March 17, 2003
INFORMATION STATEMENT (March 7, 2003 DRAFT)
Pursuant to Section 14(c) of
the Securities Exchange Act of 1934
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14c-5(d)(2))
[ ] Definitive Information Statement
ALFA UTILITY SERVICES, INC.
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
ALFA UTILITY SERVICES, INC.
396 Chrislea Road
Woodbridge, Ontario, Canada L4L 8A8
Phone (905) 850-2220
Fax (905) 850-9152
jalfano@alfautilityservices.com
Attention: JOSEPH ALFANO, President
JAMES R. LEONE
Attorney at Law
P.O. Box 755
New Smyrna Beach, FL 32170-0755
3188 Oak Lane
Edgewater, FL 32132
Telephone (386) 478-1743
Fax (386) 478-1744
Mobile (407) 701-8550
E-mail: jrleoneattorney@yahoo.com
March 7, 2003
INFORMATION STATEMENT
(FEBRUARY 25, 2003 Preliminary DRAFT)
SUMMARY OF INFORMATION STATEMENT.
This Information Statement advises you and other shareholders of Alfa Utility
Services Inc., a Delaware corporation (the "COMPANY"), about corporate action to
dissolve the Company.
Alfa's dissolution will terminate its corporate existence.
This corporate action is being taken as approved by a majority (53.5%) but less
than unanimous written consent (vote) of shareholders without a meeting.
PLEASE BE ADVISED THAT THIS IS ONLY AN INFORMATION STATEMENT. WE ARE NOT ASKING
YOU FOR A PROXY (A VOTE OF YOUR SHARES) AND YOU ARE REQUESTED NOT TO SEND US A
PROXY.
CONTACT INFORMATION. Our executive offices are at 396 Chrislea Road, Woodbridge,
Ontario L4L 8A8 Canada, phone (905) 850-2220, attention Robert Simone, Vice
President.
RECORD DATE FOR SHAREHOLDER NOTICE AND VOTING RIGHTS. Our Board of Directors
fixed the close of business on March 6, 2003 as the Record Date to determine
stockholders of record on the stock books. They are entitled to receive this
Information Statement as notice that if a meeting were being held they would be
entitled to vote on the proposal to dissolve the Company. On that date
22,803,058 shares of our common stock were outstanding. The proposed dissolution
requires approval by holders of a majority of the outstanding shares of common
stock entitled to vote. Each share of common stock entitles the holder to one
vote on the proposed dissolution.
APPROVALS; TERMS OF DISSOLUTION. No regulatory approval is needed for
dissolution. On March 16, 2003 the Board of Directors by unanimous written
Consent approved dissolution, and then on that date Joseph Alfano (the Company's
President) signed a written Consent voting his majority holding of 12,000,000
shares (53.5%) in favor. Accordingly, all corporate actions necessary to
authorize the dissolution have been taken and no vote by you is needed.
Securities Exchange Act of 1934 voting information regulations allows that
authorization to become effective 20 or more days (business days if information
is incorporated by reference) after we mail this Information Statement to you.
Thus, we intend to file the Certificate of Dissolution (ENCLOSURE "A" with this
Information Statement) with the Delaware Department of State, intended to be
effective about April 7, 2003.
MAILING DATE. This Information Statement is first being sent about March 17,
2003 to holders of our common stock, our only outstanding voting securities.
BUSINESS CONDUCTED. Prior to December 31, 2002, Alfa was engaged in utilities
infrastructure construction. That involved trenching for and installing
electrical, communications, lighting, and water-sewer-storm drain distribution
systems.
2
REASONS FOR DISSOLUTION. We believe dissolution is in the best interests of the
Company and our shareholders and creditors. The reasons include the following.
As of December 31, 2002, the former and now restored owners of the
Company's operating subsidiary, Ontario Power Contracting Limited ("ONTARIO
POWER"), reversed the stock shares exchange that made it a subsidiary of what
became a Company subsidiary. That left the Company with no operations, no
revenues, virtually no assets, but ongoing administrative and disclosure
reporting expenses that no longer serve any useful purpose and merely drain the
earnings of Ontario Power (the only practical source of funding for such
expenses).
The former and now restored owners of Ontario Power took such action
because ongoing preliminary financing and acquisition discussions with new
financial advisors made it clear there is not any urgent need (as previously
believed) to issue registered stock for such purposes. Thus, there is little or
no reason for the high cost of dilution of Ontario Power earnings and assets by
virtue of the high percentage (46.5%) of the "float" stock left in the hands of
the shareholders of the Company when it was known as Envirotech Mfg. Corp., now
renamed Alfa.
Our Board of Directors believes the Company would not benefit from
attempting to continue its existence, because its inability to pay its expenses
would be unfair to its creditors and would only lead to litigation and cessation
of ability to conduct any activity. Because of the large dilution referred to
above and such expenses, the Board does not wish to pursue attempting to utilize
the Company as a "shell" corporation to pursue a business combination.
NO APPRAISAL RIGHTS. Under Delaware General Corporation Law Section 262
dissenting shareholders are not entitled to appraisal rights as to dissolution,
only merger, etc.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The following
table sets forth information as of March 6, 2003 as to beneficial ownership of
our common stock by (i) each director and executive officer, (ii) all executive
officers and directors as a group and (iii) each over 5% owner:
OWNER NAME AND ADDRESS SHARES OWNED PERCENTAGE (1)
- ---------------------- ------------- --------------
Joseph Alfano (2) 12,200,000 53.5%
Director, President and CEO
Robert Simone (2) None -0-
Director, V.P. Finance and CFO
Anthony Sanginesi (2) None -0-
Director, V.P. Operations and COO,
General Manager
All Directors and Executive
Officers as a group 12,200,000 53.5%
Douglas Murdock (3) 2,721,276 11.9%
(1) Based on 22,803,058 shares of Common Stock issued and outstanding. 4,000,000
shares of Alfa (Delaware) Common Stock had been issuable pursuant to a
conversion (exchange) option granted to the former corporate holders of
stock of Ontario Power Contracting Limited the operating subsidiary of an
Alfa (Delaware) subsidiary, Alfa (Canada), which corporations are controlled
by Mr. Alfano.
(2) Address 396 Chrislea Road Woodbridge, Ontario L4L 8A8 Canada
(3) Address 2170 Stanfield Road. Mr. Murdock directly owns 144,000 shares, and
is the apparent owner, officer, or other controlling person of Belmont
Management Services (which owns 332,170 shares) and Interlock Steel (475,000
shares), subtotal 951,170 shares or 4.2%. He also is believed to have an
adult relative, Cathy Murdock (500,000 shares). In January 2003 Alfa was
advised that her stockholding address is the same as Mr. Murdock's business
address, as is the address of Glencario Sanbro (600,000 shares), and that
Ernest Anderson (220,000 shares) is listed as "c/o Doug Murdock", and that
his shares and 450,106 shares listed as In Trust by the Transfer Agent, Olde
Monmouth Stock Transfer, were transferred from 650,106 shares formerly held
by Edward M. "Ted" Slessor, at the request of Mr. Murdock, and that the In
Trust shares are subject to transfer at Mr. Murdock's directions. Thus, Mr.
Murdock appears to control, and beneficially own, such shares in other
persons' names, subtotal 1,770,106 or 7.8%, plus his own and his corporate
shares, subtotal 951,170 or 4.2%, making a grand total of 2,721,276 shares
or 11.9% (not 12% due to decimal rounding off). Mr. Murdock has made stock
transfers on the same dates as 18 other shareholders owning 6,890,000
shares, which might or might not be significant.
SEE "CONVERSION OPTION" UNDER PART II ITEM II-1 "MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS" in Amendment No. 6 to Alfa's Form 10-SB
Registration Statement under the Securities Exchange Act, if information is
desired about a no longer effective 4,000,000 share conversion option
formerly held by two corporations controlled by Mr. Alfano.
FINANCIAL INFORMATION. ENCLOSED or incorporated by reference as listed below
are the financial data listed. Any incorporated information will be sent upon
request (oral or written to the address or phone listed above) at no charge,
within one business day.
3
ALFA INFORMATION AT SEC OFFICE AND WEBSITE. We must comply with the Securities
Exchange Act of 1934 disclosure reporting requirements until the Certificate of
Dissolution is filed. Then we will cease to exist and be unable to take any
action. For further information about us, you may refer to our Form 10-QSB
Quarterly Reports for June 30, 2002 and September 30, 2002 and to our latest
Amendment to our Form 10-SB Registration Statement. You can review them at the
SEC public reference facility, Judiciary Plaza, Room 1024, 450 Fifth Street,
N.W., Washington, D.C. 20549 (phone 1-800-SEC-0330 or 1-800-732-0330), or
electronically on the World Wide Web at http://www.sec.gov.
March 7, 2003 By the Order of the Board of Directors
By: /s/
--------------------------------
JOSEPH ALFANO, President
ENCLOSURES
- ----------
"A" Certificate Of Dissolution (form of)
"B" Alfa Form 10-QSB Quarterly Report for September 30, 2002
"C" Alfa Financial Statements from Form 10-SB Amendment No.5
INFORMATION INCORPORATED BY REFERENCE
- -------------------------------------
None
4
ENCLOSURE "A"
CERTIFICATE OF DISSOLUTION
OF
ALFA UTILITY SERVICES, INC.
UNDER SECTIONS 103 and 275 OF THE DELAWARE GENERAL CORPORATION LAW THE
UNDERSIGNED, BEING THE PRESIDENT OF ALFA UTILITY SERVICES, INC., HEREBY
CERTIFIES:
1. The name of the corporation is ALFA UTILITY SERVICES, INC. (the
"CORPORATION").
1A. The Certificate of Incorporation of said Corporation was filed with the
Delaware Department of State on December 15, 1994.
1B. The Certificate of Incorporation of the Corporation was subsequently
amended more than once (August 30, 1995 and June 1, 2001), changing the
Corporation's name to Envirotech Mfg. Corp. and then to Alfa Utility Services,
Inc., and for other purposes.
2. The execution and filing of this Certificate of Dissolution of the
Corporation has been duly authorized by the unanimous written consent of the
Board of Directors of the Corporation dated March __, 2003, followed by the
written consent dated March __, 2003, of the holder of at least a majority of
all outstanding shares of the Corporation entitled to vote on approval of the
Certificate of Dissolution.
3. In accordance with Delaware General Corporation Law Section 275(a) and (b) it
was determined to be desirable, necessary and in the best interests of the
Corporation and its shareholders and creditors, for the Corporation to terminate
its existence by executing and filing this Certificate of Dissolution. The Board
of Directors caused an Information Statement to be mailed to each stockholder
entitled to vote, notifying them of the Board's written consent adopting a
resolution recommending dissolution as described herein. It also notified them
of the written consent of the holder of a majority of shares, voting to approve
dissolution, effective upon filing this Certificate of Dissolution.
4. The Corporation's directors' and officers' names and address are as follows:
Joseph Alfano, Director, President, CEO c/o Alfa Utility Services, Inc.
Robert Simone, Director, V.P. Finance, 396 Chrislea Road
Secy./Treas., CFO, Woodbridge, Ontario L4L 8A8 Canada
Anthony Sanginese, Director, V.P.
Operations, COO, G. Mgr.
5. The written consent of majority shareholder and written notice to other
shareholders were given in accordance with Delaware General Corporation Law Sec.
228(a) and (d).
IN WITNESS WHEREOF, I have signed this Certificate on March ____, 2003, and I
affirm the statements contained herein as true under penalties of perjury.
JOSEPH ALFANO, President
ENCLOSURE "A" To Information Statement
5
ENCLOSURE "B"
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2002
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
COMMISSION FILE NO. 0-49694
ALFA UTILITY SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 30-0057068
---------------------- ------------------
(State of incorporation) (I.R.S. Employer
Identification Number)
396 CHRISLEA ROAD
WOODBRIDGE, ONTARIO CANADA L4L 8A8
(address of principal executive offices) (Zip Code)
(905) 850-2220, FAX (905) 850-9152
---------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, address and fiscal year, if changed since last report)
Check whether the issuer: (1) has filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
YES [X] NO [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Check whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, of 15(d) of the Exchange Act
subsequent to the distribution of securities under a plan confirmed by the
court.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: At November 12, 2002, there were
22,803,058 shares of common stock outstanding.
FORM 10-QSB
ALFA UTILITY SERVICES, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item I-1. FINANCIAL STATEMENTS 3
Independent Accountant's Report 5/F-1
Consolidated Balance Sheet at September 30, 2002 (Unaudited) 6/F-2
and December 31, 2001
Consolidated Statement of Changes in Stockholders' Equity 7/F-3
for the Nine Months Ended September 30, 2002 and 2001
(Unaudited)
Consolidated Statement of Operations and Comprehensive
Income for the Three and Nine Months Ended
September 30, 2002 and 2001 (Unaudited) 8/F-4
Consolidated Statement of Cash Flows for the Nine Months
Ended September 30, 2002 and 2001 (Unaudited) 9/F-5
Notes to Consolidated Financial Statements 10/F-6
Item I-2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR 11
PLAN OF OPERATION
Item I-3. CONTROLS AND PROCEDURES. (Regulation SB
Item 307) 16
PART II. OTHER INFORMATION 16
Item II-1. LEGAL PROCEEDINGS - NOT APPLICABLE 16
Item II-2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- NOT APPLICABLE 16
Item II-3. DEFAULTS UPON SENIOR SECURITIES -
- NOT APPLICABLE 16
Item II-4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS - NOT APPLICABLE 16
Item II-5. OTHER INFORMATION - NOT APPLICABLE 16
Item II-6. EXHIBITS AND REPORTS ON FORM 8-K
- NOT APPLICABLE 16
SIGNATURES 16
- 3 -
PART I. FINANCIAL INFORMATION
ITEM I-1. FINANCIAL STATEMENTS (REG. S-B ITEM 310(B))
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
- ----------------------------------------------- ----------------------------------------------------------------------------------
PREFERRED STOCK COMMON STOCK ACCUMULATED
------------------------------------------------- OTHER
------------------------------------------------- COMPREHENSIVE
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. -- -- 10,802,058 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 22,802,058 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 22,802,058 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 22,802,058 $ 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 22,802,058 22,802,058 22,802,058 16,866,681
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING - DILUTED 26,802,058 26,802,058 22,802,058 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 -
ITEM I-2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(REG. S-B ITEM 303)
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD LOOKING STATEMENTS
Statements in this Form 10-QSB 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.
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 in Item 1 of this Form 10-QSB.
11
RESULTS OF OPERATIONS
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
SEPTEMBER 30, SEPTEMBER 30,
2002 2001 2002 2001
----------------------------------------------------------
PERCENTAGES PERCENTAGES
Total Sales 100.0 100.0 100.0 100.0
Total Cost of Goods Sold 88.6 89.7 88.0 90.6
----------------------------------------------------------
Gross Profit 11.4 10.3 12.0 9.4
Total Operating Expenses 7.2 8.3 11.6 9.6
----------------------------------------------------------
Income (Loss) From Operations 4.2 2.0 0.4 -0.2
Interest Expense, Net -0.2 -0.7 -0.4 -0.9
----------------------------------------------------------
Income (Loss) Before Income Taxes 4.0 1.3 0.0 -1.1
Provision for (Recovery of) Income Tax 2.9 -0.5 -0.8 -0.9
----------------------------------------------------------
Net Income (Loss) 1.1 0.8 -0.8 -2.0
Other Comprehensive Income (Loss),
Net of Income Tax -0.6 -0.7 0.1 -0.4
----------------------------------------------------------
Comprehensive Income (Loss) 0.5 0.1 -0.7 -2.4
==========================================================
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.
12
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. 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.
13
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.
14
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.
INFLATION
Alfa does not believe its operations have been materially affected by
inflation. Inflation is not expected to have a material future effect.
15
ITEM I-3. CONTROLS AND PROCEDURES. (REGULATION SB ITEM 307)
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
- ------------------------------------------------
The conclusions of Alfa's principal executive officer and principal
financial officer about the effectiveness of Alfa's disclosure controls and
procedures (as defined in Securities Exchange Act of 1934 Rule 13a-14(c) and
summarized below), based on evaluation within 90 days of filing the report, are
that they are effective in their design and implementation, except as follows:
NOT APPLICABLE.
"DISCLOSURE CONTROLS AND PROCEDURES" means controls and other
procedures designed to ensure that information required to be disclosed in
reports under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported, within the time periods specified in SEC rules and
forms. DISCLOSURE CONTROLS AND PROCEDURES include, without limitation, controls
and procedures designed to ensure that information required to be disclosed in
the reports under the Act is accumulated and communicated to the issuer's
management, including its principal executive officer and principal financial
officer, as appropriate to allow timely decisions regarding required disclosure.
(b) CHANGES IN INTERNAL CONTROLS. There were no significant changes in the
internal controls or in other factors that could significantly affect them (for
better or worse) after the above described evaluation, including any corrective
actions as to significant deficiencies and material weaknesses, except as
follows: NOT APPLICABLE.
PART II. OTHER INFORMATION
Item II-1. Legal Proceedings (Reg. S-B Item 103) - Not applicable
Item II-2. Changes in Securities and Use of Proceeds (10-QSB Item II-2,
Reg. S-B Item 701, Rule 463) - Not applicable
Item II-3. Defaults upon senior securities - Not applicable
Item II-4. Submission of matters to a vote of security holders - Not applicable
Item II-5. Other Information (Form 8-K) - Not applicable
Item II-6. Exhibits and reports on Form 8-K - Not applicable
(A) Exhibits:
SEC Ref. No. Title of Document Location
Not applicable (Previously reported, and no contracts entered into during the
quarter are deemed by management to be material in the light of the registrant's
operating results, financial conditions and other factors.)
(B) Reports on Form 8-K: None in this quarter.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized
ALFA UTILITY SERVICES, INC.
November 14, 2002 By: /S/ JOSEPH ALFANO
-------------------------------------------------
Joseph Alfano, President
November 14, 2002 By: /S/ ROBERT SIMONE
-------------------------------------------------
Robert Simone, CFO, Vice President Finance
(Principal Financial and Chief Accounting Officer)
16
CERTIFICATION
In connection with the Quarterly Report of Alfa Utility Services,
Inc. (the "Company") on Form 10-QSB for the period ended September 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Joseph Alfano, Principal Executive Officer of the Company and Robert
Simone, Chief Financial Officer of the Company, each hereby certifies, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of his knowledge:
(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects the financial condition and results of the Company.
Date: November 14, 2002 /S/ JOSEPH ALFANO
-------------------------------------------
Joseph Alfano
President
(Principal Executive Officer)
/S/ ROBERT SIMONE
--------------------------------------------
Robert Simone,
Vice President Finance, Treasurer and CFO
(Principal Financial Officer)
17
I, JOSEPH ALFANO, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ALFA
UTILITY SERVICES, INC.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "EVALUATION DATE"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/S/ JOSEPH ALFANO
-----------------------------
/s/ JOSEPH ALFANO, President
(Principal Executive Officer)
18
I, ROBERT SIMONE, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of ALFA
UTILITY SERVICES, INC.;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "EVALUATION DATE"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 14, 2002
/S/ ROBERT SIMONE
--------------------
ROBERT SIMONE,
Vice President Finance, Treasurer and CFO
(Principal Financial Officer)
ENCLOSURE "C"
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