As filed with the Securities and Exchange Commission on December 9, 2002
REGISTRATION NO. 333-86984
(PRIOR FORM 10-SB REGISTRATION NO. 0-49694)
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
AMENDMENT NO. 1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ALFA UTILITY SERVICES, INC.
----------------------------------------------------------
(Name of Small Business Issuer in its Charter)
Delaware 340-4261 30-0057068
-------- -------- ----------
(State or Other (Primary Standard Industrial (IRS Employer
Jurisdiction of Classification Number) Identification No.)
Incorporation or
Organization)
396 Chrislea Road 396 Chrislea Road
Woodbridge, Ontario L4L 8A8 Woodbridge, Ontario L4L 8A8
CANADA CANADA
Phone (905) 850-2220 Phone (905) 850-2220
Fax (905) 850-9152 Fax (905) 850-9152
(Address and Telephone Number of (Address of Principal Place of Business)
Principal Executive Offices)
Joseph Alfano, President
396 Chrislea Road
Woodbridge, Ontario L4L 8A8
CANADA
Phone (905) 850-2220
Fax (905) 850-9152
(Name, Address and Telephone Number of Agent for Service)
------------------------
Copies of all communications to:
James R. Leone,
Attorney at Law
P.O. Box 755
New Smyrna Beach, Florida 32170-0755
Phone (386) 478-1743, Fax (386) 478-1744
e-mail jrleoneattorney@yahoo.com
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this Registration Statement.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box: [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective Registration Statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement number for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act Registration Statement number of the earlier effective Registration
Statement for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule
434, check the following box. [ ]
CALCULATION OF REGISTRATION FEE
PROPOSED
MAXIMUM
OFFERING PRICE PROPOSED MAXIMUM
PER AGGREGATE OFFERING
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE UNIT/SHARE PRICE AMOUNT OF
REGISTERED REGISTERED F/N (1) F/N (1) REGISTRATION FEE
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
Common Stock F/N (2)(4) 10,603,058 $6.50 $68,919,877 $17,229.97
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
Common Stock F/N (3) 500,000 $6.50 $3,250,000 $ 812.50
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
- ------------------------------------------- ---------------- ----------------- -------------------- --------------------
TOTALS 11,103,058 $6.50 $72,169,877 $18,042.47
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<FN>
Footnotes:
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
(2) These are "public float" shares registered to permit resale by transferees
of promoters and affiliates. They are being registered because the registrant
might be deemed to have been a "blank check" company as indicated in the
Securities and Exchange Commission Staff's January 21, 2001 Interpretive Letter
to the National Association of Securities Dealers, Inc. The registrant does not
hereby concede that it was a "blank check" company.
(3) These are shares being offered for public sale by the registrant. This
number may or may not be increased as described in Footnote (4).
(4) Shares are only being offered for resale by the prospectus to the extent of
and subject to the terms of a Stock Resale Form signed by the shareholders and
filed as an Exhibit to the Registration Statement. It allows sales of up to 5%
per year of the shares held, October 15, 2002-2004, and all thereafter. Other
(non-signing) shareholders' shares may not be offered for resale directly by
shareholders unless Alfa releases the restrictions placed with the Transfer
Agent, but may (or may not) be repurchased by the registrant. Such repurchase
would be made at the lower of the current market price or the current offering
price, which may be discounted by the registrant's determinable actual pro-rata
repurchase costs and, if the shares are intended to be resold hereunder, the
pro-rata resale costs. Shares not intended to be resold or to be maintained on a
Rule 415 "shelf" registration, will be deregistered.
</FN>
The registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a), of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
PROSPECTUS SUBJECT TO COMPLETION, DATED DECEMBER 9, 2002
ALFA UTILITY SERVICES, INC.
UP TO 500,000 SHARES AND UP TO 10,603,058 SHARES OF COMMON STOCK
PURPOSES OF REGISTRATION. Up to 500,000 Common Shares are offered for
sale by Alfa Utility Services, Inc. ("ALFA") at $6.50 primarily to stimulate
market interest. Also, up to 10,603,058 "public float" shares are being
registered for resales by transferees of promoters and affiliates. At November
15, 2002, there were 2,068 shareholders other than Joseph Alfano, Alfa's
President and 53.5% shareholder (12,200,000 shares), who is keeping his shares.
Shareholders are allowed to resell hereunder up to 5% per year of their shares
October 15, 2002-2004, and all thereafter. SELLING SHAREHOLDERS MAY BE DEEMED TO
BE STATUTORY "UNDERWRITERS" AND THEY AND THEIR BROKER DEALERS MUST CONSULT LEGAL
COUNSEL AND READ THE IMPORTANT LEGAL COMPLIANCE INFORMATION UNDER "PLAN OF
DISTRIBUTION" HEREIN.
NO PUBLIC MARKET UNTIL REGISTRATION AND NASDAQ FILING ARE EFFECTIVE AND
RESALES OCCUR. Prior to substantial resales (if any) by existing shareholders or
by new purchasers from Alfa, no public trading market can exist. If little or no
reselling occurs, Alfa will sell shares in small lots to stimulate market
interest and add to its shareholder base. We cannot guarantee a trading market
will develop and be sustained. The stock is not listed on a national securities
exchange. A Form 211 Information Statement has been filed for the NASDAQ OTC
Bulletin Board and its approval is expected concurrently with effectiveness of
the Form SB-2 Registration Statement No.333-86984 under the Securities Act of
1933 of which this Prospectus is Part I. Alfa is a reporting company under its
Form 10-SB Registration No. 0-49694, effective under the Securities Exchange Act
of 1934 Section 12(g) on May 14, 2002. Alfa's Registrations and updated Reports
are at http://www.sec.gov.
ESTIMATED PRICE RANGE AND PROCEEDS. Alfa is offering 500,000 shares at
$6.50 (maximum proceeds $3,250,000 before offering expenses, with no minimum
offering and no escrow) through its officers and Directors, who will not receive
sales compensation. Sales are intended to be made for nine months after this
Prospectus's date (below), generally in lots of 100 - 1,000 shares. Only selling
shareholders will receive proceeds from resale of their share lots. Alfa
estimates resold shares may trade at up to $6.50 or possibly higher if Alfa's
intended but not guaranteed private placement (or possibly registered) cash
sales and corporate acquisitions succeed and produce investor interest and
significant earnings per share. Such estimates are arbitrary and not based on
book value, earnings or other established criteria of value. Prices will be
determined by sellers and buyers. The timing and number of shares traded cannot
be predicted.
HIGH RISK INVESTMENT. We strongly urge you to read the entire
Prospectus. PURCHASE OF THESE SHARES INVOLVES A HIGH DEGREE OF RISK AND
SUBSTANTIAL DILUTION. YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A
COMPLETE LOSS. CAREFULLY REVIEW "RISK FACTORS" AT PAGE 6 AS TO MAJOR RISKS
BEFORE MAKING ANY DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR
DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATON TO THE
CONTRARY IS A CRIMINAL OFFENSE.
PRELIMINARY PROSPECTUS. This Prospectus is incomplete and may be
changed. Shareholders may not sell until the Registration is effective. The
Prospectus speaks as of its date and is not an offer to sell or a solicitation
of an offer to buy securities in any state where that is not permitted. Updated
information will be in Alfa's reports to the SEC (http://www.sec.gov).
The date of this Prospectus is _________ ___ , 2002.
TABLE OF CONTENTS
SUMMARY 3
RISK FACTORS 6
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 7
USE OF PROCEEDS 7
DETERMINATION OF OFFERING PRICE 8
DIVIDEND POLICY 8
DILUTION 8
SELLING SECURITY HOLDERS 9
PLAN OF DISTRIBUTION 10
BUSINESS 14
PROPERTY 25
DIRECTORS AND EXECUTIVE OFFICERS 25
EXECUTIVE COMPENSATION 27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 29
INDEMNIFICATION OF DIRECTORS AND OFFICERS 29
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT 30
DESCRIPTION OF SECURITIES 31
TRANSFER AGENT 33
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 33
LEGAL PROCEEDINGS 36
LEGAL MATTERS 36
EXPERTS 36
AVAILABLE INFORMATION 36
MANAGEMENT'S DISCUSSION AND ANALYSIS 37
FINANCIAL STATEMENTS 41
SUBSCRIPTION AGREEMENT 42
SUMMARY
OUR COMPANY
CORPORATE STRUCTURE; FIGURES IN U.S. DOLLARS
Unless otherwise indicated herein, the information set forth herein
reflects the closing of the transactions effectuated between the close of
business on May 31, 2001 and the opening of business on June 1, 2001 by the
Amended Assignment of Stock and related Amended Consent of Directors and Amended
Option Agreements, which are further described under "BUSINESS - - GENERAL
DEVELOPMENT OF BUSINESS AND OVERVIEW OF THE COMPANY", and are filed as EXHIBITS
to the Form SB-2 Registration Statement. Thus, all references herein to "ALFA",
"WE" (or "US" or "OUR"), or the "REGISTRANT" or the "COMPANY", which is Alfa
Utility Services, Inc. (a Delaware corporation), also include the assets,
liabilities and operations of its subsidiary Alfa Utility Services Inc. (a
Canadian corporation) and that subsidiary's operating subsidiary, Ontario Power
Contracting Limited (an Ontario corporation). Monetary figures are in U.S.
Dollars (USD) unless stated otherwise (CDN for Canadian Dollars).
BUSINESS
We are a full service utilities infrastructure design and construction
company. We install, refurbish or replace underground and overhead electrical
and communications distribution systems, as well as natural gas, water and sewer
distribution systems. Alfa (the parent company and the registrant for this
Prospectus) was organized under the laws of Delaware on December 15, 1994.
OPERATING HISTORY, BACKLOG GROWTH, MANAGEMENT EXPERIENCE
Alfa's operating subsidiary, Ontario Power Contracting Limited, was
founded in 1988 by Alfa's President and 53.5% shareholder, Joseph Alfano. At the
end of 2001 confirmed pending sales orders were $9,628,000 (up 35%) compared to
$7,125,000 a year earlier. Alfa is one of the Big Three utilities contractors in
the Province of Ontario market. Its three executive officers (ages 33 - 49) have
a total of 52 years of expertise in their areas of management, and middle level
officers have approximately the same amount of experience in their fields.
OPERATING RESULTS
We have had operating revenues from operations of $12,090,683 in 2001
and $9,862,552 in 2000, with a 2001 loss of $151,135 and a 2000 loss of $23,535.
Total assets and stockholders' equity were $4,580,073 and $702,300 for 2001, and
$3,895,681 and $853,435 for 2000. See the tables below in this "SUMMARY" and the
Financial Statements and Notes to Financial Statements elsewhere in this
Prospectus.
FUTURE INTERNAL GROWTH, FINANCING AND ACQUISITIONS
We are expanding our operations and we expect greater economies of
scale and increasing operating efficiencies to improve our profitability in
2002. We are seeking to augment our asset base and revenue stream with financing
by possible private (or registered) stock or other securities placements for
cash, and with one or more intended corporate acquisitions for stock in the
Southern United States. Such matters are in preliminary negotiations without any
understandings or agreements as to terms, and there cannot be any guarantee that
they will occur. Alfa's reports to the SEC (http://www.sec.gov) and to
shareholders will contain such information.
-3-
ALFA'S ADDRESS, PHONE AND FAX
Our principal offices are located at 396 Chrislea Road, Woodbridge,
Ontario L4L 8A8, Canada. Our telephone number is (905) 850-2220 and our fax
number is (905) 850-9152.
SEC REPORTING STATUS
Alfa became a permanent SEC reporting company when its Form 10-SB
registration No. 0-49694 became effective on May 14, 2002.
STOCK DATA
GENERAL
- --------------------------------------- -----------------------------------------------------------------------------------
Common Stock outstanding 22,803,058 shares
- --------------------------------------- -----------------------------------------------------------------------------------
ALFA'S STOCK OFFERING
- --------------------------------------- -----------------------------------------------------------------------------------
Shares Offered Up to 500,000 shares of Common Stock
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Price $6.50 per share
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Sale Proceeds $3,250,000 maximum before expenses, no minimum offering
- --------------------------------------- -----------------------------------------------------------------------------------
SELLING STOCKHOLDERS
- --------------------------------------- -----------------------------------------------------------------------------------
Available for resale up to 10,603,058 shares of Common Stock held by 2,068 shareholders *
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Possible Resale Price $6.50 per share (more or less, depending on sellers and buyers)
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
2,068 potential selling shareholders may be deemed to be statutory "underwriters"
who are "engaged in a public distribution". They and certain broker dealers are
required to deliver a Prospectus 48 hours prior to confirming sales. See the
"Underwriters" distribution Prospectus back cover. SELLING SHAREHOLDERS AND THEIR BROKER DEALERS MUST CONSULT
LEGAL COUNSEL AND READ THE IMPORTANT "UNDERWRITERS" LEGAL COMPLIANCE INFORMATION
UNDER "PLAN OF DISTRIBUTION" HEREIN. **
- --------------------------------------- -----------------------------------------------------------------------------------
- --------------------------------------- -----------------------------------------------------------------------------------
Sale proceeds Resale proceeds will go to selling shareholders
- --------------------------------------- -----------------------------------------------------------------------------------
<FN>
* See "SELLING SECURITY HOLDERS" in this Prospectus
** Alfa is deemed a "blank check" company (not conceded by Alfa) under the
Securities and Exchange Commission ("SEC") Staff's January 21, 2000 Interpretive
Letter to the National Association of Securities Dealers, Inc. ("NASD"). The
NASD's Notice to Members No. 00-49 announced the SEC Letter to regulated broker
dealers. It stated the SEC no longer recognized the "free trading" status of
restricted securities of "blank check" companies even if held for years in
"technical compliance" with SEC Rule 144 or certain other exemptions under the
Securities Act of 1933. Thus, all transferees of Alfa's founders in 1994 and of
a former majority shareholder, an "affiliate", in 1996 - 1997 may be deemed
statutory "underwriters" and "engaged in a public distribution" by reselling
shares. Copies of the NASD's Notice to Members No. 00-49, containing the SEC
Letter and seven examples of "blank check" shell companies, may be obtained from
the NASD Website at www.nasd.com (on the right hand side of the page click
"NOTICE TO MEMBERS"). If you do not have access to a computer or the Internet
most local public libraries provide access which you can use to obtain this
information, or call the NASD at (301) 590-6500.
</FN>
-4-
SUMMARY FINANCIAL INFORMATION
SEE DETAILS ELSEWHERE
This summary financial information should be read in conjunction with
our financial statements and notes thereto and other financial information
elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA
The following table sets forth our selected financial data for the
periods ending December 31, 2001 and 2000.
(unaudited)
NINE MONTHS ENDED YEAR ENDED YEAR ENDED
9/30/02 12/31/01 12/31/00
- -------------------------------------------------------------------------------------------------
Revenues from operations $ 9,606,445 $12,090,683 $9,862,552
Net (loss) income $(72,466) $(121,768) $3,367
Comprehensive net loss* $(66,667) $(167,909) $(23,535)
Comprehensive net income (loss) per share $ 0.00 $ (0.01) $ 0.00
Weighted average shares outstanding 22,803,058 18,301,784 12,000,000
<FN>
* Reflects currency translation from Canadian to U.S. Dollars.
</FN>
BALANCE SHEET DATA
The following table is a summary of our balance sheets:
(unaudited)
AS OF 9/30/02 AS OF 12/31/01 AS OF 12/31/00
-------------- -------------- --------------
Current assets $3,545,980 $3,291,259 $2,387,106
Working capital (deficiency) $73,832 $ (48,022) $107,661
Total assets $4,252,388 $4,580,073 $3,895,681
Total liabilities $3,633,529 $3,894,547 $3,042,246
Total stockholders' equity $618,859 $685,526 $853,435
-5-
RISK FACTORS
1INTRODUCTION; RISK OF 100% LOSS
Please carefully consider these risks. They are some of the factors
that make an investment in our securities risky. Our securities should only be
considered for purchase if you can afford the risk of losing your entire
investment. Prior to purchasing our securities, prospective investors should
carefully consider the following risk factors.
MINIMAL RECENT PROFITS/LOSSES FROM GROWING OPERATIONS
As shown in the preceding "SUMMARY" and the enclosed Financial
Statements and Notes to Financial Statements, we have had recent modest losses
and minor profits as we have emphasized increased revenues supported by what we
believe is superior customer service. There cannot be any guarantee that our
October 31, 2002 27% increase compared to 2001 year end in the backlog of sales
orders can be sustained and made more profitable than past sales.
PROPOSED STOCK SALES AND ACQUISITIONS NOT GUARANTEED
We are preliminarily negotiating, but there cannot be any guarantee as
to, growth financing by private placement stock or other securities sales and by
corporate acquisitions in the Southern United States for restricted stock (or
such sales and acquisitions may be made by registered offerings of tradable
stock), for which no agreements or understandings are yet in place.
STOCK TRADING MARKET NOT YET DEVELOPED, AND MAY FLUCTUATE; 5% ANNUAL RESALES
LIMIT TILL OCTOBER 15, 2004
Only after the Form SB-2 Registration (of which this Prospectus is Part
I) is effective (on the date at the bottom of the Prospectus cover page) can
trading occur in Alfa's stock. A pending NASDAQ trading application is expected
to be approved concurrently with such event. 10,603,058 shares are being
registered for potential resale by up to 2,068 shareholders, and it is not
possible to predict the timing and amount of resales which may occur, if any.
Heavy sales or fear of heavy sales may adversely affect prices. However, annual
resales are limited to 5%, October 15, 2002-2004, under the Stock Resale Form
(an Exhibit to the Registration), the terms of which are a condition of resale
hereunder. Thereafter, all shares may be resold. See "Plan of Distribution -
Stock Resale Form; 5% Annual Resales Limit Till October 15, 2004." If little or
no reselling occurs, Alfa will offer shares at $6.50 under its stock offering,
in small lots of 100 - 1,000 shares, to stimulate market interest and add to its
shareholder base. Any trading market and price increases, if any, which might
develop might not be sustained if investor interest is not sustained by adequate
growth in revenues and earnings per share. However, management's 53.5% stock
ownership gives it a great incentive to build a successful business and a stable
trading market. Future announcements concerning Alfa or even merely the industry
in general or its competitors, nonexclusively including quarterly variations in
actual operating results, announcements of litigation, or even changes in
earnings estimates by outside analysts, could cause the market price of Alfa's
Common Stock to fluctuate substantially. These fluctuations, as well as general
economic, political and market conditions, and events such as terrorist attacks
in Canada or the U.S., recessions, international instabilities or military
conflicts, may materially and adversely affect the market price of Alfa's Common
Stock. Alfa has a large public float of shares which may be resold, which could
adversely affect the stock price. See "MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS".
-6-
NORTH AMERICAN ELECTRICAL AND COMMUNICATIONS DEREGULATION ENCOURAGES INCREASED
COMPETITION ALONG WITH MARKET GROWTH
Deregulation of the Canadian and United States electrical and
communications industries has fostered and continues to encourage increased
competition along with market growth. Alfa believes its emphasis on low cost,
high quality, on time construction for both the municipality and the real estate
development non-road infrastructure markets makes it a strong competitor. Alfa
proposes to finance internal growth by private stock sales for cash, which are
now being discussed on a preliminary basis and which cannot be guaranteed. With
recent signs of U.S. recession recovery, Alfa also is seeking to acquire for
Alfa restricted stock, Southern U.S. utilities contractors whose operations can
be strengthened and grown as the surprisingly strong U.S. housing industry
continues to be assisted by low interest rates. Also, the obvious need for
increased U.S. electrical generation and distribution capacity invites what we
believe is the quality innovation on which Alfa management prides itself.
Nevertheless, there can be no guarantee that such acquisitions will occur or
that terrorism or other risks will not delay or reverse electrical and
communications infrastructure growth.
DEPENDENCE ON MANAGEMENT
As noted above in the "SUMMARY" and under "BUSINESS", "DIRECTORS AND
EXECUTIVE OFFICERS" and elsewhere, Alfa depends heavily on its three seasoned
senior officers to expand its business and make it profitable. Loss of their
services for any reason, especially Mr. Alfano's, could have an adverse effect
on Alfa's business and stock. The Board of Directors has not determined that it
would be useful to enter into any employment agreements or to purchase key
person life or disability insurance, but may consider such matters, or
recruitment of additional management, as circumstances warrant.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
We have made some statements in this Prospectus, nonexclusively
including some under "SUMMARY," "RISK FACTORS," "PLAN OF DISTRIBUTION,"
"BUSINESS," and elsewhere, which may constitute forward-looking statements
(estimates, projections or plans). These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results, levels
of activity, performance or achievements to be materially different from any
expressed or implied by any forward-looking statements. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "could," "intends," "plans," "anticipates," "believes," "estimates,"
"predicts," "seeks," "potential," or "continue" or the negative of these terms
or other comparable terminology. We do not intend to update any forward-looking
statements except as required by law.
-7-
USE OF PROCEEDS
Alfa's gross proceeds upon sale of 500,000 shares by it would be
$3,250,000 (maximum, no minimum) before offering related expenses. (See "PLAN OF
DISTRIBUTION" herein.) Alfa will use proceeds (if any) from sale of its shares
for general working capital purposes to support its expanding business,
nonexclusively including financing receivables by paying the labor and materials
costs for increased sales and construction activities. As noted above, we are
pursuing preliminary discussions for possible private (or registered) placements
of debt or equity securities for cash sales and corporation acquisitions to
finance continued growth in operations. The timing, prices and other terms of
such securities and their sale cannot be predicted but may be substantial. Only
selling shareholders will receive the proceeds of any sale of their shares.
DETERMINATION OF OFFERING PRICE
Alfa is offering up to 500,000 shares at $6.50. If little or no resale
of shares by the selling shareholders occurs, Alfa will be making this stock
offering in small lots of 100 - 1,000 shares to stimulate market interest and
add to its shareholder base. The price was arbitrarily determined by Alfa in
view of its intended but not guaranteed private placements of securities for
operational financing and one or more corporate acquisitions of Southern U.S.
utilities contractors. It is not based on book value, earnings or any other
established criteria of value. It is not possible to predict the effects, if
any, on Alfa's equity or earnings that may result if its private (or registered)
placement intentions are successfully implemented. This registration primarily
is for resales (if any) by shareholders other than Joseph Alfano, Alfa's 53.5%
shareholder and President. Sellers and buyers will determine the prices in any
such resales. There is no established public market for the Common Stock and
there can be no guarantee that one will develop or be sustained, or that prices
will be stable. However, Mr. Alfano's holdings and Alfa's intent to make one or
more private (or registered) placements to promote its growth, provide a great
incentive to develop a strong, stable market by increasing earnings and
sustaining investor interest in Alfa. Alfa may hire one or more public relations
firms and/or a market maker to assist it in attracting potential investors to
support a trading market, but no guarantee can be given that such parties can be
retained or will be successful. An agreement is being negotiated with a public
relations firm, coordinated by Alfa's financial consultant firm, and it is
expected that the broker dealer submitting the NASDAQ Bulletin Board Form 211
quotation application will act as market maker or assist in retaining one. See
"Plan of Distribution - Possible Use of Broker Dealers to Sell Shares."
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock.
We presently intend to reinvest earnings to finance operations and to develop
and expand our business. Therefore, we do not anticipate paying cash dividends
on our Common Stock in the foreseeable future. The declaration of cash dividends
in the future will be at the discretion of our Board of Directors and will
depend upon our earnings, capital requirements and financial position, general
economic conditions and other pertinent factors.
DILUTION
Alfa's net tangible book value per share consists of its total tangible
assets ($4,580,073) minus its total liabilities ($3,894,547), divided by the
total number of shares of Common Stock outstanding including shares issuable
upon conversion, etc. (26,803,058). Thus, as of December 31, 2001, we had a net
tangible book value of $685,526 or about $0.026 (2.6 cents) per share.
-8-
The 16,200,000 shares beneficially owned by Alfa's President Joseph
Alfano (including 4,000,000 shares issuable on conversion), were acquired for
approximately $.08 (8 cents) per share.
Accordingly, buyers purchasing shares at prices above such levels may
be deemed to incur dilution to the extent of such excess. If 500,000 shares are
sold by Alfa at $6.50, net tangible book value would increase to about $0.15 (15
cents) per share, creating appreciation in the value of all existing
shareholders' shares (including Mr. Alfano) to the extent of about 7 cents per
share.
SELLING SECURITY HOLDERS
The stockholders list as of November 15, 2002 shows 2,068 shareholders
other than Alfa's President and 53.5% shareholder, Joseph Alfano. Their holdings
range from 34 shares (nil %) to 750,000 shares (3.29%). They hold a total of
10,603,058 shares, 46.5% of the 22,803,058 shares outstanding, not counting
4,000,000 shares issuable to Joseph Alfano upon conversion as described under
"MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS - - CONVERSION
OPTION". It is not possible to predict whether or when any shareholders will
choose to resell shares, or the number to be sold. None of such shareholders is
known to have had any position, office or other material relationship with Alfa
or its affiliates except Edward M. "Ted" Slessor, Alfa's former President and
former majority shareholder. In 1996 - 1997, due to health reasons and his
failure to achieve his financing goals for the Company, Mr. Slessor gave away
most of his shares to approximately 30 current and former employees, friends and
suppliers in amounts up to 750,000 shares. Because he had misplaced one or more
certificates, some certificates were not delivered until up to May 2001.
Set forth below are the names and amounts owned by 16 shareholders
holding 228,031 or more shares, which is one percent (1%) of the outstanding
stock.
NAME SHARES PERCENT
Ulty Alfano 750,000 3.29%
Belmont Management Services 300,000 1.32%
Dave Boyett 650,000 2.85%
Leo Di Paoil 750,000 3.29%
Marlo Fregona 650,000 2.85%
Interlock Steel Structures, Inc. 475,000 2.08%
Terri Linseman 475,000 2.08%
Cathy Murdock 500,000 2.19%
Steven Parker 450,000 1.97%
Eloi Raposa 450,000 1.97%
Frank Ricci 750,000 3.29%
Derek Rishke 425,000 1.86%
M. Rishke 750,000 3.29%
Tyson Rishke 450,000 1.97%
Glancario Sanbro 600,000 2.63%
Edward M. Slessor 650,106 2.85%
- --------------------------------------------------------------------------------
16 Shareholders 9,075,106 39.78%
Shares (39.80% w/o rounding)
-9-
The foregoing shareholders with the same last name are not listed at
the same address or even in the same city.
Cede & Co., a broker dealer nominee, holds six certificates issued from
October 13, 1998 to March 13, 2002 in amounts from 34 to 120,688 shares totaling
231,366 shares (1.02%). Alfa has no reason to believe that all shares might be
owned by one person.
PLAN OF DISTRIBUTION
PROSPECTUS INFORMATION AVAILABLE
We may advise prospective investors that our Registration Statement,
including this Prospectus, and updated reports, are available on the SEC Website
at http://www.sec.gov. Notices of the offering and how to get a Prospectus may
be posted on an Alfa Website if established (not presently planned), or in
selected newspapers and other publications, and may be sent to interested
parties by mail. These notices will be in the "tombstone" form permitted by Rule
134 under the Securities Act of 1933 and in accordance with SEC Release No.
33-7856.
No person, individual or group has been authorized to give any
information or to make any representations in connection with resales other than
those contained in this Prospectus. Any information or representations not in
the Prospectus must not be relied on as having been authorized by our officers
or us. This Prospectus is not an offer to sell, nor a solicitation of an offer
to buy, any of the securities it offers, to any person in any jurisdiction in
which that offer or solicitation is unlawful. Neither the delivery of this
Prospectus nor any sale shall, under any circumstances, create any implication
that the information in this Prospectus is correct as of any date later than the
date of this Prospectus.
NO MINIMUM OFFERING AND NO ESCROW ACCOUNT FOR ALFA'S SHARES AT $6.50
There is no minimum offering amount that is required to be sold before
we may use the proceeds of Alfa's offering. Funds tendered by prospective
purchasers will not be placed in escrow, but will be available for use by us
immediately upon acceptance, for the purposes and in the amounts estimated in
"USE OF PROCEEDS."
SELF UNDERWRITING BY ALFA
This Prospectus includes a direct offering by us of shares at $6.50 as
shown on the Prospectus cover page. There is no underwriter for this offering.
Therefore, you will not have the benefit of an underwriter's due diligence
efforts which would typically include the underwriter being involved in the
preparation of information for disclosure and the pricing of the securities
being offered as well as other matters. Alfa's officers have virtually no
experience in the public sale of stock. Accordingly, there can be no guarantee
as to the number of shares that may be sold or the amount of capital that may be
raised by this offering.
-10-
No person or group has made any commitment to purchase any or all of
our securities being offered. We have not been advised by any of our officers,
directors, or current shareholders of their intention to purchase any shares
from Alfa. If they do purchase shares, it will be at the same terms as offered
to the public. Our President, Joseph Alfano, and/or our Vice President, Robert
Simone, will work diligently to find purchasers for our securities. We cannot
state at this point how many shares will be sold. This offering will begin as
soon as practicable after this registration statement becomes effective and will
continue through 2002.
Although it is not our present intention, other officers and directors
may agree to assist us in the sale of our securities in the future. We will
reimburse our officers and directors for expenses incurred in connection with
the offer and sale of our shares: however, no sales commissions will be paid to
them. They will be relying on Rule 3a4-1 of the Securities Exchange Act of 1934
as a "safe harbor" from registration as a broker dealer in connection with the
offer and sales of the shares. In order to rely on such "safe harbor" provisions
provided by Rule 3a4-1, an officer or director must be in compliance with all of
the following:
|X| not be subject to a statutory disqualification;
|X| not be compensated in connection with such selling participation by
payment of commissions or other payments based either directly or
indirectly on such transactions;
|X| not be an associated person of a broker dealer;
|X| must restrict participation to transactions involving offers and sale
of the shares;
|X| perform substantial duties for the issuer after the close of this
offering not connected with transactions in securities, and not have
been associated with a broker or dealer for the preceding 12 months,
and not participate in selling an offering of securities for any
issuer more than once every 12 months; and
|X| must restrict participation to written communications or responses to
inquiries of potential purchasers.
Our officers and directors intend to comply with the guidelines
enumerated in Rule 3a4-1.
POSSIBLE USE OF BROKER DEALERS TO SELL SHARES
As of the date of this Prospectus, we have not retained a broker dealer
for the sale of our securities. If we engage broker dealers in a selling
syndicate after the effective date of this Registration Statement, we will
furnish that information by an updated Prospectus. Before any broker dealer
could participate in the offering, it must obtain a "no objection" position on
the terms of the underwriting compensation from the NASD's Corporate Finance
Department.
Alfa may hire one or more public relations firms and/or a market maker to assist
it in attracting potential investors to support a trading market, but no
guarantee can be given that such parties can be retained or will be successful.
An agreement is being negotiated with a public relations firm, coordinated by
Alfa's financial consultant firm, and it is expected that the broker dealer
submitting the NASDAQ Bulletin Board Form 211 quotation application will act as
market maker or assist in retaining one. The public relations firm is Mediacomm
Marketing International, Inc., PO Box 727, Indian Hills, Colorado. It is being
asked to provide public relations services, develop a company logo, prepare
correspondence and review Alfa's website. Its compensation is intended to be
paid out of shares given to Alfa's financial consulting firm, Belmont Management
Services, Inc., which is one of Alfa's selling shareholders, and due upon the
effectiveness of the Form SB-2 registration. Alfa expects to release the 5%
resale restriction on the public relation firm's shares when its work is
complete (or as it is completed.) Alfa's Form 211 NASDAQ Bulletin Board
quotation application was submitted by Equitrade Securities Corp. of Pacific
Beach, California, an NASD Member Firm (licensed broker dealer). It is expected
and generally understood that Equitrade may act as a market maker, but no firm
contractual agreement or compensation terms have been agreed upon. The market
maker is not participating in the issuer (Alfa) managed offering being made by
this Prospectus, but rather will provide customary market maker services to
facilitate an orderly and stable resale market for existing shareholders. It may
sell shares for them under this Prospectus for a discount or commission of not
over 8%. The market maker may also be retained by Alfa on a cash compensation
basis under an investment banking or other agreement to render particular
financial consulting services as needs arise. However, no such arrangements have
been negotiated, pending effectiveness of the SB-2 registration and the Form 211
trading quotation application, and the need for such services as trading begins
to develop. The public relations and broker dealer assistance has been
coordinated by Belmont, which was retained to coordinate activities related to
registering Alfa's shares with the Securities and Exchange Commission and
becoming a public company. Belmont's compensation consisted of 300,000 shares of
common stock which were given to Belmont by the former majority shareholder of
Alfa when it was named Envirotech Mfg. Co., Edward M. Slessor, who originally
had retained Belmont to market Envirotech as a "shell company" to acquire a new
business.
-11-
HOW TO SUBSCRIBE FOR SHARES
To subscribe for the shares, you must complete, date, execute and
deliver to us the Subscription Agreement (inside the back cover of this
Prospectus) and pay the purchase price of the shares subscribed for by check,
money order, wire transfer, credit card, or electronic check payable to Alfa
Utility Services, Inc. We reserve the right to reject any subscription in part
or in its entirety or to allocate shares among Prospective investors. If any
subscription is rejected, funds received by us for the subscription will be
returned to the subscriber without interest or deduction. Within five business
days of our receipt of a Subscription Agreement accompanied by payment of the
purchase price, we will send written confirmation to notify the subscriber of
the extent, if any, to which the subscription has been accepted by us.
REGISTRATION EXPENSES
Alfa is paying the expenses of the SEC registration of all the shares
covered by this Prospectus, totaling approximately $114,542.47. For details, go
to the SEC Website at http://www.sec.gov, or contact Alfa, for a copy of ITEM 25
"OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION" in Part II of the Form SB-2
Registration Statement of which this Prospectus is Part I.
SELLING SHAREHOLDER "UNDERWRITER" STATUS; PROSPECTUS DELIVERY REQUIREMENT
As indicated on the Prospectus cover page, all shareholders as of the
date of this Prospectus who resell such shares may be deemed to be statutory
"underwriters" (as defined in Securities Act of 1933 Section 2(11)) and "engaged
in a public distribution". Accordingly, Alfa intends to mail a Prospectus to
each shareholder. Each should review it carefully and deliver it to any broker
dealer engaged to sell stock or to any buyer in a direct sale. Selling
shareholders and certain broker dealers are required to deliver a Prospectus 48
hours prior to confirming sales. See the back cover page of the Prospectus.
Additional copies of the Prospectus may be printed by accessing it on the SEC
Website at http://www.sec.gov, or it may be obtained by writing or
calling/faxing Alfa as shown in the "SUMMARY" herein. See "SELLING SECURITY
HOLDERS" above for information as to the largest shareholders, the amounts
owned, and any relationships with Alfa.
STOCK RESALE FORM; 5% ANNUAL RESALES LIMIT TILL OCTOBER 15, 2004.
Annual resales are limited to 5%, October 15, 2002-2004, under the Stock Resale
Form (an Exhibit to the Registration), the terms of which are a condition of
resale hereunder. Thereafter, all shares may be resold. Other (non-signing)
shareholders' shares may not be offered for resale directly by shareholders
unless Alfa releases the restrictions placed with the Transfer Agent, but may
(or may not) be repurchased by the registrant. Such repurchase would be made at
the lower of the current market price or the current offering price, which may
be discounted by the registrant's determinable actual pro-rata repurchase costs
and, if the shares are intended to be resold hereunder, the pro-rata resale
costs. Shares not intended to be resold or to be maintained on a Rule 415
"shelf" registration, will be deregistered. The Transfer Agent, Olde Monmouth
Stock Transfer Co., 77 Memorial Parkway, Suite 101, Atlantic Highlands, NJ
07716, phone (732) 872-2727, fax -2728, is being given a list of shareholders
signing the Stock Resale Form and permitted to resell 5% per year of their
shares, October 15, 2002-2004, and thereafter all. The Transfer Agent also is
being advised of the SEC Staff January 21, 2000 Interpretive Letter to the NASD
described in the NASD Notice to Members No. 00-49
(www.nasd.com/regulation/publications and notices), which effectively revokes
the free trading status of all unregistered shares of "blank check" companies.
Thus, the Transfer Agent is being instructed to stop transfer of shareholders
not signing the Stock Resale Form, absent a legal opinion, satisfactory to
Alfa's legal counsel.
SUGGESTED SELLING SHAREHOLDER UNDERWRITING COMPLIANCE PROCEDURES
Except as indicated under "SELLING SECURITY HOLDERS" none of the
shareholders is known to Alfa to be a broker dealer or to have any experience in
the distribution of securities or to have any material relationships with Alfa.
Alfa is not aware of any intent by a shareholder to engage in passive market
making transactions as permitted by Rule 10b-6A under the Securities Exchange
Act of 1934 or in stabilization or other transactions affecting the market
price. We are not aware of any intent by our officers, directors or principal
shareholders to purchase shares from selling shareholders.
-12-
It is suggested to selling shareholders that, to avoid technical
violations of underwriting regulations, they should observe the Prospectus
delivery requirement described above and on the back cover of the Prospectus, as
well as the following suggested procedures, and also consult legal counsel.
These suggestions do not constitute legal advice nor any representation or
warranty that these are necessary or sufficient to comply with, or avoid
enforcement action (civil or criminal) for alleged violations of, any type of
law. Shareholders engaging in any direct or indirect transactions of any nature
as to any of Alfa's securities do so at their own risk and expense. All sales
should be conducted through broker dealers, who should be given a copy of the
Prospectus and advised of the SEC and NASD position that such sales may be
deemed to be part of a "public distribution" by statutory "underwriters"
(selling shareholders). No purchases of shares or other transactions having the
purpose or effect of affecting the price should be engaged in by or on behalf of
shareholders before or after the sale. Alfa's public reporting status (upon its
Form 10-SB Registration No. 0-49694 becoming effective on May 14, 2002) should
be brought to the brokers' or dealers' and buyers' attention. Updated
information about Alfa will be in its reports to the SEC at http://www.sec.gov.
See "AVAILABLE INFORMATION" near the end of the Prospectus, for further details
on how to obtain copies of such reports.
Although isolated resales often are exempt from state "blue sky"
securities regulation and registration requirements, and the reporting company
status of an issuer (such as Alfa on May 14, 2002) broadens the availability of
resale exemptions, selling shareholders should be cautious in view of their
"underwriter" status in the eyes of the SEC and NASD. They are urged to consult
qualified local securities counsel. Alfa is not undertaking, and it will be the
selling shareholders' responsibility, to file any necessary state exemption,
qualification, or registration statements or notices (such as Form U-1) and
offering documents (such as this Prospectus) if needed for resales in a
particular state.
PENNY STOCK STATUS WHILE PRICE IS UNDER $5
The SEC has adopted regulations which generally define a "designated
security" (sometimes referred to as a "penny stock") to be any equity security
that has a market price of less than $5 per share or an exercise price of less
than $5 per share. As a result, our Common Stock (while trading under $5) is
subject to rules that impose additional sales practice requirements on broker
dealers.
If and when a market develops, our Common Stock (while trading under
$5) will be considered a "penny stock," or "designated security" as the term is
defined by Rule 3a51-1 under the Securities Exchange Act of 1934. This makes our
securities subject to reporting, disclosure and other requirements for a broker
or dealer to do the following in connection with transactions in penny stocks.
Prior to the transaction the broker or dealer must:
o approve the person's account for transactions in penny stocks by
obtaining information from the person regarding his or her financial
situation, investment experience and objectives
o reasonably determine, based on that information, that transactions in
penny stocks are suitable for the person, that the person has
sufficient knowledge and experience in financial matters, and that the
person or his or her independent advisor reasonably may be expected to
be capable of evaluating the risks of transactions in penny stocks
o deliver to the person a written statement setting forth the basis for
the determination and advising, in highlighted format, that it is
unlawful for the broker or dealer to effect a transaction in a penny
stock unless the broker or dealer has received a prior written
agreement from the person
-13-
o receive a manually signed and dated written agreement from the person
in order to effectuate transactions in a penny stock.
After the penny stock agreement is signed, the broker or dealer must:
o disclose to the customer the inside bid quotation for the penny stock
and, if there is no inside bid quotation or inside offer quotation, he
or she must disclose the offer price for the security transacted for a
customer on a principal basis unless exempt from doing so under the
rules.
o disclose the aggregate amount of compensation received or to be
received by the broker or dealer in connection with the transaction,
and the aggregate amount of cash compensation received or to be
received by any associated person of the broker dealer, other than a
person whose function is solely clerical or ministerial.
o unless exempted by the rules, send to the customer a written statement
containing the identity and number of shares or shares of each such
security and the estimated market value of the security.
Brokers or dealers may be discouraged from dealing in penny stocks, due
to the additional time and responsibility involved, and as a result, while
Alfa's stock is trading under $5, the Penny Stock Rule may have a deleterious
effect on the market for our securities. Some states have similar rules, as
well. Sellers and their broker dealers should consult local legal counsel in the
states where they intend to sell if the stock price is $5 or less.
BUSINESS
CORPORATE STRUCTURE
Unless otherwise indicated herein, the information set forth herein
reflects the closing of the transactions effectuated between the close of
business on May 31, 2001 and the opening of business on June 1, 2001 by the
Amended Assignment of Stock and related Amended Consent of Directors and Amended
Option Agreements, which are further described below, and are filed as EXHIBITS
to the Registration Statement of which this is a part. Thus, all references
herein to "ALFA", "WE" (or "US" or "OUR"), or the "REGISTRANT" or the "COMPANY",
which is Alfa Utility Services, Inc. (Delaware), also include the assets,
liabilities and operations of its subsidiary, Alfa Utility Services, Inc.
(Canada), and that subsidiary's subsidiary, Ontario Power Contracting Limited
(Ontario).
Alfa's corporate structure expressed in a tabular listing format is as
follows:
PARENT COMPANY (REGISTRANT):
- ---------------------------
Alfa Utility Services, Inc., a Delaware Corporation
corporate offices and operational headquarters are at:
396 Chrislea Road
Woodbridge, Ontario Canada L4L 8A8
Phone (905) 850-2220, Fax -9152
SUBSIDIARY OF ALFA UTILITY SERVICES, INC. (DELAWARE):
Alfa Utility Services Inc., a Canadian Corporation
SUBSIDIARY OF ALFA UTILITY SERVICES INC. (CANADA):
Ontario Power Contracting Limited, an Ontario Corporation
-14-
GENERAL DEVELOPMENT OF BUSINESS AND OVERVIEW OF THE COMPANY
DELAWARE INCORPORATION AND PRIOR CANADIAN OWNERSHIP.
Alfa was incorporated in the United States under the laws of the
State of Delaware on December 15, 1994 as Triad Instrument Co. Inc. ("TRIAD").
Triad was formed through a corporate reorganization of Indento Research Corp.
("INDENTO") with Morris Diamond as the President. Each shareholder of Indento
received shares in the newly formed company, Triad. The shareholders of Indento
contributed shares of common stock of several closely held companies. In
addition, the out of pocket costs of incorporating Triad were paid by the
shareholders. On or about June 7, 1995, 90% of the stock of Triad (the Company)
was acquired for $75,000 (negotiated at arms length) by Edward M. Slessor, a
Canadian citizen and resident, to provide a means to seek financing for his
patented window and door manufacturing process.
After the sale, Mr. Diamond's management was replaced by Mr. Slessor
and substantially all (90%) of Triad's stock was transferred to Mr. Slessor.
Triad's name was changed on August 30, 1995 to Envirotech Mfg. Corp.
("ENVIROTECH"). As noted above, Slessor owned and operated a window
manufacturing business with specialized patents. It was his intention to file
for trading of the stock in order to help Envirotech (the Company) raise funds
and expand the business. However, with the economy changing, Slessor did not
raise the expansion funds and the stock remained non-trading. In ill health, he
then gave away most of his shares (approximately 9,484,370, retaining 650,106)
to employees, suppliers and friends. See "MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS".
ONTARIO POWER ACQUIRED IN RECAPITALIZATION; ALFANO TOOK CONTROL OF COMPANY.
For over 13 years Joseph Alfano had been the principal manager of
Ontario Power Contracting Limited, located in Woodbridge, Ontario Canada and
holder of control of its two former corporate shareholders. By Amended Consents
of Directors and Shareholders, an Amended Assignment of Stock and Amended Option
Agreements effective between the close of business on May 31, 2001 and the
opening of business on June 1, 2001, all of the Common Stock of Alfa Utility
Services Inc., a Canadian corporation with a wholly owned Ontario corporation
subsidiary, Ontario Power Contracting Limited, was acquired in exchange for
12,000,000 shares of legended (transfer restricted) Common Stock of Envirotech
(the Company) and an Option for 4,000,000 restricted shares in conversion of
Alfa Canada's Class A Preference Shares held by the two former corporate
shareholders. The transaction has been accounted for as a recapitalization,
resulting in the historical operations of Ontario Power Contracting Limited
being deemed to be the historical operations of Alfa. Thus, control of the
Company was transferred to Joseph Alfano, a citizen and resident of Canada.
Prior officers and directors of Envirotech were replaced by Alfano and other
persons who had no past relationships with the stockholders or prior directors
and officers of Envirotech. Alfano also contracted to buy 200,000 additional
shares of Alfa stock.
NAME CHANGE, STOCK CAPITALIZATION.
Effective upon filing a Restated Certificate of Incorporation on June
1, 2001 the Company changed its name to Alfa Utility Services, Inc. and
authorized a capitalization of 50,000,000 shares of Common Stock, par value
$.001, of which 22,803,058 shares are issued and outstanding. SEE "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT," and "DESCRIPTION OF
SECURITIES" herein, and "RECENT SALES OF UNREGISTERED SECURITIES" in Part II of
the Registration Statement.
-15-
DURATION AND TYPES OF BUSINESS.
Alfa Utility Services Inc.'s wholly owned subsidiary, Ontario Power
Contracting Limited, has been in full operation since November 1988. It designs,
constructs, refurbishes and maintains utility systems, installs underground
electrical, water, gas and sewer lines, and installs street lighting, as well as
traffic control and other communications systems. Alfa pursues a goal of
providing superior quality utility systems and electrical services, specializing
in total electrical utility solutions. Over the last few years, Alfa's senior
management has seen a strong growth in the development of its product lines.
COMPETITIVE ADVANTAGES.
Alfa has sought to provide customer support excellence by competitive
prices, meeting deadlines, and offering attractive lead times. Alfa intends to
expand its role as a speciality service provider in the construction of utility
systems, focusing on products, services and complete systems in targeted
markets, seeking to deliver innovation and reliability.
DESCRIPTION OF OPERATIONS
BUSINESS CATEGORIES.
Alfa Utility Services, Inc. is a full service utilities construction,
management and services company. Alfa has a clearly defined market niche,
concentrating on electrical utilities, communications, natural gas pipelines,
sewer and waterworks distribution systems.
PRINCIPAL SERVICES AND MARKETS.
Alfa generates revenues by:
Installation of underground electric distribution systems (primary,
secondary and streetlights) for residential developments.
Reconstructing and rehabilitating outdated or damaged portions of a
Public Utility's primary and secondary distribution systems.
General civil/electrical and maintenance work for existing power
producers and energy service providers.
Installation of new underground communications distribution systems
(such as traffic lights, telephone, cable TV, fiber optics, etc.).
Installation of natural gas, waterworks and sewer distribution systems.
Contracting for the design and comprehensive installation in new
development sites for both developers and municipalities, of non-road
"infrastructure" - - electrical utilities, communications, natural gas
pipelines, sewer and waterworks systems.
-16-
INDUSTRY SEGMENTS.
Industry segments are not required to be described because they are not
yet material to an understanding of Alfa's business as a whole. Business
segments will be stated for three years based on classes of similar products or
services accounting for 15% or more of consolidated revenues when they or the
public stock float exceed $25,000,000 for two years (or 10% if revenues exceed
$50,000,000 in a year).
9 MONTHS ENDED
2000 2001 9/30/02
---- ---- --------------
Sales To Unaffiliated Customers $9,739,352 $12,090,683 $9,605,445
Income From Operations $123,102 $125,618 $ 39,585
Identifiable Assets $3,895,681 $4,580,073 $4,252,388
Alfa's operational subsidiary performs civil underground and overhead
construction and maintenance activities for utility companies and developers. We
are experts in joint trench solutions. "JOINT TRENCH" refers to placing more
than one utility in the same trench, such as communication wire/optical fiber,
natural gas distribution piping, and power distribution wires. This reduces the
cost per foot of infrastructure construction, because trench costs are shared,
as well as long-term maintenance costs, because trench profiles are consistent
throughout the site, and accidental cross cutting and other costs are reduced.
Alfa can install these increasingly desirable combined infrastructures.
Prior to the end of 2001, individual profit/cost centers (segments)
were not tracked and managed as such. Management has recently changed accounting
packages and we have designed the new system to account and report on the
activities of multiple profit and cost centers, in multiple geographies and in
multiple currencies. To go back in history and break down information would not
be practical.
SOURCES OF MATERIALS.
Construction materials are readily available from a variety of local,
national and international sources. There seldom is any prolonged difficulty in
obtaining supplies.
WORKING CAPITAL PRACTICES OF COMPANY AND COMPETITORS.
Described below are any practices relating to such items as any
maintenance of a significant products inventory to allow rapid delivery or a
continuous flow of goods or services; or customer returns policies; or extended
payment terms; or similar practices affecting working capital for Alfa or for
its competitors.
Working capital is managed primarily through control of accounts
receivable, inventory and accounts payables. A just-in-time inventory model and
preferred supplier payment terms have represented large sources of cash for Alfa
during the last 3-year period. As management believes little improvement is
possible regarding further control of inventory levels, a greater focus has been
placed on accounts receivable and accounts payable management.
Deregulation of the energy sector in North America has afforded Alfa
the opportunity to consider offering project-financing services as a method to
reduce DAYS SALES OUTSTANDING (DSO). Once this new service is implemented and
with aggressive collection practices, DSO results should improve. "DAYS
SALES OUTSTANDING" (DSO) is a measure of Weighted - Aged Accounts Receivables to
total annual revenue. Alfa clients are predominantly high credit quality, slow
paying clients. It is not uncommon for Municipal Utilities or Real Estate
Developers to make payments 30 to 45 days past due. Alfa seeks institutional
financing for these clients. Management expects the average days outstanding for
most financed projects to be approximately 10 days. Financing for 25% of the
projects could result in a significant drop in DSO and in related costs of
capital, viewed from the perspective of either external interest expense or loss
of return on internal working capital. The improved working capital levels in
turn will further enhance Alfa's buying power and ability to exercise prompt
payment discounts on its accounts payables, and thus boost its rate of return on
working capital.
-17-
No particular practices relating to working capital are known to have
any special effects on competitors.
DISTRIBUTION OF PRODUCTS AND SERVICES; BUSINESS NOT DEPENDENT UPON A FEW
CUSTOMERS.
Alfa obtains business by referrals or by responding to Requests For
Proposals based on its reputation, under contracts which are usually negotiated,
but sometimes on auction type bids (lowest qualified bidder).
If loss of one or more customers or affiliated groups of customers
accounting for 10% or more of revenues would have a material adverse effect on a
segment, their names and any relationships with Alfa are disclosed below.
As no single project or client has represented more than 5% of Alfa's
total revenue in any given period, there is no dependence on a specific client
or business segment.
Further, because of factors developed over the years, sudden loss of
a customer appears to be a very remote possibility, and even a large project
would be unlikely to pose a material risk of non-payment. Alfa and its
subsidiaries enjoy extremely low bad debt expenses for the following reasons:
the client base is composed of residential and commercial real estate developers
as well as municipal and provincial electrical authorities who consistently pay
their bills; and the majority of clients are required to post standby
irrevocable letters of credit as security against work performed. In the 12 year
history of Alfa's primary subsidiary only two liens were filed against clients
and in both cases full payment of accounts were made.
BACKLOG OF FIRM ORDERS.
Set forth below as of the most recent practical date compared to a year
ago, is a discussion of Alfa's backlog of firm orders, stating the portion to be
filled this year and any seasonal or other material aspects such as unfunded
government orders, or awarded contracts not yet signed.
Alfa Utility Services, Inc. currently has the largest new orders list
in its history. As of October 31, 2002, Alfa had $12,190,000 of confirmed orders
in backlog. This is up 27% compared to a $9,628,000 backlog at the end of fiscal
2001, and would indicate continued strong revenue growth in fiscal 2003. Orders
usually are fulfilled in less than a year.
The 2001 year end backlog is expected to be completed and billed in
2002. Management believes the increased backlog indicates increased acceptance
of Alfa's services in the market place.
One of management's key initiatives involves raising funds to ensure
working capital levels are adequate in coming quarters to meet the demands of
increased revenue levels, such as financing increased receivables by funding the
early stages of construction when advance draws (if any) may be insufficient to
cover all costs, and because completion payments occur after costs are paid or
after any uncovered interest and late fees are incurred.
Management also is planning expansion into additional markets where
existing Alfa clients desire the same level of service received from Alfa in the
Ontario area.
NO GOVERNMENT CONTRACTS SUBJECT TO TERMINATION OR PROFIT RENEGOTIATION.
Alfa has no material amount of business under government contracts
providing for renegotiation of profits, or termination at the convenience or
discretion of the government, or other adverse terms.
In fact, all government contracts are firm and have no provision for
termination or profit renegotiation.
-18-
BUSINESS NOT DEPENDANT ON PATENTS, TRADEMARKS, OR OTHER GOVERNMENT REGULATIONS
OR APPROVAL OR LABOR AGREEMENTS.
Alfa's business is not dependent upon intellectual property ownership
or licenses (copyrights, trademarks, patents, etc.) or government licenses,
franchises, permits or other regulations or approvals beyond those required for
all construction activities. See the discussion below regarding environmental
matters. Also, there are no significant royalty agreements or labor contracts
that materially affect Alfa's operations.
COMPETITIVE CONDITIONS.
The number of competitors for each business segment, the relative
ranking of Alfa, and the names of dominant firms, are set forth below.
In the markets where Alfa currently participates, it is the third
largest competitor. The first and second largest companies, Con Elco and
Trans-Power are related to large development companies. Alfa presently performs
services throughout southern, western and central Ontario. Alfa is an approved
utility contractor in eastern Ontario, but we have not sought work in that
region due to working capital constraints.
While other competitors exist they can be classified as indirect
because they are specialized and rely to a greater extent on one or two clients.
An example of this would be Robert Sommerville Construction. That company
performs the vast majority of its work for a small number of Natural Gas
distributors. Alfa performs similar services and given the generalist nature of
Alfa's services, a significant competitive advantage is enjoyed in the
increasingly more common joint trench civil project environment.
COMPETITIVE EXCELLENCE; MARKETS FOR EXPANSION OR ACQUISITION.
Alfa's senior executives pursue a goal of providing for superior
quality utility systems and electrical services, for total electrical utility
solutions. Alfa has sought to provide customers with support excellence by being
price competitive, meeting deadlines, and offering attractive lead times. Alfa
intends to continue in its already established role as a speciality service
provider in construction of utility systems, focusing on total turnkey utility
services in each target market. The prime goals are to have the flexibility to
respond to individual market challenges, while focusing on overall customer
service, maintaining market and product discipline, and improving output volume.
Alfa's target markets are civil infrastructure installations in
eastern Ontario, and subsequently overhead and civil installations in select
U.S. markets. Alfa is pursuing opportunities with existing clients who are
developing real estate in the United States, specifically Sarasota, Florida and
Scottsdale, Arizona. Alfa intends to acquire utilities contractors successfully
completing similar work in the target U.S. markets. To this end, Alfa has become
a member of the NUCA (National Underground Contractors Association). We have
held meetings with the Executive Director of the Florida chapter to discuss our
plans and solicit her assistance via a consulting arrangement. Such arrangement
is not expected to require any material amount of payments for consulting
services. No guarantee can be given that such service will result in a more
advantageous, or any, acquisition.
COMPANY RESEARCH AND DEVELOPMENT EXPENDITURES AND ACTIVITIES IN LAST
THREE YEARS.
Alfa Utility Services, Inc.'s research and development activities have
been restricted to methods related to performing services in a more cost
effective manner. An example would be unique trench profiles that allow for
increases in both safety and production levels. The costs of such research are
nominal, generally consisting of careful observation and analysis of procedures,
supplies and equipment, and contacting suppliers for improvements.
-19-
ENVIRONMENTAL COMPLIANCE COSTS FOR THIS YEAR AND NEXT YEAR.
Alfa handles a minimal amount of hazardous waste. All waste products
are disposed of through local waste management partners, and the costs are
nominal in relation to revenues.
NUMBER OF EMPLOYEES SHARPLY INCREASING; SEASONALITY DECREASING
As of May 2001, Alfa had a team of 76 employees, including an
administrative staff of approximately 10. By November 2002, Alfa had increased
its employee count by 34% to 102 including an administrative staff of
approximately 15. Implementing greater operating efficiencies over the past few
years, Alfa's staff previously had remained relatively constant. With the
increasing pace of business, the normally slow period of January, February and
March (due to climatic conditions) no longer is affecting operations as it used
to.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC SALES.
To date, virtually all operations have been conducted in Canada's
Province of Ontario; also neither revenues nor public stock float have exceeded
$25,000,000 for two years. Thus, no discussion is included herein as to 15% of
consolidated revenues (or 10% if revenues exceed $50,000,000 in a year) being
accounted for by either non-Canadian sales or non-Ontario Province sales.
Likewise, there is no presentation of separate financial information about the
geographic distribution of sales nor is there a separate discussion of foreign
sales dependence and risks for any business segment, because there have been
none.
BUSINESS EXPANSION AND POSSIBLE ACQUISITIONS PLANS.
Presently, Alfa operates in central, southern and western Ontario. We
are developing a plan of expansion into eastern Ontario as well as select
southern states in the United States of America, i.e. Florida and Arizona.
Expansion plans into the southern United States are in their infancy.
Alfa has identified the types of acquisition targets that represent
synergies for Alfa. For example, Alfa does not have a directional (horizontal)
boring capability and historically has outsourced this function. Entities
exhibiting these sorts of capabilities are first on the acquisition list.
Preliminary discussions of a general nature have been undertaken with a few
potential acquisition targets but no agreements in principle or understandings
as to terms have been reached orally or in writing.
In addition, Alfa has begun discussions with an overhead-contracting
firm based in the Greater Toronto Area. This firm has expressed great interest
in being acquired. Alfa management, however, has sought to proceed slowly to
allow for financing activities to bear fruit prior to commencing negotiations in
earnest.
Alfa also has entered into a preferred supplier relationship with First
Nations Power. FNP is an Aboriginal owned, Canadian company focused on
development of environmentally responsible hydropower, wind power and
cogeneration projects. FNP has agreed in principle to offer Alfa a first right
of acceptance/refusal on all work undertaken by FNP. Such arrangement (if
finalized) is not presently expected to result in a material amount of revenues
in 2002.
Further, Alfa management seeks involvement in bi-fuel conversion and
methane gas collection programs. To that end, Alfa has met with suppliers of
specialty equipment like EMCON-OWT and the methane gas project developer
Biomass. Alfa is preliminarily discussing with Biomass the possibility of
developing up to 25 methane gas sites within the next 5 years, if and when
suitable projects are located and appropriate financing is obtained. No
guarantee can be given that any such project will occur.
No guarantee can be given that any of the foregoing will result in
material revenues or earnings for Alfa.
SHORT-TERM AND MEDIUM-TERM STRATEGIES (1 TO 5 YEARS).
Alfa's overall plan is to improve its size and competitive position in
the general contracting, supply and installation of its core products and
services, with related operations entered into or acquired as customer demand
necessitates. To accomplish that in the short and medium term (1 to 5 years)
Alfa intends to pursue the following strategies:
-20-
Start the process of becoming a major participant in the entire
electrical, communications and other utilities construction markets
by taking the following additional measures:
Promote sales growth for greater economies of scale and increase the
profitability and cash flow of the existing core business in Canada's
Province of Ontario and outside Ontario where existing real estate
developer customers are taking on projects.
Build up assets by continued reinvestment of a substantial portion of
profits and cash flow.
Complete the re-engineering and the modernization of its operational
facilities at its headquarters offices, as appropriate and needed for
increased business.
Access sources of increased funding, including Canadian and U.S. debt
or equity public financing strategies.
Then, when internal and external capitalization sources are sufficient,
identify potential acquisition targets among North American electrical,
communications and other utilities contracting companies, including
U.S. operations which are compatible with Alfa. For example, Alfa will
seek companies having capabilities it needs such as directional
(horizontal) boring equipment and personnel. In that way, Alfa intends
to implement its goals for customer service and prompt delivery, in
order to generate even faster growth.
Establish broader North American market awareness of Alfa and its
business.
Plan and as needed implement market awareness of Alfa and its business
in select overseas markets.
NO SPECIFIC PRESENT ACQUISITION PLANS.
Although Alfa intends to grow through external acquisitions, we have
no understandings or agreements to make any specific acquisition at this time
except to the extent indicated above. The terms and conditions of any such
acquisition would be subject to negotiations and management's discretion, as
well as Alfa's ability to borrow funds or utilize its own debt or equity
securities to acquire business assets (or control blocks of stock) or to raise
acquisitions funding.
-21-
EXPERIENCED MANAGEMENT.
Alfa's senior management are dedicated to seeing Alfa achieve its
goals and meets its obligations to all customers, and to its shareholders and
employees. Alfa's three executive officers (ages 34-51) have a total of over 52
years of experience in their areas of expertiese. Middle level management
officers have a comparable amount of experience.
ADDITIONAL INDUSTRY DISCUSSION
PROVINCE OF ONTARIO ELECTRICAL DEREGULATION
Deregulation of the Province of Ontario energy sector commenced in 1995
with the submission of a provincially funded report calling for full wholesale
and retail competition in the Ontario energy market. Since the filing of that
white paper, Municipal Hydro Authorities have consolidated to 94 from 312.
Ontario Hydro, the single largest hydro authority in North America, was
dismantled and restructured into three operating entities. On May 1, 2002, it
was widely reported that the Ontario energy market was successfully deregulated
with all 94 MHA's now required to bill transmission and generation separately to
all clients. In addition, electrical energy resellers have been active in the
market, seeking to sign up supply contracts for all types of energy clients.
NATIONAL ELECTRICAL DISTRIBUTION VERSUS LOCAL RETAIL SELLING.
The new North American competitive electrical marketplace requires
regulated (shared national generation and distribution grid wires) and
unregulated (local retailing) business activities to be separated. This will
ensure that a competitive playing field exists and at the same time assure that
the competitive `retail' businesses are not subsidized (and
controlled/coordinated) by the semi-monopoly `wires' activities. Similar changes
have occurred and still are occurring in the communications markets.
LOCAL RETAILERS' EMERGENCE.
North American electrical utility retail activities will be separated
and absorbed into local distribution systems, meaning that local independent
distribution utilities will emerge. Each presently existing or future
distribution utility will separate their generation and power grid wires
business from electricity sales. This already has occurred in some regions and
will continue to expand.
LOCAL RETAILERS' MERGERS.
As new legislation unfolds, utilities will be free to merge with
other utilities outside their original/municipal boundaries. In Ontario Canada,
the Ontario Energy Board (OEB) will regulate these types of mergers and
acquisitions. The OEB already has received numerous applications involving
mergers, acquisitions and/or amalgamations. In the United States a similar
evolution is taking place in electrical fields and the communications industries
already have taken many of these steps.
-22-
DIRECT COMPETITORS
U.S. CONTRACTORS OFFER SOME COMPETITION.
Direct competitors are defined as contractors in the utility
distribution construction industry that offer equivalent services. Alfa Utility
Services' principal competition comes from within North America, especially from
the United States for this newly emerging electrical sales industry.
ALFA'S BUSINESS STRUCTURE.
Most of Alfa's competitors do not have what Alfa would regard as a
comparable business structure: the service network of technicians, engineers,
and installers, and the customer base, that Alfa has developed over the years.
While large competitors exist, i.e. PAR/Quanta, Aecon etc., they offer more
generalized transmission infrastructure expertise. Alfa's size and structure of
services is believed to afford it the advantage of increased flexibility as to
job scope as well as other project attributes.
GROWING MARKET WILL SUPPORT EVEN MORE COMPETITORS.
Few competitors have been able to offer the same quality of products
and services that Alfa believes is provided by its wholly owned operating
subsidiary - Ontario Power Contracting Limited. Competitors include those who
offer the same core products and services as Alfa and those who offer only some
of these products and services combined in a package, or a part of a package
with other services. The North American and Overseas Markets for utilities
construction and servicing are so large and in such an embryonic growth stage,
that there is room for any number of companies engaged in the same business as
Alfa. As demand for power grows due to new development, we anticipate that new
installation contractors will enter the marketplace. Competition will increase
and Alfa will need to continue to devote resources to the development and
maintenance of its operating facilities and systems designed to reduce costs
without sacrificing the quality of services that Alfa believes has become its
leading attribute.
-23-
ALFA'S BUSINESS RELATED RISK FACTORS
FOUR MAJOR RISKS FOR ESTABLISHED BUSINESSES.
Alfa believes the four most common risk factors for established
companies are over-pricing services, not establishing or maintaining personal
relationships with clients and potential clients in the marketplace, poor
quality of products, and poor quality of support services. Competitive pricing
and quality service are believed to be the keys which have fostered Alfa's
success. Prices open many doors, and Alfa's emphasis on quality goods and
services is what it believes keeps and develops those opportunities. Alfa's
proven track record is what it believes has generated solid client contacts at
senior management levels. Management is of the opinion that Alfa is now
strategically positioned to take advantage of the current economic climate
throughout North America.
RISK EVALUATION FOR NEW CONTRACTS.
Prior to acceptance of new contracts from new or existing clients, they
undergo a thorough feasibility study for risk factors pertaining to
environmental implications; the probability of all levels of permits being
granted, profitability, other terms, and the receipt of payments. Once Alfa's
upper management approvals are secured, the project commences.
ADHERING TO ALFA'S HIGH ENVIRONMENTAL STANDARDS.
Alfa recognizes the impact that our activities may have on the
environment. We are therefore committed to high standards of environmental care,
and continually are improving our environmental performance. Alfa aims to
constantly strengthen our environmental track record by:
Complying fully with legislation and, if possible, exceeding minimum
legal requirements.
Maintaining effective and efficient Environmental Management Systems.
Minimizing environmental risks and preventing pollution.
Reducing any adverse visual impact of operations.
Promoting the efficient use of transportation in all activities.
Managing the land sensitively and promoting nature conservation.
Informing suppliers and contractors of high environmental standards and
otherwise encouraging high standards throughout the supply chain.
SHAREHOLDERS' ENVIRONMENTAL INPUT.
Alfa also recognizes that its shareholders have a role to play in
providing input to guide Alfa's environmental affairs and help educate the staff
to conduct corporate activities in an environmentally responsible manner.
-24-
PROPERTY
Alfa's headquarters offices and operational facilities, including its
supplies warehouse, are located at 396 Chrislea Road, Woodbridge, Ontario L4L
8A8 in Canada. They total approximately 12,500 square feet, of which 3,000
square feet comprise the offices. The property is occupied under a short-term
renewable lease. Rent of $5,350 is payable each month. The lease is from an
unrelated third party. The lease expires in May 2003. It is renewable at the
option of the lessee for a 12-month period at a rental of $5,350.
Alfa's offices and services facilities were last generally refurbished
for operational efficiency in 1999. Specific improvements are and will be added
as needed for the expansion of operations. They are deemed to be suitable and
adequate for Alfa's present and proposed needs.
Alfa carries on its Balance Sheet as of October 31, 2002 depreciated
Property and Equipment totaling $489,000 most of which is contractor's equipment
and automotive equipment, accounting for approximately 24% of Total Assets. The
equipment is collateral security for Alfa's Long Term Debt (Lien Notes) and its
Demand Loan, which aggregate $290,000 at October 31, 2002. Alfa leases a
facility and contractor's equipment under leases expiring at various dates
through 2005. Operating lease rentals were $362,000 and $108,000 for the period
ended October 31, 2002 and 2001, respectively and $248,000 and $47,000 for the
years ended December 31, 2001 and 2000, respectively. Additional construction
equipment valued at $168,066 was leased in the third quarter of 2001 under
capital leases expiring in 2004. This lease was cancelled during the first
quarter of 2002. Annual rentals were $57,390. See Notes D, E, F, G, and H to the
December 31, 2001 Balance Sheet at pages F-8 to F-10.
DIRECTORS AND EXECUTIVE OFFICERS
MANAGEMENT EXPERIENCE
Information with respect to the Directors and executive officers of
Alfa is set forth below.
Unless otherwise indicated below, there are no other nominees to become
Directors of the registrant (Alfa Utilities Services, Inc., a Delaware
corporation), all Directors serve annual terms until the following annual
meeting of shareholders and their successors are elected, qualify and assume
office, and there is no arrangement or understanding with Mr. Alfano or others
for the selection of any Director or officers.
The Bylaws provide that the number of Directors shall be three (3) to
five (5), that their annual meeting shall be held without notice after and at
the same place as the annual shareholders meeting, and that other regular
meetings may be set without notice by resolution. They also provide that special
board meetings may be called by or at the request of the President or any two
Directors on seven days notice (two days by telegraph). The Bylaws provide that
the President and Secretary may not be the same person.
The Bylaws provide that special meetings of stockholders may be called
only by the President, by request of a majority of the Board of Directors, or by
the Secretary upon the written request of the holders of not less than 25% of
the shares of stock outstanding and entitled to vote at the meeting. These
provisions may make it more difficult for stockholders to take action opposed by
the Board of Directors.
All Directors and officers have served in their positions since mid -
2001 after Mr. Alfano acquired a majority of Alfa's stock. There are no family
relationships among such persons by blood, marriage or adoption, not more remote
than first cousin. There are no other key employees generally equivalent to
executive officers who make significant contributions to the business, such as
production managers, sales managers or research scientists. No Director holds a
directorship in a publicly reporting company or registered Investment Company
(or complex). None of the legal proceedings disclosable as to such persons or
control persons occurred in the last 5 years. See "LEGAL PROCEEDINGS" herein.
-25-
NAME AGE POSITION
Joseph Alfano 38 President & Chief Executive Officer, Director
Robert Simone 34 Vice President Finance, Secretary, Treasurer
and CFO, Director
Anthony Sanginesi 51 Vice President Operations & COO,
General Manager, and Director
JOSEPH ALFANO
Mr. Alfano has more than 16 years experience in infrastructure design
and construction. From 1987 to 1993, he was general manager of Maple Paving
Products Ltd., a wholly owned subsidiary of Ontario Paving Company Limited, once
one of Toronto's largest construction companies. He was responsible for design,
construction, operations and quality control of plant facilities in asphalt and
concrete manufacturing and recycling. He also was responsible for design
licensing, and operation of gravel pits. In 1988 he founded and in 1994 he took
over active management of Ontario Power Contracting Limited and set out to be a
strategic partner with Ontario Paving, offering total solutions in residential
and industrial land development servicing. Mr. Alfano has grown Ontario Power to
be known in the Greater Toronto Area as one of the "The Big Three" underground
electrical utility contracting firms. Mr. Alfano is a graduate of Ryerson
Polytechnical Institute, where his studies focused on Civil Engineering. Mr.
Alfano is a Director of the Utility Contractors Association of Ontario.
ROBERT SIMONE
Mr. Simone has more than 10 years of Finance sector experience (1990 to
2001). He enjoyed progressive roles for financial services organizations such as
Royal Bank of Canada (1992 to 1996), Toronto Dominion Bank (1996 to 1998), MCAP
Financial at Mutual Capital Corp. (commercial real estate lending) (1998),
Newcourt Credit Group at Dell Financial Services, Inc. (leasing) (1998 to 2000),
and Compaq Financial Services (2000 to 2001). As a Director of Business
Development and Sales with both Newcourt and Compaq Financial Services, Mr.
Simone was responsible for the negotiation and execution of financing agreements
with fortune 500 companies as well as large public sector entities in both
Canada and abroad. His focus has been in the areas of debt finance, lease
finance, operations, business development, and human resources management. Mr.
Simone received an MBA in his 1993 - 1997 studies at Wilfrid Laurier University,
at Waterloo, Ontario Canada, where he focused on Finance and Marketing. He also
completed his Bachelor of Arts in History and Political Theory in 1990 at the
University of Toronto.
-26-
ANTHONY SANGINESI, C.E.T.
Mr. Sanginesi has more than 26 years of experience in the electrical
utility business. He started his career as a design technician with North York
Hydro (1975 to 1980). He also enjoyed progressive roles with Markham Hydro and
the Vaughan Hydro Electric Commission. In 1987, Mr. Sanginesi held the position
of Design Supervisor - Underground Section of Markham Hydro. He was responsible
for overseeing the design and construction of all electrical plant
installations. In 1997, Mr. Sanginesi moved to Ontario Power Contracting Limited
and holds the position of General Manager. Mr. Sanginesi is responsible for
managing and overseeing day-to-day operations, contract negotiations, project
estimating and major materials purchasing. He is a member of the Ontario
Association of Certified Engineering Technicians and Technologists, and is a
Director of the Utility Contractors Association of Ontario. Mr. Sanginesi is a
graduate of Seneca College in Engineering Drafting, at Toronto, Ontario Canada.
LIABILITY LIMITATION AND INDEMNIFICATION
Alfa's Restated Certificate of Incorporation and By-Laws provide for
limitation of the liability of Directors to Alfa and its stockholders, and for
indemnification of Directors, officers, employees and agents of Alfa,
respectively, to the maximum extent permitted by the Delaware General
Corporation Law. See "INDEMNIFICATION OF DIRECTORS AND OFFICERS" herein.
EXECUTIVE COMPENSATION
For the indicated fiscal years ending December 31, the executive
officers of Alfa received cash and cash equivalent plan and non-plan
compensation for all services in all capacities to it and its subsidiaries, as
follows:
SUMMARY COMPENSATION TABLE
There were no long-term compensation awards (such as stock awards or
appreciation rights) or payouts (such as long term incentive plans). All amounts
were converted from Canadian Dollars at a rate of $1.65 CDN per USD.
NAME AND ANNUAL COMPENSATION
PRINCIPAL POSITION YEAR SALARY BONUS OTHER
- ------------------ ---- ------ ----- -----
Joseph Alfano 1999 $78,000 $0 $0
President, 2000 $78,000 $0 $0
Chief Executive Officer 2001 $78,000 $0 $0
Robert Simone 2001 $97,500 $0 $0
Secretary - Treasurer,
VP Finance and CFO
Anthony Sanginesi 1999 $65,000 $1,800 $0
VP Operations, 2000 $65,000 $0 $0
GM and COO 2001 $65,000 $0 $0
All amounts in the above table represent annual salaries. The actual
compensation paid to Mr. Simone in 2001 was $48,750.
-27-
OPTION / SAR GRANTS
In the last fiscal year there were no grants of stock options or stock
appreciation rights.
OPTION / SAR EXERCISES AND YEAR END VALUES
In the last fiscal year there were no exercises of stock options or
stock appreciation rights, and none were outstanding and unexercised at year
end.
LTIP AWARDS
In the last fiscal year there were no awards made under any long term
incentive plans.
DEFINED BENEFIT OR ACTUARIAL PLANS
There is no defined benefit or actuarial plan by which retirement or
other benefits are determined primarily by final or average compensation and
years of service. All employees of Alfa Utility Services, Inc. are offered a
standard benefits program, which includes prescription, dental and long-term
disability coverage. In addition to these benefits, Alfa matches employee RRSP
(Regular Retirement Savings Plan) contributions up to a maximum of 2% of their
base salary. The provider for this service is Sun Life Canada.
COMPENSATION OF DIRECTORS
No Director is compensated for services on the Board or a Committee or
a special assignment under standard or any other arrangements (such as
consulting arrangements), unless otherwise described herein.
NO EMPLOYMENT OR SEVERANCE ARRANGEMENTS; REASONABLE EXPENSES ARE REIMBURSED
Except as indicated above, no person has a written or oral employment
contract or severance compensation arrangement (aggregating over $500,000) for
retirement or any other termination of employment with Alfa or its subsidiaries,
or for a change in control, or for a change in responsibilities after a change
in control. Officers and Directors are reimbursed for out-of-pocket business
expenses. So long as the expenses are reasonable and accounted for to the
satisfaction of the Board of Directors, there is no predetermined limitation on
the amount which may be reimbursed.
REPRICING OF OPTIONS / SARS
In the last fiscal year the registrant, while a reporting company under
the Securities Exchange Act of 1934 Section 13(a), did not reprice (by any
means) outstanding stock options for the named executive officers.
-28-
NO BENEFIT PLANS; STOCK OPTION PLAN MAY BE ADOPTED
As indicated above, at the present time, Alfa has no option, severance,
retirement, pension, profit sharing, or similar programs for the benefit of its
employees. Alfa expects to adopt a stock option or incentive plan pursuant to
which options or shares can be granted to key employees, officers, directors and
consultants of Alfa. The number of shares and other terms have not been
determined, and will be set by the Board of Directors based on its analysis of
Alfa's need for such incentives. There currently are no issued or outstanding
options, warrants or rights granted to any Director, officer, employee or
consultant of Alfa in the nature of compensation. See "CONVERSION OPTION" under
"MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS" as to 4,000,000
shares issuable to two corporations controlled by Joseph Alfano, Alfa's
President and 53.5% shareholder (12,200,000 shares).
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Alfa's subsidiary, Ontario Power Contracting Limited, was indirectly
acquired as of the opening of business June 1, 2001 from two corporate
shareholders controlled by Joseph Alfano, who then became Alfa's President,
Director and 53.5% shareholder. All of Ontario Power Contracting Limited's stock
had been equally owned by those two corporations, which transferred it to Alfa
Utility Services Inc., a Canadian corporation, which at that time was 100% owned
by its founder, Joseph Alfano. Due to Canadian capital gains tax law, the
selling shareholders were issued Class A Preference Shares (nonvoting) of Alfa
Canada.
Then Mr. Alfano exchanged the Alfa Canada Common Shares he had received
upon forming it, for 12,000,000 shares of the registrant Alfa Utility Services,
Inc., a Delaware corporation ("Alfa").
The Alfa Canada Class A Preference Shares have an annual
noncumulative 6% dividend of $120,000 CDN($75,000 USD), a $2,000,000 CDN
($1,250,000 USD at a currency conversion ratio of $1.60 CDN to $1.00 USD)
liquidation preference, a $2,000,000 CDN ($1,250,000 USD)redemption right by the
shareholders on 30 days notice (waived until June 1, 2003), and a conversion
(exchange) option on and after June 1, 2003 for 4,000,000 Common Shares of Alfa
restricted stock. The redemption option has been permanently waived by the
shareholders. See "CONVERSION OPTION" under "MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDERS MATTERS" herein.
In the latter part of 2000, Ontario Power had made a $238,750
unsecured, non-interest bearing loan to one of those corporate shareholders,
Carmine Industries, Ltd., owned by Mr. Alfano. The loan is scheduled for
repayment by the third quarter of 2002. Mr. Alfano did not receive any
compensation relating to this loan.
Sales for the year ended December 31, 2001 and 2000 included $0 and
$123,200, respectively to Limehouse Clay Products, Ltd. (an Ontario
corporation), owned by Mr. Alfano. See Note K to the December 31, 2001 Financial
Statements.
Alfa paid management fees in the amount of $45,820 and $0 for the years
ended December 31, 2001 and 2000, respectively to a related company. Alfa's
majority shareholder and President, Joseph Alfano is the shareholder of the
related company. See Note K to the December 31, 2001 Financial Statements.
Alfa's Board of Directors has not made a formal policy determination on
related party transactions, which have been helpful to Alfa/Ontario on occasion.
If an instance of proposed advantageous dealings is presented to the Board, it
will be evaluated for fairness to Alfa. It will not be rejected simply because
it involves a related party or a potential conflict of interest. Future related
party sales or purchases also are intended to be at prices and on other terms
which are deemed fair and equitable to Alfa, and comparable to those in dealings
with unrelated parties.
-29-
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Alfa's Restated Certificate of Incorporation (the "Certificate of
Incorporation") and By-laws as amended (the "By-laws") provide for limitation of
the liability of the Directors to Alfa and its stockholders and for
indemnification of Directors, officers, employees and agents of Alfa,
respectively, to the maximum extent permitted by the Delaware General
Corporation Law ("Delaware Law").
The Certificate of Incorporation provides that the Directors are not
liable to Alfa or its stockholders for monetary damages for breaches of
fiduciary duty as a Director, except for liability (i) for any breach of the
Director's duty of loyalty to Alfa or its stockholders; (ii) for acts or
omissions not in good faith or which involved intentional misconduct or a
knowing violation of law; (iii) for dividend payments or stock repurchases in
violation of Delaware Law, or (iv) for any transaction from which the Director
derived any improper personal benefit.
The By-laws include provisions by which Alfa will indemnify its
officers and Directors and other persons against expenses, judgments, fines and
amounts paid in settlement with respect to threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
Alfa as officers, Directors or in other capacities, except in relation to
matters with respect to which such persons shall be determined not to have acted
in good faith, lawfully or in the best interests of Alfa. With respect to
matters as to which Alfa's officers, Directors, employees, agents or other
representatives are determined to be liable for misconduct or negligence in the
performance of their duties, the By-Laws provide for indemnification only to the
extent that Alfa determines that such person acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
Alfa.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons, we
are aware that, in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act of 1933 and is unenforceable.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
STOCK OWNERSHIP
The following table sets forth certain information as of the most
recent practical date, March 21, 2002, concerning the beneficial ownership of
each class of equity securities of Alfa or any parent or subsidiary corporation
with respect to (i) each person or group (defined in Securities Exchange Act of
1934 Section 13(d)(3)) known by Alfa to own beneficially more than 5% of the
outstanding shares, (ii) each of Alfa's Directors (and nominees) and executive
officers, and (iii) all Directors and executive officers as a group. Unless
otherwise indicated, each of the stockholders has sole voting and investment
power with respect to the shares beneficially owned. Common Stock of Alfa is the
only outstanding equity security so owned.
-30-
NAME AND ADDRESS NUMBER OF SHARES
OF BENEFICIAL OWNER BENEFICIALLY OWNED PERCENTAGE (1)
- ------------------- ------------------ --------------
Joseph Alfano 12,200,000 53.5 %
Director, President and CEO
396 Chrislea Road
Woodbridge, Ontario Canada L4L 8A8
Robert Simone None -0-
Director, V.P. Finance and CFO
396 Chrislea Road
Woodbridge, Ontario Canada L4L 8A8
Anthony Sanginesi None -0-
Director, V.P. Operations and COO,
General Manager
396 Chrislea Road
Woodbridge, Ontario Canada L4L 8A8
All Directors and Executive
Officers as a group 12,200,000 53.5%
___________
(1) Based on 22,803,058 shares of Common Stock issued and outstanding.
4,000,000 shares of Alfa (Delaware) Common Stock are issuable pursuant
to a conversion (exchange) option granted to the former corporate
holders of its subsidiary, Alfa (Canada), which corporations are
controlled by Mr. Alfano.
See "CONVERSION OPTION" under "MARKET FOR COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS" for information about a 4,000,000 share conversion option
held by two corporations controlled by Mr. Alfano.
CHANGE IN CONTROL ARRANGEMENTS
No arrangements are known to the registrant (Alfa), including any
pledge of stock by the registrant or any parent corporation, which could change
control of the registrant, except that it is theoretically possible, under
extremely unlikely conditions, that the majority shareholder's Common Stock
percentage of record could be diluted to 50% or less by issuance of 4,000,000
conversion shares. Also, Alfa may issue on a private, that is exempt basis, a
number of restricted (not freely transferable) or public, that is registered
(freely tradable), debt or equity securities which may include or be convertible
into Common Stock. The amount, timing and other terms of such issues for
operational funding or corporate acquisitions for growth, as to which there
cannot be any guarantee, cannot be predicted at this time, but might be
substantial. Such issuance also could and probably will dilute Mr. Alfano's
voting percentage of record below 50%. See "CONVERSION OPTION" and "POSSIBLE
PRIVATE STOCK ISSUES FOR CASH OR ACQUISITIONS" under "MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS".
-31-
DESCRIPTION OF SECURITIES
GENERAL
Alfa's authorized capitalization is 50,000,000 shares of Common Stock,
$.001 par value per share, of which 22,803,058 shares are currently issued and
outstanding. Holders of shares of Common Stock are entitled to one vote per
share on matters to be voted upon by the stockholders, to receive dividends when
and if declared by the Board of Directors of Alfa, and to share ratably in the
assets of Alfa legally available for distribution to stockholders in the event
of liquidation or dissolution of Alfa.
The Common Stock has no pre-emptive rights and no subscription,
redemption or conversion privileges. Holders of the stock do not have cumulative
voting rights, which absence means that the holders of more than one-half of the
shares voting for the election of Directors can elect all of the Directors. All
of the outstanding shares are fully paid and not liable for further call or
assessment. There are no outstanding warrants or options for the purchase of any
shares of Alfa's Common Stock, except that 4,000,000 restricted shares are
issuable as described below under "CONVERSION OPTION" in "MARKET FOR COMMON
EQUITY AND RELATED SHAREHOLDER MATTERS".
Certain provisions of the Delaware General Corporation Law ("Delaware
Law") and of Alfa's By-Laws summarized in the following paragraphs may be
considered to have an anti-takeover effect. That is, they may delay, deter or
prevent a tender offer, proxy contest or other takeover attempt that a
stockholder might consider to be in such stockholder's best interest, including
such an attempt as might result in payment of a premium over the market price of
shares held by stockholders.
DELAWARE ANTI-TAKEOVER LAW
Alfa, as a Delaware corporation, is subject to the provisions of
Delaware Law, including Section 203. In general, Section 203 prohibits a public
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years after the date of a
transaction in which such person became an interested stockholder unless: (i)
prior to such date the Board of Directors approved either the business
combination or the transaction which resulted in the stockholder becoming an
interested stockholder; or (ii) upon becoming an interested stockholder, the
stockholder then owned at least 85% of the voting stock, as defined in Section
203; or (iii) subsequent to such date, the business combination is approved by
both the Board of Directors and the holders of at least 66 2/3% of the
corporation's outstanding voting stock, excluding shares owned by the interested
stockholder. For these purposes the term "business combination" includes
mergers, asset sales and other similar transactions with an "interested
stockholder." An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within the prior three years did own) 15% or
more of the corporation's voting stock. Although Section 203 permits a
corporation to elect not to be governed by its provisions, Alfa to date has not
made such an election.
-32-
SPECIAL MEETINGS OF STOCKHOLDERS
Alfa's By-laws provide that special meetings of stockholders may be
called only by the President, by request of a majority of the Board of
Directors, or by the Secretary upon the written request of the holders of not
less than 25% of the shares of stock outstanding and entitled to vote at the
meeting. These provisions may make it more difficult for stockholders to take
action opposed by the Board of Directors.
TRANSFER AGENT
Olde Monmouth Stock Transfer Co., Inc. at 77 Memorial Parkway, Suite
101, Atlantic Highlands, New Jersey 07716, phone (732) 872-2727, fax -2728 is
the Registrar and Transfer Agent for Alfa's Common Stock.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
As of date hereof, there is no established U.S. or Canadian or other
public trading market and there cannot be any guarantee that a market will
develop and be sustained for Alfa's Common Stock, the only class of equity
securities that Alfa has authorized, issued and outstanding. There are no
options or warrants to purchase, or securities convertible into, the Common
Stock except that 4,000,000 restricted shares are issuable as described below
under "CONVERSION OPTION".
There are 10,603,058 shares (46.5%) of Alfa's outstanding stock, not
owned by Alfa's officers, Directors or over 5% shareholders, referred to as the
"public float". Most of those shares had been issued in mid-1995 to Alfa's
former major owner, Edward M. "Ted" Slessor, a Canadian. In 1996 -1997, due to
health reasons and failure of Mr. Slessor to achieve funding for operations, he
made gifts of most of his stock totalling approximately 9,484,370 shares
(retaining 650,106 shares) in amounts up to 750,000 shares to approximately 30
past and current employees, suppliers and friends.
Previously such shares now would be deemed freely tradable and
available for resale by non-affiliates after two years without conditions or
restrictions pursuant to Rule 144 and/or other exemptions under the Securities
Act of 1933, according to the terms thereof as formerly interpreted.
However, by its No. 00-49 Notice to Members (broker dealers) the
National Association of Securities Dealers ("NASD") announced a U.S. Securities
and Exchange Commission ("SEC") January 21, 2000 Interpretive Letter. The NASD
told broker dealers the SEC Letter administratively declared it would no longer
recognize the free trading status of shares issued by "blank check" (shell)
companies to founders or affiliates (such as a majority shareholder, Mr.
Slessor). The SEC therefore regards such persons and their transferees as
statutory "underwriters" and requires registration under the Securities Act of
1933 of their shares prior to resale, Rule 144 not being available despite
"technical compliance" with its exemption provisions.
All such shares are being registered by the Form SB-2 Registration
Statement of which this Prospectus is Part I, in order to comply with the SEC's
administrative position, although Alfa is not conceding that it was a "blank
check" company.
Copies of the NASD's Notice to Members No. 00-49, containing the SEC
Letter and seven examples of "blank check" shell companies, may be obtained from
the NASD Website at www.nasd.com (on the right hand side of the page click
"NOTICE TO MEMBERS"). If you do not have access to a computer or the Internet,
most local public libraries provide access which you can use to obtain this
information, or call the NASD at (301) 590-6500.
Except for the shares hereby being offered by Alfa at $6.50, no Common
Stock is being or proposed to be publicly offered by the registrant (Alfa) other
than pursuant to an employee benefit plan or dividend reinvestment plan (if and
when adopted), the offering of which could have a material effect on the market
price.
-33-
Alfa is unable to predict when or to what extent any such securities
will be sold under Rule 144 or otherwise. The availability of shares for sale or
the public sale of large amounts of Alfa's Common Stock could have a significant
adverse effect upon the market price of the Common Stock and upon Alfa's ability
to sell additional securities publicly. Annual resales are limited to 5%,
October 15, 2002-2004, under the Stock Resale Form (an Exhibit to the
Registration), the terms of which are a condition of resale hereunder.
Thereafter, all shares may be resold. See "Plan of Distribution - Stock Resale
Form; 5% Annual Resales Limit Till October 15, 2004."
Alfa has filed a Form 211 Information Statement application with the
NASD but there cannot be any guarantee that its securities will be quoted on the
OTC Bulletin Board quotation service.
Alfa may hire one or more public relations firms and/or a market
maker to assist it in attracting potential investors to support a trading
market, but no guarantee can be given that same can be retained or will be
successful. An agreement is being negotiated with a public relations firm,
coordinated by Alfa's financial consultant firm, and it is expected that the
broker dealer submitting the NASDAQ Bulletin Board Form 211 quotation
application will act as market maker or assist in retaining one. See "Plan of
Distribution - Possible Use of Broker Dealers to Sell Shares."
HOLDERS
There are approximately 2,069 stockholders of record of the Common
Stock of Alfa according to the September 14, 2002 records of Alfa's transfer
agent, Olde Monmouth Stock Transfer Co., Inc. of Atlantic Highlands, New Jersey.
DIVIDENDS
Alfa has not declared or paid dividends on its Common Stock during
the existence of Alfa and of its direct and indirect subsidiaries or predecessor
companies. Alfa intends to declare and pay dividends in the future, subject to
Alfa's achieving such net income and cash flow levels as may be established by
Alfa's Board of Directors. The actual dividends declared at the discretion of
the Board of Directors will depend on a number of factors including future
earnings, working capital requirements, and the cash flow of Alfa. As to a
subsidiary's $75,000 Class A Preference Shares dividend, see "CONVERSION OPTION"
below. The $75,000 dividend that the Class A Preference Shareholders are
entitled to is not being paid out for 2001, because the right has expired for
this year. Further, the dividend has been waived for 2002.
EQUITY COMPENSATION PLAN
The registrant has no securities authorized for issuance under any
equity compensation plan. However, the Board intends to consider a stock option
or incentive plan when conditions appear to be appropriate. The amount and terms
of such issuances cannot be determined or predicted at this time, but might be
substantial.
-34-
CONVERSION OPTION
Due to Canadian capital gains tax law, the acquisition as of the
opening of business on June 1, 2001 by Alfa Canada of its operating subsidiary
Ontario Power Contracting Limited involved the issuance to Ontario Power's two
corporate shareholders of 1,000 of Alfa Canada's Class A Preference Shares
(nonvoting). To allow future simplification of such capitalization (to
facilitate stock sales or corporate acquisitions), an Amended Option Agreement
allows the Class A conversion into (exchange for) 4,000,000 restricted shares of
Alfa Delaware Common Stock on or after June 1, 2003. Alfa's Financial Statements
reflect earnings per share on a fully diluted basis as if the 4,000,000 shares
are outstanding. Until converted, the Class A Preference Shares bear a 6%
non-cumulative dividend totaling $120,000 CDN per year (or $75,000 US at a
currency translation ratio of $1.60 CDN to $1.00 USD), and would be entitled to
a liquidation preference, or to a redemption price beginning June 1, 2003 at the
shareholder's election (on 30 or more days notice), of $2,000,000 CDN
($1,250,000 USD). The redemption option has been permanently waived by the
shareholders. Such 1,000 Class A Preference Shares (nonvoting) are held in equal
amounts by Carmine Industries, Ltd. and 815748 Ontario Limited, both Province of
Ontario corporations controlled by Alfa's majority shareholder and President,
Joseph Alfano.
POSSIBLE PRIVATE OR PUBLIC STOCK ISSUES FOR CASH OR ACQUISITIONS
Alfa may issue debt or equity securities which may include or be
convertible into Common Stock. It is intended that such issues of restricted
securities (not freely transferable) will be on an exempt, private placement
basis, but they could be made on a registered (freely tradable) basis. The
amount, timing, prices, ratios for conversion (if any), voting rights (if any),
interest rates or dividend and redemption/liquidation rights (if any) and other
terms of such issues cannot be predicted, but might possibly be substantial.
Alfa has been engaged in negotiations with possible acquisition targets in the
Southern United States, and has been indirectly approached for a possible
issuance of its stock for cash. As of November 15, 2002, discussions are in the
early stages, with no execution of letters of intent or memoranda of
understandings or similar documents, and with no oral agreements or
understandings on specific terms. There cannot be any guarantee that any of the
foregoing transactions will occur or be on favorable terms.
SHARES ELIGIBLE FOR FUTURE SALE
We have 22,803,058 shares of issued and outstanding Common Stock out
of 50,000,000 shares authorized. To the extent the shareholders are subject to
the terms of the Stock Resale Form, the 10,603,058 shares of Common Stock hereby
registered are salable to the extent of 5% per year, October 15, 2002-2004, and
then are intended and believed to be freely transferable without restrictions or
further registration under the Securities Act of 1933, except for any of our
shares purchased by an "affiliate."
"Affiliate" is defined by the Securities Act of 1933 and such status
determines whether certain shares owned by or acquired from such a person are
subject to the resale limitations of Rule 144 promulgated under the Securities
Act of 1933. Generally, shares of stock owned or acquired by officers,
directors, and over 10% shareholders, and shares acquired from them or from an
issuer in private transactions, are "restricted securities". Such securities may
be sold under Rule 144 in brokerage transactions and/or market maker
transactions, after a one year period, provided such sales comply with the Rule
144 volume limitations. Under Rule 144, sales in a three-month period are
limited to an amount equal to the greater of either one percent of our issued
and outstanding Common Stock or the average weekly trading volume of the Common
Stock during the four weeks prior to such sale. Rule 144 also permits the sale
of shares without any quantity limitation by a person who is not our affiliate
for at least three months and who has satisfied a two-year holding period.
12,200,000 shares of stock are beneficially owned by Alfa's President,
Joseph Alfano. Those shares are restricted securities under Rule 144, and have
been beneficially owned since June 1, 2001. Future sales under Rule 144 may have
an adverse effect on the market price of the shares of Common Stock.
-35-
LEGAL PROCEEDINGS
Neither Alfa, nor any of its direct and indirect subsidiaries, is a
party to, nor is the property or business of any of them the subject of, any
material pending legal proceeding or threatened governmental legal proceeding,
nor is any of their over 5% shareholders, affiliates, officers or directors, an
adverse party to (nor do they have an adverse interest in) such pending
proceedings.
LEGAL MATTERS
James R. Leone, P.O. Box 755, New Smyrna Beach, Florida 32170-0755, our
securities counsel, has passed on the validity of the Common Stock. Mr. Leone
has been advised that he is receiving 100,000 shares of outstanding stock from
E.M. "Ted" Slessor as part of Mr. Slessor's gifts to former employees, vendors,
etc. Mr. Leone rendered legal services to Alfa when it was majority owned by
Mr. Slessor and named Envirotech Mfg. Co.
EXPERTS
Rotenberg & Co., LLP, of Rochester, NY, independent certified public
accountants, have audited our financial statements to the extent and for the
periods set forth in their report. Our financial statements are included in this
Prospectus in reliance upon their report, given upon their authority as experts
in accounting and auditing.
AVAILABLE INFORMATION
We have filed with the SEC a Registration Statement on Form SB-2
relating to the securities being offered. This Prospectus, which is Part I of
the Registration Statement, does not contain all of the information included in
the Registration Statement and the Exhibits and Schedules. For further
information about us and about our securities, reference is made to the
Registration Statement, including the exhibits and schedules. Statements
contained in this Prospectus concerning the provisions or contents of any
contract, agreement or any other document referred to are not necessarily
complete. With respect to each such contract, agreement or document filed as an
exhibit to the Registration Statement, reference is made to such exhibit for a
more complete description of the matters involved.
You can review and print copies of the Prospectus, Registration
Statement, Exhibits and Schedule, as well as our future updated reports or
registrations, at the SEC Website, at http://www.sec.gov. At your request, we
will provide you, without charge, a copy of any information incorporated by
reference in this Prospectus. If you want more information, write or call us at:
Alfa Utility Services, Inc., 396 Chrislea Road, Woodbridge, Ontario L4L 8A8
CANADA. Our telephone number is (905) 850-2220 and our fax number is (905)
850-9152.
-36-
Our fiscal year ends on December 31. We will furnish our shareholders
annual reports containing audited financial statements and other appropriate
information. In addition, on May 14, 2002 we became a fully reporting
company and will file annual, quarterly and current reports, proxy statements or
other information with the SEC. You may read and copy this Prospectus, our
Registration Statements, and any reports, statements or other information we
file at the SEC's Public Reference Room in Washington D.C. You can request
copies of these documents, upon payment of a duplicating fee, by writing to the
U.S. Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, DC
20549. Please call the SEC at (800) SEC-0330 for further information on the
operation of the Public Reference Room. Our SEC filings are also available to
the public on and may be computer printed from the SEC's Website at
http://www.sec.gov.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FORWARD LOOKING STATEMENTS
Statements in this registration which are not historical facts,
nonexclusively including statements below, may contain forward-looking
statements that are subject to important factors that could cause actual results
to differ materially from those in the forward-looking statement. Such factors
nonexclusively include product demand; the effect of economic conditions; the
impact of competitive services, products, and pricing; product developments;
supply restraints or difficulties; industry regulation; the continued
availability of capital resources and financing; acts of terrorism, war or civil
unrest; and other risks set forth or incorporated herein and in Alfa's other
Securities and Exchange Commission filings. Alfa does not undertake to update
any forward-looking statement that may be made from time to time by or on behalf
of Alfa.
Alfa has not released and does not presently intend to release any
projections of revenues or net income, or other forward-looking statements,
without complying with the requirements for such statements.
INTRODUCTION TO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Effective between the close of business on May 31, 2001, and the
opening of business on June 1, 2001 pursuant to the terms and condition of an
Amended Assignment of Stock and Amended Option Agreements and Amended Consents
of Directors and Shareholders, Alfa Utility Services Inc. (a Canadian
Corporation) and its wholly owned subsidiary, Ontario Power Contracting Limited,
became wholly owned subsidiaries of Alfa Utility Services, Inc. (a Delaware
Corporation, the registrant herein, referred to as "Alfa"). That transaction has
been accounted for as a recapitalization, resulting in the historical operations
of Ontario Power Contracting Limited being the historical operations of Alfa
Utility Services, Inc. (a Delaware Corporation). Prior to the recapitalization,
Alfa Utility Services, Inc. (a Delaware Corporation) had not engaged in any form
of business activity and as a result, has no operating history. Accordingly, the
following discussion and analysis of financial conditions and results of
operations is a discussion of the historical financial performance of Ontario
Power Contracting Limited.
-37-
Alfa generates revenue by:
o Installation of the joint use underground primary, secondary and
streetlight distribution systems for residential developments
o Reconstruction and rehabilitation of parts of a Public Utility's
primary and secondary distribution systems
o General civil/electrical and maintenance work for existing power
producers and energy service providers
o Installation of new underground communications distribution systems
o Installation of natural gas, waterworks, and sewer distribution
systems
o Design and installation of electrical utilities, communications,
natural gas pipelines, sewer and waterworks systems in new development
sites for developers and municipalities
The following discussion and analysis of Alfa's financial condition and
results of operations should be read in conjunction with the financial
statements appearing below.
RESULTS OF OPERATIONS IN PERCENTAGES
The following table sets forth a statement of operations and
comprehensive income data of Alfa expressed as a percentage of sales for the
periods indicated:
THREE MONTHS ENDED NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
2002 2001 2002 2001 2001 2000
----------------------------------------------------------------------------------
PERCENTAGES PERCENTAGES
Total Sales 100.0 100.0 100.0 100.0 100.0 100.0
Total Cost of Goods Sold 88.6 89.7 88.0 90.6 86.2 88.0
--------------------------------------------------------------------------------
Gross Profit 11.4 10.3 12.0 8.4 13.8 12.0
Total Operating Expenses 7.2 8.3 11.6 9.6 12.6 10.7
--------------------------------------------------------------------------------
Income (Loss) From Operations 4.2 2.0 0.4 -0.2 1.2 1.3
Interest Expense, Net -0.2 -0.7 -0.4 -0.9 -0.7 -1.1
--------------------------------------------------------------------------------
Income (Loss) Before Income Taxes 4.0 1.3 0.0 -1.1 0.5 0.2
Provision for (Recovery of) Income Tax 2.9 -0.5 -0.8 -0.9 1.4 0.2
--------------------------------------------------------------------------------
Net Income (Loss) 1.1 0.8 -0.8 -2.0 -0.9 0.0
Other Comprehensive Income (Loss),
Net of Income Tax -0.6 -0.7 0.1 -0.4 -0.4 -0.2
--------------------------------------------------------------------------------
Comprehensive Income (Loss) 0.5 0.1 -0.7 -2.4 -1.3 -0.2
================================================================================
THREE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2001
SALES
Sales for the three months ended September 30, 2002 increased
$247,000 or 6% to $4,055,000 from $3,809,000 for the three months ended
September 30, 2001.
COST OF GOODS SOLD
Cost of Goods Sold for the three months ended September 30, 2002 was
$3,593,000 or 88.6% of sales as compared to $3,417,000 or 89.7% of sales for the
three months ended September 30, 2001.
The decrease in cost of goods sold as a percentage of sales is due to
better purchasing of materials and increased efficiency. In addition, Alfa is
taking advantage of just-in-time inventory as much as possible which is helping
to reduce the materials costs. In addition, there has been a change in the mix
of Alfa's business toward Natural Gas which has lower material costs and a
resulting higher gross profit.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense for the three months ended
September 30, 2002 decreased $26,000 or 9% to $283,000 from $309,000 for the
three months ended September 30, 2001.
-38-
INTEREST EXPENSE
Interest expense for the three months ended September 30, 2002
decreased $15,000 or 61% to $10,000 from $25,000 for the three months ended
September 30, 2001.
This decrease is a product of three factors; the improved management
of operating debt, the repayment of term debt and the increased use of operating
leases to finance the acquisition of debt.
Alfa has implemented cash flow forecasting models along with other
cash management practices that have reduced Alfa's dependence on bank operating
debt. These practices have permitted Alfa to finance increased revenues and
accounts receivable with reduced dependence on bank lines of credit.
PROVISION FOR INCOME TAXES
The provision for income taxes has increased $96,000 to $117,000 for
the three months ended September 30, 2002 from $21,000 for the three months
ended September 30, 2001 due to the adjustment to deferred taxes related to
accounts receivable and fixed assets.
NET INCOME
The net income for the three months ended September 30, 2002
increased $15,000 to $44,000 from $29,000 for the three months ended September
30, 2001. The main factors contributing to this was an increase in gross profit
of $70,000, a decrease is general and administrative expense of $26,000 and a
decrease in interest of $15,000 offset by an increase in the provision for
income taxes of $96,000.
NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED WITH NINE MONTHS ENDED
SEPTEMBER 30, 2001
SALES
Sales for the nine months ended September 30, 2002 increased
$1,128,000 or 13% to $9,605,000 from $8,478,000 for the nine months ended
September 30, 2001.
Sales growth was driven by increased activities in the Residential
Subdivision-Servicing group with an increase in revenue of $1.1 million in 2002
over 2001. The growth is attributed to management's focus on quality service.
This focus on quality has strengthened relationships in the client community
which in turn has resulted in increased business for Alfa. In addition to
improved volume generated by the aforementioned group, the Natural Gas group
increased capacity in the second quarter of 2001 to allow for the complete
internal fulfillment of gas infrastructure requirements. Historically, Ontario
Power had jointly bid on projects and contracted out the natural gas portion.
Management expects the volume of revenue obtained from the Natural Gas group to
grow in importance and represent 10% of Alfa's gross volume by the end of 2002.
Previously, this group represented less than 3% of Alfa's volumes as the natural
gas portion was contracted out to other companies. This group had an increase in
revenue of $560,000 in 2002 over 2001.
-39-
COST OF GOODS SOLD
Cost of Goods Sold for the nine months ended September 30, 2002 was
$8,456,000 or 88.0% of sales as compared to $7,678,000 or 90.6% of sales for the
nine months ended September 30, 2001.
The decrease in cost of goods sold as a percentage of sales is due to
better purchasing of materials and increased efficiency. In addition, Alfa is
taking advantage of just-in-time inventory as much as possible which is helping
to reduce the materials costs. In addition, there has been a change in the mix
of Alfa's business toward Natural Gas which has lower material costs and a
resulting higher gross profit.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense for the nine months ended
September 30, 2002 increased $289,000 or 37% to $1,077,000 from $788,000 for the
nine months ended September 30, 2001.
This increase in general and administrative expense is mainly a
result of increased spending in a number of areas. Office salaries increased
$110,000 to accommodate the growth in sales which began in 2001. In conjunction
with that, related office expenses related to the increased staffing increased
$24,000. Insurance expense increased $31,000 due to the need for more insurance
to cover the growth of Alfa since the prior year. Management fees paid to Alfa's
President increased $45,000 in 2002 as no fees paid in the first six months of
2001. Professional service fees increased $48,000 due to the costs associated
with the registration of Alfa's securities with the Securities and Exchange
Commission.
INTEREST EXPENSE
Interest expense for the nine months ended September 30, 2002
decreased $36,000 or 48% to $40,000 from $76,000 for the nine months ended
September 30, 2001.
This decrease is a product of three factors; the improved management
of operating debt, the repayment of term debt and the increased use of operating
leases to finance the acquisition of debt.
Alfa has implemented cash flow forecasting models along with other
cash management practices that have reduced Alfa's dependence on bank operating
debt. These practices have permitted Alfa to finance increased revenues and
accounts receivable with reduced dependence on bank lines of credit.
NET LOSS
The net loss for the nine months ended September 30, 2002 decreased
$93,000 to $72,000 from $165,000 for the nine months ended September 30, 2001.
The main factors contributing to this increase was an increase in gross profit
of $349,000 and a decrease in interest expense of $36,000, offset by an increase
in general and administrative expenses of $289,000.
CAPITAL RESOURCES AND LIQUIDITY
Alfa's cash flow provided by operations was $90,000 for the nine
months ended September 30, 2002 and cash flows used by operations was $38,000
for the nine months ended September 30, 2001. The increase is due to a decrease
in the net loss, an increase in prepaid expenses, an increase in accounts
payable and accrued expenses and an increase in deferred taxes. This was offset
by an increase in accounts receivable and inventories.
-40-
Cash provided by investing activities was $308,000 for the nine
months ended September 30, 2002. Cash used in investing activities was $141,000
for the nine months ended September 30, 2001. The increase in cash provided is
due to the fact that there were lower purchases of property, plant and equipment
and higher proceeds from sales of property, plant and equipment in 2002.
Cash used in financing activities was $395,000 for the nine months
ended September 30, 2002. Cash provided by financing activities was $212,000 for
the nine months ended September 30, 2001. The change is due to net repayment on
borrowings in the nine months ended September 30, 2002 and net borrowings in the
nine months ended September 30, 2001.
Property, plant and equipment, net has decreased from $1.1 million at
December 31, 2001 to $0.5 million at September 30, 2002 and long-term debt has
decreased from $0.5 million at December 31, 2001 to $0.1 million at September
30, 2002 due to the sale-leaseback of equipment during the nine months ended
September 30, 2002.
Alfa generally does not maintain cash balances as all funds are
currently being reinvested into Alfa to continue to grow the Company. Alfa
currently has a Revolving Demand Loan in the amount of the lesser of $1 million
(CDN) or 80% of the receivables value, as defined in the credit agreement (of
which $266,125 was outstanding as of September 30, 2002). The loan bears
interest at the prime rate plus 1%. Alfa also must pay an administration fee of
$50 monthly.
The demand loan is renewable yearly. Interest only is payable monthly
on the demand loan. The demand loan is secured by all assets of Alfa, various
insurance policies and a personal guarantee of one of the directors of Alfa.
The demand loan contains various covenants pertaining to the
maintenance of net worth, direct borrowings, leverage and liquidity
requirements. At September 30, 2002, Alfa was not in compliance with the net
worth, leverage and liquidity ratios. Under the terms of the agreement, the bank
may call the loan if Alfa is in violation of any restrictive covenant. Alfa has
not obtained a waiver from the bank. The management of Alfa has the means and
the willingness to refinance the debt should demand for payment be made through
collateralizing its fixed assets. As of November 13, 2002, the bank has not
called the loan and continues to allow Alfa to borrow under the original terms
of the agreement, having renewed it twice while out of compliance with one or
more ratio maintenance provisions.
The continued availability of the demand loan is necessary in
order for management to continue to grow the business. If the demand loan or
similar financing was not available, Alfa would be required to slow growth in
order to have the necessary cash to meet its obligations.
Beginning June 1, 2003, Alfa may be required to make a redemption
payment to its Canadian subsidiary (Alfa Utility Services Inc.) Class A
Preference shareholders at their election (on 30 days notice) of $1,250,000.
-41-
YEAR ENDED DECEMBER 31, 2001 ("2001 OPERATING YEAR") COMPARED WITH YEAR
ENDED DECEMBER 31, 2000 ("2000 OPERATING YEAR")
SALES
Sales for the year ended December 31, 2001 increased $2,228,000 or 23%
to $12,091,000 from $9,863,000 for the year ended December 31, 2000.
Sales growth was driven by increased activities in the Residential
Subdivision-Servicing group with an increase in revenue of $200,000 in 2001 over
2000. The growth is attributed to management's focus on quality service. This
focus on quality has strengthened relationships in the client community which in
turn has resulted in increased business for Alfa. In addition to improved volume
generated by the aforementioned group, the Natural Gas group increased capacity
in the second quarter of 2001 to allow for the complete internal fulfillment of
gas infrastructure requirements. Historically, Ontario Power had jointly bid on
projects and contracted out the natural gas portion. Management expects the
volume of revenue obtained from the Natural Gas group to grow in importance and
represent 10% of Alfa's gross volume by the end of 2002. Previously, this group
represented less than 3% of Alfa's volume as the natural gas portion was
contracted out to other companies. This group had an increase in revenue of
$400,000 in 2001 over 2000.
-42-
COST OF GOODS SOLD
Cost of Goods Sold for the year ended December 31, 2001 was $10,427,000
or 86.2% of sales as compared to $8,682,000 or 88.0% of sales for the year ended
December 31, 2000.
The decrease in cost of goods sold as a percentage of sales is due to
better purchasing of materials and increased efficiency.
Increased working capital will allow Alfa to take advantage of
invoicing discounts for prompt payments, which represent a possible 3 to 5%
improvement in cost of goods sold. In addition, as Natural Gas,
Overhead/Electrical and Lateral Service groups each enjoy much higher gross
margin levels (35%, 22% and 17%, respectively) than the Underground/Electrical
group (less than 8%), a focus on growth in these segments will aid in improved
overall cost of goods sold results.
GENERAL AND ADMINISTRATIVE EXPENSE
General and administrative expense for the year ended December 31, 2001
increased $391,000 or 46% to $1,237,000 from $846,000 for the year ended
December 31, 2000.
This increase in general and administrative expense is a result of
increased spending in a number of areas. Administrative salaries increased
$46,000 during the year ended December 31, 2001 due to the hiring of a Chief
Financial Officer during 2001. Office salaries increased $114,000 to accomodate
the growth in sales during 2001 and related expenses due to the increase in
employees increaed $40,000 over 2000. Professional service fees increased
$113,000 due to the costs associated with the registration of Alfa's securities
with the Securities and Exchange Commission. The remainder of the increase is
due to the expansion of the business which resulted in an increase in insurance
of $30,000 and an increase in advertising of $34,000. It is management's goal to
grow general and administrative expense at a rate not to exceed 60% of net
income growth for future periods.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense for the year ended December 31,
2001 increased $90,000 or 43% to $301,000 from $211,000 for the year ended
December 31, 2000.
Depreciation and amortization expense increases can be associated with
the requirement for additional light and heavy construction equipment brought on
by increased work volume in the same period. Management is experimenting with
the employment of owner operated construction equipment. Provided this
experiment continues to yield positive results, we would expect depreciation and
amortization expenses to decrease as a component of total expenses in periods to
come, as less equipment would have to be purchased.
INTEREST EXPENSE
Interest expense for the year ended December 31, 2001 decreased
$17,000 or 16.3% to $87,000 from $104,000 for the year ended December 31, 2000.
This decrease is due to a lower weighted average debt balance of approximately
$400,000 and a decrease in the weighted average interest rate during the year of
approximately 1%.
-43-
PROVISION FOR INCOME TAXES
The provision for income taxes has increased $144,000 to $161,000 for
the year ended December 31, 2001 from $16,000 for the year ended December 31,
2000 due to the adjustment of deferred taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes", for the
higher tax rate that Alfa will be required to pay due to becoming a "public"
reporting company. Previously, Alfa was able to take advantage of the Canadian
controlled small corporation tax incentive whereby all income under $200,000
(CDN) is taxed at a rate of 20%. Alfa's acquisition of Ontario Power resulted in
a loss of Alfa's ability to use this preferred tax rate.
NET LOSS
The net loss for the year ended December 31, 2001 was $122,000 compared
to net income of $3,000 for the year ended December 31, 2000. The main factors
contributing to this was an increase in gross profit of $483,000 offset by an
increase in general and administrative expenses of $391,000 and an increase in
income tax expense of $144,000.
CAPITAL RESOURCES AND LIQUIDITY
Alfa's cash flow from operations was $432,000 and $565,000 for the
years ended December 31, 2001 and 2000, respectively. The decrease is due to a
net loss rather than net income and an increase in accounts receivable due to an
increase is sales. This was offset by better management of inventory and
accounts payable and an increase in deferred taxes due to the higher tax rate as
discussed in "Provision for Income Taxes."
Cash provided by investing activities was $25,000 for the year ended
December 31, 2001. Cash used in investing activities was $921,000 for the year
ended December 31, 2000. The increase in cash provided is mainly due to the fact
that there were lower purchases of property, plant and equipment and much larger
proceeds from sales of property, plant and equipment in 2001.
Cash used in financing activities was $457,000 for the year ended
December 31, 2001. Cash provided by financing activities was $356,000 for the
year ended December 31, 2000. The change is due to net repayment on borrowings
in the year ended December 31, 2001 and net borrowings in the year ended
December 31, 2000.
The large increase in accounts receivable of $1.0 million from
December 31, 2000 to December 31, 2001 is due to an increase in sales of $1.1
million in the fourth quarter ended December 31, 2001 as compared to the year
ended December 31, 2000.
Inventory has decreased from $571,000 at December 31, 2000 to $411,000
at December 31, 2001. This reduction is due to management's concerted effort to
improve working capital. Management is accomplishing this through better use of
just-in-time inventory. Whenever possible, inventory is being delivered directly
to the construction site rather than being stored in the warehouse for a period
of time prior to use at the construction site.
Current assets at December 31, 2001 were $3,291,000 which is $904,000
or 38% higher than current assets at December 31, 2000 which were $2,387,000.
Accounts receivable contributed $1,038,000 to this increase.
-44-
Property, plant and equipment, net has decreased from $1.3 million at
December 31, 2000 to $1.1 million at December 31, 2001 and debt has decreased
from $1.3 million at December 31, 2000 to $0.9 million at December 31, 2001 due
to the sale-leaseback of equipment during the year.
Accounts Payable increased from $1.6 million at December 31, 2000 to
$2.7 million at December 31, 2001. This is also due to the increase in sales. In
addition, management has accomplished this by an extension of payment terms on
vendor payables.
Alfa generally does not maintain cash balances as all funds are
currently being reinvested into Alfa to continue to grow the Company. Alfa
currently has a Revolving Demand Loan in the amount of the lesser of $1 million
(CDN) or 80% of the receivables value, as defined in the credit agreement (of
which $257,865 was outstanding as of December 31, 2001). The loan could have
been increased to $1.15 million (CDN) between October 31, 2000 and February 28,
2001. The loan bears interest at the prime rate plus 1% if the loan is under $1
million (CDN) and at the prime rate plus 1.25% if the loan is over $1 million
(CDN). Alfa also must pay an administration fee of $50 monthly.
The demand loan is renewable yearly. Interest only is payable monthly
on the demand loan. The demand loan is secured by all assets of Alfa, various
insurance policies and a personal guarantee of one of the directors of Alfa.
The demand loan contains various covenants pertaining to the
maintenance of net worth, direct borrowings, leverage and liquidity
requirements. At December 31, 2001, Alfa was not in compliance with the net
worth, leverage and liquidity ratios. Under the terms of the agreement, the bank
may call the loan if Alfa is in violation of any restrictive covenant. Alfa has
not obtained a waiver from the bank. The management of Alfa has the means and
the willingness to refinance the debt should demand for payment be made through
collateralizing its fixed assets. As of June 1, 2002, the bank has not called
the loan and continues to allow Alfa to borrow under the original terms of the
agreement, having renewed it twice while out of compliance with one or more
ratio maintenance provisions.
The continued availability of the demand loan is necessary in order
for management to continue to grow the business. If the demand loan or similar
financing was not available, Alfa would be required to slow growth in order to
have the necessary cash to meet its obligations.
-45-
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, "Accounting for
Goodwill and Other Intangibles", which specifies that goodwill and some
intangible assets will no longer be amortized, but instead will be subject to
periodic impairment testing. The pronouncement is effective for the Company
beginning January 1, 2002. The Company is in the process of evaluating the
financial statement impact of the adoption of SFAS No. 142. Management does not
anticipate that the adoption of SFAS No. 142 will have any material impact on
the financial statements but may impact the financial statements for later
quarters for the effects of future business acquisitions.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations", which specifies that the fair value of a liability for
an asset retirement obligation be recognized in the period in which it is
incurred if a reasonable estimate of fair value can be made. The pronouncement
is effective for the Company beginning January 1, 2003. The Company is in the
process of evaluating the financial statement impact of the adoption of SFAS No.
143. Management does not anticipate that the adoption of SFAS No. 143 will have
any material impact on the financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for the Company
beginning January 1, 2002. This statement supercedes SFAS 121, "Accounting for
the Impairment of Long-Lived Assets to be Disposed Of" and other related
guidance. The Company is in the process of evaluating the financial statement
impact of the adoption of SFAS No. 144. Management does not anticipate that the
adoption of SFAS No. 144 will have any material impact on the financial
statements.
In April 2002, the Financial Accounting Standards Board issued SFAS
No. 145, Rescission of SFAS No. 4, 44, and 64, Amendment of SFAS No. 13, and
Technical Corrections. SFAS 145 requires that gains and losses from
extinguishment of debt be classified as extraordinary items only if they meet
the criteria in Opinion 30. Applying the provisions of Opinion 30 will
distinguish transactions that are part of an entity's recurring operations from
those that are unusual and infrequent and therefore meet the criteria for
classification as an extraordinary item. SFAS 145 also requires that
modifications to a capital lease that make it an operating lease be accounted
for, as applicable, in accordance with SFAS No. 98, Accounting for Leases, or
SFAS No. 28, Accounting for Sales with Leasebacks. SFAS 145 is required to be
applied in fiscal years beginning after May 15, 2002 and to provisions relating
to modifications of a capital lease that make it an operating lease as of May
15, 2002. Upon adoption of SFAS 145, gains and losses on debt extinguishment
that have been shown on the income statement as extraordinary items in prior
periods should be reclassified, unless they meet the criteria for extraordinary
status per Opinion 30. Management does not anticipate that the adoption of SFAS
145 will have any material impact on the financial statements.
In June 2002, the Financial Accounting Standards Board issued SFAS
No. 146, "Accounting for Costs Associated with Exit or Disposal Activities."
SFAS 146 addresses financial accounting and reporting for costs associated with
exit or disposal activities and nullifies Emerging Issues Task Force Issue No.
94-3, Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).
SFAS 146 requires companies to recognize costs associated with exit or disposal
activities when they incurred rather than at the date of a commitment to an exit
or disposal plan. Costs covered by SFAS 146 include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
146 applies to all exit or disposal activities initiated after December 31,
2002. Management does not anticipate that the adoption of SFAS 146 will have any
material impact on the financial statement.
In October 2002, the Financial Accounting Standards Board issued SFAS
No. 147, "Accounting for Acquisitions of Certain Financial Institutions" - an
amendment of SFAS No. 72 and 144 and FASB Interpretation No. 9 (SFAS 147). SFAS
147 amends SFAS 72 and no longer requires companies to recognize, and
subsequently amortize, any excess of the fair value of liabilities assumed over
the fair value of tangible and identifiable intangible assets acquired as an
unidentifiable intangible asset. In addition, SFAS 147 amends SFAS 144 to
include in its scope long-term customer-relationship intangible assets of
financial institutions such as depositor and borrower relationship intangible
assets and credit cardholder intangible assets. Consequently, those intangible
assets are subject to the same undiscounted cash flow recoverability test and
impairment loss recognition and measurement provisions that SFAS 144 requires
for other long-lived assets that are held and used. Management does not
anticipate that the adoption of SFAS 147 will have any material impact on the
financial statements.
-46-
INFLATION
Alfa does not believe its operations have been materially affected by
inflation. Inflation is not expected to have a material future effect.
FINANCIAL STATEMENTS
On the following pages are the Index to Financial Statements together
with the Auditors Report, the Financial Statements, and the Notes to Financial
Statements. They are followed by the "SUBSCRIPTION AGREEMENT".
[Any blank remainder of this page is intentional.]
-47-
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
Woodbridge, Ontario Canada
--------------------------------------------
FINANCIAL REPORTS
AT
DECEMBER 31, 2001
--------------------------------------------
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Independent Auditor's Report 1
Consolidated Balance Sheet at December 31, 2001 and 2000 2
Consolidated Statement of Changes in Stockholders' Equity for the
Years Ended December 31, 2001 and 2000 3
Consolidated Statement of Operations and Comprehensive Income for the
Years Ended December 31, 2001 and 2000 4
Consolidated Statement of Cash Flows for the Years Ended December 31,
2001 and 2000 5
Notes to Consolidated Financial Statements 6-12
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Alfa Utility Services, Inc.
Woodbridge, Ontario Canada
We have audited the accompanying consolidated balance sheet of Alfa
Utility Services, Inc. as of December 31, 2001 and 2000, and the related
consolidated statements of changes in stockholders' equity, operations and
comprehensive income, 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 auditing standards
generally accepted in the United States of America. Those standards require that
we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Alfa
Utility Services, Inc. as of December 31, 2001 and 2000, and the results of its
operations and comprehensive income and its cash flows for the years then ended,
in conformity with accounting principles generally accepted in the United States
of America.
As discussed in Note M, the financial statements have been restated
to give effect to the deferred gain on the sale-leaseback transaction.
/s/ Rotenberg & Co., LLP
- ------------------------
Rotenberg & Co., LLP
Rochester, New York
March 29, 2002
except Note M, as to
which the date is
Ausust 14, 2002
F-1
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED BALANCE SHEET
==========================================================================================
(Restated)
December 31, 2001 2000
- ------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Accounts Receivable - Net of Allowances $ 2,773,513 $ 1,735,448
Inventories 410,890 570,826
Income Taxes Receivable 28 674
Prepaid Expenses, Deposits and Other Current Assets 106,828 80,158
- ------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,291,259 2,387,106
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 1,083,854 1,289,512
OTHER ASSETS
Due from Related Parties 204,960 219,063
- ------------------------------------------------------------------------------------------
TOTAL ASSETS $ 4,580,073 $ 3,895,681
==========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Demand Loan $ 257,865 $ 305,003
Capital Lease Payable - Due Within One Year 53,061 --
Long-Term Debt - Due Within One Year 160,528 247,112
Deferred Income Taxes 174,628 80,631
Accounts Payable and Other Accrued Expenses 2,693,201 1,646,699
- ------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,339,283 2,279,445
OTHER LIABILITIES
Capital Lease Payable - Due After One Year 83,808 --
Long-Term Debt - Due After One Year 372,056 730,953
Deferred Income Taxes 87,154 31,848
Other Liabilities 12,246 --
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,894,547 3,042,246
- ------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock - $4.00 Par; 1,000 Shares Authorized,
Issued and Outstanding (Liquidation
Value of $1,250,000) 4,000 4,000
Common Stock - $.001 Par; 50,000,000 Shares Authorized,
22,803,058 Issued and Outstanding 22,803 12,000
Additional Paid-In Capital 107,169 --
Retained Earnings 698,189 937,929
Accumulated Other Comprehensive Loss (146,635) (100,494)
- ------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 685,526 853,435
- ------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,580,073 $ 3,895,681
==========================================================================================
The accompanying notes are an integral part of this financial statement.
F-2
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
====================================================================================================================================
ACCUMULATED
OTHER
COMPREHENSIVE
LOSS-
PREFERRED STOCK COMMON STOCK ADDITIONAL CUMULATIVE TOTAL
NUMBER OF $4.00 PAR NUMBER OF $.001 PAR PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL EARNINGS ADJUSTMENTS EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - JANUARY 1, 2000 1,000 $ 4,000 12,000,000 $ 12,000 $ -- $ 934,562 $ (73,592) $ 876,970
(AFTER RECAPITALIZATION)
Net Income -- -- -- -- -- 3,367 -- 3,367
Foreign Currency Translation -- -- -- -- -- -- (26,902) (26,902)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 2000 1,000 4,000 12,000,000 12,000 -- 937,929 (100,494) 853,435
May 31, 2001 - Acquisition
of Shell Company -- -- 10,803,058 10,803 107,169 (117,972) -- --
Net Loss (Restated) -- -- -- -- -- (121,768) -- (121,768)
Foreign Currency Translation -- -- -- -- -- -- (46,141) (46,141)
(Restated)
- ------------------------------------------------------------------------------------------------------------------------------------
BALANCE - DECEMBER 31, 2001 1,000 $ 4,000 22,803,058 $ 22,803 $ 107,169 $ 698,189 $ (146,635) $ 685,526
(Restated)
====================================================================================================================================
The accompanying notes are an integral part of this financial statement.
F-3
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME
================================================================================
(Restated)
For the Years Ended December 31, 2001 2000
- --------------------------------------------------------------------------------
SALES $ 12,090,683 $ 9,862,552
- --------------------------------------------------------------------------------
COST OF GOODS SOLD
Subdivision Material 5,298,096 6,172,921
Wages 3,110,267 2,086,529
Other 2,018,976 422,883
- --------------------------------------------------------------------------------
TOTAL COST OF GOODS SOLD 10,427,339 8,682,333
- --------------------------------------------------------------------------------
GROSS PROFIT 1,663,344 1,180,219
- --------------------------------------------------------------------------------
OPERATING EXPENSES
General and Administrative 1,236,780 846,081
Depreciation and Amortization 300,946 211,036
- --------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 1,537,726 1,057,117
- --------------------------------------------------------------------------------
INCOME FROM OPERATIONS 125,618 123,102
- --------------------------------------------------------------------------------
INTEREST EXPENSE, net of interest income
of $7,742 in 2001 and $0 in 2000 (86,690) (103,524)
- --------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 38,928 19,578
PROVISION FOR INCOME TAXES 160,696 16,211
- --------------------------------------------------------------------------------
NET (LOSS) INCOME (121,768) 3,367
OTHER COMPREHENSIVE LOSS, NET OF INCOME TAX
Foreign Currency Translation, net of income
tax of $0 in 2001 and 2000 (46,141) (26,902)
- --------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $ (167,909) $ (23,535)
================================================================================
(LOSS) INCOME PER COMMON SHARE - BASIC $ (0.01) $ 0.00
(LOSS) INCOME PER COMMON SHARE - DILUTED $ (0.01) $ 0.00
================================================================================
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - BASIC 18,301,784 12,000,000
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - DILUTED 18,301,784 16,000,000
================================================================================
The accompanying notes are an integral part of this financial statement.
F-4
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================
(Restated)
For the Years Ended December 31, 2001 2000
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET (LOSS) INCOME $ (121,768) $ 3,367
NON-CASH ADJUSTMENTS
Depreciation and Amortization 300,946 211,036
Gain on Sale of Equipment (22,285) (381)
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts Receivable (1,174,636) 725,591
Inventories 130,550 (114,953)
Income Taxes Receivable 625 (25,419)
Prepaid Expenses, Deposits and
Other Current Assets (33,318) 10,477
Accounts Payable and Other Accrued Expenses 1,177,999 (261,159)
Deferred Income Taxes 160,696 16,211
Other Liabilities 12,625 --
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 432,434 564,770
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Repayments from (Advances to) Related Party 1,361 (107,665)
Purchases of Property, Plant and Equipment (471,726) (828,838)
Proceeds from Sale of Property, Plant and Equipment 494,881 15,416
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES 24,516 (921,087)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of Demand Loan (30,249) (231,926)
Proceeds from Long-Term Debt 251,852 752,845
Repayment of Long-Term Debt (652,296) (164,602)
Repayment of Capital Lease Obligation (26,257) --
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (456,950) 356,317
- --------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS -- --
- --------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents -- --
Cash and Cash Equivalents - Beginning of Year -- --
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF YEAR $ -- $ --
================================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Year for Income Taxes $ (625) $ 25,419
Cash Paid During the Year for Interest - Net $ 86,690 $ 103,524
- --------------------------------------------------------------------------------
NON-CASH INVESTING ACTIVITIES
Acquisition of Equipment Under Capital Leases $ 168,066 $ --
================================================================================
The accompanying notes are an integral part of this financial statement.
F-5
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE A - THE COMPANY
The original company was incorporated under the laws of the state of
Delaware on December 15, 1994 as Triad Instrument Co. Inc.
Subsequently, Triad's name was changed to Envirotech Mfg. Corp.
(Envirotech), then Alfa Utility Services, Inc. (A Delaware Corporation)
(the Company) on June 1, 2001.
On June 1, 2001, pursuant to a reorganization, Alfa Utility Services
Inc. (a Canadian Corporation) and its wholly owned subsidiary, Ontario
Power Contracting Limited, became wholly owned subsidiaries of Alfa
Utility Services, Inc. (A Delaware Corporation). The transaction was
accounted for as a recapitalization, resulting in the historical
operations of Ontario Power Contracting Limited being the historical
operations of Alfa Utility Services, Inc. Accordingly, the accompanying
financial statements have been restated to reflect the financial
position, results of operations, and cash flows for all periods
presented as if the recapitalization had occurred at the beginning of
the earliest period presented.
The January 1, 2000 balance (after recapitalization) represents the
stockholder's equity of Alfa Utility Services, Inc.'s subsidiary,
Ontario Power Contracting Limited, prior to the recapitalization plus
the 12,000,000 common shares and 1,000 preferred shares issued in
conjunction with the recapitalization. On May 31, 2001, Envirotech was
acquired by exchanging shares of Alfa Utility Services, Inc. on a 1 for
1 basis for shares of Envirotech. Envirotech had no assets or
liabilities at such time. This transaction is represneted by showing
the number of shares, the share value, additional paid-in capital and
retained earnings of Envirotech at the date of acquisition.
SCOPE OF BUSINESS
The Company is a full service utility construction and maintenance
company, concentrating on electrical utilities, communications, natural
gas pipelines, sewer and waterworks systems, currently serving the city
of Toronto, Ontario Canada and surrounding areas.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
METHOD OF ACCOUNTING
The Company maintains its books and prepares its financial statements
on the accrual basis of accounting.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Alfa Utility Services Inc.
and Ontario Power Contracting Limited. All significant intercompany
balances and transactions have been eliminated in the consolidation.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
FOREIGN CURRENCY TRANSLATION The Company's foreign operations, Alfa
Utility Services Inc. (Canada) and Ontario Power Contracting Limited,
are measured using the local currency, Canadian dollars, as the
functional currency. Assets and liabilities are translated at exchange
rates as of the balance sheet date. Revenues, expenses and cash flows
are translated at weighted average rates of exchange in effect during
the year. The resulting cumulative translation adjustments have been
recorded as a separate component of stockholders' equity and
comprehensive income. There are no foreign currency transaction gains
and losses as all operations are currently conducted in Canada.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include time deposits, certificates of
deposit, and all highly liquid debt instruments with original
maturities of three months or less. The Company maintains cash and cash
equivalents at financial institutions which periodically may exceed
federally insured amounts.
-continued-
F-6
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
PROPERTY, EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost less accumulated
depreciation. Depreciation is computed on accelerated methods over the
estimated useful lives as follows:
Automotive Equipment 3 - 4 Years
Computers 3 - 4 Years
Machinery and Equipment 5 Years
Office Equipment 5 Years
Leasehold improvements are being depreciated on a straight-line basis
over five years. Maintenance and repairs are charged to expense as
incurred. Upon sale or retirement of assets, the cost and related
accumulated depreciation are eliminated from the accounts, and any
resulting gain or loss is recognized.
IMPAIRMENT OF ASSETS
In accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to Be Disposed Of," the Company assesses all long-lived assets
for impairment at least annually or whenever events or circumstances
indicate that the carrying amount may not be recoverable.
INVENTORY
Inventory is comprised of raw materials and is stated at the lower of
cost or market. Cost is determined by the first-in, first-out method
and market is based on the lower of replacement cost or net realizable
value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting periods. Actual results can differ
from those estimates.
ADVERTISING
The Company expenses advertising costs as incurred.
REVENUE RECOGNITION
The Company earns revenue primarily under service contracts that are
time and materials based. The Company determines the percentage of work
completed on a monthly basis and measures this based on the labor hours
incurred and the materials used. The Company recognizes revenue based
on the services performed. The final holdback amount, which
approximates ten per cent of the total contract, is recognized after
final completion and acceptance of the project. This generally occurs
within 30 days of the completion of work. Contracts generally do not
extend for periods in excess of one year. Holdbacks as of December 31,
2001 and 2000 were $423,000 and $345,000, respectively, and are
included in accounts receivable.
-continued-
F-7
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
GOVERNMENT CONTRACTS
The Company has no material amount of business under government
contracts providing for renegotiation of profits, or termination at the
convenience or discretion of the government, or other adverse terms.
FINANCIAL INSTRUMENTS
The Company's financial instruments consist of cash, accounts
receivable, long-term debt and accounts payable. Unless otherwise
noted, it is management's opinion that the Company is not exposed to
significant interest, currency or credit risks arising from these
financial instruments. The fair value of these financial instruments
approximates their carrying value, unless otherwise noted.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes,"
using the asset and liability approach, which requires recognition of
deferred tax liabilities and assets for the expected future tax
consequences of temporary differences between the carrying amounts and
the tax basis of such assets and liabilities. This method utilizes
enacted statutory tax rates in effect for the year in which the
temporary differences are expected to reverse and gives immediate
effect to changes in the income tax rates upon enactment.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 142, "Accounting
for Goodwill and Other Intangibles", which specifies that goodwill and
some intangible assets will no longer be amortized, but instead will be
subject to periodic impairment testing. The pronouncement is effective
for the Company beginning January 1, 2002. The Company is in the
process of evaluating the financial statement impact of the adoption of
SFAS No. 142. Management does not anticipate that the adoption of SFAS
No. 142 will have any material impact on the financial statements but
may impact the financial statements for later quarters for the effects
of future business acquisitions.
In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations", which specifies that the fair value of a
liability for an asset retirement obligation be recognized in the
period in which it is incurred if a reasonable estimate of fair value
can be made. The pronouncement is effective for the Company beginning
January 1, 2003. The Company is in the process of evaluating the
financial statement impact of the adoption of SFAS No. 143. Management
does not anticipate that the adoption of SFAS No. 143 will have any
material impact on the financial statements.
In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which is effective for
the Company beginning January 1, 2002. This statement supercedes SFAS
121, "Accounting for the Impairment of Long-Lived Assets to be Disposed
Of" and other related guidance. The Company is in the process of
evaluating the financial statement impact of the adoption of SFAS No.
144. Management does not anticipate that the adoption of SFAS No. 144
will have any material impact on the financial statements.
NOTE C - ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
------------------------------------------ --------------- ------------
December 31, 2001 2000
------------------------------------------ --------------- ------------
Accounts Receivable $ 2,776,656 $ 1,744,795
Less: Allowance for Doubtful Accounts 3,143 9,347
------------------------------------------ --------------- ------------
Net Accounts Receivable $ 2,773,513 $ 1,735,448
------------------------------------------ --------------- ------------
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
---------------------------------- ---------- ---------- ----------- -----------
OWNED LEASED TOTAL Total
December 31, 2001 2000
---------------------------------- ---------- ---------- ----------- -----------
Automotive Equipment $ 595,365 $ -- $ 595,365 $ 666,120
Computer Equipment and Software 88,116 -- 88,116 50,945
Contractor's Equipment 902,384 168,066 1,070,450 1,193,457
Furniture and Fixtures 54,262 -- 54,262 44,467
Office Equipment 16,656 -- 16,656 11,779
Leasehold Improvements 25,640 -- 25,640 22,024
---------------------------------- ---------- ---------- ----------- -----------
$1,682,423 $ 168,066 $ 1,850,489 $ 1,988,792
Less: Accumulated Depreciation 750,402 16,233 766,635 699,280
---------------------------------- ---------- ---------- ----------- -----------
Net Property and Equipment $ 932,021 $ 151,833 $ 1,083,854 $ 1,289,512
---------------------------------- ---------- ---------- ----------- -----------
F-8
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE E - DEMAND LOAN
The demand loan consisted of the following:
=======================================================================
December 31, 2001 2000
-----------------------------------------------------------------------
Demand Loan, prime plus 1.0%, secured by
all assets of the Company, various
insurance policies and a personal guarantee
of one of the directors of the Company. $ 257,865 $ 305,003
-----------------------------------------------------------------------
The prime rate was 4.00% and 7.50% at December 31, 2001 and 2000,
respectively.
The demand loan is for a one-year term and is renewable annually.
Interest only is payable monthly on the demand loan. The maximum amount
of borrowings under the demand loan is the lesser of $1 million (CDN)
or 80% of the receivables value, as defined in the credit agreement.
The loan could have been increased to $1.5 million (CDN) between
October 31, 2000 and February 28, 2001.
The demand loan contains various covenants pertaining to the
maintenance of net worth, direct borrowings, leverage, and liquidity
requirements. At December 31, 2001 and 2000, the Company was not in
compliance with certain ratios. Under the terms of the agreement, the
bank may call the loan if the Company is in violation of any
restrictive covenant. As of March 29, 2002, the Company had not
obtained a waiver from the bank. Non-compliance with the covenants has
had no impact on the Company's ability to borrow funds or on the terms
of the loan. The management of the Company has the means and the
willingness to refinance the debt should demand for payment be made.
NOTE F - LONG-TERM DEBT
Long-term debt consisted of the following:
-----------------------------------------------------------------------
December 31, 2001 2000
-----------------------------------------------------------------------
Lien Notes, 3.0% to 4.9%, secured by
automotive and contractor's
equipment, due in installments
through 2005.
$ 150,722 $ 269,672
Lien Notes, 5.90% to 10.25%, secured by
automotive and contractor's
equipment, due in installments through 2005.
381,862 708,393
---------------------------------------------- --------- -----------
Total Long-Term Debt $ 532,584 $ 978,065
Less: Current Portion 160,528 247,112
---------------------------------------------- --------- -----------
Amount Due After One Year $ 372,056 $ 730,953
====================================================================
Annual maturities of debt for the five years succeeding December 31,
2001 are as follows:
2002 2003 2004 2005 2006 Total
----------- ----------- ----------- ----------- ----------- -----------
$ 160,528 $ 167,328 $ 164,493 $ 40,235 $-- $ 532,584
=======================================================================
F-9
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE G - CAPITAL LEASES
During the third quarter of 2001, the Company entered into capital
leases for various construction equipment valued at $168,066. Such
capital leases expire in 2004. The assets and liabilities under capital
leases are recorded at the lower of the present value of the minimum
lease payments or the fair value of the assets. The assets are
depreciated over the lower of their related lease terms or their
estimated productive lives. Depreciation of assets under capital lease
is included in depreciation expense for the year ended December 31,
2001.
Minimum future lease payments under capital leases as of December 31,
2001 for each of the next five years and thereafter are:
=======================================================================
Year Ended December 31, Amount
-------------------------------------------------- -------------------
2002 $ 57,390
2003 57,390
2004 43,917
2005 --
2006 --
Subsequent to 2006 --
-------------------------------------------------- -------------------
Total Minimum Lease Payments $ 158,697
Less: Amount Representing Interest 7,530
-------------------------------------------------- -------------------
Present Value of Net Minimum Lease Payments $ 151,167
=======================================================================
NOTE H - LEASE ARRANGEMENTS
The Company leases a facility and contractor's equipment under
operating leases which expire at various dates through 2005.
During 2001, the Company entered into sale-leaseback arrangements with
unrelated third parties. Under the arrangements, the Company sold
certain contractor's equipment and leased it back over periods ranging
from 3 to 4 years. The leases have an option at the end of the term to
purchase the equipment at fair value, renew the lease or return the
equipment. The Company is responsible for ordinary maintenance on the
equipment. The leasebacks have been accounted for as operating leases.
The gain of $18,046 realized in this transaction is being deferred
over the lease's term and is netted against general and administrative
expense.
At December 31, 2001, the Company's future minimum lease payments are
as follows:
2002 2003 2004 2005 2006 Total
----------- ----------- ----------- ----------- --------- -------------
$ 278,952 $ 208,522 $ 181,190 $ 78,982 $-- $ 747,646
=======================================================================
Rent expense under operating leases was $248,177 and $46,819 for the
years ended December 31, 2001 and 2000, respectively.
F-10
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE I - CONVERSION OPTION
The acquisition as of June 1, 2001 by Alfa Utility Services Inc. (A
Canadian Corporation) of its operating subsidiary Ontario Power
Contracting Limited involved the issuance to Ontario's two corporate
shareholders of 1,000 of Alfa Canada's Class A Preference Shares. An
Amended Option Agreement was entered into to allow the Class A
Preference Shares to be converted into 4,000,000 restricted shares of
Alfa Utility Services, Inc. (A Delaware Corporation) Common Stock.
Alfa's financial statements reflect earnings per share on a fully
diluted basis as if the 4,000,000 shares are outstanding for the period
December 31, 2000. For the period ended December 31, 2001, the
financial statements do not include the 4,000,000 shares, as they are
antidilutive . Until converted, the Class A Preference Shares bear a 6%
non-cumulative dividend totaling $75,000 per year and would be entitled
to a liquidation preference of $1,250,000 and, beginning June 1, 2003,
a redemption payment at the shareholder's election (on 30 days notice)
of $1,250,000. The redemption option has been permanently waived by the
shareholders. Such 1,000 Class A Preference Shares are held in equal
amounts by Carmine Industries, Ltd. and 815748 Ontario Limited. Both
are Ontario corporations controlled by Alfa's President, Joseph Alfano.
The option will expire on May 31, 2006.
NOTE J - RETIREMENT PLAN
The Company maintains a defined contribution retirement savings plan,
which covers substantially all employees. The Company makes matching
contributions to the plan up to 2% of each employee's base salary. The
Company's matching contributions for 2001 and 2000 amounted to
approximately $6,500 and $3,900 for 2001 and 2000, respectively.
NOTE K - RELATED PARTY TRANSACTIONS
Sales for the years ended December 31, 2001 and 2000 include $-0- and
$123,200, respectively, to a related party. The amounts included in
accounts receivable from this related party amounted to $-0- and
$51,500 for the years ended December 31, 2001 and 2000, respectively.
One of the shareholders of the related party is also a shareholder of
the Company.
The amount due from related parties, who are related parties by virtue
of common stockholders, is non-interest bearing, unsecured, with no set
terms of repayment.
The Company paid management fees in the amount of $45,820 and $-0- for
the years ended December 31, 2001 and 2000, respectively, to a related
company. One of the directors of the Company is the shareholder of the
related company.
NOTE L - INCOME TAXES
The components of the provision for income taxes are as follows:
==================================================================
December 31, 2001 2000
------------------------------------------------------ -----------
CURRENT
U.S. $ -- $ --
Foreign -- --
DEFERRED
U.S. -- --
Foreign 160,696 16,211
----------------------------------------------------- -----------
Totals $ 160,696 $ 16,211
=================================================================
F-11
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE L - INCOME TAXES - CONTINUED
Deferred tax (liabilities) assets consist of the following:
------------------------------------------ ------------- --------------
December 31, 2001 2000
------------------------------------------ ------------- --------------
Property and equipment basis difference $(87,154) $(31,848)
Contracts (198,877) (102,130)
------------------------------------------ ------------- --------------
Gross Deferred Tax Liabilities (286,031) (133,978)
------------------------------------------ ------------- --------------
Net Operating Loss Carryforward 24,249 21,499
------------------------------------------ ------------- --------------
Gross Deferred Tax Assets 24,249 21,499
------------------------------------------ ------------- --------------
Net Deferred Tax Liability $(261,782) $(112,479)
------------------------------------------ ------------- --------------
The net operating loss carryforward expires in 2007.
NOTE M - RESTATEMENT
In 2002, after giving consideration to guidance provided by Statement
of Financial Accounting Standards No. 28, "Accounting For Sales with
Leasebacks," the Company deferred the gain on the sale-leaseback
transaction that occurred in 2001.
YEAR ENDED DECEMBER 31,
2001
- --------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD $ (151,135)
AS ORIGINALLY REPORTED
Deferred Gain on Sale-Leaseback ( 16,774)
- --------------------------------------------------------------------------------
COMPREHENSIVE LOSS FOR THE PERIOD,
RESTATED $ (167,909)
================================================================================
F-12
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
----------------------------------------------------
FINANCIAL REPORTS
AT
SEPTEMBER 30, 2002
----------------------------------------------------
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
TABLE OF CONTENTS
- ------------------------------------------------------------------------------
Independent Accountant's Report F-1
Consolidated Balance Sheet at September 30, 2002 (Unaudited)
and December 31, 2001 F-2
Consolidated Statement of Changes in Stockholders' Equity for the
Nine Months Ended September 30, 2002 and 2001 (Unaudited) F-3
Consolidated Statement of Operations and Comprehensive Income for the
Three and Nine Months Ended September 30, 2002 and 2001 (Unaudited) F-4
Consolidated Statement of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 (Unaudited) F-5
Notes to Consolidated Financial Statements F-6
INDEPENDENT ACCOUNTANT'S REPORT
To the Board of Directors
Alfa Utility Services, Inc.
Woodbridge, Ontario Canada
We have reviewed the accompanying consolidated balance sheet of Alfa
Utility Services, Inc. (A Delaware Corporation) as of September 30, 2002, and
the related consolidated statements of operations and comprehensive income for
the three and nine months ended September 30, 2002 and 2001, and the
consolidated statements of changes in stockholders' equity, and cash flows for
the nine months ended September 30, 2002 and 2001. All information included in
these financial statements is the responsibility of the management of Alfa
Utility Services, Inc.
We conducted our reviews in accordance with standards established by
the American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with auditing standards generally accepted in the United States of
America, the objective of which is the expression of an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications
that should be made to the accompanying financial statements in order for them
to be in conformity with accounting principles generally accepted in the United
States of America.
We have previously audited, in accordance with auditing standards
generally accepted in the United States of America, the consolidated balance
sheet (presented herein) of Alfa Utility Services, Inc. as of December 31, 2001,
and the related consolidated statements of operations and comprehensive income,
changes in stockholders' equity, and cash flows for the year then ended (not
presented herein); and in our report, dated March 29, 2002, except for Note M,
as to which the date is August 14, 2002, we expressed an unqualified opinion on
those consolidated financial statements. In our opinion, the information set
forth in the accompanying consolidated balance sheet as of December 31, 2001 is
fairly stated, in all material respects. No auditing procedures have been
performed subsequent to the date of our report.
/s/ Rotenberg & Co., LLP
Rotenberg & Co., LLP
Rochester, New York
November 12, 2002
F-1
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED BALANCE SHEET
- ---------------------------------------------------------------------------------------------------------------------
(UNAUDITED)
SEPTEMBER 30, December 31,
2002 2001
- ---------------------------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents $ 2,491 $ --
Accounts Receivable - Net of Allowances 2,962,419 2,773,513
Inventories 499,098 410,890
Income Taxes Receivable 28 28
Prepaid Expenses, Deposits and Other Current Assets 81,944 106,828
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 3,545,980 3,291,259
PROPERTY AND EQUIPMENT - NET OF ACCUMULATED DEPRECIATION 499,838 1,083,854
OTHER ASSETS
Due from Related Parties 206,570 204,960
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 4,252,388 $ 4,580,073
===================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Demand Loan $ 266,125 $ 257,865
Capital Lease Payable - Due Within One Year -- 53,061
Long-Term Debt - Due Within One Year 59,417 160,528
Deferred Income Taxes - Due Within One Year 272,093 174,628
Accounts Payable and Other Accrued Expenses 2,874,513 2,693,201
- ---------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 3,472,148 3,339,283
OTHER LIABILITIES
Capital Lease Payable - Due After One Year -- 83,808
Long-Term Debt - Due After One Year 88,874 372,056
Deferred Income Taxes - Due After One Year 63,587 87,154
Other Liabilities 8,920 12,246
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES 3,633,529 3,894,547
- ---------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock - $4.00 Par; 1,000 Shares Authorized, Issued and
Outstanding (Liquidation Value of $1,250,000) 4,000 4,000
Common Stock - $.001 Par; 50,000,000 Shares Authorized;
22,803,058 Issued and Outstanding 22,803 22,803
Additional Paid-In Capital 107,169 107,169
Retained Earnings 625,723 698,189
Accumulated Other Comprehensive Loss (140,836) (146,635)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 618,859 685,526
- ---------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,252,388 $ 4,580,073
===================================================================================================================
The accompanying notes are an integral part of this financial statement.
- F-2 -
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- ----------------------------------------------- ----------------------------------------------------------------------------------
ACCUMULATED
OTHER
COMPREHENSIVE
PREFERRED STOCK COMMON STOCK LOSS -
NUMBER $4.00 NUMBER $.001 ADDITIONAL CUMULATIVE TOTAL
OF PAR OF PAR PAID-IN RETAINED TRANSLATION STOCKHOLDERS'
SHARES VALUE SHARES VALUE CAPITAL EARNINGS ADJUSTMENTS EQUITY
- ----------------------------------------------- ------------------------------------------------------------------------------------
BALANCE JANUARY 1, 2001 1,000 $ 4,000 12,000,000 $ 12,000 $ -- $ 937,929 $(100,494) $ 853,435
May 31, 2001 - Recapitalization as
Alfa Utility Services, Inc. -- -- 10,803,058 10,803 107,169 (117,972) -- --
Net Loss for the Period (Unaudited) -- -- -- -- -- (165,222) -- (165,222)
Foreign Currency Translation
(Unaudited) -- -- -- -- -- -- (38,591) (38,591)
- -------------------------------------------- --------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2001 1,000 4,000 22,803,058 22,803 107,169 654,735 (139,085) 649,622
(Unaudited)
Net Income for the Period (Unaudited) -- -- -- -- -- 43,454 -- 43,454
Foreign Currency Translation
(Unaudited) -- -- -- -- -- -- (7,550) (7,550)
- -------------------------------------------- --------------------------------------------------------------------------------------
BALANCE DECEMBER 31, 2001 1,000 4,000 22,803,058 22,803 107,169 698,189 (146,635) 685,526
Net Loss for the Period (Unaudited) -- -- -- -- -- (72,466) -- (72,466)
Foreign Currency Translation
(Unaudited) -- -- -- -- -- -- 5,799 5,799
- -------------------------------------------- --------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 2002 1,000 $ 4,000 22,803,058 $ 22,803 $ 107,169 $ 625,723 $(140,836) $ 618,859
(Unaudited)
- -------------------------------------------- --------------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
- F-3 -
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE INCOME--Unaudited
- -----------------------------------------------------------------------------------------------------------------------------------
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------- ----------------------------------------
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
SALES $ 4,055,455 $ 3,808,892 $ 9,605,445 $ 8,477,529
- -----------------------------------------------------------------------------------------------------------------------------------
COST OF GOODS SOLD
Subdivision Material 1,820,936 2,028,000 4,366,739 4,358,730
Wages 1,251,005 939,854 2,829,487 2,179,526
Other 521,370 448,817 1,260,178 1,139,636
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL COST OF GOODS SOLD 3,593,311 3,416,671 8,456,404 7,677,892
- -----------------------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 462,144 392,221 1,149,041 799,637
- -----------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
General and Administrative 282,601 309,291 1,076,873 787,784
Depreciation and Amortization 9,173 8,349 32,583 24,173
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL OPERATING EXPENSES 291,774 317,640 1,109,456 811,957
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS 170,370 74,581 39,585 (12,320)
OTHER INCOME (EXPENSE)
Interest Expense - Net (9,984) (25,299) (39,798) (75,845)
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE INCOME TAXES 160,386 49,282 (213) (88,165)
Provision for Income Taxes 116,805 20,505 72,253 77,057
- -----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS) 43,581 28,777 (72,466) (165,222)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation, net of
Income tax of $0 in 2002 and 2001 (23,919) (26,655) 5,799 (38,591)
- -----------------------------------------------------------------------------------------------------------------------------------
COMPREHENSIVE INCOME (LOSS) FOR THE PERIOD $ 19,662 $ 2,122 $ (66,667) $ (203,813)
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) PER COMMON SHARE - BASIC $ 0.00 $ 0.00 $ (0.00) $ (0.00)
INCOME (LOSS) PER COMMON SHARE - DILUTED $ 0.00 $ 0.00 $ (0.00) $ (0.00)
- -----------------------------------------------------------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - BASIC 22,803,058 22,803,058 22,803,058 16,866,681
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - DILUTED 26,803,058 26,803,058 22,803,058 16,866,681
- -----------------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
- F-4 -
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
- --------------------------------------------------------------------------------
Nine Months Ended September 30, 2002 2001
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
NET LOSS $ (72,466) $(165,222)
NON-CASH ADJUSTMENTS
Depreciation and Amortization 132,607 134,365
Loss on Sale of Equipment 27,286 --
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts Receivable (168,071) (158,371)
Inventories (85,467) 235,080
Income Taxes Receivable -- 641
Prepaid Expenses, Deposits and Other Current Assets 25,871 (54,207)
Accounts Payable and Other Accrued Expenses 161,064 (87,778)
Deferred Income Taxes 72,253 57,595
Other Liabilities (3,442) --
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM OPERATING ACTIVITIES 89,635 (37,897)
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of Property, Plant and Equipment (51,499) (141,462)
Proceeds from Sale of Property, Plant and Equipment 359,545 --
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM INVESTING ACTIVITIES 308,046 (141,462)
- --------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Demand Loan 350,493 224,517
Repayment of Demand Loan (344,224) --
Repayment of Long Term Debt (390,704) --
Repayments of Capital Lease Obligation (10,745) (12,264)
- --------------------------------------------------------------------------------
NET CASH FLOWS FROM FINANCING ACTIVITIES (395,180) 212,253
- --------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS (10) --
- --------------------------------------------------------------------------------
Net Increase in Cash and Cash Equivalents 2,491 32,894
Cash and Cash Equivalents - Beginning of Period -- --
- --------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,491 $ 32,894
- --------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash Paid During the Period for Income Taxes $ -- $ --
Cash Paid During the Period for Interest - Net $ 39,798 $ 75,845
- --------------------------------------------------------------------------------
NON-CASH INVESTING ACTIVITIES
Termination of Capital Leases - Equipment $ 127,989 $ --
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this financial statement.
- F-5 -
ALFA UTILITY SERVICES, INC.
(A DELAWARE CORPORATION)
WOODBRIDGE, ONTARIO CANADA
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - BASIS OF PRESENTATION
The condensed consolidated financial statements of Alfa Utility
Services, Inc. (the "Company") included herein have been prepared
by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC").
Certain information and footnote disclosures normally included in
financial statements prepared in conjunction with accounting
principles generally accepted in the United States of America have
been condensed or omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to
make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction
with the annual audited financial statements and the notes thereto,
included in the Company's Form 10-SB Registration Statement, Form
SB-2 Registration Statement, and other filings with the SEC.
The accompanying unaudited interim consolidated financial
statements reflect all adjustments of a normal and recurring nature
which are, in the opinion of management, necessary to present
fairly the financial position, results of operations and cash flows
of the Company for the interim periods presented. The results of
operations for these periods are not necessarily comparable to, or
indicative of, results of any other interim period of or for the
fiscal year taken as a whole. Factors that affect the comparability
of financial data from year to year and for comparable interim
periods include non-recurring expenses associated with the
Company's registrations with the SEC and the seasonal fluctuations
of the business. Certain financial information that is not required
for interim financial reporting purposes has been omitted.
RECLASSIFICATIONS
Certain amounts in the prior year financial statements have been
reclassified to conform with the current year presentation.
- F-6 -
SUBSCRIPTION AGREEMENT
(copies available at http://www.sec.gov)
ALFA UTILITY SERVICES, INC.
I hereby irrevocably tender this Subscription Agreement for
the purchase of _________ Common Shares at $6.50 per share and I tender payment
of $__________. This completed Subscription Agreement must be submitted
(overnight express or registered mail is suggested) concurrently with the total
stock purchase payment: (CIRCLE ONE) Check, Money Order, Wire Transfer [phone
(905) 850-2220, ext. 239, Robert Simone or fax (905) 850-9152 for wire
instructions] payable only to:
ALFA UTILITY SERVICES, INC.
396 Chrislea Road
Woodbridge, Ontario L4L 8A8 CANADA
Upon acceptance by Alfa, this constitutes a subscription for shares of
Alfa Common Stock. A copy will be returned as a receipt, and stock certificates
will be issued shortly thereafter. Subscriptions may be refused in whole or part
for any or no reason.
In connection with this investment, I represent and warrant as follows:
(a) Prior to tendering payment, I received Alfa's final Prospectus dated June
____, 2002. AND EITHER:
(b) As an INDIVIDUAL, namely, a natural person, I am (or someone I am buying for
is) a bona fide resident of the state of ________________________. (Fill in
"INDIVIDUALS" blanks, next page.)
OR:
(c) I am buying as a representative for a LEGAL ENTITY organized under the laws
of__________which maintains offices in __________________________
and conducts business (if any) in___________________. (Fill in blanks below.)
LEGAL ENTITY - -
[ ] CORPORATION (authorized agent of corporation must sign at end of form)
[ ] EXISTING PARTNERSHIP (at least one partner must sign at end of form)
[ ] TRUST (all trustees must sign at end of form)
- --------------------------------------------------------------------------------
NAME OF ENTITY
- --------------------------------------------------------------------------------
NAME OF AUTHORIZED AGENT (OR PARTNER(S) OR TRUSTEE(S) SIGNING AT END OF FORM)
- --------------------------------------------------------------------------------
TITLE OF AUTHORIZED AGENT (OR PARTNER(S) OR TRUSTEE(S))
- --------------------------------------------------------------------------------
SOCIAL SECURITY OR FEDERAL EMPLOYER (TAX) IDENTIFICATION NUMBER OF ENTITY
- --------------------------------------------------------------------------------
STREET (ADDRESS FOR STOCK RECORDS, TO SEND NOTICES, ETC.)
- --------------------------------------------------------------------------------
CITY STATE ZIP
- --------------------------------------------------------------------------------
BUSINESS TELEPHONE AND HOME TELEPHONE OF AUTHORIZED AGENT
(OR CONTACT PARTNER/TRUSTEE)
- ------------------------------------------- ------------------------------------
FAX E-MAIL
-48-
INDIVIDUAL(S) -- if more than one owner, please issue as follows:
[ ] Tenants-in-Common (all parties must sign -- each investor has an undivided
interest)
[ ] Joint Tenants with Right of Survivorship (all parties must sign
for joint ownership)
[ ] Adult custodian for a Minor under the Uniform Gift to Minors Act in your
state (the minor will have sole beneficial ownership)______________________
(Custodian's name), UGMA of ____________________(State) for
___________________________(Minor's name)
- --------------------------------------------------------------- --------------------------------------------------------
INVESTOR NO. 1 Printed or Typed Name INVESTOR NO. 2 Printed or Typed Name
- --------------------------------------------------------------- --------------------------------------------------------
Street (residence address) Street (residence address)
- ------------------------------------ ----------- -------------- ------------------------------------- --------- --------
City State Zip City State Zip
- --------------------------------- ----------------------------- ----------------------------- --------------------------
Home Phone Business Phone Home Phone Business Phone
- --------------------------------- ----------------------------- ------------------------- ------------------------------
Fax E-mail Fax E-mail
- --------------------------------------------------------------- --------------------------------------------------------
Social Security Number Social Security Number
SIGNATURES - -
The undersigned acknowledges that the foregoing information is true, accurate,
and complete. If more signatures are needed use copies of this page or the back
side, and mark here ____.
- ------------------------------------------- ---------- ---------------- --------
SIGNATURE Date SIGNATURE Date
- ------------------------------------------- ---------- ---------------- --------
SIGNATURE Date SIGNATURE Date
ACCEPTED AND CONFIRMED BY - - Alfa Utility Services, Inc.
- ------------------------------------------ -------------------------------------
SIGNATURE Name Title Date (2 days after
Prospectus delivery)
- END -
-49-
ALFA UTILITY SERVICES, INC.
(a Delaware corporation)
500,000 Shares of Common Stock offered at $6.50 by Alfa
($3,250,000 maximum, no minimum)
10,603,058 Shares of Common Stock
for resale from time to time by "public float" Selling Shareholders
TABLE OF CONTENTS AND SUBSCRIPTION AGREEMENT LOCATIONS
See the inside front cover (page 2) of this Prospectus for the TABLE OF
CONTENTS.
See the pages in front of this outside back cover for the SUBSCRIPTION
AGREEMENT, to buy shares from Alfa. Copies of it, this Prospectus, and Alfa's
Registration Statements and updated Reports to the SEC can be computer printed
from http://www.sec.gov. If you do not have Internet access, your local public
library probably can give you access on a library computer available to members
of the public.
DEALER PROSPECTUS DELIVERY OBLIGATION
Until 90 days after the date at the bottom of the Prospectus front
cover page, all dealers that effect transactions in these securities, whether or
not participating in sales by Alfa or in resales by the existing shareholders as
of the date of this Prospectus, may be required to deliver a Prospectus. This is
in addition to dealers' obligation to deliver a Prospectus when acting as
"underwriters" (which term is deemed to include all shareholders as of the date
of this Prospectus when reselling their shares owned on that date) and with
respect to any applicable unsold allotments or subscriptions. (See Securities
Act of 1933 Section 4(3) and Rule 174.) Also, a broker or dealer (including a
shareholder as of the date of this Prospectus) must deliver a Prospectus at
least 48 hours before sending a sale confirmation. (See SEC Rule 15c2-8 under
the Securities Exchange Act of 1934.)
(This is the Outside Back Cover (Last Page) of the Prospectus)
-50-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
LIABILITY LIMITATION AND INDEMNIFICATION
Alfa's Restated Certificate of Incorporation and By-Laws provide for
limitation of the liability of Directors to Alfa and its stockholders, and for
indemnification of Directors, officers, employees and agents of Alfa,
respectively, to the maximum extent permitted by the Delaware General
Corporation Law. See "INDEMNIFICATION OF DIRECTORS AND OFFICERS" in the
Prospectus.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses ("E" = estimated) anticipated to be payable by Alfa
Utility Services, Inc. in connection with the securities being registered are as
follows. The selling shareholders will not pay any of these expenses, but may be
required by the Transfer Agent to pay other fees for its services or transfer
taxes if applicable.
SEC registration fee $ 18,042.47
Blue Sky (state) fees and expenses E $ - 0 -
Legal fees and expenses $ 45,000.00
Accounting fees and expenses E $ 30,000.00
Promotion and advertising expenses E $ - 0 -
Postage and courier expenses E $ 2,000.00
Printing and engraving expenses E $ 2,000.00
Transfer Agent fees and expenses $ 5,000.00
Director/Officer Liability Insurance E $ - 0 -
Miscellaneous expenses E $ 10,000.00
EDGAR Conversion Fees E $ 5,000.00
Total E $ 114,542.47
-51-
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years the following securities were sold, which
were not registered under the U.S. Securities Act of 1933:
Effective as of the close of business on May 31, 2001, Alfa concluded
the sale of 12,000,000 shares of its Common Stock $.001 par value to Joseph
Alfano in exchange for transfer to Alfa as of the opening of business on June 1,
2001 of all Common Shares of Alfa Utility Services Inc., a Canadian corporation,
which thus became Alfa Delaware's subsidiary, bringing with it Ontario Power
Contracting Limited as Alfa Canada's subsidiary. An option also was agreed upon
effective as of June 1, 2001 for Alfa's issuance on or after June 1, 2003 of
4,000,000 restricted shares to two former corporate shareholders of Ontario
Power Contracting Limited upon their conversion of Alfa Canada's 1,000 Class A
Preferred Shares. See "MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS". The U.S. Securities Act of 1933 Section 5 registration requirement was
deemed not applicable to the issuance of such shares because Mr. Alfano was a
citizen and resident of and located in Canada (and was not acting as an
underwriter to distribute the shares to U.S. citizens or residents) and the
registrant (Alfa) had its offices in Canada and executed in Canada the
authorizing documents for the issuance. In other words, the issuance was a
foreign transfer outside of the U.S. to a foreign national by an issuer located
outside the U.S., not using U.S. mails or interstate commerce, so the securities
registration requirement of U.S. law is considered not applicable to the
transaction. If U.S. law somehow applied merely because of the issuer's
formation under the laws of Delaware, or otherwise, then a Regulation S
exclusion and "safe harbor" from registration under Section 5 of the Securities
Act of 1933 would be available due to the foregoing facts, and in any event a
Section 4(2) exemption would apply, because this was a non-public sale to one
person in the past three years.
ITEM 27. EXHIBITS
EXHIBITS INDEX AND DESCRIPTION
This Prior
SB-2 10-SB
NO. P. # EXH. # DESCRIPTION
- --- ---- ---- -----------
<s>
(1) N/A N/A (UNDERWRITING AGREEMENT) NOT APPLICABLE
(2) N/A N/A (REORGANIZATION, ACQUISITION AGREEMENT, ETC.) NOT APPLICABLE
(3) N/A N/A ARTICLES AND BY-LAWS
3(i) C/ 2.01 Certificate of Incorporation filed 12/15/94
3(ii) C/ 2.02 Amended (Restated) Certificate of Incorporation filed 8/30/95
3(iii) C/ 2.1 Restated Certificate of Incorporation filed 6/1/01
3(iv) C/ 2.3 By-Laws (under original corporate name, Triad Instrument Co. Inc.)
(4) N/A N/A (INSTRUMENTS DEFINING RIGHTS OF REGISTRANT'S EQUITY AND DEBT SECURITY HOLDERS (WHEN
AUTHORIZED DEBT EXCEEDS 10% OF CONSOLIDATED ASSETS))
4.1 C/ 3.1 5/31/01 Amended Consent of Directors and Shareholders of Envirotech Mfg. Corp., a
Delaware corporation, to amend and restate Articles to change name to Alfa Utility
Services, Inc., to increase authorized stock from 20,000,000 to 50,000,000 shares, to
issue 12,000,000 shares to Alfano in exchange for all common shares of Alfa Utility
Services Inc., a Canadian corporation (and its 100% subsidiary Ontario Power Contracting
Limited, an Ontario corporation), to replace Slessor with Alfano as Sole Director and
officer and to approve the stock exchange agreement, option agreement and to reserve
4,000,000 common shares for issuance upon receipt of conversion notice and endorsed
certificates for 1,000 Class A Preference Shares of Alfa Canada under the option
agreement between them.
4.2 C/ 3.2 5/31/01 Amended Assignment of Stock (Common Stock of Alfa Utility Services Inc., a
Canadian corporation, by Alfano to Alfa Utility Services, Inc., a Delaware corporation
(formerly named Envirotech Mfg. Corp.))
4.3A C/ 3.3A 6/1/01 Resolution of the Board of Directors of Alfa Utility Services Inc., a Canadian
corporation, to issue 500 Class A Preference Shares to Carmine Industries Ltd.
-52-
4.3B C/ 3.3B 6/1/01 Resolution of the Board of Directors of Alfa Utility Services Inc., a
Canadian corporation, to issue 500 Class A Preference Shares to 815748 Ontario Limited
4.3C C/ 3.3C 6/1/01 Resolution of the Director of Alfa Utility Services Inc., a Canadian
corporation, to issue 100 Common Shares to Joseph Alfano
4.4A C/ 3.4A 6/1/01 Option Agreement to convert (exchange) 500 Alfa Canada Class A Preference Shares
into 2,000,000 Alfa Delaware Common Shares
4.4B C/ 3.4B 6/1/01 Option Agreement to convert (exchange) 500 Alfa Canada Class A Preference Shares
into 2,000,000 Alfa Delaware Common Shares
4.4C C/ 3.4C 6/1/01 Amended Option Agreement to convert (exchange) 500 Alfa Canada Class A Preference
Shares into 2,000,000 Alfa Delaware Common Shares (Sec. 2.2 waiver of redemption until
6/1/03)
4.4D C/ 3.4D 6/1/01 Amended Option Agreement to convert (exchange) 500 Alfa Canada Class A Preference
Shares into 2,000,000 Alfa Delaware Common Shares (Sec. 2.2 waiver of redemption until
6/1/03)
4.4E C/ 3.4E 6/1/01 Second Amended Option Agreement to convert (exchange) 500 Alfa Canada Class A
Preference Shares into 2,000,000 Alfa Delaware Common Shares (Sec. 2.0 waiver of conversion
until 6/1/03)
4.4F C/ 3.4F 6/1/01 Second Amended Option Agreement to convert (exchange) 500 Alfa Canada Class A Preference
Shares into 2,000,000 Alfa Delaware Common Shares (Sec. 2.0 waiver of conversion until 6/1/03)
4.4G C/ 3.4G 7/31/02 Agreement between Carmine Industries, Ltd. and Alfa Utility Services, Inc. to
permanently waive the redemption option
4.4H C/ 3.4H 7/31/02 Agreement between 815748 Ontario Limited and Alfa Utility Services, Inc. to permanently
waive the redemption option
4.5A C/ 3.5A 7/27/01 Demand Loan Agreement
4.5B C/ 3.5B Amending Agreement dated 9/24/01 to the 7/27/01 Demand Loan Agreement
4.5C C/ 3.5C Amending Agreement dated 2/18/02 to the 7/27/01 Demand Loan Agreement and the 9/24/01 Amending
Agreement
4.6A A/ N/A Stock Resale Form
(5) N/A N/A (OPINION RE: LEGALITY)
5.1 A/ N/A Legal opinion of James R. Leone
(6) N/A N/A (NO EXHIBIT REQUIRED)
(7) N/A N/A (NO EXHIBIT REQUIRED)
(8) N/A N/A (OPINION RE: TAX MATTERS) NOT APPLICABLE
(9) N/A N/A (VOTING TRUST AGREEMENT) NOT APPLICABLE
(10) N/A N/A (MATERIAL CONTRACTS, INCLUDING WITH RELATED PARTIES, OR TO BUY/SELL/LEASE OVER 15% OF
ASSETS, OR FOR MANAGEMENT SERVICES OR COMPENSATION)
10.1 C/ 6.1 Premises Lease by Ontario Power Contracting Limited from United Rentals of Canada, Inc.
10.2 C/D 6.2 Contractor's Equipment and Automotive Equipment Leases
(11) N/A N/A (STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
11.1 A/ N/A Statement of Computation of Per Share Earnings
(12) N/A N/A (NO EXHIBIT REQUIRED)
(13) N/A N/A (ANNUAL OR QUARTERLY REPORTS, FORM 10-Q) NOT APPLICABLE
(14) N/A N/A (NO EXHIBIT REQUIRED)
(15) N/A N/A (LETTER ON UNAUDITED INTERIM FINANCIAL INFORMATION) NOT APPLICABLE
-53-
(16) N/A N/A (LETTER ON CHANGE IN CERTIFYING ACCOUNTANT) NOT APPLICABLE
(17) N/A N/A (LETTER ON DIRECTOR RESIGNATION) NOT APPLICABLE
(18) N/A N/A (LETTER ON CHANGE IN ACCOUNTING PRINCIPLES) NOT APPLICABLE
(19) N/A N/A (REPORTS FURNISHED TO SECURITY HOLDERS) NOT APPLICABLE
(20) N/A N/A (OTHER DOCUMENTS OR STATEMENTS TO SECURITY HOLDERS)
NOT APPLICABLE
(21) N/A N/A (SUBSIDIARIES OF THE REGISTRANT)
21.1 A/ N/A Subsidiaries List
(22) N/A N/A (PUBLISHED REPORT REGARDING MATTERS SUBMITTED TO VOTE) NOT APPLICABLE
(23) N/A N/A (CONSENT OF EXPERTS AND COUNSEL)
23.1 N/A N/A Consent by legal counsel to file his Legal Opinion as to Stock Legality - - see the
Opinion, Exhibit 5.1 herein.
23.2 A/ N/A Consent of Rotenberg & Company, LLP to use of Auditors Report on Financial Statements
(24) N/A N/A (POWER OF ATTORNEY TO SIGN REGISTRATION OR REPORT) NOT APPLICABLE
(25) N/A N/A (STATEMENT OF ELIGIBILITY OF TRUSTEE UNDER THE TRUST INDENTURE ACT OF 1939) NOT APPLICABLE
(26) N/A N/A (INVITATION FOR COMPETITIVE BIDS FOR SECURITIES BEING REGISTERED) NOT APPLICABLE
(27) N/A N/A (FINANCIAL DATA SCHEDULE WHEN THE FILING INCLUDES ANNUAL AND/OR INTERIM FINANCIAL
STATEMENTS NOT PREVIOUSLY INCLUDED IN A FILING) NOT APPLICABLE
(28) N/A N/A (NO EXHIBIT REQUIRED)
(29) - (98) N/A N/A (NO EXHIBITS REQUIRED)
(99) N/A N/A (ADDITIONAL EXHIBITS - - IF SHOWN HERE, OR FOR FORM 10-QSB OR FORM 10-KSB COVERING A
PERIOD IN WHICH AN EARNINGS STATEMENT FOR AT LEAST 12 MONTHS AFTER THIS REGISTRATION IS
EFFECTIVE IS MADE GENERALLY AVAILABLE PURSUANT TO SECURITIES ACT OF 1933 SECTION 11(A) BY
OTHER METHODS THAN IN RULE 158(A) OR (B).) NOT APPLICABLE
-54-
N/A Not Applicable
A/ Filed Herewith
B/ Previously Filed
C/ Incorporated by Reference from Alfa's Form 10-SB Registration Statement
No. 0-49694 under the Form 10-SB Exhibit No. shown in the third column
of the list
D/ Incorporated by reference from Alfa's Form 10-SB (File No. 0-49694)
Exhibit 6.2. Pursuant to U.S. Securities and Exchange Commission Form
10-SB Part III Item 2, incorporating Form 1-A Part III, and its Item 2,
Instruction (b), the registrant is not filing equipment leases, but
agrees to provide to the Commission supplementally upon request,
typical forms of regular and capital leases. Although the aggregate
amount of leased equipment is material, no individual item of leased
equipment is material. Further, the leases are such as ordinarily
accompany the registrant's kind of business, and otherwise are made in
the ordinary course of business.
ITEM 28. UNDERTAKINGS
(A) RULE 415 OFFERING
Alfa Utility Services, Inc. undertakes to:
(1) File, during any period in which any selling shareholder holding
one percent or more of the then outstanding Common Stock offers or
sells securities, a post effective amendment to this Registration
Statement to:
(i) Include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) Reflect in the Prospectus any facts or events which,
individually or together, represent a fundamental change in
the information in the Registration Statement. Notwithstanding
the forgoing, any increase or decrease in the volume of
securities offered (if the total dollar value of securities
offered would not exceed that which was registered) due to any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of Prospectus
filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table; and
(iii) Include any additional or changed material information
on the plan of distribution.
-55-
(2) For determining liability under the Securities Act, treat each
post-effective amendment as a new Registration Statement of the
securities offered, and the offering of the securities at that time as
the initial bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(B) WARRANTS AND RIGHTS OFFERING. NOT APPLICABLE
(C) COMPETITIVE BIDS. NOT APPLICABLE
(D) EQUITY OFFERING BY NONREPORTING SMALL BUSINESS ISSUER. NOT APPLICABLE
(THE REGISTRANT IS A REPORTING COMPANY ON MAY 14, 2002
PURSUANT TO ITS FORM 10-SB REGISTRATION STATEMENT NO. 0-49694.)
(E) REQUEST FOR ACCELERATION OF EFFECTIVE DATE. If the small business
issuer will request acceleration of the effective date of the
Registration Statement under Rule 461 under the Securities Act, include
the following:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to
directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in
the opinion of the Securities and Exchange Commission
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of expenses
incurred or paid by a director, officer or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(F) RULE 430A PROSPECTUS. NOT APPLICABLE
(Any blank remainder of this page is intentional.
Next page is Signature page.)
-56-
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Woodbridge, Province of Ontario CANADA, on December 9, 2002.
ALFA UTILITY SERVICES, INC.
/S/ JOSEPH ALFANO
- --------------------------
Joseph Alfano, President (For the Registrant)
In accordance with the Securities Act of 1933, this Registration
Statement was signed by the following persons in the capacities and on the dates
indicated.
/S/ JOSEPH ALFANO December 9, 2002
- --------------------------------
Joseph Alfano, President,
Chief Executive Officer,
Chairman of the Board of Directors, and Director
(Principal Executive Officer and Director)
/S/ ROBERT SIMONE December 9, 2002
---------------------------------
Robert Simone, Vice President Finance
and CFO, Secretary and Treasurer, and Director
(Principal Accounting Officer,
Principal Financial Officer and Director)
/S/ ANTHONY SANGINESI December 9, 2002
- -----------------------------------
Anthony Sanginesi, Vice President and Director
Operations and COO, General Manager, and Director
(Director)
-57-