8-K/A 1 d8ka.txt FORM 8-K AMENDMENT NO. 1 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 May 15, 2000 ------------------------------ Date of Report (Date of earliest event reported) EarthFirst Technologies, Incorporated ------------------------------------------------------ (Exact name of registrant as specified in its charter) Florida 0-23897 59-3462501 ------------------------------ ------- ------------------ (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification No.) 1226 Tech Blvd., Tampa, Florida 33619 ------------------------------ ------------------ (Address of principal executive offices) (Zip Code) (813) 635-2050 ----------------------------- (Registrant's telephone number, including area code) Not Applicable ---------------------------------- (Former name or former address if changed since last report) Page 1 of 2 Item 7. Financial Statements and Exhibits. (a) Financial Statements of Businesses Acquired. Financial statements for the combined balance sheet of SAC-1, Inc. and the government contracting division of Octofoil International Group, Inc., as of December 31, 1999, and the related combined statements of operations, owners' equity and cash flows for the year then ended accompany this filing as an exhibit. (b) Pro Forma Financial Information. Introduction: On May 15, 2000, EarthFirst Technologies, Incorporated, a Florida Corporation formerly known as Toups Technology Licensing, Incorporated (the "Company") acquired all of the outstanding stock of SAC-1, Inc. ("SAC-1"), also known as Strategic Acquisition Corporation, in exchange for issuing 26,500,000 shares of the Company's common stock. In anticipation of this transaction, SAC-1 acquired the government contract operations conducted by Octofoil International Group, Inc. Additional information regarding these transactions has been disclosed in the Company's Form 10-Q for the period ending June 30, 2000 as well as the original Form 8-K filed on May 30, 2000. As a result of the May 15th transaction, SAC-1 became a wholly-owned subsidiary of the Company. Information concerning the business operations of SAC-1, including its government contract division, are included in the accompanying financial statements described in (a) above. Included as an exhibit to this filing is pro forma financial information intended to reflect the effect on the Company's balance sheet as of December 31, 1999 and on its income statement for the year ending December 31, 1999 had the above transaction occurred on January 1, 1999. The pro forma financial information excludes the financial effects of all of the Company's business segments that were discontinued on or before June 30, 2000. Accordingly, only the effects of the Company's Alternative Fuels division is included in the pro forma financial information. The accompanying pro forma information merely combines the historical results of continuing operations during 1999. This information may not necessarily be an accurate indication of the results of future operations. The Company has issued its Form 10-K for the period ended December 31, 2000 as well as its Form 10-Q for the period ended March 31, 2001. The information contained in those filings should be reviewed in connection with the reading of the pro forma information. The information included in those filings may indicate significant differences in operations from the information reflected in the pro forma information. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. July 13, 2001 EarthFirst Technologies, Incorporated By: /s/ John D. Stanton ------------------- John D. Stanton CEO and President SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. COMBINED FINANCIAL STATEMENTS DECEMBER 31, 1999 Independent Auditors' Report ---------------------------- Board of Directors SAC-1, Inc. Tampa, Florida We have audited the accompanying combined balance sheet of SAC-1, Inc. and the government contracting division of Octofoil International Group, Inc. (the "Companies"), as of December 31, 1999, and the related combined statements of operations, owners' equity and cash flows for the year then ended. These financial statements are the responsibility of the Companies' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly in all material respects, the combined financial position of the Companies, as of December 31, 1999, and the results of their combined operations and their combined cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ Aidman, Piser & Company, P.A. June 6, 2001 Tampa, Florida SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. COMBINED BALANCE SHEET DECEMBER 31, 1999 ASSETS Current assets: Cash and cash equivalents $ 271,010 Accounts receivable: Trade (net of $15,000 allowance for doubtful accounts) 1,299,605 Retainage 154,864 Costs and estimated earnings in excess of billings on uncompleted contracts 30,867 Inventories 471,992 ---------- Total current assets 2,228,338 Property, plant and equipment, net 1,536,961 ---------- $3,765,299 ========== LIABILITIES AND OWNERS' EQUITY Current liabilities: Accounts payable $1,968,712 Accrued expenses 89,578 Billings in excess of costs and estimated earnings on uncompleted contracts 159,638 Current maturities of long-term debt 351,031 Current maturities of capital lease obligations 25,521 Due to related parties 181,022 ---------- Total current liabilities 2,775,502 Long-term debt, less current maturities 641,406 Capital lease obligations, less current maturities 54,552 ---------- Total liabilities 3,471,460 ---------- Commitments and contingencies - Owners' equity: Common stock, $1 par value, 100 shares authorized, 100 shares issued and outstanding 100 Additional paid-in capital 277,093 Retained earnings 16,646 ---------- Total owners' equity 293,839 ---------- $3,765,299 ========== See notes to combined financial statements. F-2 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1999 Sales $5,671,737 Cost of sales 4,515,596 ---------- Gross profit 1,156,141 ---------- Operating expenses: General and administrative 1,052,206 Depreciation and amortization 42,825 ---------- 1,095,031 ---------- Income from operations 61,110 Interest expense (44,464) ---------- Income before income taxes 16,646 Income tax expense - ---------- Historical net income $ 16,646 ========== Pro forma statement of operations data: Net income as reported $ 16,646 Pro forma adjustment to recognize "C" Corporation provision for income tax expense (6,000) ---------- Pro forma net loss $ 10,646 ========== See notes to combined financial statements. F-3 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. COMBINED STATEMENT OF OWNERS' EQUITY YEAR ENDED DECEMBER 31, 1999

See notes to combined financial statements F-4 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1999 Cash flows from operating activities: Net income $ 16,646 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 42,825 Increase (decrease) in cash due to changes in: Accounts receivable 403,987 Inventories (311,572) Accounts payable (323,267) Accrued expenses (117,105) Billings in excess of costs and estimated earnings on uncompleted contracts 128,771 ----------------- Net cash used in operating activities (159,715) ----------------- Cash flows from financing activities: Proceeds from issuance of stock 277,193 Advances from related party 181,022 Payments on long-term debt and capital lease obligations (27,490) ---------------- Net cash provided by financing activities 430,725 ----------------- Increase in cash and cash equivalents 271,010 Cash and cash equivalents, beginning of year - ----------------- Cash and cash equivalents, end of year $ 271,010 =================

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION ---------------------------------------------- Interest paid was $44,464 for the year ended December 31, 1999. See notes combined financial statements F-5 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 1. Nature of business, basis of presentation and summary of significant accounting policies: Nature of business: SAC-1, Inc. ("SAC-1" or the "Company"), was incorporated in the State of Florida on September 20, 1999 to perform demolition and recycling services. SAC-1 operates in two business segments, demolition and recycling. In its demolition operations, the Company enters into fixed-price contracts to demolish structures such as buildings and bridges. Services are rendered primarily within the State of Florida. In its recycling operations the Company operates scrap yards at locations in Gibsonton and Brooksville, Florida. The Company purchases scrap metal and similar items from unrelated parties and from the demolition business. Scrap acquired is processed ultimately for resale to mills. The government contract division conducted by Octofoil International Group, Inc. ("Octofoil") enters into contractual arrangements, primarily with the federal government, to procure various products. Octofoil is owned by the two primary shareholders of SAC-1 and Octofoil and is an S-Corporation. Basis of Presentation: SAC-1 and the government contracting division of Octofoil are under common control and, as such, combined financial statements are presented. The combined financial statements reflect the operations of SAC-1 since its inception (September 20, 1999) through December 31, 1999, and the operations conducted by the government contract segment of Octofoil during the year ended December 31, 1999. All intercompany accounts and transactions have been eliminated. F-6 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 1. Nature of business, basis of presentation and summary of significant accounting policies (continued): Revenue and cost recognition: Revenues from fixed-price demolition contracts in the demolition segment are recognized on the percentage-of-completion method, measured by the percentage of cost incurred to date to the estimated total contract cost. Contract costs include all direct labor and equipment costs and those indirect costs related to contract performance, such as indirect labor, depreciation, repairs, supplies and tools. Selling, general and administrative costs are charged to expense as incurred. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the revisions are determined. Because of the inherent uncertainties in estimating costs, it is at least reasonably possible that the estimates used will change within the near term. The asset "Costs and estimated earnings in excess 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. Revenues generated from the recycling activities in the demolition and recycling segment are recognized when the scrap is shipped. As of December 31, 1999, there were $30,638 of accounts receivable associated with the recycling business. Revenues generated from the government contract segment are recognized when goods are shipped to the ultimate customer and collectability is assessed. Allowances for estimated future returns are made at the time goods are shipped. Inventories: Inventories are stated at the lower of cost or market. Cost is determined on a first-in, first-out method. Inventories relate to the recycling operation (consisting primarily of scrap metals such as aluminum, iron, copper, and steel) and to government contract operations (consisting of commodities purchased for resale to government entities). F-7 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 1. Nature of business, basis of presentation and summary of significant accounting policies (continued): Property and equipment: Property and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which range from 7 to 39 years. Cash and cash equivalents: Cash and cash equivalents are defined as all highly liquid unrestricted investments purchased with an original maturity of three months or less. In addition, the Company considers certain secured debt instruments, which can be liquidated upon demand, to be cash equivalents. New accounting pronouncements: During 1999, the Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income" and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." SFAS 130 presents standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) including those currently required to be accounted for as direct charges or credits to the statement of owners' equity in a full set of general-purpose financial statements. Adoption of this standard had no significant impact on the Company. SFAS No. 131 requires that public companies report financial and descriptive information about its reportable operating segments, which are defined as those components that are evaluated regularly by the chief operating officer in determining resource allocations and performance assessments. Use of estimates: Preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. F-8 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 2. Purchase of assets used in demolition and recycling operations: On October 15, 1999, an Agreement was entered into by and between Shulnburg Recycling, Inc., Eagle Demolition, Inc., Eagle Amalgamated Services, Inc., R.V. Shulnburg, Inc. (collectively the "Sellers") and SAC-1 whereby substantially all of the business assets owned and used by the Sellers were acquired by SAC-1 in return for SAC-1's assumption of certain obligations of the Sellers. The transaction was accounted for as a purchase business combination in which the purchase price was allocated to the net assets acquired based upon their respective fair values. SAC-1 also acquired real property located in Gibsonton and Brooksville, Florida from unrelated third parties. The property acquired from the Sellers included receivables, real estate, certain demolition contracts in process, inventories of scrap, machinery, equipment, and vehicles. 3. Business segment information: The Companies have operations classified in two business segments: 1) demolition and recycling and 2) government contract. The demolition and recycling business has two divisions. The demolition division enters into fixed priced contracts to demolish buildings and other structures. The recycling business operates a scrap yard. There were no significant intersegment sales or transfers during 1999. Summarized financial information by business segment for 1999 is as follows: Demolition Government and Recycling Contracts Total --------------- --------------- --------------- Total revenue $ 2,480,443 $ 3,191,294 $ 5,671,737 Cost of sales 1,732,395 2,783,201 4,515,596 --------------- --------------- --------------- Income (loss) before income taxes ($ 96,384) $ 113,030 $ 16,646 =============== =============== =============== Total assets $ 2,439,220 $ 1,326,079 $ 3,765,299 =============== =============== =============== Depreciation and amortization $ 42,825 $ - $ 42,825 =============== =============== =============== Capital expenditures $ - $ - $ - =============== =============== =============== F-9 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 4. Inventories: Inventories consist of the following: Purchased scrap metal $ 160,239 Commodities purchased for resale to government entities 311,753 ------------------ $ 471,992 ================== 5. Costs and estimated earnings on uncompleted contracts: Costs and estimated earnings on uncompleted contracts are summarized as follows: Costs incurred on uncompleted contracts $ 955,174 Estimated earnings 241,687 ------------------ 1,196,861 Less billings to date 1,325,632 ------------------ ($128,771) ================== The amounts are reported in the accompanying balance sheet under the following captions: Costs and estimated earnings in excess of billings on uncompleted contracts $ 30,867 Billings in excess of costs and estimated earnings on uncompleted contracts (159,638) ------------------ ($128,771) ================== 6. Property, plant and equipment: Property, plant and equipment at December 31, 1999 consists of the following: Land $ 93,315 Buildings 16,165 Machinery and equipment 1,470,306 ------------------ 1,579,786 Accumulated depreciation (42,825) ------------------ $ 1,536,961 ==================

F-10 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 7. Long-term debt: Long-term debt consists of the following: Bank notes, payable in monthly installments aggregating $2,377 (including interest), maturing through 2003; interest at rates varying from 9.5% to 10.25%, collateralized by equipment. $ 91,666 Various equipment loans with financing companies with interest rates ranging from 7.9% to 10.25%, with varying monthly payments and maturity dates ranging from July 1, 2000 to June 15, 2004. 900,771 --------------- 992,437 Less current maturities 351,031 --------------- $ 641,406 =============== Future maturities of long-term debt are as follows: Year ending December 31, ------------------------ 2000 $ 351,031 2001 294,126 2002 251,026 2003 67,498 2004 28,756 --------------- $ 992,437 =============== 8. Capital lease obligations: The Company has entered into capital lease arrangements for the acquisition of equipment. The capitalized asset cost and accumulated depreciation at December 31, 1999 were: Capitalized cost $ 105,771 Accumulated depreciation ( 3,078) --------------- Net book value $ 102,693 ===============

F-11 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 8. Capital lease obligations (continued): Amortization expense for this equipment has been included in depreciation expense in the accompanying statement of operations. Future minimum lease payments under the capital leases are as follows: Year ending December 31, ------------------------ 2000 $ 28,178 2001 27,138 2002 17,083 2003 14,109 Less imputed interest (6,435) --------- $ 80,073 ========= 9. Related party transactions: Due to related parties consist of unsecured, non-interest bearing advances from SAC-1 shareholders or affiliates thereof. 10. Income taxes: As of December 31, 1999, SAC-1 had a net operating loss for income tax purposes of approximately $30,000, which expires in 2014. This loss results in a deferred tax asset of approximately $13,000. Since, it is not possible to determine the recoverability of such tax benefits, a valuation allowance for the full amount of this deferred tax asset has been recorded. The pro forma statement of operations data in the statement of operations provides information as if SAC-1 and the Octofoil division, an S-Corporation, which had income of approximately $113,000, had all been treated as a C-Corporation for income tax purposes. F-12 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 10. Income taxes (continued): The expected income tax expense at the statutory tax rate differed from income taxes in the accompanying statement of operations, as follows: Historical ---------- Statutory tax rate on C-Corporation pre-tax losses of $90,000 (34.0)% Change in deferred tax valuation allowance (39) Allowance for doubtful accounts 17 Depreciation on property and equipment 56 ---------- Effective tax rate in accompanying statement of operations 0% ========== 11. Contingent liabilities: The entities from whom the Company acquired assets in the transaction described in Note 2 are involved with various lawsuits as either a plaintiff or defendant. Some of these lawsuits include demolition contracts which were completed either before or after the asset acquisition described in Note 2. The ultimate resolution of these lawsuits, and the effect, if any, on the Company, has not been determined. No adjustments for the outcome of this uncertainty has been reflected in these financial statements. 12. Concentration of credit risk: The demolition business segment has receivables from 12 different customers totaling $426,640. Of this amount, $223,978 is owed by local governmental entities. Substantially all of the Company's receivables are owed by customers within the State of Florida. The Company's accounts receivable of $1,012,191 generated in the government contract operations are owed primarily by various agencies of the federal government. The Company requires no collateral from its customers. The Company maintains its cash balance primarily in one financial institution located in Tampa, Florida. This balance is insured by the Federal Deposit Insurance Corporation up to $100,000. F-13 SAC-1, INC. AND THE GOVERNMENT CONTRACTING DIVISION OF OCTOFOIL INTERNATIONAL GROUP, INC. NOTES TO COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1999 13. Subsequent events: On May 15, 2000, SAC-1 acquired the assets and liabilities used in the government contract division conducted by Octofoil. On May 15, 2000 the shareholders of the newly merged Company also executed an Acquisition and Stock Exchange agreement with EarthFirst Technologies, Incorporated ("EarthFirst) (then known as Toups Technology Licensing, Incorporated) pursuant to which the Company's shareholders exchanged their stock in SAC-1 for an aggregate of 26,500,000 shares of common stock of EarthFirst. As a result, SAC-1 became a wholly owned subsidiary of EarthFirst. EarthFirst is a publicly held corporation whose stock is traded on the over-the-counter market. Pursuant to the Agreement, all of the members of EarthFirst's Board of Directors resigned, with the exception of Phillip M. Rappa, and John Stanton, the President of SAC-1, became the Chairman of the Board and Chief Executive Officer for EarthFirst. F-14 EarthFirst Technologies, Incorporated Pro Forma Condensed Balance Sheet December 31, 1999. Form 8-K/A, Item 7(b)

1 EarthFirst Technologies, Incorporated Pro Forma Condensed Balance Sheet December 31, 1999. Form 8-K/A, Item 7(b) continued

See Explanatory Note (1). 2 EarthFirst Technologies, Incorporated Pro Forma Condensed Income Statement Year Ended December 31, 1999 Form 8-K/A, Item 7(b) continued

See Explanatory Notes. Weighted average shares outstanding calculated by adding the 26,500,000 shares issued as part of the May 15, 2000 acquisition to the 28,935,217 weighted average shares outstanding reflected on the 1999 Consolidated Statements of Operations for EarthFirst Technologies for the period ending December 31, 1999. 3 EarthFirst Technologies, Incorporated Pro Forma Financial Information Explanatory Notes Form 8-K/A, Item 7(b) continued (1) The effects of the May 15, 2000 acquisition of SAC-1, Inc. are reflected on the Pro Forma Balance Sheet as of December 31, 1999 as follows. The audited balance sheet as of December 31, 1999 for EarthFirst Technologies, Incorporated, as presented on its 1999 Form 10-K, is presented in the left hand column titled "EarthFirst Technologies Incorporated." The audited balance sheet as of December 31, 1999 for SAC-1, including the government contract operations of Octofoil International Group, Inc., is presented in the second column titled "SAC-1, Inc." This balance sheet information is the information presented in section 7(a) in this Form 8-K/A. Under the column titled "ProForma Effect of Purchase Accounting" is reflected the $405,114 write up of the value of the property and equipment owned by SAC-1 at the time of the May 15th transaction along with the $4,494,886 write up in the value of goodwill which also resulted from the May 15th acquisition. The write up of the property and equipment values is the same as that used in the financial statements presented with the 2000 Form 10-K. The pro forma financial information for both EarthFirst Technologies and SAC-1, combined with the effects of the purchase accounting, is added together to arrive at the values under the column titled "Pro Forma Combined Entities." (2) The Pro Forma Condensed Income Statement presents information reflecting the proforma results of continuing operations of EarthFirst Technologies and SAC-1 had they been combined at the beginning of 1999. As discussed in the footnotes to both the Form 10-Q for the quarter ended June 30, 2000 and the Form 10-K for the year ended December 31, 2000 for EarthFirst Technologies, many of the historical businesses conducted by EarthFirst Technologies were discontinued shortly after the May 15th acquisition of SAC-1. The Pro Forma Condensed Income Statement is intended to reflect only the results during 1999 of the research and development operations conducted by EarthFirst Technologies in its Alternative Fuels and Environmental Solutions business segment. EarthFirst Technologies discontinued all of its other business segments and consequently, the results from those segments have been excluded from the Pro Forma Condensed Income Statement for the year ended December 31, 1999 as the statement is intended to only reflect the pro forma results from continuing operations. (3) The General and administrative operating expenses of $515,000 reflected under the Pro Forma income statement information for EarthFirst Technologies is an estimate of the portion of total general and administrative operating expenses that were attributable to the Alternative Fuels and Environmental Solutions business segment during the period ended December 31, 1999. During 2000, a proportionately larger amount of general and administrative expenses were incurred in connection with the Alternative Fuels and Environmental Solutions business segment as a result of increased activity to promote the technologies being developed and other matters. Furthermore, during 1999, certain general and administrative expenses were allocated among both continuing and discontinued operations possibly resulting in a lesser amount of general and administrative expenses related to continuing operations than might otherwise have resulted. (4) The amounts reflected on the Pro Forma Condensed Income Statement under the column "SAC-1, Inc." are the amounts reflected in the audited financial statement for SAC-1, Inc. and the Government Contracting Division of Octofoil International Group, Inc. for the period ending December 31, 1999 as are presented in section 7(a) in this Form 8-K/A. (5) The amounts reflected in the column titled Pro Forma Effect of Purchase Accounting on the Pro Forma Condensed Income Statement represent the amount of depreciation and amortization attributable to the $4,900,000 asset write up ($405,114 property and equipment plus $4,494,886 goodwill) that resulted from the acquisition that occurred on May 15, 2000. Depreciation and amortization were calculated over a 10-year life and resulted in $490,000 of expense on the Pro Forma Condensed Income Statement. 4 EarthFirst Technologies, Incorporated Pro Forma Financial Information Explanatory Notes Form 8-K/A, Item 7(b) continued (6) The Pro Forma Financial Information presented above is merely an attempt to estimate the results from continuing operations had the Alternative Fuels and Environmental Solutions division of EarthFirst Technologies, the government contract division of Octofoil International Group, and the demolition and recycling operations conducted by SAC-1 been combined. This information is not necessarily an accurate indication of the actual results in later periods. EarthFirst Technologies has issued its Form 10-K for the period ending December 31, 2000 which includes the actual results of operations for all of these operations as is more fully described in the Form 10-K. 5

EARTHFIRST TECHNOLOGIES INC 8-K/A