-----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, TFlVtavKWUtM2Gj/QxcknCWsJxtDZnASse1fBYPZPOLsQbeIAItdOsLzfkMPuKTy MrGph945WRmWkcZ4JglO7Q== 0000826411-96-000019.txt : 19961223 0000826411-96-000019.hdr.sgml : 19961223 ACCESSION NUMBER: 0000826411-96-000019 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961220 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ABLE TELCOM HOLDING CORP CENTRAL INDEX KEY: 0000826411 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL WORK [1731] IRS NUMBER: 650013218 STATE OF INCORPORATION: FL FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21986 FILM NUMBER: 96684059 BUSINESS ADDRESS: STREET 1: 1601 FORUM PL STREET 2: STE 305 CITY: WEST PALM BEACH STATE: FL ZIP: 33401 BUSINESS PHONE: 4076880400 MAIL ADDRESS: STREET 1: 1601 FORUM PLACE CITY: WEST PALM BEACH STATE: FL ZIP: 33401 FORMER COMPANY: FORMER CONFORMED NAME: DELTA VENTURE FUND INC DATE OF NAME CHANGE: 19890312 8-K/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------- FORM 8-K/A-1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) of the SECURITIES EXCHANGE ACT OF 1934 Date of earliest event reported: December 20, 1996 (Amending form 8K filed on October 25, 1995 to report event on October 12, 1996) Able Telcom Holding Corp. (Exact name of registrant as specified in charter) Florida 0-21986 65-0013218 (State or other jurisdiction (Commission (IRS employer of incorporation) file number) identification no.)
1601 Forum Place, Suite 1110, West Palm Beach, Florida 33401 (Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (561) 688-0400 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Item 7. Financial Statements and Exhibits. The following financial statements, pro forma financial information and exhibits are filed as part of this Form 8-K/A-1: (a) Financial Statements. Financial Statements of Georgia Electric Company: Report of Independent Auditors Balance Sheet as of December 31, 1995 and 1994 Statements of Income and Retained Earnings for the Years Ended December 31, 1995 and 1994 Statement of Cash Flows for the years ended December 31, 1995 and 1994 Notes to Financial Statements Report of Independent Auditors Balance Sheet as of December 31, 1993 Statements of Income and Retained Earnings for the Years Ended December 31, 1993 Statement of Cash Flows for the years ended December 31, 1993 Notes to Financial Statements Report of Independent Auditors Balance Sheet as of April 30, 1993 and 1992 Statements of Income and Retained Earnings for the Years Ended April 30, 1993 and 1992 Statement of Cash Flows for the years ended April 30, 1993 and 1992 Notes to Financial Statements Supplemental Information ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES (b) Pro Forma Financial Information. On October 12, 1996, the Registrant, through its wholly-owned subsidiary Traffic Management Group, completed the acquisition of all of the issued and outstanding stock of Georgia Electric Company ("GEC"), a Georgia corporation, from Gerry W. Hall and J. Barry Hall for a combination of $3,000,000 cash plus the issuance at the end of each of the next five years a number of shares of common stock of the registrant having a then current market value of $1,000,000, subject to adjustment based on the pretax earnings of GEC. The following Pro Forma Combined Balance Sheet of the Registrant has been prepared by management of the Registrant based upon the balance sheets of the Registrant as of October 31, 1995 and July 31, 1996 and of GEC as of December 31, 1995 and October 12, 1996. The Pro Forma Combined Statement of Income was prepared based upon the statement of income for the Registrant for the twelve months ended October 31, 1995 and the nine months ended July 31, 1996 and for the twelve months ended December 31, 1995 and the nine and one half months ended October 12, 1996 and. The pro forma statements give effect to the transaction under the purchase method of accounting and the assumptions and adjustments in the accompanying notes to pro forma combined financial statements. The pro forma combined balance sheet gives effect to the acquisition as if it had occurred as of July 31, 1996. The pro forma combined statement of income for the year ended October 31, 1995 gives effect to the acquisition as if it had occurred as of November 1, 1994. The pro forma combined statement of income for the nine months ended July 31, 1996 gives effect to the acquisition as if it had occurred as of November 1, 1995. The pro forma adjustments are based upon available information and certain assumptions that management believes are reasonable. The pro forma combined financial statements don not purport to represent what the combined companies's financial position or results of operations would actually have been had the acquisition occurred on such date or as of the beginning of the period indicated, or to project the combined companies' financial position or results of operations for any future period. 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 thereunto duly authorized. ABLE TELCOM HOLDING CORP. By: /s/ Daniel L. Osborne ----------------------------------- Daniel L. Osborne Chief Accounting Officer Dated: December 20, 1996 MITCHELL, HONEYCUTT & RAY, P.C. Certified Public Accountants 3310 Atlanta Road, Smyrna Georgia 30080 (770) 434-4040 Voice (770) 432-5043 Fax Board of Directors Georgia Electric Company Albany, Georgia We have audited the accompanying balance sheet of Georgia Electric Company as of December 31, 1995 and December 31, 1994 and the related statements of income, retained earnings, and cash flows for the year 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 audit. We conducted our audit 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 audit provides 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 Georgia Electric Company as of December 31, 1995 and December 31, 1994 and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplementary Information is presented for purposes of additional analysis and is not a required part of the basic 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/Mitchell, Honeycutt & Ray, P.C. - --------------------------------- Mitchell, Honeycutt & Ray, P.C. Certified Public Accountants March 13, 1996 Georgia Electric Company Balance Sheet December 31, 1995 and 1994 Assets 1995 1994 Current Assets Cash in Bank and Temporary Investments $ 550,022 $ 1,266,635 Cash in Bank - Retainage Escrow 103,629 136,306 Accounts Receivable Trade 3,225,875 1,820,621 Retainage 433,391 176,244 Other 33,928 32,151 Provision for Doubtful Accounts (2,882) (2,882) -------------- ----------- Total Accounts Receivable $ 3,690,312 $ 2,206,134 Inventory - Material 580 793 Prepaid Expenses 148,708 110,685 Cost and Profit on Incomplete Contracts in Excess of Billings 325,280 247,810 -------------- ----------- Total Current Assets $ 4,818,531 $ 3,788,363 Property and Equipment net of Accumulated Depreciation totaling $2,084,127 and $1,681,302 for 1995 and 1994 respectively 1,337,848 1,058,323 Cash Value of Life Insurance 254,098 198,342 ------------- ----------- Total Assets $ 6,410,477 $ 5,045,028 ============== ===========
Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 922,030 $ 336,171 Accrued Salaries and Bonuses 304,679 207,352 Accrued and Withheld Taxes 123,823 72,827 Accrued Expenses 222,653 163,383 Provision for Workers Compensation Claims 350,000 281,244 Provision for Warranty Costs 35,395 35,395 Billings in Excess of Cost and Profit on Incomplete Contracts 127,802 170,774 Other Current Liabilities 73,783 73,782 Notes Payable - Due After One Year - Note E 550,000 1,000,000 ----------- ----------- Total Current Liabilities $ 2,710,165 $ 2,340,928 Stockholders' Equity Common Stock - 45,000 Shares $1 Par Value Issued and Outstanding $ 45,000 $ 45,000 Paid-in Capital 1,036,640 1,036,640 Retained Earnings 2,618,672 1,622,460 ----------- ----------- Total Stockholders' Equity $ 3,700,312 $ 2,704,100 ----------- ----------- Total Liabilities and Stockholders' Equity $ 6,410,477 $ 5,045,028 =========== ===========
The accompanying notes are an integral part of these financial statements. Page 2 Georgia Electric Company Statement of Income and Retained Earnings For the Years Ended December 31, 1995 and 1994 1995 1994 Revenue $ 21,978,222 $ 14,585,287 Cost of Contract Operations 18,816,967 11,972,650 ------------ ------------ Gross Profit - Note A $ 3,161,255 $ 2,612,637 Operating Expenses Equipment and Shop Expense $ (805,501) $ (139,213) Sales and Estimating Expense 198,747 163,179 Administrative Expense 1,129,080 941,258 ------------ ------------ Total Operating Expenses $ 522,326 $ 965,224 ------------ ------------ Income From Operations $ 2,638,929 $ 1,647,413 Other Income 43,071 44,291 ------------ ------------ Net Income $ 2,682,000 $ 1,691,704 Retained Earnings, January 1 1,622,460 2,005,256 Distributions (1,685,788) (2,074,500) ------------ ------------ Retained Earnings, December 31 $ 2,618,672 $ 1,622,460 ============ ============
The accompanying notes are an integral part of these financial statements. Page 3 Georgia Electric Company Statement of Cash Flows For the Years Ended December 31, 1995 and 1994 1995 1994 ------------ ------------ Cash Flows From Operating Activities: Net Income Provided From Operations $ 2,682,000 $ 1,691,704 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation 402,825 329,421 (Increase) Decrease in: Accounts Receivable (1,664,178) (297,144) Inventory and Work in Process (120,228) 52,674 Prepaid Expenses (38,023) (83,335) Increase (Decrease) in: Accounts Payable 585,859 (808,865) Accrued Expenses 207,593 (104,481) Other Payables 68,756 211,849 Other Liabilities 0 (60,397) ------------ ------------ Net Cash Provided by Operations $ 2,124,604 $ 931,426 Cash Flows From Investing Activities Increase in Cash Value of Life Insurance (55,756) (139,694) Purchases of Equipment (682,350) (524,185) ------------ ------------ Total Cash Flows From Investing Activities $ (738,106) $ (663,879) Cash Flows From Financing Activities Payment of Note Payable (450,000) 0 Distributions to Stockholders (1,685,788) (2,074,500) ------------ ------------ Total Cash Flows From Financing Activities $(2,135,788) $ (2,074,500) Increase (Decrease) in Cash $ (749,290) $ (1,806,953) Cash at Beginning of Year 1,402,941 3,209,894 ------------ ------------ Cash at End of Year $ 653,651 $ 1,402,941 ============ ============
The accompanying notes are an integral part of these financial statements. Page 4 Georgia Electric Company Notes to Financial Statements December 31, 1995 and 1994 Note A - Summary of Significant Account Policies Revenue and Cost Recognition The Company recognized revenues from fixed price and modified fixed price contracts on the percentage- of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. Revenue from contracts based on time and materials is recognized when invoices are issued. Contract costs include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor, supplies, and tools and equipment usage costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such loss is determined. Changes in job performance, conditions and the estimated profitability may result in revisions to costs and income which are recognized in the period in which the revisions are determined. Depreciation Depreciation is provided principally on the straight line method over the estimated useful lives of the assets which are generally five years. Income Taxes Effective May 1, 1993, the Company and its shareholders elected under provisions of the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the shareholders of an S Corporation are taxed on their proportionate share of the company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Note B - Organization Georgia Electric Company, a Georgia Corporation was, prior to May 1, 1993, a subsidiary of Electric Company of Georgia, Inc. On May 1, 1993 Electric Company of Georgia, Inc. distributed the shares of Georgia Electric Company to its shareholders. Also on May 1, 1993 the shareholders elected to be taxed as an S Corporation and in accordance with the regulations covering S Corporations elected to change the fiscal year of the Company to a calendar year. Note C - Operating Lease Agreements The Company leases its office and storage facilities in Albany, Georgia from officers of the Company who are the shareholders of the Company. The monthly rental is $5,000.00. Page 5 Georgia Electric Company Notes to Financial Statements December 31, 1995 and 1994 Note D - Costs and Estimated Earnings on Uncompleted Contracts
December 31, 1995 1994 Costs Incurred on Uncompleted Contracts $ 9,697,706 $ 7,391,722 Earnings Recognized on Uncompleted Contracts 1,257,705 1,107,449 ----------- ----------- Total $10,995,411 $ 8,499,171 Billings to date 10,757,933 8,422,134 ----------- ----------- Total $ 197,478 $ 77,037 =========== =========== Included in the accompanying balance sheet under the following headings: Cost and Profit on Incomplete Contracts in Excess of Billing 325,280 247,811 Billings in Excess of Cost and Profit on Incomplete Contracts 127,802 170,774 ----------- ----------- Total $ 197,478 $ 77,037 =========== ===========
Note E - Long Term Indebtedness Long Term Indebtedness consists of a note payable to Trust Company Bank of South Georgia, N.A., bearing interest at the prime rate charged by that bank. The original terms were that the loan was to be repaid in five annual installments of $200,000 beginning January 1, 1996. During 1995 principal payments totaling $450,000 were made to reduce the balance due at December 31, 1995 to $550,000. Based on the 1995 payments and the intentions of management to repay this loan when cash flows are adequate, the amount is included as a current liability. Note F - Property and Equipment Property and Equipment of the Company is summarized as follows: 1995 1994 Motor Vehicles $ 1,683,979 $ 1,449,146 Equipment 1,495,870 1,082,753 Trailers 36,340 16,382 Office Furniture and Equipment 60,417 52,588 Data Processing Equipment 134,781 128,169 Leasehold Improvements 10,588 10,588 ------------ ----------- Totals $ 3,421,975 $ 2,739,626 Accumulated Depreciation 2,084,127 1,681,303 ------------ ----------- Total $ 1,337,848 $ 1,058,323 ============ ===========
Note G - Related Party Transactions The Company has transactions with related corporations and its stockholders. These include the rental of property noted in Note C above, and various services provided at cost which are not material. Page 6 Georgia Electric Company Notes to Financial Statements December 31, 1995 and 1994 Note H - Employee Savings and Benefit Plan The Company has a qualified Section 401K Savings and Benefit Plan for its employees with one year's service. The Company contributes based on employee savings. The contributions to the plan for the period ending December 31, 1995 totaled $69,277 and for the year ended December 31, 1994, $64,072. Note I - Shop Expense - Allocations to Contracts Contracts are charged, at market rates, for equipment used on the contract. Allocations for the year exceeded the total shop expense for the year since the amounts charged to contracts at market rates exceed the actual cost. Note J - Provision for Workers Compensation Claims The Company elected, with the renewal of its insurance policy on May, 1994, to be self insured on the first $325,000 of workers compensation claims. Claims totaling $43,756 were received through December 31, 1994 and provision is made for the remainder of the contingent liability during the remaining period of the policy. The self insured portion was reduced to $250,000 for the policy year beginning May 1, 1995. The provision for claims was increased to $350,000 at December 31, 1995. Note K - Distributions to Stockholders Distributions were made during 1994 and 1995 primarily for the payment of income taxes due by stockholders resulting from the inclusion of corporate income in their personal returns. Due to increased income in 1995, additional distributions will be made in 1996 for payment of income tax due on 1995 income. Note L - Business Concentration A substantial portion of the revenue of the Company is from one Company. The nature of this business is based on cost-plus contracts for maintenance and contract services. It is the opinion of management that this concentration does not jeopardize the operations of the Company. Note M - Available Line of Credit The company has an open, unused line of credit available from Trust Company Bank of South Georgia, N.A. in the amount of $1,000,000 at December 31, 1995 and at the date of this report. Page 7 MITCHELL, HONEYCUTT & RAY, P.C. Certified Public Accountants 3310 Atlanta Road, Smyrna Georgia 30080 (404) 434-4040 Board of Directors Georgia Electric Company Albany, Georgia We have audited the accompanying balance sheet of Georgia Electric Company as of December 31, 1993, and the related statements of income, retained earnings, 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 audit. We conducted our audit 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 audit provides 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 Georgia Electric Company as of December 31, 1993 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplementary Information is presented for purposes of additional analysis and is not a required part of the basic 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/Mitchell, Honeycutt & Ray, P.C. --------------------------------- Mitchell, Honeycutt & Ray, P.C. Certified Public Accountants February 26, 1994 Georgia Electric Company Balance Sheet December 31, 1993 Assets Current Assets Cash in Bank and Temporary Investments $ 3,140,308 Cash in Bank - Retainage Escrow 69,586 Accounts Receivable Trade $ 1,407,699 Retainage 197,035 Other 130,098 ----------- Total $ 1,734,832 Provision for Doubtful Accounts -5,843 1,728,989 Prepaid Expenses 27,350 Cost and Profit on Incomplete Contracts in Excess of Billings 477,963 ----------- Total Current Assets $ 5,444,196 Property and Equipment Less Accumulated Depreciation of $ 1,359,682 863,558 Cash Value of Life Insurance 58,649 ----------- Total Assets $ 6,366,403 ===========
Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 1,145,036 Accrued Salaries and Bonuses 178,259 Accrued and withheld Taxes 31,724 Accrued Expenses 338,062 Provision for Warranty Costs 75,220 Accrued Profit Sharing Plan Contribution 29,570 Billings in Excess of Cost and Profit on Incomplete Contracts 347,459 Other Current Liabilities 134,177 ----------- Total Current Liabilities $ 2,279,507 Long Term Indebtedness 1,000,000 ----------- Total Liabilities $ 3,279,507 Stockholders' Equity Common Stock - 45,000 Shares $1 Par Value Issued and Outstanding $ 45,000 Paid-in Capital 1,036,640 Retained Earnings 2,005,256 ----------- Total Stockholders' Equity $ 3,086,896 Total Liabilities and Stockholders' Equity $ 6,366,403 ===========
The accompanying notes are an integral part of these financial statements. Page 2 Georgia Electric Company Statement of Income and Retained Earnings For the Period May 1, 1993 through December 31, 1993 Revenue $ 13,677,087 Cost of Contract Operations 12,163,127 ------------ Gross Profit - Note A $ 1,513,960 Operating Expenses Shop Expense (Credit) $ (282,463) Sales and Estimating Expense 64,603 Administrative Expense 444,926 227,066 ------------ ------------ Income From Operations $ 1,286,894 Other Income 65,172 Net Income $ 1,352,066 Retained Earnings, May 1 1,183,190 Dividends Paid 530,000 653,190 ------------ ------------ Retained Earnings, December 31 $ 2,005,256 ============ Earnings Per Share $ 44.56 ============
The accompanying notes are an integral part of these financial statements. Page 3 Georgia Electric Company Statement of Cash Flows For the Period May 1, 1993 through December 31, 1993 Cash Flows From Operating Activities: Net Income Provided From Operations $ 1,352,066 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation 198,945 Deferred Income Taxes (59,440) Loss (Gain) From Fixed Asset Disposal (778) (Increase) Decrease in: Inventory and Work in Process (62,126) Accounts Receivable 274,843 Prepaid Expenses (27,350) Increase (Decrease) in: Accounts Payable 705,379 Accrued Expenses 29,195 Other Payables (27,046) Other Liabilities (49,729) ----------- Net Cash Provided by Operations $ 2,333,959 Cash Flows From Investing Activities: Increase in Cash Value of Life Insurance (572) Purchases of Equipment (149,624) Proceeds From Sale of Property and Equipment 2,525 ----------- Total Cash Flows From Investing Activities $ (147,671) Cash Flows From Financing Activities: Dividends Paid (530,000) ----------- Increase (Decrease) in Cash $ 1,656,288 Cash at Beginning of Year 1,553,606 ----------- Cash at End of Year $ 3,209,894 ===========
The accompanying notes are an integral part of these financial statements. Page 4 Georgia Electric Company Notes to Financial Statements December 31, 1993 Note A - Summary Of Significant Accounting Policies Revenue and Cost Recognition The Company recognizes revenues from fixed price and modified fixed price contracts on the percentage-of- completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. Revenue from contracts based on time and materials is recognized when invoices are issued. Contract costs include all direct material and labor costs and those indirect costs related to contract performance such as indirect labor, supplies, and tools and equipment usage costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such loss is determined. Changes in job performance, conditions and the estimated profitability may result in revisions to costs and income which are recognized in the period in which the revisions are determined. Depreciation Depreciation is provided principally on the straight line method over the estimated useful lives of the assets which are generally five years. Income Taxes Effective May 1, 1993, the Company and its shareholders elected under provisions of the Internal Revenue Code to be an S Corporation. In lieu of corporate income taxes, the shareholders of an S Corporation are taxed on their proportionate share of the Company's taxable income. Therefore, no provision or liability for federal income taxes has been included in the financial statements. Note B - Organization Georgia Electric Company, a Georgia Corporation was, prior to May 1, 1993, a subsidiary of Electric Company of Georgia, Inc. On May 1, 1993 Electric Company of Georgia, Inc. distributed the shares of Georgia Electric Company to its shareholders. Also on May 1, 1993 the shareholders elected to be taxed as an S Corporation and in accordance with the regulations covering S Corporations elected to change the fiscal year of the Company to a calendar year. Note C - Operating Lease Agreements The Company leases its offices and storage facilities in Albany, Georgia from officers of the Company who are the shareholders of the Company. The monthly rental is $5,000.00. Page 5 Georgia Electric Company Notes to Financial Statements December 31, 1993 Note D - Costs and Estimated Earnings on Uncompleted Contracts Costs Incurred on Uncompleted Contracts $ 8,395,054 Earnings Recognized On Uncompleted Contracts 879,720 Total $ 9,274,774 Billings to Date 9,144,270 ------------ Total $ 130,504 ============ Included in the accompanying balance sheet under the following headings: Cost and Profit on Incomplete Contracts in Excess of Billings $ 477,963 Billings in Excess of Cost and Profit on Incomplete Contracts 347,459 ------------ Total $ 130,504 ============
Note E - Due From Parent Company The amount represents advances to Electric Company of Georgia, Inc., the sole shareholder of the Company. Note F - Long Term Indebtedness Long term indebtedness consists of a note payable to Trust Company Bank of South Georgia, N.A. bearing interest at the prime rate charged by that bank and to be repaid in five annual installments of $200,000 beginning January 1, 1995. Note G - Property and Equipment Property and Equipment of the Company is summarized as follows: Motor Vehicles $ 1,184,482 Equipment 841,309 Trailers 10,782 Office Furniture and Equipment 47,910 Data Processing Equipment 128,169 Leasehold Improvements 10,588 ----------- Totals 2,223,240 ----------- Accumulated Depreciation $ 1,359,682 ----------- Total $ 863,558 ===========
Page 6 Note H - Related Party Transactions The Company has transactions with related corporations and its stockholders. These include the rental of property noted in Note D above, and various services provided at cost which are not material. Note I - Employee Savings and Benefit Plan The Company has aa qualified Section 401K savings and benefit plan for its employees with one year's service. The Company contributes based on employee savings. The contributions to the plan for the period ended December 31, 1993 totaled $26,852. Note J - Shop Expense - Allocations to Contracts Contracts are charged, at market rates, for equipment used on the contract. Allocations for the year exceeded the total shop expense for the year since market rates exceed the actual cost. Note K - Subsequent Events The Directors and Stockholders of the parent company, Electric Company of Georgia, Inc. elected to distribute the shares of Georgia Electric Company stock to its shareholders effective May 1, 1993. Subsequently the stockholders of Georgia Electric Company elected with the Internal Revenue Service to be taxed as an S Corporation with a taxable year ending on December 31. The effect of the election will be the tax on corporate income being paid by the shareholders rather than the Company. It is anticipated that dividends will be paid in the future in the amount at lease equal to the individual tax liability resulting from inclusion of corporate income. Page 7 MITCHELL, HONEYCUTT & RAY, P.C. CERTIFIED PUBLIC ACCOUNTANTS 3310 Atlanta Road, Smyma, Georgia 30080 (404) 434-4040 Board of Directors Georgia Electric Company Albany, GA We have audited the accompanying balance sheet of Georgia Electric Company as of April 30, 1993 and 1992, and the related statements of income, retained earnings, 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 audit. We conducted our audit 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 audit provides 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 Georgia Electric Company as of April 30, 1993 and 1992, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplementary Information is presented for purposes of additional analysis and is not a required part of the basic 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/ Mitchell, Honeycutt & Ray, P.C. ----------------------------------- Mitchell, Honeycutt & Ray, P.C. Certified Public Accountants July 21, 1993 Georgia Electric Company Balance Sheet As of April 30, 1993 and 1992 Assets 1993 1992 Current Assets Cash in Bank and Temporary Investment $ 1,553,606 $ 1,044,200 Accounts Receivable Trade 1,777,860 1,610,861 Retainage 96,713 83,338 Other 135,102 48,505 ----------- ----------- Total $ 2,009,675 $ 1,742,704 Provision for Doubtful Accounts -5,843 -5,843 ----------- ----------- Accounts Receivable - Net $ 2,003,832 $ 1,736,861 Deposits -0- 7,500 Cost and Profit on Incomplete Contracts in Excess of Billings 123,265 68,368 ----------- ----------- Total Current Assets $ 3,680,703 $ 2,856,929 Property and Equipment Less Accumulated Depreciation of $1,175,224 for 1993 and $932,077 for 1992 917,626 885,986 Cash Value of Life Insurance 58,077 -0- Due From Parent Company -0- 1,703,704 ----------- ----------- Total Assets $ 4,656,406 $ 5,446,619 =========== ===========
Liabilities and Stockholders' Equity Current Liabilities Accounts Payable $ 439,657 $ 740,246 Accrued Salaries and Bonuses 91,154 77,191 Accrued and withheld Taxes 92,634 101,627 Other Payables 365,108 115,702 Provision for Warranty Costs 75,220 75,946 Accrued Profit Sharing Plan Contribution 36,955 31,024 Billings in Excess of Cost and Profit on Incomplete Contracts 54,887 308,993 Other Current Liabilities 176,521 109,389 ----------- ----------- Total Current Liabilities $ 1,332,136 $ 1,560,118 Long Term Indebtedness 1,000,000 -0- Deferred Income Tax 59,440 70,061 ----------- ----------- Total Liabilities $ 2,391,576 $ 1,630,179 Stockholders' Equity Common Stock - 45,000 Shares $1 Par Value Issued and Outstanding $ 45,000 $ 45,000 Paid-in Capital 1,036,640 1,036,640 Retained Earnings 1,183,190 2,734,800 ----------- ----------- Total Stockholders' Equity $ 2,264,830 $ 3,816,440 Total Liabilities and Stockholders' Equity $ 4,656,406 $ 5,446,619 =========== ===========
The accompanying notes are an integral part of these financial statements. Page 2 Georgia Electric Company Statement of Income and Retained Earnings For the Years Ended April 30, 1993 and 1992 1993 1992 Revenue $ 14,818,781 $ 9,973,013 Cost of Contract Operations 11,747,662 7,872,381 ------------ ------------ Gross Profit - Note A $ 3,071,119 $ 2,100,632 Operating Expenses Shop Expense (Credit) $ (350,273) $ (336,835) Sales and Estimating Expense 146,726 142,752 Administrative Expense 1,812,571 1,167,821 ------------ ------------ Total Operating Expenses $ 1,609,024 $ 973,738 Income From Operations $ 1,462,095 $ 1,126,894 Other Income 45,537 104,095 ------------ ------------ Income Before Provision for Income Tax $ 1,507,632 $ 1,230,989 Provision for Income Taxes 569,422 326,065 ------------ ------------ Net Income $ 938,210 $ 904,924 Retained Earnings, May 1 2,734,800 2,529,876 Dividends Paid (2,489,820) (700,000) ------------ ------------ Retained Earnings, April 30 $ 1,183,190 $ 2,734,800 ============ ============ Earnings Per Share $ 20.85 $ 20.11 ============ ============
The accompanying notes are an integral part of these financial statements. Page 3 Georgia Electric Company Statement of Cash Flows For the Years Ended April 30, 1993 and 1992 1993 1992 Cash Flows From Operating Activities Net Income Provided From Operations $ 938,210 $ 904,924 Adjustments to Reconcile Net Income to Net Cash Provided By Operating Activities: Depreciation 265,960 218,423 Deferred Income Taxes (10,621) (78,843) Loss (Gain) From Fixed Asset Disposal 8,297 (24,808) (Increase) Decrease in: Inventory and Work in Process (309,003) (290,675) Contract Deposits -0- 60,000 Accounts Receivable (266,971) (404,762) Deposits 7,500 (7,500) Increase (Decrease) in: Accounts Payable (300,589) 257,307 Accrued Expenses 4,970 (13,354) Other Payables 249,406 (168,532) Other Liabilities 72,337 (93,726) ----------- ----------- Net Cash Provided by Operations $ 659,496 $ 358,454 Cash Flows From Investing Activities: Increase in Cash Value of Life Insurance (58,077) -0- Purchases of Equipment (369,297) (331,648) Proceeds From Sale of Property and Equipment 63,400 45,439 Collection in Amount Due From Parent 1,703,704 15,413 ----------- ----------- Total Cash Flows From Investing Activities $ 1,339,730 $ (270,796) Cash Flows From Financing Activities Proceeds from Long Term Indebtedness 1,000,000 0 Dividends Paid (2,489,820) (700,000) ----------- ----------- Increase (Decrease) in Cash $(1,489,820) $ (612,342) Cash at Beginning of Year 1,044,200 1,656,542 ----------- ----------- Cash at End of Year $ 1,553,606 $ 1,044,200 =========== ===========
The accompanying notes are an integral part of these financial statements. Page 4 Georgia Electric Company Notes to Financial Statements April 30, 1993 and 1992 Note A - Summary Of Significant Accounting Policies Revenue and Cost Recognition The Company recognizes revenues from fixed price and modified fixed price contracts on the percentage-of-completion method, measured by the percentage of cost incurred to date to estimated total cost for each contract. Revenue from contracts based on time and materials is recognized when invoices are issued. Contract costs include all direct material and labor costs and those indirect costs related to contract performance such as Indirect labor, supplies, and tools and e(equipment usage costs. Provisions for estimated losses on uncompleted contracts are made in the period in which such loss is determined. Changes in job performance, conditions and the estimated profitability may result in revisions to costs and income which are recognized in the period in which the revisions are determined. Depreciation Depreciation is provided principally on the straight line method over the estimated useful lives of the assets which are generally five years. Income Taxes Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. The deferred taxes represent the future tax return consequences of the timing differences in the recognition of revenue and expenses for tax and financial reporting. The primary differences consist of the deferral of revenue and expense for tax purposes, provisions for future costs, and depreciation, which is computed for tax purposes using accelerated methods. Taxes due currently are paid to the parent corporation to apply against taxes on the consolidated returns. Note B - Organization Georgia Electric Company, a Georgia Corporation, is a wholly owned subsidiary of Electric Company of Georgia, Inc., also a Georgia Corporation. Note C - Operating Lease Agreements The Company leases its offices and storage facilities in Albany, Georgia from officers of the Company who are also majority shareholders of Electric Company of Georgia, Inc., the sole shareholder of the Company. The monthly rental is $4,750.00 Page 5 Georgia Electric Company Notes to Financial Statements April 30, 1993 and 1992 Note D - Costs and Estimated Earnings On Uncompleted Contracts 1993 1992 Cost Incurred on Uncompleted Contracts $ 3,781,432 $ 3,547,595 Earnings Recognized on Uncompleted Contracts 381,896 2,931,946 ----------- ----------- Total $ 4,163,328 $16,479,541 Billings to Date 4,094,950 -16,720,166 ----------- ----------- Total $ 68,378 $ -240,625 =========== =========== Included in the accompanying balance sheet under the following headings: Cost and Profit on Incomplete Contracts in Excess of Billings $ 123,265 $ 68,368 Billings in Excess of Cost and Profit on Incomplete Contracts -54,887 -308,993 ----------- ----------- Total $68,378 $ -240,625 =========== ===========
Note E - Due From Parent Company The amount represents advances to Electric Company of Georgia, Inc., the sole shareholder of the Company. Note F - Long Term Indebtedness Long term indebtedness consists of a note payable to Trust Company Bank of South Georgia, N.A. bean' interest at the prime rate charged by that bank and to be repaid in five annual installments of $200,000 beginning May 1, 1994. The note is secured by the shareholders of Electric Company of Georgia, Inc. Note G - Property and Equipment Property and equipment of the Company is summarized as follows: 1993 1992 Motor Vehicles $ 1,051,070 $ 968,211 Equipment 841,309 652,013 Trailers 10,782 10,782 Office Furniture and Equipment 45,101 45,101 Data Processing Equipment 126,150 123,518 Leasehold improvements 18,438 18,438 ----------- ----------- Totals $ 2,092,850 $ 1,818,063 Accumulated Depreciation 1,175,224 932,077 ----------- ----------- $ 917,626 $ 885,986 =========== ===========
Page 6 Georgia Electric Company Notes to Financial Statements April 30, 1993 and 1992 Note H - Related Party Transactions The Company has transactions with related corporations and its stockholders. These include the rental of property noted in Note D above, and various services provided at cost which are not material. Note I - Employee Savings and Benefit Plan The Company has a qualified Section 401K savings and benefit plan for its employees with one year's service. The Company contributes based on employee savings. The contributions to the plan for 1993 totaled $30,874 and $17,393 for 1992. Note J - Shop Expense - Allocations to Contracts Contracts arc charged, at market rates, for equipment used on the contract. Allocations for the year exceeded the total shop expense for the year since market rates exceed the actual cost. Note K During the year the Directors declared a dividend payable to the parent company, Electric Company of Georgia, Inc. in the amount of the balance advanced to the parent over the years. The amount distributed totaled $1,789,820. Note L - Subsequent Events The Directors and Stockholders of the parent company, Electric Company of Georgia, Inc. elected to distribute the shares of Georgia Electric Company stock to its shareholders effective May 1, 1993. Subsequently the stockholders of Georgia Electric Company elected with the Internal Revenue Service to be taxed as an S Corporation with a taxable year ending on December 31. The effect of the election will be the tax on corporate income being paid by the shareholders rather than the company. It is anticipated that dividends will be paid in the future in the amount at least equal to the individual tax liability resulting from inclusion of corporate income. Page 7 Supplementary Information Georgia Electric Company Supporting Schedules For the Years Ended April 30, 1993 and 1992 1993 1992 Cost of Contract Operations Salaries, Wages and Bonuses $ 8,001,488 $ 4,259,685 Employee Benefits and Taxes 1,290,423 744,111 Subcontractors 340,001 206,963 Materials 1,269,647 1,750,704 Travel 33,023 40,684 Yard and Office Rental 19,100 15,751 Telephone and Utilities 22,005 23,853 Equipment Rental 757,301 728,579 Repair and Maintenance 169,823 203,603 Tools and Supplies 112,417 147,115 Bond Expense 34,445 9,223 Consulting and Legal Fees 242 -345 Warranty Expense -0- 25,069 Taxes and Licenses 6,658 1,309 Other Costs 145 7,721 ----------- ----------- Total Cost of Contract Operations $12,056,718 $ 8,164,025 Work in Process Adjustments -309,056 -291,644 ----------- ----------- Total $11,747,662 $ 7,872,381 =========== =========== Shop Expense Salaries and Wages $ 21,113 $ 23,545 Employee Benefits and Taxes 5,017 6,142 Travel 30 55 Equipment Rental 318 270 Rent 39,608 28,500 Telephone and Utilities 1,164 1,191 Repairs and Maintenance 25,658 31,308 Tools and Supplies 1,051 2,262 Depreciation 207,756 181,630 Taxes and Licenses 6,935 13,460 Insurance 61,365 69,038 Other Expenses 3,148 133 ----------- ----------- Total Shop Expense $ 373,163 $ 357,534 Less Allocations to Contracts -723,436 -694,369 ------------ ----------- Total $ -350,273 $ -336,835 ============ ===========
Page 8 Georgia Electric Company Supporting Schedules For the Year Ended April 30, 1993 and 1992 1993 1992 Selling Expense Salaries and Wages $ 68,882 $ 78,196 Employee Benefits and Taxes 10,745 13,964 Travel 8,694 18,600 Telephone and Utilities 9,496 9,704 Rent 22,108 5,700 Repairs and Maintenance 3,924 5,165 Dues and Subscriptions 1,222 989 Plans and Proposals 6,246 4,088 Depreciation 2,632 2,394 Supplies 5,878 147 Insurance 6,607 3,702 Other Expenses 292 103 ----------- ----------- Total Selling Expense $ 146,726 $ 142,752 =========== =========== Administrative Expense Management Fees $ 961,590 $ 651,795 Salaries and Wages 217,446 223,923 Employee Benefits 33,699 -81,024 Payroll Taxes 20,447 20,076 Travel and Entertainment 88,532 103,443 Rent 34,883 22,800 Telephone and Utilities 23,948 22,488 Repairs and Maintenance 15,624 21,461 Office Supplies and Expense 19,328 13,584 Depreciation 55,572 30,534 Insurance 123,788 21,298 Taxes and Licenses 32,594 34,644 Computer Programming 2,049 1,500 Computer Expense 4,846 4,105 Legal and Accounting 48,937 33,345 Profit Sharing Contribution 30,874 17,393 Dues and Subscriptions 2,408 3,272 Bad Debt Expense 500 12,676 Bond Forfeiture 88,572 -0- Other Expense 6,934 10,508 ----------- ----------- Total Administrative Expense $ 1,812,571 $ 1,167,821 =========== ===========
Page 9 ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Pro Forma Combined Balance Sheets (Unaudited)
Able Telcom Holding Corp. Georgia and Electric Subsidiaries Company ----------- ---------- July 31, October 12, Pro Forma ------------------------- 1996 1996 Adjustments Combined ----------- ---------- ---------- ---------- Assets Current assets: Cash $ 1,230,118 $ 1,366,619 $ - $ 2,596,737 Investments, net 566,250 566,250 Accounts receivable, net 9,758,910 4,373,914 14,132,824 Inventories 3,075,588 28,225 3,103,813 Prepaid expense and other 1,235,855 269,594 1,505,449 ----------- ----------- ----------- ----------- Total current assets 15,866,721 6,038,352 21,905,073 Property and equipment, net 6,752,240 1,658,672 600,000(B) 9,010,912 Other assets: Deferred income taxes 439,405 439,405 Investment in Latin 2,005,427 2,005,427 American subsidiary Goodwill and contractual 6,004,596 6,004,596 rights, net Other 357,927 357,927 ----------- ----------- ----------- ----------- Total other assets 8,807,355 8,807,355 ----------- ----------- ----------- ----------- Total assets $31,426,316 7,697,024 600,000 $39,723,340 =========== ========== =========== ===========
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Pro Forma Combined Balance Sheets (Unaudited)
Able Telcom Holding Corp. Geordia and Electric Subsidiaries Company ----------- ---------- July 31, October 12, Pro Forma ------------------------- 1996 1996 Adjustments Combined ----------- ---------- ---------- ----------- Liabilities and Shareholders' Equity Current liabilities: Current Portion of long-term debt $ 1,266,694 $ - 600,000(A) $ 1,866,694 Notes payable to shareholders/directors 1,557,976 1,557,976 Notes payable - other 1,869,049 1,869,049 Line of credit 4,538,437 4,538,437 Accounts payable 2,902,482 1,175,513 4,077,995 Accrued expenses 1,210,476 1,449,874 2,660,350 ----------- ----------- ---------- ----------- Total current liabilities 13,345,114 2,625,387 600,000 16,570,501 Deferred income taxes 479,486 479,486 Distributions payable 2,671,637 2,671,637 Long-term debt, excluding current portion 3,091,008 2,400,000(A) 5,491,008 ----------- ---------- ---------- ----------- Total liabilities 16,915,608 5,297,024 3,000,000 25,212,632 Stockholders' equity: Common stock, $.001 par value, authorized 25,000,000 shares; 8,193,212 issued and outstanding 8,203 45,000 (45,000) 8,203 Additional paid-in capital 12,800,222 1,036,640 (1,036,640) 12,800,222 Unrealized loss on investments, net (58,750) (58,750) Retained earnings 1,761,033 1,318,360 (1,318,360) 1,761,033 ----------- ---------- ---------- ----------- Total shareholders' equity 14,510,708 2,400,000 (2,400,000) 14,510,708 ----------- ---------- ---------- ----------- Total liabilities and shareholders' equity $31,426,316 $7,697,024 $ 600,000 $39,723,340 =========== ========== ========== ===========
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Pro Forma Combined Statements of Income (Unaudited) For the twelve months ended
Able Telcom Holding Corp. Georgia and Electric Subsidiaries Company ----------- ----------- October 31, December 31, Pro Forma -------------------------- 1995 1995 Adjustments Combined ----------- ----------- ----------- ---------- Revenues $35,407,581 $21,978,222 $ - $57,385,803 Cost and expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) 27,719,750 17,656,529 45,376,279 General and administrative 5,464,338 1,279,939 50,000(C) 6,794,277 Depreciation and amortization 1,914,064 402,825 150,000(D) 2,466,889 Translation/transaction losses, net 95,798 95,798 Loss on sale of investments 100,379 100,379 Interest expense 1,117,932 255,000(E) 1,372,932 Interest and dividends (672,598) (43,071) (715,669) ----------- ----------- ---------- --------- 35,739,663 19,296,222 455,000 55,490,885 ----------- ----------- ---------- ---------- (Loss) income before income taxes and minority interest (332,082) 2,682,000 (455,000) 1,894,918 Income tax (benefit) expense (368,105) 823,990(F) 455,885 ---------- ----------- ---------- ---------- Income before minority interest 36,023 2,682,000 (1,278,990) 1,439,033 Minority interest 317,189 317,189 ---------- ----------- ----------- ---------- Net (loss) income $ (281,166) $ 2,682,000 $(1,278,990) $1,121,844 =========== =========== =========== ========== (Loss) income per common share and common equivalent share: Primary and fully diluted $ (0.03) $ 0.14 Wieghted average shares outstanding: Primary and fully diluted 8,283,668 8,283,668
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Pro Forma Combined Statements of Income (Unaudited) For the nine months ended
Able Telcom Holding Corp. Georgia and Electric Subsidiaries Company ----------- ---------- July 31, October 12, Pro Forma --------------------------- 1996 1996 Adjustments Combined ------------ ------------ -------------- -------------- Revenues $36,030,910 $23,343,226 $ - $59,374,136 Cost and expenses: Cost of revenues (exclusive of depreciation and amortization shown separately below) 28,285,785 16,750,713 45,036,498 General and administrative 4,866,655 1,698,288 (25,000)(C) 6,539,943 Depreciation and amortization 1,746,911 327,405 90,000 (D) 2,164,316 Translation/transaction losses, net 1,508,556 1,508,556 Restructuring charges 2,433,085 2,433,085 Interest expense 828,500 5,160 191,500 (E) 1,025,160 Interest and dividends (181,098) (73,025) (254,123) ------------ ------------ -------------- -------------- Total cost and expenses 39,488,394 18,708,541 256,500 58,453,435 ------------ ------------ -------------- -------------- (Loss) income before income taxes and minority interest (3,457,484) 4,634,685 (256,500) 920,701 Income tax expense 282,412 10,000 1,479,215 (F) 1,771,627 ------------ ------------ -------------- -------------- Income before minority interest (3,739,896) 4,624,685 (1,735,715) (850,926) Minority interest (781,408) (781,408) ------------ ------------ -------------- -------------- Net (loss) income $(2,958,488) $ 4,624,685 $(1,735,715) $ (69,518) ============ ============ ============== ============== (Loss) income per common share and common equivalent share: Primary and fully diluted $ (0.35) $ (0.01) Wieghted average shares outstanding: Primary and fully diluted 8,355,804 8,355,804
ABLE TELCOM HOLDING CORP. AND SUBSIDIARIES Notes To Pro Forma Combined Financial Statements (Unaudited) (A) The initial purchase price for the acquisition of all of the Common Stock of Georgia Electric Company was $3,000,000 which approximates the stepped-up book value at the closing date. Accordingly, no goodwill was recorded upon payment of the initial purchase price. However, the purchase price is subject to adjustment based upon an earn-out arrangement payable in Able Telcom Holding Corp. Common Stock over the next five years which may result in recorded goodwill. The acquisition is accounted for under the purchase method of accounting. (B) To reflect the fair market value of the property and equipment acquired. (C) To reflect the increase (decrease) in salaries and benefits paid to the former owners of Georgia Electric Company during the pro forma periods. (D) Adjustment to record the additional depreciation expense associated with the fair market value of the property and equipment. (E) Interest expense on the debt incurred of $3,000,000, at 8.5%. Interest was computed based on the debt having been outstanding as of November 1, of each pro forma period. (F) To reflect the tax effect of the combinations on the tax income using a federal and state tax rate of 37%. (G) Certain items in the July 31, 1996, Consolidated Financial Statements have been reclassified to conform to the 1995 presentation. -----END PRIVACY-ENHANCED MESSAGE-----