Future Tech
International, Inc.
Unaudited Interim Condensed
Financial Statements
June 30, 1999 and 1998
Future Tech International, Inc. (in Liquidation Effective May 14, 1999)
Balance Sheet
June 30, 1999
(unaudited)
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Assets
Current Assets:
Cash and cash equivalents $ 3,374,153
Restricted cash 3,504,750
Accounts receivable, net 13,998,484
Inventories 3,814,200
Investment securities - trading 150,689
Prepaid expenses and other current assets 1,847,165
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Total current assets 26,689,441
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Property and equipment, net 2,073,118
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Total assets $ 28,762,559
============
Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable $ 40,486,973
Accrued expenses 1,032,894
Accrued income taxes, interest and penalties 4,603,259
Current portion of mortgage payable 3,827
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Total current liabilities 46,126,953
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Non-current liabilities:
Mortgage payable, less current portion 132,452
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Total liabilities 46,259,405
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Commitments and contigencies
Stockholders' deficit:
Common stock, $1 par value; 1,000 shares authorized,
issued and outstanding 1,000
Advances to stockholders (2,430,706)
Accumulated deficit (15,067,140)
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Total stockholders' deficit (17,496,846)
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Total liabilities and stockholders' deficit $ 28,762,559
============
The accompanying notes are an integral part of these financial statements.
1
Future Tech International, Inc. (in Liquidation Effective May 14, 1999)
Statements of Discontinued Operations in Liquidation
Six Months Ended June 30, 1999 and 1998
(unaudited)
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1999 1998
Net sales:
Third parties $66,885,689 $80,599,744
Related parties 416,255 11,418,237
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67,301,944 92,017,981
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Cost of sales:
Third parties 63,598,696 74,744,678
Related parties 400,169 10,955,525
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63,998,865 85,700,203
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Gross profit 3,303,079 6,317,778
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Operating expenses:
Selling, general and administrative 3,613,352 5,017,743
Legal and professional 548,534 1,325,268
Depreciation and amortization 248,916 248,705
Provision for doubtful accounts:
Third parties 1,375,109 2,036,583
Related parties 416,255 7,123,013
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6,202,166 15,751,312
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Loss from operations (2,899,087) (9,433,534)
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Other income (expense):
Interest income 197,051 328,861
(Loss) gain on sales of investment securities (67,450) 219,926
Interest expense (172,220) (190,844)
Other income 19,032 538,118
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(23,587) 896,061
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Net loss $(2,922,674) $(8,537,473)
=========== ============
Basic and diluted loss per share $ (2,923) $ (8,537)
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Weighted average common shares outstanding
- basic and diluted 1,000 1,000
=========== ============
The accompanying notes are an integral part of these financial statements.
2
Future Tech International, Inc. (in Liquidation Effective May 14, 1999)
Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998
(unaudited)
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1999 1998
Cash flow from operating activities:
Net loss $ (2,922,674) $ (8,537,473)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provisions for doubtful accounts 1,791,364 9,159,596
Depreciation and amortization 248,916 248,705
Decrease in deferred income taxes -- 167,270
Loss (gain) on sales of investment securities 67,450 (219,926)
Changes in operating assets and liabilites:
Restricted cash (3,504,750) --
Accounts receivable (927,137) (7,645,246)
Inventories 4,986,084 3,990,012
Prepaid expenses and other current assets (920,378) (1,003,698)
Accounts payable (211,985) (7,233,863)
Accrued expenses 31,138 (813,000)
Accrued income taxes, interest and penalties 152,799 --
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Net cash used in operating activities (1,209,173) (11,887,623)
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Cash flows from investing activities:
Purchases of property and equipment (55,547) (97,657)
Purchases of investment securities (4,242,969) (1,756,565)
Proceeds from sales of investment securities 4,024,830 1,976,491
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Net cash (used in) provided by investing activities (273,686) 122,269
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Cash flows from financing activities:
Advances to stockholders -- (239,093)
Repayments of advances to stockholders 7,156 --
Dividends -- (1,711,001)
Principal payments on mortgage payable (3,173) (4,021)
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Net cash provided by (used in) financing activities 3,983 (1,947,115)
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Net decrease in cash and cash equivalents (1,478,876) (13,712,469)
Cash and cash equivalents, beginning of period 4,853,029 20,223,307
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Cash and cash equivalents, end of period $ 3,374,153 $ 6,510,838
============ ============
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
3
Future Tech International, Inc.
Notes to Condensed Financial Statements
Six Months Ended June 30, 1999 and 1998
(unaudited)
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1. Basis of Financial Statement Presentation
The accompanying financial statements of Future Tech International, Inc.
(the "Company") have been prepared solely to comply with Bell
Microproducts, Inc.'s ("Bell") requirement to provide audited financial
statements for acquisitions that meet the Securities and Exchange
Commission's criteria under Regulation S-X and are not intended to be used
for any other purpose.
The Company is a privately-held entity owned by two individuals. The
Principal Shareholder owns 80% of the common stock and served as its
Chairman and Chief Executive Officer through September 1998. The Minority
Shareholder owns the remaining 20% and currently serves as its Chief
Executive Officer. The Principal Shareholder fled the United States and is
a fugitive from justice. In October 1998 the Principal Shareholder
tendered control of the Company to the Minority Shareholder, who remains
in control. In April 1999 the U. S. District Court prohibited the
Principal Shareholder from exercising dominion and control over any aspect
of the Company's business. Accordingly, the Company has been operating
under the auspices and control of the Minority Shareholder since the
Court's ruling, and as of the filing of the bankruptcy has operated under
the jurisdiction of the bankruptcy court.
On May 14, 1999, the Company entered into an asset purchase agreement to
sell certain of its operating assets, including certain inventories,
certain accounts receivable and certain plant and equipment, to a
wholly-owned subsidiary of Bell. Under the asset purchase agreement, the
Bell subsidiary agreed to assume up to $22,000,000 of the Company's debt
to its trade vendors including Quantum Corporation, Maxtor Corporation,
and others, subject to the right to certain offsets and reductions for
uncollected receivables. On May 17, 1999, the Company filed a voluntary
petition for relief under the provisions of Chapter 11 of the United
States Bankruptcy Code. The Company's reorganization plan and the sale of
assets to the Bell subsidiary were approved by the United States
Bankruptcy Court on July 9, 1999. The Bell subsidiary closed the
transaction on July 21, 1999. The Bell subsidiary paid the Company
$1,500,000 at closing and is obligated to pay additional consideration of
$1,000,000 subject to certain offsets and reductions within 45 days of the
closing date. The parties agreed to extend the 45-day period while the
parties calculate all applicable offsets and reductions. Neither Bell nor
the subsidiary assumed any rights or obligations to collect amounts due
from related parties (Note 4), to pay additional assessments arising from
any examinations or investigations by the IRS, state or other authorities
(Note 3), or to prosecute, defend, collect or pay obligations, if any,
that may ultimately arise from the Company's litigation with a former
vendor (Note 5). Neither Bell nor the Bell subsidiary entered into any
agreements in connection with the asset purchase agreement that would
subject either to claims by the Company's creditors in its bankruptcy
proceeding.
4
Future Tech International, Inc.
Notes to Condensed Financial Statements
Six Months Ended June 30, 1999 and 1998
(unaudited)
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The accompanying financial statements have been prepared assuming the
Company continues business in the normal course as a going concern. The
Company is currently in liquidation as part of its reorganization plan;
the financial statements have not been prepared on a liquidation basis.
These financial statements do not include any adjustments that might arise
from the outcome of the bankruptcy proceedings.
In management's opinion, the accompanying unaudited interim condensed
financial statements of Future Tech International, Inc. (the "Company"),
in liquidation effective May 14, 1999 under Chapter 11 of the United
States Bankruptcy Code, contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the Company's financial
position, the results of its operations and its cash flows.
The accompanying unaudited interim condensed financial statements have
been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission. Pursuant to such rules and regulations, certain
information and disclosures normally included in the financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted. The interim condensed financial statements
should be read in conjunction with the Financial Statements and the Notes
to the Financial Statements for the year ended December 31, 1998.
The accounting policies followed for interim financial reporting are the
same as those disclosures in Note 1 of the Notes to Financial Statements
for the year ended December 31, 1998.
2. 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. The Company's management uses estimates
primarily with respect to the allowance for doubtful accounts, the useful
lives of property, plant and equipment and accrued expenses. Actual
results could differ from those estimates.
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Future Tech International, Inc.
Notes to Condensed Financial Statements
Six Months Ended June 30, 1999 and 1998
(unaudited)
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3. Earnings Per Share
Earnings per share have been calculated in accordance with Statement of
Financial Accounting (SFAS) No. 128, "Earnings per share". Basic earnings
per share is computed by dividing the earnings available to common
stockholders by the weighted average number of common shares outstanding.
For the six months ended June 30, 1999 and 1998, there were no common
stock equivalents. Accordingly, basic and diluted earnings per share are
equivalent.
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