10,620) (9,490)
__________ __________
Net change in cash (14) (305)
CASH AND EQUIVALENTS,
BEGINNING OF YEAR 14 319
__________ __________
CASH AND EQUIVALENTS, END OF YEAR $ - $ 14
RECONCILIATION OF NET INCOME (LOSS)
TO NET CASH FLOWS FROM OPERATING
ACTIVITIES -
Net income (loss) $ 207,831 $ (14,532)
ADJUSTMENTS TO RECONCILE NET INCOME
(LOSS) TO NET CASH FLOWS FROM
OPERATING ACTIVITIES:
Gain on extinguishment of debt (219,085) -
Postpetition payables 634 5,042
__________ _________
NET CASH FLOWS FROM OPERATING
ACTIVITIES $ (10,620) $ (9,490)
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
ALFA INTERNATIONAL CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1:
NATURE OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
NATURE OF THE BUSINESS - Alfa International Corp. ("Alfa"
or the "Company") and its wholly-owned inactive subsidiary
have no operating business.
PRINCIPLES OF CONSOLIDATION - The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiary. All intercompany transactions
have been eliminated in consolidation.
FINANCIAL INSTRUMENTS - Financial instruments include cash,
accounts receivable and accounts payable. The amounts reported
for financial instruments are considered to be reasonable
approximations of their values, based on market information
available to management.
ESTIMATES AND UNCERTAINTIES - 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, as determined at a later date, could differ
from those estimates.
INCOME TAXES - The Company is subject to income taxes at both
the Federal and state level. Separate state income tax returns
are filed with each state in which the Company conducts
business.
Deferred tax assets and liabilities are recognized based on
differences between the book and tax bases of assets and
liabilities using presently enacted income tax rates. The
provision for income taxes is the sum of the amount of income
taxes paid, payable or receivable from the period as
determined by applying the provisions of the applicable enacted
tax laws to taxable income for that period and the net change
during the period in the Company's deferred tax assets and
liabilities. Valuation allowances are established when
necessary to reduce deferred tax assets to the amount expected
to be realized.
PER SHARE DATA - Per share data is based on weighted number of
shares of common stock, convertible preferred stock and common
<PAGE>
stock equivalents (options, preferred stock) outstanding during
each year. Common stock equivalents are not included in the
1994 computation since their effect was anti-dilutive.
NOTE 2:
BANKRUPTCY:
On December 9, 1992, Alfa filed a petition for reorganization
("Petition") under Chapter 11 of the Federal Bankruptcy Code
in the United States Bankruptcy Court ("Court") for the
District of Arizona. Under Chapter 11, certain claims against
Alfa in existence prior to the filing of the Petition are
stayed while Alfa continues business operations as a
debtor-in-possession. These claims were reflected on the
Company's 1993 and 1994 balance sheets as "Liabilities Subject
to Compromise." In 1993 Alfa sold substantially all of its
assets to a company controlled by Alfa's President. On
April 25, 1994 Alfa filed a disclosure statement and a Plan of
Reorganization ("Plan") with the Court. On August 4, 1995 the
Court issued an order confirming the Plan.
In accordance with the confirmed Plan, the Company took the
following actions:
1. The Company reverse split, on a 1 for 25
basis, the 6,545,006 shares of its issued and outstanding $.01
par value common stock.
2. The Company issued 303,672 shares of its
common stock to its pre-petition creditors who had filed a
proof of claim with the Court to discharge a total of $522,757
in liabilities.
3. The Company issued 21,600 shares of common
stock to its preferred stockholders in exchange for their
preferred shares.
4. The Company issued 498,241 shares of common
stock to its President, Frank J. Drohan in satisfaction of his
post-petition claim of $4,982.
On August 12, 1996 the Court issued a Final Decree approving the
consummation of the Plan, releasing the Company from the
supervision of the Court and discharging the Company from
bankruptcy proceedings.
NOTE 3:
MANAGEMENT'S PLANS:
It is management's intention to attempt to combine Alfa, via a
merger or acquisition transaction, with a privately held company
<PAGE>
or companies seeking to become publicly held.
The Company has no employees. Absent a merger or other business
combination, the Company's cash requirements for the next twelve
months are expected to be minimal.
NOTE 4:
COMMON STOCK, PREFERRED STOCK AND STOCK OPTION PLAN:
COMMON STOCK SPLIT - On August 7, 1995, the Board of Directors
declared a one for 25 reverse common stock split distributable on
August 4 1995 to shareholders of record at the close of business
on August 4, 1995. All references to per share amounts and number
of shares except shares authorized, have been restated to reflect
the stock split on a retroactive basis. In addition, an amount
equal to the par value of the shares of common stock outstanding
prior to the split was transferred from capital in excess of par
value to common stock.
PREFERRED STOCK - The Company has 978,400 shares of undesignated
preferred stock which may be issued with such rights and
preferences as the Board of Directors may determine. Therefore,
the undesignated preferred stock may be issued with liquidation,
dividend, voting and other rights superior to those of existing
common shareholders, including the right to elect a controlling
number of directors as a class.
STOCK OPTION PLAN - The Company's Stock Option Plan provides for
the granting of Incentive Stock Options and Non-qualified Stock
Options to all employees and others who perform key services to
purchase up to 750,000 shares of common stock at an exercise price
equal to at least the fair market value of a share of common stock
at the date of grant (exercise prices for incentive options for
holders of more than 10% of the outstanding common stock must be
at least 110% of the fair market value on the date of grant).
Incentive stock options are exercisable in 20% increments
commencing one year after the date of grant and generally expire
five years after the date of grant. The Stock Option Plan expires
on December 27, 1997.
At December 31, 1995, there were no stock options outstanding under
the Stock Option Plan.
NOTE 5:
PROVISION FOR INCOME TAXES:
Deferred tax asset is comprised of the following:
December 31,
1995 1994
Federal net operating
loss carryforwards $1,140,000 $1,210,000
State net operating
loss carryforwards
net of federal tax
benefit 180,000 195,000
__________ __________
1,320,000 1,405,000
Less:
Valuation allowance 1,320,000 1,405,000
__________ __________
$ - $ -
The Company's effective tax rate differs from the expected
federal income tax rate due to a change in the valuation
allowance at December 31, 1995.
Management has determined, based on the Company's current
condition, that a full valuation allowance is appropriate at
December 31, 1995.
At December 31, 1995, the Company had Federal net operating
loss carryforwards of approximately $3,300,000 which expire
beginning in 2004. The Company's issuance of shares during
fiscal 1995 and subsequent thereto results in a "Change of
Ownership" as defined by the Internal Revenue Code of 1986,
which limits the Company's use of these net operating loss
carryforwards.
