-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESD+0v8RvPJaWwMeOtQi1QmfExDATkjBKlQWrI0w4ixyrEzNSlAbuBRQP060sHTz qFolsX8xzCRh2bnW13kZeQ== /in/edgar/work/20000714/0000910680-00-000457/0000910680-00-000457.txt : 20000920 0000910680-00-000457.hdr.sgml : 20000920 ACCESSION NUMBER: 0000910680-00-000457 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000407 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20000714 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED VENTURES GROUP INC /CO/ CENTRAL INDEX KEY: 0001098332 STANDARD INDUSTRIAL CLASSIFICATION: [9995 ] IRS NUMBER: 841516192 STATE OF INCORPORATION: CO FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-28663 FILM NUMBER: 673458 BUSINESS ADDRESS: STREET 1: 2338 BROADWAY #100 CITY: DENVER STATE: CO ZIP: 80304 BUSINESS PHONE: 3034405356 MAIL ADDRESS: STREET 1: 2338 BROADWAY #100 CITY: DENVER STATE: CO ZIP: 80304 FORMER COMPANY: FORMER CONFORMED NAME: ADVANCED CEILING SUPPLIES INC DATE OF NAME CHANGE: 19991103 8-K/A 1 0001.txt AMENDMENT TO FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 8-K/A Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): April 7, 2000 UNITED VENTURES GROUP, INC. - -------------------------------------------------------------------------------- (Exact Name of Registrant as Specified in its Charter Post-Merger) ADVANCED CEILING SUPPLIES CORP. ------------------------------- (Prior name of corporation pre-merger)
Colorado 0-27773 84-1516192 ------------------------ ----------- ------------------------------ (State or Other Jurisdiction (Commission (IRS Employer of Incorporation pre-merger) File No.) Identification No. pre-merger) Delaware 65-0675444 ------------------------ ------------- (State or Other Jurisdiction of (IRS Employer Incorporation post-merger) Identification No. post-merger)
131 West 35th Street, New York, NY 10001 - -------------------------------------------------------------------------------- (Address of principal executive office (Zip Code) Registrant's telephone number, including area code (212) 736-0880 ITEM 1. CHANGES IN CONTROL OF REGISTRANT. --------------------------------- On April 7, 2000, the Registrant completed a merger with United Ventures Group, Inc. ("UVGI"). The transaction was consummated pursuant to a Share Purchase Agreement (the "Agreement") that was entered into by and among United Ventures Group, Inc., a Delaware corporation, Advanced Ceiling Supplies Corp., a Colorado corporation (the "Registrant"), and certain shareholders of Advanced Ceiling Supplies Corp. on April 3, 2000. Pursuant to the Agreement, UVGI acquired 660 shares of common stock of the Registrant for $163.69 per share, which constituted 98.2% of the issued and outstanding common stock of the Registrant. UVGI purchased the remaining 12 shares of common stock of the Registrant at $163.69 per share from certain other shareholders of the Registrant pursuant to various Sale Agreements dated April 6, 2000. The Registrant was subsequently merged with and into UVGI and the Registrant's name was changed to United Ventures Group, Inc. The source of cash consideration for the merger was from working capital of UVGI. ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS. ------------------------------------- Upon the consummation of the transaction described in Item 1, the Registrant acquired the business and operations of UVGI. UVGI was incorporated in May 1996 under the name Travelnet International, Corp. UVGI manufactures, designs and distributes a wide assortment of 14 karat gold earrings, charms, bracelets and rings in the United States, some of which are accented with colored gem stones. UVGI offers its customers a large selection of jewelry styles, consistent product quality and prompt delivery of product orders. Its customers include mass merchandisers such as JC Penny and Sears, discount stores, home shopping networks such as QVC, warehouse clubs such as Jan Bell and jewelry wholesalers and distributors. In fiscal 1997 and 1998, UVGI generated sales from approximately 100 customers. Its five largest customers, on an aggregated basis, accounted for approximately 60% and 53% of net sales, respectively. UVGI currently offers over 1000 styles of gold charms, earrings, bracelets and rings, with the majority of its products retailing between $50 and $300. Its products are intended to appeal to consumers who are value conscious as well as fashion conscious. UVGI maintains an in-house design staff to create new designs for its products and to work closely with its senior officers and marketing personnel to develop new products meeting the needs of its customers. UVGI updates its product catalogue each year by adding new designs and eliminating less popular styles. Substantially all of its jewelry is manufactured by UVGI at its plant in New York City. UVGI believes it has appropriate equipment and facilities at its plant for gold casting, gold stamping and tool manufacturing and, therefore, the ability to finish the production of a product commencing with its design in under four weeks. This enables it to rapidly produce customer samples embodying new fashion trends. UVGI markets and sells its jewelry primarily through its in-house sales force from its showroom in its New York City facility, through direct presentations at customer's locations and through the use of catalogues and trade show exhibitions. ITEM 3. BANKRUPTCY OR RECEIVERSHIP. None. ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT None. ITEM 5. OTHER EVENTS None. ITEM 6. RESIGNATION AND APPOINTMENT OF DIRECTORS The following directors of the Registrant were appointed simultaneously with the consummation of the transaction described in Item 1 herein. Isaac Nussen became a director of the Registrant on April 7, 2000. He has served as President, CEO and a director of UVGI since November 1998. Since 1993 he also served in the same positions for Jarnow Corporation, a subsidiary of UVGI. He is responsible for the marketing and sales of the Registrant. Mr. Nussen served as an executive officer other jewelry manufacturing companies for over 25 years. George Weisz (a.k.a. Ghidale Weisz) became a director of the Registrant on April 7, 2000. George Weisz has served as Chief Operating Officer, Vice President and Secretary of UVGI since November 1998. Since 1993 he also served in the same positions for Jarnow Corporation. He is responsible for day to day operations the Registrant, including development and manufacturing. Mr. Weisz served as an executive officer of other jewelry manufacturing companies for over 25 years. Eric J. Rothschild became a director of the Registrant on April 7, 2000. He previously served as a director of UVGI since November 1998. For the past five years, and prior thereto, he has been a self-employed physician and a member of Orangeburg Orthopedic Associates. Israel Braun became a director of the Registrant on April 7, 2000. He previously served as a director of UVGI since November 1998. Since 1990, he has served as the President of American Computer Forms, Inc., a distributor of stationery and computer paper. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. FINANCIALS: 7(a) Report of Independent Auditors Consolidated Balance Sheet of the Company for the year ended December 31, 1999. Consolidated Statement of Operations for years ended December 31, 1998 and 1999. Consolidated Statements of Cash Flows for years ended December 31, 1998 and 1999. Notes to these financial statements. 7(b) Pro Forma Financial Data Introduction Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2000. Unaudited Pro Forma Consolidated Statement of Operations as of March 31, 2000. Notes to these Financial Statements. EXHIBITS: Exhibit No. Description --- ----------- *10.1 Share Purchase Agreement dated April 3, 2000, by and among UVGI, Advanced Ceiling and the shareholders of Advanced Ceiling. *10.2 Plan of Merger dated April 7, 2000. *10.3 Form of Acceptance and Sale Agreement dated April 3, 2000. 27.1 Financial Data Schedule 99.1 Financials ------------------ * Previously filed. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: July 13, 2000 UNITED VENTURES GROUP, INC. By: /s/ Isaac Nussen -------------------- President EX-27.1 2 0002.txt FINANCIAL DATA SCHEDULE
5 1 U.S.DOLLARS 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 1 97,465 0 2,612,855 (240,000) 9,785,730 12,256,050 2,432,254 (2,158,951) 13,098,332 13,731,592 0 0 200 24,931 (956,027) 13,098,332 6,980,670 6,980,670 6,855,358 6,855,358 6,512,009 0 3,236,763 (8,983,058) 0 (8,983,058) 0 640,402 0 (9,623,460) (1.45) (1.45)
EX-99.1 3 0003.txt FINANCIAL STATEMENTS UNITED VENTURES GROUP, INC. AND SUBSIDIARIES REPORT ON AUDIT OF CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1999 AND 1998 UNITED VENTURES GROUP, INC. AND SUBSIDIARIES -------------------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ PAGE NUMBER ------ Independent Auditors' Report F-2 Consolidated Financial Statements: Balance Sheet F-4 Statements of Operations F-5 Statements of Stockholders' Equity (Deficit) F-6 Statements of Cash Flows F-7 Notes to Financial Statements F8 - F16 Pro Forma Financial Data F17 - F20 INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders United Ventures Group, Inc. Long Island City, New York We have audited the accompanying consolidated balance sheet of United Ventures Group, Inc. and Subsidiaries as of December 31, 1999 and the related statements of operations, stockholders' equity (deficit) and cash flows for the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Ventures Group, Inc. and Subsidiaries as of December 31, 1999 and the results of its operations and its cash flows for the years ended December 31, 1999 and 1998 in conformity with generally accepted accounting principles. Non-trade receivables of $3,000,000 have been written-off. If any collection is received subsequent to December 31, 1999, they will be recorded as income. F-2 The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements the Company has a working capital and stockholders' deficiency of approximately $1,476,000 and $931,000, respectively at December 31, 1999, and has incurred significant recurring operating losses which raise substantial doubt about its ability to continue as a going concern without the raising of additional debt and/or equity financing to fund operations. Management's plans in regard to these matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Feldman Sherb Horowitz & Co., P.C. -------------------------------------- Feldman Sherb Horowitz & Co., P.C. Certified Public Accountants New York, New York July 13, 2000 F-3
UNITED VENTURES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, 1999 ASSETS ------ CURRENT ASSETS: Cash $ 97,465 Accounts receivable-net of allowance for doubtful accounts of $ 240,000 2,372,855 Inventories 9,785,730 ------------------ TOTAL CURRENT ASSETS 12,256,050 PROPERTY AND EQUIPMENT, net 273,303 OTHER ASSETS : Deferred financing cost 551,354 Other 17,625 ------------------ $ 13,098,332 ================== LIABILITIES AND STOCKHOLDERS' DEFICIT ------------------------------------- CURRENT LIABILITIES: Accounts payable and accrued expenses $ 1,740,366 Loans payable 4,310,688 Convertible debentures 1,300,000 Notes payable - financial institutions 6,380,538 ------------------ TOTAL CURRENT LIABILITIES 13,731,592 DUE TO STOCKHOLDERS 297,636 STOCKHOLDERS' DEFICIT : Common Stock, $.001 par value - 35,000,000 shares authorized, 24,930,992 shares issued and outstanding 24,931 Preferred stock, $.001 par value - 5,000,000 shares authorized, 200,000 Series A shares issued and outstanding 200 Additional paid-in capital 10,950,067 Stock subscription receivable (957,578) Deferred compensation expense (136,667) Accumulated deficit (10,811,849) ------------------ TOTAL STOCKHOLDERS' DEFICIT (930,896) ------------------ $ 13,098,332 ==================
See notes to consolidated financial statements F-4 UNITED VENTURES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31, ----------------------- 1999 1998 ------------------ --------------- Net sales $ 6,980,670 $ 8,064,598 Cost of goods sold 6,855,358 7,165,065 ------------------ --------------- Gross profit 125,312 899,533 Selling, general and administrative expenses 1,706,549 2,920,953 Bad debts 4,165,058 692,050 ------------------ --------------- Loss from operations (5,746,295) (2,713,470) Interest expense 312,616 1,094,959 Interest expense - Non-cash 2,924,147 - ------------------ --------------- Income (loss) before extraordinary items (8,983,058) (3,808,429) Extraordinary items - loss on early extinguishment of debt, net of taxes 640,402 58,613 ------------------ --------------- Net loss $ (9,623,460)$ (3,867,042) ================== =============== Pro forma net loss (unaudited): Historical income before income taxes and extraordinary items $ (8,983,058)$ (3,808,429) Historical income taxes - - Pro forma income taxes (unaudited) - - ------------------ --------------- Pro forma loss before extraordinary income (unaudited) (8,983,058) (3,808,429) Extraordinary item net of pro forma tax benefit (unaudited) 640,402 58,613 ------------------ --------------- Pro forma net loss (unaudited) $ (9,623,460)$ (3,867,042) ================== =============== Basic and diluted pro forma net loss per common share (unaudited): Before extraordinary item $ (1.35)$ (2.45) Extraordinary item (0.10) (0.04) ------------------ --------------- Pro forma net loss $ (1.45)$ (2.49) ================== =============== Weighted average common shares outstanding 6,643,326 1,555,488 ================== ===============
See notes to consolidated financial statements F-5 UNITED VENTURES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Common Stock Preferred Stock, Series A ($.001par value) ($.001par value) Additional ----------------------------- --------------------------- Paid-In Shares Amount Shares Amount Capital -------------- -------------- ------------- ------------- -------------- Balance, December 31, 1997 702,350 702 -- -- 7,399,298 Issuance of common stock pursuant to acquisition 3,750,000 3,750 -- -- (3,750) Cancellation of common stock (699,218) (699) -- -- 699 Sale of common stock 646,878 647 -- -- 649,353 Forgiveness of notes payable by stockholders -- -- -- -- 500,000 Officers' compensation contributed to capital -- -- -- -- 454,000 Interest expense due shareholders -- -- -- -- 38,373 Net loss -- -- -- -- -- Termination of S Corporation status -- -- -- -- (2,531,002) ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1998 4,400,010 4,400 -- -- 6,506,971 Issuance of stock 20,350,982 20,351 200,000 200 1,634,727 Issuance of common stock for compensation 100,000 100 -- -- 204,900 Amortization of deferred compensation -- -- -- -- -- Issuance of common stock for financing 80,000 80 -- -- 208,420 Issuance of warrants -- -- -- -- 1,349,286 Subscription received -- -- -- -- -- Beneficial conversion features of convertible debentures -- -- -- -- 562,000 Officers' compensation contributed to capital -- -- -- -- 454,000 Interest due to shareholders contributed to capital -- -- -- -- 29,763 Net loss -- -- -- -- -- ------------ ------------ ------------ ------------ ------------ Balance, December 31, 1999 24,930,992 $ 24,931 200,000 $ 200 $ 10,950,067 ============ ============ ============ ============ ============ 0 Subscription Accumulated Deferred Stockholders' Receivable deficit Compensation Equity -------------- -------------- ------------- ------------- Balance, December 31, 1997 -- 147,651 -- 7,547,651 Issuance of common stock pursuant to acquisition -- -- -- -- Cancellation of common stock -- -- -- -- Sale of common stock (250,000) -- -- 400,000 Forgiveness of notes payable by stockholders -- -- -- 500,000 Officers' compensation contributed to capital -- -- -- 454,000 Interest expense due shareholders -- -- -- 38,373 Net loss -- (3,867,042) -- (3,867,042) Termination of S Corporation status -- 2,531,002 -- -- ------------ ------------ ------------ ------------ Balance, December 31, 1998 (250,000) (1,188,389) 5,072,982 Issuance of stock (957,578) -- 697,700 Issuance of common stock for compensation -- -- (205,000) -- Amortization of deferred compensation -- -- 68,333 68,333 Issuance of common stock for financing -- -- -- 208,500 Issuance of warrants -- -- -- 1,349,286 Subscription received 250,000 -- -- 250,000 Beneficial conversion features of convertible debentures -- -- -- 562,000 Officers' compensation contributed to capital -- -- -- 454,000 Interest due to shareholders contributed to capital -- -- -- 29,763 Net loss -- (9,623,460) -- (9,623,460) ------------ ------------ ------------ ------------ Balance, December 31, 1999 $ (957,578) $ (10,811,849) $ (136,667) $ (930,896) ============ ============ ============ ============
F-6 UNITED VENTURES GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, ----------------------- 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES : Net loss $ (9,623,460) $ (3,867,042) ------------ --------------- Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation 319,326 447,648 Amortization 117,048 325,451 Bad debts 4,165,058 3,192,050 Officers' compensations 454,000 454,000 Imputed interest on loan from shareholders 238,263 38,373 Interest expenses on conversion benefit 562,000 - Amortization of deferred compensation 68,333 - Extinguishment of debt 640,402 - Write-off of deferred financing and offering costs 460,530 159,672 Change in assets and liabilities; Increase in accounts receivable (1,406,264) (444,508) (Increase) decrease in inventories 1,505,219 (368,156) Decrease in prepaid expenses 2,613 97,247 Increase in accounts payable and accrued expenses 889,078 209,199 ------------ --------------- Total adjustments 8,015,606 4,110,976 ------------ --------------- Net cash provided by (used in) operating activities (1,607,854) 243,934 ------------ --------------- CASH FLOWS FROM INVESTING ACTIVITIES : Acquisition of property and equipment - (90,229) ------------ --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of notes payable - financial instituions (1,036,816) - Repayment of notes payable - line of credit - (756,312) Repayment of notes payable - term loan - (320,831) Proceeds from convertible debentures 997,000 Proceeds from loans payable 1,310,688 - Increase (decrease) in cash overdraft (146,065) 146,065 Stock subscription received 250,000 Proceeds from issuance of stock 697,700 400,000 Borrowings from (repayment to) stockholders (380,216) 383,731 ------------ --------------- Net cash (used in) provided by financing activities 1,692,291 (147,347) ------------ --------------- Net increase in cash 84,437 6,358 Cash - beginning of year 13,028 6,670 ------------ --------------- Cash - end of year $ 97,465 $ 13,028 ============ =============== 0 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION : Interest paid $ 312,616 $ 1,055,328 ============ =============== Taxes paid $ 3,596 $ 14,248 ============ =============== OFFICERS' COMPENSATION CONTRIBUTED TO CAPITAL $ 454,000 $ 454,000 ============ =============== IMPUTED INTEREST ON LOANS AND CONVERTIBLE DEBENTURES $ 1,508,998 $ 38,373 ============ =============== NON-CASH FINANICING AND INVESTING ACTIVITIES: Write-off of deferred financing and offering costs $ 460,530 $ 159,672 ============ =============== Increase in deferred financing costs $ 708,884 $ - ============ =============== Forgiveness of notes payable by related party $ - $ 500,000 ============ ===============
See notes to consolidated financial statements F-7 UNITED VENTURES GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1999 AND 1998 1. THE COMPANY ----------- United Ventures Group, Inc. ("UVGI"), formerly known as Travelnet International, Corp., was organized in May 1996. In 1998, UVGI discontinued its operations as a tour organizer and changed its name to United Ventures Group, Inc. In October 1998, UVGI acquired all of the issued and outstanding shares of Shilaat Corp. ("Shilaat"), a New York shell corporation formed on August 1998, which acquired all of the shares of Jarnow Corporation ("Jarnow"), a company which was incorporated in 1993 and manufactures and distributes gold jewelry, in exchange for 3,750,000 shares of UVGI's common stock (the "Exchange"). The Exchange was completed pursuant to the Stock Exchange Agreement between UVGI, Shilaat and Odyssey Acquisition Corp, in which 1,500,000 shares were issued to Odyssey Acquisition Corp, which owned 40% of Shilaat and 2,250,000 shares were issued to the two other stockholders who owned the remaining 60% of Shilaat. The Exchange has been accounted for as a reverse acquisition under the purchase method for business combinations. Hereinafter, UVGI, Shilaat, and Jarnow are collectively referred to as the "Company". 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ Use of Estimates - The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Inventories - Inventories consisting mainly of gold are stated at the lower of cost, determined by the first-in first-out method, or market. Allowance for Doubtful Accounts and Returns - Provisions for losses on accounts receivable are made in amounts required to maintain an adequate allowance for doubtful accounts. Accounts receivables are written off against such allowance when it is determined by the Company that collection will not be received. Property and Equipment - Property and equipment are recorded at cost. Depreciation is F-8 provided using the straight-line method over their estimated useful lives of 5 years. Depreciation expense for December 31, 1999 and 1998 is $ $319,326 and $447,648, respectively. Revenue Recognition - The Company recognizes sales upon shipment of its products. The Company also provides for bad debts that are uncollectible. In circumstances where there is significant uncertainty to reasonably estimate the extent of payments to be received the Company uses the cost recovery method whereby revenue is recorded only when collection occurs. Income Taxes - Income taxes are accounted for under Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes," which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Impairment of Long-Lived Assets - The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. At December 31, 1999, the Company believes that there has been no impairment of its long-lived assets. Fair Value of Financial Instruments - The carrying amounts reported in the balance sheet for cash, receivables, and accounts payable approximate their fair market value based on the short-term maturity of these instruments. New Accounting Pronouncement - The Company will adopt Statement of Financial Accounting Standard No. 133 ("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging Activities" as amended by SFAS No. 137 for the year ended December 31, 2000. SFAS No. 133 establishes a new model for accounting for derivatives and hedging activities and supersedes and amends a number of existing standards. The application of the new pronouncement is not expected to have a material impact on the Company's financial statements. Earnings Per Share - The Company has adopted the provisions of Financial Accounting Standards No. 128, "Earnings Per Share". Basic earnings per share is based on the weighted average number of shares outstanding. Potential common shares included in the computation of diluted earnings per share are not presented in the financial statements as their effect would be anti-dilutive. Stock based compensation - The Company accounts for stock transactions in accordance with APB Opinion No. 25, "Accounting For Stock Issued To Employees." In accordance with Statement of Financial Accounting Standards No. 123 (SFAS 123"), "Accounting For Stock - Based Compensation," the Company adopted the pro forma disclosure requirements of SFAS 123. Principles of Consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All material intercompany F-9 transactions and balances have been eliminated. 2. BASIS OF PRESENTATION --------------------- The Company has a working capital and stockholders' deficiency of approximately $1,476,000 and $931,000 respectively at December 31, 1999, and has incurred significant recurring operating losses which raise substantial doubt about its ability to continue as a going concern without the raising of additional debt and/or equity financing to fund operations. Management is actively pursuing new debt and/or equity financing and continually evaluating the Company's profitability, however any results of their plans and actions cannot be assured. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. 3. INVENTORIES ----------- Inventories consist of the following at December 31, 1999: Raw Materials $484,836 Work in Process 827,357 Finished Goods 8,473,537 ------------------- $ 9,785,730 =================== 4. PROPERTY AND EQUIPMENT ---------------------- Property and equipment at December 31, 1999 consists of the following: Factory machinery and equipment $2,040,648 Furniture and fixtures 27,781 Leasehold improvements 43,267 Computer software 194,004 Computer equipment 126,554 ------------------ 2,432,254 Less : Accumulated depreciation 2,158,951 ------------------ $ 273,303 ================== Substantially, all of the Company's property and equipment are collateral for its debt obligations. F-10 5. GOODWILL - NET -------------- Goodwill of $1,627,261 relates to the prior years' acquisition by Jarnow of stock and assets of other companies and has been fully amortized. Amortization expense of goodwill amounted to $117,048 and $325,451 for the years ended December 31, 1999 and 1998 respectively. 6. LOANS PAYABLE ------------- During the year ended December 31, 1999, the Company borrowed mony from unrelated third parties on an informal basis. Such loans have no stated due date and therefore have been classified as current. Imputed interest at a rate of 10% per annum has been accrued on the outstanding loan balances. 7. NOTE PAYABLE ------------ In June 1998, the Company entered into a financing agreement with a financial institution ("Finance Company") which provided initial funding of $6,500,000 based upon certain levels of accounts receivable, inventory and equipment, and secured by the Company's assets. The proceeds of this loan were used to repay the Company's existing line of credit and term loan with a bank. Additional advances were made to the Company based on additional sales and other requirements, as defined. In September 1999, the Company entered into an arrangement with the Finance Company to settle the obligation by executing the following; (i) the issuance of a $2,000,000 note payable to the Finance Company with an annual interest rate of 10% due September 2000 and guaranteed by the principal shareholders of the Company; (ii) the payment of $500,000 (see below), and (iii) the transfer of the remaining balance of the existing line of credit at September 30, 1999 of $3,477,460, to the principal shareholders of the Company. Concurrent with the above financing, the Company entered into a separate financing agreement with another financial institution which provided for payment of $500,000 to the Finance Company. Funds are advanced directly to the Company based on sales and levels of accounts receivable, as defined, and collateralized by the Company's assets. Such advances bear interest at the rate of 10% per annum. As of December 31, 1999 the amount owed under such loan is $963,551. On April 5, 2000 a settlement agreement was reached in consideration for the Finance Company canceling: (a) a Term Promissory Note dated September 30, 2000, in the original principal amount of $2,000,000, from Jarnow to the Finance Company; and (b) a Term Promissory Note dated September 30, 2000, in the original principal amount of $3,477,460 (the "Jarnow Note"), from principal shareholders of the Company to the Finance Company by the Company making the following payments and accepting certain covenants. a) Jarnow made a payment of $1,200,000 to the Finance Company in immediately available funds. F-11 b) Principal shareholders of the Company will assign the Jarnow Note to the Finance Company. Finance Company will cancel the Jarnow Note in return for the principal shareholders of the Company's covenant not to receive any consideration whatsoever in connection with this transaction and the canceling of the Jarnow Note. c) Finance Company and Company will amend the existing Warrants (see Note 13) to provide for Finance Company's right to purchase a maximum of four million shares of the Company common stock at a price of $.001 per share, and Finance Company shall exercise such right by tendering payment of $4,000. Finance Company will retain all other existing rights under the Warrants (i.e., piggy-back registration rights), except as modified by point "d" below. d) Finance Company shall not retain its existing anti-dilution rights under the Warrant, and shall not have the right under the Warrant or otherwise to buy additional shares at any set price, other than the same right as members of the general public to purchase such shares as may become available through the public markets at the prevailing price; and e) Finance Company will return to the principal shareholders of the Company all previously pledged shares of the Company, and will release and return all corporate and personal guaranties and pledge agreements of any nature. As a result of this settlement the Company will recognize as additional paid in capital the extinguishment of debt of $4,216,987 less the value assigned to the warrants of $1,000,000. 8. UNPAID PAYROLL TAXES -------------------- The Company has been delinquent on its payment of payroll taxes aggregating approximately $189,482 at December 31, 1999. The Company has reached an agreement for a payment plan with the Internal Revenue Service and as of April 25, 2000 has fully satisfied this obligation. 9. DUE TO STOCKHOLDERS ------------------- Due to stockholders in the aggregate amount of $297,636 represents advances from stockholders of the Company. Interest is imputed on such loans at the rate of 10% per annum. 10. COMMITMENTS AND CONTINGENCIES ----------------------------- The Company leases space for its administrative offices, showrooms and its manufacturing facility on a month to month basis. The Company is currently negotiating F-12 a lease for new premises of approximately 8,000 square feet for $20,000 per month. For the years ended December 31, 1999 and 1998, the Company incurred total rent expense amounting to $150,992 and $118,377 respectively. The Company is involved in various following lawsuits and claims: a) The Company is one of several defendants in a case filed on December 27, 1999, collectively alleging various causes of action which, in summary, alleges that, in connection with a New Jersey real estate transaction that occurred in the later part of 1993, the Company and/or its principals were the recipients of certain sums of money that were initially fraudulently obtained (by a third-party) from complainant. The petition seeks damages in the amount of $6,200,000. On or about March 3, 2000, the Company, its principals and certain other defendants filed a motion to dismiss the Petition for lack of subject matter jurisdiction. No decision has been rendered on this motion. At this incipient stage of the litigation it is too premature to evaluate the likelihood of an unfavorable outcome in the event this matter should go to trial or the likelihood of a favorable settlement prior to trial. The foregoing notwithstanding, management and the principals are of the belief that at least fifty-percent of the six million dollars in damages sought by the complainant are susceptible to dismissal by motion for summary judgement prior to completion of discovery and significantly before trial. b) On or about February 4, 2000 a Preliminary Order of forfeiture (the "Order") was filed by the US government pursuant to a Special Verdict of Forfeiture rendered by the jury. The Company is among the sixty-two items/entities listed in the Order to which the government asserts an entitlement and/or (undefined) ownership interest. Pursuant to the Order, the Company has thirty days from the final date of publication of the notice in a newspaper or receipt of actual notice from the government, by which to file a petition asserting claims to any right title or interest in the properties listed in the order. Management will timely file a Petition establishing the Company's prior right, title and interest to Jarnow Corporation, and will vigorously contest the ^as of yet^ undisclosed/unarticulated allegations underlying the Order. ^ The Company believes that the various asserted claims and litigation in which it is involved will not materially affect its financial position, future operating results or cash flows, although no assurance can be given with respect to the ultimate outcome of any such claim or litigation. 11. ECONOMIC DEPENDENCY AND CREDIT RISK - --- ----------------------------------- The Company's net sales derived 10% from customers were as follows: F-13 1999 1998 ---- ---- A 16% 12% B 13% 27% C 10% 12. STOCKHOLDERS' EQUITY -------------------- Common Stock and Preferred Stock : ---------------------------------- In January 2000, the Company approved an amendment to its Article of Incorporation to raise the authorized shares of its common stock to 125,000,000 shares of which 120,000,000 shall be designated as common stock with a par value of $.001 per share, and 5,000,000 shall be designated as preferred stock with a par value of $.001 per share. In March 1999, the Company issued 200,000 shares of Series A Preferred Stock at $.001 per shares to two of principal shareholders, which gave them 54% of the votes on any matter that requires a vote of shareholders. Convertible Debentures: ---------------------- In January 1999, the Company authorized the issuance of up to $10,000,000 of convertible debentures. In April 1999, the Company entered into a Securities Purchase Agreement ("Agreement") for the sale of debentures for an aggregate purchase price of $1,300,000. Such debentures are due in 2002 and bear an interest rate of 8% per annum. The debentures are convertible into shares of the Company's common stock based on the lower of $ 2.318 or 70% of the market price of the Company's common stock at the time of conversion. The net proceeds from this agreement were $997,000. Pursuant to the Agreement, the Company agreed to issue warrants to purchase up to 300,000 shares of the Company's common stock at $.70 per share and up to 1,114,285 shares at $3.325 per share. In September 1999, the Company issued warrants (the "Warrants") to the financial institution described in Note 6 to purchase 645,501 shares of the Company's common stock at $.01 per share. The warrants were issued in connection with the settlement of debt described in Note 8 and will expire in September 2004. On February 1, 2000, the Company converted $100,000 debentures to 1,359,148 shares and on February 8, 2000, debentures for $591,760 were converted to 5,995,541 shares. In May 2000, the Company entered into a settlement agreement for the remaining balance of the obligation to the financial institution by paying back $650,000 within thirty days of execution of the settlement agreement. Contemporaneously with the delivery of the F-14 $650,000, the Company shall issue lender 1,000,000 warrants to purchase common stock of the Company at $.23 per warrant. The warrants shall expire three years from the date of execution of the settlement agreement and otherwise be governed by the same term as those found in the earlier warrants issued to them in April, 1999. Stock Warrants: --------------- In Fiscal 1999, the Company issued 2,059,786 warrants. The Company recognized compensation cost for the warrants issued of $798,000 using the Black Scholes method. The following table summarizes information about stock warrants at December 31, 1999:
Warrants Outstanding and Exercisable ---------------------------------------------------------------------------------- Range of Exercise Price Number Remaining Contractual Average Exercise Outstanding Life Price --------------------------- --------------------- ----------------------------- ------------------------ $.01-$3.00 2,059,786 2 $1.90
Stock Option Plan: ------------------ In December 1998, The Company approved the establishment of a stock option plan for the issuance of 600,000 shares of its common stock. At December 31, 1999 there were no options outstanding. Deferred Compensation: ---------------------- During the year ended December 31, 1999 an advisory fee was paid to consultants retained by the Company to provide certain advisory services via the issuance of 100,000 common shares. The common shares were valued at their approximate fair market value on the dates of issuance less 20% discount. Stock subscription receivable: ------------------------------ During the year ended December 31, 1999 the Company sold 12,852,237 shares of common stock for which money is not yet received. 13. INCOME TAXES - --- ------------ The Company accounts for income taxes under the provisions of SFAS 109. SFAS No. 109 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax loss and tax credit carryforwards. SFAS 109 additionally requires the establishment of a valuation F-15 allowance to reflect the likelihood of realization of deferred tax assets. At December 31, 1999, the Company had net deferred tax assets of approximately $2,400,000. The Company has established a valuation allowance for the full amount of such deferred tax assets at December 31, 1999, as management of the Company has not been able to determine that it is more likely than not that the deferred tax assets will be realized. The following table reflects the Company's deferred tax assets and (liabilities) at December 31, 1999: Net operating loss deduction $2,400,000 Valuation allowance (2,400,000) ---------- Net deferred asset $ -- ========== The provision for income taxes (benefits) differs from the amount computed by applying the statutory federal income tax rate to income loss before income taxes as follows:
1999 1998 ---- ---- Income tax (benefit) computed at statutory rate $(2,100,000) $(415,000) Effect of permanent differences 875,000 415,000 Tax benefit not recognized (1,225,000) - ------------------- ------------------ Provision for income taxes (benefit). $ $ - - =================== ==================
The net operating loss carryforward at December 31, 1999 was approximately $7,000,000 and expires in the years 2012 to 2019. 14. SUBSEQUENT EVENTS ----------------- On April 11, 2000, United Ventures Group, Inc., ("UVGI") completed a merger with Advanced Ceiling Supplies Corp. ("ACSC"). The transaction was consummated pursuant to a share purchase agreement that was entered into by and among UVGI, a Delaware corporation, ACSC, a Colorado corporation and certain shareholders of ACSC. ACSC was subsequently merged with and into UVGI. F-16 PRO FORMA FINANCIAL DATA INTRODUCTION The following financial data is based upon the historical financial statements of United Ventures Group, Inc. ("UVGI" or the "Company") and has been prepared to illustrate the effects on such historical data of the Advanced Ceiling Supplies Corp. ("ACSC") acquisition. The unaudited pro forma consolidated balance sheet as of March 31, 2000 gives effect to the ACSC acquisition as if such transaction had been completed on March 31, 2000. The pro forma financial data is provided for comparative purposes only and does not purport to represent the actual financial position of the Company that actually would have been obtained if the ACSC acquisition had been consummated on the date specified. The pro forma financial data are based on certain assumptions and adjustments described in the notes thereto and should be read in conjunction therewith. F-17 UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 2000
Historical Pro Forma ------------------------------------ --------------------------------- Advanced Adjustments (A) As Adjusted United Venture Ceiling Group, Inc. Supplies, Inc. --------------- ------------------ --------------- -------------- Current assets: Cash $ 398,337 $ 205 $ (200,000) $ 198,542 Cash - Escrow 1,200,000 1,200,000 Accounts receivable, net 4,392,016 4,392,016 Inventory 6,408,001 6,408,001 Prepaid expenses 10,961 10,961 --------------- ------------------ --------------- -------------- Total current assets 12,409,315 205 (200,000) 12,209,520 Property and equipment, net 238,303 238,303 Other Assets: Deferred financing cost 492,281 492,281 Other 17,625 17,625 --------------- ------------------ --------------- -------------- Total assets $ 13,157,524 $ 205 $ (200,000) $ 12,957,729 =============== ================== =============== ============== Current liabilities: Accounts payable and accrued expenses $ 1,650,321 1,650,321 Loans payable 4,180,688 4,180,688 Convertible debentures 608,240 608,240 Notes payable - financial institution $ 5,714,958 $ $ $ 5,714,958 --------------- ------------------ --------------- -------------- Total current liabilities 12,154,207 12,154,207 --------------- ------------------ --------------- -------------- Due from shareholder 381,728 381,728 Stockholders' equity: Common stock, $.001 par value 35,000,000 shares authorized, 51,974,393 (actual) and 52,374,393 (pro forma) shares issued and outstanding 51,974 300 100 52,374 Preferred stock, $.001 par value - 5,000,000 shares authorised, 200,000 Series A shares 200 200 issued and outstanding Additional paid-in capital 11,624,702 (200,195) 11,424,507 Stock subscription receivable (799,996) (799,996) Deferred compensation expense (85,418) (85,418) Accumulated deficit (10,169,873) (95) 95 (10,169,873) --------------- ------------------ --------------- -------------- Total stockholders' equity 621,589 205 (200,000) 421,794 --------------- ------------------ --------------- -------------- Total liabilities and stockholders' equity $ 13,157,524 $ 205 (200,000) $ 12,957,729 =============== ================== =============== ==============
See notes to unaudited pro forma consolidated financial statements F-18 UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS AS OF MARCH 31, 2000
Historical Pro Forma ---------------------------------- ------------------------------- Advanced Adjustments As Adjusted United Venture Ceiling Group, Inc. Supplies, Inc. See notes to unaudited pro forma consolidated financial statements F-19 NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS 1. The following unaudited pro forma adjustments are included in the unaudited pro forma balance sheet at March 31, 2000: To record the acquisition of ACSI by UVGI. In April 11, 2000, UVGI completed the acquisition of ACSI under an agreement dated as of April 3, 2000. As part of the acquisition, the UVGI acquired 666 shares of ACSI's common stock in exchange for 400,000 shares of the capital stock of UVGI and $200,000 in cash. As a result of this transaction, the UVGI received 100% of the total outstanding common stock of ACSI, and at the completion of the transaction there were 52,374,393 shares of common stock of UVGI issued and outstanding. 2. INVENTORIES ----------- Inventories consist of the following at March 31, 2000: Raw Materials $378,072 Work in Process 640,801 Finished Goods 5,389,128 ------------------- $ 6,408,001 =================== F-20 -----END PRIVACY-ENHANCED MESSAGE-----