United States Bankruptcy Court
Eastern District Of Kentucky
Ashland Division
IN RE: CASE NO. 03-10078
DEBTOR(S) CHAPTER 11
Monthly Operating Report For Month Ending August 30, 2003
Comes now Kentucky Electric Steel, Inc., debtor in possession and
herby submits its Monthly Operating Report for the Periods commencing August 3,
2003 and ending August 30, 2003 as shown by the report and exhibits consisting
of 14 pages and containing the following, as indicated:
___X____ Monthly Reporting Questionnaire (Attachment 1)
___X____ Comparative Balance Sheets (Forms OPR - 1 & OPR - 2)
___X____ Summary of Accounts Receivable (Form OPR - 3)
___X____ Schedule of Post - Petition Liabilities (Form OPR - 4)
___X____ Statement of Income (Loss) Form OPR - 5)
___X____ Statement of Sources and Uses of Cash (Form OPR - 6)
I declare under penalty of perjury that this report and all
attachments are true and correct to the best of my knowledge and belief. I also
hereby certify that the original Monthly Operating Report was filed with the
Bankruptcy Court Clerk and a copy was delivered to the U.S. Trustee.
Date: 09-16-03 DEBTOR
By: /s/ William J. Jessie
----------------------------------------
(Signature)
Name & Title: William J. Jessie, President
----------------------------
(Print or Type)
Address: US Route 60
---------------------------------
Ashland, KY 41101
------------------------------------------
Telephone Number: (606) 929 - 1200
-------------------------
Attachment 1 (Page 1)
Chapter 11
Monthly Operating Report
Monthly Reporting Questionnaire
CASE NAME: Kentucky Electric Steel, Inc.
CASE NUMBER: 03-10078
MONTH OF: AUGUST
1. Payroll - State the amount of all executive wages paid and taxes withheld
and paid (1)
Name and Title of Executive Wages Paid Taxes (2)
- --------------------------- ----------------------------- ----------------------------
Gross Net Due Paid
----- --- --- ----
William J. Jessie - $ 32,720 $ 22,280 $ 10,915 $ 10,915
(President and CFO)
- -------------------------------------------------------------------------------------------------
William H. Gerak - - - - -
(Vice President of Administration)
- -------------------------------------------------------------------------------------------------
Joseph E. Harrison - - - - -
(Vice President of Sales and Marketing)
- -------------------------------------------------------------------------------------------------
Jack W. Mehalko - - - - -
(Interim President)
- -------------------------------------------------------------------------------------------------
Total Executive Payroll: $ 32,720 $ 22,280 $ 10,915 $ 10,915
--------------------------------------------------------------
2. Insurance - Is workers' compensation and other insurance in effect? Yes Are
Payments Current? YES If any policy has lapsed, been replaced or renewed, state
so in the schedule below. Attach a copy of the new policy's binder pr cover
page.
Name of Coverage Expiration Premium Date of Coverage Pd.
Type Carrier Amount Policy # Date Amount Through
- ---- ------- -------- -------- ---------- ------- --------------------
Casualty: (3)_______________________________________________________________________________
Workers Comp. _______________________________________________________________________________
General Liability: _______________________________________________________________________________
Vehicle: _______________________________________________________________________________
Other (Specify) _______________________________________________________________________________
_______________________________________________________________________________
(1) Payroll for executives included salary and retention bonus during the
fiscal month of August.
(2) Taxes include payments made by the employer.
(3) The Company completed the sale of substantially all of its assets on
September 2, 2003 and is currently in the process of canceling appropriate
insurance policies.
Attachment 1 (Page 2)
Chapter 11
Monthly Operating Report
Monthly reporting Questionnaire
CASE NAME: Kentucky Electric Steel, Inc.
CASE NUMBER: 03-10078
MONTH OF: AUGUST
3. Bank Accounts
Account Type
-------------------------------------------------------------------------------------------------
Operating Tax Payroll Other Total
--------- --- ------- ---- -----
Bank Name See attached Exhibit A
--------------- ------------------- --------------------------- ------------
Account #
--------------- ------------------- --------------------------- ------------
Beginning Book
--------------- ------------------- --------------------------- ------------ ------------
Balance
Plus: Deposits
--------------- ------------------- --------------------------- ------------ ------------
Less: Disbursements
--------------- ------------------- --------------------------- ------------ ------------
Other:
--------------- ------------------- --------------------------- ------------ ------------
Transfers
- -------------------- --------------- ------------------- --------------------------- ------------ ------------
Ending Book Balance
--------------- ------------------- --------------------------- ------------ ------------
4. Postpetition Payments - List any postpetition payments to professionals and
payments on prepetition debts in the schedule below (attach separate sheet if
necessary)
Payments To
Professionals (attorneys, accountants, etc.):
Amount Date Check #
------------------- --------------------------- -------------------------
- ----------------------------------- ------------------- --------------------------- -------------------------
- ----------------------------------- ------------------- --------------------------- -------------------------
TOTAL $ -
Prepetition Creditors:
Senior Note
(Cigna & Modern Woodmen of America) $ 700,000 Daily Swept out of Lockbox
- ----------------------------------- ------------------- --------------------------- -------------------------
Revolving line of Credit
(National City & SunTrust) (1) $ (432,763) Daily Swept out of Lockbox
- ----------------------------------- ------------------- --------------------------- -------------------------
Prepetition Health Claims $ 399,523 8/19/2003 Various
- ----------------------------------- ------------------- --------------------------- -------------------------
- ----------------------------------- ------------------- --------------------------- -------------------------
- ----------------------------------- ------------------- --------------------------- -------------------------
TOTAL $ 666,760
(1) Represents amount escrowed for senior note holders in previous month that
was reflected as paydown on revolving line of credit in prior report. In
August, this amount was used to pay down the senior notes.
EXHIBIT A
KENTUCKY ELECTRIC STEEL, INC.
CASH SUMMARY FOR THE MONTH ENDING AUGUST 30, 2003
Workers Health Cash Collateral
Compensation Benefits Lockbox General
-------------- ------------- --------------- -------------
Bank Name National City National City National City National City
Account # 754202055 754202063 754119200 70936836
98239
Beginning Book Balance $ 100,000 $ 399,523 $ 312,427 $ (6,134,042)
Plus: Deposits - - 122,285 -
Less: Disbursements - 399,523 - 52,804
Transfers/Other:
Transfers
Transfer to Bank One Tax Account (20,000)
Transfer to NCB Office Account (70,000)
Transfer to NCB Office Account
Other
Paydown on senior notes (700,000)
Paydown on line/fund general account (232,527) 232,527
Void Checks 177,515
---------- ---------- ---------- --------------
Ending Book Balance $ 100,000 $ - $ 202,185 $(6,566,804)
========== ========== ========== ==============
Triton/ Office Professional Total
Republic Note Tax/Other Account Fees Account All Accounts
------------- --------- ------------- ------------ ------------
Bank Name National City Bank One National City National City
Private Client
Group
Account # 4090-K001-00-7 626225676 39353008 754201618
626225668
Beginning Book Balance $ 137,961 $ 6,584 $ 6,541 $ 100,425 $ (5,070,581)(1)
Plus: Deposits - - - - 122,285
Less: Disbursements - 16,377 38,251 - 506,955
Transfers/Other:
Transfers
Transfer to Bank One Tax Account 20,000 -
Transfer to NCB Office Account 70,000 -
Transfer to NCB Office Account (6,002) 6,002 -
Other
Paydown on senior notes (700,000)
Paydown on line/fund general account -
Void Checks 222 199 177,936
---------- -------- --------- ---------- --------------
Ending Book Balance $ 137,961 $ 4,426 $ 44,491 $ 100,425 $ (5,977,316)
========== ======== ========= ========== ==============
(1) The cash summary reconciles to the Monthly Operating Report as follows:
August 2, 2003 August 30, 2003
-------------- ---------------
Cash $ 251,511 $ 186,878
Restricted Cash 811,950 402,610
------------ -------------
Total Cash $ 1,063,461 $ 589,488
============ ============
The cash balance per this schedule is as follows:
Total Cash per Above $ (5,070,581) $ (5,977,316)
Less: Amount
Reported as
Line of Credit (6,134,042) (6,566,804)
------------ -------------
Cash Balance $ 1,063,461 $ 589,488
============ ============
CASE NAME: Kentucky Electric Steel, Inc. FORM OPR - 1
COMPARATIVE BALANCE SHEET
MONTH ENDED: AUGUST
CASE NUMBER: 03-10078
February 5, March 1, March 29, May 3,
2003 2003 2003 2003
------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Other Negotiable instruments (i.e.. CD's T-Bills) $ - $ - $ -
------------ ------------ ------------ ------------
Accounts receivable (See OPR - 3) 9,734,029 8,478,039 5,972,687 2,842,297
------------ ------------ ------------ ------------
Less allowance for doubtful accounts - - - -
------------ ------------ ------------ ------------
Inventory, at lower of cost or market 10,346,543 7,815,001 2,462,067 -
------------ ------------ ------------ ------------
Prepaid expenses and deposits 2,813,034 2,462,924 1,881,542 1,811,666
------------ ------------ ------------ ------------
Investments - - - -
------------ ------------ ------------ ------------
Other: Operating Supplies, rolls, molds, etc. 4,203,699 4,203,699 4,203,699 4,203,699
------------ ------------ ------------ ------------
Cash and Restricted cash 1,092,575 1,931,782 1,291,023 1,433,979
------------ ------------ ------------ ------------
Other Assets 64,794 61,294 60,935 50,953
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS $ 28,254,674 $ 24,952,739 $ 15,871,953 $ 10,342,594
------------ ------------ ------------ ------------
PROPERTY PLANT AND EQUIPMENT, $ - $ - $ - $ -
AT COST
------------ ------------ ------------ ------------
Less accumulated depreciation - - - -
------------ ------------ ------------ ------------
NET PROPERTY PLANT AND EQUIPMENT $ 19,452,338 $ 19,452,338 $ 19,452,338 $ 19,452,338
------------ ------------ ------------ ------------
Other non current assets 307,958 304,232 260,771 260,771
------------ ------------ ------------ ------------
Deferred finance charges 558,815 - - -
------------ ------------ ------------ ------------
TOTAL ASSETS $ 48,573,785 $ 44,709,309 $ 35,585,062 $ 30,055,703
------------ ------------ ------------ ------------
May 31, June 28, August 2, August 30,
2003 2003 2003 2003
------------ ------------ ------------ ------------
ASSETS
CURRENT ASSETS
Other Negotiable instruments (i.e.. CD's T-Bills)
------------ ------------ ------------ ------------
Accounts receivable (See OPR - 3) 2,149,555 1,866,505 169,979 73,728
------------ ------------ ------------ ------------
Less allowance for doubtful accounts - - - -
------------ ------------ ------------ ------------
Inventory, at lower of cost or market - - - -
------------ ------------ ------------ ------------
Prepaid expenses and deposits 1,592,967 1,320,071 1,045,001 560,434
------------ ------------ ------------ ------------
Investments - - - -
------------ ------------ ------------ ------------
Other: Operating Supplies, rolls, molds, etc. 4,203,699 4,203,699 4,203,699 4,203,699
------------ ------------ ------------ ------------
Cash and Restricted cash 1,475,449 1,195,760 1,063,461 589,488
------------ ------------ ------------ ------------
Other Assets 49,510 49,510 53,411 38,428
------------ ------------ ------------ ------------
TOTAL CURRENT ASSETS $ 9,471,180 $ 8,635,545 $ 6,535,551 $ 5,465,777
------------ ------------ ------------ ------------
PROPERTY PLANT AND EQUIPMENT, $ - $ - $ - $ -
AT COST
------------ ------------ ------------ ------------
Less accumulated depreciation - - - -
------------ ------------ ------------ ------------
NET PROPERTY PLANT AND EQUIPMENT $ 19,452,338 $ 19,354,479 $ 19,354,479 $ 19,354,479
------------ ------------ ------------ ------------
Other non current assets 260,771 260,771 260,771 260,771
------------ ------------ ------------ ------------
Deferred finance charges - - - -
------------ ------------ ------------ ------------
TOTAL ASSETS $ 29,184,289 $ 28,250,795 $ 26,150,801 $ 25,081,027
------------ ------------ ------------ ------------
* Itemize if value of "Other Assets" exceed 10% of "Total Assets."
FORM OPR - 2
CASE NAME: Kentucky Electric Steel, Inc. REV 2/90
COMPARATIVE BALANCE SHEET
MONTH ENDED: AUGUST
CASE NUMBER: 03-10078
February 5, March 1, March 29, May 3,
2003 2003 2003 2003
------------ ------------ ------------ ------------
LIABILITIES
POST PETITION LIABILITIES $ 204,746 $ 702,564 $ 947,405 $ 1,111,679
------------ ------------ ------------ ------------
PRE PETITION LIABILITIES
------------ ------------ ------------ ------------
Priority Debt 2,629,975 2,592,107 2,098,489 2,068,489
------------ ------------ ------------ ------------
Secured Debt 30,530,705 27,658,910 23,544,655 19,613,859
------------ ------------ ------------ ------------
Unsecured Debt 9,426,688 9,433,310 8,691,905 8,301,017
------------ ------------ ------------ ------------
TOTAL PRE PETITION LIABILITIES $ 42,587,368 $ 39,684,328 $ 34,335,049 $ 29,983,364
------------ ------------ ------------ ------------
TOTAL LIABILITIES $ 42,792,114 $ 40,386,892 $ 35,282,454 $ 31,095,043
------------ ------------ ------------ ------------
SHAREHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK $ -- $ -- $ --
------------ ------------ ------------ ------------
COMMON STOCK 50,516 50,516 50,516 50,516
------------ ------------ ------------ ------------
PAID-IN CAPITAL 15,817,342 15,817,342 15,817,342 15,817,342
------------ ------------ ------------ ------------
TREASURY STOCK (4,309,397) (4,309,397) (4,309,397) (4,309,397)
------------ ------------ ------------ ------------
RETAINED EARNINGS
------------ ------------ ------------ ------------
Through filing date (5,776,790) (5,776,790) (5,776,790) (5,776,790)
------------ ------------ ------------ ------------
Post filing date -- (1,459,254) (5,479,063) (6,821,011)
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ 5,781,671 $ 4,322,417 $ 302,608 $ (1,039,340)
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 48,573,785 $ 44,709,309 $ 35,585,062 $ 30,055,703
------------ ------------ ------------ ------------
May 31, June 28, August 2, August 30,
2003 2003 2003 2003
------------ ------------ ------------ ------------
LIABILITIES
POST PETITION LIABILITIES $ 1,303,592 $ 1,115,613 $ 1,237,138 $ 1,444,903
------------ ------------ ------------ ------------
PRE PETITION LIABILITIES
------------ ------------ ------------ ------------
Priority Debt 2,068,489 2,068,489 2,108,489 1,745,606
------------ ------------ ------------ ------------
Secured Debt 19,021,483 19,032,152 17,593,708 17,326,471
------------ ------------ ------------ ------------
Unsecured Debt 8,301,017 8,133,037 7,922,222 7,922,222
------------ ------------ ------------ ------------
TOTAL PRE PETITION LIABILITIES $ 29,390,988 $ 29,233,678 $ 27,624,419 $ 26,994,299
------------ ------------ ------------ ------------
TOTAL LIABILITIES $ 30,694,580 $ 30,349,291 $ 28,861,557 $ 28,439,202
------------ ------------ ------------ ------------
SHAREHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK
------------ ------------ ------------ ------------
COMMON STOCK 50,516 50,516 50,516 50,516
------------ ------------ ------------ ------------
PAID-IN CAPITAL 15,817,342 15,817,342 15,817,342 15,817,342
------------ ------------ ------------ ------------
TREASURY STOCK (4,309,397) (4,309,397) (4,309,397) (4,309,397)
------------ ------------ ------------ ------------
RETAINED EARNINGS
------------ ------------ ------------ ------------
Through filing date (5,776,790) (5,776,790) (5,776,790) (5,776,790)
------------ ------------ ------------ ------------
Post filing date (7,291,962) (7,880,167) (8,492,427) (9,139,846)
------------ ------------ ------------ ------------
TOTAL SHAREHOLDERS' EQUITY $ (1,510,291) $ (2,098,496) $ (2,710,756) $ (3,358,175)
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 29,184,289 $ 28,250,795 $ 26,150,801 $ 25,081,027
------------ ------------ ------------ ------------
<Table>
<Caption>
CASE NAME: Kentucky Electric Steel, Inc. SUMMARY OF ACCOUNTS RECEIVABLE FORM OPR - 3
REV 2/90
CASE NUMBER: 03-10078 MONTH ENDED: AUGUST
(1) (1) (1) (1)
1 - 30 DAYS 31 - 60 DAYS OVER 60 DAYS
TOTAL CURRENT PAST DUE PAST DUE PAST DUE
DATE OF FILING: FEBRUARY 5, 2003 $ 10,089,029 $ 7,974,031 $ 1,611,266 $ 479,232 $ 24,500
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (355,000)
------------
Net accounts receivable $ 9,734,029
============
MONTH: FEBRUARY - (March 1) $ 8,848,039 $ 6,254,947 $ 2,046,099 $ 435,313 $ 111,680
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (370,000)
------------
Net accounts receivable $ 8,478,039
============
MONTH: MARCH - (March 29) $ 6,357,687 $ 2,637,537 $ 2,788,675 $ 684,222 $ 247,253
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (385,000)
------------
Net accounts receivable $ 5,972,687
============
MONTH: April - (May 3) $ 3,227,297 $ 758,907 $ 1,156,614 $ 637,812 $ 673,964
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (385,000)
------------
Net accounts receivable $ 2,842,297
============
MONTH: May - (May 31) $ 2,464,555 $ 215,802 $ 98,441 $ 1,176,753 $ 973,560
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (315,000)
------------
Net accounts receivable $ 2,149,555
============
MONTH: June - (June 28) $ 2,011,505 $ 22,750 $ -- $ 72,901 $ 1,915,853
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (145,000)
------------
Net accounts receivable $ 1,866,505
============
MONTH: July - (August 2) $ 214,979 $ -- $ -- $ -- $ 214,979
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (45,000)
------------
Net accounts receivable $ 169,979
============
MONTH: August - (August 30) $ 113,728 $ -- $ -- $ -- $ 113,728
------------ ------------ ------------ ------------ ------------
Allowance for doubtful accounts $ (40,000)
------------
Net accounts receivable $ 73,728
============
</Table>
NOTE: Total accounts receivable net of allowance for doubtful accounts shown
here must agree to Form OPR - 1.
(1) The Company sells to customers on various terms including 30 days, 45 days
and 60 days. The aging reports are prepared showing current, 1 - 30 days past
due, 31 - 60 days past due and over 60 days past due.
<Table>
<Caption>
CASE NAME: Kentucky Electric Steel, Inc. SUMMARY OF POST PETITION LIABILITIES FORM OPR - 4
REV 2/90
CASE NUMBER: 03-10078 MONTH ENDED: JULY
DATE DATE TOTAL AMOUNT 0 - 30 31 - 60 61 - 90 OVER
INCURRED DUE DUE DAYS DAYS DAYS 90 DAYS
TAXES PAYABLE
Federal Income Tax
FICA - Employer's Share
FICA - Employee's Share
Unemployment Tax
Sales Tax
Property Tax
TOTAL TAXES PAYABLE $ 162,500 $ 162,500 $ -- $ -- $ --
---------- ---------- ---------- ---------- ----------
POSTPETITION SECURED DEBT See attached Exhibit B
POSTPETITION UNSECURED DEBT
ACCRUED INTEREST PAYABLE
TRADE ACCOUNTS PAYABLE & OTHER:
(list separately)
Total Trade & Other Accounts Payable $1,282,403 $ 609,704 $ 109,466 $ 109,466 $ 453,767
---------- ---------- ---------- ---------- ----------
See attached Exhibit C
TOTALS $1,444,903 $ 772,204 $ 109,466 $ 109,466 $ 453,767
---------- ---------- ---------- ---------- ----------
</Table>
Attach separate page if necessary.
Note: Total postpetition liabilities shown here must agree with the same item
as shown on Form OPR-2.
EXHIBIT B
KENTUCKY ELECTRIC STEEL, INC.
SUMMARY OF POST PETITION LIABILITIES - TAXES PAYABLE
AUGUST 30, 2003
<Table>
<Caption>
DATE DATE TOTAL 0-30 31-60 61-90 OVER
INCURRED DUE DUE DAYS DAYS DAYS 90 DAYS
-------- -------- ------- ------- ---------- ---------- ----------
TAXES PAYABLE
Property Tax
2003 Prop. Tax Accrual (7 months) 02/05/03 12/31/03 140,000 140,000 -- -- --
Kentucky license Tax (7 months) 02/05/03 Various 15,000 15,000 -- -- --
Delaware Franchise Tax (7 months) 02/05/03 Various 7,500 7,500 -- -- --
---------- ---------- ---------- ---------- ----------
TOTAL TAXES PAYABLE $ 162,500 $ 162,500 $ -- $ -- $ --
========== ==========- ========== ========== ==========
POSTPETITION SECURED DEBT -- -- -- -- --
POSTPETITION UNSECURED DEBT -- -- -- -- --
ACCRUED INTEREST PAYABLE -- -- -- -- --
</Table>
EXHIBIT C
KENTUCKY ELECTRIC STEEL, INC.
SUMMARY OF POST PETITION LIABILITIES - TRADE ACCOUNTS PAYABLES AND OTHERS
AUGUST 30, 2003
<Table>
<Caption>
DATE DATE TOTAL 0-30 31-60 61-90 OVER
Accounts Payable INCURRED DUE DUE DAYS DAYS DAYS 90 DAYS
- ---------------- -------- -------- ---------- ---------- ---------- ----------- -----------
Trade Accounts Payable
Cannonsburg Water District 08/20/03 09/25/03 188 188 -- -- --
IKON Office Solutions 08/27/03 09/06/03 707 707 -- -- --
Ashland Office Supplies 08/21/03 09/20/03 667 667 -- -- --
Ashland Office Supplies 08/30/03 09/29/03 80 80 -- -- --
Alltel 08/25/03 09/12/03 1,455 1,455 -- -- --
Alltel 08/25/03 09/12/03 103 103 -- -- --
The Wackenhut Corporation 08/24/03 09/30/03 1,127 1,127 -- -- --
The Wackenhut Corporation 08/31/03 09/30/03 1,200 1,200 -- -- --
Earle M Jorgensen Co. 03/21/03 TBD 6,576 6,576 -- -- --
Ryerson Tull Various TBD 4,170 4,170 -- -- --
The Reserves Network 08/16/03 09/15/03 798 798 -- -- --
CSX 04/04/03 04/19/03 25,000 -- -- -- 25,000
American Electric Power 08/30/03 09/12/03 17,000 17,000
---------- ---------- ---------- ---------- ----------
TRADE ACCOUNTS PAYABLE $ 59,071 $ 34,071 $ -- $ -- $ 25,000
---------- ---------- ---------- ---------- ----------
Other
Accrued Professional Fees Various TBD $ 466,167 $ 466,167 $ -- $ -- $ --
Accrued sales leaseback transaction Various TBD 757,165 109,466 109,466 109,466 428,767
---------- ---------- ---------- ---------- ----------
OTHER ACCOUNTS PAYABLE $1,223,332 $ 575,633 $ 109,466 $ 109,466 $ 428,767
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
TOTAL ACCOUNTS PAYABLE $1,282,403 $ 609,704 $ 109,466 $ 109,466 $ 453,767
---------- ---------- ---------- ---------- ----------
</Table>
CASE NAME: Kentucky Electric Steel, Inc. FORM OPR - 5
STATEMENT OF INCOME (LOSS)
MONTH ENDED: AUGUST
CASE NUMBER: 03-10078 REV 2/90
<Table>
<Caption>
FEBRUARY MARCH APRIL MAY
----------- ----------- ----------- ---------
NET REVENUE (INCOME) $ 2,600,739 $ 2,370,145 $ 1,782,455 $ 65,869
----------- ----------- ----------- ---------
COST OF GOODS SOLD
Materials -- -- -- --
----------- ----------- ----------- ---------
Labor - Direct -- -- -- --
----------- ----------- ----------- ---------
Manufacturing Overhead -- -- -- --
----------- ----------- ----------- ---------
TOTAL COST OF GOODS SOLD (3,089,476) (6,532,328) (2,521,368) (310,114)
----------- ----------- ----------- ---------
GROSS PROFIT -- -- -- --
----------- ----------- ----------- ---------
OPERATING EXPENSES -- -- -- --
----------- ----------- ----------- ---------
Selling and Marketing -- -- -- --
----------- ----------- ----------- ---------
General and Administrative (370,304) (393,192) (600,050) (226,351)
----------- ----------- ----------- ---------
Other:_______________________ -- -- -- --
----------- ----------- ----------- ---------
TOTAL OPERATING EXPENSES $ (370,304) $ (393,192) $ (600,050) $(226,351)
----------- ----------- ----------- ---------
INCOME BEFORE INTEREST, DEPRECIATION
TAXES OR EXTRAORDINARY EXPENSES $ (859,041) $(4,555,375) $(1,338,963) $(470,596)
----------- ----------- ----------- ---------
INTEREST EXPENSE (2,060) (2,403) (2,987) (2,403)
----------- ----------- ----------- ---------
MISCELLANEOUS -- -- 2 2,048
----------- ----------- ----------- ---------
DEPRECIATION -- -- -- --
----------- ----------- ----------- ---------
INCOME TAX EXPENSE (BENEFIT) -- -- -- --
----------- ----------- ----------- ---------
WRITE-OFF OF DEFERRED FINANCING FEE (545,404) -- -- --
----------- ----------- ----------- ---------
WRITE-OFF OF OTHER DEFERRED CHARGES (52,749) -- -- --
----------- ----------- ----------- ---------
EXTRAORDINARY INCOME (EXPENSE)(1) -- 537,969 -- --
----------- ----------- ----------- ---------
NET INCOME (LOSS) $(1,459,254) $(4,019,809) $(1,341,948) $(470,951)
=========== =========== =========== =========
<Caption>
FILING
JUNE JULY AUGUST TO DATE
--------- --------- --------- ------------
NET REVENUE (INCOME) $ 32,531 $ -- $ -- $ 6,851,739
--------- --------- --------- ------------
COST OF GOODS SOLD
Materials -- -- -- --
--------- --------- --------- ------------
Labor - Direct -- -- -- --
--------- --------- --------- ------------
Manufacturing Overhead -- -- -- --
--------- --------- --------- ------------
TOTAL COST OF GOODS SOLD (315,408) (389,439) (395,627) (13,553,760)
--------- --------- --------- ------------
GROSS PROFIT -- -- -- --
--------- --------- --------- ------------
OPERATING EXPENSES -- -- -- --
--------- --------- --------- ------------
Selling and Marketing -- -- -- --
--------- --------- --------- ------------
General and Administrative (208,446) (224,470) (248,071) (2,270,884)
--------- --------- --------- ------------
Other:_______________________ -- -- -- --
--------- --------- --------- ------------
TOTAL OPERATING EXPENSES $(208,446) $(224,470) $(248,071) $ (2,270,884)
--------- --------- --------- ------------
INCOME BEFORE INTEREST, DEPRECIATION
TAXES OR EXTRAORDINARY EXPENSES $(491,323) $(613,909) $(643,698) $ (8,972,905)
--------- --------- --------- ------------
INTEREST EXPENSE (2,403) (3,004) (4,807) (20,067)
--------- --------- --------- ------------
MISCELLANEOUS (94,479) 4,653 1,086 (86,690)
--------- --------- --------- ------------
DEPRECIATION -- -- -- --
--------- --------- --------- ------------
INCOME TAX EXPENSE (BENEFIT) -- -- -- --
--------- --------- --------- ------------
WRITE-OFF OF DEFERRED FINANCING FEE -- -- -- (545,404)
--------- --------- --------- ------------
WRITE-OFF OF OTHER DEFERRED CHARGES -- -- -- (52,749)
--------- --------- --------- ------------
EXTRAORDINARY INCOME (EXPENSE)(1) -- -- -- 537,969
--------- --------- --------- ------------
NET INCOME (LOSS) $(588,205) $(612,260) $(647,419) $ (9,139,846)
========= ========= ========= ============
</Table>
(1) Amount is a non-cash item representing the write-off of unrecognized gain
on sale and leaseback transaction.
CASE NAME: Kentucky Electric Steel, Inc. FORM OPR - 6
STATEMENT OF SOURCES AND USES OF CASH
MONTH ENDED: AUGUST
CASE NUMBER: 03-10078 REV 2/90
<Table>
<Caption>
FEBRUARY MARCH APRIL MAY
----------- ----------- ----------- -----------
SOURCES OF CASH
Income (Loss) From Operations $(1,459,254) $(4,019,809) $(1,341,948) $ (470,951)
----------- ----------- ----------- -----------
Add: Depreciation, Amortization
& Other Non-Cash Items 558,815 (537,969) -- --
----------- ----------- ----------- -----------
CASH GENERATED FROM OPERATIONS (900,439) (4,557,778) (1,341,948) (470,951)
----------- ----------- ----------- -----------
Add: Decrease in Assets:
Accounts Receivable 1,259,490 2,505,711 3,140,372 694,185
----------- ----------- ----------- -----------
Inventory 2,531,542 5,352,934 2,462,067 --
----------- ----------- ----------- -----------
Prepaid Expenses & Deposits 350,110 581,381 69,875 218,699
----------- ----------- ----------- -----------
Property, Plant & Equipment -- -- -- --
----------- ----------- ----------- -----------
Other: Change in Other Long-Tem Assets 3,726 43,461 -- --
----------- ----------- ----------- -----------
Increase in Liabilities:
Pre Petition Liabilities -- -- -- --
----------- ----------- ----------- -----------
Post Petition Liabilities 497,818 244,841 164,274 191,913
----------- ----------- ----------- -----------
TOTAL SOURCES OF CASH (A) $ 3,742,247 $ 4,170,550 $ 4,494,641 $ 633,846
----------- ----------- ----------- -----------
USES OF CASH
Increase in Assets:
Accounts Receivable $ -- $ -- $ -- $ --
----------- ----------- ----------- -----------
Inventory -- -- -- --
----------- ----------- ----------- -----------
Prepaid Expenses & Deposits -- -- -- --
----------- ----------- ----------- -----------
Property, Plant & Equipment -- -- -- --
----------- ----------- ----------- -----------
Other accrued expenses --
----------- ----------- ----------- -----------
Decrease in Liabilities:
Pre Petition Liabilities $ 2,903,040 $ 4,811,310 $ 4,351,685 $ 592,376
----------- ----------- ----------- -----------
Post Petition Liabilities --
----------- ----------- ----------- -----------
TOTAL USES OF CASH (B) $ 2,903,040 $ 4,811,310 $ 4,351,685 $ 592,376
----------- ----------- ----------- -----------
NET SOURCE (USE) OF CASH (A-B=NET) $ 839,207 $ (640,760) $ 142,956 $ 41,470
----------- ----------- ----------- -----------
CASH - BEGINNING BALANCE (See OPR-1) $ 1,092,575 $ 1,931,782 $ 1,291,022 $ 1,433,979
----------- ----------- ----------- -----------
CASH - ENDING BALANCE (See OPR-1) $ 1,931,782 $ 1,291,022 $ 1,433,979 $ 1,475,449
=========== =========== =========== ===========
<Caption>
FILING
JUNE JULY AUGUST TO DATE
----------- ----------- ----------- ------------
SOURCES OF CASH
Income (Loss) From Operations $ (588,205) $ (612,260) $ (647,419) $ (9,139,846)
----------- ----------- ----------- ------------
Add: Depreciation, Amortization
& Other Non-Cash Items -- -- -- 20,846
----------- ----------- ----------- ------------
CASH GENERATED FROM OPERATIONS (588,205) (612,260) (647,419) (9,119,000)
----------- ----------- ----------- ------------
Add: Decrease in Assets:
Accounts Receivable 283,050 1,692,625 111,234 9,686,667
----------- ----------- ----------- ------------
Inventory -- -- -- 10,346,543
----------- ----------- ----------- ------------
Prepaid Expenses & Deposits 272,896 275,070 484,567 2,252,598
----------- ----------- ----------- ------------
Property, Plant & Equipment 97,859 -- -- 97,859
----------- ----------- ----------- ------------
Other: Change in Other Long-Tem Assets -- -- -- 47,187
----------- ----------- ----------- ------------
Increase in Liabilities:
Pre Petition Liabilities -- -- -- --
----------- ----------- ----------- ------------
Post Petition Liabilities -- 121,525 207,765 1,428,136
----------- ----------- ----------- ------------
TOTAL SOURCES OF CASH (A) $ 65,600 $ 1,476,960 $ 156,147 $ 14,739,991
----------- ----------- ----------- -----------
USES OF CASH
Increase in Assets:
Accounts Receivable $ -- $ -- $ -- $ --
----------- ----------- ----------- ------------
Inventory -- -- -- --
----------- ----------- ----------- ------------
Prepaid Expenses & Deposits -- -- -- --
----------- ----------- ----------- ------------
Property, Plant & Equipment -- -- -- --
----------- ----------- ----------- ------------
Other accrued expenses --
----------- ----------- ----------- ------------
Decrease in Liabilities:
Pre Petition Liabilities $ 157,310 $ 1,609,259 $ 630,120 $ 15,055,100
----------- ----------- ----------- ------------
Post Petition Liabilities 187,979 187,979
----------- ----------- ----------- ------------
TOTAL USES OF CASH (B) $ 345,289 $ 1,609,259 $ 630,120 $ 15,243,079
----------- ----------- ----------- ------------
NET SOURCE (USE) OF CASH (A-B=NET) $ (279,689) $ (132,299) $ (473,973) $ (503,087)
----------- ----------- ----------- ------------
CASH - BEGINNING BALANCE (See OPR-1) $ 1,475,449 $ 1,195,760 $ 1,063,461 $ 1,092,575
----------- ----------- ----------- ------------
CASH - ENDING BALANCE (See OPR-1) $ 1,195,760 $ 1,063,461 $ 589,488 $ 589,488
=========== =========== =========== ============
</Table>
CASE NAME: Kentucky Electric Steel, Inc.
CASE NUMBER: 03-10078
CASH DISBURSEMENT DETAIL
<Table>
<Caption>
Date Payee Amount
---- ----- ------
Account #754202063
8/19/2003 Prepetition Health Benefit Claims $ 399,523
---------
Account #70936836 & 98239
8/4/2003 American Electric Power $ 16,190
8/4/2003 ADP 2,278
8/12/2003 AT&T 2,700
8/12/2003 Browning Ferris Ind 246
8/12/2003 Cannonsburg Water District 188
8/12/2003 Chapman Printing 388
8/12/2003 Ceridian Employer Services 1,274
8/12/2003 Core Risk Services 663
8/12/2003 Ikon Office Solutions 19
8/12/2003 IOS Capital 261
8/12/2003 Lightyear Communications 663
8/12/2003 The Reserves Network 828
8/12/2003 The Wackenhut Corporation 2,127
8/12/2003 Xerox Corp 141
8/15/2003 Alltel 208
8/15/2003 BHE Environmental Inc 1,377
8/15/2003 Columbia Gas Of Kentucky 40
8/15/2003 IOS Capital 1,540
8/15/2003 American Electric Power 216
8/15/2003 Professional Maintenance 578
8/15/2003 The Reserves Network 1,657
8/22/2003 BHE Environmental Inc 11,644
8/22/2003 Business Wire 636
8/22/2003 AT&T Wireless Service 502
8/22/2003 Ceridian Employer Services 91
8/22/2003 Metlife 12
8/22/2003 The Wackenhut Corporation 1,062
8/22/2003 ADP 2,278
8/25/2003 Bank Analysis Charges 228
8/29/2003 Ashland Office Supply 150
8/29/2003 AT&T 19
8/29/2003 AT&T 1,053
8/29/2003 Columbia Gas Of Kentucky 21
8/29/2003 Ceridian Employer Services 97
8/29/2003 The Wackenhut Corporation 1,075
8/29/2003 Xerox Corp 76
Various FedEx 281
---------
$ 52,804
---------
Account 626225676 & 626225668
8/13/2003 Transfer 941 P/R Taxes Hourly Deposit # 1 $ 588
8/13/2003 Transfer 941 P/R Taxes Hourly Deposit # 1 2,378
8/13/2003 Transfer 941 P/R Taxes Hourly Deposit # 1 588
8/13/2003 Transfer KIT Withholding 503
8/15/2003 Bank Service Charge - July 67
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 2 419
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 2 5,625
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 2 419
8/18/2003 Transfer KIT Withholding 1,324
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 3 665
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 3 2,610
8/18/2003 Transfer 941 P/R Taxes Hourly Deposit # 3 665
8/18/2003 Transfer KIT Withholding 526
---------
$ 16,377
---------
Account # 39353008
8/15/2003 Salary Payroll $ 8,795
8/15/2003 Salary Payroll 15,132
8/15/2003 Mark Grimm 19
8/15/2003 Kevin Bair 4,400
8/20/2003 All Seasons Storage 105
8/29/2003 Salary Payroll 9,435
8/29/2003 West Virginia State Tax Department 365
---------
$ 38,251
---------
---------
TOTAL $ 506,955
=========
</Table>
CASE NAME: Kentucky Electric Steel, Inc.
CASE NUMBER: 03-10078
CASH RECEIPTS DETAIL
<Table>
<Caption>
Date Payee Amount
---- ----- ------
Account #754119200
8/4/2003 Standens Limited $ 11,059
8/8/2003 Hilliard Lyons 13,584
8/13/2003 Reliance Trailer Co. LLC 1,574
8/13/2003 Reliance Trailer Co. LLC 3,426
8/13/2003 Williams Steel & Hardware Co. 1,500
8/18/2003 ERB Roberts Inc 2,000
8/22/2003 Ryerson Tull 407
8/22/2003 Aztec Trailer Sales 1,569
8/22/2003 Reliance Trailer Co. LLC 8,149
8/27/2003 Aztec Trailer Sales 690
8/27/2003 Aztec Trailer Sales 879
8/27/2003 Williams Steel & Hardware Co. 1,582
8/29/2003 Lamar Companies 750
8/29/2003 Client Escrow Account 336
8/29/2003 New Lexington Clinin, PSC 800
8/29/2003 State of West Virginia 300
8/29/2003 FedEx 53
8/29/2003 Arnes Welding Ltd 5,323
8/29/2003 Arnes Welding Ltd 6,006
8/29/2003 Arnes Welding Ltd 1,761
8/29/2003 Arnes Welding Ltd 1,909
8/29/2003 Crawford Metal Corporation 7,380
8/29/2003 Crawford Metal Corporation 3,436
8/29/2003 Crawford Metal Corporation 2,385
8/29/2003 Crawford Metal Corporation 6,583
8/29/2003 Crawford Metal Corporation 9,047
8/29/2003 Crawford Metal Corporation 979
8/29/2003 Crawford Metal Corporation 189
8/29/2003 Crawford Metal Corporation 1,000
8/29/2003 Talbert Mfg Inc 3,448
8/29/2003 Talbert Mfg Inc 3,335
8/29/2003 Talbert Mfg Inc 5,862
8/29/2003 Talbert Mfg Inc 2,690
8/29/2003 Talbert Mfg Inc 12,294
---------
TOTAL $ 122,285
=========
</Table>