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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For fiscal year ended July 31, 1998 Commission File No. 0-5767
LINCOLN INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Kentucky # 61-0575092
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite No. 6, 120 Village Square
Louisville, Kentucky 40243
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (502)245-8814
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each
exchange on which
registered
none none
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (no-par) voting
Title of class
Indicate by check mark whether the Registrant (1) has
filed all reports required to be filed by Section 13 or 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.
YES X NO
State the aggregate market value of the voting stock held
by non-affiliates of the Registrant. The aggregate market value
shall be computed by reference to the price at which the stock was
sold, or the average bid and asked prices of such stock, as of a
specified date within 60 days prior to the date of filing.
No regular market exists for the stock.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock, as of the July 31, 1998.
Common (no-par) 3,986
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report -- 1997-1998
(2) Information Statement -- 1998
Portions of the above Annual Report and Information
Statement to be issued are hereby incorporated by reference into
Parts II and III.
PART I
ITEM 1: BUSINESS
LINCOLN INTERNATIONAL CORPORATION (LINCOLN), incorporated
in 1960, is engaged in the management of agricultural properties
BOURBON STOCK YARDS (Bourbon) located in Louisville, Kentucky.
BOURBON has been in continuous operation for 165 years
and was merged into LINCOLN in 1978.
The following resolution was passed by the Board of
Directors at the October 18, 1997 meeting: Be it Hereby Resolved,
that the voting common stock of Lincoln International Corporation
(the only class of common stock presently outstanding) is reverse
split such that for every 400 shares outstanding prior to the
reverse split, 1 (one) new share shall be issued. There shall be
no change in the total number of shares authorized, which shall
remain at 3,000,000. However, the existing stock certificates
shall be canceled and new ones issued evidencing a new ownership
position based on the 400 for 1 ratio. For holdings or partial
holdings of common stock numbering less than the required 400
shares, scrip shall be issued as evidence of the number of shares
so held. Holders of said scrip shall have a period of 120 days
from date of issuance to either (1) accumulate sufficient scrip
from other holders thereof to acquire new shares at the prescribed
ratio of 400 for 1 or (2) present the scrip to the Company to be
redeemed at a price of $.30 per share represented by the scrip.
These options must be exercised during the 120-day life of the
scrip, the holder of said scrip shall have no further claim against
the Company, all rights having been expunged by the expiration of
the life of the scrip.
As of April 5, 1998, the reverse split was completed
resulting in Lincoln International having 3,986 shares issued and
outstanding with a total of 3,000,000 shares authorized and a total
number of 412 shareholders.
At the May 4, 1998 board meeting, the Board of Directors
approved an offering limited to existing Kentucky shareholders in
order to raise a minimum of $400,000 to begin possible construction
projects on the perimeter of the Bourbon Stock Yard property as
well as to meet other capital expenditure needs. At the time of
this filing, plans to effect the offering have been put on
temporary hold.
Lincoln International Corporation has received an
unsolicited offer from Home of the Innocents, Inc. to purchase the
Bourbon Stock Yards property. This offer contains the customary
contingencies related to such a sale so management of Lincoln
International Corporation has continued to assume that operations
will continue at Bourbon Stock Yards into the foreseeable future.
In the event the sale should be consummated, efforts have been
undertaken to find an alternative site to which the livestock
auction could be moved.
BOURBON is subject to the rules and regulations of and
must file (publicly available) reports with, the Interstate
Commerce Commission (ICC) and the United States Department of
Agriculture (USDA). BOURBON'S disposal of its waste materials is
in compliance with federal, state and local environmental laws.
EMPLOYEES:
As of July 31, 1998, LINCOLN employed one (1)
administrative personnel.
ITEM 2: Properties
The following are the various properties owned or leased by LINCOLN
as of July 31, 1998.
APPROXIMATE LEASE EXPI-
TYPE OF SQUARE FEET RATION DATE
LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS)
LINCOLN ADMINISTRATIVE OFFICES
Louisville, KY Offices 300 sq. ft. 03/01/99
* * * * * * * * *
BOURBON STOCK YARDS
Louisville, KY Stock yard 20.5 acres Owned
real estate & buildings
Stock yard
offices 10,460 sq. ft. 2/1/2001
Louisville, KY Right-of-way NA 1997 (1)
for stock yard
Louisville, KY Warehouse 4,000 sq. ft. Owned
Louisville, KY Warehouse 9,000 sq. ft. Owned
* * * * * * * * *
(1) The right-of-way is not essential to Bourbon's operations but
does provide an easier access and egress from the facility.
* * * * * * * * *
The properties listed above are suitable and adequate for the
various needs they supply.
The total fixed annual rental for all of the above leased
facilities (exclusive of taxes and other charges) was $53,095.
ITEM 3: Legal Proceedings
The litigation against Michigan Livestock Exchange (MLE) has been
settled resulting in a smaller income stream from the Bourbon Stock
Yards but a significantly reduced capital expenditure exposure from
the maintenance of the property. The underlying assumption
resulting from the settlement of this litigation is that now
Lincoln International Corporation can work to assure a positive
working relationship with MLE during the remaining 7 to 8 years
under the lease of the stock yard facilities.
ITEM 4: Submission of Matters to a Vote of Security Holders
The items to be voted on at the annual meeting which will be held
on the 4th day of December, 1998, are as follows:
(1) Election of directors and
(2) Approval of sale of the Bourbon Stock Yards and continuing in
business after the sale, seeking a new location from which to
operate the livestock auction business and continuing efforts to
find merger and acquisition candidates.
PART II
ITEM 5: Market for Registrant's Common Stock and Related
Stockholder Matters
(1) There does not exist at the present time any regular market
for any common stock of the Registrant.
(2) The Registrant has never paid or declared any dividends.
(3) The reverse split of stock was complete on April 5, 1998.
(4) On May 4, 1998, the Board of Directors approved a secondary
stock offering limited to only Kentucky residents allowing each
shareholder to purchase one share of stock, accompanied by a
warrant to purchase one additional share of common stock for the
amount of one hundred dollars ($100). Directors of the Company
were to be allowed to exercise any purchase rights not exercised by
shareholders in a manner or amount to be subsequently decided by
the Board. The purpose of the limited offering was to raise funds
to begin construction and cleanup at the Bourbon property in order
to make the property more income productive along with other
necessary capital expenditures. Any action on the offering was put
on temporary hold pending further clarification of the direction
the Company must take.
ITEM 6: Selected Financial Data
Years ending July 31
1998 1997 1996 1995 1994
Revenues 297,459 292719 301629 1362172 1507258
Income (loss) before
extraordinary items -72,688 -154577 494735 -87968 -73394
Net income (loss) -72,688 -154577 494735 -87968 -73394
Earnings (loss) per
common share:
Income (loss) before
extraordinary items -17.16 -38.71 122.70 -21.68 -18.09
Net income (loss) -17.16 -38.71 122.70 -21.68 -18.09
Cash dividends 0 0 0 0 0
Total assets 1147311 1236802 1358785 1623366 1959569
Long-term obligations 380205 385511 387250 733640 819788
ITEM 7: Management's Discussion and Analysis of Financial Conditions and
Results of Operations
Agri-Business
BOURBON STOCKYARD
During July, 1995, Lincoln International Corporation leased the
Bourbon Stockyard operations to Michigan Livestock Exchange.
Net revenue from stock yard operations increased by approximately
$11,000 or 4% during the year ended July 31, 1998 as compared to the year
ended July 31, 1997. The increase resulted from additional space that was
rented at the stock yards.
Operating costs for the year ended July 31, 1998 increased by
approximately $29,000 as compared to the year ended July 31, 1997.
There were no accounts payable or capital commitments at July 31,
1998. All funds in excess of expenses are available to the parent.
CONSOLIDATED OPERATIONS
As of April 5, 1998, the reverse split was completed resulting in
Lincoln International having 3,986 shares issued and outstanding with a
total of 3,000,000 shares authorized and a total number of 412
shareholders.
Operating costs for consolidated operations for the year ended July
31, 1998 were down approximately $80,700 or 21% as compared to the year
ended July 31, 1997. Professional fees were decreased by $25,000 and
salaries were decreased by $52,000.
There were no capital commitments at July 31, 1998.
ITEM 8: Consolidated Financial Statements and Supplementary Data
The response to this item is contained within a separate section
of this report.
ITEM 9: Changes in and Disagreements with Accountants
None.
ITEM 10:
NAME, PRINCIPAL OCCUPATION
AND OTHER POSITIONS WITH DIRECTORS SHARES OWNED AS OF 07/31/97
LINCOLN FOR LAST 5 YEARS SINCE
Thurman L. Sisney,
Chairman of the Board,
President and CEO
Director, Age 52 1994 1,273 (1)
Richard Dolin
Secretary/Treasurer
Director, Age 53 1996 0
Janet Clark Frockt
Director 1997 574 (2)
Richard Jay Frockt
Director 1997 574 (2)
Russell R. Roth
Director 1997 0
_______
Officers & Directors as a group 2,421
(1) Includes shares held in names of Drivers and Drovers
Diversified, Inc., a Kentucky corporation of which 2/3 is owned by
Thurman L. Sisney.
(2) Richard Frockt, a director of the Company, is the beneficiary
of a tax-deferred annuity which in turn is the owner of all of the
outstanding capital stock of Salina Investment LTD, the record holder of
574 shares. In addition, Janet Frockt, the wife of Richard Frockt and a
director of the Company, is the beneficiary of a tax-deferred annuity which
in turn is the owner of all of the capital stock of Pyramid Securities LTD,
the record holder of 574 shares. Mr. Frockt disclaims any beneficial
ownership interest in the shares which Mrs. Frockt is the beneficiary.
Mrs. Frockt disclaims any beneficial ownership in the shares to which Mr.
Frockt is the beneficiary.
BUSINESS HISTORY OF DIRECTORS
Thurman L. Sisney - Mr. Sisney is President, Chairman of the Board
and Chief Executive Officer of Lincoln International Corporation. Mr.
Sisney has a masters degree in business administration and a law degree
from the University of Louisville and has been in private practice since
1980. He has served as general counsel to the Kentucky Finance and
Administration Cabinet as well as counsel and legislative liaison to the
governor of Kentucky. Mr. Sisney has also served as General Counsel and
Deputy Commissioner of the Kentucky Department of Agriculture. Mr. Sisney
is active in numerous civic and charitable organizations in the community
including the board of trustees of the United Methodist Church, founder and
President of the International Association of Convention and Hospitality
and Industry Attorney's Association.
Richard Dolin - Mr. Dolin has a juris doctorate degree from the
University of Louisville law school and is a graduate of Louisville
Presbyterian Theological Seminary where he earned a double competency
degree in law and theology. He has a masters degree in Business
Administration from Bellarmine College and has done doctoral work in
business administration at the University of Kentucky. Mr. Dolin is
associate pastor for the Harvey Browne Memorial Presbyterian Church in
Louisville, Kentucky, and is responsible for adult education programs and
out-reach activities and also serves as president of Nomos, Ltd., which
provides consultation to small and medium sized organizations regarding
strategic planning, accounting, budgeting, and related matters. Mr. Dolin
is involved in many community activities including work for building homes
for developmentally disabled adults.
Janet Clark Frockt - Mrs. Frockt has a B.A. in Dramatic Arts from
the University of California at Santa Barbara. She has performed with the
Wand'ring Minstrels Theatrical Group and Theatre A La Carte in Louisville,
Kentucky. Mrs. Frockt is also the author, Assistant Director and Producer
of the film "Dominant Positions", an original screenplay filmed for PBS.
Richard Jay Frockt - Mr. Frockt has a B.S. in History from Western
Kentucky University and a juris doctorate from the University of Louisville
Law School. He was a capital partner with the law firm Barnett and Alagia
in Louisville until 1986, when he became the Chief Operating Officer of TMC
Communications, a regional long distance telephone company in Santa
Barbara, California. Mr. Frockt founded WCT Communications, Inc. in 1989.
He served as Chairman of the Board and Chief Executive Officer of that
company until 1995, seeing revenues grow to an annualized $150,000,000 and
managing an IPO (initial public offering) and NASDAQ National Market
Listing in 1993.
Russell R. Roth - Mr. Roth earned a B.S. in Economics from the
University of Kansas and an MBA in Finance from the University of Michigan.
He has served as Chief Financial Officer of Cessna Aircraft Company which
merged into General Dynamics Corporation in 1986. He then became Chief
Financial Officer of Sotheby Art Auction Company in New York City,
spearheading that company's IPO (initial public offering) in 1988. Mr.
Roth founded Las Vegas Investment Report in 1993. This publication reports
upon and analyzes the gaming industry.
ITEM 11:
The directors received compensation of Three Hundred ($300.00)
Dollars per meeting and travel expenses. The directors fees and travel
expense for 1997-1998 was $3,106.
ITEM 12 and ITEM 13:
LINCOLN intends to file an Information Statement pursuant to
Regulation 14(c) which contains all of the information required by Part III
which information is incorporated herein by reference.
PART IV
ITEM 14: Exhibits, Financial Statement Schedules and Reports on Form 8-K
Part IV which relates to Item 14 concerning exhibits, financial
statement schedules and reports is hereby amended to include the following
items by reference.
(3) Articles of Incorporation and By-Laws: The articles and by-
laws of Lincoln International Corporation were filed as a part of its
Form 10 filing in September of 1971.
(4) Form 8-K filed September, 1991, reporting sale and disposition
of assets of Lincoln Finance Company, Inc. to Kentucky Finance Co., Inc.
of three (3) of the four (4) finance companies operated by Registrant.
(5) Articles of Merger of majority held subsidiary, Professional
Services, Inc., into Registrant as filed on Form 10K for fiscal year 1991-
1992.
(6) Form 10-K - 1995 (1) A copy of the lease agreement dated
July 15, 1995, between LINCOLN INTERNATIONAL CORPORATION and Kentucky
Livestock Exchange (BOURBON STOCKYARDS OPERATIONS) a division of Michigan
Livestock Exchange, et al.
(7) Form 8-K - 1997 (1) A copy of the amendment to the Articles
of Incorporation eliminating classes of stock.
Financial data and schedules are submitted separately as a separate
schedule and are attached hereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, Lincoln International Corporation has duly
caused this report to be signed on its behalf, by the undersigned,
President and Chief Executive Officer, Thurman L. Sisney, and by its
principal Financial Officer and principal Accounting Officer, Secretary and
Treasurer, Richard Dolin, as thereunto duly authorized in the City of
Louisville, Commonwealth of Kentucky, on the 29th day of October, 1998.
LINCOLN INTERNATIONAL CORPORATION
____________________________
By: Thurman L. Sisney, President
Date: ____________________________
___________________________
By: Richard Dolin, Sec./Treas.
Date: ___________________________
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of LINCOLN INTERNATIONAL CORPORATION in the capacities and on the date
indicated.
SIGNATURE TITLE
(1) Principal Executive Officers
______________________________
Thurman L. Sisney President & Chairman of the
Board
______________________________
Richard Dolin Secretary/Treasurer
(2) Directors
_____________________________
Thurman L. Sisney Director
_____________________________
Richard Dolin Director
_____________________________
Janet Clark Frockt Director
_____________________________
Richard J. Frockt Director
_____________________________
Russell R. Roth Director
LINCOLN INTERNATIONAL CORPORATION
ANNUAL REPORT FORM 10-K
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Stockholders
Lincoln International Corporation
Louisville, Kentucky
We have audited the consolidated balance sheets of Lincoln
International Corporation listed in the accompanying index to
Financial Statements (Item 14(a)) as of July 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period
ended July 31, 1998. 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 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 audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements listed in the accompanying
Index to Financial Statements (Item 14(a)) present fairly, in all
material respects, the consolidated financial position of Lincoln
International Corporation as of July 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for each
of the three years in the period ended July 31, 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in
Note 4 to the financial statements, there is substantial doubt
about the Company's ability to continue as a going concern. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
POTTER & COMPANY, LLP
Louisville, Kentucky
September 30, 1998
LINCOLN INTERNATIONAL CORPORATION
Index to Financial Statements
Item 14(a)
The following consolidated financial statements of Lincoln
International Corporation and subsidiaries are incorporated by
reference in Item 8:
Consolidated balance sheets - July 31, 1998 and 1997
Consolidated statements of operations - years ended July 31,
1998, 1997, and 1996
Consolidated statements of stockholders' equity - years ended
July 31, 1998, 1997, and 1996
Consolidated statements of cash flows - years ended July 31,
1998, 1997, and 1996
Notes to consolidated financial statements
Supporting schedules for the three years ended July 31, 1998, 1997,
and 1996:
I - Condensed financial information (parent company only)
II - Valuation and qualifying accounts and reserves
All other schedules are omitted since the required information is
not present or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements and notes
thereto.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
July 31, 1998 and 1997
1998 1997
A S S E T S
Current assets:
Cash and cash equivalents $ 90,994 $ 156,141
Accounts receivable, net 10,911 9,732
Prepaid expenses 3,141 0
Total current assets 105,046 165,873
Investments in subsidiaries 575,000 575,000
Net property, plant and equipment 1,042,265 1,070,929
Total assets $1,722,311 $1,811,802
L I A B I L I T I E S A N D
S T O C K H O L D E R S' E Q U I T Y
Current liabilities:
Current maturities of long-term debt $ 5,849 $ 5,443
Accounts payable 12,311 28,594
Deferred rent 18,810 0
Accrued expenses 21,559 42,968
Deposits 25,000 0
Total current liabilities 83,529 77,005
Long-term debt, less current maturities 380,205 385,511
Advances from subsidiaries 582,383 582,921
Stockholders' equity:
Common stock 1,281,998 1,300,019
Retained earnings (deficit) -605,804 -533,654
Total stockholders' equity 676,194 766,365
Total liabilities and
stockholders' equity $1,722,311 $1,811,802
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Revenues:
Net service and operating revenues $ 297,459 $ 292,719 $300,199
Gain (loss) on sale of assets 0 24,999 715,210
Miscellaneous income 6,276 8,606 570,834
303,735 326,324 1,586,243
Costs and expenses:
Cost of service and operating
revenues 161,010 220,156 230,009
Operating, general and
administrative expenses 179,813 225,383 211,365
Interest expense - other 35,061 35,138 70,932
375,884 480,677 512,306
Income (loss) before provision for
income tax -72,149 -154,353 1,073,937
Income tax 0 0 14,366
Income (loss) before equity in net
earnings (losses) of subsidiaries -72,149 -154,353 1,059,571
Equity in net earnings (losses)
of subsidiaries -539 -224 -7,232
Net income (loss) $ -72,688 $-154,577$1,052,339
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Cash flows from operating activities:
Net income (loss) $ -72,688 $-154,577$1,052,339
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 40,750 44,943 56,034
Equity in net (earnings) losses of
consolidated subsidiaries 538 224 7,232
(Gain) loss on sale of property,
equipment, and operating assets 0 -24,999 -715,210
Stock bonus 0 50,000 0
Provision for losses on other
receivables 17,550 20,550 19,032
Change in assets and liabilities:
Increase in accounts receivables -18,729 -17,873 -10,190
Decrease in other current assets -3,141 0 7,091
Increase (decrease) in accounts
payable -16,282 17,509 -49,285
Decrease in accrued expenses -21,409 -14,972 -25,892
Increase (decrease) in income
taxes payable 0 -14,366 14,366
Increase in deferred rent 18,810 0 0
Increase in deposits 25,000 0 0
Net cash provided by (used in)
operating activities -29,601 -93,561 355,517
Cash flows from investing activities:
Proceeds from disposal of property,
equipment, and operating assets 0 36,500 807,426
Purchases of property and equipment -12,087 -5,740 -8,998
Net cash provided by
investing activities -12,087 30,760 798,428
Cash flows from financing activities:
Increase (decrease) in advances from
subsidiaries -538 -249 -729,387
Proceeds from long-term debt 0 0 757
Principal payments on long-term debt -4,900 -5,552 505,449
Purchase of common stock for
the treasury -18,021 0 -26,570
Net cash provided by (used in)
financing activities -23,459 -5,801-1,260,649
Net increase (decrease) in cash
and cash equivalents -65,147 -68,602 -106,704
Cash and cash equivalents
at beginning of year 156,141 224,743 331,447
Cash and cash equivalents
at end of year $ 90,994 $156,141 $224,743
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest $35,121 $36,121 $73,164
Cash paid during the year for
income taxes $ 0 $14,366 $0
Supplemental schedule of noncash
financing activities:
Issuance of common stock for
executive bonus $ 0 $50,000 $0
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 31, 1998 and 1997
1. Basis of Presentation
In accordance with the requirements of Regulation S-X of the
Securities and Exchange Commission, the financial statements of the
registrant are condensed and omit many disclosures presented in the
consolidated financial statements and the notes thereto.
2. Long-term debt
Long-term debt consists of the following:
1998 1997
Mortgage note payable, interest at 8.75%,
monthly payments of $3,283 including
principal and interest, balloon payment
due February 2001, secured by real
property. Prior to October 1, 1996,
interest was at 9.875% and monthly
payments of principal and interest
were $4,000. $386,054 $390,954
Less current maturities 5,849 5,443
Totals $380,205 $385,511
Scheduled maturities of long-term debt during the five years subsequent
to July 31, 1998 are as follows:
1999 $ 5,849
2000 6,382
2001 373,823
Total $ 386,054
3. Dividends
Cash dividends paid to Lincoln International Corporation by its
consolidated subsidiaries were $0, $0, and $557,605 for the three
fiscal years ended July 31, 1998, 1997 and 1996, respectively. The
amounts are included in miscellaneous income.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 31, 1998 and 1997
4. Going Concern
As shown in the accompanying financial statements, the Company
incurred losses from operations. The ability of the Company to
continue as a going concern is dependent upon future profitable
operations. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a
going concern.
SCHEDULE II
LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended July 31, 1998, 1997, and 1996
Column Column Column Column Column
A B C D E
Additions
Balance Charged Charged Balance
at to to Other at
Beginning Costs & Accounts Deductions End
Description of Year Expenses Describe Describe of Year
Year ended July 31, 1998
Reserves deducted from assets:
Allowance for losses:
Accounts receivable * 40,332 17,550 0 -57,882 0
Year ended July 31, 1997
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 19,782 20,550 0 0 40,332
Year ended July 31, 1996
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 750 19,032 0 0 19,782
* The allowances for losses on accounts receivable were reduced by $57,882 per a
settlement agreement dated August 18, 1998.
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED FINANCIAL STATEMENTS
AND INDEPENDENT AUDITOR'S REPORT
July 31, 1998, 1997, and 1996
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Lincoln International Corporation
Louisville, Kentucky
We have audited the accompanying consolidated balance sheets of
Lincoln International Corporation as of July 31, 1998 and 1997, and
the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the three years in the period ended
July 31, 1998. 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 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 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 Lincoln International Corporation as of July 31, 1998 and 1997, and
the consolidated results of its operations and its cash flows for each
of the three years in the period ended July 31, 1998, in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 10
to the financial statements, there is substantial doubt about the
Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the
outcome of this uncertainty.
POTTER & COMPANY, LLP
September 30, 1998
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
July 31, 1998 and 1997
A S S E T S
1998 1997
Current assets:
Cash and cash equivalents $ 90,994 $ 156,141
Other receivables 10,911 9,732
Prepaid expenses 3,141 0
Total current assets 105,046 165,873
Net property, plant and equipment 1,042,265 1,070,929
Total assets $1,147,311 $1,236,802
L I A B I L I T I E S
Current liabilities:
Current maturities of long-term
debt $ 5,849 $ 5,443
Accounts payable 12,311 28,594
Deferred rent 18,810 0
Accrued expenses 21,559 42,968
Deposits 25,000 0
Total current liabilities 83,529 77,005
Long-term debt, less current maturities 380,205 385,511
Total liabilities 463,734 462,516
Commitments
S T O C K H O L D E R S' E Q U I T Y
Stockholders' equity:
Common stock, no par value,
(3,000,000 shares authorized;
3,986 and 4,403 shares
issued and outstanding in 1998
and 1997, respectively) 1,281,998 1,300,019
Retained earnings (deficit) -598,421 -525,733
Total stockholders' equity 683,577 774,286
Total liabilities and
stockholders' equity $1,147,311 $1,236,802
See accompanying notes.
2
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Revenues:
Net service and operating revenues $297,459 $292,719 $301,629
Costs and expenses:
Cost of service and operating
revenues 161,010 220,156 230,009
Operating, general and
administrative expenses 180,352 225,607 214,585
Total costs and expenses 341,362 445,763 444,594
Loss from operations -43,903 -153,044 -142,965
Other income (expense):
Gain on sale of property,
equipment, and operating assets 0 24,999 715,210
Interest expense -35,061 -35,138 -80,405
Miscellaneous income 6,276 8,606 17,286
Total other income (expense) -28,785 -1,533 652,091
Income (loss) before income taxes -72,688 -154,577 509,126
Provision for income taxes 0 0 14,391
Net income (loss) $-72,688 $-154,577 $494,735
Net income (loss) per common share $ -17.16 $ -38.71 $ 122.70
See accompanying notes.
3
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended July 31, 1998, 1997, and 1996
Total
Common Common Additional Retained Stock-
Stock Stock Paid-in Earnings holders'
Voting Nonvoting Capital (Deficit) Equity
Balance at
July 31, 1995 $50,000 $761,537 $465,052 $-865,891 $410,698
Purchase of
common stock for
the treasury 0 -30,964 4,394 0 -26,570
Net income 0 0 0 494,735 494,735
Balance at
July 31, 1996 50,000 730,573 469,446 -371,156 878,863
Issuance of
common stock
for executive
bonus 0 50,000 0 0 50,000
Exchange to a
single class of
stock, no par
value 1,250,019 -780,573 -469,446 0 0
Net loss 0 0 0 -154,577 -154,577
Balance at
July 31, 1997 1,300,019 0 0 -525,733 774,286
Purchase of
common stock for
the treasury -18,021 0 0 0 -18,021
Net loss 0 0 0 -72,688 -72,688
Balance at
July 31, 1998 $1,281,998 $0 $0 $-598,421 $683,577
See accompanying notes.
4
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Cash flows from operating activities:
Net income (loss) $-72,688 $-154,577 $494,735
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 40,750 44,943 56,034
Provision for losses on other
receivables 17,550 20,550 19,032
Gain on sale of property,
equipment, and operating assets 0 -24,999 -715,210
Stock bonus 0 50,000 0
Change in assets and liabilities:
Increase in other receivables -18,729 -17,873 -8,733
(Increase) decrease in prepaid expenses -3,141 0 7,091
Increase (decrease) in accounts
payable -16,282 17,509 -49,285
Increase (decrease) in income
taxes payable 0 -14,391 8,151
Decrease in accrued expenses -21,409 -14,972 -35,669
Increase in deferred rent 18,810 0 0
Increase in deposits 25,000 0 0
Net cash used in
operating activities -30,139 -93,810 -223,854
Cash flows from investing activities:
Proceeds from disposal of property,
equipment and operating assets 0 36,500 807,426
Purchases of property and equipment -12,087 -5,740 -8,998
Net cash provided by (used in)
investing activities -12,087 30,760 798,428
See accompanying notes.
5
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 1998, 1997, and 1996
1998 1997 1996
Cash flows from financing activities:
Proceeds from long-term debt $0 $0 $757
Principal payments on long-term debt -4,900 -5,552 -656,700
Purchase of common stock for the
treasury -18,021 0 -26,570
Net cash used in
financing activities -22,921 -5,552 -682,513
Net increase (decrease) in
cash and cash equivalents -65,147 -68,602 -107,939
Cash and cash equivalents
at beginning of year 156,141 224,743 332,682
Cash and cash equivalents
at end of year $90,994 $156,141 $224,743
Supplemental disclosures of cash flow
information:
Cash paid during the year for
interest $35,121 $36,121 $84,924
Cash paid during the year for
income taxes $0 $14,366 $6,240
Supplemental schedule of noncash
financing activities:
Issuance of common stock for
executive bonus $0 $50,000 $0
See accompanying notes.
6
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Lincoln International
Corporation (the Company) is presented to assist in understanding the Company's
financial statements. The financial statements and notes are representations
of the Company's management who is responsible for their integrity and
objectivity. These accounting policies conform to generally accepted
accounting principles and have been consistently applied in the preparation of
the financial statements.
Company's Activities:
Lincoln International Corporation owns property in the state of Kentucky which
is leased to a stock yard operator.
Use of Estimates:
Management uses estimates and assumptions in preparing financial statements.
Those estimates and assumptions affect the reported amounts of assets and
liabilities, the disclosure of contingent assets and liabilities and the
reported revenues and expenses.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany transactions are
eliminated in consolidation.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers all money market
funds with a maturity of three months or less to be cash equivalents.
Property, Plant and Equipment:
Property, plant and equipment are recorded at cost. Depreciation is provided
over the following estimated useful lives:
Buildings and improvements 20-40 years
Yard and administration building 10-55 years
Leasehold improvements 3-5 years
Machinery and equipment 3-12 years
The Company uses the straight-line method of computing depreciation for
financial statement purposes and accelerated methods for income tax purposes.
Leasehold improvements are amortized using the straight-line method over the
lease term.
7
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes:
The Company files a consolidated federal income tax return. Investment tax
credits are treated as a reduction of the tax provision in the year in which
the benefit is earned (flow-through method). Separate state income tax returns
are filed for the Company and each subsidiary.
Earnings Per Share:
Earnings per share are based on the weighted average number of shares
outstanding during each year.
NOTE 2 - OTHER RECEIVABLES
Other receivables consist of the following:
1998 1997
Accounts receivable $10,911 $50,064
Less allowance for doubtful accounts 0 40,332
Totals $10,911 $ 9,732
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
1998 1997
Land $ 667,504 $ 667,504
Building and improvements 68,250 68,250
Yard and administration building 2,143,569 2,133,365
Machinery and equipment 228,228 226,346
Leasehold improvements 2,800 2,800
3,110,351 3,098,265
Less accumulated depreciation 2,068,086 2,027,336
Net property, plant and equipment $1,042,265 $1,070,929
Depreciation expense for the years ended July 31, 1998, 1997 and 1996 was
$40,750 $44,943, and $56,034, respectively.
8
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
1998 1997
Mortgage note payable, interest at
8.75%, monthly payments of $3,283,
including principal and interest,
balloon payment due February 2001,
secured by real property. Prior
to October 1, 1996, interest was
at 9.875% and monthly payments of
principal and interest were
$4,000. $386,054 $390,954
Less current maturities 5,849 5,443
Totals $380,205 $385,511
Aggregate maturities required on long-term debt at July 31, 1998 are as
follows:
1999 $ 5,849
2000 6,382
2001 373,823
Total $386,054
NOTE 5 - INCOME TAXES
The provision for income taxes consists of the following:
1998 1997 1996
Federal income taxes $ 0 $ 0 $ 2,310
State and local income taxes 0 0 12,081
Provision for income taxes $ 0 $ 0 $14,391
9
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 5 - INCOME TAXES (CONTINUED)
The Company has available at July 31, 1998 operating loss carryforwards, which
may provide future tax benefits. If not used, the carryforwards will expire as
follows:
Year of Operating Loss
Expiration Carryforwards
2005 $ 60,774
2006 216,677
2008 89,623
2009 76,331
2010 59,836
2012 106,248
2013 11,855
Total $621,344
10
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 5 - INCOME TAXES (CONTINUED)
The difference between the statutory income tax rate and the Company's
effective tax rate is reconciled as follows:
1998 1997 1996
Amount Percent Amount Percent Amount Percent
Federal taxes
(benefit) at
statutory rate $0 0% $0 0% $173,100 34.0%
Surtax exemption 0 0% 0 0% 0 .0%
Tax effect of
current
operating
loss available
for carryover 0 0% 0 0% 0 0.0%
Benefit due to
operating loss
carryforward 0 0% 0 0% -158,323 -31.1%
Temporary
differences 0 0% 0 0% -11,770 -2.3%
State and local
income taxes,
net of federal
benefit 0 0% 0 0% 11,384 2.2%
$0 0% $0 0% $14,391 2.8%
A deferred tax asset due to the operating loss carryforwards has not been
recognized because it is more likely than not that it will not be realized
based on current circumstances.
11
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 6 - LEASE COMMITMENTS
The Company and its subsidiaries lease facilities and equipment under written
operating leases.
Total rental expense amounted to $61,667 in 1998, $74,765 in 1997, and $51,483
in 1996. Future minimum rentals at July 31, 1998 are as follows:
Year ending July 31:
1999 $ 45,082
2000 38,878
2001 18,843
Totals $102,803
NOTE 7 - LEASE OF PROPERTY
On July 15, 1995, the Company leased the property associated with the operation
of its stock yard to another stock yard operator. The agreement was amended
effective August 12, 1998. Under the agreement, the Company will receive rent
of $13,500 a month. The agreement expires July 31, 2005, but may be terminated
by the company upon six months notice to the lessee. The lessee is responsible
at its expense, for most repairs, insurance, utilities and property taxes
associated with the property.
12
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 8 - LEASE OF PROPERTY, PLANT AND EQUIPMENT
The company is the lessor of property under operating leases. Following is a
summary of the Company's investment in property, plant and equipment on
operating leases as of July 31, 1998:
Land $ 667,504
Buildings and Improvements 68,250
Yard building 2,133,365
2,869,119
Less accumulated depreciation 1,834,261
$1,034,858
Under the operating method of accounting for leases, the cost of the property,
plant and equipment is recorded as an asset and is depreciated over its
estimated useful life and the rental income is recognized as the lease rental
payments are earned.
All of the leases, except for the lease described in Note 7, are month-to-
month. The minimum future rentals to be received on that lease at July 31,
1998 are as follows:
Year ending July 31:
1998 $ 163,597
1999 162,000
2000 162,000
2001 162,000
2002 162,000
Thereafter 486,000
$1,297,597
13
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1998, 1997, and 1996
NOTE 9 - ECONOMIC DEPENDENCY
For the year ended July 31, 1998, the Company recognized $216,000,
approximately 72.6% of its operating revenues, from the lessee of the stock
yard.
NOTE 10 - GOING CONCERN
As shown in the accompanying financial statements, the Company incurred losses
from operations for the three years ended July 31, 1998. The ability of the
Company to continue as a going concern is dependent upon future profitable
operations. The financial statements do not include any adjustments that might
be necessary if the Company is unable to continue as a going concern.
NOTE 11 - CAPITAL STOCK
During the year ending July 31, 1997 the company amended the articles of
incorporation and resolved that the corporate capital structure consist of
3,000,000 shares of class A common voting stock, all of no par value. This
replaces 100,000 shares of voting common stock and 2,900,000 shares of
nonvoting common stock, each with $.50 stated value.
On December 5, 1997, a resolution was approved by a majority of the
stockholders to amend the Articles of Incorporation to reflect a reverse split
of the Company's common stock in the ratio of four hundred old shares for one
new share (400 to 1). The stockholders were notified and issued scrip for each
holding of stock of less than 400 shares. The stockholders could request their
holding of old stock be exchanged for new stock in blocks of 400 shares of old
stock, or request payment of thirty cents ($.30) per share for old stock. The
stockholders were further notified if neither action was taken by April 5,
1998, the scrip would expire and represent no further legal right. All
references in the accompanying financial statements to the number of common
shares and per-share amounts for prior years have been restated to reflect the
stock split.
NOTE 12 - SUBSEQUENT EVENTS
On May 29, 1998, the Company entered into an agreement to sell the real estate
on which the stockyard is located for approximately $3,400,000. If completed,
the transaction will result in a gain of approximately $2,400,000 before income
taxes, which will be included in operations during 1999.
14