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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the fiscal year ended: Commission file number:
June 30, 1996 0-14427
LA-MAN CORPORATION
(Name of Small Business Issuer in Its Charter)
NEVADA 38-2286268
(State or other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2180 West State Road 434, Suite 6136, Longwood, Florida 32779 (407) 865-5995
(Address, including zip code, of principal executive offices and telephone
number, including area code of Issuer)
Securities registered under Section 12(b) of the Act: None
Securities Registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 Par Value
Check whether the Issuer: (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act during the last 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for past 90 days.
[X] Yes [_] No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-K is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [_]
Issuer's revenues for its most recent fiscal year: $13,696,607
On September 13, 1996 the bid and ask prices of the Common Stock were
$1.38 and $1.69, respectively, according to NASDAQ Small Cap Market quotations
furnished by the National Quotation Bureau, Inc. The aggregate market value of
the voting stock of the Issuer held by non-affiliates based on the average of
the bid and ask prices on September 13, 1996 was $3,425,395.
As of September 13, 1996, 3,228,394 shares of Common Stock were
outstanding.
Transitional Small Business Disclosure Format (check one): [_] Yes [X] No
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Item 9, Item 10, Item 11 and Item 12 of Part
III of this Report is incorporated by reference from the Issuer's definitive
proxy statement to be filed in accordance with Rule 14a-101, Schedule 14A, in
connection with the Issuer's November 19, 1996 meeting of shareholders which
involves the election of directors.
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PART I
ITEM 1. BUSINESS.
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La-Man Corporation, a Nevada corporation, was originally incorporated in
Michigan on November 2, 1979 and remained substantially inactive until the
autumn of 1980. On February 4, 1983 , La-Man Corporation, a Nevada
corporation ("the Company"), was formed and, pursuant to a Certificate of
Merger filed on May 16,1983, the Michigan corporation was merged into the
Nevada corporation. The Company's executive office is located at 2180 West
State Road 434, Suite 6136, Longwood, Florida 32779. Its telephone number is
(407)865-5995. The Company operates in three business segments: filtration
manufacturing; sign marketing and manufacturing; and telecommunications
marketing. The Company believes it only has one product line in each
business segment.
The Company's direct wholly-owned subsidiaries include Nevada SEMCO,
Inc., a Nevada corporation ("SEMCO"), Don Bell Industries, Inc. Nevada, a
Nevada corporation (Don Bell Nevada), Don Bell Industries, Inc., a Florida
corporation ("Don Bell"), Heritage Packaging Services, Inc., an Indiana
corporation ("Heritage") and Vision Trust Marketing, Inc., a Florida
corporation ("Vision"). The Company's indirect wholly-owned subsidiaries
include J.M. Stewart Industries, Inc., a Florida corporation ("Stewart
Industries") and J.M. Stewart Corporation, a Florida corporation ("Stewart
Corporation"), each of which is directly owned by SEMCO, and TracTel
Communications, Inc., a Florida corporation ("TracTel"), which is directly
owned by Stewart Corporation.
Since the commencement of its operations, the Company has been engaged in
the manufacturing and sale of a line of products which, when installed in
compressed air lines, substantially reduce or totally eliminate water and
condensate problems and most foreign contaminants, such as moisture, oil,
dust, rust, and the like, in the air line. The Company assembles and ships
all of its products from its own premises in Port Orange, Florida. However,
to minimize production costs, the actual components are manufactured by others
using tooling owned by the Company.
Heritage was incorporated on September 27, 1984. On January 5, 1991, the
Company acquired all of the issued and outstanding stock of Heritage in
exchange for shares of the Company's common stock. Heritage marketed and
distributed various packaging materials and supplies, such as cartons, tape,
staples, stretch and shrink film, foam shipping bags, Kraft paper, solid fiber
board grades and various other packing materials and supplies to industrial
and commercial establishments within an approximately 100-mile radius of Ft.
Wayne, Indiana. This business was discontinued in August 1996.
SEMCO was incorporated on August 12, 1993. SEMCO is the holding company
for Stewart Corporation which designs and markets outdoor signs for churches,
schools, and other institutional businesses and Stewart Industries, which
produces graphic arts and screen print products. TracTel
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was incorporated March 21, 1994 to be a developer of affinity programs for
church groups. Such efforts have proved unsuccessful and TracTel is currently
inactive.
On November 14, 1994, the Company purchased Vision and operates the
corporation in Orlando, Florida as a wholly-owned subsidiary offering long
distance telephone services as an authorized agent of MCI. In May 1996,
Vision entered into a new contract with MCI to extend certain commitment dates
and permit certain other activities, and the Company changed the direction of
Vision to pursue selling directly to international businesses and to
concentrate on selling long-term contracts with higher commission rates. This
new marketing direction has only started recently, and it is too soon to
evaluate its success in this area.
On September 7, 1995, the Company purchased Don Bell, located in Port
Orange, Florida. Don Bell was incorporated on January 1, 1982, which was a
successor to a family owned business and is a commercial sign manufacturer.
It has recently begun the manufacturing of some church and school signs for
Stewart Corporation. All manufacturing is done at its owned plant in Port
Orange, Florida.
Unless the context otherwise requires , the term "Company" hereinafter
refers to La-Man Corporation, Heritage, SEMCO and its subsidiaries Stewart
Corporation and Stewart Industries, Don Bell, Don Bell Nevada, Vision , and
TracTel. The Company's Consolidated Financial Statements include the accounts
of all subsidiaries. See Note 15 to the Company's Consolidated Financial
Statements for information relating to the Company's industry segments.
Line of Credit Loan Agreement
On February 27, 1996, as part of an overall refinancing (See Note 9 Long-
term Debt), La-Man Corporation and Heritage, SEMCO, Stewart Corporation, Don
Bell , Stewart Industries, Vision, and TracTel ("Subsidiary" or
"Subsidiaries"), entered into a Loan and Security Agreement ("Loan Agreement")
with The Bank of Winter Park, Winter Park, Florida (the "Bank"), which
provides that the Bank will loan to the Company up to the principal amount of
$500,000 from time to time under a revolving line of credit, evidenced by a
Master Note in such maximum principal amount from the Company to the Bank.
Under the terms of the Master Note, principal borrowings outstanding bear
interest at the rate of 1% per annum above the prime interest rate as
announced by the Wall Street Journal. The Company is required to pay monthly
installments of accrued interest only on the outstanding principal balance
until December 27, 1997 (the "Maturity Date"), at which time all outstanding
principal and accrued but unpaid interest is due and payable. The Company
also entered into a $250,000 five-year term loan ending December 27, 2000 with
interest adjustable at 2 percent over the prime rate published in the Wall
Street Journal. The term loan requires $4,166.67 of principal and interest to
be paid monthly.
The Loan Agreement contains various covenants, including the following:
(a) The Company is required to maintain a tangible net worth (i.e.,
total assets
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minus total liabilities minus any intangible assets as defined under generally
accepted accounting principles) of no less than $1,500,000, to be measured at
each fiscal quarter of the Company commencing June 30, 1996;
(b) The Company is required to maintain an interest coverage ratio,
defined as earnings before interest and taxes divided by interest, of no less
than 3-to-1, to be measured at each fiscal quarter commencing June 30, 1996.
The Company was in violation of this requirement for fiscal 1996 and the
lender has granted a waiver through June 30, 1997;
(c) The Company is required to maintain a cash flow coverage,
defined as net income plus depreciation divided by current maturities of long-
term debt and capitalized leases, of no less than 2.5 to 1.0 at each fiscal
year end, commencing June 30, 1996;
(d) The Company is prohibited, without the Bank's written consent,
from making other borrowings or incurring any other direct or indirect, fixed
or contingent indebtedness; however, the Company has the right to acquire the
stock or assets of another corporation or entity in exchange for capital stock
of the Company, provided the Company and its Subsidiaries on a consolidated
basis continue to satisfy the applicable representations, warranties and
covenants contained in the Loan Agreement and provided that neither the
Company nor any of its Subsidiaries assumes any debt of the acquired
corporation or entity.
The obligations of the Company under the Loan Agreement are secured by
all accounts receivables, inventories and real estate of the Company and the
Subsidiaries, and by the separate joint and several continuing guaranties of
the Subsidiaries.
In the event the Company fails to pay any monetary obligation within 10
days after the date due, or in the event the Company or any Subsidiary fails
to remedy or cure to the satisfaction of the Bank any representation, warranty
or covenant of the Company or the Subsidiary under the applicable loan
document within 20 days after written notice from the Bank, or if there is a
change in the Company's present executive management without the prior written
approval of the Bank, the Bank has the right to accelerate the maturity of all
obligations of the Company under the Loan Agreement and exercise all rights
granted to the Bank with respect to the collateral securing such obligations.
At the same time, the Company entered into a new mortgage loan secured by
the Don Bell building and land in the amount of $840,000. The mortgage loan
is based on a twenty-year amortization with a five-year term and has an
adjustable interest rate of 1 1/2 per cent over the prime rate published in
the Wall Street Journal. At the current prime rate, the monthly payment of
principal and interest is $8,106.18
Concurrent with this financing, the Company paid off its old line of
credit and the Don Bell long-term debt except for a $125,255 mortgage loan
secured by certain land.
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As of June 30, 1996, no balance was outstanding under the Company's
revolving line of credit facility with the Bank.
In February 1996, the Company purchased a building in Port Orange,
Florida for $162,500 plus expenses, as part of its plan to move its filter
division to Florida which was completed in May 1996. The building was
financed by a one year note in the amount of $146,250 with interest payable
monthly at prime plus 1%. A contract for the sale of the Hamilton property
was entered into in June of 1996 and closed in early July. The note for
$146,250 plus outstanding interest was paid off at the closing. The Company
recorded a gain on the sale of the property of $66,444 in June 1996.
Acquisition of Don Bell Industries, Inc.
On September 7, 1995, the Company acquired all of the outstanding shares
of Don Bell a Port Orange, Florida, manufacturer of commercial signs in
exchange for 275,000 newly issued shares of La-Man Common Stock, a 8% five-
year convertible note in the amount of $750,000 and cash of $360,000. In the
event the reported average closing price of La-Man common stock for any period
of 20 consecutive days prior to December 31, 1996 does not equal or exceed
$4.00 per share, then on or before January 31, 1997, the Company will be
required to pay additional consideration to the prior shareholders of Don
Bell, in cash, additional shares of common stock, debt, or a combination
thereof (all at the option of the Company) in an amount equal to the
difference between such $4.00 per share target price and the highest reported
average closing price of La-Man common stock for any consecutive 20-day period
prior to December 31, 1996. As of August 31, 1996 the highest 20-day average
was $1.86. The convertible note, which is convertible into La-Man Common
Stock at $4.76 per share, is payable in equal annual installments of $250,000
in the last three years of the note. Interest is payable semi-annually and
the Company has a call feature at 105% of principal in year one reducing
annually to 100% in year five.
Don Bell is a fifty-year old manufacturer of commercial signs. In
addition to its own operation, it has begun manufacturing signs for Stewart
Corporation which previously has had its church and school signs produced by
third party manufacturers, principally by one vendor . This added ability is
expected to improve the overall profitability of the Company without
substantial capital investment.
Acquisition of Vision Trust Marketing, Inc.
In November 1994, the Company purchased the outstanding shares of common
stock of Vision, an authorized agent of MCI. Under the terms of the
acquisition agreement, La-Man canceled certain contractual advances due
TracTel from Vision in the amount of $180,195 and assumed the net liabilities
of Vision. It also entered into a consulting agreement with the prior owner
of Vision and issued 70,000 newly issued shares of common stock under its
1994 Amended and Restated Employee and Consultant Stock Compensation Plan as
consideration for consulting fees under the agreement. The consulting
agreement also calls for the consultant to receive as compensation a share of
the future commissions received by Vision from MCI, ranging between 5 and 10
percent based on certain achieved commission levels. The acquisition of
Vision is being handled as a purchase for
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accounting purposes. The purchase resulted in the creation of goodwill in
the amount of $215,493 and a deferred charge of $73,500 related to the stock
issued under the consulting agreement both of which are being amortized over
20 years.
Merger Agreement with SEMCO and Public Offering
On August 19, 1993, SEMCO, a wholly owned subsidiary of the Company,
entered into an Agreement and Plan of Reorganization ("Merger Agreement") with
Stewart Eleemosynary Marketing Corporation ("SEMC"), a Florida corporation,
and J. Melvin Stewart, the sole shareholder of SEMC. In January SEMC was
merged into SEMCO upon completion of the conditions specified in the Merger
Agreement.
SEMCO has two operating subsidiaries, Stewart Corporation and Stewart
Industries, both Florida corporations. Stewart Corporation markets an
extensive line of custom designed and stock sign products which are
specifically designed for external use by churches and schools. Stewart
Industries is engaged in screen printing, design, and production of vinyl
lettering and graphics, and graphic arts.
Under the terms of the Merger Agreement, the Company paid Mr. Stewart
$214,312 in cash and 316,923 restricted shares of common stock. For financial
statement purposes, the value of the restricted shares was discounted from the
public offering price of $3.25 per share to $2.60 per share to reflect the
restriction on the transfer of the shares for a total investment cost of
$1,038,312.
The purchase price and consideration paid by the Company and SEMCO were
determined by negotiation between the parties. The total purchase price, paid
by the Company was $1,038,312 and has been allocated to the assets and
liabilities of SEMCO as follows: current assets, $618,115, property, plant,
and equipment, $291,664; other assets, $8,161; goodwill, $1,182,488; and
liabilities $1,062,116.
On January 6, 1994, the Company made a registered offering to the public
of 310,000 units at $6.50 per unit, each unit consisting of two shares of
common stock and two redeemable common stock purchase warrants through its
underwriter Mathews, Holmquist and Associates, Inc. The warrants, as issued,
entitled the registered holder to purchase one share of common stock at an
exercise price of $3.90 per share for a period of 24 months from the January
6, 1994 effective date of the registration statement under which such units
were registered.
The net proceeds to the Company from the registered offering and sale of
the units was $1,353,431 and the proceeds were used as follows:
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<TABLE>
<CAPTION>
Amount
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<S> <C>
Payment of Subordinated Debentures $ 495,000
Loan to Stewart Corporation 450,000
Payment of Note Payable 75,000
Working Capital 333,431
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$1,353,431
==========
</TABLE>
The public offering and the merger were completed concurrently on January
13, 1994.
Principal Products
Filtration and Lubrication Products. The Company is presently producing
the Pneumatic/Dryer(R) in a base model designated Model L-100 and accepts
special orders on other sizes and variations. The Pneumatic/Dryer(R) is
designed to be installed in a compressed air line within six feet of the end
use. These products remove moisture and impurities from compressed air lines
at rates ranging from 10 standard cubic feet per minute (SCFM) to 150 SCFM.
The Pneumatic/Dryer(R) has a replaceable cartridge which can be changed in
most models without disconnecting the air line.
The Extractor/Dryer (R) is designed to remove moisture and impurities
from compressed air lines at higher levels of volume than the
Pneumatic/Dryer(R) (15 SCFM-2000 SCFM). The Extractor/Dryer (R) uses a two-
step air filtration process, rather than a single-stage process, to remove
moisture and harmful contaminants from compressed air lines. The Company
currently manufactures ten sizes of the Extractor/Dryer (R) which have been
used in a variety of systems and equipment, including industrial, automotive,
atomic energy plants, and hospital, dental, bakery and sandblasting equipment
as well as numerous other applications. It can be used to supplement the
Pneumatic/Dryer(R) for demanding applications, such as spray painting. In the
years ended June 30,1996 and June 30, 1995, the various Extractor/Dryers
accounted for 7% and 14% of consolidated net sales, respectively.
The Pneuguard (R) is an advanced air tool lubricator which supplies a
precise amount of lubricant to the inside of an air tool. Its unique design,
which combines a ball check valve, a flow sensor and pressure diaphragm,
prevents sudden surges of lubricant at start-up or impulse operations.
Moreover, unlike gravity-fed devices, the Pneuguard(R) efficiently lubricates
air tools in any position in which it is set.
The LA-MAN Dryer/Pneuguard(R), as indicated by its name, combines the
moisture and contaminant- removing function of the Pneumatic/Dryer(R) with the
lubricating function of the Pneuguard(R). The use of this product facilitates
the continuous operation of compressed air machinery.
The Company also manufactures and markets replacement filters and filter
materials for each of its filtration devices. Replacement filter sales
represented 3% and 5% of consolidated net sales
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for the years ended June 30, 1996 and 1995, respectively.
The Company's float drains may be used with the Extractor/Dryer (R) to
automatically expel liquids from the compressed air filter.
Institutional Sign Products. Stewart Corporation markets custom designed
and stock sign products specifically designed for outdoor use by
institutional organizations such as churches and schools. The Company has
recently begun selling to other institutional organizations. The signs and
signage products sold by Stewart Corporation are constructed from quality
materials intended to provide years of service to the church or school. A
twenty-year comprehensive warranty is provided with each sign product sold by
Stewart Corporation, and warranty claims have historically been less than one
percent of sales. The sign cabinet is constructed of heavy gauge aluminum
extrusions which are welded at mitered corners. The exterior of the sign
cabinet is painted in various, selected customer colors utilizing high quality
automotive paints. The formed faces of the signs are constructed of a
polycarbonate product principally manufactured by General Electric under the
product name Lexan. The Lexan face provides a sign face which is long
lasting, weather and hazard resistant and extremely shatterproof. The actual
design of the sign can be selected from various stock models which have been
designed by Stewart Corporation or a sign may be custom designed by the
customer with Stewart Corporation's assistance.
The signs are internally illuminated by fluorescent lamps for night
visibility, and have facing which permits the user to customize the message or
announcement on the sign. The signs are supported by an external structure
called a yoke, which utilizes rectangular steel or aluminum tubing from the
frame's base plate up to and around the sign. The signs utilize a steel base
plate which can be bolt mounted on a concrete, stone or steel pylon base. The
signs are designed for ease of installation by the customer.
Sign and sign component manufacturing historically have been carried out
under Stewart Corporation supervision by non-affiliated manufacturing and
assembly businesses. The majority of the sign manufacture is now handled by
one unaffiliated company under an agreement dated March 3, 1995 under which
Stewart Corporation committed for an eighteen month period that it would order
a minimum of 80 signs per month or the actual number of signs sold that month,
if less. Since entering that contract, the Company has sold between 91 and 142
signs each month. Drawings and specifications are submitted to the
manufacturer, prices are negotiated and Stewart Corporation places individual
orders with the vendor based on the agreed upon prices. Payment terms are 2%
15 days, net 30 days F.O.B. (product is drop shipped to customer). The
manufacturing process utilizes molds, the engineering and design of which is
proprietary to Stewart Corporation. Stewart Corporation does not maintain an
inventory of stock signs at its Sarasota, Florida facilities. The third-party
sign manufacturing has partially been shifted to Don Bell, which the Company
acquired in September 1995. In using Don Bell, Stewart Corporation has
introduced a new less corrosive aluminum yoke and a line of message center
signs.
Stewart Corporation does not depend upon a single customer, or a few
customers, the loss
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of any one or more of which would have a material adverse effect upon Stewart
Corporation. No single customer of Stewart Corporation accounted for sales
equal to ten percent or more of Stewart Corporation revenues during the
years ended June 30, 1996 and June 30, 1995. Stewart Corporation had one
supplier of church signs which comprised purchases of 27% and 56% of the
consolidated purchases for the years ended June 30, 1996 and June 30, 1995,
respectively. Management of Stewart Corporation intends to reduce its
dependency on this supplier by transferring more of its sign manufacturing to
Don Bell.
Approximately 75% of total Stewart Corporation revenues are derived from
sales of signs and related products to churches, and approximately 24% of
total Stewart Corporation revenues are derived from sales of signs and related
products to schools. Stewart Corporation intends to create, develop and
market additional products which will be compatible with Stewart Corporation's
existing sign and related products, services and marketing procedures. Such
additional products and services may include capital goods and items for use
by churches, schools and other institutions as well as products and services
for use by individuals in churches and schools. Sales to other institutional
organizations were insignificant in the year ended June 30, 1996.
Graphic Arts. Stewart Industries produces graphic arts and screen
printed products. Stewart Industries also uses computers to design and
produce die cut vinyl letters, symbols, and logos for signs. Stewart
Corporation purchases changeable screen printed copy letters and lettered
signs for its church and school signs from Stewart Industries. Approximately
71% and 68% of Stewart Industries sales during the years ended June 30, 1996
and June 30, 1995 respectively, were to Stewart Corporation.
Commercial Signs. Don Bell is a producer of electronic message centers,
custom designed identification systems and custom graphic systems for
commercial clients. Its customer base is highly diversified and Don Bell
relies on continued soliciting efforts to obtain its sales. In addition to
outright sales, Don Bell offers leases to customers which are generally for
five year terms. Maintenance agreements are offered on all sign sales and
rentals and accounted for approximately 13 percent of Don Bell's revenue for
the ten months ended June 30, 1996.
Long-distance Services. Through its telemarketing operations Vision
pursues commercial and individual customers to sell MCI long distance
telephone services. In May 1996, Vision entered into a new contract with MCI
and reorganized its focus to deal with businesses which have substantial
international long distance usage and to push for long-term contracts with
these groups. The new contract provides higher commission rates for long-term
contracts and dependable commission income to Vision.
Patent and Trademark Protection
The Company is the owner of ten issued U.S. patents. A U.S. patent gives
the patent owner the exclusive right to exclude others from making, using, and
selling the invention for seventeen years from the grant of the patent. The
issued patents are: number 4,464,186 relating to the
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Pneumatic Liquid Evaporator/Extractor (expires in the year 2001);number
4,483,417 relating to the Pneuguard(R) Lubricator (expires in 2001); number
4,487,618 relating to the Extractor/Dryer (R) (expires in 2001); number
4,810,272 relating to the Air Inlet Valve Arrangement for Pneumatic Equipment
(expires in 2006); number Re 32,989 (Reissue of 4,600,416) relating to the Air
Line Vapor Trap (expires in 2003); number 4,874,408 relating to a Liquid Drain
Assembly (expires in 2006); number 4,925,466 relating to a Filter Cartridge
Assembly (expires in 2007); number 5,030,262 relating to the Air Vapor Trap
and Drain (expires in 2008); and number 5,114,443 relating to the Air Line
Vapor Trap (expires in 2009)and number 5,261,946 relating to the Air Line
Vapor Trap With Air Warming System (expires in 2010).
The Company also is the owner of nine foreign patents and patents
applications: Canadian Numbers 1,206,889 relating to the Pneumatic Dryer
(expires 2003); 1,197,477 relating to the Extractor/Dryer(R) (expires
2002);1,207,674 relating to the Pneuguard(R) Lubricator (expires 2003); and
1,267,057 relating to the Air Line Vapor trap(expires 2007); Canadian Patent
Application Number 2,064,401 for the Air Line Vapor With Air Warming System;
Japanese Patent Numbers 1,410,903 relating to the Airline Lubricator (expires
2002); and 1,899,252 relating to the Air Line Vapor Trap (expires 2001);
Taiwanese Patent Number UM 55136 relating to the Air Inlet Valve Arrangement
for Pneumatic Equipment (expires 2000); and Swedish Patent Number 101,861
relating to the Airline Lubricator (next renewal date July 13, 1997).
Finally, the Company is the owner of Reg. Number 1,287,666 for the
trademark LA-MAN(R), Reg.Number 1,328,054 for PNEUGUARD(R), Reg. Number
1,596,100 for EXTRACTOR/DRYER(R), and Reg. Number 1,790,935 for
ENCAPULATOR(R), all on the Principal Register of the U.S. Patent and Trademark
Office, Reg. Number 1,359,880 for the mark EXTRACTOR(R) on the Supplemental
Register and Reg number 1,844,119 for "We make Compressed Air Work". A
Trademark is exclusive to the owner and is used to identify the Company's
products and distinguish them from products sold by others, Federal trademark
protection is perpetual, but the Company must renew its trademarks every ten
years.
The Company believes its filtration and lubrication products are
proprietary assets of the Company's filtration manufacturing segment. The
Company intends to maintain all patents and trademarks material to its
business for their complete respective terms. Patents generally are granted
for 17 year terms and are nonrenewable; trademarks are renewable for ten year
terms. Heritage's, SEMCO's, Vision's, TracTel's and Don Bell's products and
services are non-proprietary and, as a result, trademarks and patents are not
deemed material to the Company's packaging materials and supplies and sign
marketing segments or its long-distance telephone marketing operations.
Marketing and Distribution
The Company's filtration and lubrication business uses various techniques
in marketing its products, such as trade media advertising, direct mail,
attendance at trade shows and direct customer contact. Presently,
approximately five percent of La-Man's products are sold by ten non-exclusive
commissioned representatives. The balance is sold directly by the Company
principally to end users,
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warehouse distributors and jobbers. The Company has expanded its marketing
strategy to target the original equipment manufacturer ("OEM") market
directly, rather than through distributors. An increasing percentage of the
Company's sales are directly to the end user and OEM markets.
SEMCO, through Stewart Corporation, markets its signs by direct marketing
efforts which include direct mail, direct calls on prospective church, school
and institutional customers, and direct calls made upon the procurement
personnel of various churches and church denominations, school board officials
and school procurement personnel. Stewart Corporation also participates in
church conventions, denominational meetings and other events attended by
representatives of potential church and school customers. Stewart Corporation
also advertises its products and services through church denominational
publications and bulletins, and publications of schools, school boards and
school administrative personnel. Stewart Corporation management estimates
that approximately 68% of church sign sales are the result of direct marketing
activities, and approximately 96% of school sign sales are the result of
direct marketing activities.
Stewart Corporation also markets products through joint venture and
similar arrangements with the denominational headquarters of various organized
churches. Under the joint venture marketing strategy, Stewart Corporation,
products are presented in denominational publications which are disseminated
to member churches. Stewart Corporation is presented as an appointed supplier
of the signs and related products and member churches are encouraged to
purchase such products from Stewart Corporation. Under such joint marketing
arrangements, Stewart Corporation remits a concession to the denominational
headquarters based upon product sales. Stewart Corporation management
estimates that approximately 32 % of church sign sales are to joint ventures.
Stewart Corporation has established a joint venture marketing arrangement
with the Sunday School Board of the Southern Baptist Convention, one of the
largest Protestant denominations in the United States. The term of the
agreement was two years beginning January 17, 1992, and the agreement has been
renewed for a two-year term with a current expiration date of December 31,
1997. The Sunday School Board endorsed Stewart Corporation as its official
representative to market church signs to Southern Baptist churches, and
Stewart Corporation remits a concession to the Sunday School Board for sales
produced under the agreement. Stewart Corporation and the Sunday School Board
jointly plan and administer the advertising and marketing under this
agreement. Approximately 23% and 26% of sales of church signs for the years
ended June 30, 1996 and June 30, 1995, were made through the joint venture
arrangement with the Southern Baptist Convention.
Stewart Corporation has established a marketing arrangement with the
Gospel Publishing House (Assemblies of God denomination). The term of the
agreement is five years beginning April 2, 1992. The Gospel Publishing House
endorses Stewart Corporation as its official representative to market church
signs to Assemblies of God churches and other churches regularly serviced by
the Gospel Publishing House, and Stewart Corporation pays a concession to the
Gospel Publishing House for sales produced under the agreement. The Gospel
Publishing House plans and executes
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the church sign advertising and all customer responses are forwarded to
Stewart Corporation. Approximately 7%, and 6% of sales of church signs for the
years ended June 30, 1996 and June 30, 1995, respectively, were made through
the marketing agreement with Gospel Publishing House.
Stewart Corporation has also established such joint venture and similar
arrangements with Messenger Publishing House (Pentecostal Church of God
denomination), the Church Growth Institute, and Randall House Publishing of
the Free Will Baptist Church. Other than discussed above, no joint venture
arrangement comprised more than 5% of total sales during the years ended June
30, 1996 and June 30, 1995.
The average size of a sale under the joint venture agreements is
approximately the same as the average size of a sale to other customers of
Stewart Corporation. Stewart Corporation will also endeavor to establish
similar joint venture arrangements with other church denominational
headquarters. The total number of churches presently operating in the
United States and Canada, including denominational churches, is estimated by
management at 375,000.
Stewart Corporation also intends to utilize joint venture arrangements
in sign marketing to schools, whereby Stewart Corporation will secure sign
product endorsement from school boards and other administrative and governing
bodies. Management of SEMCO estimates that there are approximately 170,000
schools, colleges and universities in the United States.
Don Bell markets all products through a staff of commissioned
salespersons and commissioned independent sales contractors and primarily
electronic message centers through dealers. It also participates in
conventions, advertising programs and trade associations. Its long-time
reputation as a quality manufacturer is a valued source of sales leads.
Vision operates a telemarketing operation in Orlando, Florida which
pursues customers who have an interest in obtaining MCI long distance
telephone services. A concerted effort to obtain small business accounts with
international activities on a long-term contract basis was initiated in May
1996.
Backlog
Most of the Company's filtration customers place orders on an as-needed
basis, which orders generally have been filled on a timely basis, i.e., in
accordance with its usual practice of filling orders within one to five days
after receipt of such orders and in accordance with the delivery requirements
of the Company's customers. The Company did not have any "backlog orders,"
as of September 13, 1996, i.e. firm orders for products which it had not been
able to fill in accordance with its usual practice. The Company's larger
customers provide the Company with "blanket orders," i.e., scheduled orders
at designated prices over the course of six month or twelve month periods.
Such orders are subject to modification by the customer from time to time.
Stewart Corporation's customers place orders on an as-needed basis.
Stewart Corporation
12
<PAGE>
authorizes the manufacture of the sign when it obtains a deposit, customarily
50% of the order, from the customer. The completed sign is shipped to the
customer approximately 6-8 weeks after the deposit is received by Stewart
Corporation. As of June 30, 1996, Stewart Corporation did not have any
"backlog orders,"i.e., firm orders for products which it had not been able to
fill in accordance with its usual practice.
Don Bell's customers also place orders on an as-needed basis. Deposits of
up to 50% are obtained with the order from customers based on negotiations of
the sales contract. Delivery and installation are dependent on the size and
customization required of the order and are usually completed within two
months, except for long-term contracts. Don Bell does not have "backlog
orders" which it is not able to fill in accordance with its usual practice.
However, it does have contracts in process exceeding $2,000,000 in contract
value as of June 30, 1996.
Employees
The Company currently employs 164 full-time employees, excluding the
independent sales representative staff. The following table shows the
breakdown of employees:
<TABLE>
<S> <C> <C>
Executive Offices and Filtration Sales Longwood, Florida 6
Filtration Division Port Orange Florida 5
Church and School Sign Business Sarasota, Florida 46
Commercial Sign Business Port Orange, Florida 71
Long-Distance Service Orlando, Florida 36
--
164
===
</TABLE>
The Company considers its relationship with its employees satisfactory and
is not a party to any collective bargaining agreement.
Competition
The Company's filtration manufacturing segment is subject to substantial
competition from a number of companies. At present, screening devices such
as filters and cumbersome water traps are the principal methods of attempting
to remove moisture and other impurities from compressed air lines. The
Company is not aware of any product presently produced and marketed that
offers the range of uses, effectiveness and ease of installation provided by
the Company's line of products. The principal methods of competition include
performance, service and price. Management believes the Company's product
prices are within the range of the prices of its competitors.
Stewart Corporation encounters substantial competition on signs and
related products from a myriad of local signage companies which operate
throughout the United States and Canada. In the opinion of the management of
Stewart Corporation, the principal factors in such competition are product
pricing, service, quality, design, production and delivery time, and product
warranties. Stewart Corporation products contain materials of high quality. A
twenty- year sign warranty is also
13
<PAGE>
provided. Stewart Corporation management believes that the comparative
quality of the Stewart Corporation sign product, together with related
services provided and the extensive product warranty, permit Stewart
Corporation to effectively compete with other sign companies. Additionally,
Stewart Corporation believes that its joint venture marketing strategy
provides an access to potential church and school customers which is generally
not available to such local concerns. Stewart Corporation is aware of only
one other sign company, Signs Plus, that markets its products in a manner
similar to Stewart Corporation. Stewart Corporation believes such competing
entity does not have a joint venture marketing relationship with any church
denomination headquarters or school board that has a joint venture marketing
agreement with Stewart Corporation. Stewart Corporation also competes with a
number of smaller companies, particularly, in the sale of lower volume economy
signs.
Don Bell is in a highly competitive market, primarily for medium-to-large
sign programs and electronic message systems, with both national and local
sign makers. The strength of its sales force, quality of its products and
electronics, price and name recognition are the keys to its successful sales
record.
Vision, in its telemarketing long-distance services, is in direct
competition with other long-distance telephone providers. It is constantly
looking for affiliations which provide it an edge on its competitors.
Vision's strength is in its training programs and development of
telemarketers.
Government Regulation
The Company has no knowledge of any U.S. governmental regulations which
adversely affect its business operations. In the manufacture of its products
for government agencies, the Company is required to meet certain governmental
specifications. The Company has had no difficulty satisfying these
requirements.
Environmental Protection Compliance
The Company has no knowledge of any federal, state or local environmental
compliance regulations which materially affect its current business
activities. The Company has not expended any capital to comply with
environmental protection statutes and does not anticipate that such
expenditures will be necessary in the future with respect to its filtration
and lubrication products, its packaging materials and supplies, or its sign
marketing and manufacturing or long distance services segments.
Research and Development Costs
The Company's expenditures for its last two fiscal years on research and
development of new filtration and lubrication products were not significant.
SEMCO's, and Vision's operations do not require the expenditure of any sums
for research and development. Don Bell is expected to have continuing
research and development costs for enhancement to current message centers and
for
14
<PAGE>
reduction of manufacturing costs.
ITEM 2. PROPERTIES
-------------------
The Company maintains its executive offices in a 3,150 square-foot suite
in an office building in Longwood, Florida under a three year lease expiring
in 1997. Vision maintains a 5,250 square foot telemarketing facility in a
shopping center in Orlando, Florida under a five year lease expiring in 2000.
The Filtration Division operates in its owned manufacturing facilities in a
8,750 square foot structure in Port Orange, Florida. This building, situated
on just under an acre, adjacent to the Don Bell property, is a one-story,
steel frame structure with a metal roof, slab floor, heat and partial central
air conditioning.
Stewart Corporation leases approximately 8,175 feet of office space in
Sarasota, Florida for a five-year term that ends on December 31, 2000, at the
present rate of $10,368 per month, subject to yearly increases during the
term of the lease. Stewart Corporation also leases for its graphics and
screen print operation space in Sarasota, Florida for a three-year term that
ends on January 31, 1997, at a rate of $1,484 per month. SEMCO does not have
separate offices and conducts its business from the offices of Stewart
Corporation.
Don Bell operates in its owned manufacturing facilities in a 38,000
square foot structure in Port Orange, Florida. This building, situated on
eight acres of land owned by Don Bell, is a one and one half-story, steel
frame structure with a metal roof and slab floor. The Don Bell facility and
the underlying real property are subject to a mortgage in favor of Bank of
Winter Park securing principal indebtedness of approximately $840,000, which
was refinanced in December 1995. Another parcel of real property owned by Don
Bell is encumbered by a mortgage lien in favor of William Ethridge securing
present indebtedness of approximately $120,000 which was also incurred by Don
Bell prior to its acquisition by La-Man.
The Company believes its facilities are adequate for the foreseeable
future.
ITEM 3. LEGAL PROCEEDINGS.
---------------------------
The Company is not a party to any material pending legal proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
-------------------------------------------------------------
None.
(REMAINDER OF PAGE INTENTIONALLY LEFT BLANK)
15
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED SECURITY HOLDER
--------------------------------------------------------------------------
MATTERS.
--------
The Company's common stock is quoted on the NASDAQ Small Cap Market under
the trading symbol "LAMN" but is not traded on any exchange. The following
table indicates the range of high and low bid prices for the common stock for
each full quarterly period within the two most recent fiscal periods ended
June 30, 1996 and June 30, 1995 as such quotes were supplied by the NASDAQ
Small Cap Market to the National Quotation Bureau, Inc. and reported to the
Company by the National Quotation Bureau, Inc. The market quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission and may
not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Common Stock Bid Prices
Fiscal Year /1/ Quarter Ending High Low
<S> <C> <C> <C>
1994 - 1995 September 30, 1994 $2.00 $ .81
December 31, 1994 1.03 .38
March 31, 1995 .59 .38
June 30, 1995 1.13 .50
1995 - 1996 September 30, 1995 1.38 .63
December 31, 1995 2.25 1.00
March 31, 1996 1.44 .97
June 30, 1996 1.41 .88
</TABLE>
/1/The Company's fiscal year ends on June 30 of each year.
As of September 13, 1996, there were approximately 1,300 holders of
record of the Common Stock.
The Company has never paid and does not anticipate paying any cash
dividends on its Common Stock in the foreseeable future, but instead intends
to retain all working capital and earnings, if any, for use in the Company's
business operations and in the expansion of its business.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
--------------------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
Results of Operations
The Company's consolidated financial statements include the accounts of
its wholly owned subsidiaries: Heritage, SEMCO, Stewart Corporation, Stewart
Industries, TracTel, Vision (since
16
<PAGE>
November 14, 1994) and Don Bell (since September 7, 1995). See "Summary of
Significant Accounting Policies" prior to the Notes to the Company's
Consolidated Financial Statements.
Year ended June 30, 1996 compared with year ended June 30, 1995
The Company's consolidated sales of $13,696,607 for the fiscal year ended
June 30, 1996 increased $6,787,793 or 98% over the prior fiscal year ended
June 30, 1995. Operating income of $556,224 for the year represented an
improvement of $217,462 over the prior year operations of $338,762.
Consolidated sales and operating income were record performances for the
Company. Income from continuing operations of $626,446 increased from
$251,234, an improvement of $375,212 or 149%. In fiscal year-end 1996, the
Company recognized a deferred tax benefit of $125,000 related to net operating
losses that management believes it will be able to use in the future. In
August 1996, the Company discontinued the operations of Heritage Packaging
Services, Inc. and recognized a loss on sale of $115,000. Operating losses
for the fiscal year ended June 30, 1996 for Heritage were $143,660 for a total
loss from discontinued operations of $258,660 in the fiscal year ended June
30, 1996. Net income of $367,806 was an improvement of $203,636 over the prior
years net income of $164,170.
Earnings per share from continuing operations of $.22 for the fiscal
year-end 1996 doubled the $.11 in the prior year. Net Income per share
improved to $.13 from $.07 per share.
The results of operations for the year ended June 30, 1996 include the
operations of Vision Trust and Don Bell which were acquired in November 1994
and September 1995, respectively, and accounted for as purchase transactions.
Vision Trust's and Don Bell's operating results for the year ended June 30,
1996 are as follows:
<TABLE>
<CAPTION>
Vision Don
Trust Bell
---------------
(In 000's)
<S> <C> <C>
Sales $429 $5,244
Cost of Sales 70 3,319
----- ------
Gross Profit 359 1,925
Operating Expenses 757 1,466
----- ------
Income (Loss) from Operations (398) 459
Interest Income - 48
Interest Expense - (177)
Gain on Sale of Equipment - 8
----- ------
Income (Loss) Before Income Taxes ($398) $ 338
===== ======
</TABLE>
Absent the acquisition of Don Bell: 1) consolidated sales of $8,452,263
represented an increase of $1,543,449 or 22% over the year ended June 30,
1995; 2) for the same period income from continuing operations of $288,651 for
the period compared to $251,234 for the year ended June 30, 1995; 3) the
gross profit of $5,146,469 was an improvement of $973,144 or 23% over the
17
<PAGE>
comparable period in 1995 and; 4) the gross profit margin improved from 60% to
61%.
The lubrication and filtration division's sales of $1,587,980 represented
a decrease of $14,022. Operating income of $540,640 for the fiscal year ended
June 30, 1996 was higher than the prior year by $24,868 due to improved
margins related to product mix and lower operating expenses.
The long-distance telephone services telemarketing operation had sales of
$429,062 compared to $39,320 in the prior period. Operating losses in the
current period were $397,749, an increase of $279,704 from the prior period.
A new more lucrative contract giving higher commission rates on term contracts
has been negotiated with MCI and management is optimistic that operating
results will improve in the coming year.
The church and school sign marketing operations' sales of $6,435,221
increased from $5,267,492 or 22%. The increase was basically due to record
orders booked in June in advance of a price increase and the increase in the
trained sales force added in the prior year. Operating income of $786,888 was
an increase of $104,038 or 15% from the prior year due primarily to the sales
increase.
Excluding Don Bell, operating expenses of $5,049,397 in the year ended
June 30, 1996 represented an increase of $1,214,834 or 32% as compared to the
year ended June 30, 1995. The primary reasons for the increase were higher
costs related to the church and school sign marketing operations which
incurred greater selling and support costs related to the increase in
revenues. The telemarketing operation which expanded this year also had
higher selling and administrative costs. In addition, corporate expenses
increased related to the Company's annual report, proxy statement and
shareholders meeting, which were the first in its history.
Other expenses of $54,758 decreased from $87,528 for the year ended June
30, 1995. The Company recorded a charge of $95,000 for costs related to the
dismissal of two officers by the Board of Directors in September 1994. Net
interest expense increased in 1996 due primarily to the debt incurred with the
Don Bell acquisition. This was partially offset by the gain on the sale of
the Hamilton property upon relocation of the filter operation to Port Orange
of $66,444.
Liquidity and Capital Resources
Liquidity and capital resources will be discussed in three broad
categories, namely, operating, investing, and financing activities. The cash
available at June 30, 1995 of $364,531 decreased $251,804 to $112,727 at June
30, 1996.
Net cash provided from continuing for operating activities in the year
ending June 30, 1996 was $596,498. Income from continuing operations of
$626,466 and non-cash charges for depreciation and amortization of $460,002
were partially offset by the net changes in assets and liabilities, net of
effects of acquisition of $255,553, deferred income of $97,928 and the
deferred tax benefit of $125,000. Net cash used for discontinued operating
activities was $62,213.
18
<PAGE>
Net cash used for investing activities of $925,948 related largely to the
payment for Don Bell of $469,569 less the cash acquired with the acquisition
of $59,819. The Company also used $504,598 for capital expenditures primarily
for its new facility in Port Orange, Florida for the lubrication and filter
operation and equipment at Don Bell.
Net cash provided by financing activities for the year ending June 30,
1996 was $139,859. In January and February 1996, 330,750 SD Warrants were
converted to La-Man Corporation common stock for net proceeds to the Company
of $224,495 and 10,000 unregistered shares of common stock were sold for net
proceeds of $10,000. This was offset in part by the reduction of long-term
debt for the refinancing of $57,256 and the payments on capital leases.
The Company completed its debt refinancing in December 1995 by entering
into a $500,000 two-year term revolving line of credit, a new mortgage on Don
Bell's principal manufacturing facility in the amount of $840,000 based on a
twenty-year amortization for a five-year term and a $250,000 five-year term
loan repayable at $4,166.67 a month plus interest. The line of credit was
unused at June 30, 1996. In February 1996, the Company entered into a one-
year note on its new facility for the filter division in the amount of
$146,250. The Company repaid this note with the proceeds from the sale of
the Company's lubrication and filter division facility in Hamilton, Indiana.
Inflation
Although inflation has slowed in recent years, it continues to be a
factor in the Company's operations. In recent years, the Company has taken
steps to counteract the effects of inflation by price increases and by careful
cost control. There are no other significant factors which are expected to
cause a material increase in the general and administrative expense as a
percentage of sales.
Recent Accounting Pronouncements
See Summary of Signifcant Accounting Policies to the Company's
Consolidated Financial Statements for information relating to recent
accounting pronouncements.
ITEM 7 FINANCIAL STATEMENTS
---------------------------
Financial statements are included at the end of this report starting at
page F-1.
PART III
THE INFORMATION REQUIRED BY ITEM 9, ITEM 10, ITEM 11 AND ITEM 12 OF THIS PART
III IS INCORPORATED BY REFERENCE FROM THE COMPANY'S DEFINITIVE PROXY STATEMENT
TO BE FILED IN CONNECTION WITH THE NOVEMBER 19, 1996 MEETING OF SHAREHOLDERS
OF THE COMPANY WHICH WILL INVOLVE THE ELECTION OF DIRECTORS.
19
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
- ---------------------------------------------------------------------------
(a) The following documents are filed as part of this Report:
LA-MAN CORPORATION AND SUBSIDIARIES
Report of Independent Certified Public Accountants - BDO Seidman, LLP.... F-2
Consolidated Balance Sheet as of June 30, 1996........................... F-3
Consolidated Statements of Income for years ended June 30, 1996 and 1995. F-5
Consolidated Statements of Stockholders' Equity for years ended
June 30, 1996 and 1995.................................................. F-6
Consolidated Statement of Cash Flows for years ended June 30, 1996
and 1995................................................................ F-7
Summary of Significant Accounting Policies............................... F-8
Notes to Consolidated Financial Statements............................... F-11
Exhibit
Number Title of Exhibit
------ ----------------
3.1 Articles of Incorporation of Registrant/1//
--
3.2 Certificate of Merger/1//
--
3.3 Bylaws of Registrant as amended/27//
---
3.4 Amendment to Articles of Incorporation/9//
--
3.5 Articles of Incorporation of Heritage Packaging Service, Inc./14//
---
3.6 By-Laws of Heritage Packaging Services, Inc. as amended/17//
---
3.7 Certificate of Incorporation as amended of International Stained
Glass Overlay, Inc./17//
---
3.8 By-Laws of International Stained Glass Overlay, Inc./17//
---
3.9 Articles of Incorporation of Nevada SEMCO, Inc., a Nevada
corporation/20//
---
3.10 By-Laws of Nevada SEMCO, Inc./20//
---
3.11 Articles of Incorporation of TracTel Communications, Inc., a Florida
corporation/23//
---
3.12 Bylaws of TracTel Communications, Inc./23//
---
3.13 Articles of Incorporation of Vision Trust Marketing, Inc., a Florida
corporation/27//
---
3.14 Bylaws of Vision Trust Marketing, Inc./27//
---
3.15 Articles of Incorporation of Don Bell Industries, Inc., a Florida
corporation/27//
---
3.16 Bylaws of Don Bell Industries, Inc./27//
---
3.17 Articles of Incorporation of Don Bell Industries of Nevada,
Inc./27//
---
3.18 Bylaws of Don Bell Industries of Nevada, Inc./27//
---
4.1 Specimen of Common Stock Certificate/17//
---
4.2 Specimen of Warrant Certificate (as revised)/17//
---
20
<PAGE>
4.3 Form of Representative's Unit Purchase Option (as revised)/20//
---
4.4 Form of 10% Subordinated Debenture/17//
---
4.5 Form of Series SD Common Stock Purchase Warrant/17//
---
4.7 Form of Warrant Agreement among Registrant, Mathews, Holmquist &
Associates, Inc., and Continental Stock Transfer & Trust Company
(revised)/20//
---
4.8 Specimen Certificate of Common Stock to be included in Units/17//
---
4.9 Form of March, 1993 Amendment to the 10% Subordinated Debenture/17//
---
4.10 Form of May, 1993 Amendment to the 10% Subordinated Debenture/18//
---
4.11 Form of Series SD Common Stock Purchase Warrant Certificate (as
amended)/28//
---
4.12 Form of Series DFRV Common Stock Purchase Warrant Certificate (as
amended)/28//
---
4.13 Amendment No. 1 to Warrant Agreement, dated as of December 8, 1995,
between La-Man Corporation and Continental Stock Transfer & Trust
Company, as Warrant Agent/29//
---
10.1 Royalty Agreement Re: U.S. Patent No. 4,116,650/1//
--
10.2 License Agreement Re: U.S. Patent No. 4,116,650/1//
--
10.3 Assignment of U.S. Patent No. 4,116,650/1//
--
10.7 Warranty Deed for Indiana Property/1//
--
10.9 License Agreement between Registrant and J & M/1//
--
10.14 License Agreement dated November 9, 1987 between Registrant and J &
M Company, Ltd./16//
---
10.15 Agreement to Purchase Patents and Applications for Patents,
Trademarks and Applications for Trademarks and International
Marketing and Sales Rights between Registrant and J & M Company Ltd.
dated November 9, 1987/16//
---
10.16 Assignment of Patents and Applications for Patents, Trademarks and
Applications for Trademarks and International Marketing and Sales
Rights to J & M Company, Ltd. dated November 9, 1987/16//
---
10.19 Asset Purchase Agreement dated as of September 8, 1989/10//
---
10.20 Bill of Sale/12//
---
10.21 Noncompetition Agreement/12//
---
10.22 License Agreement/12//
---
10.23 Assignment of Trademark/12//
---
10.24 Assignment of Patents and Patent Applications/12//
---
10.25 Promissory Note executed by MST, Inc. on March 16, 1990/12//
---
10.26 Security Agreement Relating to Intellectual Property/12//
---
10.27 Security Agreement Relating to Personal Property /12//
---
10.28 Agreement Regarding Inventory/12//
---
10.29 Stock Purchase Agreement/13//
---
10.30 Promissory Note executed by Heritage Packaging Services, Inc. on
January 5, 199l/13//
---
10.32 Lincoln National Bank and Trust Company of Fort Wayne Commercial
Note dated June 10, 1991 for $75,000/14//
---
10.33 Letter of Ameritrust National Bank dated May 8, 1991 as to
commitment to $150,000 line of credit/14//
---
10.34 Promissory Note from Heritage Packaging Service to Mrs. Ruth A.
Finkbohnner for $5,500/14//
---
10.35 Agreement between Registrant and AMK, Inc. dated February 1,
1992/16//
---
10.36 Merger Agreement between Nevada SEMCO, Inc. and Stewart Eleemosynary
Marketing
21
<PAGE>
Corporation, dated August 19, 1993/19//
---
10.37 Amendment to J & M Agreement dated May, 1992/16//
---
10.38 Lease Agreement dated June 23, 1992 between Wayne Coliseum Limited
Partnership and Heritage Packaging Services, Inc./16//
---
10.39 Ameritrust National Bank, Michiana, Note and Mortgage/16//
---
10.40 Ameritrust National Bank, Michiana Line of Credit Agreement/16//
---
10.41 Ameritrust National Bank, Michiana, $150,000 Note dated September
30, 1992/16//
---
10.42 Ameritrust National Bank, Michiana, Term Sheet/16//
---
10.43 Mortgage Modification between Registrant and Ameritrust National
Bank, Michiana/16//
---
10.44 Consulting and Marketing Service Agreement by and between Registrant
and All Pro Marketing, Inc./17//
---
10.45 Consulting and Marketing Service Agreement by and between Registrant
and K.A.M. Group, Inc/17//
---
10.46 1988 Incentive Stock Option Plan/17//
---
10.47 1992 Stock Option and Appreciation Rights Plan/17//
---
10.48 Employment Agreement dated November 4, 1992 between Registrant and
Richard W. Coffman/17//
---
10.49 Employment Agreement dated November 4, 1992 between Registrant and
Philip Howe Hoard/17//
---
10.55 Agreement to Terminate Letter of Intent and Underwriting
Agreement/18//
---
10.57 Employment Agreement dated July 26, 1993 between Registrant and
Richard W. Coffman/20//
---
10.58 Employment Agreement dated July 26, 1993 between Registrant and
Philip Howe Hoard/20//
---
10.59 Supplementary Agreement of Asset Purchase Agreement dated June 30,
1993, between Registrant and MST/20//
---
10.60 Employment Agreement dated August 19, 1993, between J.M. Stewart
Corporation and J. Melvin Stewart/20//
---
10.61 Employment Agreement dated as of April 28, 1994 between Registrant
and J. William Brandner/21//
---
10.62 Stock Option Agreement dated as of September 6, 1994 between
Registrant and J. William Brandner/23//
---
10.63 Stock Option Agreement dated as of September 6, 1994 between
Registrant and Richard W. Coffman/23//
---
10.64 Stock Option Agreement dated as of September 6, 1994 between
Registrant and Michael J. Derrick/23//
---
10.65 Stock Option Agreement dated as of September 6, 1994 between
Registrant and Philip Howe Hoard/23//
---
10.66 Stock Option Agreement dated as of September 6, 1994 between
Registrant and Otto J. Nicols/23//
---
10.67 Stock Option Agreement dated as of September 6, 1994 between
Registrant and J. Melvin Stewart/23//
---
10.68 Stock Option Agreement dated as of September 6, 1994 between
Registrant and Max D. Tavernier/23//
---
10.69 Telecommunications Agreement dated February 25, 1994 among
Registrant, Vision Trust
22
<PAGE>
Marketing, Inc. and Tampa Bay Financial, Inc./21//
---
10.70 Joint Marketing Agreement effective March 31, 1994 among Vision
Trust Marketing, Inc., TracTel Communications, Inc. and J. M.
Stewart Corporation/21//
---
10.71 Investor Relations Agreement dated as of April 14, 1994 between
Registrant and Corporate Investor Relations, Inc./23//
---
10.72 Investor Relations Agreement dated as of April 29, 1994 between
Registrant and Florida Gulf Capital & Equity Corp., as amended July
11, 1994/23//
---
10.73 Stock Option Agreement dated July 11, 1994 between Registrant and
Florida Gulf Capital & Equity Corp./23//
---
10.74 Stock Purchase and Sale Agreement dated as of November 14, 1994
between and among La-Man Corporation, TracTel Communications, Inc.,
Vision Trust Marketing, Inc., Pamela J. Wilkinson and Stuart M.
Cohen/24//
---
10.75 Consulting Agreement dated as of November 17, 1994 between and among
La-Man Corporation, Vision Trust Marketing, Inc. and Pamela J.
Wilkinson/24//
---
10.76 Warrant Repurchase Agreement dated as of November 14, 1994 between
La-Man Corporation and All Pro Marketing, Inc./24//
---
10.77 Loan and Security Agreement dated February 13, 1995 between and
among La-Man Corporation, Heritage Packaging Services, Inc., Nevada
SEMCO, Inc., J.M. Stewart Corporation, J.M. Stewart Industries,
Inc., Vision Trust Marketing, Inc., TracTel Communications, Inc.,
and The Bank of Winter Park./25//
---
10.78 Master Note dated February 13, 1995 from La-Man Corporation to The
Bank of Winter Park/25//
---
10.79 La-Man Corporation Security Agreement dated February 13, 1995/25//
---
10.80 Heritage Packaging Services, Inc. Security Agreement dated February
13, 1995/25//
---
10.81 Nevada SEMCO, Inc. Security Agreement dated February 13, 1995/25//
---
10.82 J.M. Stewart Corporation Security Agreement dated February 13,
1995/25//
---
10.83 J.M. Stewart Industries, Inc. Security Agreement dated February 13,
1995/25//
---
10.84 Vision Trust Marketing, Inc. Security Agreement dated February 13,
1995/25//
---
10.85 TracTel Communications, Inc. Security Agreement dated February 13,
1995/25//
---
10.86 Heritage Packaging Services, Inc. Continuing Guaranty dated February
13, 1995/25//
---
10.87 Nevada SEMCO, Inc. Continuing Guaranty dated February 13,
1995/25//
---
10.88 J.M. Stewart Corporation Continuing Guaranty dated February 13,
1995/25//
---
10.89 J.M. Stewart Industries, Inc. Continuing Guaranty dated February 13,
1995/25//
---
10.90 Vision Trust Marketing, Inc. Continuing Guaranty dated February 13,
1995/25//
---
10.91 TracTel Communications, Inc. Continuing Guaranty dated February 13,
1995/25//
---
10.92 Employment Agreement dated as of August 31, 1995 between Registrant
and Otto J. Nicols/27//
---
10.93 Employment Agreement dated as of August 31, 1995 between Registrant
and Max D. Tavernier/27//
---
10.94 Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
between Registrant and J. William Brandner/27//
---
10.95 Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
between Registrant and Philip Howe Hoard/27//
---
10.96 Amendment No. 1, dated as of August 31, 1995 to Employment Agreement
between Registrant and J. Melvin Stewart/27//
---
23
<PAGE>
10.97 Stock Option Agreement dated as of September 1, 1995 between
Registrant and J. William Brandner/27//
---
10.98 Stock Option Agreement dated as of September 1, 1995 between
Registrant and Philip Howe Hoard/27//
---
10.99 Stock Option Agreement dated as of September 1, 1995 between
Registrant and Otto J. Nicols/27//
---
10.100 Stock Option Agreement dated as of September 1, 1995 between
Registrant and J. Melvin Stewart/27//
---
10.101 Stock Option Agreement dated as of September 1, 1995 between
Registrant and Max D. Tavernier/27//
---
10.102 Stock Purchase and Sale Agreement dated as of September 7, 1995
among Registrant, Don Bell Industries, Inc., Worrell Enterprises,
Inc. and Gary D. Bell /26//
---
10.103 8% Convertible Note of Registrant, dated September 7, 1995, in
principal amount of $750,000 to Worrell Enterprises, Inc./26//
---
10.104 Employment Agreement dated as of September 7, 1995 among
Registrant, Don Bell Industries, Inc. and Gary D. Bell/26//
---
10.105 Employee Stock Option Agreement dated as of September 7, 1995
between Registrant and Gary D. Bell/26//
---
10.106 La-Man Corporation 1994 Amended and Restated Employee and
Consultant Stock Compensation Plan, as amended by Amendment No. 1
thereto dated as of August 31, 1995/26//
---
10.107 Loan and Security Agreement dated December 27, 1995 between and
among La-Man Corporation, Heritage Packaging Services, Inc., Nevada
SEMCO, Inc., J.M. Stewart Corporation, J.M. Stewart Industries,
Inc., Vision Trust Marketing, Inc., TracTel Communications, Inc.,
Don Bell Industries, Inc., Don Bell Industries of Nevada, Inc., and
The Bank of Winter Park/30//
---
10.108 Agreement for Purchase of Assets dated as of August 27, 1996
between Heritage Packaging Services, Inc. and Midwest Packaging
Products, Inc./31//
---
16.01 Statement of Change in Independent Principal Accountants/22//
---
22 Subsidiaries
28.3 U.S. Patent No. 4,483,417/1//
--
28.4 Trademark Registration No. 1,287,666/1//
--
28.5 U.S. Patent No. 4,487,618/2//
--
28.6 Trademark Registration No. 1,328,054/2//
--
28.7 Trademark Registration No. 1,359,880 (Supplemental Register)/4//
--
28.8 Canadian Patent No. 1,197,477/16//
---
28.9 U.S. Patent Number 4,600,416 for the Extractor Dryer/16//
---
28.10 Canadian Patent Number 1,206,889 for the Pneumatic Dryer/16//
---
28.11 Trademark Registration Number 1,372,359/16//
---
28.12 Canadian Patent Number 1,207,674/16//
---
28.13 Japanese Patent Number 1,410,903 for the Airline Lubricator/9//
--
28.14 U.S. Patent Number 4,865,815 for the In-Line Compressed Air Carbon
Monoxide Filter/11//
---
28.15 Taiwanese Patent Certificate Number UM 55136 for the Air Inlet
Valve Arrangement for Pneumatic Equipment/14//
---
24
<PAGE>
28.16 U.S. Patent Number 5,030,262 for the Air Vapor Trap and Drain
Therefore/14//
---
28.17 U.S. Patent Number 5,114,443 for the Air Line Vapor Trap With Air
Warming System/16//
---
28.18 Japanese Patent Number 1,899,252 for the Air Line Vapor Trap/16//
---
---------------
/1// Incorporated by reference from Registrant's Pre-Effective Amendment
-- No. 1 to the Registrant's Registration Statement on Form S-18
(Registration No. 2-89341).
/2// Incorporated by reference from Registrant's Pre-Effective Amendment
-- No. 2 to the Registrant's Registration Statement on Form S-18
(Registration No. 2-89341).
/3// Filed as an exhibit to Registrant's Form 10-Q for the period ended
-- June 30, 1986 (File No. 0-14427), and incorporated by reference.
/4// Incorporated by reference from Registrant's Post-Effective Amendment
-- No. 1 to Registrant's Registration Statement on Form S-18 (Registration
No. 2-89341).
/5// Filed as an exhibit to Registrant's Form 10-Q for the period ended
-- December 31, 1985 (File No. 0-14427), and incorporated by reference.
/6// Filed as an exhibit to Registrant's Current Report on Form 8-K filed
-- on December 23, 1987 (File No. 0-14427), and incorporated by reference.
/7// Filed as an exhibit to Registrant's Form 10-K for the period ended
-- September 30, 1986 (File No. 0-14427), and incorporated by reference.
/8// Filed as an exhibit to Registrant's Form 10-K for the period ended
-- September 30, 1987 (File No. 0-14427), and incorporated by reference.
/9// Filed as an exhibit to Registrant's Form 10-K for the period ended
-- September 30, 1988 (File No. 0-14427), and incorporated by reference.
/10// Filed as an exhibit to Registrant's Current Report on Form 8-K filed
--- on October 3, 1989 (File No. 0-14427), and incorporated by reference.
/11// Filed as an exhibit to Registrant's Form 10-K for the period ending
--- September 30, 1989 (File No. 0-14427), and incorporated by reference.
/12// Filed as an exhibit to Registrant's Form 8-K dated March 29, 1990
--- (File No. 0-14427), and incorporated by reference.
/13// Filed as an exhibit to Registrant's Form 8-K dated January 5, 1991
--- (File No. 0-14427), and incorporated by reference.
/14// Filed as an exhibit to Registrant's Form 10-K for the period ending
--- September 30, 1991 (File No. 0-14427), and incorporated by reference.
25
<PAGE>
/15// Filed as an exhibit to Registrant's Form 8-K filed on September 3,
--- 1992 (File No. 0-14427), and incorporated by reference.
/16// Filed as an exhibit to Registrant's Form 10-K for the transition
--- period ending June 30, 1992 (File No. 0-14427), and incorporated by
reference.
/17// Previously filed as an exhibit to the Registration Statement
--- (Registration No. 33-54230) and incorporated by reference.
/18// Previously filed as an exhibit to Post Effective Amendment No. 1 to
--- the Registration Statement (Registration No. 33-54230) and incorporated
by reference.
/19// Filed as an Exhibit to Registrant's Form 8-K dated August 19, 1993
--- (File No. 0-14427) and incorporated by reference.
/20// Previously filed as an exhibit to Post Effective Amendment No. 2 to
--- the Registration Statement (Registration No. 33-54230) and incorporated
by reference.
/21// Filed as an exhibit to Registrant's Form 8-K dated June 23, 1994
--- filed on June 28,1994 (File No. 0-14427), and incorporated by
reference.
/22// Filed as an exhibit to Registrant's Form 8-K dated January 27, 1994
--- and filed on February 3, 1994 (File No. 0-14427), and incorporated by
reference.
/23// Filed as an exhibit to Registrant's Form 10-K for the period ending
--- June 30, 1994 (File No. 0-14427), and incorporated by reference.
/24// Filed as an exhibit to Registrant's Form 8-K dated November 14, 1994
--- and filed on January 27, 1995 (File No. 0-14427), and incorporated by
reference.
/25// Filed as an exhibit to Registrant's Form 8-K dated February 13, 1995
--- and filed on February 27, 1995 (File No. 0-14427), and incorporated by
reference.
/26// Filed as an exhibit to Registrant's Form 8-K dated September 7, 1995
--- and filed effective September 22, 1995 (File No. 0-14427), and
incorporated by reference.
/27// Filed as an exhibit to Registrant's Form 10-KSB for the period
--- ending June 30, 1995 (File No. 0-14427), and incorporated by reference.
/28// Filed as an exhibit to Registrant's Registration Statement on Form
--- S-3 (Registration No. 33-98964), and incorporated by reference.
/29// Filed as an exhibit to Registrant's Post-Effective Amendment No. 7
--- to Registration Statement on Form S-3 (Registration No. 33-54230), and
incorporated by reference.
/30// Filed as an exhibit to Registrant's Form 8-K dated December 27, 1995
--- (File No. 0-14427), and incorporated by reference.
26
<PAGE>
/31// Filed as an exhibit to Registrant's Form 8-K dated August 28, 1996
--- (File No. 0-14427), and incorporated by reference.
(b) No reports on Form 8-K were filed by the Registrant during the three-
month period ended June 30, 1996, the last quarter of the period
covered by this Annual Report on Form 10-KSB.
(c) Exhibits:
None
27
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly authorized.
By: /s/ J. William Brandner
---------------------------------------
J. William Brandner, President and
Chief Executive Officer
September 16, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report had been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C>
By: /s/ Philip Howe Hoard By: /s/ Otto J. Nicols
------------------------------------- -----------------------------------------
Philip Howe Hoard, Vice President Otto J. Nicols, Vice President, Treasurer
Secretary and Director (Chief Financial Officer and Chief
September 16, 1996 Accounting Officer) and Director
September 16, 1996
By: /s/ J. Melvin Stewart By: /s/ Max D. Tavernier, Jr.
------------------------------------- -----------------------------------------
J. Melvin Stewart, Chairman of Max D. Tavernier, Jr., Director
the Board and Director September 16, 1996
September 16, 1996
By: /s/ J. William Brandner By: /s/ Gary D. Bell
------------------------------------- -----------------------------------------
J. William Brandner, President Gary D. Bell, Director
and CEO, and Director September 16, 1996
September 16, 1996
By: /s/ Ithiel C. Clemmons By: /s/ Edwin M. Freakley
------------------------------------- -----------------------------------------
Ithiel C. Clemmons, Director Edwin M. Freakley, Director
September 16, 1996 September 16, 1996
By: /s/ Thomas N. Grant By: /s/ Robert M. Smither, Jr.
------------------------------------- -----------------------------------------
Thomas N. Grant, Director Robert M. Smither, Jr., Director
September 16, 1996 September 16, 1996
</TABLE>
28
<PAGE>
LA-MAN CORPORATION AND SUBSIDIARIES
Index to Finanacial Statements
<TABLE>
<CAPTION>
LA-MAN CORPORATION AND SUBSIDIARIES
<S> <C>
Report of Independent Certified Public Accountants.................... F-2
Consolidated Balance Sheet as of June 30, 1996........................ F-3
Consolidated Statements of Operations for the years ended
June 30, 1996 and 1995................................................ F-5
Consolidated Statements of Stockholders' Equity for the years
ended June 30, 1996 and 1995.......................................... F-6
Consolidated Statement of Cash Flows for the years ended
June 30, 1996 and 1995................................................ F-7
Summary of Significant Accounting Policies............................ F-8
Notes to consolidated financial statements............................ F-11
</TABLE>
F-1
<PAGE>
Report of Independent Certified Public Accountants
To the Board of Directors and Stockholders
La-Man Corporation
We have audited the accompanying consolidated balance sheet of La-Man
Corporation and subsidiaries as of June 30, 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for
each of the two years in the period ended June 30, 1996. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits 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 audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of La-Man
Corporation and subsidiaries as of June 30, 1996, and the results of their
operations and their cash flows for each of the two years in the period
ended June 30, 1996 in conformity with generally accepted accounting
principles.
BDO Seidman, LLP
Orlando, Florida
August 15, 1996
F-2
<PAGE>
La-Man Corporation and Subsidiaries
Consolidated Balance Sheet
================================================================================
<TABLE>
<CAPTION>
June 30, 1996
- -----------------------------------------------------------------------
<S> <C>
Assets
Current:
Cash $ 112,727
Accounts receivable:
Trade, less allowance for doubtful accounts
of $126,871 (Notes 8 and 9) 1,785,219
Other (Note 5) 205,678
Inventories (Notes 2, 8 and 9) 1,070,391
Prepaid expenses 256,412
Deferred tax assets (Note 11) 125,000
- --------------------------------------------------------------------------------
Total current assets 3,555,427
- --------------------------------------------------------------------------------
Property, plant and equipment,
less accumulated depreciation (Notes 3, 8 and 9) 2,830,878
- --------------------------------------------------------------------------------
Other assets:
Intangibles, less accumulated amortization
(Notes 1 and 4) 2,526,246
Other (Note 5) 471,424
- --------------------------------------------------------------------------------
2,997,670
- --------------------------------------------------------------------------------
$ 9,383,975
================================================================================
</TABLE>
F-3
<PAGE>
La-Man Corporation and Subsidiaries
Consolidated Balance Sheet
================================================================================
<TABLE>
<CAPTION>
June 30, 1996
- -----------------------------------------------------------------------
<S> <C>
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,082,846
Customer deposits 540,752
Accrued expenses 760,049
Billings in excess of costs and estimated
earnings on uncompleted contracts (Note 6) 201,329
Deferred income (Note 7) 53,634
Provision for loss on disposal of
packaging operations (Note 19) 115,000
Current maturities of long-term debt (Note 9) 113,443
Current portion of obligations under
capital leases (Note 10) 21,774
- -------------------------------------------------------------------------------
Total current liabilities 2,888,827
- -------------------------------------------------------------------------------
Long-term debt, less current maturities (Note 9) 1,867,851
Obligations under capital leases, less current
portion (Note 10) 29,137
Deferred income (Note 7) 38,422
- --------------------------------------------------------------------------------
Total liabilities 4,824,237
- --------------------------------------------------------------------------------
Commitments and contingencies (Notes 1 and 10)
Stockholders' equity (Notes 1 and 12):
Common stock, par value $.001; authorized 50,000,000
shares; issued and outstanding 3,058,665 shares 3,059
Additional paid-in capital 6,158,510
Accumulated deficit (1,601,831)
- --------------------------------------------------------------------------------
Total stockholders' equity 4,559,738
- --------------------------------------------------------------------------------
$9,383,975
================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
La-Man Corporation and Subsidiaries
Consolidated Statement of Income
================================================================================
<TABLE>
<CAPTION>
Year ended June 30, 1996 1995
- -----------------------------------------------------------------------
<S> <C> <C>
Sales $ 13,696,607 $6,908,814
Cost of sales 6,624,778 2,735,489
- -----------------------------------------------------------------------
Gross profit 7,071,829 4,173,325
- -----------------------------------------------------------------------
Operating expenses 6,515,605 3,834,563
- -----------------------------------------------------------------------
Income from operations 556,224 338,762
- -----------------------------------------------------------------------
Other income (expense):
Interest income 72,343 32,689
Interest expense (201,266) (31,682)
Gain on disposal of property and
equipment (Note 14) 69,644 5,700
Officer termination costs - (95,000)
Miscellaneous income 4,521 765
- -----------------------------------------------------------------------
(54,758) (87,528)
- -----------------------------------------------------------------------
Income from continuing operations
before deferred tax benefit 501,466 251,234
Deferred tax benefit (Note 11) 125,000 -
- -----------------------------------------------------------------------
Income from continuing operations 626,466 251,234
Discontinued operations (Note 19):
Loss from operations of discontinued
packaging division 143,660 87,064
Loss on sale of packaging division,
including provision of $30,000 for
operating losses during phase-out period 115,000 -
- -----------------------------------------------------------------------
Loss from discontinued operations 258,660 87,064
- -----------------------------------------------------------------------
Net income $ 367,806 $ 164,170
=======================================================================
Income (loss) per share:
Continuing operations $ .22 $ .11
Discontinued operations (.09) (.04)
- -----------------------------------------------------------------------
Net income per share $ .13 $ .07
=======================================================================
Weighted average number of shares
outstanding 2,861,739 2,442,540
=======================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes
to consolidated financial statements.
F-5
<PAGE>
La-Man Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
==============================================================================================================
Common Stock
------------------------ Additional Total
Number Par Paid-In Accumulated Stockholders'
of Shares Value Capital Deficit Equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance,
June 30, 1994 2,161,026 $2,161 $4,517,824 $(2,133,807) $2,386,178
Stock issued for
consulting services
(Note 1) 70,000 70 73,430 - 73,500
Sales of common stock 126,373 126 130,258 - 130,384
Net income - - - 164,170 164,170
- -------------------------------------------------------------------------------------------------------------
Balance,
June 30, 1995 2,357,399 2,357 4,721,512 (1,969,637) 2,754,232
Stock issued to pay
accounts payable 36,000 36 44,964 - 45,000
Stock issued for
purchase of business
(Note 1) 275,000 275 1,099,725 - 1,100,000
Stock contributed to
401(k) plan (Note 13) 49,516 50 58,155 - 58,205
Sale of common stock 10,000 10 9,990 - 10,000
Exercise of common
stock warrants, net
of registration costs 330,750 331 224,164 - 224,495
Net income - - - 367,806 367,806
- --------------------------------------------------------------------------------------------------------------
Balance,
June 30, 1996 3,058,665 $3,059 $6,158,510 $(1,601,831) $4,559,738
==============================================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-6
<PAGE>
La-Man Corporation and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
====================================================================================
Year ended June 30, 1996 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 367,806 $ 164,170
Adjustments to reconcile net income to net cash
provided by continuing operating activities:
Loss from discontinued operations 258,660 87,064
Depreciation and amortization 460,002 226,792
Gain on disposal of property, plant and equipment (69,644) (5,700)
Contribution of common stock to 401(k) plan 58,205 -
Realization of deferred income (97,978) -
Deferred tax benefit (125,000) -
Net changes in assets and liabilities, net of effects
of acquisition:
Accounts receivable (553,554) (231,519)
Inventories 14,507 (18,586)
Prepaid expenses (46,471) (77,062)
Accounts payable 239,662 25,518
Customer deposits (186,570) 225,312
Accrued expenses and other 75,544 37,877
Billings in excess of costs and estimated earnings on
uncompleted contracts 201,329 -
- -------------------------------------------------------------------------------------
Net cash provided by continuing operating activities 596,498 433,866
Net cash used by discontinued operating activities (62,213) (100,085)
- -------------------------------------------------------------------------------------
Cash flows from investing activities:
Increase in notes receivable - (73,939)
Purchase of property, plant and equipment (504,598) (77,471)
Payment for purchase of Don Bell Industries, Inc., net of
cash acquired of $59,819 (409,750) -
Purchase of intangible assets (9,180) (4,158)
Net proceeds from sale of property, plant and equipment 49,459 5,700
Increase in other assets (51,879) -
- -------------------------------------------------------------------------------------
Net cash used for investing activities (925,948) (149,868)
- -------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from issuance of notes 1,090,000 -
Principal payments on notes (1,147,256) (299,997)
Proceeds from sales of stock 10,000 130,384
Proceeds from exercise of warrants, net of
registration costs 224,495 -
Payments on capital lease obligations (37,380) (20,419)
- --------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities 139,859 (190,032)
- --------------------------------------------------------------------------------------
Net decrease in cash (251,804) (6,119)
Cash, beginning of year 364,531 370,650
- --------------------------------------------------------------------------------------
Cash, end of year $112,727 $364,531
======================================================================================
</TABLE>
See accompanying summary of significant accounting policies and notes to
consolidated financial statements.
F-7
<PAGE>
La-Man Corporation and Subsidiaries
Summary of Significant Accounting Policies
================================================================================
Principles of The consolidated financial statements
Consolidation include the accounts of the Company
and its wholly-owned subsidiaries,
Heritage Packaging Services, Inc.;
Nevada SEMCO, Inc.; J.M. Stewart
Corporation; J.M. Stewart Industries;
Vision Trust Marketing, Inc.; Don
Bell Industries, Inc.; Don Bell
Industries of Nevada, Inc. and
TracTel Communications, Inc. (the
"Company"). All significant
intercompany accounts and
transactions have been eliminated in
consolidation. The Company operates
in four business segments (Note 15).
Inventories Inventories are valued at the lower
of first-in, first-out (FIFO) cost or
market.
Property, Plant Property, plant and equipment are
and Equipment stated at cost. Depreciation is
computed over the estimated useful
lives of the assets by the
straight-line method for financial
reporting and accelerated methods for
income tax purposes.
Intangible Assets Intangible assets are amortized using
the straight-line method over their
estimated useful lives.
Revenue The Company recognizes revenue on
Recognition long-term construction contracts
under the percentage-of-completion
method, measured by the percentage of
contract costs incurred to estimated
total contract costs for each
contract. Contract costs include all
direct material and labor costs and
those indirect costs related to
contract performance. 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. Profit
is included in revenues when its
realization is reasonably assured.
Net Income Net income per share is computed by
per Share dividing net income by the weighted
average number of common shares
outstanding during the year, as
adjusted for the stock dividend
issued subsequent to year end (Note
18). Warrants, stock options,
convertible debt and contingent
shares have been excluded from the
earnings per share calculations
because they are either antidilutive
or their aggregate potential dilutive
effect is not significant.
F-8
<PAGE>
La-Man Corporation and Subdidiaries
Summary of Significant Accounting Policies
================================================================================
Leasing Activities The Company leases certain of its
signs to customers under long-term
noncancellable leases which are
accounted for as sales-type leases.
The present value of the minimum
rentals to be received under such
leases is recorded currently as net
sales revenue. The cost of the leased
property is charged against income at
the time the sale is recorded.
Income Taxes The Company accounts for income taxes
in accordance with Statement of
Financial Accounting Standards No.
109, "Accounting for Income Taxes"
("FAS 109"). FAS 109 is an asset and
liability approach that requires the
recognition of deferred tax assets
and liabilities for the expected
future tax consequences of events
that have been recognized in the
Company's financial statements or tax
returns. Measurement of deferred
income tax is based on enacted tax
laws including tax rates, with the
measurement of deferred income tax
assets being reduced by available tax
benefits not expected to be realized.
Fair Value of Statement of Financial Accounting
Financial Standards No. 107, "Disclosures about
Instruments Fair Value of Financial Instruments,"
requires disclosure of fair value
information about financial
instruments. Fair value estimates
discussed herein are based upon
certain market assumptions and
pertinent information available to
management as of June 30, 1996.
The respective carrying value of
certain on-balance-sheet financial
instruments approximated their fair
values. These financial instruments
include cash, trade receivables,
accounts payable and accrued
expenses. Fair values were assumed to
approximate carrying values for these
financial instruments since they are
short term in nature and their
carrying amounts approximate fair
values or they are receivable or
payable on demand. The fair value of
the Company's long-term debt is
estimated based upon the quoted
market prices for the same or similar
issues or on the current rates
offered to the Company for debt of
the same remaining maturities.
F-9
<PAGE>
La-Man Corporation and Subsidiaries
Summary of Significant Accounting Policies
================================================================================
Use of The preparation of financial
Estimates statements in conformity with
generally accepted accounting
principles requires management to
make estimates and assumptions that
affect the reported amounts of 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.
Recent Statement of Financial Accounting
Accounting Standards No. 121, "Accounting for
Pronouncements the Impairment of Long-Lived Assets
and for Long-Lived Assets to be
Disposed Of," issued by the Financial
Accounting Standards Board (FASB), is
effective for financial statements
for fiscal years beginning after
December 15, 1995. The new standard
establishes new guidelines regarding
when impairment losses on long-lived
assets, which include plant and
equipment and certain identifiable
intangible assets and goodwill,
should be recognized and how
impairment losses should be measured.
The Company does not expect adoption
to have a material effect on its
financial position or results of
operations.
Statement of Financial Accounting
Standard No. 123, "Accounting for
Stock-Based Compensation," (SFAS
123), issued by the Financial
Accounting Standards Board (FASB), is
effective for specific transactions
entered into after December 15, 1995,
while the disclosure requirements of
SFAS No. 123 are effective for
financial statements for fiscal years
beginning no later than December 15,
1995. The new standard encourages a
fair value method of accounting for
stock-based compensation plans. This
statement provides a choice to either
adopt the fair value based method of
accounting or continue to apply APB
Opinion No. 25, which would require
only disclosure of the pro forma net
income and earnings per share,
determined as if the fair value based
method has been applied. The Company
plans to continue to apply APB
Opinion No. 25 when adopting this
statement, and accordingly, this
statement is not expected to have a
material impact on the Company.
F-10
<PAGE>
La-Man Corporation and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
1. Acquisitions On September 7, 1995, the Company
acquired all of the outstanding common
stock, 8% cumulative preferred stock and
$935,091 of notes receivable from Don
Bell Industries, Inc. (DBI) for a total
consideration of $2,210,000 comprised of
$360,000 cash, 275,000 shares of common
stock and a $750,000 convertible note
payable (Note 9). Additional cash,
common stock or debt may be contingently
issuable should the market price of the
Company's common stock not exceed $4 per
share for any consecutive 20-day period
prior to December 31, 1996. The highest
consecutive 20-day average through
August 31, 1996 was $1.86 per share, and
the contingent liability was $588,000 at
that date. The acquisition has been
recorded using the purchase method of
accounting. Accordingly, the purchase
price was allocated to the net assets
acquired based upon their estimated fair
market values. The excess of the
purchase price over the estimated fair
value of net assets acquired amounted to
approximately $1.1 million, which has
been accounted for as goodwill. The
operating results of DBI are included in
the Company's consolidated results of
operations from the date of acquisition.
In November 1994, the Company purchased
all of the shares of common stock of
Vision Trust Marketing, Inc. ("VTM") in
consideration for the cancellation of a
note receivable in the amount of
$180,195. VTM is an authorized agent of
MCI Telecommunications Corporation
("MCI") and generates commissions from
MCI through the solicitation and sale of
MCI services. The Company also entered
into a consulting agreement with the
former shareholder of VTM. Under that
consulting agreement, the former owner
received 70,000 shares of newly issued
shares of registered common stock of La-
Man Corporation under its 1994 Amended
and Restated Employee and Consultant
Stock Compensation Plan for services to
be rendered over the life of the
agreement. The consulting agreement also
calls for the consultant to receive a
share of the future commissions received
by VTM from MCI, ranging between 5 and
10 percent based on certain achieved
commission levels. The acquisition has
been accounted for by the purchase
method of accounting, and the purchase
price of $180,195 approximated the fair
value of the net assets acquired
including goodwill of $215,493. The
operating results of VTM are included in
the Company's consolidated results of
operations from the date of acquisition.
F-11
<PAGE>
La-Man Corporation and Subsidiaries
Notes to Consolidated Financial Statements
================================================================================
The following unaudited pro forma
summary presents the consolidated
results of continuing operations as if
the acquisition of Don Bell and the
acquisition of VTM had occurred at the
beginning of the periods presented and
do not purport to be indicative of what
would have occurred had the acquisitions
been made as of those dates or of
results which may occur in the future.
<TABLE>
<CAPTION>
Year ended June 30, 1996 1995
--------------------------------------------------
<S> <C> <C>
Net sales $14,472,000 $ 13,056,000
Net income $ 230,000 $ 22,000
Net income per share $ .08 $ .01
==================================================
</TABLE>
2. Inventories Inventories at June 30, 1996 consist of
the following:
<TABLE>
--------------------------------------------------
<S> <C>
Raw materials $ 801,794
Work in process 86,634
Finished goods 93,750
Cartons and supplies 88,213
--------------------------------------------------
1,070,391
==================================================
</TABLE>
F-12
<PAGE>
La-Man Corporation and Subdiaries
Notes to Consolidated Financial Statements
================================================================================
3. Property, Plant Property, plant and equipment at June
and Equipment 30, 1996 consist of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives
-------------------------------------------------------
<S> <C> <C>
Land $ 530,000
Land improvements 15 years 1,575
Buildings and improvements 15-30 years 997,594
Leasehold improvements 30 years 27,792
Machinery and equipment 5-10 years 953,115
Office equipment and
furniture 5-10 years 774,582
Transportation equipment 3-5 years 261,229
Signs 15 years 84,899
Signs held for lease 11 years 255,528
-------------------------------------------------------
3,886,314
Less accumulated depreciation 1,055,436
-------------------------------------------------------
2,830,878
=======================================================
</TABLE>
Depreciation expense from continuing
operations for the years ended June 30,
1996 and 1995 was $362,564 and $151,247,
respectively.
4. Intangible Intangible assets are summarized as
Assets follows:
<TABLE>
<CAPTION>
Useful Lives
---------------------------------------------------------
<S> <C> <C>
Patents 5 years $ 211,819
Goodwill 20-40 years 2,461,878
Deferred consulting fees 20 years 73,500
---------------------------------------------------------
2,747,197
Less accumulated amortization 220,951
---------------------------------------------------------
2,526,246
=========================================================
</TABLE>
Amortization expense from continuing
operations for the years ended June 30,
1996 and 1995 was $97,438 and $75,545,
respectively.
F-13
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
5. Net Investment The Company is the lessor of a variety of signs and
in Sales-Type advertising display units under agreements expiring
Leases through 2003. The Company accounts for these leases as
sales-type leases. At June 30, 1996, the net investment
in sales-type leases consists of the follows:
---------------------------------------------------------
Total minimum lease payments to be received $ 656,562
Less unearned income 144,757
---------------------------------------------------------
Net investment in sales-type lease 511,805
Less current portion 118,185
---------------------------------------------------------
Long-term net investment $ 393,620
=========================================================
The following is a schedule of minimum lease payments to
be received as of June 30, 1996:
---------------------------------------------------------
<TABLE>
<S> <C>
1997 $ 173,417
1998 161,531
1999 138,238
2000 113,354
2001 40,184
Thereafter 29,838
---------------------------------------------------------
$ 656,562
=========================================================
</TABLE>
F-14
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
6. Billings in Costs and estimated earnings on uncompleted contracts
Excess of consist of the following at June 30, 1996:
Costs and
Estimated ---------------------------------------------------------
Earnings on
Uncompleted Costs incurred on uncompleted contracts $ 386,851
Contracts Estimated earnings 83,239
---------------------------------------------------------
470,090
Billings to date (671,419)
---------------------------------------------------------
Billings in excess of costs and estimated
earnings on uncompleted contracts $(201,329)
=========================================================
7. Deferred Deferred income consists of deferred revenues from
Income leases sold with recourse. The Company has sold the
rights to future collection from certain operating leases
held by the Company to various financing institutions.
Revenue was recognized at the time of sale for leases
sold without recourse. For leases sold with recourse,
revenue was deferred and recognized ratably over the term
of the lease. At June 30, 1996, $92,056 is outstanding
under recourse provisions for leases on which revenue
recognition has been deferred, of which an estimated
portion of $53,634 will be recognized as revenue in
fiscal year 1997 and the remaining $38,422 will be
recognized thereafter.
8. Line of Credit The Company has a $500,000 revolving bank line of credit
which was unused at June 30, 1996. Advances on the credit
line carry an interest rate of 1% over prime. Under the
terms of this loan agreement, the line of credit matures
December 27, 1997 and is collateralized by property,
accounts receivable and inventory. The agreement has
covenants which require the Company to maintain certain
financial and operating ratios, including tangible net
worth and interest coverage ratio requirements. At June
30, 1996, the Company was in violation of the interest
coverage ratio requirement, and the lender has granted a
waiver through June 30, 1997.
F-15
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
9. Long-Term Long term debt at June 30, 1996 is summarized as follows:
Debt ---------------------------------------------------------
8.5% unsecured note payable, due in monthly
installments of $3,265 through November 1997. $ 49,228
9% mortgage note payable, due in monthly
installments of $1,420 through April 2008,
secured by land of Don Bell Industries. 123,843
Prime plus 2% (10.25% at June 30, 1996) term
loan payable, due in monthly principal
installments of $4,167 plus interest; unpaid
principal plus accrued interest due December
2000; secured by all inventory and accounts
receivable of the Company and specific assets
of Don Bell Industries and guaranteed by all
the subsidiaries of La-Man Corporation. 225,000
Prime plus 1.5% (9.75% at June 30, 1996) term
loan payable, due in monthly installments of
$8,106 through December 2000, at which time
the remaining principal plus accrued interest
is due; secured by all inventory and accounts
receivable of the Company and specific assets
of Don Bell Industries and guaranteed by all
the subsidiaries of La-Man Corporation. 833,223
8% convertible note payable, annual principal
payments of $250,000 plus interest for three
years beginning September 1998; conversion
price of $5 per share. 750,000
---------------------------------------------------------
1,981,294
Less current portion 113,443
---------------------------------------------------------
Total $1,867,851
=========================================================
Aggregate maturities of long-term borrowings over future
years are as follows: 1997 - $113,443; 1998 - $329,405;
1999 - $325,184; 2000 -$327,740; 2001 - $798,749;
thereafter - $86,773.
F-16
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
10. Commitments Leases
------
The Company conducts its operations partially from leased
facilities in Florida. These leases are classified as
operating leases and expire on various dates through
2001.
The Company also leases computer equipment under capital
leases which expire on various dates through 1999. The
total costs for this equipment are $85,550 with
accumulated depreciation of $33,655 as of June 30, 1996.
As of June 30, 1996, future net minimum lease payments
under capital leases and future minimum rental payments
required under operating leases that have initial or
remaining noncancelable lease terms in excess of one year
are as follows:
<TABLE>
<CAPTION>
Capital Operating
Year ending June 30, Leases Leases
---------------------------------------------------------
<S> <C> <C>
1997 $ 27,497 $ 276,350
1998 18,224 224,372
1999 16,838 208,202
2000 - 200,464
2001 - 84,066
---------------------------------------------------------
62,559 $ 993,454
=========
Less amount representing interest 11,648
--------
Present value of minimum lease
payments $ 50,911
========
</TABLE>
Rental expense for the years ended June 30, 1996 and 1995
was approximately $275,000 and $207,000, respectively.
Employment Agreements
---------------------
The Company has entered into employment agreements
expiring at various dates from 1997 through 1998. The
contracts have change of control provisions which require
the payment of up to three years of salary under certain
conditions whereby a change of control, as defined, has
occurred. As of June 30, 1996, if all employees under
contract were to be terminated by the Company, the
Company's liability would be approximately $1,065,000.
F-17
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
11. Income Taxes The components of deferred tax assets and liabilities
consist of the following as of June 30, 1996:
<TABLE>
<CAPTION>
---------------------------------------------------------
<S> <C>
Deferred tax assets:
Accruals $ 89,000
Inventory 22,000
Bad debts 48,000
Net operating loss carryforwards 1,016,000
Amortization 1,000
---------------------------------------------------------
Gross deferred tax assets 1,176,000
Valuation allowance (736,000)
---------------------------------------------------------
Total deferred tax assets 440,000
---------------------------------------------------------
Deferred tax liabilities:
Depreciation (315,000)
---------------------------------------------------------
Net deferred tax assets $ 125,000
=========================================================
</TABLE>
The change in the valuation allowance for deferred tax
assets was an increase of approximately $19,000 during
1996.
At June 30, 1996, the Company had unused net operating
losses (NOLs) to carry forward against future years'
taxable income of approximately $2,816,000 expiring in
various amounts from 2001 to 2010. However, as a result
of the consummation of the Company's public offering and
certain acquisitions, the use of $1,206,000 of these NOLs
will be limited to approximately $186,000 per year under
the provisions of Section 382 of the Internal Revenue
Code of 1986, as amended. Additionally, $1,443,000 of the
NOLs are further limited under the provisions of Treasury
Regulation 1.1502-21 regarding Separate Return Limitation
years and can only be used to the extent that income is
generated through Don Bell Industries, Inc. and the SEMCO
group. The tax benefit of these losses of approximately
$1,016,000 has been partially offset by a valuation
allowance sufficient to reduce the deferred tax asset to
an amount management believes is more likely than not to
be realized.
F-18
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
<TABLE>
<CAPTION>
The following summary reconciles differences from taxes
at the federal statutory rate with the effective rate:
1996 1995
---------------------------------------------------------
<S> <C> <C>
Federal taxes on income at statutory rates 34% 34%
Net operating loss carryforwards recognized (59%) (34%)
---------------------------------------------------------
Taxes on income (benefit) at effective rates (25%) 0%
=========================================================
</TABLE>
12. Capital Stock Stock Warrants
--------------
As of June 30, 1996, the Company had the following
exercisable common stock purchase warrants outstanding:
<TABLE>
<CAPTION>
Common Stock
Issuable Exercise Expiration
Upon Exercise Price Date
---------------------------------------------------------
<C> <C> <S>
620,000 $ 5.00 January 6, 1997
50,000 $ 0.38 October 15, 1996
=========================================================
</TABLE>
During the year ended June 30, 1996, a total of 330,750
warrants were exercised at a price of $.75 per share.
F-19
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
Stock Options
-------------
On June 29, 1994, the Board of Directors adopted the
amended and restated 1994 Employee and Consultant Stock
Compensation Plan. The 1994 plan provides for the
issuance of up to 2,200,000 shares of the Company's
common stock, directly as stock awards or upon exercise
of non-qualified options, in exchange for services of
employees and consultants. As of June 30, 1996, a total
of 351,367 shares of stock had been awarded under this
plan valued at $403,500. Changes in options outstanding
under this plan are summarized as follows:
<TABLE>
<CAPTION>
Option Price
Shares per Share
---------------------------------------------------------
<S> <C> <C>
Balance, June 30, 1994 - $ -
Options granted 1,105,000 $ .56 - $3.50
Options exercised (100,000) $ .95
Options repurchased (69,000) $ .88
Options canceled (400,000) $1.12 - $3.50
---------------------------------------------------------
Balance, June 30, 1995 536,000 $ .56 - $ .88
Options granted 373,333 $ .63 - $ .75
---------------------------------------------------------
Balance, June 30, 1996 909,333 $ .56 - $ .88
---------------------------------------------------------
Options available for grant
at June 30, 1996 839,300
Total shares reserved at
June 30, 1996 1,748,633
Options exercisable at
June 30, 1996 909,333
======================================
</TABLE>
F-20
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
On November 4, 1992, the Board of Directors adopted the
1992 Stock Option and Appreciation Rights Plan. The 1992
plan provides for non-qualified options to be granted to
employees, officers, directors and consultants of the
Company. Under the 1992 plan, up to 575,000 shares of
common stock are reserved for issuance upon exercise of
options granted to employees and nonemployees. Grants of
options shall not be less than 85% of fair market value
on the date of grant and are exercisable no more than ten
years from the date of grant. Changes in options
outstanding under this plan are summarized as follows:
<TABLE>
<CAPTION>
Option Price
Shares per Share
---------------------------------------------------------
<S> <C> <C>
Balance, June 30, 1994 - $ -
Options granted 18,000 $ .50 - $2.250
---------------------------------------------------------
Balance, June 30, 1995 18,000 $ .50 - $2.250
Options granted 8,000 $1.063
---------------------------------------------------------
Balance, June 30, 1996 26,000 $ .50 - $2.250
=========================================================
Options available for grant
at June 30, 1996 549,000
Total shares reserved at
June 30, 1996 575,000
Options exercisable at
June 30, 1996 26,000
=====================================
</TABLE>
F-21
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
On April 25, 1988, the Company adopted the 1988 Incentive
Stock Option Plan whereby up to 166,667 shares of common
stock are reserved for issuance upon exercise of options
granted to employees. Grants of options are to be not
less than fair market value on the date of grant and are
exercisable after 18 months from the date the grant is
awarded. Changes in options outstanding under this plan
are summarized as follows:
<TABLE>
<CAPTION>
Option Price
Shares per Share
---------------------------------------------------------
<S> <C> <C>
Balance, June 30, 1995 and 1994 - $ -
Options granted 166,667 $.69
---------------------------------------------------------
Balance, June 30, 1996 166,667 $.69
========================================================
Options available for grant
at June 30, 1996 -
Total shares reserved at
June 30, 1996 166,667
Options exercisable at
June 30, 1996 -
========================================
</TABLE>
Other Equity Instruments
------------------------
The Company has outstanding an option to purchase 31,000
units, each unit consisting of two shares of common stock
and two nonredeemable common stock purchase warrants, for
a price of $7.80 per unit. Each common stock purchase
warrant obtainable under this option entitles the holder
to purchase one share of common stock at a price of
$4.68. Both the option to purchase the units, and the
purchase warrants included in the units, expire on
January 6, 1999.
Shares Reserved
---------------
At June 30, 1996, the Company has reserved common stock
for future issuance under all of the above arrangements
and the convertible note payable (Note 9) amounting to
3,434,300 shares.
F-22
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
13. Employee During the fiscal year ended June 30, 1995, the Company
Benefit Plan adopted the La-Man Corporation 401(k) profit sharing
plan. The plan covers all employees with more than six
months of service and allows employees to contribute up
to 15% of their income to the plan. The Company
contributes to the plan at a matching rate of 50% of the
employees' contributions up to 6% of the employees'
compensation. Company contributions to the plan are in
the form of the Company's common stock. As of June 30,
1996, the Company accrued $20,791 for its unmatched
portion of the employees' contribution. The Company
issued to the 401(k) plan in fiscal year 1996, 49,516
shares of La-Man Corporation's common stock at closing
prices ranging from $.81 to $1.13 per share.
14. Gain on The Company moved its filtration manufacturing plant
Disposal of from Indiana to Florida in May 1996. The Company sold its
Property and facilities in Indiana for net proceeds of $236,544, less
Equipment costs of $170,100 (including relocation costs of
$116,624) and recorded a net gain of $66,444.
15. Industry The Company's operations are classified into four
Segments business segments: filtration manufacturing, package
wholesaling, sign marketing and manufacturing and
telecommunications marketing.
Operations within the filtration manufacturing segment
include the manufacture and sale of a line of products
which, when installed in compressed air lines,
substantially reduce or totally eliminate water and
condensate problems and most foreign contaminants in the
air line.
The package wholesaling segments markets and sells
various packaging materials and supplies such as cartons,
tape, staples, stretch and shrink films, foam shipping
bags and other various package materials to industrial
and commercial establishments. This segment was
discontinued subsequent to June 30, 1996 (see Note 19).
The sign marketing and manufacturing segment markets and
produces custom designed and stock sign products which
are specifically designed for external use by churches,
schools and commercial enterprises.
F-23
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
The telecommunications marketing segment is an authorized
agent of MCI Telecommunications Corporation and generates
commissions from MCI through the solicitation and sale of
MCI services.
The following table shows sales and operating income from
continuing operations and other financial information by
industry segment as of and for the years ended June 30,
1996 and 1995:
<TABLE>
<CAPTION>
Sign
Marketing Tele-
Filtration Package and communications
Manufacturing Wholesaling Manufacturing Marketing Corporate Consolidated
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1996
Sales $ 1,587,980 $ - $ 11,679,565 $ 429,062 $ - $ 13,696,607
Operating income
(loss) 540,640 - 1,246,040 (397,749) (832,707) 556,224
Depreciation and
amortization 82,362 - 323,046 9,306 45,288 460,002
Identifiable assets 1,056,281 216,815 6,618,103 135,169 1,357,607 9,383,975
Capital expenditures 270,879 925 193,990 37,388 1,416 504,598
1995
Sales 1,602,002 - 5,267,492 39,320 - 6,908,814
Operating income
(loss) 515,772 - 682,850 (118,045) (741,815) 338,762
Depreciation and
amortization 105,600 - 65,626 1,176 54,390 226,792
Identifiable assets 786,082 206,398 1,390,502 67,151 1,609,130 4,059,263
Capital expenditures 11,948 - 52,691 2,892 9,940 77,471
====================================================================================================================================
</TABLE>
F-24
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
16. Supplemental The Company paid $181,266 and $31,682 for interest for
Cash Flow the years ended June 30, 1996 and 1995, respectively.
Information
The following summarizes noncash investing and financing
transactions:
<TABLE>
<CAPTION>
1996 1995
---------------------------------------------------------
<S> <C> <C>
Issuance of common stock for payment
of accounts payable $ 45,000 $ -
Common stock contributed to 401(k)
plan $ 58,205 $ -
Common stock issued in purchase of
stock of Don Bell subsidiary
(Note 1) $1,100,000 $ -
Issuance of note payable for payment
of accounts payable $ 55,000 $ -
Acceptance of note receivable for
sale of property and equipment $ 87,492 $ -
Capital lease incurred to acquire
equipment and a sub-lease
receivable $ - $ 31,696
Cancellation of note receivable to
acquire stock of VTM subsidiary,
net of cash acquired (Note 1) $ - $179,995
Stock issued in connection with
deferred consulting agreement
(Note 1) $ - $ 73,500
=========================================================
</TABLE>
17. Economic For the years ended June 30, 1996 and 1995, the Company
Dependence had one supplier which accounted for a significant volume
of consolidated purchases. For the year ended June 30,
1996, purchases of signs from this supplier approximated
$2,147,000, or 27% of consolidated purchases. For the
year ended June 30, 1995, purchases of signs from this
supplier approximated $2,076,000, or 56% of consolidated
purchases. With the acquisition of Don Bell, the Company
is currently manufacturing a portion of these signs at
its facilities in Florida.
F-25
<PAGE>
[LETTERHEAD OF LA-MAN CORPORATION AND SUBSIDIARIES APPEARS HERE]
Notes to Consolidated Financial Statements
================================================================================
18. Subsequent On July 12, 1996, the Company authorized a 5 percent
Event stock dividend to be issued August 7, 1996 to holders of
record on July 26, 1996. The dividend resulted in the
issuance of an additional 152,768 shares of the Company's
$.001 par value common stock. Net income per share for
the years ended June 30, 1996 and 1995 has been
retroactively restated to reflect the effects of this
stock dividend.
19. Discontinued During August 1996, the Company made a strategic
Operations decision to discontinue the operations of Heritage
Packaging Services, Inc. ("Heritage"), its package
wholesaling subsidiary. On August 27, 1996, the Company
sold substantially all of Heritage's accounts receivable,
inventory and fixed assets for cash proceeds of $35,000
and the assumption of certain liabilities, and recognized
a loss of $57,764. Sales for Heritage for the years ended
June 30, 1996 and 1995 amounted to $918,662 and
$1,141,024, respectively. Included in the Company's
consolidated balance sheet at June 30, 1996 are
Heritage's current and long-term assets of $96,315 and
$30,115, respectively, and its current liabilities of
$232,179. The current liabilities include an accrual
providing for aggregate losses on discontinued operations
in the amount of $115,000, including the loss of $57,764
on the sale of net assets of Heritage.
F-26
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10-KSB AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 112,727
<SECURITIES> 0
<RECEIVABLES> 2,117,768
<ALLOWANCES> (126,871)
<INVENTORY> 1,070,391
<CURRENT-ASSETS> 3,555,427
<PP&E> 3,886,314
<DEPRECIATION> (1,055,436)
<TOTAL-ASSETS> 9,383,975
<CURRENT-LIABILITIES> 2,888,827
<BONDS> 1,867,851
0
0
<COMMON> 3,059
<OTHER-SE> 4,556,679
<TOTAL-LIABILITY-AND-EQUITY> 9,383,975
<SALES> 13,696,607
<TOTAL-REVENUES> 13,696,607
<CGS> 6,624,778
<TOTAL-COSTS> 6,515,605
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (201,266)
<INCOME-PRETAX> 501,466
<INCOME-TAX> 125,000
<INCOME-CONTINUING> 626,466
<DISCONTINUED> (258,660)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 367,806
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
