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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, 1999 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 101, 2200 Greene Way
Louisville, Kentucky 40243
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (502)671-0010
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) 7,972
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report -- 1998-1999
(2) Information Statement -- 1999
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 rental of commercial office property in Louisville, Kentucky.
On March 5, 1999 Lincoln International Corporation closed on the sale of the
Bourbon Stock Yard real estate located at 1048 East Main to the Home of the
Innocents, Inc. for a total purchase price of $3,377,991, net of sales
expense. The first mortgage on the property, with Stock Yards Bank & Trust
Co. of Louisville, Kentucky, was paid off in the amount $385,605.
All proceeds of this sale were deposited with an intermediary as required
under United States Code Section 1031 in order to effect a deferral of
capital gains on the sale of proceeds.
On May 3, 1999 Lincoln International Corporation purchased for $282,500 a
3500 square foot office condominium located at 11860 Capital Way as part of
the USC Section 1031 transaction.
On June 18, 1999 the company closed on the purchase of real estate located
at 2200, 2211, and 2300 Greene Way, Jeffersontown, Kentucky for a purchase
price of $2,800,000. With the purchase of 11860 Capital Way and 2200, 2211,
2300 Greene Way, Lincoln International Corporation, in effect, deferred all
or substantially all of the capital gains that would have been incurred by
the company from the sale of the Bourbon Stock Yards.
On August 5, 1999 Articles of Dissolution for Farmers Friend Mineral
Company, Inc. and Lincoln Finance Company, Inc. were filed with the
Secretary of State for the Commonwealth of Kentucky thereby dissolving the
two subsidiaries which have required consolidated financial reports. It is
believed that the dissolution of these two corporations, which owned no
assets nor were not operating in any way, will simplify the accounting and
lower accounting costs for Lincoln International Corporation
On January 4, 1999 an intrastate sale of Lincoln securities as a Unit
Offering to Kentucky residents was completed and pursuant to authorization
of and by the Board of Directors, all Units remaining after the close of the
offer were made available for purchase by other existing shareholders as
determined solely by the Board of Directors. The shares remaining after the
close were made available and purchased as follows:
1. 600 Units shall be available for purchase by Pyramid Securities LTD,
P.O. Box 2185,Georgetown, Grand Cayman, British West Indies;
2. 600 Units shall be available for purchase by Salina Investment LTD,
P.O. Box 2185,Georgetown, Grand Cayman, British West Indies;
3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt
Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500,
Louisville, Kentucky 40202;
4. 150 shares available to Richard A. Dolin, Director of Lincoln
International Corporation,5502 Tecumseh Circle, Louisville, Kentucky
40207;
5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner,
1741 Kensington Pl.Lane, Louisville, Kentucky 40205-2748.
6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas,
NV 89113;
7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director
and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059.
Total capital raised from the Unit Offering was $597,900.
EMPLOYEES:
As of July 31, 1999, LINCOLN employed one 1) administrative personnel.
ITEM 2: Properties
The following are the various properties owned or leased by LINCOLN as of
July 31, 1999.
APPROXIMATE LEASE EXPI-
TYPE OF SQUARE FEET RATION DATE
LOCATION PROPERTY FLOOR SPACE (RENEWAL OPTIONS)
LINCOLN ADMINISTRATIVE OFFICES
Louisville, KY Offices 790 sq. ft. Owned
RENTAL PROPERTIES
Louisville, KY Office Spaces 16,210 sq. ft Owned
Louisville, KY Office Spaces 15,800 sq. ft Owned
Louisville, KY Office Spaces 15,120 sq. ft Owned
Louisville, KY Office Spaces 3,500 sq. ft Owned
* * * * * * * * *
The properties listed above are suitable and adequate for the various needs
they supply.
ITEM 3: Legal Proceedings
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 directors Thurman L. Sisney, David Barhorst
(who resigned June of 1998) and Mr. Richard A. 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.
At this time, all Motions are either pending or further briefing will be
required. In addition to replacing one of the original plaintiffs,
defendants also raise 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 coporation
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,
as well as its opposition to other Motions filed on behalf of the plaintiffs
our answer will be filed to the complaint.
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 3rd
day of December, 1999, are as follows:
(1) Election of directors and
(2) Transaction of any other business as may properly come before the
meeting or any adjournment thereof.
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) On January 4, 1999 an intrastate sale of Lincoln securities as a Unit
Offering to Kentucky residents was completed and pursuant to authorization
of and by the Board of Directors, all Units remaining after the close of
the offer were made available for purchase by other existing shareholders
as determined solely by the Board of Directors. The shares remaining after
the close were made available and purchased as follows:
1. 600 Units shall be available for purchase by Pyramid Securities LTD,
P.O. Box 2185, Georgetown, Grand Cayman, British West Indies;
2. 600 Units shall be available for purchase by Salina Investment LTD, P.O.
Box 2185, Georgetown, Grand Cayman, British West Indies;
3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt
Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500,
Louisville, Kentucky 40202;
4. 150 shares available to Richard A. Dolin, Director of Lincoln
International Corporation, 5502 Tecumseh Circle, Louisville, Kentucky
40207;
5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner,
1741 Kensington Pl.Lane, Louisville, Kentucky 40205-2748.
6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas,
NV 89113;
7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director
and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059.
Total capital raised from the Unit Offering was $597,900.
ITEM 6: Selected Financial Data
Years ending July 31
1999 1998 1997 1996 1995
Revenues 190050 297459 292719 301629 1362172
Income (loss) before
extraordinary items 1474483 -72688 -154577 494735 -87968
Net income (loss) 1474483 -72688 -154577 494735 -87968
Earnings (loss) per
common share:
Income (loss) before
extraordinary items 235.64 -17.16 -38.71 122.70 -21.68
Net income (loss) 235.64 -17.16 -38.71 122.70 -21.68
Cash dividends 0 0 0 0 0
Total assets 3690394 1147311 1236802 1358785 1623366
Long-term obligations 0 380205 385511 387250 733640
ITEM 7: Management's Discussion and Analysis of Financial Conditions and
Results of Operations
On February 16, 1999 Thurman L. Sisney resigned as Chairman of the Board of
Lincoln International Corporation and the Board of Directors unanimously
elected Mr. Richard J. Frockt as Chairman.
On March 5, 1999 Lincoln International Corporation closed on the sale of
the Bourbon Stock Yard real estate located at 1048 East Main to the Home of
the Innocents, Inc. for a total purchase price of $3,400,000. The first
mortgage on the property, with Stock Yards Bank & Trust Co. of Louisville,
Kentucky, was paid off in the amount $385,605. All proceeds of this sale
were deposited with an intermediary as required under United States Code
Section 1031 in order to effect a deferral of capital gains taxes on the sale
proceeds.
On May 3, 1999 Lincoln International Corporation purchased for $282,500 a
3500 square foot office condominium located at 11860 Capital Way as part of
the USC Section 1031 transaction.
On June 18, 1999 the company closed on the purchase of real estate located
at 2200, 2211, and 2300 Greene Way, Jeffersontown, Kentucky for a purchase
price of $2,800,000. With the purchase of 11860 Capital Way and 2200, 2211,
2300 Greene Way, Lincoln International Corporation, in effect, deferred all
or substantially all of the capital gains that would have been incurred by
the company from the sale of the Bourbon Stock Yards.
On August 1, 1999 Lincoln International Corporation moved its corporate
offices to 2200 Greene Way, Suite 101, Jeffersontown, Kentucky 40220.
Legal Proceedings: 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 directors Thurman L. Sisney,
David Barhorst (who resigned June of 1998) and Mr. Richard A. 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 Mothion 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 anohter plaintiff in place of one of the original plaintiffs,
Sarah Forree. At this time, all Motions are either pending or further
briefing will be required. In addition to replacing one of the original
plaintiffs, defendants also raise 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, as well as its opposition to other Motions filed on
behalf of the plaintiffs our answer will be filed to the complaint.
On August 5, 1999 Articles of Dissolution for Farmers Friend Mineral
Company, Inc. and Lincoln Finance Company, Inc. were filed with the Secretary
of State for the Commonwealth of Kentucky thereby dissolving the two
subsidiaries which have required consolidated financial reports. It is
believed that the dissolution of these two corporations, which owned no
assets nor were not operating in any way, will simplify the accounting and
lower accounting costs for Lincoln International Corporation.
On August 6, 1999 the Board of Directors of the company approved the
investment of 1.5 million dollars in Accounting Outsource Solutions, LLC a
New Albany, IN limited liability corporation, owned and operated by Mr.
Brian McDonald, MBA/CPA. Since establishing the company within the last
2 1/2 years it has grown it to a 350,000 gross revenue company. The company
has agreed to form a new corporation by the name of Accounting USA, Inc. and
to register it in the state of Nevada. The newly formed company will
provide accounting and bookkeeping services for small businesses. Under a
merger agreement Accounting Outsource Solutions, LLC will be merged with
Accounting USA, Inc.; and in return for the 1.5 million dollar investment,
Lincoln International Corporation will receive 75% of the equity of
Accounting USA, Inc. It is anticipated that the first injection of capital
in the newly formed corporation will occur in on or around September 30, 1999.
The balance of the 1.5 million dollar investment will be made at such time
as the newly formed corporation begins developing branch outlets. Thurman
L. Sisney, Director and Richard J. Frockt, Director, will serve as two of
the three Directors of Accounting USA, Inc.
On August 7, 1999 Mr. Russell Roth was unanimously elected to serve as
Secretary/Treasurer of Lincoln International Corporation until the next
election of officers. Mr. Richard J. Frockt had been serving as
Assistant/Secretary Treasurer following the death of Director Richard A.
Dolin in February of 1999.
On August 7, 1999 the Board of Directors of Lincoln International
Corporation unanimously approved the retention of Potter & Company, 500
West Jefferson Street, Louisville, Kentucky 40202, as the auditor and
accountant for Lincoln International Corporation for the upcoming fiscal
year.
On January 4, 1999 an intrastate sale of Lincoln securities as a Unit
Offering to Kentucky residents was completed and pursuant to authorization
of and by the Board of Directors, all Units remaining after the close of
the offer were made available for purchase by other existing shareholders
as determined solely by the Board of Directors. The shares remaining after
the close were made available and purchased as follows:
1. 600 Units shall be available for purchase by Pyramid Securities LTD,
P.O. Box 2185, Georgetown, Grand Cayman, British West Indies;
2. 600 Units shall be available for purchase by Salina Investment LTD,
P.O. Box 2185, Georgetown, Grand Cayman, British West Indies;
3. 600 Units shall be available for purchase by the Ryan Jeffrey Frockt
Trust; Sheldon G. Gilman, Trustee, 462 So. 4th Avenue, Suite 500,
Louisville, Kentucky 40202;
4. 150 shares available to Richard A. Dolin, Director of Lincoln
International Corporation, 5502 Tecumseh Circle, Louisville, Kentucky
40207;
5. 100 shares to Earl W. Winebrenner, III and/or Holly Winebrenner, 1741
Kensington Pl. Lane, Louisville, Kentucky 40205-2748.
6. 150 shares to Russell Roth, Director, 7769 Spanish Lake Dr., Las Vegas,
NV 89113;
7. and 427 shares to Thurman L. Sisney and/or Sherleen Sisney, Director
and Chairman of the Board, 8002 Montero Court, Prospect, Kentucky 40059.
Total capital raised from the Unit Offering was $597,900.
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
LINCOLN FOR LAST 5 YEARS SINCE AS OF 7/31/99
Thurman L. Sisney,
President
Director, Age 53 1994 2,893 (1)
Richard Jay Fockt
Chairman of the Board
Director 1997 1,207 (2)
Russell R. Roth
Secretary/Treasurer
Director 1997 150
Janet Clark Frockt
Director 1997 1,206 (2)
_______
Officers & Directors as a group 5,456
(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 the outstanding
capital stock of Salina Investment LTD, the record holder of 1,207
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 the capital stock of Pyramid
Securities LTD, the record holder of 1,206 shares. Mr. Frockt
disclaims any beneficial ownership interest in thee shares to which
Mr. Fockt is beneficiary. Further, Ryan Jeffrey Frockt Trust, Sheldon
Gilman, Trustee, is the owner of 600 shares of Lincoln International
Corporation stock. Ryan Jeffrey Frockt is the legally emancipated son
of Richard Jay Frockt and Janet Clark Frockt, both of whom disclaim
any beneficial ownership in the shares to which Ryan Jeffrey Frockt is
beneficiary.
BUSINESS HISTORY OF DIRECTORS
Thurman L. Sisney-Mr. Sisney is President of Lincoln International
Corporation. He has a masters degree in Business Administration and a law
degree from the University of Louisville and has been in private practice
since 1980. Mr. Sisney has served as general counsel to the Finance and
Administration Cabinet as well as counsel and legislative liaison to the
governor of Kentucky. He has also served as general counsel and Deputy
Commissioner of the Department of Agriculture. Mr. Sisney is and has been
active in numerous civic and charitable organizations, including the Board
of Trustees of the United Methodist Church, founder and president of the
International Association of Convention and Hospitality and Industry
Attorneys Association.
Janet Clark Frockt-Ms. Clark 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.
Ms. 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 is Chairman of the Board of Lincoln
International Corporation. 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.
Russell R. Roth-Mr. Roth is Secretary-Treasurer of the Company. 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 Sotherby
Art Auction Company in New York City. 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
1998-1999 was $4,025.
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, Thurman L.
Sisney, and by its principal Financial Officer and principal Accounting
Officer, Secretary and Treasurer, Russell R. Roth, as thereunto duly
authorized in the City of Louisville, Commonwealth of Kentucky, on the
27th day of October, 1999.
LINCOLN INTERNATIONAL CORPORATION
____________________________
By: Thurman L. Sisney, President
Date: ____________________________
___________________________
By: Russell R. Roth, 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
_____________________________
Richard Jay Frockt Chairman of the
Board
_____________________________
Russell R. Roth Secretary/Treasurer
(2) Directors
_____________________________
Thurman L. Sisney Director
_____________________________
Richard Jay Frockt Director
_____________________________
Janet Clark 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, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of
the three years in the period ended July 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 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
resonable 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, 1999 and 1998, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended July 31,
1999, in conformity with generally accepted accounting principles.
POTTER & COMPANY, LLP
Louisville, Kentucky
October 5, 1999
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, 1999 and 1998
Consolidated statements of operations - years ended July 31, 1999, 1998,
and 1997
Consolidated statements of stockholders' equity - years ended July 31,
1999, 1998, and 1997
Consolidated statements of cash flows - years ended July 31, 1999, 1998,
and 1997
Notes to consolidated financial statements
Supporting schedules for the three years ended July 31, 1999, 1998, and 1997:
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, 1999 and 1998
1999
1998
A S S E T S
Current assets:
Cash and cash equivalents $ 396,466 $ 90,994
Other receivable, net 2,500 10,911
Prepaid expenses 0 3,141
Total current assets 398,966 105,046
Investments in subsidiaries 0 575,000
Net property, plant and equipment 3,105,922 1,042,265
Noncurrent assets:
Deferred tax asset 185,506 0
Total assets $ 3,690,394 $ 1,722,311
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 $ 0 $ 5,849
Accounts payable 32,297 12,311
Deferred rent 0 18,810
Accrued expenses 18,750 21,559
Deposits 0 25,000
Total current liabilities 51,047 83,529
Noncurrent liabilities:
Long-term debt, less current
maturities 0 380,205
Deferred tax liability 883,387 0
Total noncurrent liabilities 883,387 380,205
Advances from subsidiaries 0 582,383
Total liabilities 934,434 1,046,117
Stockholders' equity:
Common stock 1,879,898 1,281,998
Retained earnings (deficit) 876,062 (605,804)
Total stockholders' equity 2,755,960 676,194
Total liabilities and
Stockholders' equity $ 3,690,394 $ 1,722,311
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF OPERATIONS
Years ended July 31, 1999, 1998, and 1997
1999 1998 1997
Revenues:
Service and operating revenue $ 190,050 $ 297,459 $ 292,719
Gain (loss) on sale of assets 2,359,078 0 24,999
Interest and dividend income 48,606
Miscellaneous income 1,355 6,276 8,606
Total revenues 2,599,089 303,735 326,324
Costs and expenses:
Cost of service and operating
revenue 162,542 161,010 220,156
Operating, general and
administrative expenses 241,571 179,813 225,383
Interest expense - other 20,312 35,061 35,138
Total costs and expenses 424,425 375,884 480,677
Income (loss) before provision
for income taxes 2,174,664 (72,149) (154,353)
Income tax 700,181 0 0
Income (loss) before equity in net losses
of subsidiaries 1,474,483 (72,149) (154,353)
Equity in net losses of
Subsidiaries 0 (539) (224)
Net income (loss) $ 1,474,483 $ (72,688) $ (154,577)
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS
Years ended July 31, 1999, 1998, and 1997
1999 1998 1997
Cash flows from operating activities:
Net income (loss) $ 1,474,483 $ (72,688) $ (154,577)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation and amortization 37,126 40,750 44,943
Equity in net losses of
consolidated subsidiaries 0 539 224
Gain on sale of property,
equipment, and operating assets (2,359,078) 0 (24,999)
Deferred income taxes 697,881 0 0
Stock bonus 0 0 50,000
Provision for losses on other
Receivables 0 17,550 20,550
(Increase) decrease in:
Other receivables 8,411 (18,729) (17,873)
Prepaid expenses 3,141 (3,141) 0
Increase (decrease) in:
Accounts payable 19,986 (16,282) 17,509
Accrued expenses (2,809) (21,409) (14,972)
Income taxes payable 0 0 (14,366)
Deferred rent (18,810) 18,810 0
Deposits (25,000) 25,000 0
Net cash used in operating
activities (164,669) (29,600) (93,561)
Cash flows from investing activities:
Proceeds from sale of property,
equipment, and operating assets 3,377,991 0 36,500
Purchase of property and
equipment (3,119,696) (12,087) (5,740)
Net cash provided by (used in)
investing activities 258,295 (12,087) 30,760
Cash flows from financing activities:
Proceeds from issuance of common
stock 597,900 0 0
Decrease in advances from
Subsididiaries 0 (539) (249)
Proceeds from long-term debt 0 0 0
Principal payments on long-term
debt (386,054) (4,900) (5,552)
Purchase of common stock for
the treasury 0 (18,021) 0
Net cash provided by (used in)
financing activities $ 211,846 $(23,460) $(5,801)
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED STATEMENTS OF CASH FLOWS - CONTINUED
Years ended July 31, 1999, 1998, and 1997
1999 1998
1997
Net increase (decrease) in
cash equivalents $ 305,472 $(65,147) $(68,602)
Cash and cash equivalents
at beginning of year 90,994 156,141 224,743
Cash and cash equivalents
at end of year $ 396,466 $ 90,994 $ 156,141
Supplemental disclosures of cash flow information:
Cash paid during the year
for interest $ 20,312 $ 35,121 $ 36,121
Cash paid during the year
for income taxes $ 0 $ 0 $ 14,366
Supplemental schedule of non cash financing activities:
Issuance of common stock
for executive bonus $ 0 $ 0 $ 50,000
See accompanying notes.
SCHEDULE I
LINCOLN INTERNATIONAL CORPORATION (PARENT COMPANY ONLY)
NOTES TO CONDENSED FINANCIAL STATEMENTS
July 31, 1999 and 1998
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:
1999 1998
Mortgage note payable, interest at
8.75%, monthly payments of $3,283
including principal and interest.
The entire note balance was paid
off March, 1999. $ 0 $ 386,054
Less current maturities 0 5,849
Total $ 0 $ 380,205
3. Dividends
Cash dividends paid to Lincoln International Corporation by its consolidated
subsidiaries were $0 for the three fiscal years in the period ended July 31,
1999.
SCHEDULE II
LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended July 31, 1999, 1998, and 1997
Column A Column B Column C Column D Column E
Additions
Balance Charged
at to Charged to Balance
Beginning Costs & Other Accts Deductions at End
Description of Year Expenses Describe Describe of Year
Year ended July 31, 1999
Reserves deducted from
assets:
Allowance for
losses:
Accounts
Receivable: $ 0 $ 0 $ 0 $ 0 $ 0
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
* The allowance for losses on accounts receivable and 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, 1999, 1998, and 1997
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, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the three years in the period ended July 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 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, 1999 and 1998, and the consolidated
results of its operations and its cash flows for each of the three years in
the period ended July 31, 1999, in conformity with generally accepted
accounting principles.
POTTER & COMPANY, LLP
October 5, 1999
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEETS
July 31, 1999 and 1998
A S S E T S
1999 1998
Current assets:
Cash and cash equivalents $ 396,466 $ 90,994
Other receivables 2,500 10,911
Prepaid expenses 0 3,141
Total current assets 398,966 105,046
Net property, plant and equipment 3,105,922 1,042,265
Noncurrent assets:
Deferred tax asset 185,506 0
Total assets $ 3,690,394 $ 1,147,311
L I A B I L I T I E S
Current liabilities:
Current maturities of
long-term debt $ 0 $ 5,849
Accounts payable 32,297 12,311
Deferred rent 0 18,810
Accrued expenses 18,750 21,559
Deposits 0 25,000
Total current liabilities 51,047 83,529
Noncurrent liabilities:
Long-term debt, less
current maturities 0 380,205
Deferred tax liability 883,387 0
Total noncurrent liabilities 883,387 380,205
Total liabilities 934,434 463,734
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;
7,972 and 3,986 shares
issued and outstanding in 1999
and 1998, respectively) 1,879,898 1,281,998
Retained earnings (deficit) 876,062 (598,421)
Total stockholders' equity 2,755,960 683,577
Total liabilities and
Stockholders' equity $ 3,690,394 $ 1,147,311
See accompanying notes.
2
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended July 31, 1999, 1998, and 1997
1999 1998 1997
Revenues $ 190,050 $ 297,459 $ 292,719
Costs and expenses:
Cost of revenues 162,542 161,010 220,156
Operating, general
and administrative
expenses 241,571 180,352 225,607
Total costs and
expenses 404,113 341,362 445,763
Loss from operations (214,063) (43,903) (153,044)
Other income (expense):
Gain on sale of property,
equipment, and operating
assets 2,359,078 0 24,999
Interest and dividend
income 48,606 0 0
Miscellaneous income 1,355 6,276 8,606
Interest expense (20,312) (35,061) (35,138)
Total other income
(expense) 2,388,727 (28,785) (1,533)
Income (loss) before
income taxes 2,174,664 (72,688) (154,577)
Provision for income taxes 700,181 0 0
Net income (loss) $ 1,474,483 $ (72,688) $ (154,577)
Net income (loss) per
common share $ 235.64 $ (17.16) $ (38.71)
See accompanying notes.
3
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended July 31, 1999, 1998, and 1997
Additional Retained Total
Common Stock Paid-in Earnings
Stockholders'
Voting Nonvoting Capital (Deficit) Equity
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
Issuance of
common stock
For cash 597,900 0 0 0 597,900
Net income 0 0 0 1,474,483 1,474,483
Balance at
July 31, 1999 $1,879,898 $0 $0 $876,062 $2,755,960
See accompanying notes
4
LINCOLN INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended July 31, 1999, 1998, and 1997
1999 1998 1997
Cash flows from operating activities:
Net income (loss) $ 1,474,483 $ (72,688) $ (154,577)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 37,126 40,750 44,943
Provision for losses on other
receivables 0 17,550 20,550
Gain on sale of property, equipment, and
operating assets -2,359,078 0 (24,999)
Deferred income taxes 697,881 0 0
Stock bonus 0 0 50,000
(Increase) decrease in:
Other receivables 8,411 (18,729) (17,873)
Prepaid expenses 3,141 (3,141) 0
Increase (decrease) in:
Accounts payable 19,986 (16,282) 17,509
Income taxes payable 0 0 (14,391)
Accrued expenses (2,809) (21,409) (14,972)
Deferred rent (18,810) 18,810 0
Deposits (25,000) 25,000 0
Net cash used in
operating activities (164,669) (30,139) (93,810)
Cash flows from investing activities:
Proceeds from sale of property, equipment and
operating assets 3,377,991 0 36,500
Purchase of property and equipment -3,119,696 (12,087) (5,740)
Net cash provided by (used in)
investing activities 258,295 (12,087) 30,760
Cash flows from financing activities:
Proceeds from issuance of common stock 597,900 0 0
Principal payments on long-term debt (386,054) (4,900) (5,552)
Purchase of common stock for the treasury 0 (18,021) 0
Net cash provided by (used in)
financing activities 211,846 (22,921) (5,552)
Net increase (decrease) in cash and
cash equivalents 305,472 (65,147) (68,602)
Cash and cash equivalents at
beginning of year 90,994 156,141
224,743
Cash and cash equivalents at end
of year $ 396,466 $ 90,994 $ 156,141
Supplemental disclosures of cash flow information:
Cash paid during the year for
interest $ 20,312 $ 35,121 $ 36,121
Cash paid during the year for income
taxes $ 0 $ 0 $ 14,366
Supplemental schedule of non cash financing activities:
Issuance of common stock for executive
bonus $ 0 $ 0 $ 50,000
See accompanying notes.
5
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
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 owned property in Louisville, Kentucky
which it leased to a stockyard operator. The plant, property and equipment
of the stockyard were sold during fiscal year 1999. The proceeds from the
sale were used to purchase commercial rental office buildings in Louisville,
Kentucky.
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 at the date
of the financial statements and the reported revenues and expenses during
the period.
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.
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes result primarily from using different accounting
methods for financial reporting from those used for income tax reporting.
The deferred tax assets and liabilities represent future tax consequences
of those differences, which will either be taxable or deductible when the
assets and liabilities are recovered or settled.
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:
1999 1998
Accounts receivable $ 0 $ 10,911
Refundable deposits 2,500 0
Less allowance for doubtful accounts 0 0
Total $ 2,500 $ 10,911
7
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
1999 1998
Land $ 310,054 $ 667,504
Building and improvements 2,790,483 68,250
Yard and administration building 0 2,143,569
Machinery and equipment 50,940 228,228
Leasehold improvements 2,800 2,800
3,154,277 3,110,351
Less accumulated depreciation 48,355 2,068,086
Net property, plant and equipment $ 3,105,922 $ 1,042,265
Depreciation expense for the years ended July 31, 1999, 1998 and 1997 was
$37,126, $40,750 and $44,943, respectively.
All plant, property, and equipment of Bourbon Stock Yards was sold on
March 5, 1999 for $3,377,991, net of sales expense. The sale resulted in a
gain of $2,359,078 for financial statement purposes. The proceeds were
used to purchase commercial rental office buildings. Substantially all of
the gain was deferred under Section 1031 for federal and state tax purposes.
NOTE 4 - LONG-TERM DEBT
Long-term debt consists of the following:
1999 1998
Mortgage note payable, interest at 8.75%,
monthly payments of $3,283, including
principal and interest. The entire note
balance was paid off March, 1999. $ 0 $
386,
054
Less current maturities 0
5,849
Total $ 0 $
380,
205
8
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
NOTE 5 - INCOME TAXES
A deferred tax asset has been recognized primarily for operating loss
carryovers that are to offset future income taxes.
A deferred tax liability has been recognized as the result of the deferred
gain on the sale of property and plant for income tax purposes.
The deferred tax (expense) benefit in the balance sheet as of July 31, 1999,
1998, and 1997 consisted of the following:
1999
1998 1997
Deferred tax asset $ 185,506 $ 0
$ 0
Deferred tax liability (883,387) 0
0
Net deferred tax expense $(697,881) $
0
$ 0
The Company has available at July 31, 1999 operating loss carryforwards,
which may provide future tax benefits. If not used, the carryforwards will
expire as follows:
Year of Operating Loss
Expiration Carryforwards
2006 $ 175,187
2007 0
2008 72,982
2009 31,281
2010 31,281
2011 0
2012 84,103
2013 70,061
$ 464,895
The provision for income taxes consists of the following:
1999 1998 1997
Federal income taxes $ 18,719 $ 0 $ 0
State and local income taxes 7,708 0 0
Deferred taxes 697,881 0 0
Tax benefit of net operating
loss carryforward (24,127) 0
0
Provision for income taxes $ 700,181 $ 0 $ 0
9
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
NOTE 6 - LEASE COMMITMENTS
The Company leases equipment under written operating leases.
Total rental expense amounted to $32,323 in 1999, $61,667 in 1998, and
$74,765 in 1997. Future minimum rentals at July 31, 1999 are as follows:
Year ending July 31:
2000 $ 4,796
2001 4,796
2002 4,796
Total $ 14,388
NOTE 7 - LEASE OF PROPERTY, PLANT AND EQUIPMENT
The Company is the lessor of commercial rental office buildings under
operating leases. Following is a summary of the Company's investment in
property, plant and equipment under operating leases as of July 31, 1999:
Land $ 310,054
Buildings and improvements 2,790,483
3,100,537
Less accumulated depreciation 12,469
$ 3,088,068
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.
The minimum future rentals to be received on the leases at July 31, 1999 are
as follows:
Year ending July 31:
1999 $ 118,846
2000 81,151
2001 46,151
2002 44,147
2003 22,104
Thereafter 116,046
Total $ 428,445
10
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 1999, 1998, and 1997
NOTE 8 - CONCENTRATION OF CREDIT RISK
The Company maintains cash accounts in a commercial bank located in
Louisville, Kentucky. Accounts are guaranteed by the Federal Deposit
Insurance Corporation (FDIC) up to $100,000. The Company has an uninsured
amount of $300,961 outstanding at July 31, 1999.
NOTE 9 - CAPITAL STOCK
During fiscal 1999, the Company issued an aggregate 3,986 shares of common
stock to stockholders residing in the state of Kentucky. One option to
acquire an additional share at $150 in the first year, $160 in the second
year, or $170 in the third year after the issue was attached to each share
issued.
NOTE 10 - YEAR 2000 ISSUE
The year 2000 issue is the result of shortcomings in many electronic data
processing systems and other electronic equipment that may adversely affect
the company's operations.
The Company has assessed its various types of electronic equipment and does
not believe the year 2000 issue will pose significant operational problems.
Because of the unprecedented nature of the year 2000 issues, its effects and
the success of related remediation efforts will not be fully determinable
until the year 2000 and thereafter. Management cannot assure that the
Company is or will be year 2000 ready, that the Company's remediation
efforts will be successful in whole or in part, or that the parties with
whom the Company does business will be year 2000 ready.
The final impact on the Company, if any, cannot be determined
NOTE 11 - SUBSEQUENT EVENTS
On August 6, 1999, the Company's Board of Directors approved the investment
of $1,500,000 in a company which provides accounting and bookkeeping
services for small businesses. The Company will receive 75% of the equity
of the company providing the accounting and bookkeeping services.
11