<PAGE>
FORM 10-Q
COMPLETE WITH
EXHIBITS
SECURITIES AND EXCHANGE COMMISSIONS
Washington, DC 20559
________________________________________________________________________________
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended JUNE 30, 1996
AND
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 2-41015
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LBU, INC.
(Exact name of Registrant as specified in its charter)
formerly New Century Media, Ltd.
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Nevada 62-1203301
(Jurisdiction of Incorporation) (I.R.S. Employer Identification No.)
310 PATERSON PLANK ROAD, CARLSTADT, NJ 07072
(Address of executive offices) (zip code)
Registrant's telephone number, including are code: (201)933-2800
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
YES [ ] NO [X] (Indicate by check mark whether the Registrant (1) has filed all
report required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the proceeding 12 months (or for such shorter period the
Registrant was required to file such report(s) and (2) has been subject to such
filing requirements for the past 90 days.)
As of June 30, 1996, the number of shares outstanding of the Registrant's Common
Stock was 1,345,834.
PART I
1
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ITEM 1. FINANCIAL STATEMENTS
Attached hereto and incorporated herein by reference are unaudited financial
statements of the Company for June 30, 1996 and results of operations for the
six months then ended.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Sales volume for the six months ending June 30, 1996 increased 22% over the same
period in the prior year. The cost of sales increased 46%, gross profit
decreased 11%. This was due to the increase in sales volume of products with
lower pricing in order to increase market share.
General administrative expenses decreased 26% over the same period in the prior
year. This was due to greater efficiency of management in the utilization of its
personnel and computer systems.
The increase in factor fees and interest reflects the higher level of borrowings
against factored accounts receivable. This also includes a one time non-
recurring fee in order to finance an order to a customer.
Management believes that sales will continue to increase as new product lines
are introduced to its expanding markets. The company recently entered the high
end designer accessory market. This should significantly improve the company's
profit margins
LIQUIDITY AND CAPITAL RESOURCES
The sales growth, profits and its borrowing capacity has been hindered due to
the current level of capital resources available in the Company. Until
additional capital is invested in the Company, it will continue to incur high
interest expense and large fluctuations in its liquidity. Company management is
investigating various alternatives in attracting capital for the Company.
2
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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 17, 1996 the registered agent of the Company was served with a
complaint arising from a financial services contract entered into by the company
on July, 24, 1995. The lawsuit was filed in the Eighth District Court, Las
Vegas, Nevada. The plaintiff's are Glenneyre Capital Corporation, Pominandres
Financial Corporation and HJS Financial Services, Inc. The suit alleges the
Company committed breach of contract, and other causes of action against the
plaintiffs in connection with the financial services contract and the securities
issued to the plaintiffs which were subsequently canceled by the company. The
Company believes the action it has taken, in the cancellation of said stock, is
appropriate. The initial complaint has been answered by the Company denying all
allegations of any wrong doing.
ITEM 2. CHANGES IN SECURITIES
The company sold 38,000 shares of its previously unissued common stock with
restricted legends to a consultant for services rendered and a sum of $15,000 in
the second quarter of the fiscal year.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTER TO VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8 K
None
EXHIBIT INDEX
Financial Statements and documents furnished as part of this registration
statement.
EXHIBIT F-2
Financial Statements (unaudited) June 30, 1996 and 1995
EXHIBIT F-27
SIGNATURES
3
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Pursuant to the requirements of the Securities Exchange Act of 1934, the form
10-Q report for the quarter ended June 30, 1996 has been signed below by the
following person on behalf of the registrant and in the capacity and on the data
indicated.
Date:___________________ LBU, Inc.
A NEVADA CORPORATION
by
_________________________________ _______________________________
JEFFREY MAYER FRED KING
President/Director Director
4
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LBU, INC.
BALANCE SHEET
JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
June 30,
CURRENT ASSETS 1996 1995
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<S> <C> <C>
Cash $ 335,552 $ 78,465
Accounts Receivable, Net 302,475 274,532
Inventory 500,658 520,930
Other current assets 39,326 49,365
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Total Current Assets 1,178,011 923,292
========== ==========
Equipment and Lease Hold Improvements, Net 166,401 70,667
Other Assets - Deposits 38,782 38,782
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Total Assets $1,383,194 $1,032,741
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
CURRENT LIABILITIES
<S> <C> <C>
Accounts Payable 433,613 430,732
Accrued Expences 155,175 111,135
Customer Deposits 53,052
Note Payable 100,000
Accrued Taxes 80,113 49,365
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Total Current Liabilities 821,953 591,232
Stockholders Equity
Common Stock Authorized
50,000,000 shares $.001 par value
Issued and outstanding at:
June 30, 1996, 1,345,834 shares
June 30, 1995, 18,550,000 shares 1,346 18,550
Additional Paid in Capital 717,201 558,050
Accumulated (Deficit) (157,306) (144,126)
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Net Stockholder's Equity 561,241 432,474
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Total Liabilities and Stockholder's Equity $1,383,194 $1,032,741
========== ==========
</TABLE>
5
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LBU, INC.
STATEMENT OF INCOME AND EXPENSES
FOR SIX MONTHS ENDED
JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1996 1995
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<S> <C> <C>
Sales $ 2,929,285 $2,401,604
Costs of Goods Sold 1,962,538 1,344,898
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Gross Profit 966,747 1,056,706
OPERATING EXPENSES
Sales Expenses 389,507 404,066
General and Administrative Expense 307,768 415,229
Factor Fees and Interest 98,711 29,184
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Total 795,986 848,479
Income from Operations 170,761 202,227
OTHER INCOME
Interest 936
Rent 24,000
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Income before income taxes 192,996 208,227
Provision for income taxes 69,115 58,400
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Net income for the period stated $ 123,881 $ 149,827
=========== ==========
Retained Earnings, December 31, 1995 (283,888)
Retained Earnings, June 30, 1996 157,306
==========
</TABLE>
6
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LBU, INC.
STATEMENT OF CASH FLOW
FOR SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
For the six months
ended June 30
1996 1995
--------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net Income 123,881 149,827
Adjustments to reconcile net income to net
cash used in operating activities;
depreciation and amortization 7,942 12,238
Provision for losses on accounts receivable (8,110)
Investment Income (936)
(INCREASE) DECREASE IN:
Accounts Receivable (210,980) (222,200)
Inventories 74,877 (100,034)
Other current assets (12,392) 1,559
INCREASE (DECREASE) IN:
Accounts Payable 161,839 92,305
Accrued Expenses (39,816) 14,901
Taxes Payable 69,117 58,400
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Net cash provided (used) in operating activities 173,532 (1,614)
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CASH FLOW FROM INVESTING ACCOUNTS:
Capital Expenditures (25,673) (28,391)
Collection of Loan 2,202
Increase in other assets 936 (38,782)
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Net cash (used) in investing activities (22,535) (67,173)
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CASH FLOW FROM FINANCING ACTIVITIES:
Loan payments received 15,383
Net Borrowing from Banks 150,000
Repayment of Loans (50,000) (55,000)
Sale of Capital Stock 15,000 125,000
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Net cash provided by Financing Activities 115,000 85,383
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Net increase in cash 265,997 16,596
Cash at beginning of period 69,555 61,869
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Cash at end of period 335,552 78,465
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Supplemental Disclosures
Cash paid during the period for:
Interest $ 98,711 $ 25,709
Income taxes
</TABLE>
7
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LBU, INC.
(FORMERLY NEW CENTURY MEDIA, LTD.)
NOTES TO FINANCIAL STATEMENT
JUNE 30, 1996
(UNAUDITED)
Note 1 - Organization and Significant Accounting Policies
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Organization: LBU, Inc. (a Nevada corporation) (the "Company) previously
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known as New Century Media Ltd. is a manufacturing marketing operation that
specializes in the creation of innovative, fashionable utility and wearable bags
for the accessory, retail and promotional markets.
In February 1995, the Company entered into a plan of reorganization with LBU,
Inc. (a Delaware corporation) (LBU-Delaware) whereby the shareholders of LBU-
Delaware would obtain controlling interest of New Century Media, Ltd., in a
transaction accounted for as a reverse acquisition. New Century Media, Ltd.
ultimately changed its name to LBU, Inc. on March 31, 1995.
Inventories: Inventories are valued at the lower of cost or market, with
------------
cost being determined by the first-in, first-out (FIFO) method.
Fixed Assets: Property and equipment are stated at cost. Depreciation of
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furniture, fixtures and equipment is provided using the straight-line method
over the estimated useful lives of the assets. Leasehold improvements are
amortized over the term of the lease on straight-line basis.
Cash and Cash Equivalents: For the purposes of the statement of cash
--------------------------
flows, the Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalent.
Income Taxes: Income taxes are provided for the tax effects of
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transactions reported in the financial statements and consist of taxes currently
due plus deferred taxes related primarily to differences between the accelerate
depreciation methods, the reserve method for bad debt and the uniform
capitalization rules under IRS Code Section 263A for financial and income tax
reporting. The deferred taxes represent the future tax return consequences of
those differences, which would be either be taxable or deductible when the
assets and liabilities are recovered or settled. Effective March 31, 1995, LBU-
Delaware became a taxable entity due to the successful reorganization.
Previously, its earnings and losses were included in the personal tax returns of
the stockholders, and the company did not record an income tax provision.
Estimates: The preparation of financial statements in conformity with generally
- ----------
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
8
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Stockholders Equity: In August 1995, the company declared a 20 for 1
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reverse stock split on the then issued and outstanding common shares. All
outstanding share amounts included in the accompanying financial statements have
been retroactively adjusted to reflect the 20 for 1 reverse stock split. The
result of this action reduced the previous 24,550,000 shares of common stock to
1,227,500 shares.
In July, 1995 the company entered into a financial services agreement with
Glenneyre Capital Corp. (GCC), Poimandres Financial Corp. (PFC) and Bristel
Media Ltd. (BML) (a group of financial consultants. The agreement required GCC,
PFC and BML to provide certain professional services relating to raising of
capital to the Company in exchange for 300,000 shares of the Company's common
stock. The agreement specified that such services were assigned value of
$60,000. However, the Company had recorded the issuance of the 300,000 shares
based upon the then market value of its common stock, $540,000, resulting in a
charge to additional paid in capital for the current period. The company issued
38,000 shares of common stock for services and $15,000 in cash during the second
quarter of 1996.
Note 2 - Accounts Receivable and Factoring Arrangements.
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The Company entered into a factoring arrangement with a factor whereby the
factor will make advances to the Company on approved accounts receivable
balances. Interest of 2% per annum above the prime rate will be charged on
outstanding advances. The factor has a lien against all assigned receivable. In
addition, the Company's president/principal shareholder and his wife, who is
also an officer of the Company, have personally guaranteed factor advances under
this agreement.
The factor will also charge a commission of 1 1/8% on the gross face amount of
all accounts factored during each calendar month. The minimum commission on each
invoice is $5.00. Further, a fee will be charged for each new customer, for any
customer that has not had any activity with the factor for at least 18 months
and other miscellaneous activity.
Note 3 - Commitments and Contingencies
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In August, 1993, LBU-Delaware entered into employment agreement with the
president/principal shareholder. These agreements provide for payments of
approximately $148,999 per year, and escalated periodically to approximately
$163,000 per year, and run through 1996.
9
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The Company entered into a ten year lease agreement for its new facilities in
Carlstadt, New Jersey. The rent commencement date is July 1, 1995. At the time,
the Company incurred incidental non-recurring costs due to the relocation of
approximately $100,000. Rent paid during the year ended December 31, 1995
amounted to $99,105. The minimum future rental payments under the non-cancelable
operating leases ad of December 31, 1996 are:
<TABLE>
<CAPTION>
Year ending
December 31. Amount
------------ ------
<S> <C>
1996 $134,414
1997 138,821
1998 143,228
1999 148,369
2000 154,245
2001 and thereafter 766,083
</TABLE>
The company is currently involved in a dispute with Glenneyre Capital
Corporation, Poimandres Financial Corporation and HJS Financial Services, Inc.
("the plaintiff's"). The lawsuit stems from a financial services agreement dated
July 24, 1995, between the plaintiff's and LBU, Inc.
300,000 shares of LBU, Inc's. restricted common stock were issued to the
Plaintiffs in return for services in connection with the raising of capital.
Currently, the restrictions on these shares are in dispute in addition to the
actual services which LBU, Inc. claims were not performed. The shares were
stopped by LBU, Inc. on November 19, 1995.
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995 DEC-31-1996 DEC-31-1996
<PERIOD-START> JAN-01-1995 JAN-01-1995 JAN-01-1996 JAN-01-1996
<PERIOD-END> SEP-03-1995 DEC-31-1995 MAR-31-1996 JUN-01-1996
<CASH> 15,484 69,555 87,247 335,552
<SECURITIES> 0 0 0 0
<RECEIVABLES> 240,471 176,487 255,396 387,467
<ALLOWANCES> 41,300 34,992 84,992 84,992
<INVENTORY> 558,870 575,538 540,100 500,658
<CURRENT-ASSETS> 800,969 766,724 827,887 1,178,011
<PP&E> 186,552 186,552 200,303 216,521
<DEPRECIATION> 33,301 37,882 41,854 50,120
<TOTAL-ASSETS> 993,002 954,176 1,025,118 1,383,194
<CURRENT-LIABILITIES> 567,035 534,517 588,787 821,953
<BONDS> 0 0 0 0
0 0 0 0
0 0 0 0
<COMMON> 1,228 1,311 1,311 1,346
<OTHER-SE> 577,279 702,236 702,236 717,201
<TOTAL-LIABILITY-AND-EQUITY> 993,002 954,176 10,251,118 1,383,194
<SALES> 3,332,196 3,827,995 941,895 2,929,285
<TOTAL-REVENUES> 3,332,196 3,839,018 954,370 2,954,221
<CGS> 1,996,030 2,245,633 578,666 1,962,538
<TOTAL-COSTS> 587,098 668,672 182,702 389,507
<OTHER-EXPENSES> 594,178 846,491 171,449 307,768
<LOSS-PROVISION> 0 0 0 0
<INTEREST-EXPENSE> 41,570 54,578 11,934 98,711
<INCOME-PRETAX> 143,320 12,621 21,553 192,996
<INCOME-TAX> 0 (8,300) 4,881 69,115
<INCOME-CONTINUING> 143,320 23,644 21,553 192,996
<DISCONTINUED> 0 0 0 0
<EXTRAORDINARY> 0 (19,932) 0 0
<CHANGES> 0 0 0 0
<NET-INCOME> 143,320 12,012 16,672 123,881
<EPS-PRIMARY> .12 .001 .012 .09
<EPS-DILUTED> .12 .001 .012 .09
</TABLE>
