-----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, G4gEbrRczOEenDp6HdekZEM7uHlYXQFcH0gPVGEpQX/bel5w7LmUxJ/FI8I+A8Gk 2K46ZnijRxijQ4W44L2VCg== 0001023856-98-000008.txt : 19980403 0001023856-98-000008.hdr.sgml : 19980403 ACCESSION NUMBER: 0001023856-98-000008 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19980402 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEGASUS INDUSTRIES INC CENTRAL INDEX KEY: 0000757073 STANDARD INDUSTRIAL CLASSIFICATION: BOTTLED & CANNED SOFT DRINKS CARBONATED WATERS [2086] IRS NUMBER: 953599648 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-12977 FILM NUMBER: 98585826 BUSINESS ADDRESS: STREET 1: 400 N ST PAUL STREET 2: SUITE 950 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2145208300 FORMER COMPANY: FORMER CONFORMED NAME: PATHFINDER CORP DATE OF NAME CHANGE: 19940324 10-K 1 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 the fiscal year ended December 31, 1995 Commission File Number 0-12977 PEGASUS INDUSTRIES, INC. -------------------------------------------------- (Exact name of registrant as specified in charter) Nevada 95-3599648 - ----------------------------- --------------------------------------- (State or other jurisdiction) (I.R.S. Employer Identification Number) 400 N. St. Paul, Suite 950, Dallas, TX 75201 -------------------------------------------- (Address of principal executive offices) (214) 520-8300 ------------------------------- (Registrant's telephone number) Title of each class Name of each exchange on which to be so registered each class is to be registered - ------------------- ------------------------------ None None Securities registered pursuant to Section 12(g) of the Act: Common Stock Par Value $0.01 (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 ____ No X Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III this form 10-K or any amendment to this form 10-K. [ X ] The aggregate market value of the voting stock held by non-affiliates as of March 26, 1998 was $448,504.72. APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS Indicate by check mark whether the Registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by the court. Yes X No ___ The number of shares of Common Stock outstanding as of March 26, 1998 was 14,352,151 shares, $0.01 par value. Page 2 PEGASUS INDUSTRIES, INC. PART I ITEM 1. DESCRIPTION OF BUSINESS Introduction - ------------ Pegasus Industries, Inc., formerly known as Pathfinder Corporation, a Nevada corporation (the "Company") is a holding company that, prior to February 1995 had no operating activities. As discussed below, the Company made a series of acquisitions prior to 1995 which were later rescinded, or alternatively are inactive and carried at no value on the Company's financial statements. In February 1995 the Company acquired Zearl T. Young, Incorporated ("ZTY") and experienced a change in both management and ownership control in connection with the acquisition. (See "Acquisition of ZTY" below). The Company was originally incorporated as a Nevada corporation on November 1968 under the name Helistructures Corporation as a wholly owned subsidiary of American International, Inc. (formerly American Mining and Development Company). In January 1974, the Company changed its name from Helistructures Corporation to Midas International and in 1982 the name was changed from Midas International , Inc. to MII, Inc. In December 1985 the Company filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code in the Central District of California. In December 1990, pursuant to the Plan of Reorganization of the Company approved by the Bankruptcy Court, the Company issued 19,454,000 shares of common stock to unsecured creditors for cancellation of $1,018,000 in debt. In August 1990 the Company changed its name from MII, Inc. to Pathfinder Corporation. In 1990 the Company initiated a reverse stock split whereby all outstanding shares were reversed by a factor of 1 for 100 with the stipulation that no shareholder be reduced to less than 10 post-split shares. In connection with this stipulation, the Company issued 48,576 pre-split common shares. From 1973 to 1991 the Company's activities consisted primarily of the management of its interests in various uranium mining claims. On March 13, 1995 the Company changed its name from Pathfinder Corporation to Pegasus Industries, Inc. in connection with the acquisition of ZTY and the resulting change of control. Additionally, the Company's executive offices were moved to Dallas, Texas as a result of the change in control. Acquisition and Disposition of Oil and Gas Interest - --------------------------------------------------- In September 1992 the Company acquired certain oil and gas producing properties for 699,997 shares of its common stock. In 1994 the Company rescinded the acquisition and cancelled the Page 3 699,997 shares of stock it issued due to difficulties the Company encountered in obtaining clear title to the oil and gas properties. In January 1994, the Company authorized the purchase of an office building valued at $700,000 for 700,000 shares of common stock of the Company from certain officers and directors of the Company. In February 1994 the Company rescinded the transaction and cancelled all 700,000 shares of stock issued related to the purchase. Acquisition of Zearl T. Young, Incorporated and Change of Control - ----------------------------------------------------------------- Effective February 28, 1995, the Company acquired 100% of the outstanding common stock of Zearl T. Young, Incorporated ("ZTY") from Pegasus Ventures, Inc. ("Ventures"), a privately held Texas corporation, pursuant to a Stock Exchange Agreement in exchange for the issuance of 11,500,000 shares of the Company's common stock. ZTY currently operates a nine store retail and consumer finance concern in Hobbs, New Mexico. ZTY has assets of over $11 million and generated revenues in fiscal 1994 in excess of $9 million. Ventures is a wholly owned subsidiary of Boudreau & Associates, Inc. ("BAI") formed in 1992 by John R. Boudreau and Robert W. Schleizer, officers and directors of the Company, to acquire undermanaged and undervalued companies. In connection with the transaction, Mr. Boudreau and Mr. Schleizer were elected to fill two of the three seats on the Company's board of directors. Kevin Chisholm, a certified public accountant in private practice, was elected to fill the remaining seat. The Company's prior directors, James M. Richards, Allen C. Stout and Kenneth Mock resigned. Mr. Boudreau was subsequently elected by the Company's board to fill the positions of Chairman of the Board, President and Secretary of the Company. Mr. Schleizer was elected Chief Financial Offficer and Treasurer of the Company. The ZTY transaction is the initial step in an aggressive long-term program to diversify the Company's activities and expand its operations under the new management team. Business of Zearl T. Young, Incorporated - ---------------------------------------- ZTY was founded in 1955 as a single location Western Auto store in Hobbs, New Mexico and was incorporated as a New Mexico corporation in 1958. Since that time it has grown to nine separate retail locations as well as a consumer finance company. In October 1993, ZTY was acquired by Pegasus Ventures, Inc. ("Ventures") as part of a successful plan of reorganization under Chapter 11 of the U.S. Bankruptcy Code. Ventures completed a substantial restructuring of ZTY's business activities in 1994 as part of the restructuring and secured a $10,000,000 line of credit for ZTY. ZTY is engaged in the retail sale at its nine locations of a diverse range of products including: (1) furniture; (2) home electronics; (3) household appliances; (4) hardware; (5) home Page 4 improvement supplies; (6) household and commercial floor coverings and installation thereof; (7) sporting goods and recreational equipment; (8) automotive parts, supplies and accessories; (9) automotive repair services; and (10) toys. ZTY's stores include a Western Auto affiliated store and a True Value Hardware store. ZTY operates its business from nine retail locations in Hobbs, New Mexico. The diversified retail concern draws customers from a 100 mile radius area in southeastern New Mexico and western Texas. The company generates 74% of its revenues from sales of retail merchandise. Approximately 26% of ZTY's revenues are derived from the financing of consumer purchases. ZTY offers its customers a variety of programs to finance purchases which provides the company with the unique ability to draw customers from a broad economic and geographic base. The Company had no operations in 1993 or 1994. With the acquisition of ZTY effective February 28, 1995, the Company has entered into the retail sales and consumer finance business. Environmental Matters - --------------------- Compliance with the applicable federal, state and local environmental regulations has not had, and the Company does not believe that in the future such compliance will have, a material effect on its financial position, results of operations, expenditures or competitive position. Competition - ----------- ZTY offers its customers a variety of finance programs to purchase goods at all of its stores and supports its sales with convenient service centers, free delivery and in-home repairs. The retail merchandise trade in which ZTY is engaged is highly competitive. ZTY has successfully competed in Hobbs, New Mexico despite the influx of retail discounters such as Kmart and Walmart several years ago. ZTY has eliminated operations that compete directly with the strengths of the large discount operations focusing on its strength; customer service and in-house financing. Large warehouse stores and various small, independent stores also provide competition to the Company. Employees - --------- As of December 31, 1995, ZTY employed 105 people in New Mexico, 82 of which engaged in operating the retail operation, 19 operating the consumer finance business and 4 in administrative support positions. The Company currently has four employees in Dallas, Texas in administrative and executive capacities. ITEM 2. DESCRIPTION OF PROPERTY The Company's headquarters are at 400 N. St. Paul, Suite 950, Dallas, Texas 75201. Page 5 ZTY, which the Company acquired in February 1995, has nine retail locations in Hobbs, New Mexico occupying 140,000 square feet of retail space. The Company also has an additional 40,000 square feet of retail space available for expansion under the same master lease agreement. ZTY also leases 50,000 square feet of warehouse space under the master lease. The master lease expires in November 2012. The master lease was negotiated on an arm's length basis with a company owned by some of ZTY's preferred shareholders. As part of the lease negotiations, ZTY obtained an option to purchase the properties for $500,000 plus any outstanding indebtedness on the building at any time prior to the expiration of the lease. ZTY owns a 5,500 square foot office building in Hobbs, New Mexico that serves as its corporate office. ITEM 3. LEGAL PROCEEDINGS The Company is not a party to any material pending litigation or other legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fiscal year covered by this report to a vote of security holders, through solicitation of proxies or otherwise. Page 6 PART II ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS The Company's Common Stock, $.01 par value ("Common Stock") is traded on an interdealer basis under the symbol PIND (formerly "PTHF"). The following table set forth the high and low bid price of the Common Stock for the period indicated as quoted from the NASDAQ Bulletin Board Listing.
Fiscal 1995 Low Bid High Bid ----------- ------- -------- 1st Quarter .06 .25 2nd Quarter .25 1.00 3rd Quarter .25 1.00 4th Quarter .25 .75 Fiscal 1994 Low Bid High Bid ----------- ------- -------- 1st Quarter .05 .05 2nd Quarter .12 .50 3rd Quarter .25 .25 4th Quarter .06 .25
There is an absence of an established public trading market, therefore the market for the Common Stock is limited, sporadic and highly volatile. Though no dividend restrictions exist relative to the Company's paying cash dividends, the Company has never paid cash dividends on its stock and does not anticipate doing so in the foreseeable future. Rather, the Company has determined to utilize any earnings in the operation of its business. Such policy is subject to change based on current industry and market conditions, as well as other factors beyond the control of the Company. As of March 26, 1998, there were 6,222 shareholders of record of the Common Stock. Page 7 ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following is management's discussion and analysis of significant factors which have affected registrant's financial position and operations during the year ended December 31, 1995 as compared to December 31, 1994. The Company had no operations in 1994. In a reverse acquisition, Pegasus Ventures, Inc. ("Ventures") acquired 11,500,000 shares or 80.1% of the Company's common stock in exchange for 100% of the common stock of ZTY in February 1995. Results of Operations - --------------------- Comparison of year ended December 31, 1995 to year ended December 31, 1994. Pegasus had no operations in the year ended December 31, 1994. The Company's Statement of Operations herein reflect solely the operations of ZTY, its wholly owned subsidiary which was acquired in February 1995. ZTY's revenues decreased $1,658,709 for the year ended December 31, 1995 as compared to December 31, 1994, a 23% decrease. The decrease is due to the closing of four stores in 1995 due to unprofitable operations. Gross profits declined 43% or $1,287,350 for the same period. Reduced sales and difficulty obtaining current inventory due to insufficient working capital caused the decline. Financing income decreased from $2,024,464 to $2,000,153 for the year ended December 31, 1995 as compared to the year ended December 31, 1994, a 1% decrease. The Company reported a net loss of $1,455,466 for the year as compared to a net profit of $137,478 for 1994. The loss from discontinued operations of $458,716 recognized in the third quarter of 1995 combined with the significant decline in sales due to low inventory levels were the primary factors contributing to the losses. Liquidity and Capital Resources - ------------------------------- Current liabilities as of December 31, 1995 of $8,999,399 exceeded current assets by $3,206,250. The Company experienced significant working capital shortages resulting in the inability to purchase sufficient inventory to maintain sales. The Company was in default on certain financial covenants of its senior loan agreement including shareholder equity, collateral base and profitability provisions. Management negotiated a daily working agreement for short term cash needs. Notice of the default was given to the Company on February 22, 1996. ITEM 7. FINANCIAL STATEMENTS AND SELECTED FINANCIAL DATA The following selected financial data of the Company for fiscal years 1995, 1994 and 1993 should be read in conjunction with the financial statements and related notes appended to this Form 10-K beginning with page F-1. The Company's 1995 financials have been prepared by William L. Clancy, CPA. Duane V. Midgley, the Company's former accountant, and Johnson, Miller & Co, the auditors for Zearl T. Young, Inc., were dismissed by the Company on March 16, 1996. This event will be reported in detail on a subsequent Form 8-K, a copy of which is attached hereto. (See "Financial Statements and Notes Thereto"). Page 8
For the Year Ended December 31, 1995 1994 1993 Income Statement Data: Revenues 7,622,010 -0- -0- Net Income (Loss) (1,455,460) -0- -0- Net Income (Loss) per share (.09) -0- (.0001) Dividends per share - - - Weighted average shares outstanding 14,352,151 2,781,151 3,552,148 Balance Sheet Data: Total Assets 8,874,210 -0- 4,571,997 Long Term Debt 286,828 -0- -0- Stockholder's Equity (1,253,499) -0- 4,497,747
See Management's Discussion and Analysis of Financial Condition and Results of Operations for ZTY financial data for comparable periods. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTABILITY AND FINANCIAL DISCLOSURE There have been no changes in accountants in 1995, nor have their been any disagreements regarding accounting and financial disclosure. The Company's 1995 financials have been prepared by William L. Clancy, CPA. Duane V. Midgley, the Company's former accountant, and Johnson, Miller & Co, the auditors for Zearl T. Young, Inc., were dismissed by the Company on March 16, 1996. This event will be reported in detail on a subsequent Form 8-K, a copy of which is attached hereto. ITEM 9. DIRECTORS AND OFFICERS OF THE REGISTRANT In January 1995, in connection with the acquisition of ZTY by the Company, all officers and directors of the Company resigned and the shareholders elected the following officers and directors. Name Age Position Term John R. Boudreau 70 President, Secretary and Chairman 1/95 - 12/31/95 of the Board of Directors Robert W. Schleizer 42 Chief Financial Officer, Treasurer 1/95 - Present and Director Kevin Chisholm 53 Director 1/95 - 12/31/95 Compliance with Section 16(a) - ----------------------------- Section 16(a) of the Securities Exchange Act of 1934 ("Exchange Act") requires the Company's directors, officers and persons who own more than ten percent of a registered class of the Page 9 Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Directors, officers and greater than ten percent beneficial owners are required by applicable regulations to furnish the Company with copies of all forms they file with the Commission pursuant to Section 16(a). The Company is not aware of any beneficial owner of more than ten percent of its registered Common Stock for purposes of Section 16(a). Based solely upon a review of the copies of the forms furnished to the Company, the Company believes that during 1995 all filing requirements applicable to its directors and executive officers were satisfied. ITEM 10. EXECUTIVE COMPENSATION Executives received compensation from the Company during 1995 as follows:
Summary Compensation Table --------------------------- Annual Compensation Long Term Compensation All other ------------------- --------------------------- Compensation Awards Payouts ------------ Name and Other Restricted Principal Annual Stock Options/LTIP Position Year Salary($) Bonus($) Comp($) Award(s)(1) SARs(#) Payouts($) - ---------- ----- --------- ------- ------- ----------- ------- ------------ John R. Boudreau, President 1995 $100,000 -0- -0- -0- -0- -0- Robert W. Schleizer, Chief Financial Officer 1995 $100,000 -0- -0- -0- -0- -0-
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 1995 there were 14,352,151 common shares of the Company, the Company's only class of voting securities. The Company has no knowledge of any arrangements which could affect the Company. In conjunction with the acquisition of ZTY by the Company on February 28, 1995, 11,500,000 shares of common stock were issued to Pegasus Ventures, Inc. ("Ventures") in exchange for all of the common stock of ZTY. The following table will identify as of December 31, 1995, the number and percentage of outstanding shares of common stock owned by (i) each person known to the Company who owns more than five percent of the outstanding common stock, (ii) each officer and director of the Company, and (iii) officers and directors of the Company as a group:
Name of Beneficial Owner Amount of Ownership Percent of Class Pegasus Ventures, Inc.* 11,500,000 80% Kevin Chisholm -0- -0- All Executive Officers/Directors as a Group (3 persons) 11,500,000 80% *Mssrs. Boudreau and Schleizer each beneficially own 49.5% of the common stock of Ventures which owns the 80% interest in the Company per the above table.
Page 10 ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company leases substantially all of its buildings from Young's Investment Corporation ("YIC") an affiliated entity. Zearl T. Young and family own 100% of the stock of YIC and also own 100% of the series A preferred stock of ZTY, a wholly owned subsidiary of the Company. Page 11 ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES & REPORTS ON FORM 8-K Documents filed as part of this report: (a) Financial Statements Statement Name Page No. Pegasus Industries, Inc. Report of Independent Certified Public Accountants..........F-1 Balance Sheet...............................................F-2 Statement of Operations.....................................F-4 Statement of Stockholders' Equity...........................F-5 Statement of Cash Flows.....................................F-7 Notes to Financial Statements...............................F-9 (b) Reports on Form 8K A report on Form 8K dated March 12, 1996 will be filed subsequent to this Form 10-K, changing Registrant's certifying accountant and reporting a transfer of shares owned by Pegasus Ventures, Inc..............30 (c) Exhibits Zearl T. Young, Incorporated -1994 and 1993 Financial Statements Report of Independent Certified Public Accountant.............33 Balance Sheet.................................................35 Statement of Operations.......................................36 Statement of Stockholders' Equity.............................37 Statement of Cash Flows.......................................38 Notes to Financial Statements.................................39 Page 12 WILLIAM L. CLANCY CERTIFIED PUBLIC ACCOUNTANTS CENTRAL PLAZA SUITE 890 4041 NORTH CENTRAL AVENUE P.O. BOX 16627 (85011-6627) (602) 266-2646 PHOENIX, ARIZONA 85012 (602) 266-2402 INDEPENDENT AUDITOR'S REPORT Board of Directors Pegasus Industries, Inc. Dallas, Texas 75201 I have audited the accompanying consolidated balance sheet of Pegasus Industries, Inc. as of December 31, 1995 and 1994, and the related consolidated statements of operations, stockholders, equity and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. My responsibility is to express an opinion on these financial statements based on my audit. The financial statements of Pegasus Industries, Inc. as of December 31, 1994 were audited by other auditors whose report dated March 31, 1995, expressed an unqualified opinion on those statements. I conducted our audit in accordance with generally accepted auditing standards. Those standards require that I 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. I believe that my audit of the financial statements provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pegasus Industries, Inc. as of December 31, 1995 and 1994 in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has suffered recurring losses from operations and has net capital deficiency that raises doubt about the Company's ability to continue as a going concern. Management's plan regard to these matters is also describe in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ William L. Clancy - --------------------------------- April 30, 1996 (except for Note 9, the date is May 10, 1996) F-1 PEGASUS INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET December 31, 1995 and 1994 ASSETS
1995 1994 Current Assets Cash $ 73,782 $ 0 Receivables - Note 3 4,456,621 0 Inventories at Cost - Note 2 1,026,491 0 Investment in Cooperative Securities - Note 4 16,550 0 Prepaid Expenses 219,645 0 --------- -------- Total Current Assets 5,793,089 0 Property and Equipment - Note 5 Property and Equipment 1,269,341 0 Less Accumulated Depreciation 918,472 0 --------- -------- Net Book Value 350,869 0 Deferred Tax Benefit - Note 7 60,152 Other Assets Noncurrent Portion of Financing Receivable - Note 6 2,625,230 Cash Value of Life Insurance, Net of Policy Loans of $915,894 In 1995, and $765,658 in 1994 (Face Value of Approximately $7,600,000) - Note 9 44,870 0 ---------- --------- Total Other Assets 2,670,100 0 ---------- --------- Total Assets $ 8,874,210 $ 0 ========== =========
The accompanying notes are an integral part of these financial statements. F-2 PEGASUS INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET December 31, 1995 and 1994 LIABILITIES AND STOCKHOLDERS' EQUITY
1995 1994 Current Liabilities Trade Accounts Payable - Note 8 $ 795,324 $ 0 Other Liabilities 99,221 0 Note Payable and Current Portion of Long-Term Debt - Note 9 7,678,870 0 Accrued Expenses 139,096 0 ---------- -------- Total Current Liabilities 8,712,511 0 Long-Term Debt - Note 9 286,828 0 ---------- -------- Total Liabilities 8,999,339 0 Preferred Stockholders, Equity In Subsidiary - Note 10 1,128,370 0 Stockholders' Equity Common Stock, Par Value $.01 Authorized 50,000,000 shares; Issued and Outstanding, 14,352,151 Shares at December 31, 1995 and 2,851,151 at December 31, 1994 143,521 28,521 Additional Paid-In Capital 58,446 3,522,602 Retained Earnings - A Deficit (1,455,446) (3,551,123) ----------- ----------- Total Stockholders' Equity (1,253,499) 0 ----------- ----------- Total Liabilities and Stockholders' Equity $ 8,874,210 0 =========== ===========
The accompanying notes are an integral part of these financial statements. F-3 PEGASUS INDUSTRIES, INC. CONSOLIDATED STATEMENT OF OPERATIONS For The Year Ended December 31, 1995 and 1994
1995 1994 Sales $ 5,621,857 $ 0 Cost of Sales 4,071,915 0 --------- ------- Gross Profit 1,549,942 0 Financing Income 2,000,153 0 Cost of Financing Interest Expense 875,892 0 Amortization of loan costs 156,680 0 --------- ------- 1,032,572 --------- Net Financing Income 967,581 0 -------- ------- Total Gross Income 2,517,523 0 Expenses Selling 1,418,933 0 General and Administrative 2,590,856 0 --------- ------- Total Expenses 4,009,769 0 --------- ------- Operating Loss (1,492,246) 0 Other Income and Expense Gain on Sale of Equipment 6,521 0 Receipt from Bankruptcy Court In Connection With Reorganization 108,631 0 Other Income 18,394 0 Depreciation Expense 96,766 0 --------- ------- Total Other Income and Expense 36,780 0 --------- ------- Net Loss $(1,455,466) $ 0 ========= ======= Net Loss Per Share $ ( .09) $ NIL ========= =======
The accompanying notes are an integral part of these financial statements. F-4 PEGASUS INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For The Year Ended December 31, 1995 and 1994
Common Stock Additional Retained Shares Amount Paid-In Earnings - Capital A Deficit Balance, December 31, 1992 3,151,998 $ 31,521 $ 5,495,350 $ (1,047,123) Transfer Agent Adjustments 150 0 Issuance of Common Stock For Finders Fee, January 4, 1993 400,000 4,000 Net Loss Year Ended December 31, 1993 (4,000) --------- -------- ----------- ----------- Balance - December 31, 1993 3,552,148 35,521 5,495,349 (1,051,123) Issuance of Common Stock For Building January 4, 1994 700,000 7,000 693,000 Cancellation of Issuance of Common Stock For Building On February 22, 1994 (700,000) (7,000) 693,000 Cancellation of Common Stock In Connection With Rescission Of Oil and Gas Acquisition on September 12, 1994 (699,997) (7,000) (1,972,747) Net Loss Year Ended December 31, 1994 (2,500,000) --------- --------- ------------ ------------ Balance - December 31, 1994 2,852,151 28,521 3,522,602 (3,551,123)
The accompanying notes are an integral part of these financial statements. F-5 PEGASUS INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY For The Year Ended December 31, 1995 and 1994
Additional Retained Common Stock Paid-In Earnings - Shares Amount Capital A Deficit Issuance of Shares in Connection With Acquisition Of 100% of the Outstanding Common Shares of Zearl T. Young, Inc. and Recording of Quasi-Reorganization Effective February 28, 1995 11,500,000 115,000 (3,464,156) 3,551,123 Net Loss Year Ended December 31, 1995 (1,455,466) ---------- -------- ------------ ------------ Balance - December 31, 1995 14,352,151 $ 143,521 58,446 $(1,253,499) ========== ========= ============ ============
The accompanying notes are an integral part of these financial statements. F-6 PEGASUS INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS For The Year Ended December 31, 1995 and 1994
1995 1994 Cash Flows From Operating Activities Net Income or (Loss) $(1,455,466) $(2,500,000) Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities Depreciation 96,766 0 Changes in Operating Assets and Liabilities Abandonment of Patents, Trademarks and Marketing Rights 2,500,000 Receivables (7,081,851) 0 Inventories at Cost (1,026,491) 0 Investment in Cooperative Securities (16,550) 0 Prepaid Expenses (219,645) 0 Cash Value of Life Insurance (44,870) 0 Deferred Tax Benefit (60,152) 0 Trade Accounts Payable 795,324 0 Other Liabilities 99,221 0 Accrued Expenses 139,096 0 ----------- --------- Total Adjustments (7,319,152) 2,500,000 ----------- --------- Net Cash Flows Provided by Operating Activities (8,774,618) 0 Cash Flows From Investing Activities Capital Expenditures 447,635 0 ----------- --------- Net Cash Flows From Investing Activities (447,635) 0 Cash Flows From Financing Activities Cash Received from Borrowings 7,965,698 0 Preferred Stockholders' Equity In Subsidiary 1,128,370 0 Common Stock 201,967 0 ----------- --------- Net Cash Provided by Financing Activities 9,296,035 0 ----------- --------- Increase (Decrease) in cash 73,782 0 Cash beginning of period 0 0 Cash end of period $ 73,782 0 =========== =========
The accompanying notes are integral part of these financial statements. F-7 PEGASUS INDUSTRIES, INC. CONSOLIDATED STATEMENT OF CASH FLOWS For The Year Ended December 31, 1995 and 1994
Supplemental Information Interest Expense Paid $ 604,444 $ 0 ========= ====== Income Taxes Paid $ 0 $ 0 ========= ====== Noncash investing and Financing activities Acquisition of 100% Interest In Subsidiary In Exchange for Issuance of Common Stock $ 115,000 $ 0 ========= ====== A Quasi-Reorganization reduced beginning retained earnings - a deficit to zero with a charge to paid-in capital. $ 3,551,123 $ 0 ========= ======
The accompanying notes are an integral part of these financial statements. F-8 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 1 - ORGANIZATION ------------ Pegasus Industries, Inc. (The Company), was incorporated under the name Helistructures Corporation on November 25, 1968 under the laws of the State of Nevada with an authorized capital of 2,500 shares of common stock with no pay value. On January 12, 1973, the Company filed restated Articles of Incorporation changing it's name to Midas International, Inc. and increasing it's authorized capital to 125,000 shares of common stock with a par value of $.20. The restated articles supersede the original Articles of Incorporation and all amendments heretofore made thereto prior to this date. On December 14, 1982, the Company amended it's Articles of Incorporation changing it's name to MII and increasing it's authorized capital to 20,000,000 shares of common stock with a par value of $.01. In December, 1985, the Company applied for and was allowed protection under Chapter 11 of the Bankruptcy Court in the Central District of California. On December 19, 1989, the Bankruptcy court accepted the Order of Confirmation of the Trustee's second amended Chapter 11 plan of Reorganization which in effect returned all assets of the Company to creditors for cancellation of all debt. The Company issued a total of 19,454,500 shares of common stock to the unsecured creditors for cancellation of $1,018,000 of debt. On January 19, 1990, the Company amended it's Articles of Incorporation increasing it's authorized capital to 50,000,000 shares of common stock with a par value of $.01. On August 7, 1990, the Company amended it's Articles of Incorporation changing it's name to Pathfinder Corporation and authorizing a reverse split of 100 to 1 with the stipulation that no shareholders be reduced to less than 10 shares. Due to the stipulation that no shareholder be reduced to less than 10 shares, the Company issued an additional 48,576 shares to maintain the 10 share minimum. On September 30, 1992, the Company acquired oil and gas producing properties for 699,997 shares of common stock. On September 12, 1994, the purchase agreement was rescinded and the shares of common stock were returned and cancelled. On March 30, 1995, the Company amended it's Articles of Incorporation changing it's name to Pegasus Industries, Inc. The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The Company has suffered recurring losses from operations, has a net capital deficiency and is in default on several loan agreement items, that raises doubt about the Company's ability to continue as a going concern. F-9 PEGASUS INDUSTRIES, INC. NOTES TO AUDITED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 1 - ORGANIZATION (CONTINUED) ------------------------ The financial statements do not include any adjustments that might result from the outcome of this uncertainty. NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES ------------------------------- A. Basis of Financial Statement Presentation ----------------------------------------- The records of the Company (A Corporation) are maintained using the accrual method of accounting. B. Principles of Consolidation --------------------------- The accompanying consolidated financial statements include the accounts of the Company and it's wholly owned subsidiary, Zearl T. Young, Inc. Intercompany transactions have been eliminated in consolidation. C. Company's Activities and Operating Cycle ---------------------------------------- The Company's business consist of the sale of retail consumer products, primarily consumer durable goods such as furniture, appliances, carpets and electronics and the related financing of those purchases with consumer finance contracts. The Company experiences the normal cyclical fluctuations of most retailers with operations during the fourth quarter (October through December) comprising a disproportionate portion of it's annual revenues and gross profits. D. Cash and Cash Equivalents ------------------------- The Company considers all highly liquid debt instruments with a maturity of three months or less to be cash and cash equivalents. E. Inventories ----------- As of December 31, 1994, the Company changed it's method of determining the cost of merchandise inventory from the retail inventory method to the lower of cost (first-in, first out) or market. F. Depreciation ------------ The cost of property and equipment is depreciated over useful lives of the related assets. The straight line method is utilized for substantially all assets for financial reporting, but accelerated methods are used income tax reporting. The estimated lives used in determining depreciation are: F-10 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) ------------------------------------------- F. Depreciation (Continued) ------------------------ Buildings and Improvements 30 Years Furniture, Fixtures and Equipment 5-15 Years Automobiles and Trucks 3-5 Years G. Investment in Life Insurance ---------------------------- The Company's investment in corporate owned life insurance policies is reported net of policy loans. The net life insurance expense, including interest expense, is included in General and Administrative Expense in the Statement of Operations. H. Earnings or (Loss) Per Share ---------------------------- Earnings or (loss) per share is computed using the weighted average number of shares of common stock outstanding. NOTE 3 - RECEIVABLES ----------- The Company's revenue and receivables are from retail sales to customers in the Lea County, New Mexico trade area through several retail outlets selling a variety of merchandise and services.
December 31, 1995 Receivables consist of: Open Trade Accounts $ 108,963 Employees' Accounts 60,875 --------- Less Allowance for Doubtful Receivables (6,586) ---------- 163,252 Current Portion of Financing Contracts Receivable 4,425,091 Less Allowance for Doubtful Collections (131,722) ---------- 4,293,369 ---------- $ 4,456,621 ========== The following is an aging of receivables at December 31, 1995. Current $ 2,820,811 1-30 days 889,083 31-60 323,301 61-90 128,529 91 and over 433,205 ---------- Total 4,594,929 Less Allowance for Doubtful Accounts (138,308) ----------- $ 4,456,621 ===========
F-11 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 4 - INVESTMENT IN COOPERATIVE SECURITIES ------------------------------------ The Company does business with a supplier which operates as a cooperative. Under the cooperative structure, purchasers receive restricted stock and notes. The stock and notes are recorded at cost by the Company. The stock is subject to certain buy-sell restrictions. The notes have maturities dated December 31, 1999. The balance is as follows at December 31, 1995:
Notes $ 4,640 Stock 11,910 ------- Total $16,550 =======
NOTE 5 - PROPERTY AND EQUIPMENT ----------------------
December 31, 1995 Buildings $ 50,000 Leasehold Improvements 176,767 Equipment 501,376 Furniture and Fixtures 300,007 Automobiles and Trucks 241,191 ------------- 1,269,341 Less Accumulated Depreciation 918,472 ------------- Net Book Value $ 350,869 =============
Expenditures for repairs and maintenance and minor renewal and betterments are charged to operations in the year incurred. Major renewals and betterments are capitalized. NOTE 6 - FINANCING CONTRACTS RECEIVABLE ------------------------------ The Company finances customer purchases on various terms not exceeding 36 months. Interest charged varies and currently is 21%. There were 9,699 customer contracts outstanding at December 31, 1995. The contracts are secured by furniture, appliances or other consumer products purchased. The balance consist of:
December 31 1995 Financing Contracts $ 8,407,283 Less Unearned Finance and Insurance Charges (1,285,734) -------------- 7,121,549 Less Allowance for Doubtful Accounts (212,950) -------------- $ 6,908,599 ==============
F-12 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 6 - FINANCING CONTRACTS RECEIVABLE ------------------------------
Current Portion $ 4,283,369 Noncurrent Portion 2,625,230 ----------- $ 6,908,599 ===========
NOTE 7 - INCOME TAXES ------------ As of December 31, 1995, the Company has net operating loss of approximately $3,813,117 which will expire in the years 2009 and 2010, if not utilized. The estimated deferred income tax benefit net of a valuation allowance for doubtful realization, consist of:
December 31, 1995 Benefit $ 772,000 Valuation Allowance (711,848) ------------ 60,152
NOTE 8 - ACCOUNTS PAYABLE ---------------- The following is an aging of accounts payable at December 31, 1995.
Current $ 327,602 31-60 74,009 61-90 3,267 91 and Over 390,446 --------- Total $795,324
Note 9 - LONG-TERM DEBT -------------- Revolving note of $10,000,000 with a financial institution, secured by substantially all assets of the Company, bearing interest at the institution's base rate plus 2.5% or 11% currently, the available loan amount varies on a formula based upon the amount of eligible contracts receivable, and the amount of inventory on hand; interest is payable monthly with the principle due December 31, 1996. The loan agreement provides for acceleration of the maturity date of the F-13 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENT December 31, 1995 and 1994 NOTE 9 - NOTES PAYABLE (CONTINUED) ------------------------- note and certain other remedies upon occurrence as of an Event of Default. Certain potential Events of Default as that term is used in the loan agreement have occurred as of and subsequent to December 31, 1995. The Company was officially notified of the defaults on February 22, 1996. As of May 10, 1996, the lender has not accelerated maturity and has agreed to renegotiate the note with revised Events of Default. $ 7,403,085 Various unsecured notes payable to pre-petition creditors, bearing interest at 6.21% or 2.5%, due in quarterly and annual payments of principal and interest of varying amounts beginning March 15, 1994, with varying balloon payouts due December 15, 1998. The death benefit of a $446,000 face value life insurance policy on the life of the majority preferred stockholder in the subsidiary, is pledged to pay these notes payable. These notes are currently in arrears in payment. 260,871 Note payable, secured by real estate, bearing interest at 6%, due in monthly payments of principal and interest of $500 through August, 2004. 41,046 Note payable, secured by equipment, bearing interest at 7.9%, due in monthly payments of principal and interest of $540 through September, 1995. 540 Note payable, secured by equipment, bearing interest at 7.9%, due in monthly payments of principal and interest of $461 through December, 1995. 1,303 Note payable, secured by equipment, bearing interest at 9.95%, due in monthly payments of principal and interest of $268.25 beginning August 15, 1995 through August 15, 1998. 8,853 F-14 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 9 - LONG-TERM DEBT (CONTINUED) -------------------------- Note payable, secured by credit insurance commissions, dated August 4, 1995 bearing interest at 10.75% with payments due quarterly, and principal payments of $12,500 due monthly. Note is due September 4, 1996. 250,000 ------------ Total 7,965,698 Less Current Portion 7,678,870 ------------ $ 286,828 ============ At December 31, 1995, there were two letters of credit outstanding with a financial institution in the amount of $ 100,000 each, maturing June 1, 1996. The annual maturities and for the five years ended December 31, 2000, and in the aggregate are as follows:
1996 $ 7,698,870 1997 29,501 1998 29,960 1999 17,983 2000 13,443 Thereafter 195,941 ---------- $ 7,965,698 ==========
NOTE 10 - PREFERRED STOCKHOLDERS' EQUITY IN SUBSIDIARY -------------------------------------------- As a part of the bankruptcy (chapter 11) plan and quasi-reorganization of the Company's subsidiary, all common shares of the then existing shareholders' of the subsidiary were cancelled, with the existing shareholders accepting preferred shares in the subsidiary and allowing the subsidiary to issue new common stock to the new shareholders that purchased the subsidiary as of December 31, 1994, all prior to the merger with the Company. NOTE 11 - TRANSACTIONS WITH RELATED PARTIES --------------------------------- The Company rents all but one of it's buildings from Young's Investment Corporation. Young's Investment Corporation is 100% owned by Zearl T. Young who owns 50% of the Series A preferred stock of Zearl T. Young, Inc., a wholly owned subsidiary of the Company. The amount of rent was $240,000 for the year ended December 31, 1995. The Company was in arrears, in rent payments, as of December 31, 1995 in the amount of $31,500. The Company pays certain expenses related to the buildings such as property taxes, insurance, and repairs and maintenance. F-15 PEGASUS INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1995 and 1994 NOTE 11 - TRANSACTIONS WITH RELATED PARTIES (CONTINUED) --------------------------------------------- The Company also pays management and director fees to companies that are related through common ownership. These amounts totaled $72,000 in 1995. NOTE 12 - SUBSEQUENT EVENTS ----------------- On March 6, 1996, the Board of Directors adopted a resolution to issue a new class of preferred stock, with the rights, privileged and preferences to be determined at a future date. F-16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on March 2, 1998. PEGASUS INDUSTRIES, INC. By: /s/Robert W. Schleizer ----------------------------- Robert W. Schleizer, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in capacities and on the dates indicated. /s/ Robert W. Schleizer - ---------------------------------- Robert W. Schleizer, President (1) March 26, 1998 (1) Principal executive officer Page 13 EX-21 2 JOHNSON, MILLER & CO. Certified Public Accountants A Professional Corporation REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Directors Zearl T. Young, Inc. Hobbs, New Mexico We have audited the accompanying balance sheets of Zearl T. Young, Inc. as of December 31, 1994 and 1993, and the related statements of operations, stockholders' equity, and cash flows for the years then ended. 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 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 Zearl T. Young, Inc. as of December 31, 1994 and 1993, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. As explained in NOTE A to the financial statements, for the year ending December 31, 1994, the Company has changed accounting methods for determining the cost of inventory, from the retail method to the first-in first-out. The Company has determined that this change will more accurately match revenues with expenses and we agree with this conclusion. As explained in NOTE B to the financial statements, on May 14,,1993, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Mexico and emerged from the reorganization proceedings on August 11, 1993, with a Bankruptcy Court approved plan of reorganization. Also as reported in the financial statements and explained in NOTE B to the financial statements, the Company is required to comply with the provisions of the plan of reorganization and certain restrictive covenants of notes payable and security agreements. 225 E. Bender - P.O. Drawer 220 - Hobbs, New Mexico 88241 - (505) 393-2171 - FAX (505) 397-4301 Page 33 Report Of Independent Certified Public Accountants (continued) - -------------------------------------------------------------- As explained in NOTE B to the financial statements, on December 31, 1994 the Company, as a result of restructuring, underwent a quasi -reorganization. In connection therewith, certain assets and liabilities were revalued. Hobbs, New Mexico /s/ Johnson, Miller & Co. April 28, 1995 (except for NOTE H, as to which the date is July 17, 1995) Page 34 ZEARL T. YOUNG, INC. BALANCE SHEETS DECEMBER 31, ASSETS -----------
1994 1993 ------- ------- CURRENT ASSETS Cash $ 99,759 $ - Receivables (NOTES C AND H) 5,413,357 5,610,407 Inventories at cost (NOTES A AND H) 1,637,910 2,551,157 Investment in cooperative securities (NOTE G) 6,335 - Prepaid expenses 319,113 22,278 ---------- ---------- Total current assets 7,476,474 8,183,842 ---------- ---------- PROPERTY AND EQUIPMENT (NOTES F AND H) 404,201 373,512 ---------- ---------- DEFERRED TAX BENEFIT (NOTES D AND J) 60,152 60,152 ---------- ---------- OTHER ASSETS Non-current portion of financing contracts receivable (NOTES E AND H) 2,538,124 2,655,190 Cash value of life insurance, net of policy loans of $765,658 in 1994 and $493,749 in 1993 (face value of approximately $7,600,000) (NOTE H) 94,576 119,257 Other assets - 2,679 --------- --------- 2,632,700 2,777,126 --------- --------- $10,573,527 $11,394,632 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Bank overdraft $ - $ 71,727 Trade accounts payable 655,080 299,247 Other liabilities 158,205 260,854 Notes payable and current portion of long-term debt (NOTE H) 107,999 269,107 Accrued interest 88,407 95,918 ---------- ---------- Total current liabilities 1,009,691 996,853 LONG-TERM DEBT (NOTE H) 8,233,499 9,742,662 STOCKHOLDERS' EQUITY 1,330,337 655,117 ---------- ---------- $10,573,527 $11,394,632 ========== ==========
The accompanying notes are an integral part of the financial statements. Page 35 ZEARL T. YOUNG, INC. STATEMENTS OF OPERATIONS YEAR ENDED DECEMBER 31,
1994 1993 ------- ------- SALES $ 7,280,566 $ 9,295,040 COST OF SALES 4,543,274 6,845,112 Gross profit 2,737,292 2,449,928 FINANCING INCOME 2,024,464 2,099,705 ----------- ----------- 4,761,756 4,549,633 ----------- ----------- SELLING EXPENSES 1,233,039 l,535,382 GENERAL AND ADMINISTRATIVE EXPENSES (including interest of $813,135 for 1994 and $731,477 for 1993; and depreciation of $97,078 for 1994 and $69,690 for 1993) 3,391,239 4,200,345 ----------- ------------ 4,624,278 5,735,727 ----------- ----------- Earnings (loss) from operations 137,478 (1,186,094) OTHER LOSS AND EXPENSE Legal and professional expenses of bankruptcy reorganization (NOTE D) - (445,882) ----------- ------------ Net earnings (loss) before income taxes $ 137,478 $ (1,631,976) INCOME TAXES (NOTE J) - $ 60,152 ----------- ----------- Net earnings (loss) $ 137,478 $ (1,571,824) =========== ============ EARNINGS (LOSS) PER COMMON SHARE (NOTE N) $ 68.74 $ (1027.00) =========== ============
The accompanying notes are an integral part of the financial statements. Page 36
NO PAR PREFERRED STOCK - ------------------------------ Number Retained Total of Paid-in Earnings Stockholders' Shares Amount Capital (Deficit) Equity - ------- -------- -------- ----------- ----------- - $ - $1,061,269 $1,062,754 $2,245,023 - - - 121,000 - - - - - 100,000 1,000,000 400,000 (400,000) - - - - - (118,082) (118,082) - - - (1,571,824) (1,571,824) 1,000,000 400,000 661,269 (506,152) 655,117 - - - - 1,128,370 - - (590,628) - (590,628) - (400,000) 400,000 - - - - (368,674) 368,674 - - - - 137,478 137,478 - --------- --------- --------- --------- ----------- 1,000,000 $ - $ 101,967 $ - $ 1,330,337 ========= ======== ========= ========= ===========
Page 37 ZEARL T. YOUNG, INC. STATEMENTS OF CASH FLOWS YEAR ENDED DECEMBER 31,
1994 1993 ------ ------ CASH FLOWS FROM OPERATING ACTIVITIES (NOTE L) Cash received from customers $ 9,145,477 $ 11,869,303 Cash paid to suppliers and employees (8,691,341) (10,753,669) Interest paid (820,646) (614,139) ------------ ---------- (366,510) 501,495 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures (112,085) (255,918) ------------ ----------- CASH FLOWS FROM FINANCING ACTIVITIES Stockholder distributions - (115,082) Cash received from additional borrowings 2,904,561 378,329 Cash paid to reduce debt (2,326,207) (508,824) ------------ ----------- 578,354 (245,577) ------------ ---------- NET (DECREASE) IN CASH AND CASH EQUIVALENTS 99,759 - CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR - - ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 99,759 $ - =========== ==========
Noncash investing and financing activities: As a result of the Bankruptcy Court's approved plan of reorganization, the Company transacted the following noncash activities during the year ended December 31, 1993: Issued notes payable and long-term debt of $1,890,638, net of the investment in cooperative securities of $367,384, as payment of accounts payable, leases and accrued interest of $2,222,095 with a gain on debt forgiveness of $35,927, Issued a note payable in payment of a capital lease of $104,819. Issued common stock to reduce accrued professional fees of $100,000, Issued preferred stock to the former stockholders of the Company in the amount of $400,000, and canceled $121,000 of $100 par common stock. The Company transacted the following noncash activities during 1994: Restructured long-term debt which resulted in debt reduction of $2,320,352, issuance of preferred stock of $1,128,370, and a gain on debt forgiveness of $1,191,982 (NOTE B). The accompanying notes are an integral part of the financial statements. Page 38 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE A - SUMMARY OF ACCOUNTING POLICIES ------------------------------ This summary of significant accounting policies of Zearl T. Young, Inc. (the Company) is presented to assist in understanding the Company's financial statements. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Inventories - ------------ As of December 31, 1994, the Company changed its method of determining the cost of merchandise inventory from the retail inventory method to the lower of cost (first-in, first-out) or market. The Company believes that with the implementation of a new inventory management system, the use of the first-in, first-out method results in A better matching of costs and revenues. The cumulative effect of the change in this accounting method on prior years is not determinable because the detailed information required to make the calculation is not readily available from the Company's accounting records. Depreciation - ------------- Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations over their estimated service lives. The straight line method of depreciation is utilized for substantially all assets for financial reporting, but accelerated methods are used for income tax reporting. The estimated lives used in determining depreciation are: Buildings and improvements 30 years Furniture, fixtures and equipment 5-15 years Automobiles 3-7 years Investment in life insurance - ---------------------------- The Company's investment in corporate owned life insurance policies is reported net of policy loans. The net life insurance expense, including interest expense, is included in General and Administrative Expenses in the Statements of Operations. NOTE B - BANKRUPTCY AND QUASI-REORGANIZATION ----------------------------------- On May 14, 1993, (the petition date), Zearl T. Young, Inc. (the Company), filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (Chapter 11) in the United States Bankruptcy Court for the District of New Mexico (the Bankruptcy Court). The Company emerged from the bankruptcy reorganization on August 11, 1993, with a Bankruptcy Court approved plan of reorganization (the Plan). The voluntary reorganization under Chapter 11 was a continuation of the Company's restructuring of the Company's business and finances initiated by management in 1992. During 1992, the Company liquidated over two million dollars of obsolete inventory and closed an unprofitable clothing store. Management also eliminated a significant amount of the remaining obsolete inventory contributing to its net loss in 1993 and closed another unprofitable store in 1993. Inventory levels were reduced to $2,551,157 at December 31, 1993, from $4,055,460 at December 31, 1992. Page 39 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE B - BANKRUPTCY AND QUASI-REORGANIZATION (continued) ----------------------------------------------- During 1993, in addition to liquidating inventory, management attempted to extend and restructure its secured debt. When unable to extend or restructure the debt, management filed for reorganization and included in the Plan, the sale of the Company's common-stock to new owners and the restructuring of debt as described below. During 1993, the Company issued approximately $1.9 million in notes payable which are to be paid over various terms through the year 2001 in settlement of pre-petition amounts due to pre-petition unsecured creditors (NOTE H). The Company also restructured its bank notes and financing agreement which are to be paid through 1998 (NOTE H). The restructured agreement and notes contained certain restrictive covenants with which the Company must comply. Under the Plan, all shares of existing common stock were canceled. The Company amended its articles of incorporation and issued 2,000 shares of common stock to the corporation purchasing the Company and 1,000,000 shares of redeemable preferred stock to previously existing stockholders in accordance with the Plan (NOTE 0). As of December 31, 1994 the Company underwent a quasi -reorganization. A quasi- reorganization is an elective accounting procedure (not requiring shareholder approval in New Mexico) intended to restate assets and liabilities to current values and eliminate any accumulated deficit in retained earnings. Accordingly, the various debt and preferred stock settlements and asset valuation adjustments that occurred during 1994 have been reported as direct stockholders' equity transactions, rather than as results of operations, and the Company's accumulated deficit as of December 31, 1994 has been eliminated against paid-in capital. The book value for property and equipment is considered to be current value and no valuation adjustment has been made. The impact of the quasi -reorganization on stockholders' equity of the settlements and reorganization transactions described above was as follows: 1. Bank debt settlement Debt before settlement $ 2,044,298 Cash settlement (750,000) Series B preferred stock issued, 40,000 shares (NOTE 0) (200,000) ----------- $1,094,298 2. Settlement on debt to pre-petition creditors Debt before settlement 1,314,692 Cash settlement (22,690) Series B preferred stock issued, 185,764 shares (NOTE 0) (928,370) Debt after settlement (265,948) ---------- 97,684 Page 40 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE B - BANKRUPTCY AND QUASI-REORGANIZATION (continued) ----------------------------------------------- 3. Adjustment of assets to current value Receivables (468,178) Inventories (1,314,432) ------------ (1,782,610) ----------- $ (590,628) ---------- Since the Company has emerged from the bankruptcy reorganization the financial statements have been prepared on a going concern basis, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the ordinary course of business. The appropriateness of using the going concern basis depends on, among other things, compliance with all requirements in the Plan, future profitable operations, the ability to comply with the restrictive covenants in the restructured debt and the ability to generate sufficient cash from operations and financing sources to purchase inventory and meet obligations. NOTE C - RECEIVABLES ----------- The Company's revenue and receivables are from retail sales to customers within the Lea County, New Mexico trade area through several retail outlets selling a variety of merchandise and services.
December 31, ------------ Receivables consist of: 1994 1993 ----- ----- Open trade accounts (NOTE M) $ 154,249 $ 90,087 Employees' accounts 190,859 220,939 ---------- ----------- 345,108 311,026 Less allowance for doubtful receivables (8,000) (11,000) ---------- ----------- 337,108 300,026 Current portion of financing contracts receivable (NOTE E) 5,076,249 5,310,381 ---------- ----------- $5,413,357 $5,610,407 ========== ===========
NOTE D - INCOME TAXES ------------ Through September 30, 1993, income taxes on net earnings were payable personally by the stockholders pursuant to an election under Subchapter S of the Internal Revenue Code not to have the Company taxed as a corporation. Accordingly, no provision was required or was made for federal or state income taxes from January 1, 1993, through September 30, 1993. From September 30, 1993, through December 31, 1993, and for the year ended December 31, 1994, the Company provided for income taxes based on income reported for financial statement purposes. Page 41 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE D - INCOME TAXES (continued) ------------------------ The Company became a C Corporation on September 30, 1993. The 1993 loss of $1,631,976 includes $445,882 of bankruptcy reorganization costs which is not a deductible expense under the Internal Revenue Code. As a result, the income tax net operating loss of $1,186,095 is to be divided between the period before and after September 30, 1993. The income tax loss for the period prior to September 30, 1993, is allocable to the shareholders. The income tax loss from September 30, 1993, through December 31, 1993, is allocable to the Corporation. This portion of the net operating loss is available to be carried forward to offset future earnings and will expire in the year 2008 if not utilized. The estimated deferred income tax benefit of $60,152 from utilization of this carryforward is reported as an asset on the balance sheet as of December 31, 1993. As of December 31, 1994, the Company has a net operating loss of approximately $700,000 which will expire in the year 2009 if not utilized. The estimated deferred income tax benefit net of a valuation allowance for doubtful realization, consists of:
December 31, ----------- 1994 1993 ---- ---- Benefit $140,000 $ 60,152 Valuation allowance (79,848) - -------- -------- $ 60,152 $ 60,152 ======== ========
NOTE E - FINANCING CONTRACTS RECEIVABLE ------------------------------ The Company finances customer purchases on various terms not exceeding 36 months. Interest charged varies and is currently 21%. There were 11,399 customer contracts outstanding at December 31, 1994, and 12,077 customer contracts outstanding at December 31, 1993. The contracts are secured by furniture, appliances or other consumer products purchased. The balances consist of:
December 31, ------------ 1994 1993 ---- ---- Financing contracts $ 9,466,491 $ 9,830,072 Less unearned finance and insurance charges (1,568,118) (1,520,501) ------------ ----------- 7,898,373 8,309,571 Less allowance for doubtful collection (284,000) (344,000) ------------ ----------- $ 7,614,373 $ 7,965,571 ============ ============ Current portion $ 5,076,249 $ 5,310,381 Noncurrent portion 2,538,124 2,655,190 ----------- ----------- $ 7,614,373 $ 7,965,571 =========== ===========
Page 42 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE F - PROPERTY AND EQUIPMENT ---------------------- Property and equipment are reported at cost less accumulated depreciation as follows:
December 31, ----------- 1994 1993 ---- ---- Buildings $ 50,000 $ 50,000 Equipment 483,093 450,384 Furniture and fixtures 300,007 299,747 Automobiles 223,507 223,507 Leasehold improvements 169,300 90,184 ---------- ----------- 1,225,907 1,113,822 Less accumulated depreciation (821,706) (740,310) ---------- ----------- $ 404,201 $ 373,512 ========== ===========
Depreciation expense was $97,078 for 1994 and $69,690 for 1993. NOTE G - INVESTMENT IN COOPERATIVE SECURITIES ------------------------------------ The Company does business with a supplier which operates as a cooperative. Under the cooperative structure, purchasers receive restricted stock and notes. The stock and notes are recorded at cost by the Company. The stock is subject to certain buy-sell restrictions. The notes have maturities from 1993 to 1995. During 1993 in accordance with the Company's approved reorganization plan, all stocks and notes from the Cooperative were offset against the debt owed to the Cooperative. The balances are as follows:
December 31,1994 December 31, 1993 ---------------- ----------------- Current Noncurrent Total Current Noncurrent Total ------- ---------- ----- ------- ---------- ----- Stock $6,335 $ - $6,335 - - - Notes - - - - - - Accrued Interest - - - - - - ------ ------- ------ ------ --------- ----- $6,335 $ - $6,335 $ - $ - $ - ====== ======= ====== ====== ========= =====
Page 43 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE H - LONG TERM DEBT --------------
December 31, ------------ 1994 1993 ----- ----- Revolving note of $10,000,000.00 with a financial institution, secured by substantially all assets of the Company, bearing interest at the institution's base rate plus 2.5%, the available 1oan amount varies on a formula based upon the amount of eligible contracts receivable; interest is payable monthly with the principal due December 1996. The loan agreement provides for acceleration of the maturity of the note and certain other remedies upon occurrence of an Event of Default. Certain potential Events of Default as that term is used in the loan agreement have occurred as of and subsequent to December 31, 1994. As of July 17, 1995, the lender is aware of these events, has not accelerated maturity and has agreed to renegotiate the note with revised Events of Default. $7,950,411 $ - Various unsecured notes payable to pre-petition creditors, bearing interest at 6.21% or 2.5%, due in quarterly and annual payments of principal and interest of varying amounts beginning March 15, 1994, with varying balloon payouts due December 15, 1998. The death benefit of a $451,000 face value life insurance policy on the life of the majority preferred stockholder is pledged to partially pay these notes payable. 265,948 617,087 Note payable to a related party, bearing interest at 11%, monthly principal payments determined by accounts receivable collections, secured by prior year written-off accounts receivable. 69,000 - Note payable, secured by real estate, bearing interest at 6%, due in monthly payments of principal and interest of $500 through August, 2004. 44,211 46,787 Note payable, secured by equipment,, bearing interest at 7.9%, due in monthly payments of principal and interest of $540 through September, 1995. 5,228 10,538 Note payable, secured by equipment, bearing interest at 7.9%, due in monthly payments of principal and interest of $461 with a final payment due December, 1995. 4,700 10,134 Unsecured note payable to a related party, bearing interest at 11%, variable monthly payments. 2,000 -
Page 44 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE H - LONG TERM DEBT (continued) --------------------------
December 31, ------------ 1994 1993 ---- ---- Financing agreement with a consumer receivable financing company, secured by all receivables, a life insurance policy on Dollie Dimple Young, a second lien on inventory and the personal guarantees of Zearl T. Young and Dollie Dimple Young, bearing interest at prime rates plus 2.75%, the available loan amount varies on a formula based upon the amount of eligible contracts receivable; interest is payable monthly with the principal due August 11, 1995, with an option to renew for one year. Certain potential events of default as that term is used in the loan agreement have occurred and have been waived by the lender as of December 31, 1993. - 6,318,622 Bank notes payable, secured by certain mortgages on property in Lea County, New Mexico; all inventory; second lien on all receivables; insurance policies on the lives of two former officer-stockholders; all common and preferred stock of the Company; and personal guarantees of three former officer- stockholders, bearing interest at 6.21%, due in quarterly payments of principal and interest of $53,720 beginning February 15, 1994, and a final payment of $1,511,320 due December 31, 1998. A provision of the loan agreement requiring principal payments on this note when the inventory borrowing base falls below $3,000,000 has been waived by the lender as of December 31, 1993. - 1,999,591 Unsecured note payable to a large pre-petition creditor, guaranteed by a majority of the preferred stockholders, bearing interest at 6.21%, due in monthly payments of principal and interest of $7,531 beginning March 15, 1994, through February 15, 2000. - 459,353 Unsecured note payable to a large pre-petition creditor, bearing interest at 8% which is waived if the Company purchases in excess of $1,500,000 in merchandise annually, due in monthly payments of $3,632 beginning March 15, 1994, through February 15, 2001. - 305,753 Note payable to financing company, bearing interest at 6.21%, due in quarterly payments of principal and interest of $2,142 beginning March 15, 1994, with a final payment of $93,752 due December 15, 1998. - 103,904 Unsecured note payable to a consumer receivable financing company, bearing interest at 6.21%, due in monthly payments of principal and interest of $987 beginning March 15, 1994, with a final payment of $71,003 due November 15, 1998. 100,000
Page 45 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE H - LONG TERM DEBT (continued) -------------------------- December 31, ------------ 1994 1993 ---- ----
Unsecured note payable to a related party, with interest of $4,000 due in February, 1994, and monthly principal payments of $20,000 through February, 1994. - 40,000 ---------- -------------- Less current portion 8,341,498 10,011,769 ---------- -------------- $ 8,233,499 $ 9,742,662 =========== ==============
Future maturities on these notes are: For year ending December 31, 1995 $ 107,999 1996 7,975,496 1997 26,282 1998 27,545 1999 17,983 Thereafter 186,193 ------------ $ 8,341,498 ============
NOTE I - CAPITAL LEASES -------------- The Company leased computer and office equipment under capital leases. The leases were converted to notes payable during 1993 as a result of the bankruptcy reorganization, and are included in NOTE H. NOTE J - INCOME TAX (EXPENSE) BENEFIT ----------------------------
Income tax (expense) benefit consists of: Year Ended December 31, ----------------------- 1994 1993 ---- ---- Federal income tax on financial statement income at statutory rate $ (48,117) $ - State income tax (6,874) - Deferred benefit resulting from: Income tax reporting of debt forgiveness and asset adjustments in 1994 118,126 - 1993 net operating loss incurred after termination of S election (NOTE D) - 60,152 Adjustment of valuation allowance for deferred tax assets (63,135) - ----------- --------- $ - $60,152 =========== =========
Page 46 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE K - PENSION PLAN ------------ The Company sponsors a defined contribution Profit Sharing Plan which covers substantially all of its employees. Employees must be employed full time, must have worked for the Company continuously for six months and must be at least twenty-one years old. Discretionary contributions by the employer to the Plan are decided annually. There were no discretionary contributions for the years ended December 31, 1994 and 1993. The Plan also provides that employees can contribute to the plan by reducing their salary by 3%. These salary reductions resulted in profit sharing contributions of $6,683 in 1994 and $2,674 in 1993. The Plan has received. a favorable determination letter from the Internal Revenue Service. NOTE L - STATEMENT OF CASH FLOWS ----------------------- Cash and cash equivalents include petty cash, bank checking accounts and all highly liquid investments purchased with a maturity of three months or less. The following reconciles net income (loss) to the cash flows provided from (used by) operating activities reported on the statements of cash flows:
1994 1993 ----- ----- NET INCOME (LOSS) $ 137,478 $(1,571,824) Depreciation 81,396 69,690 Expense paid by issuance of common stock - 100,000 Debt forgiveness income - (64,988) Noncash income recognized (6,335) - NET CHANGE IN Inventories (401,185) 1,504,304 Accounts receivable (154,062) 343,898 Other assets 27,360 (37,242) Prepaid expenses (296,835) (22,278) Accounts payable 355,833 28,884 Other current liabilities (102,649) 93,865 Accrued interest (7,511) 117,338 Deferred income taxes - (60,152) ---------- ----------- CASH FLOWS PROVIDED FROM (USED BY) OPERATING ACTIVITIES $(366,510) $501,495 ========== ============
NOTE M - RELATED PARTY TRANSACTION ------------------------- The Company rents all but one of its buildings from Young's Investment Corporation. Young's Investment Corporation is 100% owned by Zearl T. Young who owns 50% of the Series A preferred stock of Zearl T. Young, Inc. The amount of rent was $238,450 for the year ended December 31, 1994, and $164,441 for the year ended December 31, 1993. Zearl T. Young, Inc. also paid certain expenses related to the buildings such as property taxes and repairs and maintenance for the years ended December 31, 1994, and 1993. The Company also pays management and director fees to companies that are related to the Company through common ownership. These amounts totaled $47,000 in 1994, and $14,000 in 1993. Page 47 ZEARL T. YOUNG, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1994 AND 1993 NOTE M - RELATED PARTY TRANSACTION (continued) ------------------------------------- During 1994, the Company sold inventory to Young's Rent To Own, a related Company on an open trade account. At December 31, 1994; the balance of the account receivable was $67,809. NOTE N - EARNINGS (LOSS) PER COMMON SHARE -------------------------------- Earnings per common share are based on the weighted average number of common shares outstanding (2,000 in 1994 and 1,530 in 1993). There were no common stock equivalents or potentially dilutive securities during 1994 or 1993. NOTE 0 - COMMON AND PREFERRED STOCK -------------------------- The Company has three classes of stock; common, no-par preferred (Series A) and $5 par preferred (Series B). Common stock is authorized at 5,000 shares with no par value and 2,000 of those shares are issued and outstanding at December 31, 1994 and 1993. Series A preferred stock is authorized at 1,000,000 shares with no par value. All of which are issued and outstanding at December 31, 1994. The Series A preferred stock has voting power limited to one advisory director to the Board of Directors; is redeemable at the option of the Board of Directors, pays 5% non-cumulative dividends annually based on an assumed value of $1 per share and has a liquidation preference of 75% of the first $250,000 of the net value of the Company's assets, 60% of the next $250,000 of the net value of the Company's assets and 50% of the remaining net asset value. The carrying amount of the Series A preferred stock-was reduced to zero at the time of the quasi-reorganization since the Company does not intend to redeem the Series A preferred stock at the $.40 per share as was anticipated prior to the quasi-reorganization. Series B preferred stock is authorized at 300,000 shares. The Series B preferred stock has no voting rights and the Company is not required at any time or for any reason to redeem this stock. The Series B preferred stock is preferred up to $5 per share in event of liquidation or dissolution before any payments are made to holders of common or Series A preferred stock. The Series B preferred stock is entitled to cumulative dividends of $.25 per share annually. The Series B preferred stock can be converted to common stock only in the event of certain merger transactions and subject to limitations. No dividends have been declared or paid on the common or preferred stock during the years ended December 31, 1994 and 1993. NOTE P - SUBSEQUENT EVENT ---------------- On February 28, 1995, the common stockholders of Zearl T. Young, Inc. exchanged 100% of the outstanding common stock of Zearl T. Young, Inc. for 80% of the outstanding common stock of Pathfinder Corporation, a Nevada Corporation. As a result of this transaction, Zearl T. Young, Inc. has become a wholly owned subsidiary of Pathfinder Corporation. Page 48 SUPPLEMENTARY INFORMATION ------------------------- Page 49 JOHNSON, MILLER & CO. Certified Public Accountants A Professional Corporation REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS -------------------------------------------------- ON SUPPLEMENTARY INFORMATION ---------------------------- The Board of Directors Zearl T. Young, Inc. Hobbs, New Mexico Our audits were conducted for the purpose of forming an opinion on the financial statements of Zearl T. Young, Inc. as of December 31, 1994, and 1993. The supplementary schedules of selling expenses and general and administrative expenses are presented for purposes of additional analysis and are not a required part of the financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/Johnson, Miller & Co. Hobbs, New Mexico April 28, 1995 225 E. Bender - P.O. Drawer 220 - Hobbs, New Mexico 88241 - (505) 393-2171 - FAX (505) 397-4301 Page 50 ZEARL T. YOUNG, INC. SELLING EXPENSES YEAR ENDED DECEMBER 31,
1994 1993 ---- ---- Salaries - sales $ 616,939 $ 758,697 Advertising 418,770 428,354 Salaries - warehouse 151,278 280,255 Sales and promotion 46,052 68,076 --------- ---------- $1,233,039 $ 1,535,382 ========= ==========
Page 51 ZEARL T. YOUNG, INC. GENERAL AND ADMINISTRATIVE EXPENSES YEAR ENDED DECEMBER 31,
1994 1993 ------ ------- Interest expense $ 813,135 $ 731,477 Salaries - administration 665,342 489,772 Salaries - general 285,212 438,997 Professional fees 242,702 399,171 Rent 238,450 164,441 Taxes - payroll 139,849 189,517 Utilities 114,508 137,730 Depreciation 97,078 69,690 Insurance - property and liability 85,993 167,200 Miscellaneous expense 78,853 57,816 Travel and meal expense 75,069 53,284 Telephone 64,255 69,113 Supplies 58,406 85,896 Bad debts 52,369 700,476 Insurance - workers' compensation 48,702 63,271 Directors and management fees 47,000 14,000 Gas and oil 39,621 49,529 Officers' life insurance 36,624 56,463 Postage 31,737 22,770 Insurance - health 30,346 39,908 Amortization of loan fees 23,077 - Equipment rental 21,836 15,947 Bank charges 17,501 8,970 Taxes - property 12,403 12,981 Temporary labor 12,123 62,438 Repairs and maintenance - equipment 9,119 35,544 Employee expense 9,104 - Computer expense 8,203 7,302 Profit sharing 6,683 2,674 Repairs and maintenance - buildings 6,358 22,830 Other taxes and licenses 5,352 1,001 Repairs and maintenance - merchandise 4,640 8,639 Dues and subscription 3,970 12,043 Penalties 2,336 1,798 Laundry and uniforms 1,878 5,380 Contributions 1,405 2,277 ---------- ---------- $3,391,239 $4,200,345 ========== ==========
Page 52 EX-27 3
5 YEAR DEC-31-1995 DEC-31-1995 73,782 16,550 4,456,621 0 1,026,491 5,793,089 1,269,341 918,472 8,874,210 8,712,511 0 0 0 143,521 0 8,874,210 5,621,857 5,621,857 4,071,915 4,071,915 4,009,769 0 604,444 (1,455,466) 0 0 0 0 0 (1,455,466) (0.09) (0.09)
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