8-K/A 1 v191547_8ka.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K/A

Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported):  May 13, 2010

SSGI, Inc.
(Exact name of registrant as specified in its charter)

Florida
(State or other jurisdiction of incorporation)

333-160700
91-1930691
 (Commission File Number)
 (IRS Employer Identification No.)

3706 DMG Drive, Lakeland, Florida 33811
(Address of principal executive offices, including zip code)

(863) 644-0456
(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
 

Item 2.01   Completion of Acquisition or Disposition of Assets.

On May 18, 2010, the registrant, SSGI, Inc. (the “Company”), filed a Current Report on Form 8-K (the “Current Report”) describing, among other things, the acquisition by the Company of all of the outstanding shares of capital stock of B&M Construction Co., Inc., a Florida corporation (“B&M”). The Current Report contemplated that the financial statements of B&M required to be filed under Item 9.01(a) of this report, and any pro forma financial information required to be filed under Item 9.01(b) of this report, would be filed by amendment within 71 calendar days after the date that the Current Report was required to be filed. The purpose of this amendment is to file such financial statements and pro forma information.

Item 9.01. Financial Statements and Exhibits.
 
(a) Financial statements of businesses acquired.
  
 
Page
   
CONSOLIDATED FINANCIAL STATEMENTS - DECEMBER 31, 2009 AND 2008
  
   
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets
F-3
   
Consolidated Statements of Operations
F-4
   
Consolidated Statements of Changes in Stockholders' Equity
F-5
   
Consolidated Statements of Cash Flows
F-6
   
Notes to Consolidated Financial Statements
F-7 - F-16
   
INTERIM CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 2010
  
   
Consolidated Balance Sheets (unaudited)
F-17
   
Consolidated Statements of Operations (unaudited)
F-18
   
Consolidated Statements of Cash Flows (unaudited)
F-19
   
Notes to Consolidated Financial Statements (unaudited)
F-20 - F-26
(b) Pro forma financial information.
  
 
Page
   
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
   
Unaudited Pro Forma Consensed Combined Financial Information
F-28
   
Unaudited Pro Forma Consensed Combined Balance Sheet as of March 31, 2010
F-29
   
Unaudited Pro Forma Consensed Combined Statement of Operations for the Year Ended December 31, 2009
F-30
   
Unaudited Pro Forma Consensed Combined Statement of Operations for the Three Months Ended March 31, 2010
F-31
 
(d) Exhibits.

23.1
Consent of Mallah Furman

 
2
 

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 thereunto duly authorized.

Dated:  July 29, 2010
SSGI, INC.
 
(Registrant)
   
 
    
 
Larry M. Glasscock, Jr.
 
Chief Executive Officer and President
 
(Principal Executive Officer)

 
3
 
B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 
Page
   
CONSOLIDATED FINANCIAL STATEMENTS - DECEMBER 31, 2009 AND 2008
  
   
Report of Independent Registered Public Accounting Firm
F-2
   
Consolidated Balance Sheets
F-3
   
Consolidated Statements of Operations
F-4
   
Consolidated Statements of Changes in Stockholders' Equity
F-5
   
Consolidated Statements of Cash Flows
F-6
   
Notes to Consolidated Financial Statements
F-7 - F-16
   
INTERIM CONSOLIDATED FINANCIAL STATEMENTS - MARCH 31, 2010
  
   
Consolidated Balance Sheets (unaudited)
F-17
   
Consolidated Statements of Operations (unaudited)
F-18
   
Consolidated Statements of Cash Flows (unaudited)
F-19
   
Notes to Consolidated Financial Statements (unaudited)
F-20 - F-26

 
F-1
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
B & M Construction Co., Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of B & M Construction Co., Inc. and Subsidiaries (“the Company”) as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders’ equity and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of B & M Construction Co., Inc. and Subsidiaries as of December 31, 2009 and 2008, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ Mallah Furman
  
   
Fort Lauderdale, Florida
  
July 21, 2010
  

 
F-2
 
  
B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2008

   
2009
    
2008
  
ASSETS
            
             
CURRENT ASSETS:
            
             
Cash and cash equivalents
   $ 176,704     $ 297,573  
Contracts receivable, net
     1,963,830       2,462,014  
Costs and estimated earnings in excess of billings on uncompleted contracts
     215,886       942,534  
Prepaid expenses and other current assets
     139,947       39,009  
Due from related parties
     536,527       499,669  
                 
TOTAL CURRENT ASSETS
     3,032,894       4,240,799  
                 
PROPERTY AND EQUIPMENT, NET
     295,767       333,528  
                 
CASH SURRENDER VALUE OF INSURANCE
     756,094       753,529  
                 
TOTAL ASSETS
   $ 4,084,755     $ 5,327,856  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES:
                
                 
Accounts payable and accrued expenses
   $ 859,838     $ 1,422,399  
Billings in excess of costs and estimated earnings on uncompleted contracts
     371,521       130,471  
Estimated losses on uncompleted contracts
     63,743       -  
Current portion of long-term debt
     136,101       218,016  
Stockholders payable
     -       583,000  
                 
TOTAL CURRENT LIABILITIES:
     1,431,203       2,353,886  
                 
LONG TERM DEBT, NET OF CURRENT PORTION
     681,819       815,577  
                 
TOTAL LIABILITIES
     2,113,022       3,169,463  
                 
STOCKHOLDERS' EQUITY
                
                 
Common stock - $1 Par value, 5,000 shares authorized, 496 and 527 shares issued and outstanding at December 31, 2009 and 2008, respectively
     496       527  
Additional paid in capital
     713,036       865,428  
Retained earnings
     1,723,786       1,905,839  
Notes receivable from stock purchases
     (471,433 )     (627,316 )
Total
     1,965,885       2,144,478  
Non-controlling interest
     5,848       13,915  
                 
TOTAL STOCKHOLDERS' EQUITY
     1,971,733       2,158,393  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 4,084,755     $ 5,327,856  

The accompanying notes are an integral part of these consolidated financial statements.

 
F-3
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

   
2009
    
2008
  
             
CONTRACT REVENUES EARNED
   $ 18,312,641     $ 24,828,783  
COST OF REVENUES EARNED
     15,724,876       21,040,907  
                 
GROSS PROFIT
     2,587,765       3,787,876  
                 
GENERAL AND ADMINISTRATIVE EXPENSES
                
Payroll and related costs
     1,305,991       1,519,824  
Insurance
     340,072       305,903  
Rent
     184,460       179,460  
Telephone and utilities
     150,905       183,528  
Office expense and supplies
     141,522       204,907  
Travel and entertainment
     132,030       190,504  
Professional fees
     73,023       46,723  
Repairs and maintenance
     55,073       74,903  
Taxes and license fees
     49,335       36,334  
Various other operating expenses
     77,750       97,377  
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
     2,510,161       2,839,463  
                 
INCOME FROM OPERATIONS
     77,604       948,413  
                 
OTHER INCOME (EXPENSES):
                
Interest income
     25,387       63,326  
Other income
     29,705       20,540  
Interest expense
     (44,795 )     (41,553 )
Loss on asset disposition
     (2,308 )     (24,725 )
TOTAL OTHER INCOME:
     7,989       17,588  
                 
NET INCOME BEFORE TAXES
     85,593       966,001  
                 
PROVISION FOR TAXES
     (2,950 )     (14,000 )
                 
INCOME BEFORE NON-CONTROLLING INTEREST IN NET INCOME OF SUBSIDIARIES
     82,643       952,001  
                 
NON-CONTROLLING INTEREST IN NET INCOME OF SUBSIDIARIES
     (6,933 )     (8,114 )
                 
NET INCOME
   $ 75,710     $ 943,887  

The accompanying notes are an integral part of these consolidated financial statements.

 
F-4
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

               
Additional
                          
   
Common
    
Common
    
Paid In
    
Retained
    
Notes Receivable
    
Non-Controlling
        
   
Shares
    
Stock
    
Capital
    
Earnings
    
from Stock Purchases
    
Interest
    
Total
  
                                           
BALANCE AT DECEMBER 31, 2007
     695     $ 695     $ 1,307,931     $ 2,285,024     $ (993,391 )   $ 57,801     $ 2,658,060  
                                                         
Net income
     -       -       -       943,887       -       8,114       952,001  
                                                         
Net repayments of notes receivable from stock purchases
     -       -       -       -       366,075       -       366,075  
                                                         
Purchased and retired treasury stock
     (168 )     (168 )     (442,503 )     (449,536 )     -       -       (892,207 )
                                                         
Distributions to stockholders
     -       -       -       (873,536 )     -       (52,000 )     (925,536 )
                                                         
                                                         
BALANCE AT DECEMBER 31, 2008
     527       527       865,428       1,905,839       (627,316 )     13,915       2,158,393  
                                                         
Net income
     -       -       -       75,710       -       6,933       82,643  
                                                         
Net repayments of notes receivable from stock purchases
     -       -       -       -       155,883       -       155,883  
                                                         
Purchased and retired treasury stock
     (31 )     (31 )     (152,392 )     -       -       -       (152,423 )
                                                         
Distributions to stockholders
     -       -       -       (257,763 )     -       (15,000 )     (272,763 )
                                                         
BALANCE AT DECEMBER 31, 2009
     496     $ 496     $ 713,036     $ 1,723,786     $ (471,433 )   $ 5,848     $ 1,971,733  

The accompanying notes are an integral part of these consolidated financial statements.

 
F-5
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

   
2009
    
2008
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net income
   $ 75,710     $ 943,887  
Non-controlling interest in net income of subsidiaries     6,933       8,114  
Income before Non-controlling interest in net income of subsidiaries     82,643       952,001  
Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
                
Depreciation and amortization
     136,960       152,976  
Loss on disposal of assets
     2,308       24,725  
Changes in operating assets and liabilities:
                
(Increase) decrease in assets:
                
Contracts receivable
     498,184       (143,164 )
Costs and estimated earnings in excess of billings on uncompleted contracts
     726,648       (435,040 )
Due from related parties
     (36,858 )     (396,626 )
Prepaid expenses and other current assets
     (100,938 )     142,589  
Cash surrender value life insurance and other assets
     (2,565 )     (62,623 )
Increase (decrease) in liabilities:
                
Accounts payable, accrued expenses and estimated losses on uncompleted contracts
     (498,818 )     325,962  
Billings in excess of costs and estimated earnings on uncompleted contracts
     241,050       (690,877 )
Net cash provided by (used in) operating activities
     1,048,614       (130,077 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from sale of equipment
     1,500       18,072  
Purchase of equipment
     (103,007 )     (26,814 )
Net cash used in investing activities
     (101,507 )     (8,742 )
                 
CASH FLOWS FROM  FINANCING ACTIVITIES:
                
Payments from stockholders on notes receivable from stock purchases
     155,883       366,075  
Payments on  long term debt
     (368,096 )     (14,009 )
Payments on stockholders payable
     (583,000 )     (524,837 )
Distributions to stockholders
     (272,763 )     (925,536 )
Net cash used in financing activities
     (1,067,976 )     (1,098,307 )
                 
CHANGE IN CASH AND CASH EQUIVALENTS
     (120,869 )     (1,237,126 )
                 
Cash and cash equivalents at beginning of the year
     297,573       1,534,699  
                 
Cash and cash equivalents at end of year
   $ 176,704     $ 297,573  
                 
SUPPLEMENTAL CASH FLOW INFORMATION
                
                 
Interest paid during the year
   $ 44,795     $ 41,553  
Income taxes paid during the year
   $ 3,130     $ 13,520  
                 
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
                
                 
Repurchase of common stock with notes payable
   $ 152,423     $ 892,207  

The accompanying notes are an integral part of these financial statements.

 
F-6
 
  
B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations
B & M Construction Co. Inc.  was incorporated in the state of Florida on January 12, 1968.  B & M Construction Co. Inc. and Subsidiaries (the “Company”) is engaged in the construction of industrial and commercial buildings, primarily in the petroleum industry in Florida and Georgia.  Work is performed under various fee arrangements including cost plus fee contracts, fixed price contracts, fixed price contracts with incentive and penalty provisions, and straight hourly fee contracts.  These contracts are undertaken by the Company alone or in conjunction with other contracts.

Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Subtopic 105-10, Generally Accepted Accounting Principles (“GAAP”) (“FASB ASC 105-10”). This Standard establishes an integrated source of existing authoritative accounting principles to be applied by all non-governmental entities and is effective for interim and annual periods ending after September 15, 2009. The adoption of FASB ASC 105-10 by the Company did not have a material impact on our financial statements and only resulted in modifications in accounting reference in our footnotes and disclosures.

Principles of Consolidation
The 2009 consolidated financial statements includes the accounts of the Company and its 70% majority-owned subsidiary.  The 2008 consolidated financial statements includes the accounts of the Company and its 70% and 80% majority-owned subsidiaries.  All significant inter-company transactions have been eliminated.

Non-controlling interest in subsidiaries
FASB ASC 810-10-65, Consolidations, requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest.  The non-controlling interest represents the minority interests not held by the Company. The Company has recorded a non-controlling interest in its Consolidated Financial Statements to reflect the minority interests.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 most significant management estimate relates to the determination of percentage of completion in connection with the recognition of profit on contracts.

Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.  Cash and cash equivalents include money market accounts and investments in a repurchase agreement backed by government securities.

 
F-7
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Credit Risk
The Company is subject to some credit risk through short term cash investments which are placed with high credit quality financial institutions.  The Company has entered into an overnight repurchase and cash management agreement with a financial institution to invest idle funds in US government securities.  The Company maintains its cash accounts in several commercial banks located in Central Florida.  The Federal Deposit Insurance Corporation (FDIC) guarantees accounts in the financial institution up to $250,000.  At various times throughout the year, the Company had cash balances that exceeded the FDIC limit.

The Company provides construction services, parts sales and servicing and extends trade credit to the petroleum distribution industry.  The customers are primarily to major oil companies and large independent distributors in Florida and Georgia.  The Company grants credit to its customers during the normal course of business.  The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral.  Management believes that its contract acceptance, billing and collections policies are adequate to minimize potential risk.  The Company does not believe that any single customer, industry, or concentration in any geographic area represents significant credit risk.

Property and Equipment
Property and equipment are recorded at cost and depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, usually from three to forty years.  Routine repairs and maintenance are expensed as incurred.  Accelerated depreciation is used for tax reporting and straight-line depreciation is used for financial statement reporting.

Long-lived Assets
The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with FASB ASC 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets.

Revenue and Cost Recognition
Revenues from fixed price or modified fixed price construction contracts are recognized on the percentage of completion method, measured by the costs incurred to date relative to estimated total costs for each contract.  Where appropriate, certain contracts are segmented into major activities due to the particular scope of work and services to be performed.  These methods are used because management considers costs incurred and possible segmentation of specific contracts to be the best available measure of progress. The length of the Company’s contracts varies, but is typically less than one year.

Contract costs include all direct material and labor costs, and those indirect costs related to contract performance such as insurance, employee benefits, supplies, small tools, repairs, and indirect labor.

Selling, general and administrative costs are charged to expense as incurred.  Provisions for estimated losses on uncompleted contracts, if applicable, are made in the period in which such losses are determined.

 
F-8
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue and Cost Recognition (continued)
Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, represents revenues recognized in excess of amounts billed.  The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenues recognized.

Income Taxes
The Company elected to be taxed as a Subchapter S-Corporation.  Under those provisions, the Company does not pay income taxes on its taxable income.  Instead, the stockholder will include the Company’s taxable income or loss in his individual income tax return.

The Company adopted the provisions FASB ASC 740-10, Accounting for Uncertainty in Income Taxes, (“FASB ASC 740-10”), on January 1, 2009, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company’s adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial position and results of operations.

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would then be recorded if the Company determined it is probable that a position would not be sustained upon examination or if a payment would have to be made to a taxing authority and the amount is reasonably estimable. As of December 31, 2009, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. No accrued interest or penalties on uncertain tax positions have been included on the consolidated statements of operation or the consolidated balance sheets. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2006 through 2009.

Fair Value Measurements
Effective January 1, 2009, the Company adopted FASB ASC 820 “Fair Value Measurements”, (“FASB ASC 820”) for its non-financial assets and liabilities and for its financial assets and liabilities measured at fair value on a nonrecurring basis. This Standard provides a framework for measuring fair value in generally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of FASB ASC 820 for the Company’s non-financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements.

Financial Instruments
Financial instruments consist of cash and cash equivalents, contracts receivable, notes receivables for stock purchases, accounts payable and accrued expenses, and long-term debt. The carrying values of cash and cash equivalents, contracts receivable, and accounts payable and accrued expenses, approximate their

 
F-9
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments (continued)
fair values due to their relatively short lives to maturity.  The fair value of notes receivable from stock purchases and long-term debt also approximate fair market value, as these amounts are due at rates which are compatible to market interest rates.

NOTE B – CONTRACTS RECEIVABLE

Contracts receivable consist of the following at December 31, 2009 and 2008, respectively:

   
2009
    
2008
  
Contract billings
   $ 2,019,260     $ 2,517,444  
Allowance for doubtful accounts
     (55,430 )     (55,430 )
Total
   $ 1,963,830     $ 2,462,014  

Management used the allowance method of recording bad debts and has reviewed all outstanding accounts for collectability.  Credit losses have been minimal and have consistently been within management’s expectation.  No additional allowance was considered necessary at December 31, 2009 and 2008, respectively.

NOTE C – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts consist of the following at December 31, 2009 and 2008:

   
2009
    
2008
  
Costs incurred on uncompleted contracts
   $ 2,867,161     $ 5,338,147  
Estimated earnings
     143,964       843,506  
      3,011,125       6,181,653  
Less billings to date
     3,166,760       5,369,590  
Total
   $  (155,635 )   $ 812,063  

These amounts are included in the Company’s consolidated balance sheet under the following captions:

   
2009
    
2008
  
Costs and estimated earnings in excess of billings on uncompleted contracts
   $ 215,886     $ 942,534  
                 
Billings in excess of costs and estimated earnings on uncompleted contracts
     (371,521 )     (130,471 )
Total
   $  (155,635 )   $ 812,063  

 
F-10
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE D – BACKLOG

The following schedule summarizes the changes in the backlog on contracts during the year ended December 31, 2009.  Backlog represents the amount of revenue the Company expects to realize and work to be performed on uncompleted contracts in progress at year end and from contractual agreements on which work has not yet begun.

Backlog balance at December 31, 2008
   $ 10,742,309  
New contracts during the year
     15,944,014  
Less contract revenue earned during the year
     18,627,011  
Backlog balance at December 31, 2009
   $ 8,059,312  

NOTE E – PROPERTY AND EQUIPMENT

Property and equipment, at cost, consists of the following at December 31, 2009 and 2008, respectively:

   
2009
    
2008
  
Estimated
Useful Lives
Vehicles and trucks
   $ 819,031     $ 975,984    
3-5 years
Construction equipment
     731,918       669,984    
5-7 years
Furniture and office equipment
     374,257       362,309    
5-10 years
Leasehold improvements
     178,110       178,110    
10-40 years
      2,103,316       2,186,387      
Less accumulated depreciation
     1,807,549       1,852,859      
Total
   $ 295,767     $ 333,528      

Aggregate depreciation and amortization expense was $136,960 and $152,976 for the years ended December 31, 2009 and 2008, respectively.  Depreciation charged to cost of contract revenues was $132,478 and $147,027 for the years ended December 31, 2009 and 2008.

NOTE F – CASH SURRENDER VALUE OF INSURANCE

The Company is the beneficiary and owner of an insurance policy on the life of an officer with a total death benefit of approximately $1,200,000.  The cash surrender value relative to the policy at December 31, 2009 and 2008 was $756,094 and $753,529, respectively. At December 31, 2009 and 2008 the Company did not have any loans on this policy. Any loans payable to the insurance company pursuant to borrowings against this policy are collateralized by the cash value of the policy.

NOTE G – LINE OF CREDIT

On June 30, 2010, the bank withdrew the Company's line of credit.  The Company is currently seeking financing from several financial institutions.

 
F-11
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE G – LINE OF CREDIT (continued)

As of December 31, 2009 and 2008, respectively, the Company had a $1,000,000 and $2,000,000 available line of credit which matured on June 30, 2010.  Amounts borrowed under this line of credit accrued interest at 2.85 basis points above the LIBOR market interest rate (0.23% at December 31, 2009) with a floor of 5%. This facility was collateralized by all assets of the Company and required compliance with certain covenants including a funds flow coverage ratio, a deposit relationship and a total liabilities to effective tangible net worth ratio.  The Company was not in compliance with certain of the covenants at December 31, 2009.  At December 31, 2009 and 2008, respectively, the Company did not have any borrowings outstanding on this line of credit.

NOTE H – LONG TERM DEBT

Long term debt arouse from stock purchased by the Company from former stockholders (see Note J) and relates to the following at December 31, 2009 and 2008, respectively:

   
2009
    
2008
  
4.25% note payable to a former stockholder, $802 principal and interest payments monthly, through January 2010
   $ 799     $ 10,166  
                 
5.00% note payable to a former stockholder, $9,317 principal and interest payments monthly, through June 2015
     534,508       616,894  
                 
5.00% note payable to withdrawing stockholder, $2,097 principal and interest payments monthly, through June 2015
     120,788       139,405  
                 
3.25% note payable to a former stockholder, $2,357 principal and interest payments monthly, through January 2016.
     156,316       197,009  
                 
4.25% note payable to a former stockholder, $5,528 principal and interest payable monthly, through January 2010
     5,509       70,119  
      817,920       1,033,593  
Less current portion
     136,101       218,016  
Total
   $ 681,819     $ 815,577  

 
F-12
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE H – LONG TERM DEBT (continued)

Maturities of long term debt are as follows:

Year ending
        
December 31,
    
Amount
  
 
2010
     $ 136,101  
 
2011
       136,005  
 
2012
       142,520  
 
2013
       149,353  
 
2014
       156,521  
 
Thereafter
       97,420  
 
Total
     $ 817,920  

Interest paid on long term debt during the year ended December 31, 2009 and 2008 was $44,795 and $41,553, respectively.

NOTE I –NOTES RECEIVABLE FROM STOCK PURCHASES

The notes receivable from stock purchases relates to shares sold to employees of the Company.  The stock is held in escrow until the stockholder makes all required payments (see Note J). Since the notes relate to purchase of common stock, the accounts have been classified in the equity section of the accompanying consolidated balance sheets and consolidated statements of changes in stockholders' equity.  The notes receivable from stock purchases consists of following at December 31, 2009 and 2008 respectively:

   
2009
    
2008
  
8.25% note receivable, collateralized by Company stock, annual payments of $38,426 including interest, through December 2016
   $ 178,369     $ 213,091  
                 
5.00% note receivable, collateralized by Company stock, annual payments of $21,762 including interest, paid in full in 2009
     -       78,129  
                 
5.25% note receivable, collateralized by Company stock, annual payments of $28,045 including interest, through December 2014
     118,666       140,370  
                 
8.25% note receivable, collateralized by Company stock, annual payments of $34,583 including interest, through December 2016
     174,398       195,726  
      471,433       627,316  
Less current portion
     72,313       77,813  
Total
   $ 399,120     $ 549,503  

 
F-13
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE I –NOTES RECEIVABLE FROM STOCK PURCHASES (continued)

Maturity of these notes receivable is as follows:

Year Ending
        
December 31,
    
Amount
  
2010
     $ 72,313  
2011
       76,110  
2012
       80,105  
2013
       84,311  
2014
       86,257  
Thereafter
       72,337  
Total
     $ 471,433  

Interest income received on the notes receivable during the year ended December 31, 2009 and 2008, was $24,540 and $56,076, respectively.

NOTE J – STOCKHOLDERS' STOCK AGREEMENT

The common stock of the Company is subject to the provisions of a stockholders stock agreement ("Stockholders Agreement"), which restricts transfers, encumbrances and other changes to stock ownership.  The Stockholders Agreement outlines the purchase and sales price, terms and eligibility to purchase the Company's common stock. Employees that purchase stock in the Company may acquire the shares with a note receivable to the Company (see Note I).  These notes receivable require equal annual payments of principal and interest over a maximum of nine years, at interest rates at the prime rate of the month immediately preceding the stock purchased.

In addition, the Stockholders Agreement has a provision requiring mandatory purchase by the Company or the remaining stockholders of Company common stock held by a former stockholder who is no longer employed by the Company.  Per the Stockholders Agreement, the former stockholder agrees to accept a note payable from the Company for the repurchased shares (see Note H). These notes payable are repaid in equal monthly payments of principal and interest over seven years.  The interest rate is determined using the prime rate of the month immediately preceding the stock repurchased.

Treasury stock repurchased from stockholders is retired immediately.  The Company accounts for the repurchased common stock under the par method of accounting for treasury stock.

NOTE K – INCOME TAXES

Certain states require the Company to pay state income taxes on S-Corporation earnings.  The provision for state income taxes consists of $2,950 at December 31, 2009 and $14,000 at December 31, 2008.  During the years ended December 31, 2009 and 2008, the Company made actual state income tax payments of $3,130 and $13,520, respectively.

 
F-14
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE L – 401(k) RETIREMENT PLAN

The Company sponsors a 401(k) plan for eligible employees.  The Company’s contributions to the Plan are determined annually by the Board of Directors.  The allocation of the Company’s contribution to the Plan among eligible employees was based upon formulas stated within the Plan.  The contribution for the year ended December 31, 2009 and 2008 was $122,289 and $105,810, respectively.  The Company matches up to 3% of compensation that a participant contributes to the Plan.

NOTE M – COMMITMENTS AND CONTINGENCIES

Leases
The Company leases vehicles for use in its operations.  The leases call for 36 month terms, with varying end dates.  Minimum future vehicle lease commitments are as follows:

Year ending
        
December 31,
    
Amount
  
2010
     $ 173,661  
2011
       39,165  
2012
       27,590  
Total
     $ 240,416  

Legal Matters
The Company is a party in legal proceedings in the ordinary course of business. The Company does not believe that the ultimate outcome of the legal proceedings will have an impact on the consolidated financial statements.

Other
The Company is periodically involved in disputes and claims with contractors and owners in connection with its ongoing construction activities.  At the date of the financial statements, the outcome of such claims/disputes was not subject to accurate determination and they were not considered to be material.

NOTE N – RELATED PARTIES

The Company leases office facilities from three entities related to the Company's stockholders.  The annual lease payments for the facilities were $179,460 for the years ended December 31, 2009 and 2008, respectively.  The leases provide for minimum annual rental payments plus sales tax.

The following is a schedule of future minimum lease payments to these affiliated entities:

Year Ending
        
December 31,
    
Amount
  
2010
     $ 128,520  
2011
       94,520  
Total
     $ 223,040  

The Company has receivables from the above related entities in the amount of $536,527 and $449,669, respectively as of December 31, 2009 and 2008.  These amounts are non-interest bearing, due on demand and are reflected in due from related parties on the accompanying consolidated balance sheets.

 
F-15
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
December 31, 2009 and 2008
 
NOTE O – SUBSEQUENT EVENTS

Management has performed an analysis through July 27, 2010 of the activities and transactions subsequent to December 31, 2009 to determine the need for any adjustments to and/or disclosures within the consolidated financial statements for the year then ended December 31, 2009. 

On May 13, 2010, SSGI, Inc. (the "SSGI"), a public company, acquired all of the outstanding shares of capital stock of the Company.  As consideration for the acquisition, SSGI paid $1,000,000 in cash, issued a Promissory Note in the amount of $1,173,473, bearing interest at 4% per annum and payable in forty-eight equal monthly installments, commencing on the 30th day following the closing date, plus issued 6,124,622 shares of SSGI common stock, par value $0.001 per share, (the "SSGI Common Stock"). SSGI also issued warrants to certain stockholders of the Company to purchase 250,000 shares of SSGI Common Stock exercisable for five years at an exercise price of $0.75 per share.

On June 30, 2010, the bank withdrew the Company's line of credit (see Note G).  The Company is currently seeking financing from several financial institutions.

 
F-16
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

   
March 31,
    
December 31,
  
   
2010
    
2009
  
   
(unaudited)
    
(audited)
  
ASSETS
            
             
CURRENT ASSETS:
        
             
Cash and cash equivalents
   $ 3,474     $ 176,704  
Contracts receivable, net
     1,420,300       1,963,830  
Costs and estimated earnings in excess of billings on uncompleted contracts
     292,631       215,886  
Prepaid expenses and other current assets
     126,489       139,947  
Due from related parties
     326,527       536,527  
                 
TOTAL CURRENT ASSETS
     2,169,421       3,032,894  
                 
PROPERTY AND EQUIPMENT, NET
     274,160       295,767  
                 
CASH SURRENDER VALUE OF INSURANCE
     784,798       756,094  
                 
TOTAL ASSETS
   $ 3,228,379     $ 4,084,755  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
CURRENT LIABILITIES:
                
                 
Accounts payable and accrued expenses
   $ 628,252     $ 859,838  
Billings in excess of costs and estimated earnings on uncompleted contracts
     234,779       371,521  
Estimated losses on uncompleted contracts
     -       63,743  
Current portion of long-term debt
     131,319       136,101  
                 
TOTAL CURRENT LIABILITIES:
     994,350       1,431,203  
                 
LONG TERM DEBT, NET OF CURRENT PORTION
     648,411       681,819  
                 
TOTAL LIABILITIES
     1,642,761       2,113,022  
                 
STOCKHOLDERS' EQUITY
                
                 
Common stock - $1 Par value, 5,000 shares authorized, 496 issued and outstanding
     496       496  
Additional paid in capital
     713,036       713,036  
Retained earnings
     1,352,685       1,723,786  
Notes receivable from stock purchases
     (471,433 )     (471,433 )
Total
     1,594,784       1,965,885  
Non-controlling interest
     (9,166 )     5,848  
                 
TOTAL STOCKHOLDERS' EQUITY
     1,585,618       1,971,733  
                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 3,228,379     $ 4,084,755  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-17
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   
Three Months Ended March 31,
  
   
2010
    
2009
  
             
CONTRACT REVENUES EARNED
   $ 2,676,507     $ 5,010,988  
COST OF REVENUES EARNED
     2,500,303       4,292,383  
                 
GROSS PROFIT
     176,204       718,605  
                 
GENERAL AND ADMINISTRATIVE EXPENSES
                
Payroll and related costs
     365,331       290,268  
Rent
     46,365       47,313  
Insurance
     41,353       144,255  
Telephone and utilities
     34,532       33,731  
Office expense and supplies
     26,412       41,128  
Travel and entertainment
     15,705       59,341  
Professional fees
     6,425       32,382  
Repairs and maintenance
     5,561       8,221  
Taxes and license fees
     4,645       8,737  
Various other operating expenses
     9,443       19,103  
TOTAL GENERAL AND ADMINISTRATIVE EXPENSES
     555,772       684,479  
                 
(LOSS) INCOME FROM OPERATIONS
     (379,568 )     34,126  
                 
OTHER INCOME (EXPENSES):
                
Interest income
     67       123  
Other income
     526       10,484  
Interest expense
     (9,640 )     (10,306 )
Gain/(Loss) on asset disposition
     2,500       -  
TOTAL OTHER (EXPENSES) INCOME:
     (6,547 )     301  
                 
NET (LOSS) INCOME BEFORE TAXES
     (386,115 )     34,427  
                 
PROVISION FOR TAXES
     -       -  
                 
(LOSS) INCOME BEFORE NON-CONTROLLING INTEREST IN NET LOSS (INCOME) OF SUBSIDIARIES
     (386,115 )     34,427  
                 
NON-CONTROLLING INTEREST IN NET LOSS (INCOME) OF SUBSIDIARIES
     15,014       (22,080 )
                 
NET (LOSS) INCOME
   $ (371,101 )   $ 12,347  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
F-18
 

B&M CONSTRUCTION CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

   
Three Months Ended March 31,
  
   
2010
    
2009
  
             
CASH FLOWS FROM OPERATING ACTIVITIES:
            
Net (loss) income
   $ (371,101 )   $ 12,347  
Non-controlling interest in net (loss) income of subsidiary     (15,014 )     22,080  
(Loss) Income before non-controlling interest in net (loss) of subsidiary     (386,115 )     34,427  
Adjustments to reconcile net (loss) income to net cash and cash equivalents (used in) provided by operating activities:
                
Depreciation and amortization
     30,619       30,348  
Gain on disposal of assets
     (2,500 )     -  
Changes in operating assets and liabilities:
                
 (Increase) decrease in assets:
                
Contracts receivable
     543,530       319,301  
Costs and estimated earnings in excess of billings on uncompleted contracts
     (76,745 )     318,033  
Due from related parties
     210,000       (36,830 )
Prepaid expenses and other current assets
     13,458       (71,179 )
Cash surrender value life insurance and other assets
     (28,704 )     (49,750 )
Increase (decrease) in liabilities:
                
Accounts payable, accrued expenses and estimated losses on uncompleted contracts
     (295,329 )     (513,796 )
Billings in excess of costs and estimated earnings on uncompleted contracts
     (136,742 )     92,488  
Net cash (used in) provided by operating activities
     (128,528 )     123,042  
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
                
Proceeds from sale of equipment
     3,500       -  
Purchase of equipment
     (10,012 )     (19,765 )
Net cash used in investing activities
     (6,512 )     (19,765 )
                 
CASH FLOWS FROM  FINANCING ACTIVITIES:
                
Payments from notes receivable from stockholders
     -       102,442  
Payments on stockholders payable
     (38,190 )     (42,982 )
Distributions to stockholders
     -       (356,979 )
Net cash used in financing activities
     (38,190 )     (297,519 )
                 
CHANGE IN CASH AND CASH EQUIVALENTS
     (173,230 )     (194,242 )
                 
Cash and cash equivalents at beginning of the period
     176,704       297,573  
                 
Cash and cash equivalents at end of period
   $ 3,474     $ 103,331  
                 
SUPPLEMENTAL CASH FLOW INFORMATION
                
                 
Interest paid during the period
   $ 9,640     $ 10,306  
Income taxes paid during the period
   $ 2,950     $ 11,306  
 
The accompanying notes are an integral part of these financial statements.
 
 
F-19
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations
B & M Construction Co. Inc.  was incorporated in the state of Florida on January 12, 1968.  B & M Construction Co. Inc. and Subsidiaries (the “Company”) is engaged in the construction of industrial and commercial buildings, primarily in the petroleum industry in Florida and Georgia.  Work is performed under various fee arrangements including cost plus fee contracts, fixed price contracts, fixed price contracts with incentive and penalty provisions, and straight hourly fee contracts.  These contracts are undertaken by the Company alone or in conjunction with other contracts.

Interim Financial Statements
Although the Company is not a Securities Exchange Commission registrant, these financial statements have been prepared in accordance with the rules of interim financial statements stipulated in Regulation S-X. In the opinion of management, such financial statements include all adjustments (consisting of normal recurring accruals) necessary for the fair presentation of the financial position and the results of operations. The results of operations for the periods presented are not necessarily indicative of the results to be expected for the full year. The balance sheet information as of December 31, 2009 was derived from the audited financial statements. The interim financial statements should be read in conjunction with those statements.

Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Subtopic 105-10, Generally Accepted Accounting Principles (“GAAP”) (“FASB ASC 105-10”). This Standard establishes an integrated source of existing authoritative accounting principles to be applied by all non-governmental entities and is effective for interim and annual periods ending after September 15, 2009. The adoption of FASB ASC 105-10 by the Company did not have a material impact on our financial statements and only resulted in modifications in accounting reference in our footnotes and disclosures.

Principles of Consolidation
These consolidated financial statements includes the accounts of the Company and its 70% majority-owned subsidiary.  All significant inter-company transactions have been eliminated.

Non-controlling interest in subsidiaries
FASB ASC 810-10-65, Consolidations, requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest.  The non-controlling interest represents the minority interests not held by the Company. The Company has recorded a non-controlling interest in its Consolidated Financial Statements to reflect the minority interests.

Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 most significant management estimate relates to the determination of percentage of completion in connection with the recognition of profit on contracts.

 
F-20
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents
The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.  Cash and cash equivalents include money market accounts and investments in a repurchase agreement backed by government securities.

Concentration of Credit Risk
The Company is subject to some credit risk through short term cash investments which are placed with high credit quality financial institutions.  The Company has entered into an overnight repurchase and cash management agreement with a financial institution to invest idle funds in US government securities.  The Company maintains its cash accounts in several commercial banks located in Central Florida.  The Federal Deposit Insurance Corporation (FDIC) guarantees accounts in the financial institution up to $250,000.  At various times throughout the period, the Company had cash balances that exceeded the FDIC limit.

The Company provides construction services, parts sales and servicing and extends trade credit to the petroleum distribution industry. The customers are primarily to major oil companies and large independent distributors in Florida and Georgia.  The Company grants credit to its customers during the normal course of business.  The Company performs ongoing credit evaluations of its customers’ financial condition and generally does not require collateral.  Management believes that its contract acceptance, billing and collections policies are adequate to minimize potential risk.  The Company does not believe that any single customer, industry, or concentration in any geographic area represents significant credit risk.

Property and Equipment
Property and equipment are recorded at cost and depreciation is provided principally on the straight-line method over the estimated useful lives of the assets, usually from three to forty years.  Routine repairs and maintenance are expensed as incurred.  Accelerated depreciation is used for tax reporting and straight-line depreciation is used for financial statement reporting.

Long-lived Assets
The Company reviews long-lived assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. If the undiscounted future cash flows attributable to the related assets are less than the carrying amount, the carrying amounts are reduced to fair value and an impairment loss is recognized in accordance with FASB ASC 360-10-05, Accounting for the Impairment or Disposal of Long-Lived Assets.

Revenue and Cost Recognition
Revenues from fixed price or modified fixed price construction contracts are recognized on the percentage of completion method, measured by the costs incurred to date relative to estimated total costs for each contract.  Where appropriate, certain contracts are segmented into major activities due to the particular scope of work and services to be performed.  These methods are used because management considers costs incurred and possible segmentation of specific contracts to be the best available measure of progress. The length of the Company’s contracts varies, but is typically less than one year.

Contract costs include all direct material and labor costs, and those indirect costs related to contract performance such as insurance, employee benefits, supplies, small tools, repairs, and indirect labor.

 
F-21
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue and Cost Recognition (continued)
Selling, general and administrative costs are charged to expense as incurred.  Provisions for estimated losses on uncompleted contracts, if applicable, are made in the period in which such losses are determined.

Changes in job performance, job conditions and estimated profitability, including those arising from contract penalty provisions and final contract settlements, may result in revisions to costs and income and are recognized in the period in which the revisions are determined.

The asset, “Costs and estimated earnings in excess of billings on uncompleted contracts”, represents revenues recognized in excess of amounts billed.  The liability, “Billings in excess of costs and estimated earnings on uncompleted contracts”, represents billings in excess of revenues recognized.

Income Taxes
The Company elected to be taxed as a Subchapter S-Corporation.  Under those provisions, the Company does not pay income taxes on its taxable income.  Instead, the stockholder will include the Company’s taxable income or loss in his individual income tax return.

The Company adopted the provisions FASB ASC 740-10, Accounting for Uncertainty in Income Taxes, (“FASB ASC 740-10”), on January 1, 2009, which provide interpretative guidance for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Effective with the Company’s adoption of these provisions, interest related to the unrecognized tax benefits is recognized in the financial statements as a component of income taxes. The adoption of ASC 740 did not have an impact on the Company’s financial position and results of operations.

In the unlikely event that an uncertain tax position exists in which the Company could incur income taxes, the Company would evaluate whether there is a probability that the uncertain tax position taken would be sustained upon examination by the taxing authorities. Reserves for uncertain tax positions would then be recorded if the Company determined it is probable that a position would not be sustained upon examination or if a payment would have to be made to a taxing authority and the amount is reasonably estimable. As of March 31, 2010, the Company does not believe it has any uncertain tax positions that would result in the Company having a liability to the taxing authorities. No accrued interest or penalties on uncertain tax positions have been included on the consolidated statements of operation or the consolidated balance sheets. The Company’s tax returns are subject to examination by the federal and state tax authorities for the years ended 2006 through 2009.

Fair Value Measurements
Effective January 1, 2009, the Company adopted FASB ASC 820 “Fair Value Measurements”, (“FASB ASC 820”) for its non-financial assets and liabilities and for its financial assets and liabilities measured at fair value on a nonrecurring basis. This Standard provides a framework for measuring fair value in generally accepted accounting principles, expands disclosures about fair value measurements, and establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The adoption of FASB ASC 820 for the Company’s non-financial assets and liabilities did not have a material impact on the Company’s consolidated financial statements.

 
F-22
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE A – NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Financial Instruments
Financial instruments consist of cash and cash equivalents, contracts receivable, notes receivables for stock purchases, accounts payable and accrued expenses, and long-term debt. The carrying values of cash and cash equivalents, contracts receivable, and accounts payable and accrued expenses, approximate their fair values due to their relatively short lives to maturity.  The fair value of notes receivable from stock purchases and long-term debt also approximate fair market value, as these amounts are due at rates which are compatible to market interest rates.

NOTE B – CONTRACTS RECEIVABLE

Contracts receivable are as follows

   
March 31, 2010
    
December 31, 2009
  
Contract billings
   $ 1,475,730     $ 2,019,260  
Allowance for doubtful accounts
     (55,430 )     (55,430 )
Total
   $ 1,420,300     $ 1,963,830  

Management used the allowance method of recording bad debts and has reviewed all outstanding accounts for collectability.  Credit losses have been minimal and have consistently been within management’s expectation.  No additional allowance was considered necessary at March 31, 2010 and December 31, 2009, respectively.

NOTE C – COSTS AND ESTIMATED EARNINGS ON UNCOMPLETED CONTRACTS

Costs and estimated earnings on uncompleted contracts consist of the following at:

   
March 31, 2010
    
December 31, 2009
  
Costs incurred on uncompleted contracts
   $ 2,767,025     $ 2,867,161  
Estimated earnings
     274,355       143,964  
      3,041,380       3,011,125  
Less billings to date
     2,983,528       3,166,760  
Total
   $ 57,852     $ (155,635 )

These amounts are included in the Company’s consolidated balance sheet under the following captions:

   
March 31, 2010
    
December 31, 2009
  
Costs and estimated earnings in excess of billings on uncompleted contracts
   $ 292,631     $ 215,886  
                 
Billings in excess of costs and estimated earnings on uncompleted contracts
     (234,779 )     (371,521 )
Total
   $ 57,852     $ (155,635 )

 
F-23
 
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE D – LONG TERM DEBT

Long term debt arouse from stock purchased by the Company from former stockholders (see Note E) and relates to the following at March 31, 2010 and December 31, 2009, respectively:

   
March 31, 2010
    
December 31, 2009
  
4.25% note payable to a former stockholder, $802 principal and interest payments monthly, last payment made in January 2010
   $ -     $ 799  
                 
5.00% note payable to a former stockholder, $9,317 principal and interest payments monthly, through June 2015
     513,261       534,508  
                 
5.00% note payable to a former stockholder, $2,097 principal and interest payments monthly, through June 2015
     115,987       120,788  
                 
3.25% note payable to a former stockholder, $2,357 principal and interest payments monthly, through January 2016.
     150,482       156,316  
                 
4.25% note payable to a former stockholder, $5,528 principal and interest payable monthly, last payment made in January 2010
     -       5,509  
      779,730       817,920  
Less current portion
     131,319       136,101  
Total
   $ 648,411     $ 681,819  

Interest paid on long term debt for the three month periods ended March 31, 2010 and 2009 was $9,640 and $10,306, respectively.

NOTE E – STOCKHOLDERS' STOCK AGREEMENT

The common stock of the Company is subject to the provisions of a stockholders stock agreement ("Stockholders Agreement"), which restricts transfers, encumbrances and other changes to stock ownership.  The Stockholders Agreement outlines the purchase and sales price, terms and eligibility to purchase the Company's common stock.

 
F-24
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE E – STOCKHOLDERS' STOCK AGREEMENT (continued)

Employees that purchase stock in the Company may acquire the shares with a note receivable to the Company.  Since the notes relate to purchase of common stock, the accounts have been classified in the equity section of the accompanying consolidated balance sheets These notes receivable require equal annual payments of principal and interest over a maximum of nine years, at interest rates at the prime rate of the month immediately preceding the stock purchased.  The balance of notes receivable from stock purchases was $471,433, respectively at March 31, 2010 and December 31, 2009.

In addition, the Stockholders Agreement has a provision requiring mandatory purchase by the Company or the remaining stockholders of Company common stock held by a former stockholder who is no longer employed by the Company.  Per the Stockholders Agreement, the former stockholder agrees to accept a note payable from the Company for the repurchased shares (see Note D). These notes payable are repaid in equal monthly payments of principal and interest over seven years.  The interest rate is determined using the prime rate of the month immediately preceding the stock repurchased.

Treasury stock repurchased from stockholders is retired immediately.  The Company accounts for the repurchased common stock under the par method of accounting for treasury stock.

NOTE F – 401(k) RETIREMENT PLAN

The Company sponsors a 401(k) plan for eligible employees.  The Company’s contributions to the Plan are determined annually by the Board of Directors.  The allocation of the Company’s contribution to the Plan among eligible employees was based upon formulas stated within the Plan.  The contribution for the three month periods ended March 31, 2010 and 2009 was $15,219 and $20,962, respectively.  The Company matches up to 3% of compensation that a participant contributes to the Plan.

NOTE G – COMMITMENTS AND CONTINGENCIES

Legal Matters
The Company is a party in legal proceedings in the ordinary course of business. The Company does not believe that the ultimate outcome of the legal proceedings will have an impact on the consolidated financial statements.

Other
The Company is periodically involved in disputes and claims with contractors and owners in connection with its ongoing construction activities.  At the date of the financial statements, the outcome of such claims/disputes was not subject to accurate determination and they were not considered to be material.

NOTE H – RELATED PARTIES

The Company leases office facilities from three entities related to the Company's stockholders.  The lease payments for the facilities were $46,365 and $45,313 for the three month periods ended March 31, 2010 and 2009, respectively.  The leases provide for minimum annual rental payments plus sales tax.

The Company has receivables from the above related entities in the amount of $326,527 and $536,527, respectively as of March 31, 2010 and December 31, 2009.  These amounts are non-interest bearing, due on demand and are reflected in due from related parties on the accompanying consolidated balance sheets.

 
F-25
 

B & M CONSTRUCTION CO., INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
March 31, 2010
 
NOTE I – SUBSEQUENT EVENTS

Management has performed an analysis through July 27, 2010 of the activities and transactions subsequent to March 31, 2010 to determine the need for any adjustments to and/or disclosures within the consolidated financial statements for the period ended March 31, 2010. 

On May 13, 2010, SSGI, Inc. (the "SSGI"), a public company, acquired all of the outstanding shares of capital stock of the Company.  As consideration for the acquisition, SSGI paid $1,000,000 in cash, issued a Promissory Note in the amount of $1,173,473, bearing interest at 4% per annum and payable in forty-eight equal monthly installments, commencing on the 30th day following the closing date, plus issued 6,124,622 shares of SSGI common stock, par value $0.001 per share, (the "SSGI Common Stock"). SSGI also issued warrants to certain stockholders of the Company to purchase 250,000 shares of SSGI Common Stock exercisable for five years at an exercise price of $0.75 per share.

On June 30, 2010, the bank withdrew the Company's line of credit.  The Company is currently seeking financing from several financial institutions.  At March 31, 2010 and December 31, 2009, respectively, the Company did not have any borrowings outstanding on this line of credit.

 
F-26
 
  
SSGI, INC.

INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

 
Page
   
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  
   
Unaudited Pro Forma Consensed Combined Financial Information
F-28
   
Unaudited Pro Forma Consensed Combined Balance Sheet as of March 31, 2010
F-29
   
Unaudited Pro Forma Consensed Combined Statement of Operations for the Year Ended December 31, 2009
F-30
   
Unaudited Pro Forma Consensed Combined Statement of Operations for the Three Months Ended March 31, 2010
F-31

 
F-27
 
 
SSGI, Inc. and Subsidiaries
 
On May 13, 2010, SSGI, Inc. (the "Company" or “SSGI”), acquired all of the outstanding shares of capital stock of B&M Construction Co., Inc., a Florida corporation (“B&M”).  B&M is a construction company, operating in the Southeastern United States that specializes in the design, construction and maintenance of retail petroleum facilities.  As consideration for the acquisition, the Company paid $1,000,000 in cash, issued a Promissory Note in the amount of $1,173,473, bearing interest at 4% per annum and payable in forty-eight equal monthly installments, commencing on the 30th day following the closing date, plus issued 6,124,622 shares of SSGI common stock, par value $0.001 per share, (the "SSGI Common Stock"). SSGI also issued warrants to certain stockholders of the Company to purchase 250,000 shares of SSGI Common Stock exercisable for five years at an exercise price of $0.75 per share. The Company valued the total consideration paid to be approximately $6.8 million.
 
In our opinion, all material adjustments necessary to reflect the effects of the above transaction have been made.
 
The following unaudited pro forma consolidated balance sheet as of March 31, 2010 is presented as if we acquired B&M on March 31, 2010.  The following unaudited pro forma consolidated statements of operations for the three months ended March 31, 2010 and for the year ended December 31, 2009 are presented as if we had acquired B&M on January 1, 2009.  This unaudited pro forma consolidated financial information should be read in conjunction with the historical financial statements and notes thereto as filed in our quarterly report on Form 10-Q for the three months ended March 31, 2010 and our annual report on Form 10-K for the year ended December 31, 2009 and are not necessarily indicative of what the actual financial position or results of operations would have been had we completed the transaction as of the beginning of the periods presented, nor is it necessarily indicative of future results.
 
F-28

PROFORMA CONDENSED COMBINED BALANCE SHEET (Unaudited)
As of March 31, 2010

         
B&M Construction
    
Pro Forma
        
   
SSGI, Inc.
    
Co., Inc.
    
Adjustments
    
Pro Forma
  
ASSETS
                        
                         
CURRENT ASSETS:
                        
                         
Cash and cash equivalents
   $ 111,103     $ 3,474     $ -     $ 114,577  
Restricted cash deposits
     237,918       -       -       237,918  
Contracts receivable, net
     348,401       1,420,300       -       1,768,701  
Costs and estimated earnings in excess of billings on uncompleted contracts
     34,323       292,631       -       326,954  
Prepaid expenses and other current assets
     59,921       126,489       -       186,410  
Investment in subsidiary
     -       -       -       -  
Due from related parties
     -       326,527       (326,527 )     -  
                                 
TOTAL CURRENT ASSETS
     791,666       2,169,421       (326,527 )     2,634,560  
                                 
PROPERTY AND EQUIPMENT, NET
     319,324       274,160       -       593,484  
                                 
OTHER ASSETS
     14,280       784,798       5,199,368       5,998,446  
                                 
TOTAL ASSETS
   $ 1,125,270     $ 3,228,379     $ 4,872,841     $ 9,226,490  
                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                                
                                 
CURRENT LIABILITIES:
                                
                                 
Accounts payable and accrued expenses
   $ 1,784,029     $ 628,252     $ -     $ 2,412,281  
Billings in excess of costs and estimated earnings on uncompleted contracts
     228,848       234,779       -       463,627  
Notes payable, current
     1,060,807       -       1,000,000       2,060,807  
Current portion of long-term debt
     85,000       131,319       229,261       445,580  
Stockholders payable
     11,624       -       -       11,624  
                                 
TOTAL CURRENT LIABILITIES:
     3,170,308       994,350       1,229,261       5,393,919  
                                 
LONG TERM DEBT, NET OF CURRENT PORTION
     1,329,756       648,411       944,212       2,922,379  
                                 
TOTAL LIABILITIES
     4,500,064       1,642,761       2,173,473       8,316,298  
                                 
STOCKHOLDERS' EQUITY
                                
                                 
Common stock
     34,688       496       5,629       40,813  
Additional paid in capital
     3,160,158       713,036       3,574,991       7,448,185  
Retained earnings
     (6,569,640 )     1,352,685       (1,352,685 )     (6,569,640 )
Notes receivable from stock purchases
     -       (471,433 )     471,433       -  
Total
     (3,374,794 )     1,594,784       2,699,368       919,358  
Non-controlling interest
     -       (9,166 )      -       (9,166 ) 
                                 
TOTAL STOCKHOLDERS' EQUITY
     (3,374,794 )     1,585,618       2,699,368       910,192  
                                 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
   $ 1,125,270     $ 3,228,379     $ 4,872,841     $ 9,226,490  

See accompanying information to unaudited pro forma condensed combined financial statements.

 
F-29
 

PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (Unaudited)
Year Ended December 31, 2009

         
B&M Construction
        
   
SSGI, Inc.
    
Co., Inc.
    
Pro Forma
  
                   
CONTRACT REVENUES EARNED
   $ 7,784,942     $ 18,312,641     $ 26,097,583  
                         
COST OF REVENUES EARNED
     7,240,425       15,724,876       22,965,301  
                         
GROSS PROFIT
     544,517       2,587,765       3,132,282  
                         
GENERAL AND ADMINISTRATIVE EXPENSES
     1,898,245       2,510,161       4,408,406  
                         
INCOME/(LOSS) FROM OPERATIONS
     (1,353,728 )     77,604       (1,276,124 )
                         
OTHER INCOME (EXPENSES):
                        
Interest income
     1,878       25,387       27,265  
Other income
     6,629       29,705       36,334  
Financing costs
     (181,201 )     -       (181,201 )
Interest expense
     (141,268 )     (44,795 )     (186,063 )
Gain/(Loss) on asset disposition
     (2,305 )     (2,308 )     (4,613 )
TOTAL OTHER INCOME/(EXPENSES):
     (316,267 )     7,989       (308,278 )
                         
NET INCOME/(LOSS) BEFORE TAXES
     (1,669,995 )     85,593       (1,584,402 )
                         
PROVISION FOR TAXES
     -       (2,950 )     (2,950 )
                         
INCOME/(LOSS) BEFORE NON-CONTROLLING INTEREST IN NET INCOME OF SUBSIDIARIES
     (1,669,995 )     82,643       (1,587,352 )
                         
NON-CONTROLLING INTEREST IN NET INCOME OF SUBSIDIARIES
     -       (6,933 )     (6,933 )
                         
NET INCOME/(LOSS)
  $ (1,669,995 )   $ 75,710     $ (1,594,285 )
                         
Loss per share:
                        
Basic and Diluted
   $ (0.048 )           $ (0.042 )
                         
Weighted Average Outstanding Shares:
                        
Basic and Diluted
     34,679,909               37,742,220  

See accompanying information to unaudited pro forma condensed combined financial statements.

 
F-30
 

PROFORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS (Unaudited)
For the Three Months Ended March 31, 2010

         
B&M Construction
        
   
SSGI, Inc.
    
Co., Inc.
    
Pro Forma
  
                   
CONTRACT REVENUES EARNED
   $ 738,737     $ 2,676,507     $ 3,415,244  
                         
COST OF REVENUES EARNED
     932,825       2,500,303       3,433,128  
                         
GROSS PROFIT/(LOSS)
     (194,088 )     176,204       (17,884 )
                         
GENERAL AND ADMINISTRATIVE EXPENSES
     429,532       555,772       985,304  
                         
LOSS FROM OPERATIONS
     (623,620 )     (379,568 )     (1,003,188 )
                         
OTHER INCOME (EXPENSES):
                        
Interest income
     20       67       87  
Other income
             526       526  
Interest expense
     (38,735 )     (9,640 )     (48,375 )
Gain/(Loss) on asset disposition
     -       2,500       2,500  
TOTAL OTHER EXPENSE:
     (38,715 )     (6,547 )     (45,262 )
                         
NET LOSS BEFORE TAXES
     (662,335 )     (386,115 )     (1,048,450 )
                         
PROVISION FOR TAXES
     -       -       -  
                         
LOSS BEFORE NON-CONTROLLING INTEREST IN NET LOSS OF SUBSIDIARIES
     (662,335 )     (386,115 )     (1,048,450 )
                         
NON-CONTROLLING LOSS IN NET LOSS OF SUBSIDIARIES
     -       15,014       15,014  
                         
NET LOSS
   $ (662,335 )   $ (371,101 )   $ (1,033,436 )
                         
Loss per share:
                        
Basic and Diluted
   $ (0.019 )           $ (0.028 )
                         
Weighted Average Outstanding Shares:
                        
Basic and Diluted
     34,687,630               37,746,081  

See accompanying information to unaudited pro forma condensed combined financial statements.

 
F-31