<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
_______________________________________________________________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the year ended December 31, 1995
Commission File Number: 2-41015
________________________________________________________________________
LBU, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FORMERLY NEW CENTURY MEDIA, LTD.:
ORIGINALLY HALCYON DATA MANAGEMENT, INC. AND LATER GALAXY GROUP, INC.,
QUEST INTERNATIONAL EQUITIES, INC. AND AGRI-QUEST MINING, INC.
_________________________________________________________________________
NEVADA 62-1203301
(JURISDICTION OF INCORPORATION) (IRS 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 SEPTEMBER 30, 1995, THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S
COMMON STOCK WAS 1,227,500.
NOT [X] (INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS ( 229.405) IS
NOT AND WILL NOT TO THE BEST OF REGISTRANT'S KNOWLEDGE BE CONTAINED HEREIN, IN
DEFINITIVE PROXY OR INFORMATION STATEMENTS INCORPORATED HEREIN BY REFERENCE OR
ANY AMENDMENT HERETO.)
AS OF DECEMBER 31, 1995 THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S
COMMON STOCK WAS 1,310,834.
<PAGE>
PART 1
ITEM 1. BUSINESS
The company was originally organized under the laws of Delaware, incorporated
October 26,1970 as Halcyon Data Management Group, Inc. The Company had a public
offering dated September 27, 1971.
The company name was changed to Quest International Equities, Inc. in 1974. The
company merged with Era Oil Company, Inc. on December 16, 1983. The company also
acquired Astrotek, Inc. during the same year. On November 27, 1990 the company
name was changed to Agri-Quest Mining, Inc. On September 1, 1994 the company had
a 100 to 1 reverse stock spilt. The company then merged with New Century Media,
Ltd., a Nevada Corporation, who became the surviving entity in the merger. On
February 17, 1995 the company entered into plan of reorganization to acquire the
assets, business and capital stock of LBU, Inc. The plan was consummated on
March 24, 1995 and the company changed its name to LBU, Inc. On August 7, 1995,
the company had a 20 to 1 reverse spilt of its common stock; From inception to
March 24, 1995, the company was involved in several business ventures which were
not successful. The company had been dormant for periods of time and was dormant
just prior to the acquisition of LBU, Inc.
LBU, Inc. and its management had no relationship with any of the predecessor
companies prior to its acquisition on March 24, 1995. At the present time, there
are no members of management nor any directors of LBU, Inc. that have had any
affiliation with any of the predecessor companies.
General. LBU, Inc. (the company) is a leading manufacturer of over
-------
300 styles of custom made fashionable and wearable bags. The company designs,
manufactures, and distributes these high quality products to the retail,
industrial, accessory and the promotional markets. LBU's largest area is the
promotional/premium markets where the company's extensive line of custom bags
are purchased by consumer product and service companies, seeking to increase
sales, and brand awareness.
Strategy. The company business strategy is to continue to expand its
---------
market share and increase sales in all divisions the company operates.
The major strengths or the company is its ability to take a corporation's image
or their ideas and fully execute from design to finish a personalized, custom
made promotional product program that will help increase their market share,
brand awareness, customer loyalty and sales.
The company's full in house design, cutting, printing and sample making
departments help set the company apart from its competitors who may rely on
Asian or other overseas factories.
The company has the capability of providing a client within 48 hours a custom
promotional product line. This gives the company a distinct competitive
advantage since the average lead time in the industry for custom samples alone
can take 2 - 6 weeks.
2
<PAGE>
EXPANSION - NEW MARKETS
- -----------------------
RETAIL. The creation of a new product line including Ironing Board
------
Cover and Pad Sets and its full laundry care program is in the works. This
extensive new line will play a major role in the company's retail division. The
company provides retailers such as Bed Bath and Beyond, Burlington Coat Factory,
K-Mart Stores, Kroger, Nordstroms, Neiman Marcus, Rite Aid and Lechters with
numerous products, such as water bottle bags, backpacks and laundry bags.
ACCESSORY. The accessory market consists of high end wearable Back
---------
Packs, Totes, Gear Bags, Cosmetic Pouches, Water Bottle Holders, and many other
stylish products. The products designed for this market are made from the latest
fashionable materials and fabrics. These new high end products are a growing
market for the company.
INDUSTRIAL. The industrial division consists of heavy duty custom
----------
made bags for various OEM, industrial, and government applications. The company
relies on extensive advertising through the Thomas Register, Industrial buying
guides and trade shows to increase market share.
PROMOTIONAL AND PRIVATE LABEL. The promotional and private label
-----------------------------
markets should continue to account for a large percentage of the companies
revenues. This market, into which the company has recently entered, accounts
for approximately 50% if its business. Private label customers include Tommy
Hilfiger, Jantzen Swimwear, Speedo, Mondi, Dockers and many others. Promotional
customers include American Express, AT&T, Coca-Cola Dean Witter, Hitachi, Pepsi-
Cola, Philips, General Electric, Ford Motor Company and the New York Yankees.
Additionally, the company has license agreements with many colleges and
universities throughout the United States.
SALES AND MARKETING. The company sales originate through its in-house
-------------------
salesmen, outside sales representatives, distributors, catalogs and trade shows.
In addition the Company has developed its relationships with the Ad Specialty
Market, which consists of over 6,000 independent distributors. All
manufacturing is done in the United States.
EMPLOYEES. The company employs 30 people at their headquarters and
---------
manufacturing facility in Carlstadt, NJ
3
<PAGE>
ITEM 2. PROPERTIES
The company leases 30,000 square feet, located at 310 Paterson Plank
Road, Carlstadt, NJ. The executive offices, printing and part of the
manufacturing facility are at this location.
ITEM 3. LEGAL PROCEEDINGS
On April 17, 1996 the registered agent of the Company was served with
a complaint arising from the 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 the plaintiffs pursuant thereto. The Company believes the
action it has taken is appropriate under the circumstances and intends to
vigorously defend itself in the lawsuit. The initial complaint has been answered
by the Company denying all allegations of any wrong doing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE TO SECURITY HOLDERS
No matters were submitted to a vote of the company's shareholders
during the fourth quarter of the fiscal year ending December 31, 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.
The company has a single class of stock outstanding. It is designated
as voting common stock with each share issued having a single vote. The company
is authorized 50,000,000 shares at .001 par value shares. Issued and outstanding
at December 31, 1995 are 1,310,834 shares.
The company has never declared a cash dividend on its common stock. It
is not anticipated the company will declare a dividend in the foreseeable
future.
The companies common stock is listed on the electronic bulletin board
under the symbol LBUAA. Prior to the acquisition of LBU, Inc. on March 24,
1995, there was no quoted market for the company's stock. Subsequent to March
24, 1995 the common stock fluctuated from a low bid of $ .0938 to a high bid of
$4.37 during 1995.
At December 31, 1995, the company had 1,310,834 shares of common stock
outstanding. There were approximately 300 shareholders at December 31, 1995.
During the fourth quarter, the company sold 83,334 shares if its voting common
stock to investors for $125,000. In addition the company has disputed the
proprietary of the issuance of certain shares under a financial consulting
contract. Please refer to Part 1, Item 3, Legal Proceedings of this report for
more detail.
4
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The company acquired LBU, Inc. during the fiscal year. Prior to this
combination, the aquiring company had been dormant for approximately two years,
therefore its financial history is not relevant. LBU, Inc. (a Delaware
Corporation) has conducted business since 1989 and their it's financial data for
1993 and 1994 are presented here for comparative purposes only.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- -----------
<S> <C> <C> <C>
Total Assets $ 951,376 $ 647,308 $ 502,375
Revenues 3,827,995 2,721,154 1,779,441
Operating Expenses 1,569,741 1,183,929 1,075,347
Net Earnings or (loss) 12,012 8,609 (282,388)
Per Share Earnings or (loss) .009 N/A N/A
Average Common Shares outstanding 1,310,834 N/A N/A
</TABLE>
ITEM 7. MANAGEMENT ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The company was dormant for approximately two years prior to March 24,
1995 when it underwent a reorganization with LBU, Inc. through a reverse
acquisition. The financial transactions for 1995 are applicable and presented as
if the business combination occurred on January 1, 1995. Any comparative data
for prior years is based on the activities of LBU, Inc. before the business
combination occurred.
The company has a 41% increase in sales in 1995 over 1994 levels. The
customized specialty promotional/premium segment continues to account for and
increasing percentage of sales.
The company manufactures its own product line under the LBU, Inc.
label. It also manufactures a variety of customized bags which carry the brand
name or corporate logo of the client wishing to increase its product or company
awareness.
The company generates sales throughout the U.S. and abroad through
outside sales reps and in house sales associates. The company exhibits its
products at many leading trade shows throughout the U.S. and abroad.
During 1995, the company moved its headquarters and manufacturing
facilities to a 30,000 square foot complex in Carlstadt, New Jersey. This was
necessary to meet the increased sales and production capacity as well as the
future sales growth of the company.
The company factors its receivable to the CIT Group. The Company
borrows against its receivables at a rate of 2% above the prime lending rate.
Interest expense increased 86% from $29,742 in 1994 to $54,578 in 1995. This is
due to the Company's increase in borrowings against factored receivables.
5
<PAGE>
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The audited financial statements of the company as of December 31,
1995 and the year then ended are attached to this report as Exhibit A and are
incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The company changed auditors for the fiscal year ended December 31,
1995. This change was not due to any disagreement over accounting or financial
disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Jeffrey Mayer 33 President and director
Fred King 53 Director
</TABLE>
Jeffrey Mayer is the founder of LBU, Inc. Formerly in various sales
and marketing positions with Coca Cola and other companies. Mr. Mayer is
responsible for the sales and marketing of the Company.
Fred King has been in a sales capacity with LBU, Inc. since 1994. He
has experience in owning and operating retail establishments in the New York
area. Mr. King is currently Director of Sales.
Mr. Robert Alpers resigned as a Director of the company during the
fourth quarter of the year. His resignation was not due to any disagreement with
the management of the company. Mr. Robert Alpers is currently National Sales
Manager.
6
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Jeffrey Mayer, President, is currently the sole corporate officer.
Mr. Mayer devotes full time to the company and was compensated $100,000 during
the year ended December 31, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following is a schedule of ownership of the company's common stock
by officers, directors and holders of more then 5% of the issued and
outstanding shares at December 31, 1995.
OFFICERS AND DIRECTORS
NAME POSITION SHARES %
Jeffrey Mayer President/Director 676,500 51.6
All Officers and Directors 676,500 51.6
OTHER HOLDERS OF 5% OR MORE OF COMMON STOCK
NAME SHARES %
HJS Financial Services Inc.
Glenneyre Equity Group, Ltd.
Poimandres Financial Corporation
219 Broadway Suite 261
Laguna Beach, CA 92651 300,000 22.8
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8K
REPORTS ON FORM 8K
March 24, 1996-Incorporated herein by reference
August 8, 1996-Incorporated herein by reference
7
<PAGE>
FINANCIAL STATEMENTS AND SCHEDULES
EXHIBIT F-2
Report of Independent Certified Public Accountants
Balance Sheet, December 31, 1995
Statement of Income For the Year Ended December
31, 1995 the Year Ended December 31, 1995
Statement of changes in Stockholders' Equity For
December 31, 1995
Statement of Cash Flows For the Year Ended
Notes to the Financial Statements, December 31,
1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the individual capacities and on the date indicated.
Date_______________________
LBU, Inc.
(A Nevada Corporation)
by
_________________________ _______________________
Jeffrey Mayer Fred King
President/Director Director
8
<PAGE>
LBU, INC.
(formerly NEW CENTURY MEDIA, LTD.)
FINANCIAL STATEMENTS
* * * *
DECEMBER 31, 1995
<PAGE>
[LETTER OF NEIL DELLA TORRE & COMPANY APPEARS HERE]
July 18, 1996
To The Board of Directors of
LBU, Inc.
Independent Auditor's Report
----------------------------
We have audited the balance sheet of LBU, Inc., (a Nevada corporation) (formerly
New Century Media, Ltd.) as of December 31, 1995, and the related statements of
income, changes in stockholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
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 financial statements referred to above present fairly, in
all material respects, the financial position of LBU, Inc., as of December 31,
1995, and the results of its operations, changes in stockholders' equity and
cash flows for the years then ended in conformity with generally accepted
accounting principles.
/s/ Neil Della Tore & Company
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Balance Sheet
-------------
December 31, 1995
-----------------
Assets
------
<TABLE>
<CAPTION>
<S> <C>
Current assets
Cash $ 69,555
Accounts receivable (net of allowance
for bad debts of $84,992) 91,495
Inventory 575,538
Deferred tax asset 23,000
Other current assets 7,136
--------
Total current assets 766,724
Noncurrent assets
Fixed assets (net of accumulated
depreciation of $37,882) 148,670
Security deposit 38,782
--------
Total assets $954,176
========
</TABLE>
Liabilities and Stockholders' Equity
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Current liabilities
Accounts payable $ 282,306
Accrued expenses 144,643
Customer advances 92,868
Income taxes payable 14,700
---------
Total current liabilities 534,517
---------
Stockholders' equity
Common stock (50,000,000 shares authorized;
1,310,834 shares issued and outstanding,
stated value $.001) 1,311
Additional paid-in capital 702,236
Retained earnings (deficit) (283,888)
---------
Total stockholders' equity 419,659
---------
Total liabilities and stockholders' equity $ 954,176
=========
</TABLE>
The accompanying notes are an integral part of these financial statements
- 2 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Statement of Income
-------------------
For the year ending December 31, 1995
-------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Net sales $3,827,995
Cost of sales 2,245,633
----------
Gross profit 1,582,362
----------
Operating expenses
Shipping and selling 668,672
General and administrative 846,491
Interest expense 54,578
----------
Total operating expenses 1,569,741
----------
Income from operations 12,621
----------
Other income (expense)
Interest income (expense) 1,023
Rental income 10,000
Loss on sale of fixed assets (19,932)
----------
Total other income (expense) (8,909)
----------
Income before taxes 3,712
Income tax benefit 8,300
----------
Net income $ 12,012
==========
Earnings per share on common stock $ .009
==========
</TABLE>
The accompanying notes are an integral part of these financial statements
- 3 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Statement of Changes in Stockholders' Equity
--------------------------------------------
For the year ended December 31, 1995
------------------------------------
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-in Earnings
--------------------
Shares Amount Capital (Deficit) Total
------ ------ ---------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994 102,500 $ 103 $ 636,311 $(636,414) $ -
(Post reverse stock split)
Recapitalization pursuant to
a plan of reorganization 200,000 200 (183,067) 340,514 157,647
Capital Investment 625,000 625 124,375 - 125,000
Financial services agreement
(Note 1) 300,000 300 539,700 - 540,000
Financial service fees charged
to additional paid in capital - (540,000) (540,000)
Capital investment 83,334 83 124,917 - 125,000
Net income for the year ended
December 31, 1995 - - - 12,012 12,012
--------- ------ --------- --------- --------
Balance at December 31, 1995 1,310,834 $1,311 $ 702,236 $(283,888) $419,659
========= ====== ========= ========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements
- 4 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Statement of Cash Flows
-----------------------
For the year ending December 31, 1995
-------------------------------------
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net income $ 12,012
---------
Adjustment to reconcile net income (loss) to
net cash used in operating activities
Depreciation and amortization 16,268
Provision for bad debt 36,692
Loss on sale of fixed assets 19,932
Accounts receivable (84,465)
Inventory (154,642)
Deferred tax asset (23,000)
Other current assets 59,171
Security deposit (38,782)
Accounts payable (56,121)
Accrued expenses 48,409
Customer advances 92,868
Income taxes payable 14,700
---------
Total adjustments (68,970)
---------
Net cash used in operating activities (56,958)
---------
Cash flows from investing activities
Capital expenditures (130,356)
---------
Cash flows from financing activities
Repayment of loans payable (55,000)
Proceeds from sale of common stock 250,000
---------
Net cash provided by financing activities 195,000
---------
Net increase in cash 7,686
Cash - beginning of year 61,869
---------
Cash - end of year $ 69,555
=========
Cash paid during the year for:
Interest $ 54,578
Income taxes $ 3,155
=========
</TABLE>
Schedule of non-cash financing activities
The Company issued 300,000 shares of common stock valued at $540,000 for
financial services. The financial services fees were charged to Additional Paid
in Capital.
In connection with the recapitalization pursuant to a plan of reorganization
200,000 shares of common stock, with a net value of $157,647, were issued to
acquire LBU, Inc.-Delaware in February 1995.
The accompanying notes are an integral part of these financial statements
- 5 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Notes to the Financial Statements
---------------------------------
December 31, 1995
-----------------
Note 1 - Organization And Significant Accounting Policies
- ---------------------------------------------------------
Organization: LBU, Inc. (a Nevada corporation) (the "Company") previously known
- -------------
as New Century Media Ltd. is a manufacturing marketing operation that
specializes in the creation of innovative, fun and fashionable utility and
wearable bags for the accessory industry, 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
- -------------
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 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 equivalents.
Income Taxes: Income taxes are provided for the tax effects of transactions
- -------------
reported in the financial statements and consist of taxes currently due plus
deferred taxes related primarily to differences between the accelerated
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 will 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.
Stockholders Equity: In August 1995, the Company declared a 20 for 1 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 Bristol
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 a value of
$60,000. However, the Company has 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.
- 6 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Notes to the Financial Statements
---------------------------------
December 31, 1995
-----------------
Note 2 - Accounts Receivable And Factoring Arrangements
- -------------------------------------------------------
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 receivables.
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.
Included in cash for the year ended December 31, 1995 is $42,350 in an interest
bearing cash account held as additional collateral by the factor.
The components of accounts receivable are summarized as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Accounts receivable assigned to factor $ 321,670
Advanced by factor on assigned accounts receivable (252,807)
Non-factored accounts receivable 96,334
Chargeback factor 11,290
Allowance for doubtful accounts (84,992)
---------
Net accounts receivable $ 91,495
=========
</TABLE>
Note 3 - Inventories
- --------------------
As of December 31, inventories were as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Raw materials $ 298,527
Work-in-progress 26,823
Finished goods 250,188
---------
Total $ 575,538
=========
</TABLE>
Note 4 - Equipment And Leasehold Improvements
- ---------------------------------------------
Equipment and leasehold improvements are summarized as follows:
<TABLE>
<CAPTION>
1995
----
<S> <C>
Machinery and equipment $ 81,088
Furniture and fixtures 38,981
Leasehold improvements 66,483
--------
Total 186,552
Less accumulated depreciation and amortization 37,882
--------
Net equipment and leasehold improvements $148,670
========
</TABLE>
- 7 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Ltd.)
----------------------------------
Notes to the Financial Statements
---------------------------------
December 31, 1995
-----------------
Note 5 - Related Party Transactions
- -----------------------------------
During 1995, loans in the amount of $55,000 were repaid to related parties plus
interest of approximately $6,500.
Note 6 - Income Taxes
- ---------------------
The provision for income taxes consists of the following components:
<TABLE>
<CAPTION>
<S> <C>
Current
Federal $ 8,000
State 6,700
-------
Total current expense 14,700
-------
Deferred
Federal 7,800
State 5,200
Change in tax status 10,000
-------
Total deferred benefit 23,000
-------
Net income tax benefit $ 8,300
=======
</TABLE>
As discussed in Note 1, LBU-Delaware changed its tax status from nontaxable to
taxable effective March 31, 1995. Accordingly, the deferred tax asset at the
date that the termination election was filed of approximately $10,000 has been
recorded through a credit to the deferred tax provision.
Note 7 - Commitments and Contingencies
- --------------------------------------
In August, 1993, LBU-Delaware entered into employment agreements with the
president/principal shareholder and his wife, who is also an officer of the
Company. These agreements provide for payments of approximately $148,999 per
year, and escalates periodically to approximately $163,000 per year, and run
through 1996.
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 that
time, the Company incurred incidental non-recurring costs due to the relocation
of approximately $200,000. Rent paid during the year ended December 31, 1995
amounted to $99,105. The minimum future rental payments under the non-
cancelable operating leases as of December 31, 1995 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 Plaintiffs"). The lawsuit stems from a financial service agreement dated
July 24, 1995, between the plaintiff's and LBU, Inc.
- 8 -
<PAGE>
LBU, Inc.
---------
(formerly New Century Media, Inc.)
----------------------------------
Notes to the Financial Statements
---------------------------------
December 31, 1995
-----------------
Note 7 - Commitments and Contingencies (continued)
- --------------------------------------------------
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.
Although legal counsel is unable to evaluate the likelihood of an unfavorable
outcome or an estimate of the potential loss, the plaintiffs are requesting in
excess of $10,000 for complaint damages, $60,000 in punitive damages determined
by the fair market of their services at the time of the service agreement and an
undeterminable amount of punitive damages.
With respect to the $60,000 claim for services to raise capital, such
transaction would have no net effect on the Company's book equity.
Management believes these charges are without merit and that the outcome of the
claim will not have a material impact on the Company's financial position.
Nevertheless, due to uncertainties in the settlement process, it is at least
reasonably possible that management's view of the outcome will change in the
near term.
- 9 -
<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-10-1996
<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 1,025,118 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> 1,966,030 2,245,633 578,666 1,962,538
<TOTAL-COSTS> 587,098 668,672 182,702 3,895,507
<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>
