SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (earliest event reported): November 14, 1996
GDC GROUP, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 0-15891 84-0891674
- --------------------------------------------------------------------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification number)
1580 Lincoln St., Suite 900, Denver. Colorado 80203
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (303) 840-6585
------------------------------
DK Industries, Inc., 1580 Lincoln St., Suite 1125, Denver, Colorado 80203
- --------------------------------------------------------------------------------
(Former name and former address of registrant)
Page 1 of 4
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
--------------------------------
None.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
On December 13, 1996, the Registrant, acquired 100% of the membership
interest of Walsh Remedial Construction Services, LLC, ("WRCS") a Colorado
limited liability company. The interests were acquired from James P. Walsh &
Associates, Inc., a Colorado corporation, doing business under the name of Walsh
Environmental Engineers, Inc. ("Walsh Environmental") and from William T. Spear,
one of the WRCS' managers. The consideration for the acquisition was the payment
of certain obligations of WRCS and its members, an agreement to make certain
conditional royalty payments based upon certain project revenues, to BankOne,
Boulder, Colorado, to be credited to a debt owed by Walsh Environmental to the
bank, and the assumption of WRCS' liabilities and obligations.
WRCS conducts and provides environmental remediation services and
general environmental services. WRCS' principal project is as project manager of
a New Jersey partnership engaged in harbor dredging and material disposal for
the Port Authority of New York and New Jersey. WRCS' principal physical assets
are the equipment used in material handling for the dredging project.
William T. Spear, one of the selling members, is a manager of WRCS.
Mr. Spear is also a guarantor of the Bank One debt referred to above. The
royalty payments to be paid to Bank One are generated from projects in the New
York and New Jersey harbors, being performed by Enviro-Dredge, a New Jersey
limited liability partnership, for which WRCS is the project manager.
The acquisition was funded by loans from two private party lenders, in
the total amount of $3,000,000. The loans bear interest at the rate of 14% per
annum and are payable in three installments, $750,000, plus accrued interest due
April 1, 1997, and July 1, 1997, and a payment of $1,500,000 plus accrued
interest due December 15, 1997. These loans are currently past due and in
default.
The lenders are shareholders of the Registrant, each holding less than
5% of the issued and outstanding shares of the Registrant.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
--------------------------
None.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT
---------------------------------------------
None.
Page 2 of 4
ITEM 5. OTHER EVENTS
------------
At a special shareholders meeting held November 14, 1996, the Articles
of Incorporation were amended to:
a. Change the name of the Registrant to GDC Group, Inc.
b. Increase the authorized shares of common stock of the Registrant
from 30,000,000 to 70,000,000 shares and increase the number of
authorized shares of preferred stock of the Registrant from
10,000,000 to 20,000,000.
c. Walsh Remedial Construction Services, LLC reorganized in March,
1997, as a Delaware corporation named Walsh Remedial Construction
Services, Inc., a Delaware corporation.
d. In June, 1997, Walsh Remedial Construction Services, Inc. formed
a wholly owned subsidiary, Enviro-Dredge, Inc., a Delaware
corporation.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
-------------------------------------
John E. McConnaughy, Jr. resigned as a Director of Registrant on July
10, 1997. Kathleen Elnaggar resigned as a Director of Registrant on
August 11, 1997.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Financial Statements of Business Acquired.
------------------------------------------
Audited Financial Statements for the business acquired, Walsh
Remedial Construction Services, LLC, are included for the period from inception,
March 1, 1995 to 9/30/96, see F-1 through F-13 attached.
(b) Pro Forma Financial Information.
--------------------------------
Pro Forma Condensed Combined Balance Sheet for the Registrant at
9/30/96 (Unaudited), and Pro Forma Condensed Combined Statements of Operations
for year ended 9/30/96 and ten months ended 9/30/95 (Unaudited), see F-14
through F-16 attached.
ITEM 8. CHANGE IN FISCAL YEAR
---------------------
None.
Page 3 of 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GDC GROUP, INC.
Date: Oct. 24, 1997 By: /s/ James W. Muzzy
-----------------------------------
James W. Muzzy, Vice President, and
Principal Financial Officer
Page 4 of 4
INDEPENDENT AUDITORS' REPORT
To the Board Of Directors and Members
Walsh Remedial Construction Services, LLC
Boulder, Colorado
We were engaged to audit the accompanying balance sheet of Walsh Remedial
Construction Services, LLC as of September 30, 1996, and the related statements
of operations, changes in members' equity (deficit), and cash flows for the nine
months then ended. These financial statements are the responsibility of the
Company's management.
During 1996, the Company developed a new process to dredge harbors and process
and recycle the resulting sediment for the use in other commercial enterprises.
Based upon this process, the Company formed a joint venture with three
additional companies to implement this process on a pilot contract with the Port
Authority of New York and New Jersey. The contract was to process 100,000 cubic
yards of sediment and was to be completed in August 1996. During the course of
performing the contract, the Company discovered several problems with its
process and encountered changed conditions in the harbor from what was
originally represented. These conditions caused significant delays and cost
overruns related to their segment of the contract. Several modifications to the
process have been attempted by the Company but none have sustained consistent
production. The Company estimates that it will incur total costs of $7,710,659
on the project which will exceed budgeted revenues and result in an estimated
loss of $4,871,658. The Company believes it has identified an economically
feasible way to complete the project. However, the Company is unable to estimate
with certainty what costs will be incurred to complete this project and thus,
cannot estimate with certainty what its liability and ultimate loss on this
project will be. The losses incurred to date have used all of the Company's
financial resources and as of November 13, 1996, the Company is in default on
its loans with a commercial bank. The Company is negotiating to be acquired by
an entity with the financial resources to complete the project. If it is
unsuccessful in securing new financing as a part of the sale, it will be unable
to continue in existence.
As discussed in Note 6, the Company received a $1,000,000 deposit relating to a
potential sale of the Company. This potential sale was not consummated and the
Company in accordance with their interpretation of the contract recognized this
as other income. The Company has been notified by the investors that they
believe the $1,000,000 is owed to them by the Company and that they will pursue
collection efforts for this amount.
F-1
To the Board Of Directors and Members
Walsh Remedial Construction Services, LLC
Page Two
Because of the uncertainty regarding the Company's ability to complete the Port
Authority Project and the determination of the ultimate costs to complete the
project, we therefore are unable to form an opinion regarding the estimated
costs to complete this project and the ultimate loss resulting from this project
which is significant to the financial statements. In addition, the resolution of
the $1,000,000 deposit is not known at this time. Due to the items discussed
above, we are unable to and we do not express, an opinion on the financial
statements referred to in the first paragraph.
/s/ Ehrhardt Keefe Steiner & Hottman PC
Ehrhardt Keefe Steiner & Hottman PC
November 13, 1996
Denver, Colorado
F-2
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC
BALANCE SHEET
September 30, 1996
ASSETS
Current assets $123,567
Cash 436,133
Accounts receivable, net of allowance of $0 27,021
Dividend receivable (Note 8) 4,200
Work in process 14,451
Prepaid expenses -----------
Total current assets 605,372
-----------
Property and equipment 26,011
Furniture and equipment 29,442
Computer equipment 28,138
Lab and field equipment 58,455
Vehicles -----------
142,046
Less accumulated depreciation and amortization (30,635)
-----------
111,411
-----------
Receivable to be settled with an exchange of property (Note 9) 140,565
Other assets 1,894
Note receivable - related party (Note 3) 4,509
-----------
$863,751
===========
LIABILITIES AND MEMBERS' DEFICIT
Current liabilities
Note payable and lines-of-credit (Note 4) $2,080,830
Estimated costs in excess of future billings (Note 2) 459,600
Related party advances (Note 8) 213,217
Accounts payable - trade 1,393,292
Accrued payroll 59,988
Accrued expenses 444,377
Current portion of capital lease obligations (Note 5) 3,883
Total current liabilities 4,655,187
-----------
Capital lease obligations, net of current portion (Note 5) 10,326
COMMITMENTS AND CONTINGENCIES (NOTE 5)
Member's deficit ($3,801,762)
-----------
$ 863,751
===========
See Notes to Financial Statements
F-3
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
STATEMENTS OF OPERATIONS
For the Nine Months Ended September 30, 1996
Contract revenues $1,822,919
----------
Operating expenses
Contract costs 1,726,616
General and administrative 129,058
Research and development costs (Note 2) 4,871,658
----------
(Loss) from operations 6,727,332
----------
(4,904,413)
----------
Other income (expense)
Forfeited deposit (Note 6) 1,000,000
Interest income 1,386
Interest expense (85,288)
----------
916,098
----------
Net (Loss) for the nine months ended
September 30, 1996 (3,988,315)
==========
See Notes to Financial Statements
F-4
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC
Statement of Changes in Members' Equity (Deficit)
For the Nine Months Ended
September 30, 1996
Members' equity at January 1, 1996 186,553
Net loss for the nine months ended September 30, 1996 (3,988,315)
-----------
Members' deficit at September 30, 1996
$(3,801,762)
===========
See notes to financial statements.
F-5
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
Statements of Cash Flows
For the Nine Months Ended September 30, 1996
Cash flows from operating activities
Net loss $(3,988,315)
Adjustments to reconcile net loss to net cash provided by ------------
operating activities -
Depreciation and amortization 20,106
Receivable to be settled with an exchange of property (140,565)
Changes in assets and liabilities -
Accounts receivable 1,160,632
Work in process 82,998
Prepaid expenses 6,414
Estimated costs in excess of future billings 459,600
Accounts payable 385,368
Accrued expenses 344,228
------------
2,318,871
------------
Net cash (used in) operating activities (1,669,444)
------------
Cash flows from investing activities
Capital expenditures (13,922)
Net cash (used in) investing activities (13,922)
------------
Cash flows from financing activities
Principal payments on notes payable (121,170)
Proceeds from note payable and lines-of-credit 1,882,000
Principal payments on capital lease obligations (5,067)
Increase in related party advance 69,595
Increase in dividend receivable to minority member (27,021)
Net cash provided by financing activities 1,798,337
------------
Net increase in cash and cash equivalents 114,971
Cash - January 1, 1996 8,596
-----
Cash - September 30, 1996 $ 123,567
-----------
Supplemental disclosure of cash flow information
See notes to financial statements.
F-6
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------------------------
Walsh Remedial Construction Services (WRCS) is a full-service environmental
construction company with the resources, personnel, and equipment to complete a
wide range of remedial construction demolition projects. WRCS is a limited
liability company (LLC) owned by Walsh Environmental Scientists and Engineers,
Inc. (Walsh Environmental), an environmental consulting firm with offices in the
United States and South America and William Spear.
With offices in Boulder, Colorado, Salt Lake City, Utah, and Elizabeth, New
Jersey, as well as a large network of subcontractors, WRCS has the flexibility
to respond to projects nationwide. WRCS provides the following services:
remedial construction and demolition, treatment services and project management.
Concentration of Credit Risk
- ----------------------------
Financial instruments which potentially subject the Company to concentrations of
credit risk consist of accounts receivable and temporary cash investments. The
Company grants credit to its customers who are located throughout the United
States and foreign countries abroad. To reduce credit risk, the Company
periodically performs credit analysis and monitors its customers' financial
condition. The Company places its temporary cash investments with high credit
quality financial institutions and, by policy, limits the amount of credit
exposure to any one financial institution. At September 30, 1996, there was
approximately $294,000 in one bank over the federally insured limit.
Revenue Recognition
- -------------------
Revenues from professional services are recognized at the time services under
contract arrangements are performed. When billings exceed revenue earned by
performance of services, the excess billing is deferred. Services in excess of
billings are reflected as work in process. Income is recognized as work on
contracts progresses. Estimated losses on contracts in progress are charged to
operations when determined (Note 2).
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Equipment under capital lease is
stated at the net present value of the minimum lease payments at inception of
the lease.
Depreciation and amortization are provided using the straight-line method over
the estimated useful asset lives for owned assets and the related lease terms
for equipment under capital leases.
F-7
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
- --------------------------------------------------------------------------------
Research and Development Costs
- ------------------------------
Research and development costs are expensed as they are incurred.
All costs relating to the Port Authority Project (Note 2) have been expensed due
to the lack of technological feasibility. The actual costs incurred on this
Project as of September 30, 1996 amounted to $5,140,186 of which $1,158,781 is
equipment and $3,981,405 is labor and other contract costs. However, revenues of
$728,128 have reduced research and development costs for this project and an
additional $459,600 in estimated costs to complete in excess of future billings
have also been included in research and development costs as of September 30,
1996 (Note 2). The equipment costs are being expensed as the Company believes
there are no alternative uses for the equipment other than this Project.
Income Taxes
- ------------
The Company is a Limited Liability Corporation (LLC) for income tax purposes.
Consequently, all taxes on the income of the Company will be imposed on the
Company's members.
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 period.
Actual results could differ from those estimates.
The largest and most significant estimate is associated with the costs to
complete jobs in progress specifically the Port Authority Project (Note 2). This
project requires significant estimates which are not determinable with certainty
at this time.
NOTE 2 - FORMATION OF JOINT VENTURE AND THE PORT AUTHORITY PROJECT
- ------------------------------------------------------------------
On April 9, 1996, the Company entered into a joint venture (Enviro-Dredge, LLP)
where it prepared a joint bid with its three other partners to engage and carry
on as partners a project that involved the dredging and amendment of 100,000
cubic yards of sediment from Reach A in the Port Newark Channel and its ultimate
placement at a construction site which will use this amended material as
structural fill for the construction of a shopping center.
F-8
WALSH REMEDIAL CONSTRICTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
Note 2 - FORMATION OF JOINT VENTURE AND THE PORT AUTHORITY PROJECT (CONTINUED)
- ------------------------------------------------------------------------------
The joint venture was awarded the contract by the Port Authority of New York and
New Jersey on June 5, 1996 and work commenced on June 25, 1996. Each of the
joint venture partners were responsible for a major phase of the project. The
Port Authority is to pay the joint venture $56.00 per cubic yard of material
processed up to 100,000 cubic yards of which the Company will receive $26.02 per
cubic yard. In addition, the Company was paid $237,000 for the costs to mobilize
or set up the project. The Company's role in the joint venture is to provide
overall project management and be responsible for offloading the dredged
material and its amendment to the specifications required for the structural
fill material
However, the project incurred a number of set-backs in being able to achieve
technological feasibility. As of November 13, 1996, technological feasibility
had not been obtained because only approximately 19,000 cubic yards of material
has been processed with the Company revising its production process for a third
time.
Due to the uncertainty of the project's completion and the significance of this
project, the percentage of completion method of accounting for this project is
not feasible. However the Company has recognized and expensed all costs
associated with the project through September 30, 1996 as research and
development costs due to the uncertainty of technological feasibility. Actual
research and development expense related to this project through September 30,
1996 amounted to $5,140,186. The Company reduced research and development
expense by $728,128 which represents the revenues recognized through September
30, 1996 on this project which consists a $237,000 mobilization fee and $491,128
on the production of 18,875 cubic yards of material.
As stated above, the Company has yet to achieve technological feasibility and
thus cannot accurately determine the cost to complete this project. Management's
best estimate is as follows:
Research and development expense incurred as of September 30, 1996 $5,140,186
Less: revenue earned and recognized as of September 30, 1996 netted against
research and development costs (728,128)
---------
Net research and development expense prior to estimated costs in excess of
future billings as of September 30, 1996 4,412,058
Estimated costs to complete the project 2,570,473
Future revenues to be recognized on the project (2,110,873)
-----------
Total estimated loss on the project 4,871,658
Less: Loss incurred as of September 30, 1996 (4,412,058)
-----------
Additional costs to complete the project in excess of future billings - included
in research and development expense as of September 30, 1996 $459,600
========
F-9
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
NOTE 2 - FORMATION OF JOINT VENTURE AND THE PORT AUTHORITY PROJECT (CONTINUED)
- ------------------------------------------------------------------------------
The above estimated costs to complete the project do not include any remediation
costs.
Due to the losses incurred to date, all of the Company's financial resources
have been depleted and the Company is in default on its loans. The Company is
currently negotiating for a sale to a third party with the financial resources
to complete the development of a technologically feasible process and complete
the project. If the Company is unsuccessful in obtaining such a sale or in
obtaining additional financing, it will not continue in existence.
NOTE 3 - NOTE RECEIVABLE - RELATED PARTY
- ----------------------------------------
September 30,
1996
-------------
Note receivable - minority member of WRCS, interest at 7% per annum with
interest and principal due June 1, 2000 or within 10 days of written request. $4,509
The note is unsecured. ======
NOTE 4 - NOTE PAYABLE AND LINES-OF-CREDIT September 30,
- ----------------------------------------- 1996
-------------
Line-of-credit - bank, due March 30, 1997, with monthly interest payments at
prime plus 2% per annum (10.75% as of September 30, 1996). Collateralized by
all assets of the Company. $1,100,000
Note payable - bank, due March 6, 1999, with monthly principal payments of
$20,195 and monthly interest payments at prime plus 1% per annum (9.25% as of
September 30, 1996). Collateralized by all assets of the Company.
605,830
Line-of-credit - bank, due August 22, 1996 with interest at prime plus 2% per
annum (10.25% as of September 30, 1996) due at maturity. Collateralized by all
assets of the Company. The line-of-credit has not been repaid and is in
default.
375,000
$2,080,830
==========
F-10
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - NOTE PAYABLE AND LINES-OF-CREDIT (CONTINUED)
- -----------------------------------------------------
All of the above lines-of-credit and note payable are cross-collateralized with
all the assets of the Company. In addition, the majority member of the Company,
Walsh Environmental is a co-borrower on the above debts. As of November 13,
1996, the Company is not in compliance with certain financial covenants and has
exceeded collateral limits. The bank has notified the Company that they consider
all amounts under the note payable and line-of-credits in default and therefore
they are currently due and payable. Lastly, a minority, individual member of the
Company and three officers/stockholders of Walsh Environmental have personally
guaranteed the $375,000 line-of-credit jointly and severally.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
- --------------------------------------
Leases
- ------
The Company has entered into capital leases for an automobile. The value of the
automobile under capital lease is $21,065 with accumulated amortization of
$3,160. The Company also leases equipment and office facilities under
noncancellable operating leases that expire at various dates through March 1998.
Future minimum lease payments at September 30, 1996 are as follows:
Capital Operating
Year Ending December 31, Leases Leases
- ------------------------ ------- ----------
1997 $ 5,566 $252,842
1998 5,566 244,179
1999 5,566 76,075
2000 928 -
2001 - -
-------- --------
17,626 $573,097
========
Less amount representing
interest (3,417)
Present value of future --------
minimum lease payments 14,209
Less current portion (3,883)
--------
$10,326
========
Rent expense for the above operating leases and other month to month leases was
$1,001,823 for the nine months ended September 30, 1996.
F-11
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - COMMITMENTS AND CONTINGENCIES (CONTINUED)
- --------------------------------------------------
Accounts Payable
- ----------------
Certain amounts included in accounts payable are past due and those vendors are
demanding additional interest charges and/or collection costs be paid by the
Company and threatening the placement of liens on the Company's property. These
financial statements do not include any amounts for these additional costs.
NOTE 6 - FORFEITED DEPOSIT
- --------------------------
A certain group of investors contemplated purchasing certain assets and
liabilities of the Company. The investors agreed to provide $1,000,000 to the
Company to be used to meet its current obligations. The $1,000,000 was to be an
interest free loan to the Company in contemplation of the purchase. However, the
investors and the Company were unable to agree on the terms of the purchase.
Therefore, pursuant to the Company's interpretation agreement with the
investors, the Company believes it is not required to repay the $1,000,000 and
has reflected it as a forfeited deposit revenue. The Company has been notified
by the investor that they believe that the Company is obligated to repay this
$1,000,000 and that the investors will pursue collection efforts for this
amount.
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
- --------------------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value. Fair value estimates are made at a specific point in time for the
Company's financial instruments; they are subjective in nature and involve
uncertainties, matters of significant judgment and, therefore, cannot be
determined with precision. Fair value estimates do not reflect the total value
of the Company as a going concern.
The carrying value of cash and cash equivalents, receivables, work in process,
advances accounts payable and accrued expenses approximate their fair values due
to the liquid or short-term nature of these accounts.
Due to rates currently available to the Company for debt which are similar to
terms on the remaining maturities, the fair value of existing debt approximates
their carrying value.
No attempt has been made to estimate the fair value of financial instruments in
regards to default interest on the note payable and lines-of-credit or the
ultimate realization of the assets and liabilities, if the Company does not
continue in existence.
F-12
WALSH REMEDIAL CONSTRUCTION SERVICES, LLC.
NOTES TO FINANCIAL STATEMENTS
NOTE 8 - RELATED PARTY TRANSACTIONS
- -----------------------------------
As of September 30, 1996, the Company has been advanced $213,217 from Walsh
Environmental, the majority member of the Company. Walsh Environmental paid
$213,217 in operating expenses for the Company for the nine months ended
September 30, 1996.
As of September 30, 1996, the Company distributed $27,021 to the individual
minority member for income taxes that he would have incurred on his individual
tax return based on the net income of the Company for its first two quarters, if
the Company had continued to be profitable. Since the Company is not profitable,
the member is to repay these funds to the Company.
NOTE 9 - RECEIVABLE TO BE SETTLED WITH AN EXCHANGE OF PROPERTY
- --------------------------------------------------------------
The Company performed professional services in exchange for a kiln and a parcel
of land as payment. The outstanding receivable amount as of September 30, 1996
is $140,565 and the Company believes the fair value of the kiln and property
exceeds this amount. However, the Company doesn't currently have title to these
items.
F-13
GDC Group, Inc.
Pro Forma Condensed Combined Balance Sheet
SEPTEMBER 30, 1996 (Unaudited):
- ------------------------------------------------
Walsh GDC Group,Inc.
Remedial Pro forma
GDC Group, Construction Pro forma Condensed
ASSETS Inc. Services Entries Combined
- ------ ----------- ------------ ------------ --------------
Current Assets:
Cash & cash equivalents $1,298,361 $ 123,567 (B) $ 3,000,000 $2,446,928
(D) (975,000)
(E) (1,000,000)
Accounts receivable, trade 412,248 436,133 848,381
Other receivables 329,168 27,021 356,189
Inventory 177,234 4,200 181,434
Prepaid expenses 195,561 14,451 210,012
Other current assets 4,936 4,936
----------- ----------- ------------ -----------
Total Current Assets 2,417,508 605,372 1,025,000 4,047,880
Property & equipment, net 7,655,891 111,411 7,767,302
Debt restructure costs, net 922,501 922,501
Other assets 161,675 146,968 308,643
Goodwill (G) 3,681,723 3,681,723
----------- ----------- ------------ -----------
Total Assets $11,157,575 $ 863,751 $ 4,706,723 $16,728,049
=========== =========== ============ ===========
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
Current Liabilities:
Current portion, long-term debt $ 4,254,724 $ 609,713 (B) $ 1,500,000 $ 5,754,724
(F) (609,713)
Line of credit payable 241,726 1,475,000 (D) (975,000) 241,726
(F) (500,000)
Accounts payable, trade 2,718,932 1,393,292 (C) 1,000,000 5,112,224
(E) (1,000,000)
Accrued expenses 1,036,881 504,365 1,541,246
Est. costs in excess billings 459,600 459,600
Other current liabilities 213,217 213,217
----------- ----------- ------------ -----------
Total Current Liabilities 8,252,263 4,655,187 (584,713) 12,322,737
Long term debt, net of current 95,552 10,326 (B) 1,500,000 1,595,552
(F) (10,326)
Deferred income taxes 82,145 82,145
Stockholders' Equity:
Common stock par value 112,568 112,568
Additional paid-in capital 3,588,518 3,588,518
Retained earnings (973,471) (3,801,762) (A) 3,801,762 (973,471)
----------- ----------- ------------ -----------
Total Stockholders' Equity 2,727,615 (3,801,762) 3,801,762 2,727,615
----------- ----------- ------------ -----------
Total Liabilities &
Stockholders' Equity $11,157,575 $ 863,751 $ 4,706,723 $16,728,049
=========== =========== ============ ===========
Pro Forma Entries:
(A) Walsh capital structure is eliminated.
(B) Private party loans totaling $3,000,000 are recorded.
(C) $1 million forfeited deposit income is reversed from Walsh income statement
and recorded as a purchase price liability.
(D) Bank debt totaling $975,000 is paid in cash.
(E) Debt to an individual totaling $1,000,000 is paid in cash.
(F) Remaining bank debt totaling approximately $1,120,000 is forgiven in
exchange for future royalty payments to the bank.
(G) Goodwill is recognized to the extent that liabilities assumed exceed assets
acquired.
F-14
GDC Group, Inc.
Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 1996 (Unaudited):
- ----------------------------------------------------
Walsh
Remedial GDC Group, Inc.
Construction Pro forma
GDC Group, Services Pro Forma Condensed
Inc. (9 Months) Entries Combined
---------- ------------ --------- ---------------
Contract revenue $6,583,508 $1,822,919 $8,406,427
Cost of contract revenue 6,377,411 1,726,616 8,104,027
---------- ------------ --------- ---------------
Gross Profit 206,097 96,303 0 302,400
Research & development costs 4,871,658 4,871,658
Selling, general & admin. exp. 3,434,197 129,058 3,563,255
---------- ------------ --------- ---------------
Net Operating Income (Loss) (3,228,100) (4,904,413) 0 (8,132,513)
Other Income (Expenses):
Interest expense (934,041) (85,288) (B) ($420,000) (1,354,041)
(C) 85,288
Miscellaneous, net (283,401) 1,001,386 (A)(1,000,000) (282,015)
Amortization of goodwill (D) (245,448) (245,448)
---------- ------------ --------- ---------------
Total Other Income (Expenses) (1,217,442) 916,098 (1,580,160) (1,881,504)
---------- ------------ --------- ---------------
Income (Loss) Before Taxes (4,445,542) (3,988,315) (1,580,160) (10,014,017)
Income (Taxes) Credit 631,975 631,975
---------- ------------ --------- ---------------
Net Income (Loss) ($3,813,567) ($3,988,315) ($1,580,160) ($9,382,042)
========== ============ ========= ===============
Pro forma income (loss) per share ($5.381)
===============
Pro forma weighted average shares outstanding 1,743,612
===============
Pro Forma Entries:
(A) $1 million forfeited deposit income is reversed from Walsh income statement
and recorded as a purchase price liability.
(B) Interest expense on private party loans totaling $3,000,000 at 14% is
recorded as if the loans were obtained at the beginning of the reported
periods.
(C) Interest expense on bank debt totaling approximately $2,095,000 is reduced
as if the bank debt had been paid off at the beginning of the reported
periods.
(D) Amortization of goodwill is recorded using the straight-line method with an
estimated life of fifteen years, as if the purchase had occurred at the
beginning of the reported periods.
F-15
GDC Group, Inc.
Pro Forma Condensed Combined Statement of Operations
Ten Months Ended September 30, 1995 (Unaudited):
- ----------------------------------------------------
Walsh GDC Group, Inc.
Remedial Pro forma
GDC Group, Construction Pro Forma Condensed
Inc. Services** Entries Combined
---------- ---------- --------- ---------------
Contract revenue $8,628,165 $3,764,345 $12,392,510
Cost of contract revenue 5,544,236 3,386,222 8,930,458
---------- ---------- --------- ---------------
Gross Profit 3,083,929 378,123 0 3,362,052
Selling, general & admin. exp. 2,394,765 51,704 2,446,469
---------- ---------- --------- ---------------
Operating Income (Loss) 689,164 326,419 0 1,015,583
Other Income (Expenses):
Interest expense (563,188) (9,166)(B) ($350,000) (913,188)
(C) 9,166
Miscellaneous, net (75,557) 379 (75,178)
Members' distributions (151,079)(A) 151,079 0
Amortization of goodwill (D) (204,540) (204,540)
---------- ---------- --------- ---------------
Total Other Income (Expense) (638,745) (159,866) (394,295) (1,192,906)
---------- ---------- --------- ---------------
Income (Loss) Before Taxes
and Cumulative Effect 50,419 166,553 (394,295) (177,323)
Income (Taxes) Benefit (20,362) (20,362)
---------- ---------- --------- ---------------
Income (Loss) Before
Cumulative Effect of Change
in Accounting Principle 30,057 166,553 (394,295) (197,685)
Cumulative Effect on Prior Years
of Changing to Different
depreciation method 298,672 298,672
---------- ---------- --------- ---------------
Net Income (Loss) $328,729 $166,553 ($394,295) $100,987
========== ========== ========= ===============
Pro forma income (loss) per share $0.077
===========
Pro forma weighted average shares outstanding 1,304,720
===========
** Walsh Remedial Construction Services Statement of Operations is for the
period from inception (March 1, 1995) through December 31, 1995.
Pro Forma Entries:
(A) Distributions made to Walsh limited liability company members during the
period are reversed.
(B) Interest expense on private party loans totaling $3,000,000 at 14% is
recorded as if the loans were obtained at the beginning of the reported
periods.
(C) Interest expense on bank debt totaling approximately $2,095,000 is reduced
as if the bank debt had been paid off at the beginning of the reported
periods.
(D) Amortization of goodwill is recorded using the straight-line method with an
estimated life of fifteen years, as if the purchase had occurred at the
beginning of the reported periods.
F-16