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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, 2002 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 201, 2300 Greene Way
Louisville, Kentucky 40220
_______________________________________ __________
(Address of principal executive office) (Zip Code)
(502) 671-0010
__________________________________________________
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Name of each
exchange on which
Title of each class 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, 2002.
Common (no-par) 8,793
DOCUMENTS INCORPORATED BY REFERENCE
(1) Annual Report -- 2001-2002
(2) Information Statement -- 2002
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 providing bookkeeping and payroll services to small and medium sized
businesses primarily in Louisville, Kentucky, and the rental of commercial
office property located in Louisville, Kentucky.
On August 6, 1999 the Board of Directors of Lincoln approved the
investment of 1.5 million dollars in a newly formed corporation, Accounting USA,
Inc. Mr. Brian McDonald, MBA/CPA had established a company known as Accounting
Outsource Solutions, LLC, within the preceding 2 1/2 years. Under a Merger
Agreement, Accounting Outsource Solutions, LLC was contributed into Accounting
USA, Inc. in return for 25% of the equity. Lincoln International Corporation in
return for its investment received 75% of the equity of Accounting USA, Inc.
which was incorporated in the State of Nevada on September 30, 1999. On December
1, 2000 Accounting USA, Inc. merged into the Company. In exchange for the
minority interest, the Company issued 600 shares of the Company's common stock
to the minority interest. Accounting USA, Inc. provides accounting/bookkeeping
and payroll services for small to medium sized businesses primarily in the
Louisville area. It does, however, service clients outside of the Louisville
area on a limited basis. Accounting USA, Inc. has developed and provides
internet access for its clients into its accounting platform. The business is
not seasonal nor is it dependant on any particular customers. Direct competition
for the outsourcing of the accounting/payroll business is in effect non-existent
in the Louisville, Kentucky area. Many small to medium sized businesses employ
in-house personnel to perform the accounting/bookkeeping responsibilities for
their company. Some CPA firms and small bookkeeping firms provide bookkeeping
services for their clients although this is usually done on a historical basis
as compared with or contrasted to the services provided by Accounting USA, Inc.
on a "real time" basis. Accounting USA, Inc.'s core functions are: accounts
payable; accounts receivable; payroll; job cost; bank reconciliation; time and
billing; and financial statements. Accounting USA, Inc. also provides numerous
customized financial reports to its clients. The primary market channels for
Accounting USA, Inc. are direct sales and business partnerships with banks,
CPA's or other businesses. The intent of Lincoln is to refine the services of
Accounting USA, Inc. and the sales of those services so that it can be
replicated in other metropolitan markets around the country. Management believes
the services of Accounting USA, Inc. meets a unique market niche, particularly
with the internet access available to its clients. Given that the outsourcing of
accounting/bookkeeping can save clients an average of 30% to 40% of the cost of
doing the same service in-house, it is believed by management that the
outsourcing concept of Accounting USA, Inc. has potential for future expansion
and growth. Accounting USA, Inc. does not replace the services performed by the
client's CPA, such as tax preparation and audits. Accordingly, CPA's often find
the bookkeeping performed on behalf of their client facilitates the provision of
their professional services. Lincoln will continue to provide assistance and
support to the start-up efforts of Accounting USA, Inc.
In July, 2000 Lincoln International Corporation was approached by the
Mountain Economic Development Fund (MEDF) of 201 South Main Street, Winchester,
Kentucky 40391 through its Executive Director, Mr. Grant Satterly, requesting
financing assistance for Admiralty Boats, Inc., d/b/a Boats Ltd., a Kentucky
corporation with its principal office located at 3516 Willow Spring Road,
Lexington, Kentucky 40509. MEDF requested a loan in the sum of One Hundred
Thousand Dollars ($100,000.00) under a revolving line of credit for Boats, Ltd.
to increase their cash flow and allow more favorable purchasing of raw material.
Boats, Ltd. is in the business of manufacturing bass fishing boats and sporting
boats varying in sizes from 15 feet to 22 feet. MEDF is an affiliate of the
Christian Appalachian Project which is well known and reputable in its efforts
to retain and/or to create jobs in the Appalachian areas of Kentucky. On July
13, 2000 the company extended a one (1) year revolving line of credit to Boats,
Ltd. for One Hundred Thousand Dollars ($100,000). Loan proceeds are to be
advanced based upon a pre-determined ninety (90) percent of the manufacturer's
cost to manufacture. Lincoln receives a perfected, secured interest in each
boat. The security interest is released only upon the sale of each respective
boat and upon receipt of one hundred (100) percent of the manufacturer's total
cost. Lincoln has the exclusive right to extend the line of credit for
additional one (1) year terms. Management does not intend for lending to become
a principal part of its business.
EMPLOYEES:
As of July 31, 2002, LINCOLN employed eighteen (18) employees.
ITEM 2: PROPERTIES
The following are the various properties owned or leased by LINCOLN as
of July 31, 2002.
APPROXIMATE LEASE EXPIRATION
TYPE OF SQUARE FEET DATE (RENEWAL
LOCATION PROPERTY FLOOR SPACE OPTIONS)
LINCOLN ADMINISTRATIVE OFFICES
Louisville, KY Offices 5,111 sq. feet. Leased (Expires
May 2002 and
March 2004)
RENTAL PROPERTIES
Louisville, KY Office Spaces 15,800 sq. feet. Owned
* * * * * * * * * * * * * * * * * *
The properties listed above are suitable and adequate for the various
needs they supply.
ITEM 3: LEGAL PROCEEDINGS
Litigation Report. On March 23, 1999, two minority shareholders, Mr.
Merle Brewer and Ms. Sarah Forree, filed a lawsuit in the United States District
Court, Western District of Kentucky, Louisville Division against Lincoln
International Corporation, and individuals Thurman L. Sisney, David Barhorst
(who resigned June of 1998) and Mr. Richard Dolin (deceased in February of
1999). The case is styled: Civil Action No. 3:99CV-178-S. On May 18, 1999,
Lincoln International Corporation filed a Motion to Dismiss the complaint
alleging that there are no questions of law nor facts substantiating the
allegations in the complaint. A response to the Motion to Dismiss was filed by
the plaintiffs on July 8, 1999. On June 30, 1999, the plaintiffs filed a Motion
to Amend the complaint to substitute another plaintiff in place of one of the
original plaintiffs, Sarah Forree. On December 23, 1999 the Court granted the
plaintiff's Motion and allowed Terry Kennedy to be substituted for Sarah Forree.
On February 18, 2000 the company filed an Amended Motion to Dismiss. Defendants
have also raised in their motion to Amend the complaint the allegation that
notice of dissenters rights should have been provided in the reverse split that
concluded on April 5, 1998. On December 20, 2000 the Court entered an Order
Dismissing Count X of the Plaintiffs Amended Complaint for failure to state a
claim upon which relief could be granted pursuant to Fed. R. Civ. P. 12(b)(6)
and denied the company's Motion with respect to dismissing the remainder of the
Plaintiffs Amended Complaint. The Court's dismissal of Count X of the Complaint
in effect validated the reverse split of the company completed on April 5, 1998.
On July 17, 2001, the company entered into a Settlement Agreement with
the two named Plaintiffs Terry Kennedy and Merle Brewer and their legal counsel.
In the settlement the company agreed to give each named Plaintiff stock
equivalent to a value of $2,000, and the Plaintiffs would have a thirty-day
option to sell that stock back to the company for $2,000. The value of the stock
would be based upon the last listed trade value as listed on NASDAQ. Further,
any shareholders who tendered their stock in the Tender Offer in 1997 will be
notified that they will have the opportunity to buy back stock of the company at
a price of $120.00 per share (or $0.30 per share at the pre-split value) the
value at which the stock was sold in the Tender. In regard to those who sold
stock as part of the Reverse Split in 1998, the company will allow those
shareholders to buy back in also at the same rate i.e. $120.00 per share (or
$0.30 of the pre-split value) if they so desire. All terms of the Settlement
Agreement were complied with, and a total of six (6) shareholders elected to
purchase Lincoln stock (for a total of six (6) shares) as part of the
settlement. On July 22, 2002, the Court entered its Order dismissing the action
with prejudice. The two Plaintiffs sold their stock back to the Company.
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 6th day of December, 2002, are as follows:
(1) Election of directors;
(2) Transaction of any other business as may properly come before the
meeting or any adjournment thereof; and
(3) Approval of a 3 for 1 Reverse Split of the Company's Common Stock
as approved on August 29, 2002, by unanimous consent action and as set
forth in the following Resolution:
WHEREAS, the costs of maintaining a public company are high (estimated
at $40,000 to $50,000 per year); and
WHEREAS, the Company's stock is thinly traded and has been for over
twenty years; and
WHEREAS, it appears that the costs of remaining public company outweigh
the benefits derived by shareholders.
BE IT HEREBY RESOLVED that the following plan of reverse split be
recommended to the shareholders for their approval at a Special Shareholders
meeting to be held on November 8, 2002, or another date as is necessary, at the
offices of Lincoln International Corporation, 2300 Greene Way, Suite 201,
Louisville, Kentucky 40220, at which shareholders of record at the close of
business on October 1, 2002 would be allowed to vote.
PROPOSED PLAN OF REVERSE SPLIT
The no par common shares of Lincoln International Corporation
will be reverse split in the ratio of three old shares to one
new share. All shareholders of record at the close of business
on the date the reverse split is approved who hold only one or
two old shares and would thus be frozen out will be granted a
right to acquire from Lincoln a fractional interest in one new
share such that when combined with their scrip will enable
them to acquire one new share should they desire to remain
Lincoln shareholders.
BE IT FURTHER RESOLVED, that these Consent Minutes may be executed in
multiple counterparts.
BE IT FURTHER RESOLVED, that October 31, 2002 shall and is hereby fixed
as the record date for determination of Shareholders entitled to vote at the
December 6, 2002 annual shareholders meeting.
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.
ITEM 6: SELECTED FINANCIAL DATA
Years ending July 31
_________________________________________________________________
2002 2001 2000 1999 1998
_________ _________ _________ _________ _________
Revenues 1,292,757 1,137,268 692,942 190,050 297,459
Income (loss) before
extraordinary items (732,966) (516,830) (500,914) 1,474,483 (72,688)
Net income (loss) (732,966) (516,830) (500,914) 1,474,483 (72,688)
Earnings (loss) per
common share:
Income (loss) before
extraordinary items (83.40) (60.58) (62.83) 235.64 (17.16)
Net income (loss) (83.40) (60.58) (62.83) 235.64 (17.16)
Cash dividends 0 0 0 0 0
Total assets 1,796,781 2,730,518 3,786,349 3,690,394 1,147,311
Long-term obligations 528,498 573,320 85,511 0 380,205
Gain (loss) on sale of property,
equipment, and operating
assets 0 296,192 (12,884) 2,359,078 0
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
The results and the nature of operations for the company changed
dramatically from 1998 through January 31, 2001. Until March 5, 1999 the company
had owned and operated The Bourbon Stockyard, a livestock auction on
approximately 21 acres of land situated in downtown Louisville, Kentucky. The
cattle market was changing significantly as fewer livestock producers were
taking their livestock to auctions such as those operated by the company. There
was a definite increasing trend of selling directly to purchasers or end users
such as packing and slaughterhouses. In July of 1995, the company entered into a
ten-year operating lease with Michigan Livestock Exchange in East Lansing,
Michigan, an agriculture cooperative with sales nearing One Billion Dollars and
vast expertise in the livestock business. It was assumed that Michigan Livestock
Exchange, under the 10-year Lease Management Agreement, could provide
significantly more capital resources and expertise than the company itself could
provide over the succeeding ten years. The stockyard facilities necessary to
operate the auction covered approximately sixteen acres of the total 21 acres,
and were in dire need of repairs. It was anticipated that capital expenditures
to maintain the facilities would rise significantly just to maintain the
property/facilities in order to remain certified by the U.S. Department of
Agriculture and the Commonwealth of Kentucky. The lease proceeds from the
property were originally $18,000 per month under the management agreement and
subsequently reduced to $13,000 per month as a result of the settlement of
litigation. This cash flow was sufficient to meet the current obligations of the
company, which in fiscal 1998 were approximately $197,000 since the company had
only one employee, rented minimal office space, and its only debt service was on
a mortgage note payable of $380,205 with monthly payments of $3,283.
Accordingly, the proceeds from leases related to the property provided the
necessary liquidity into the near and longer term future in order to allow
management the time to develop other sources of revenue from the property or to
develop the portions of the property not required by the livestock auction
operations.
On May 4, 1998, the Board of Directors of the company approved, but put
on hold, an Intrastate Stock Offering aimed at raising a minimum of $400,000 to
be used for working capital and capital expenditures related to maintaining the
property for operations and at the same time, developing warehouses or office
rental space on the perimeter of the property. By the end of fiscal 1998, the
company had been approached by Home of the Innocents, Inc., a not-for-profit
health care provider to special needs children, with an expressed interest in
purchasing 5 to 7 acres of the site. The company did not desire to break up the
property and thereby diminish its value and the company had serious concerns
about environmental issues because of past uses of the property, for example
about 6 acres had been used as a railroad bed for many decades. Accordingly, the
company later proceeded with an Intrastate Stock Offering which culminated
January 4, 1999, raising $597,000 in capital to be used for maintenance and
improvements, construction of possible rentable warehouses and/or
office/warehouse on the portion of the property not used in the livestock
auction operations.
In late 1998, the company received an offer to purchase part of the
Bourbon Stock Yard real estate. On March 5, 1999 Lincoln International
Corporation sold The Bourbon Stockyards providing $3,377,991 in capital net of
expenses. Out of those sale proceeds the first Mortgage on the property to Stock
Yard Bank in the amount of $385,605 was paid off. The company began evaluating
various investment and acquisition options.
Faced with significant capital gains on the sale proceeds as well as
the lost revenue stream from leasing the property, the company sought to
purchase professional office rental property under United States Code Section
1031, which allows deferral of capital gains if the sales proceeds are timely
reinvested in property. Accordingly, on May 3, 1999 the company purchased a
3,500 square foot office/warehouse at 11860 Capital Way in Louisville, Kentucky.
Then on June 18, 1999 the company purchase approximately 44,311 square feet of
professional office space in three (3) buildings located at 2200, 2310, and 2211
Greene Way in Louisville, Kentucky. The combined gross revenue from the four
pieces of property had the potential to generate gross revenue of $560,694 or
$332,488 in revenue net of expenses using historically provided expenses
representing 37.77% of gross income. This represented a cash flow larger than
that which existed under leasing the livestock auction business and more than
adequate to meet existing obligations and long term obligations, given the
company had only one (1) employee and at that time, no debt.
The company received a one million dollar line of credit, secured by a
mortgage against the property located at 2200, 2300, and 2211 Greene Way to be
used for property improvement, working capital and expenses related to seeking
new opportunities for the company. The acquisitions of commercial real estate by
the company resulted in a revenue stream and improved liquidity. They also
represent a capital resource, which if subsequently sold, could result in the
capital gains from such sale being totally obviated by the company's net
operating losses. It was anticipated the $1,000,000 line of credit could easily
be converted to a long-term, fixed rate mortgage given the fact that the
property purchased for $2,800,000 at 2200, 2211, and 2300 Greene Way had no debt
against it other than that represented by the line of credit.
On August 6,1999 the Board of Directors of Lincoln approved the
investment of up to 1.5 million dollars in a newly formed corporation,
Accounting USA, Inc. Mr. Brian McDonald, MBA/CPA had established a company known
as Accounting Outsource Solutions, LLC, within the preceding 2-1/2 years. Under
a Merger Agreement, Accounting Outsource Solutions, LLC was converted into
Accounting USA, Inc. in return for 25% of the equity. Lincoln International
Corporation in return for its investment received 75% of the equity of
Accounting USA. Inc., which was incorporated in the State of Nevada on September
30, 1999. Accounting USA, Inc. provides accounting/bookkeeping and payroll
services for small to medium sized businesses primarily in the Louisville area.
It does, however, service clients outside of the Louisville area on a limited
basis, including clients in Georgia, Vermont, and New Hampshire. Accounting USA,
Inc. has developed and provides Internet access for its clients into its
accounting platform. The business is not seasonal nor is it dependant on any
particular customers. Direct competition for the outsourcing of the
accounting/payroll business is in effect non-existent in the Louisville,
Kentucky area. Many small to medium sized businesses employ in-house personnel
to perform the accounting/bookkeeping responsibility although this is usually
done on a historical basis as compared with or contrasted to the services
provided by Accounting USA, Inc. on a "real time" basis. Accounting USA, Inc.'s
core functions are: accounts payable; accounts receivable; payroll; job cost;
bank reconciliation; time and billing; and financial statements. Accounting USA,
Inc. also provides numerous customized financial reports to its clients. The
primary market channels for Accounting USA, Inc. are direct sales and business
partnerships with banks, CPA's or other businesses. The intent of Lincoln is to
refine the services of Accounting USA, Inc. and the sales of those services so
that it can be replicated in other metropolitan markets around the country.
Management believes the services of Accounting USA, Inc. meets a unique market
niche, particularly with the Internet access available to its clients. Given
that the outsourcing of accounting/bookkeeping is estimated to save clients an
average of 30% to 40% of the cost of doing the same service in-house, it is
believed by management that the outsourcing concept of Accounting USA, Inc. has
potential for future expansion and growth. Accounting USA, Inc. does not replace
the services performed by the client's CPA, such as tax preparation and audits.
Accordingly, CPA's often find the bookkeeping performed on behalf of their
client facilitates the provision of their professional services. Lincoln will
continue to provide assistance and support to the start-up efforts of Accounting
USA, Inc.
On August 22, 2002 Mr. Brian McDonald, the CEO of Accounting USA, Inc.,
resigned to pursue other opportunities. Mr. McDonald did not have a non-compete
agreement, and it is not known what impact, if any, his departure will have on
the Company's future. Not long after Mr. McDonald resigned two (2) client
account specialists also resigned. Concurrently with the resignations ten (10)
Accounting USA clients gave notice they were terminating Accounting USA's
services and going to a bookkeeping company. It was later learned that the
bookkeeping company was organized by one of the resigning client account
specialists on October 15, 2002.
The company filed a lawsuit against one of the former client account
specialists as well as Accounting Advantage, LLC, for which she was listed as
the agent for service of process. The company is seeking compensatory and
punitive damages and other remedies as is appropriate.
RESULTS OF OPERATIONS
The primary focus of the company over the last two years has been to
move Accounting USA, Inc. to a break-even point.
STATEMENT OF INCOME
Accounting service fee revenue increased by 34.9% during the last
fiscal year, based upon accounting service fee revenues of $827,227 and
$1,115,838, respectively, for fiscal years July 31, 2001 and 2002. The company
increased its service fee rate on new accounts sold during the last quarter of
the fiscal year ended July 31, 2001. The company increased its billing rate, on
average, by another 5% during the fiscal year July 31, 2002. This rate increase
is not expected to impact the company's growth rate.
The company's two most significant cost of sales areas, the accounting
department and the payroll department, both reflected a significant percentage
decrease relative to their relationship to accounting service fee revenue. The
accounting department cost did increase from $560,745 for the fiscal period
ended July 31, 2001 to $580,394 for the fiscal period ended July 31, 2002, but
as a percentage of service revenue the accounting department cost fell from
67.8% of sales to 52.0% of sales. Consistent with the accounting department, the
payroll department cost did increase from $167,143 for the fiscal period ended
July 31, 2001 to $207,962 for the fiscal period ended July 31, 2002, but as a
percentage of service revenue the payroll department cost fell from 20.2% of
sales to 18.6% of sales. Increased efficiencies in processing methods and
improved management techniques were important reasons for this improvement. The
company concluded that even though the payroll department demonstrated a marked
improvement in its cost relationship to revenues, this department was closed
during fiscal year July 31, 2002. The payroll service bureau services was
performed by a strategic payroll partner of the company at a cost at or below
the prior internal cost to the company.
Sales and marketing cost decreased from $248,480 in fiscal year July
31, 2001 to $156,057 in fiscal year July 31, 2002, or a $92,423 increase. The
company determined the advertising programs were largely ineffective in the
fiscal year July 31, 2001 and therefore were not continued in fiscal year July
31, 2002. The company also reduced the average size of its sales force during
the last quarter of fiscal year July 31, 2001 in order to focus its energies on
referral-based sales channels, which require less overall coverage than direct
selling programs.
Depreciation expense increased from $110,751 in fiscal year July 31,
2001 to $132,726 in fiscal year July 31, 2002. The current fiscal year increase
in depreciable assets of approximately $16,382 along with a full year
depreciation expense for assets acquired during fiscal year July 31, 2001
contributed to this 19.8% increase.
Other notable operating cost increases include delivery cost, or the
fees associated with the delivery of the company's accounting processing to the
clients. This fee increased by $14,856 from July 31, 2001 to July 31, 2002. This
fiscal year July 31, 2002 delivery cost represented 5.7% of sales for the same
period ended compared to 5.9% for the fiscal year July 31, 2001.
General and administrative cost decreased from $331,588 in fiscal year
July 31, 2001 to $292,151 during fiscal year July 31, 2002, or a 11.9% decrease.
BALANCE SHEET
The company's accounts receivable decreased by 43.0%, based upon open
receivables at July 31, 2001 of $87,164 compared to open receivables of $49,664
at July 31, 2002. Given the 34.9% increase in sales, the company did a solid job
of collecting accounts during the current fiscal period.
Net depreciable assets actually declined during the current fiscal year
as depreciation expense of $132,726 exceeded the capital asset additions of
$16,382. The company expects to continue this trend during fiscal year July 31,
2003, since the vast majority of technology assets including hardware and
software have already been acquired and placed in service.
The company capitalized an intangible asset referred to as Capitalized
Client Listing during fiscal year July 31, 2001 associated with the acquisition
of a bookkeeping service. This intangible asset had an original basis of
$123,000 and was amortized during fiscal years July 31, 2001 and 2002 producing
amortization expense totaling $17,109 and $22,905, respectively.
The company received capital injections in the form of cash from its
parent company in the amount of $425,000 during fiscal year July 31, 2002.
ACQUISITION OR DISPOSITION OF ASSETS
On January 31, 2001, the Company sold the real estate located at 2300
Greene Way for $1,062,500. On May 30, 2001 the company also sold for $1,250,000
a commercial property located at 2200 Greene Way. Currently the property located
at 2211 Greene Way is listed for sale at a price of $1,375,000.
LIQUIDITY AND CAPITAL NEEDS
The company currently has approximately $200,000 in cash and debt of
approximately $475,000 on 2211 Greene Way. The property is listed and is
anticipated could be sold within the year. The company therefore has available
approximately $1,000,000 that would be used to inject as needed into Accounting
USA, Inc. The company is currently assessing the future of Accounting USA, Inc.
and deliberating a further infusion of capital under different management.
LITIGATION
On March 23, 1999, two minority shareholders, 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
individuals Thurman L, Sisney, David Barhorst (who resigned June of 1998) and
Mr. Richard Dolin (deceased in February of 1999). The case is styled: Civil
Action No. 3:99CV-178-S. On May 18, 1999, Lincoln International Corporation
filed a Motion to Dismiss the complaint alleging that there are no questions of
law nor facts substantiating the allegations in the complaint. A response to the
Motion to Dismiss was filed by the Plaintiffs on July 8, 1999. On June 30, 1999,
the Plaintiffs filed a Motion to Amend the Complaint to substitute another
Plaintiff in place of one of the original Plaintiffs, Sarah Forree. On December
23, 1999 the Court granted the Plaintiff's Motion and allowed Terry Kennedy to
be substituted as a Plaintiff for Sarah Forree. On February 18, 2000 the company
filed an Amended Motion to Dismiss. Defendants have also raised in their Motion
to Amend the Complaint the allegation that notice of dissenter's rights should
have been provided in the reverse split that concluded on April 5, 1998. On
December 20, 2000 the Court entered an Order Dismissing Count X of the
Plaintiffs Amended Complaint for failure to state a claim upon which relief
could be granted pursuant to Fed. R. Civ. P. 12(bX6) and denied the company's
Motion with respect to dismissing the remainder of the Plaintiffs Amended
Complaint. The Court's dismissal of Count X of the Complaint in effect validated
the reverse split of the company completed on April 5, 1998.
On July 17, 2001, the company entered into a Settlement Agreement with
the two-named Plaintiffs Terry Kennedy and Merle Brewer and their legal counsel.
In the settlement the company agreed to give each named Plaintiff, stock
equivalent to a value of $2,000, and the Plaintiffs would have a thirty-day
option to sell that stock back to the company for $2,000. The value of the stock
would be based upon the last listed trade value as listed on NASDAQ. Further,
any shareholders who tendered their stock in the Tender Offer, in 1997, will be
notified that they will have the opportunity to buy back stock of the company at
a price of $120.00 per share (or $0.30 per share at the pre-split value) the
value at which the stock was sold in the Tender. In regard to those who sold
stock as part of the Reverse Split in 1998, the company will allow those
shareholders to buy back in also at the same rate i.e. $120.00 per share (or
$0.30 of the pre-split value) if they so desire. As part of the settlement Lee
Sisney will put up half of the stock to be sold to those who choose to buy back
into the company and the company will put up the other half. Also, the legal
fees for Plaintiffs attorneys will be paid in an amount not to exceed $74,500 as
verified as concurrent with the work done up to and including the settlement
agreement. The Settlement Agreement was approved by the Court, all terms of the
Settlement Agreement complied with, resulting in a total of six (6) shareholders
buying six (6) shares of Lincoln stock. On July 22, 2002 the Court entered its
Order dismissing the action with prejudice.
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 LINCOLN FOR LAST 5
YEARS
DIRECTORS SINCE SHARES OWNED AS OF
07/31/2002
Thurman L. Sisney,
President
Director 1994 2,906 (2)
Richard Jay Frockt
Chairman of the Board
Director 1997 1,208 (1)
Brian McDonald
Secretary 2000 600
(Resigned effective 8/22/02)
Russell R. Roth
Treasurer
Director 1997 165
Janet Clark Frockt
Director 1997 1,207 (1)
_____
Officers & Directors as a group 6,086
(1) 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 1,208 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 1,207 shares. Mr.
Frockt disclaims any beneficial ownership interest in the shares to which Mrs.
Frockt is the beneficiary. Mrs. Frockt disclaims any beneficial ownership
interest in the shares to which Mr. Frock is the beneficiary. Further, the 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.
(2) Mr. Sisney claims beneficial interest in 1055 shares of the
Company.
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. Mr. Sisney has been President of Lincoln International
Corporation since October of 1994.
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. He served as
Chairman of the Board and Chief Executive Officer of that company until 1995.
Brian McDonald - Mr. McDonald was Secretary of the Company. Mr.
McDonald is a 1980 graduate of Indiana University in Bloomington, Indiana,
earning a B.S. degree in Accounting. Mr. McDonald later became a certified
public accountant in the states of Indiana and Kentucky. Mr. McDonald earned his
masters degree in business administration from Indiana University in 1998. Mr.
McDonald's career has included three years in public accounting with KPMG, five
years as a corporate controller with Mid State Paving, nine years as the chief
financial officer of Hughes Group, Inc. In 1997, Mr. McDonald founded Accounting
Outsource Solutions, LLC, a company developed to provide outsourced accounting
services for small businesses. In 1999, Mr. McDonald and Lincoln International
Corp., co-founded Accounting USA, Inc. to continue the business of outsourcing
accounting servicing to small businesses. On August 22, 2002, Mr. McDonald
resigned to pursue other opportunities.
Russell R. Roth--Mr. Roth is 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 Sotheby Holdings, Inc., an art auction
company with headquarters in New York City. Mr. Roth founded Las Vegas
Investment Report in 1993. This publication reported upon and analyzed the
gaming industry and was closed in December, 1999. Mr. Roth is currently
President of Las Vegas Gaming, Inc., a gaming supply company.
ITEM 11:
The directors received no compensation for meetings. The travel
expenses for 2001-2002 were $2,053. Brian McDonald received salary of $133,538
during the year ended July 31, 2002.
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.
(8) Form 8-K filed February 2001 reporting sale of commercial rental
real estate building.
(9) Form 8-K filed June 2001 reporting sale of commercial rental real
estate building.
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 Treasurer, Russell R. Roth, as
thereunto duly authorized in the City of Louisville, Commonwealth of Kentucky,
on the 29th day of October, 2002.
LINCOLN INTERNATIONAL CORPORATION
/s/ THURMAN L. SISNEY
______________________________________
By: Thurman L. Sisney, President
Date: October 29, 2002
_________________________________
/s/ RUSSELL R. ROTH
______________________________________
By: Russell R. Roth, Treasurer
Date: October 29, 2002
_________________________________
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
/s/ THURMAN L. SISNEY
_________________________________
Thurman L. Sisney President
/s/ RICHARD JAY FROCKT
_________________________________
Richard Jay Frockt Chairman of the Board
/s/ RUSSELL R. ROTH
_________________________________
Russell R. Roth Treasurer
(2) Directors
/s/ THURMAN L. SISNEY
_________________________________
Thurman L. Sisney Director
/s/ RICHARD JAY FROCKT
_________________________________
Richard Jay Frockt Director
/s/ JANET CLARK FROCKT
_________________________________
Janet Clark Frockt Director
/s/ RUSSELL R. ROTH
_________________________________
Russell R. Roth Director
CERTIFICATIONS
I, Richard Jay Frockt, CEO, certify that:
1. I have reviewed this Annual Report on Form 10-K of Lincoln International
Corporation;
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly represent in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
i) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this Annual Report is being prepared;
ii) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this Annual
Report (the "Evaluation Date"); and
iii) Presented in this Annual Report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the board of directors (or persons performing the equivalent functions):
i) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
ii) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
October 29, 2002 /s/ RICHARD JAY FROCKT
__________________________
Richard Jay Frockt
CERTIFICATIONS
I, Thurman L. Sisney, CFO, certify that:
1. I have reviewed this Annual Report on Form 10-K of Lincoln International
Corporation;
2. Based on my knowledge, this Annual Report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this Annual Report, fairly represent in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this Annual Report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
i) Designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this Annual Report is being prepared;
ii) Evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this Annual
Report (the "Evaluation Date"); and
iii) Presented in this Annual Report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
the board of directors (or persons performing the equivalent functions):
i) All significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process,
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
ii) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
Annual Report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
October 29, 2002 /s/ THURMAN L. SISNEY
__________________________
Thurman L. Sisney
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 balance sheets of Lincoln International Corporation listed
in the accompanying index to Financial Statements (Item 14(a)) as of July 31,
2002 and 2001, and the related statements of operations, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended July 31, 2002. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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
financial position of Lincoln International Corporation as of July 31, 2002 and
2001, and the results of its operations and its cash flows for each of the three
years in the period ended July 31, 2002, in conformity with accounting
principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 23 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its 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
October 25, 2002
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:
Balance sheets - July 31, 2002 and 2001
Statements of operations - years ended July 31, 2002, 2001, and 2000
Statements of changes in stockholders' equity - years ended July 31,
2002, 2001, and 2000
Statements of cash flows - years ended July 31, 2002, 2001, and 2000
Notes to financial statements
Supporting schedules for the three years ended July 31, 2002, 2001, and 2000:
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 II
LINCOLN INTERNATIONAL CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years ended July 31, 2002, 2001, and 2000
Column A Column B Column C Column D Column E
____________________________________ ________________ ______________________________ ______________________ _____________
Additions
______________________________
Balance at Charged to Charged to
Beginning Costs and Other Accts. Deductions - Balance at
Description of Year Expenses Describe Describe End of Year
____________________________________ ________________ _____________ ______________ ______________________ _____________
Year ended July 31, 2002
Reserves deducted from assets:
Allowance for losses:
Accounts receivable $ 400 $ 6,600 $ 0 $ 0 $ 7,000
Note receivable 0 35,100 0 0 35,100
_______ ________ _____ ______ ________
$ 400 $ 41,700 $ 0 $ 0 $ 42,100
======= ======== ===== ====== ========
Year ended July 31, 2001
Reserves deducted from assets:
Allowance for losses:
Accounts receivable 8,195 400 0 8,195 400
Note receivable 0 35,100 0 0 35,100
_______ ________ _____ ______ ________
$ 8,195 $ 35,500 $ 0 $8,195 $ 35,500
======= ======== ===== ====== ========
Year ended July 31, 2000
Reserves deducted from assets:
Allowance for losses:
Accounts receivable $ 0 $ 8,195 $ 0 $ 0 $ 8,195
======= ======== ===== ====== ========
LINCOLN INTERNATIONAL CORPORATION
FINANCIAL STATEMENTS AND
INDEPENDENT AUDITOR'S REPORT
July 31, 2002, 2001, and 2000
T A B L E O F C O N T E N T S
Independent Auditor's Report 1
Balance Sheets 2
Statements of Operations 3
Statements of Changes in Stockholders' Equity 4
Statements of Cash Flows 5 - 6
Notes to the Financial Statements 7 - 19
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders
Lincoln International Corporation
Louisville, Kentucky
We have audited the accompanying balance sheets of Lincoln International
Corporation as of July 31, 2002 and 2001, and the related statements of
operations, changes in stockholders' equity, and cash flows for each of the
three years in the period ended July 31, 2002. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits 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 financial position of Lincoln International
Corporation as of July 31, 2002 and 2001, and the results of its operations and
its cash flows for each of the three years in the period ended July 31, 2002, in
conformity with accounting principles generally accepted in the United States of
America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 23 to the
financial statements, the Company's significant operating losses raise
substantial doubt about its 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
October 25, 2002
1
LINCOLN INTERNATIONAL CORPORATION
BALANCE SHEETS
July 31, 2002 and 2001
A S S E T S
2002 2001
___________ ___________
Current assets:
Cash and cash equivalents $ 326,995 $ 974,897
Accounts receivable, net of allowance for
doubtful accounts of $7,000 ($400 in 2001) 49,664 83,212
Note receivable, net of allowance for
doubtful amounts of $35,100 48,462 52,747
Other receivables 478 13,429
Prepaid expenses 10,120 20,948
___________ ___________
Total current assets 435,719 1,145,233
___________ ___________
Property and equipment, net 976,431 1,117,443
___________ ___________
Noncurrent assets:
Goodwill, net 138,987 178,691
Deferred tax asset 245,644 289,151
___________ ___________
Total noncurrent assets 384,631 467,842
___________ ___________
Total assets $ 1,796,781 $ 2,730,518
=========== ===========
L I A B I L I T I E S
Current liabilities:
Current maturities of long-term debt $ 41,072 $ 39,103
Obligation under capital lease 4,235 3,730
Accounts payable 63,452 153,592
Accrued expenses 43,810 50,873
Income taxes payable 0 18,433
___________ ___________
Total current liabilities 152,569 265,731
___________ ___________
Noncurrent liabilities:
Long-term debt, less current maturities 521,161 562,054
Obligation under capital lease 7,337 11,266
Deferred tax liability 245,644 289,151
___________ ___________
Total noncurrent liabilities 774,142 862,471
___________ ___________
Total liabilities 926,711 1,128,202
___________ ___________
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,
8,793 issued and outstanding (8,787 in 2001) 1,994,718 1,993,998
Retained earnings (deficit) (874,648) (141,682)
Accumulated other comprehensive income - unrealized
loss on investment (250,000) (250,000)
___________ ___________
Total stockholders' equity 870,070 1,602,316
___________ ___________
Total liabilities and stockholders' equity $ 1,796,781 $ 2,730,518
=========== ===========
See accompanying notes.
2
LINCOLN INTERNATIONAL CORPORATION
STATEMENTS OF OPERATIONS
Years ended July 31, 2002, 2001, and 2000
2002 2001 2000
___________ ___________ ___________
Revenues $ 1,292,757 $ 1,137,268 $ 692,942
___________ ___________ ___________
Costs and expenses:
Cost of revenues 946,639 950,526 616,216
Operating, general and administrative expenses 1,053,594 1,165,192 916,673
___________ ___________ ___________
Total costs and expenses 2,000,233 2,115,718 1,532,889
___________ ___________ ___________
Loss from operations (707,476) (978,450) (839,947)
___________ ___________ ___________
Other income (expense):
Gain (loss) on sale of property
and equipment 0 296,192 (12,884)
Interest income 27,960 53,924 18,618
Legal fees 0 (74,500) 0
Loss on uncollectible note receivable 0 (35,100) 0
Interest expense (53,450) (89,475) (35,307)
___________ ___________ ___________
Total other income (expense) (25,490) 151,041 (29,573)
___________ ___________ ___________
Loss before income taxes (732,966) (827,409) (869,520)
Benefit from income taxes 0 (310,579) (368,606)
___________ ___________ ___________
Net loss $ (732,966) $ (516,830) $ (500,914)
Other comprehensive income (loss):
Unrealized loss on investment 0 (250,000) 0
___________ ___________ ___________
Comprehensive income (loss) $ (732,966) $ (766,830) $ (500,914)
=========== =========== ===========
Net loss per common share $ (83.40) $ (60.58) $ (62.83)
=========== =========== ===========
See accompanying notes.
3
LINCOLN INTERNATIONAL CORPORATION
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended July 31, 2002, 2001, and 2000
Retained Unrealized Total
Earnings Loss on Stockholders'
Common Stock (Deficit) Investment Equity
____________ __________ __________ _____________
Balance at August 1, 1999 $ 1,879,898 $ 876,062 $ 0 $ 2,755,960
Net loss 0 (500,914) 0 (500,914)
___________ __________ __________ ___________
Balance at July 31, 2000 1,879,898 375,148 0 2,255,046
Issuance of common stock 114,100 0 0 114,100
Net loss 0 (516,830) 0 (516,830)
Increase in unrealized
loss on investment 0 0 (250,000) (250,000)
___________ __________ __________ ___________
Balance at July 31, 2001 1,993,998 (141,682) (250,000) 1,602,316
Issuance of common stock 720 0 0 720
Net loss 0 (732,966) 0 (732,966)
___________ __________ __________ ___________
Balance at July 31, 2002 $ 1,994,718 $ (874,648) $ (250,000) $ 870,070
=========== ========== ========== ===========
See accompanying notes.
4
LINCOLN INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
Years ended July 31, 2002, 2001, and 2000
2002 2001 2000
__________ __________ __________
Cash flows from operating activities:
Net income (loss) $ (732,966) $ (516,830) $ (500,914)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization 197,097 202,702 143,263
Bad debt 19,601 35,500 8,195
Stock issued for compensation 0 2,100 0
(Gain) loss on sale of property, equipment, and
operating assets 0 (296,192) 12,884
Deferred income taxes 0 (329,011) (368,870)
(Increase) decrease in:
Receivables 31,183 (84,890) (105,693)
Prepaid expenses 10,828 29,871 (50,819)
Increase (decrease) in:
Accounts payable (90,140) 75,000 46,295
Accrued expenses (7,062) 2,878 29,245
Income taxes payable (18,433) 18,433 0
__________ __________ __________
Net cash used in operating activities (589,892) (860,439) (786,414)
__________ __________ __________
Cash flows from investing activities:
Proceeds from sale of property, equipment and
operating assets 0 2,204,549 263,743
Purchase of property and equipment (16,382) (93,166) (386,349)
Purchase of Vena Marks & Associates, LLC 0 (110,800) 0
Purchase of Investment in Winebrenner Capital Partners, LLC 0 (250,000) 0
__________ __________ __________
Net cash provided by (used in) investing activities (16,382) 1,750,583 (122,606)
__________ __________ __________
Cash flows from financing activities:
Proceeds from issuance of common stock 720 0 0
Net proceeds on line of credit 0 500,000 500,000
Proceeds from long-term borrowings 0 33,491 115,000
Principal payments on long-term debt (38,924) (532,761) (14,574)
Principal payments on capital lease obligations (3,424) (2,779) (1,070)
__________ __________ __________
Net cash provided by (used in) financing activities (41,628) (2,049) 599,356
__________ __________ __________
Net increase (decrease) in cash and cash equivalents (647,902) 888,095 (309,664)
Cash and cash equivalents at beginning of year 974,897 86,802 396,466
__________ __________ __________
Cash and cash equivalents at end of year $ 326,995 $ 974,897 $ 86,802
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest $ 53,460 $ 87,360 $ 34,937
========== ========== ==========
5
Acquisition of Vena Marks & Associates, LLC
Assets acquired:
Property and equipment $ 0 $ 5,000 $ 0
Goodwill 0 133,800 0
__________ __________ __________
$ 0 $ 138,800 $ 0
========== ========== ==========
Payment for assets acquired:
Cash paid at closing $ 0 $ 110,800 $ 0
Stock issued 0 28,000 0
__________ __________ __________
$ 0 $ 138,800 $ 0
========== ========== ==========
Acquisition of Minority Interest
Assets acquired:
Goodwill $ 0 $ 84,000 $ 0
========== ========== ==========
Payment for assets acquired:
Stock issued $ 0 $ 84,000 $ 0
========== ========== ==========
Supplemental schedule of noncash investing activities:
Purchase of equipment under capital lease $ 0 $ 0 $ 18,845
========== ========== ==========
Supplemental schedule of noncash financing activities:
Debt paid by refinancing $ 0 $1,000,000 $ 0
========== ========== ==========
See accompanying notes.
6
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
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 accounting principles generally accepted in
the United States of America 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 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. Since the
purchase of these buildings, several have been sold. The Company is making an
effort to sell the remaining commercial rental office building.
On October 1, 1999, the Company formed Accounting USA, Inc. and received 75% of
the outstanding shares of common stock. On December 1, 2000, Accounting USA,
Inc. merged into the Company. In exchange for the minority interest, the Company
issued 600 shares of the Company's common stock.
Accounting USA, Inc. provides bookkeeping and payroll services primarily in the
Louisville metropolitan area.
Principles of Consolidation:
The consolidated financial statements include the accounts of the Company, its
wholly-owned subsidiaries, and its majority-owned subsidiary. All significant
intercompany transactions are eliminated in consolidation. As of December 1,
2000, the Company no longer has subsidiaries as Accounting USA, Inc. merged into
the Company.
Use of Estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the Company considers all highly liquid
investments with a maturity of three months or less to be cash equivalents.
7
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment:
Property and equipment are recorded at cost. Depreciation is provided over the
following estimated useful lives:
Buildings and improvements 20-40 years
Leasehold improvements 3-5 years
Office and computer 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.
Advertising:
The Company expenses advertising costs when incurred, except marketing
brochures, which are capitalized and amortized over the expected benefits
period. Advertising expense was $10,823, $74,761, and $37,153 for the years
ended July 31, 2002, 2001 and 2000 respectively.
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. Valuation allowances are established when necessary to
reduce deferred tax assets to the amount expected to be realized.
Investment tax credits are treated as a reduction of the tax provision in the
year in which the benefit is earned (flow-through method).
Earnings Per Share:
Earnings per share are based on the weighted average number of shares
outstanding during each year.
NOTE 2 - NOTE RECEIVABLE
During the year ended July 31, 2000, the Company entered into a master loan
agreement with a builder and seller of pleasure boats to help finance the
building of the boats.
The master loan agreement has an initial term of one year, renewable at that
time by the Company. The agreement is for a maximum of $100,000 to be issued in
a series of minimum installments of $15,000. Each note is secured by the boats
constructed with the funds disbursed by the Company.
8
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 2 - NOTE RECEIVABLE (CONTINUED)
The Company will disburse 90% of required funds to construct the specific boats.
At the time of sale of the boats, the Company will be repaid 100% of the
required funds.
The Company has the option to charge interest equal to 10% per annum on the
notes if they are not repaid 120 days from the date funds are disbursed.
As of July 31, 2001 the Company had disbursed a total of $90,500 on the master
loan agreement. Management does not intend to advance any additional funds.
The note receivable balance consists of the following:
2002 2001
_________ _________
Company funds disbursed $ 90,500 $ 90,500
Interest thereon 23,362 15,347
Repayments (30,300) (18,000)
_________ _________
Subtotal 83,562 87,847
Less allowance for uncollectible amounts 35,100 35,100
_________ _________
Note receivable, net $ 48,462 $ 52,747
========= =========
NOTE 3 - OTHER RECEIVABLES
Other receivables consist of the following:
2002 2001
_________ _________
Due from officer $ 0 $ 12,951
Refundable deposits 478 478
_________ _________
Total $ 478 $ 13,429
========= =========
The balance due from officer is non-interest bearing, and there are no repayment
terms on the advance.
NOTE 4 - PREPAID EXPENSES
Prepaid expenses consist of the following:
2002 2001
_________ _________
Prepaid leasing commissions $ 3,348 $ 3,348
Prepaid advertising costs 0 8,301
Prepaid maintenance, support, and training 3,738 4,010
Prepaid insurance 2,568 4,789
Other 466 500
_________ _________
Total $ 10,120 $ 20,948
========= =========
9
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 5 - INVESTMENT IN WINEBRENNER CAPITAL PARTNERS, LLC
During the year ended July 31, 2001 the Company became a 1% member in
Winebrenner Capital Partners, LLC, formed on September 1, 1999. Winebrenner
Capital Partners, LLC is registered as a broker and dealer in securities under
the Securities Exchange Act of 1934. Subsequent to July 31, 2001, the Company
exchanged their shares in Winebrenner Capital Partners, LLC for equivalent
shares in Winebrenner Holding Corp. The investment is valued at the lower of
cost or fair value. Fair value at July 31, 2001 was $0.
NOTE 6 - PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
2002 2001
__________ __________
Land $ 88,916 $ 88,916
Building 801,051 801,051
Office and computer equipment 472,107 457,557
Leasehold improvements 4,631 2,800
__________ __________
1,366,705 1,350,324
Less accumulated depreciation and amortization 401,267 246,230
__________ __________
965,438 1,104,094
Equipment held under capital lease,
net of accumulated amortization 10,993 13,349
__________ __________
Net property and equipment $ 976,431 $1,117,443
========== ======+===
Depreciation expense for the years ended July 31, 2002, 2001, and 2000 was
$157,392, $163,593, and $143,263, respectively.
NOTE 7 - GOODWILL
On November 1, 2000, the Company acquired some assets of Vena Marks &
Associates, LLC. The Company paid $110,800 in the acquisition and issued 200
shares of common stock of Lincoln International Corporation valued at $28,000.
The purchase of Vena Marks & Associates, LLC was accounted for by the purchase
method whereby the assets acquired are recorded by the Company at fair value.
Goodwill of $133,800 has been reflected in the balance sheet. The Company
expects to benefit from the goodwill acquired in this transaction over a period
of 5 years and is amortizing the amount recorded using the straight-line method.
10
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 7 - GOODWILL (CONTINUED)
With respect to the merger of Accounting USA, Inc. into Lincoln International
Corporation, the purchase of the minority interest was accounted for by the
purchase method. Goodwill of $84,000 has been reflected in the balance sheet.
The Company expects to benefit from the goodwill acquired in this transaction
over a period of 5 years and is amortizing the amount recorded using the
straight-line method
Goodwill consists of the following:
2002 2001
_________ _________
Goodwill $ 217,800 $ 217,800
Less accumulated amortization 78,813 39,109
_________ _________
Goodwill, net $ 138,987 $ 178,691
========= =========
NOTE 8 - LINE OF CREDIT
On January 31, 2001, upon the sale of one of the Company's commercial rental
buildings, a portion of the proceeds was used to pay down the line balance. At
that time, the remaining $1,000,000 balance was refinanced as a term note. As of
July 31, 2001, the Company no longer maintains a line of credit.
NOTE 9 - LONG-TERM DEBT
2002 2001
_________ _________
Term note payable, interest
at 8.75%, monthly payments of
$3,105, including principal and
interest, due October 2004.
$ 76,317 $ 105,333
Term note payable, interest at
8.73%, monthly payments of
$4,451, including principal and
interest, collateralized by a first
mortgage on the real property
of the Company and assignment
of leases and rents, due February
2006. 485,916 495,824
_________ _________
562,233 601,157
Less current maturities 41,072 39,103
_________ _________
Total $ 521,161 $ 562,054
========= =========
11
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 9 - LONG-TERM DEBT (CONTINUED)
As of July 31, 2002, the annual maturities required on the term notes payable
are as follows:
Year ending July 31:
2003 $ 41,072
2004 46,455
2005 22,434
2006 452,272
_________
Total $ 562,233
=========
NOTE 10 - CAPITAL LEASE
The following is an analysis of the property under capital lease:
2002 2001
_________ _________
Office and computer equipment $ 18,845 $ 18,845
Less accumulated amortization 7,852 5,496
_________ _________
Total $ 10,993 $ 13,349
========= =========
The following is a schedule by years of future minimum lease payments under the
capital lease together with the present value of the net minimum lease payments
as of July 31, 2002:
Year ending July 31:
2003 $ 5,571
2004 5,142
2005 3,000
_________
Total minimum lease payments 13,713
Less amount representing interest 2,141
_________
Present value of net minimum lease payments $ 11,572
=========
NOTE 11 - ACCRUED EXPENSES
Accrued expenses consist of the following:
2002 2001
_________ _________
Accrued payroll and payroll taxes $ 26,249 $ 33,394
Accrued property taxes 5,593 5,500
Other 11,968 11,979
_________ _________
Total $ 43,810 $ 50,873
========= =========
12
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 12 - INCOME TAXES
A deferred tax asset has been recognized for operating loss carryovers available
to offset future income taxes.
A deferred tax liability has been recognized as the result of the deferred gain
on the sale of property for income tax purposes.
Gross deferred income tax consists of the following:
2002 2001
_________ _________
Deferred tax asset $ 704,413 $ 311,781
Less valuation allowance 458,769 22,630
_________ _________
Net deferred tax asset $ 245,644 $ 289,151
========= =========
Deferred tax liability $(245,644) $(289,151)
========= =========
Due to uncertainty regarding the levels of future earnings, the Company has
recorded a valuation allowance to reflect the estimated amount of deferred tax
assets which may not be realized, principally due to the expiration of net
operating loss carryforwards.
The Company has available at July 31, 2002 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 $ 145,985
2007 0
2008 72,982
2009 31,281
2010 31,281
2011 0
2012 62,562
2013 0
2014 0
2015 0
2016 0
2017 0
2018 0
2019 0
2020 0
2021 464,384
2022 632,887
__________
Total $1,441,362
==========
13
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 12 - INCOME TAXES (CONTINUED)
The provision for (benefit from) income taxes consists of the following:
2002 2001 2000
_________ _________ _________
Federal income taxes $ 0 $ 278,623 $ 1,764
State and local income taxes 0 81,165 735
Deferred taxes 0 (329,012) (368,870)
Tax benefit of net operating loss carryforward 0 (341,355) (2,235)
Total $ 0 $(310,579) $(368,606)
========= ========= =========
Deferred income taxes on difference between tax and financial accounting for:
2002 2001 2000
_________ _________ _________
Depreciation $ (43,506) $ (497,367) $ (96,870)
Net deferred costs (2,914) (9,894) (5,776)
Net operating loss carryforward 46,420 (86,312) (1,663)
Loss on unconsolidated subsidiary 0 264,561 (264,561)
_________ _________ _________
Total $ 0 $(329,012) $(368,870)
========= ========= =========
For financial statement purposes, the loss of the subsidiary for the year ended
July 31, 2000 is included in the operations of the Company. The loss of the
subsidiary is not included on the parent company's tax return for the year ended
July 31, 2000, as the subsidiary files separate income tax returns for federal
and state purposes. For the year ended July 31, 2001, the Company no longer has
subsidiaries as Accounting USA, Inc. merged into the Company.
The 2002 provision for (benefit from) taxes represents an effective rate of 0.0%
(37.5% for 2001 and 42.4% for 2000) of financial income before taxes and is
different from the amount which would normally be expected by applying the
statutory federal income tax rates to such income. The reasons for the
difference are as follows:
2002 2001 2000
_________ _________ _________
Computed "expected" tax expense (benefit) $(239,581) $(281,319) $(295,637)
State and local income taxes 0 (35,411) (37,975)
Nondeductible expenses 4,270 4,265 3,273
Increase in valuation allowance 436,139 22,630 0
Effect of graduated tax rates (200,828) (20,744) (38,267)
_________ _________ _________
Provision for (benefit from) income taxes $ 0 $(310,579) $(368,606)
========= ========= =========
14
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 13 - LEASE COMMITMENTS
The Company has entered into operating lease agreements.
Total rental expense amounted to $60,403 in 2002, $28,572 in 2001, and $16,885
in 2000. Future minimum rentals at July 31, 2002 are as follows:
YEAR ENDING JULY 31:
2003 27,933
2004 17,831
2005 3,578
_______
Total $49,342
=======
NOTE 14 - LEASE OF PROPERTY 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 and
equipment under operating leases as of July 31, 2002 and 2001:
2002 2001
_________ _________
Land $ 88,916 $ 88,916
Buildings and improvements 801,051 801,051
_________ _________
889,967 889,967
Less accumulated depreciation 65,213 44,612
_________ _________
Total $ 824,754 $ 845,355
========= =========
Under the operating method of accounting for leases, the cost of the property
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, 2002 are as
follows:
Year ending July 31:
2003 $ 77,909
2004 22,104
2005 22,104
2006 22,104
2007 22,104
Thereafter 27,630
_________
Total $ 193,955
=========
15
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 15 - MAJOR BUSINESS SEGMENTS
As of October 1, 1999, Lincoln International Corporation has two reportable
segments: commercial rental real estate lessor (rental) and payroll and
bookkeeping services (bookkeeping).
The accounting policies of the segments are the same as those described in the
summary of significant accounting policies.
Lincoln International Corporation accounts for intersegment revenues as if the
transactions were to third parties.
Lincoln International Corporation's reportable segments are strategic business
units managed separately as each business requires different technology and
marketing strategies.
2002
__________________________________________
Rental Bookkeeping Total
__________ ___________ ___________
Revenues from external customers $ 189,519 $ 1,103,238 $ 1,292,757
Interest income 22,994 4,966 27,960
Interest expense 43,491 9,959 53,450
Intersegment revenue 0 12,600 12,600
Depreciation and amortization 41,466 155,631 197,097
Segment assets 1,643,890 291,691 1,935,581
Expenditures for segment assets 0 16,382 16,382
2001
__________________________________________
Rental Bookkeeping Total
__________ ___________ ___________
Revenues from external customers $ 322,641 $ 814,627 $ 1,137,268
Interest income 27,371 26,553 53,924
Interest expense 78,368 11,107 89,475
Intersegment revenue 32,530 12,600 45,130
Depreciation and amortization 64,042 138,660 202,702
Segment assets 2,631,602 491,668 3,123,270
Expenditures for segment assets 26,323 66,843 93,166
2000
__________________________________________
Rental Bookkeeping Total
__________ ___________ ___________
Revenues from external customers $ 356,862 $ 336,080 $ 692,942
Interest income 8,526 10,092 18,618
Interest expense 27,256 8,051 35,307
Intersegment revenue 18,450 11,075 29,525
Depreciation and amortization 76,073 67,190 143,263
Segment assets 3,339,876 459,354 3,799,230
Expenditures for segment assets 38,383 366,811 405,194
16
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 15 - MAJOR BUSINESS SEGMENTS
The following is a reconciliation of reportable segment revenues, cost and
revenues, profit or loss and assets as of and for the year ending July 31, 2002
and 2001.
2002 2001
___________ ___________
REVENUES
Total revenue from reportable segments $ 1,305,357 $ 1,182,398
Elimination of intersegment revenues (12,600) (45,130)
___________ ___________
Total consolidated revenues $ 1,292,757 $ 1,137,268
=========== ===========
COSTS AND EXPENSES
Total costs and expenses from reportable segments $ 2,012,835 $ 2,160,848
Elimination of intersegment costs and expenses (12,600) (45,130)
___________ ___________
Total consolidated costs and expenses $ 2,000,235 $ 2,115,718
=========== ===========
PROFIT OR LOSS
Total loss for reportable segments $ (707,478) $ (978,450)
Non-operating income 0 296,192
Interest income 27,960 53,924
Non-operating expense 0 (109,600)
Interest expense (53,450) (89,475)
___________ ___________
Loss before income taxes $ (732,968) $ (827,409)
=========== ===========
ASSETS
Total assets for reportable segments $ 1,935,581 $ 3,123,270
Elimination of intersegment receivables (138,800) (142,752)
___________ ___________
Total consolidated assets $ 1,796,781 $ 2,980,518
=========== ===========
NOTE 16 - PROFIT SHARING PLAN
The Company adopted a profit sharing plan in March 2000. The plan covers all
employees meeting the minimum eligibility requirements. Contributions to the
plan are at the discretion of the Board of Directors. No contributions were made
by the Company during the years ended July 31, 2002, 2001, and 2000.
NOTE 17 - CONCENTRATION OF CREDIT RISK
The Company maintains cash accounts in commercial banks 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 $248,242 at July
31, 2002.
17
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 18 - PROFORMA RESULTS OF COMPANY ACQUIRED
On November 1, 2000, the Company acquired some assets of Vena Marks &
Associates, LLC. Proforma financial information as though the companies had been
combined from beginning of periods:
8/1/00 - 7/31/01 8/1/99 - 7/31/00
________________ ________________
Revenue $ 1,260,183 $ 2,214,728
=========== ===========
Loss before extraordinary items (771,618) (793,261)
=========== ===========
Loss before extraordinary items
per share $ (90.45) $ (99.50)
=========== ===========
Net loss $ (771,618) $ (793,261)
=========== ===========
Net loss per share $ (90.45) $ (99.50)
=========== ===========
NOTE 19 - CAPITAL STOCK
During fiscal 1999, the Company issued an aggregate 3,986 shares of common stock
to stockholders residing in the state of Kentucky. An option was attached to
each share issued which allowed an additional share to be purchased at $150 in
the first year after issue, $160 in the second year after issue, and $170 in the
third year after issue.
NOTE 20 - COMMITMENTS
The Company has entered into an agreement with a company to find tenants for its
rental buildings. At the time of the lease agreement, the Company is to pay a
leasing commission equal to 6% of total rental income under the lease. As of
July 31, 2002 the Company had no commitments for leasing commissions dependent
on lease renewals.
NOTE 21 - SUBSEQUENT EVENTS
On August 29, 2002, the Board of Directors unanimously approved a 3-for-1
reverse stock split of the Company's common stock. All stockholders of record at
the close of business on the date the reverse split was approved, who hold less
than three shares, will be granted a right to acquire from the Company a
fractional interest in one new share in order to remain a stockholder.
18
LINCOLN INTERNATIONAL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2002, 2001, and 2000
NOTE 22 - RELATED PARTY TRANSACTIONS
On October 2000, the Company sold one of its commercial rental office buildings
to Winebrenner Capital Partners, LLC. As part of the consideration for the
transaction, the Company received $250,000 of stock in Winebrenner Capital
Partners, LLC, which is being offered under an intrastate offering at $5 per
share. The 50,000 shares received represents 1% of the limited liability
company. In addition to the 50,000 shares received, the Company received a
warrant to purchase an additional 50,000 shares over a 10 year period at $5 per
share.
NOTE 23 - GOING CONCERN
As shown in the accompanying statements of operations, the Company has incurred
continuing losses from operations. Management has developed a plan to increase
sales, as well as their profit margin, and to decrease operating expenses. The
Company is also actively searching for existing bookkeeping companies to
acquire. The ability of the Company to continue as a going concern is dependent
on the success of this plan. The financial statements do not include any
adjustments that might be necessary if the Company is unable to continue as a
going concern.
NOTE 24 - RESTATEMENT
The financial statements for the year ending July 31, 2001 have been restated to
account for an investment at fair value. As a result of the restatement,
comprehensive loss increased by $250,000 and stockholders' equity decreased by
$250,000.
19