1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
PH GROUP, INC.
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(Exact name of Small Business Issuer as specified in its charter)
Ohio Commission File No. 0-8115 31-0737351
- ---------------------------- -------------------------- ----------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification Number)
2365 Scioto Harper Drive, Columbus, Ohio 43204
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(Address of principal executive offices)
Registrant's telephone number, including area code: (614) 279-8877
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Not Applicable
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(Former name or former address, 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 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
(1) YES X NO (2) YES X NO
----- ----- ----- -----
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the last practicable date: 1,683,964 common shares, without par
value, outstanding as of August 4, 1999.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The financial statements of the Company, for the period ended June 30, 1999 and
1998, are set forth at pages F-1 through F-4 attached hereto..
NOTES TO THE FINANCIAL STATEMENTS FOR THE PERIODS ENDED JUNE 30, 1999 AND 1998.
NOTE 1. BASIS OF FINANCIAL PRESENTATION
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The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
The accounting policies followed by PH Group Inc. (the Company), are set forth
in Note 1 of the Notes to financial statements in the Company's Form 10-KSB for
the fiscal year ended December 31, 1998.
In the opinion of management, the accompanying unaudited financial statements
reflect all adjustments which are necessary for a fair presentation of the
result of operations and financial position for such periods. All such
adjustments reflected in the interim financial statements are considered to be
of a normal and recurring nature. The results of the operations for the six
month periods ended June 30, 1999 and 1998 are not necessarily indicative of the
results to be expected for the whole year. Accordingly, these financial
statements should be read in conjunction with the financial statements and notes
thereto contained in the Company's annual report on Form 10-KSB for fiscal year
ended December 31, 1998.
NOTE 2. PER SHARE INFORMATION
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The Company presents earnings per share in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." Net
income per common share is computed based on the weighted average number of
common shares and common share equivalents (stock options) outstanding during
each period. Basic earnings per share excludes dilution and is computed by
dividing income available to common shareholders by the weighted average number
of common shares outstanding during the period. Diluted earnings per share is
computed by dividing income available to common shareholders by the diluted
weighted average number of common shares outstanding during the period, which
includes the dilutive potential common shares associated with outstanding stock
options. There are no adjustments to net income necessary in the calculation of
basic and diluted earnings per share. On January 2, 1998, a five-for-four stock
split was affected whereby one additional common share was issued for each four
common shares outstanding to shareholders of record on December 15, 1997.
Accordingly, per share data and weighted average common shares outstanding for
all periods presented in the accompanying financial statements are reflective of
this split.
NOTE 3. BUSINESS COMBINATION
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Effective April 1, 1999 (the "closing Date"), PH Group Inc. ("the Company")
purchased substantially all of the assets of Vertech Systems, LLC, a Delaware
limited liability company with operations in Houston, Texas ("Seller"), pursuant
to an Amended and Restated Asset Purchase Agreement between the Seller, and the
Company dated April 1, 1999 (the "Agreement"). Prior to the Closing Date, the
Seller was engaged in the design, manufacture and sale of small insert injection
molding machines (the "Business").
The Company purchased, among other things, all of the Seller's licenses and
permits, deposits, inventory, equipment, accounts receivable and purchase orders
including all work in progress. Under the
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Agreement, Seller licensed to the Company certain intangible assets, relating to
the Business including all of Seller's trademarks, trade names, trade secrets,
corporate names, designs, patents and other intellectual property related to the
Business. Upon payment in full of the promissory notes described below, title to
the intangible assets transfers to the Company. Results of operations of the
Seller are included in the Company's financial statements since April 1, 1999.
As consideration for the sale and purchase of the assets and the
license of the intangible assets, PH Group Inc.:
(i) delivered a promissory note in the principal amount of
$650,000 payable over approximately four years,
(ii) assumed certain contractual obligations of the Seller
including certain trade payables not exceeding $100,000 in the
aggregate,
(iii) delivered a promissory note in the principal amount of
$350,000 payable over two years,
(iv) paid the Seller $25,000 at closing in addition to the $25,000
already paid the Seller,
(v) issued 50,000 shares of common stock of PH Group Inc. to the
members of the Seller.
The following summarized pro forma (unaudited) information assumes the
acquisition had occurred on January 1, 1998.
PH Group Inc.
Pro Forma Financial Information
For The Six Months Ended June 30, 1999 And 1998
(Unaudited)
1999 1998
---- ----
Net Sales 7,100,242 7,543,872
Income (Loss) From Continuing Operations 147,771 (32,737)
Net Income (Loss) 20,099 (65,114)
Pro Forma Per Share Data:
Basic Net Income (Loss) per Share 0.01 (0.04)
Diluted Net Income (Loss) per Share 0.01 (0.04)
NOTE 4. ACCOUNTING STANDARDS
- ----------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 133 (SFAS 133) "Accounting for Derivative
Instruments and Hedging Activities." In June 1999, FASB issued Statement of
Financial Accounting Standards No. 137 (SFAS 137) "Accounting for Derivative
Instruments and Hedging Activities -- Deferral of the Effective Date of FASB
Statement No. 133." SFAS 137 deferred the adoption of SFAS 133 until January 1,
2001. The Company
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has not yet determined what, if any, impact the adoption of this standard will
have in its financial statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 AS COMPARED TO THREE MONTHS ENDED JUNE 30, 1998
NET SALES
Net sales for the second quarter of 1999 totaled $4.0 million, a 27.1% increase
from the same period in 1998. Hydraulic press sales increased 9% in the second
quarter 1999 compared with the second quarter 1998, while injection molding
equipment sales increased 265% in the same period. Sales of injection molding
equipment were impacted by the volume of machines sold in the second quarter of
1999. In the current quarter three machines were sold, versus one in the same
period of 1998.
New machinery orders decreased 9% in the second quarter of 1999 compared to the
second quarter of 1998. The machine tool industry as a whole has remained
sluggish in capital spending in the second quarter of 1999. The Company
continues to have exceptional quoting activity, especially in the hydraulic
press line. Parts and service orders remained strong in the period, increasing
by 670% during the second quarter of 1999 compared to the second quarter of
1998. Parts and service sales represented 3.5% of all sales in the second
quarter of 1999.
GROSS MARGIN
Gross margins in the second quarter 1999 were 25.3% compared to 32.6% for the
same period in 1998. The Company's small press business continue to meet or
exceed historical levels. Gross margins on the larger presses have been
negatively impacted by the necessity to subcontract manufacturing space and
equipment. Gross margins on injection molding equipment were below comparable
margins in the second quarter of 1998. A new hydraulic system design has
increased costs on the initial injection molding machine installations.
Labor as a percent of sales decreased in the second quarter of 1999 to 7.0%
versus 9.1% in the same period of 1998.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative ("SG & A") expenses for the 1999 quarterly
period have decreased $188,000 or 18% over the comparable 1998 amount. Personnel
reductions decreased salary expenses $82,000. The closure of the Company
facility at Romulus, MI eliminated duplicate services. Advertising and promotion
expenses have decreased by $48,000 in the period as media ads and trade show
participation have been reduced. Professional services expenses were reduced by
$53,000 in the period.
As a percent of sales, SG&A represented 21.2% in the second quarter 1999
compared to 32.9% in the second quarter 1998. The improvement in expenses
contributed to a favorable operating income for the second quarter of 1999,
versus an operating loss in the comparative quarter of 1998.
INTEREST EXPENSE
Interest expense in the second quarter 1999 was 158% greater than the same
period in 1998. The acquisition of Vertech was completed on April 1, 1999.
Interest bearing notes payable used to acquire Vertech have contributed to the
increase in expense for the period.
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SIX MONTHS ENDED JUNE 30, 1999 AS COMPARED TO SIX MONTHS ENDED JUNE 30, 1998
NET SALES
Net sales for the first six months of 1999 totaled $6.9 million, a 6.8% decrease
from the same period in 1998. Hydraulic press sales decreased 8% in the first
six months of 1999 compared with the comparable period of 1998, while injection
molding equipment sales decreased 12% in the same period. The volume of orders
was comparable in both periods, but there was a significant difference in
product size and type, especially in the injection molding line. This impacted
selling prices of the machinery delivered.
New machinery orders decreased 39.3% in the first six months of 1999 compared to
the same period of 1998. However, sales quotation activity remains very strong,
which should increase sales in the second half of the year.
GROSS MARGIN
Gross margin for the first six months of 1999 are 26.5%, compared to 31.0% in
the same period of 1998. Material cost increases account for most of this
difference. Price and efficiency discounts gained on a multiple-machine order in
the first six months of 1998 have not been duplicated in 1999. Cost to
subcontract manufacturing to produce two presses that exceeded the capacity of
the Company's Columbus manufacturing facility also reduced margins. These jobs
would have been produced in the Romulus, MI facility in 1998.
Labor as a percent of sales decreased to 8.5% versus 8.8% in the first six
months of 1999. Total direct labor hours have decreased in 1999, in part due to
the increase in subcontract requirements.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, General and Administrative ("SG & A") expenses for the 1999 period have
decreased $430,000 or 21.3% over the comparable 1998 amount. Personnel
reductions decreased salary cost $216,000. This is primarily due to the
elimination of duplicate services at the Company's Romulus, MI facility.
Reductions in bonuses and payroll related expenses accounted for an additional
$57,000 of the decrease. Advertising and promotion expenses have decreased
$44,000 in 1999 versus 1998. Professional service expenses have decreased
$66,000. Property and casualty insurance has decreased in the six months of 1999
compared to 1998 by $34,000. This is primarily due to the closure of the
Romulus, MI facility.
As a percent of sales, SG&A represented 23.1% in the first six months of 1999
compared to 27.4% in the same period of 1998. The Company has been aggressive in
its effort to reduce office overhead and improve overall profitability.
INTEREST EXPENSE
Interest expense to date in the first six months of 1999 was 43.8% greater than
the same period in 1998. The Vertech acquisition and heavy reliance on the bank
line of credit to fund long term orders has contributed to the increase in
interest expense.
INCOME TAXES
For the six months ended June 30, 1999 a tax provision of $10,000 has been
accrued based on estimates of taxable income in 1999. In the comparable period
of 1998, $65,000 was accrued based on the earnings before taxes of the period
and the effective tax rate.
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LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash requirements are for operating expenses and capital
expenditures. These cash requirements have historically been met through a
combination of cash flow from operations and bank lines of credit.
The Company has been working with an investment bank to raise up to $3.0 million
in long-term capitalization. The increased capitalization will be used to reduce
bank debt, provide working capital and provide funds for acquisitions.
Cash provided by operations in 1999 totaled $1,426,000, resulting mainly from a
decrease in accounts receivable of $983,000, a decrease in inventory of
$1,362,000 and a decrease in customer deposits of $563,000. The decrease in
accounts receivable was due to strong collection of accounts in the first six
months of 1999. The decrease in inventory is the result of shipment of large
jobs in the second quarter of the year. The shipment of these orders, combined
with reduced new orders has resulted in a decrease in customer deposits.
As part of the Vertech acquisition, the Company made a cash payment of $50,000
towards the purchase of Vertech assets. In addition, 50,000 shares of PH Group
Inc. stock was used as part of the purchase proceeds.
YEAR 2000 READINESS
The Year 2000 ("Y2K") issue refers to a condition in computer software where a
two-digit field rather than a four-digit field is used to distinguish a calendar
year. Unless corrected, date-sensitive software may recognize a date using "00"
as the year 1900 rather than the year 2000. This could result in system failures
or miscalculations causing disruptions to various activities and operations.
Such uncorrected condition could significantly interfere with the conduct of the
Company's business, could result in disruption of its operations and could
subject it to potentially significant legal liabilities.
The Company has conducted an assessment of the Y2K issue and the potential
effect it will have on the Company and its business. The Company has prepared a
plan for dealing with the Y2K issue. The Company has taken initiatives in three
general areas: information technology and communication systems, non-information
technology systems, and third party issues.
INFORMATION TECHNOLOGY AND COMMUNICATION SYSTEMS
In 1998, the Company upgraded the computer network used throughout the
organization. This included a new client server, new desktop computers, and
upgrades and enhancements to those machines not replaced. Upgraded, Y2K
compliant versions of most software packages have been obtained. These include
the Visual Manufacturing, the Company's application system, Novell network
software, Microsoft Office, Auto CAD, and Parametric Technology Corp.'s Pro E.
Current areas of potential noncompliance include the Company's fixed asset
system software, the banking communication system software, and potentially the
network router. Other equipment such as fax machines and copy machines may not
be in compliance. The Company has purchased the upgraded fixed asset software,
but it is not currently installed. The bank communication software will be
compliant by December, 1999. The entire system was tested by an outside
consultant, and their report was provided June 25, 1999. This results of this
testing will require some patches to, or replacement of, current hardware and
software before the year end. The Company is assessing the options to determine
which course of action it will take to implement the recommendations.
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NON-INFORMATION TECHNOLOGIES SYSTEMS
The Company has internal non-information technology systems comprised primarily
of a building security systems. The Company is scheduled to move to a new
facility in September, 1999. The Company will ascertain at that time the
compliance of the new security system.
THIRD PARTIES
The Company has third party relationships with key raw materials suppliers and
outside processors. The Company is engaged in an ongoing effort with these and
key suppliers of outsource services including, but not limited to stock
transfer, debt servicing, payroll, banking, and benefit programs. The Company is
engaged in ongoing evaluations of these third parties' Y2K readiness; while
simultaneously advising them of the Company's readiness.
Because the Company's Y2K compliance is dependent upon key third parties also
being Y2K compliant on a timely basis, there can be no guarantee that the
Company's efforts will prevent a material adverse impact on its results of
operations, financial condition and cash flows. The possible consequences to the
Company of not being fully Y2K compliant include temporary plant closings,
delays in the delivery of finished products, delays in the receipt of key
ingredients and supplies, invoice and collection errors, and financing issues,
including payroll. These consequences could have a material adverse impact on
the Company's results of operations, financial condition and cash flows if the
Company is unable to conduct its business in the ordinary course.
The Company currently estimates that the aggregate cost of its Y2K efforts
should not exceed $100,000, of which $50,000 has already been expended for
hardware and software upgrades. The Company believes that such costs will not
have a material impact on results of operations, financial condition or cash
flows. Due to the nature of the Company's efforts, actual costs may vary from
these estimates and there are no guarantees regarding the timing or efficiency
of completion.
CONTINGENCY PLANS
The Company has engaged a system consultant to review all system needs and to
deal with contingency planning. This will be completed in the third quarter of
1999, after results of the assessment and remediation in progress have been
ascertained. The Company cannot currently estimate the cost, if any, associated
with contingency planning efforts that may be necessary to complete the Y2K
efforts.
REGARDING "FORWARD-LOOKING" STATEMENTS
The foregoing outlook contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 that are based on current
expectations and are subject to a number of risks and uncertainties. Actual
results could differ materially from current expectations due to a number of
factors, including general economics; competitive factors and pricing pressures;
shifts in market demand; the performance and needs of industries served by the
Company's business; actual future costs of operating expenses such as material,
wages and benefits; actual cost of continuing investments in technology; the
availability of capital to finance possible growth; the ability of management to
implement Company strategy of acquisitions and process improvements; and the
risks described from time to time in the Company's SEC reports.
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PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds On April 1, 1999, 50,000
shares of PH Group Inc. common stock were issued as part of the
purchase proceeds used to acquire Vertech Systems, LLC. The market
price at the date of the transaction was $1.38 per share.
Item 3. Defaults Upon Senior Securities At December 31, 1998, the Company had a
line of credit agreement with a bank to borrow up to $3,500,000,
subject to certain borrowing base restrictions. At December 31, 1998,
the Company was in violation of certain debt covenants regarding the
following: tangible net worth, debt to tangible net worth ratio,
defined cash flow coverage ratio and annual capital expenditures. On
March 30, 1999 the bank agreed to grant a waiver to the Company with
respect of noncompliance. A new loan agreement has been created between
the Company and the bank, but at this time has not been signed by both
parties. All borrowings under the bank line of credit are classified as
a current liability.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of shareholders of the Company was held May 4, 1999.
(b) The matters voted upon at the Annual Meeting and the results of the
voting are set forth below: (I) The shareholders voted as follows with
respect to the election of directors:
Shares in Favor Shares Withheld
Bob Binsky 1,073,444 8,607
Michael W. Gardner 1,040,351 41,700
Terry L. Sanborn 1,073,049 9,002
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index
(b) Reports on Form 8-K
On April 15, 1999 a Form 8-K was filed, the result of the purchase by
the registrant, PH Group Inc. of Vertech Systems, LLC.
On June 15, 1999 an amended Form 8-K was filed, the result of the
purchase by the registrant, PH Group Inc. of Vertch Systems, LLC. The
amended filing included financial statements, pro forma financial
information and exhibits.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PH Group Inc.,
an Ohio Corporation
Date: August 20, 1999 By: \s\ Charles T. Sherman
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Charles T. Sherman
President
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EXHIBIT INDEX
Exhibit No Description Location
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27 Financial Data Schedule Filed electronically
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*Incorporated herein by reference.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
BALANCE SHEET
1999 1998
JUNE 30 DEC. 31
ASSETS (UNAUDITED)
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Current Assets
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Cash $ 19,044 $ 5,862
Accounts Receivable 3,069,437 3,974,134
Federal and State Income Tax Receivables 77,714 157,646
Inventories 1,690,914 2,942,799
Deferred Income Taxes 186,300 186,300
Other Current Assets 325,427 85,260
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Total Current Assets 5,368,836 7,352,001
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Property and Equipment, at cost
- -------------------------------
Office Equipment 964,881 756,890
Manufacturing Equipment 1,704,878 1,090,015
Leasehold Improvements 276,431 281,821
Vehicles 140,271 140,271
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3,086,461 2,268,997
Less: Accumulated Depreciation & Amortization (1,464,096) (1,329,574)
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Net Property and Equipment 1,622,365 939,423
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Other Non-Current Assets
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Land Held for Investment 20,570 20,570
Goodwill, net 1,118,931 698,030
Deferred Income Taxes, Net 287,500 287,500
Other Noncurrent Assets, Net 408,844 285,261
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Total Other Non-Current Assets 1,835,845 1,291,361
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TOTAL ASSETS $ 8,827,046 $ 9,582,785
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See notes to the financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP INC.
BALANCE SHEET
1999 1998
JUNE 30 DEC. 31
LIABILITIES (UNAUDITED)
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Current Liabilities
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Accounts Payable $2,174,899 $2,285,591
Current Portion of Debt 2,648,722 3,281,539
Accrued Expenses 294,802 460,257
Customer Deposits 483,025 924,949
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Total Current Liabilities 5,601,448 6,952,336
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Noncurrent Liabilities
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Long-Term Debt (less current portion) 1,375,545 951,068
Deferred Compensation 15,539 12,083
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Total Noncurrent Liabilities 1,391,084 963,151
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Total Liabilities 6,992,532 7,915,487
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Common Stock Subject to Repurchase, 125,000
shares issued, 62,500 shares outstanding 187,500 262,500
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Shareholders' Equity
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Common Stock, with no par value, authorized 10,000,000
shares; issued and outstanding at stated value
(1999 - 1,616,214; 1998 - 1,519,846) 12,410 12,157
Additional Paid- In Capital 1,560,221 1,403,321
Retained Earnings (Accumulated Deficit) 74,383 (10,680)
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Total Shareholders' Equity 1,647,014 1,404,798
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TOTAL LIABILITIES AND EQUITY $8,827,046 $9,582,785
========== ==========
See notes to the financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
STATEMENT OF INCOME
(UNAUDITED)
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
1999 1998 1999 1998
---------- ---------- ---------- ----------
NET SALES $4,049,558 $3,185,492 $6,881,511 $7,386,020
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Cost of Goods Sold 3,023,591 2,145,896 5,054,802 5,097,329
---------- ---------- ---------- ----------
Gross Margin 1,025,967 1,039,596 1,826,709 2,288,691
Selling, General and
and Administrative Expense 859,561 1,047,139 1,591,512 2,021,466
---------- ---------- ---------- ----------
Income From Operations 166,406 (7,543) 235,197 267,225
---------- ---------- ---------- ----------
Other Income (Expense)
Interest Expense (89,117) (34,569) (162,395) (112,937)
Other, Net 17,677 45,351 22,405 55,586
---------- ---------- ---------- ----------
Total Other Income (Expense) (71,440) 10,782 (139,990) (57,351)
---------- ---------- ---------- ----------
Income Before Income Taxes 94,966 3,239 95,207 209,874
Provision for Taxes 10,000 (8,000) 10,000 65,000
---------- ---------- ---------- ----------
NET INCOME $ 84,966 $ 11,239 $ 85,207 $ 144,874
- ---------- ========== ========== ========== ==========
NET INCOME PER SHARE:
Basic Earnings per Share $ 0.05 $ 0.01 $ 0.05 $ 0.10
========== ========== ========== ==========
Diluted Earnings per Share $ 0.05 $ 0.01 $ 0.05 $ 0.09
========== ========== ========== ==========
Weighted Average Shares Outstanding
Basic 1,599,172 1,486,176 1,562,636 1,462,260
Diluted 1,721,523 1,580,709 1,684,555 1,556,176
See notes to the financial statements.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PH GROUP, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30
1999 1998
----------- -----------
Cash Flow From Operating Activities
Net Income $ 85,207 $ 144,874
Adjustments to Reconcile Net Income to
Net Cash Provided:
Depreciation and Amortization $ 198,627 $ 143,188
Loss on Sale of Property and Equipment $ 4,536 $ 11,485
Changes in Assets and Liabilities Affecting Cash Flows from
Operating Activities, Exclusive of Acquisitions:
Accounts Receivable $ 982,678 $ 653,837
Inventory $ 1,361,885 $ (190,688)
Other Current Assets $ (240,167) $ 16,892
Other Non Current Assets $ (111,383) $ 63,997
Accounts Payable $ (210,692) $ (64,816)
Income Taxes $ 79,932 $ (422,626)
Accrued Expenses (165,455) $ (327,556)
Customer Deposits (562,662) $(1,225,872)
Deferred Compensation 3,456 $ 5,000
----------- -----------
Net Cash (Used) Provided By Operating Activities $ 1,425,962 $(1,192,285)
----------- -----------
Cash Flows from Investing Activities
Proceeds from Sale of Assets $ 425 $ 5,000
Acquisition of Vertech Systems, Inc.:
Cash $ (4,500)
Accounts Receivable $ (77,981) --
Inventory $ (110,000) --
Property and Equipment $ (795,000) --
Cost of Acquired Assets in Excess of Fair Value:
Intangible Assets $ (414,488)
Accounts Payable $ 100,000
Customer Deposits $ 120,738 --
Notes Payable $ 1,020,704
Capital Expenditures for Property and Equipment $ (27,854) $ (101,316)
----------- -----------
Net Cash Used In Investing Activities $ (187,956) $ (96,316)
----------- -----------
Cash Flows from Financing Activities
Payments of Debt Obligations $(4,329,045) $ (238,399)
Proceeds from Debt Obligations $ 3,100,000 $ 1,477,300
Proceeds from issuance of Common Stock 4,221 $ 58,711
----------- -----------
Net Cash Provided by (Used In) Financing Activities $(1,224,824) $ 1,297,612
----------- -----------
Net Increase in Cash $ 13,182 $ 9,011
Cash, Beginning of Period $ 5,862 $ 7,789
----------- -----------
CASH, END OF PERIOD $ 19,044 $ 16,800
- ------------------- =========== ===========
PH Group Inc. paid $ 157,295 in cash for interest in 1999 and $99,603 in 1998.
PH Group, Inc. paid $ 2,800 in cash for income tax expenses in 1999 and $529,740
in 1998.
PH Group Inc. issued 50,000 shares of common stock in acquiring Vertech Systems,
LLC.
See notes to the financial statements.