United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1995
Commission File Number 2-87738
T. H. Lehman & Co., Incorporated and Subsidiaries
(Exact name of small business issuer as specified in its charter)
Delaware 22-2442356
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4900 Woodway, Suite 650
Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (713) 621-8404
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the preceding 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 the past 90
days. YES [ X ] NO [ ]
Number of shares of T.H. Lehman & Co., Incorporated Common Stock, $0.01 par
value, issued and outstanding as of February 9, 1996: 3,230,342
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PART I. FINANCIAL INFORMATION
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND MARCH 31, 1995
December 31 March 31
1995 1995
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $12,979 $46,438
Trading securities (Note 3) 7,794 7,794
Accounts receivable 36,965 48,401
Non-interest bearing advances to related parties
(Note 11) 0 36
Prepaid expenses and other current assets 27,955 41,072
Current portion of non-current receivables (Note 4) 182,836 228,314
TOTAL CURRENT ASSETS 268,529 372,055
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $228,699 at
December 31 and $189,280 at March 31 (Note 5) 113,886 137,185
OTHER ASSETS
Securities available for sale (Note 3) 585,141 515,156
Investments in non-public companies, at cost 64,500 64,500
Non-current receivables (Note 4) 2,144,465 1,806,750
Deposits 11,588 9,735
Certificate of Deposit - Restricted 80,000 0
Patents, trademarks and tradenames-at cost
less accumulated amortization of $6,395 at
December 31 and $4,750 at March 31 4,568 6,213
Covenants not to compete, less
accumulated amortization of $350,278 at
December 31 and $324,493 at March 31 71,629 97,414
Excess of cost over net assets of acquired companies,
less accumulated amortization of $16,875 at
December 31 and $13,125 at March 31 33,125 36,875
TOTAL OTHER ASSETS 2,995,016 2,536,643
TOTAL ASSETS $3,377,431 $3,045,883
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Loans payable - financial
institutions (Note 6) $303,499 $225,513
Accounts payable 362,127 285,477
Accrued liabilities 101,393 95,374
Current portion of long-term debt (Note 7) 620,663 304,077
Estimated environmental liability (Notes 2 and 12) 237,335 245,442
TOTAL CURRENT LIABILITIES 1,625,017 1,155,883
LONG-TERM DEBT, LESS CURRENT PORTION
(Note 7) 575,776 448,463
TOTAL LIABILITIES 2,200,793 1,604,346
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 8)
Common stock-par value $.01; authorized
5,000,000 shares, issued 3,230,342 shares
at December 31, and 3,230,342 at March 31 32,303 32,303
Additional paid-in capital 7,293,394 7,293,394
Accumulated deficit (6,100,622)(5,835,722)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
TOTAL STOCKHOLDERS' EQUITY 1,176,638 1,441,537
TOTAL LIABILITIES AND EQUITY $3,377,431 $3,045,883
See accompanying Notes to Consolidated Financial Statements
________________________________________________________________________________
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 1995
Three months Nine months
ended ended
December 31 December 31
1995 1995
(Unaudited) (Unaudited)
REVENUES
Management and billing fees, net of allowances $245,134 $777,956
Interest and dividends 23,739 63,744
Net gain (loss) on debt settlement 61,927 61,927
TOTAL REVENUES 330,800 903,627
OPERATING EXPENSES
Selling, general and administrative 349,073 1,098,934
Interest expense 27,844 69,593
TOTAL OPERATING EXPENSES 376,917 1,168,527
LOSS BEFORE INCOME TAXES (46,117) (264,900)
PROVISION FOR INCOME TAXES (Note 9) 0 0
NET LOSS $(46,117) $(264,900)
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
NET LOSS PER COMMON SHARE $(0.01) $(0.08)
See accompanying Notes to Consolidated Financial Statements
________________________________________________________________________________
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED DECEMBER 31, 1995
Three months Nine months
ended ended
December 31 December 31
1994 1994
(Unaudited) (Unaudited)
REVENUES
Management and billing fees, net of allowances $265,962 $805,611
Interest and dividends 19,662 59,431
Net gain (loss) on investments 0 31,874
TOTAL REVENUES 285,624 896,916
OPERATING EXPENSES
Selling, general and administrative 391,839 1,172,406
Interest expense 16,639 42,391
TOTAL OPERATING EXPENSES 408,478 1,214,796
LOSS BEFORE INCOME TAXES (122,854) (317,881)
PROVISION FOR INCOME TAXES (Note 9) 0 0
NET LOSS $(122,854) $(317,881)
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,205,342 3,205,342
NET LOSS PER COMMON SHARE $(0.04) $(0.10)
See accompanying Notes to Consolidated Financial Statements
________________________________________________________________________________
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED DECEMBER 31, 1995 AND 1994
Nine months Nine months
ended ended
December 31 December 31
1995 1994
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $(264,900) $(317,881)
Adjustments to reconcile net income to net cash
provided (required) by operating activities:
Depreciation and amortization 70,600 129,493
Provision for bad debts 0 0
(Gain) loss on marketable securities and
other assets (61,927) (31,874)
Deposits (paid) received (1,853) (2,855)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 11,436 (16,452)
(Increase) decrease in prepaid expenses
and other current assets 13,117 104,215
(Increase) decrease in prepaid income taxes 0 0
Increase (decrease) in accounts payable 76,650 (29,650)
Increase (decrease) in accrued liabilities 32,370 117,609
NET CASH PROVIDED (REQUIRED) BY
OPERATING ACTIVITIES (124,507) (47,395)
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes receivable (722,412) (911,919)
Note received net of payments related to sale of
securities 0 0
Collection of notes receivable 430,175 713,387
Collections from (advances to) related parties 36 0
Acquisition of securities (149,985) 0
Proceeds from sale of investments and other assets 0 32,374
Disposal (acquisition) of property and equipment (16,120) (726)
Payment of estimated environmental liability (8,106) 0
NET CASH PROVIDED (REQUIRED) BY
INVESTING ACTIVITIES (466,413) (166,884)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 77,986 22,000
Repayment of loans payable - financial
institution (66,700) 0
Proceeds of long-term debt 578,250 365,640
Repayment of long-term debt (98,775) (176,862)
NET CASH PROVIDED (REQUIRED) BY
FINANCING ACTIVITIES 557,461 144,078
DECREASE IN CASH (33,459) (70,201)
CASH - BEGINNING 46,438 67,576
CASH - END $12,979 ($2,625)
CASH PAID DURING THE PERIODS FOR:
Interest $1,171 $32,986
Income Taxes $0 $0
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Reduction in Notes Payable per Settlement
Agreement (Note 2) $61,927 $0
See accompanying Notes to Consolidated Financial Statements
============================================================================
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
(UNAUDITED)
The financial information contained within is unaudited, but reflects all
adjustments (consisting solely of normal recurring adjustments), which, in
the opinion of the Company, are necessary to fairly present the financial
position of the Company as of December 31, 1995 and the results of operations
and cash flows for the nine month periods ended December 31, 1995 and 1994.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations governing interim reporting. The results of operations for the
nine month period ending December 31, 1995 are not necessarily indicative of
the results to be expected for the full year.
This report should be read in conjunction with the financial statements
included in the Company's annual report on Form 10-KSB for the year ended
March 31, 1995.
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies of the Company set forth in
Note 1, Notes to Consolidated Financial Statements in the Company's Form
10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
2. ACQUISITIONS AND DISPOSITIONS
The discussion of acquisitions and dispositions of the Company set forth in
Note 2, Notes to Consolidated Financial Statements in the Company's Form
10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
In October, 1995, the Company successfully renegotiated the $450,000 note
payable associated with the August, 1992 acquisition of a medical management
entity, reducing the accrued liability on the note from $161,927 to $100,000.
As of December 31, 1995, $30,000 remains outstanding on this note.
3. SECURITIES AVAILABLE FOR SALE
The discussion of securities available for sale by the Company set forth in
Note 3, Notes to Consolidated Financial Statements in the Company's Form
10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
4. NON-CURRENT RECEIVABLES
At December 31, 1995 and March 31, 1995, notes receivable consisted of the
following:
December 31, March 31,
1995 1995
(Unaudited)
Purchased receivables of a medical provider
adjusted to estimated net realizable value (See Note
2). All of the remainder of the unpaid is expected
to be collected during the current fiscal year. $8,825 $52,396
Assigned medical billings net of allowances of
which $170,000 of the unpaid is expected to be
collected during the current fiscal year. 1,305,999 1,196,342
Working capital advances at 12% per annum interest
to a provider of medical services who has contracted
with the Company to provide management services.
None of these advances is expected to be collected
during the current fiscal year. 608,466 502,560
Convertible 6% unsecured promissory note issued
by Helionetics, Inc. in conjunction with its purchase
of the Company's former manufacturing subsidiary
due and payable December 31, 1996. Interest is
payable quarterly. 404,011 405,918
$2,327,301 $2,157,216
Less Allowance for Uncollectible (122,152) (122,152)
$2,205,149 $2,035,064
Less Current Portion (182,836) (228,314)
$2,022,313 $1,806,750
5. PROPERTY AND EQUIPMENT
December 31, March 31,
1995 1995
(Unaudited)
Machinery and Equipment 5-10 Years 20,688 4,484
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 321,397 321,481
Total $342,585 $326,465
Less Accumulated Depreciation (228,699) (189,280)
Net $113,886 $137,185
6. LOANS PAYABLE - OTHER FINANCIAL INSTITUTION
Pursuant to an agreement dated October 4, 1991 and modified March, 1993 and
March, 1994, the Company had received loans from a Netherlands corporation,
consisting of various advances from an available line of credit of $400,000.
As of December 31, 1995 and March 31, 1995, the outstanding balance against
this line of credit totaled $303,499 and $225,513, respectively. The loans
bear interest at the prime rate of a certain bank in Texas plus 2% per annum.
The weighted average interest rate for the quarter ended December 31, 1995
was 10.61%, which was computed based on month-end balance. During the nine
months ended December 31, 1995 and the year ended March 31, 1995, the
maximum outstanding balances totaled $277,849 and $286,349, respectively.
The approximate average outstanding monthly balance during the quarter ended
December 31, 1995 and the year ended March 31, 1995 amounted to $270,000
and $264,000, respectively.
7. LONG-TERM DEBT
Long-term debt consists of the following:
December 31, March 31,
1995 1995
Related Party:
Advances from an available line of credit of
$450,000. The loan bears interest at the prime
rate of a certain bank in Texas. Interest on
this loan is to be calculated and payable quarterly
as of the first day of each quarter (or at maturity).
The principal is due and payable on or before
December 31, 1997. The loan is secured by the
market value of publicly-held stock in the Company's
investment portfolio. As further consideration, 100,000
warrants expiring in December, 1997 to purchase
100,000 shares of the Company's common stock at
an exercise price of $1.25 per share were issued to
this creditor. (See Note 8) 146,025 139,503
Non-related Parties:
Debt incurred related to acquisition of California
medical management practice. (See Note 2) 30,000 159,087
Advances from an available line of credit of
$250,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before April 18, 1997. 100,560 0
Advances from an available line of credit of
$400,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before August 3, 1996. 358,621 291,869
Note payable of $22,500 principal plus accrued
interest at 6%, all due on February 28, 1997. 23,632 22,615
Advances from an available line of credit of
$100,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before August 3, 1996. 79,664 74,277
Two notes payable, $22,500 principal each plus
accrued interest at 6%, all due on January 27,
1997, unsecured. 1,418 45,776
Note payable of $22,500 principal plus accrued
interest at 10%, all due on July 21, 1997. 28,588 0
Note payable of $22,500 principal plus accrued
interest at 10%, all due on September 8, 1997. 23,203 0
Advances from an available line of credit of
$100,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before August 16, 1997. 96,815 0
Note payable of $130,000 principal plus accrued
interest at 8%, all due on September 5, 1997. 133,281 0
Notes payable of $10,000 principal plus accrued
interest at 10%, all due on December 28, 1998. 10,008 0
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 27, 1998. 10,093 0
Advances from an available line of credit of
$50,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before October 26, 1998. 12,726 0
Advances from an available line of credit of
$100,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before October 26, 1998. 25,452 0
Advances from an available line of credit of
$50,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before October 26, 1998. 12,726 0
Advances from an available line of credit of
$150,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before October 31, 1998. 40,668 0
Advances from an available line of credit of
$200,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before November 16, 1998. 47,579 0
Equipment purchase contract with a monthly
payment of $330 and an effective interest rate
of 11% payable through January, 1999. 11,820 13,722
Equipment purchase contract with a monthly
payment of $315 and an effective interest rate
of 20% payable through October, 1996. 3,559 5,691
$1,196,438 $752,540
Less Current Portion (474,638) (304,077)
$721,800 $448,463
The amounts of long-term debt maturing in each of the years ending March 31
are as follows: 1996 - $21,453; 1997 - $478,984; 1998 - $531,677; 1999 -
$164,326.
8. STOCKHOLDERS' EQUITY
The discussion regarding stockholders' equity of the Company set forth in Note
8, Notes to Consolidated Financial Statements in the Company's Form 10-KSB,
(File No. 2-87738) for the fiscal year ended March 31, 1995, is incorporated
herein by reference.
9. INCOME TAXES
The discussion regarding income taxes of the Company set forth in Note 9,
Notes to Consolidated Financial Statements in the Company's Form 10-KSB,
(File No. 2-87738) for the fiscal year ended March 31, 1995, is incorporated
herein by reference.
10. COMMITMENTS AND CONTINGENCIES
The discussion regarding commitments and contingencies of the Company set
forth in Note 10, Notes to Consolidated Financial Statements in the Company's
Form 10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
11. RELATED PARTY TRANSACTIONS
The discussion regarding related party transactions of the Company set forth in
Note 11, Notes to Consolidated Financial Statements in the Company's Form
10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
12. ALLOWANCE FOR ENVIRONMENTAL LIABILITIES
The discussion regarding related party transactions of the Company set forth in
Note 12, Notes to Consolidated Financial Statements in the Company's Form
10-KSB, (File No. 2-87738) for the fiscal year ended March 31, 1995, is
incorporated herein by reference.
=================================================================
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
DECEMBER 31, 1995
(UNAUDITED)
Statements of Operations:
Quarter Ended December 31, 1995 Compared to
Quarter Ended December 31, 1994
Total revenues for the quarter ended December 31, 1995 were $330,800 versus
$285,624 for the same period in the previous year. This increase in revenues is
attributable to the $61,927 gain realized on the renegotiation of a note
payable. Billing and management fee income decreased 8% from $264,962 in
last year's third quarter to $245,134 in the current quarter. Interest and
dividend income increased 2% to $23,739.
Consolidated net loss after taxes for the quarter ended December 31, 1995
totaled $46,117, as compared with a net loss after taxes of $122,854 from the
second quarter of the previous year. General and administrative expenses
decreased 10%, due to reductions in depreciation and amortization expenses,
but interest expense increased to $27,844, 67% higher than the $16,639
recorded in the quarter ended December 31, 1994. Medfin Management Corp.
contributed a loss of $63,922 from gross revenues of $208,353 and expenses of
$272,275. Amortization and depreciation expense comprised $7,391 of Medfin's
expenses, and intercompany interest and billing fees to another subsidiary
comprised $42,152 of those expenses. Healthcare Professional Billing
contributed $36,316 of the net loss on billing income of $65,984 and expenses of
$102,300. $14,277 of Healthcare's billing fee income was derived from fees
charged to other subsidiaries, $16,810 of its expenses were composed of
depreciation and amortization expense and intercompany interest comprised
$8,133 of its expenses.
In an effort to improve efficiency and reduce costs, Medfin Management Corp.
consolidated its two locations into one facility during January, 1996. This
is expected to lower both revenues and expenses on a going forward basis, but
is expected to result in higher overall net income for the subsidiary.
However, management cannot and does not guarantee that this will be the case.
Liquidity, Capital Resources and Income Taxes:
At December 31, 1995 working capital amounted to $12,979, compared to
March 31, 1995, when working capital was $46,438.
Medfin Management Corp. will continue to require working capital infusions
over the next few months, as the outstanding receivable collections mature to
cover current cash operating requirements; in the interim the Company believes
that it has adequate resources to meet such working capital needs.
The Company's primary source of liquidity has been the cash it has obtained
from the liquidation of its investment portfolio and collection of medical
accounts receivable, as well as loans from financial institutions.
The Company anticipates that internally generated cash and its lines of credit
will be sufficient to finance overall operations.
The Company is continually seeking to acquire businesses and may be in
various stages of negotiations at any point in time which may or may not result
in consummation of a transaction. To provide funding for such acquisitions it
may take a number of actions including (i) selling of its existing investments
(ii) use of available working capital (iii) seeking short or long term loans
(iv) issuing stock. In addition, the Company may seek additional equity
funds if needed. These sources of capital may be both conventional and
non-traditional. The Company has no existing funding commitments and is
presently under no contractual obligation to make any investment or
acquisition.
At March 31, 1995, the Company had an operating tax loss carryforward of
approximately $4,400,000. The Company expects its effective tax rate for
financial statement purposes for fiscal year 1996 to be negligible based upon
the aforementioned net operating loss carry forwards and other factors.
Impact of Inflation and Other Business Conditions:
Generally, increases in the Company's operating costs approximate the rate of
inflation. In the opinion of management, inflation has not had a material
effect on the operation of the Company. The Company has historically been able
to react effectively to increases in labor or other operating costs through a
combination of greater productivity and selective price increases where
allowable.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this amendment to this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
T.H. LEHMAN & CO., INCORPORATED
AND SUBSIDIARIES
Date: February 9, 1996 SHANNON C. GRIES
Secretary/Treasurer and
Principal Financial Officer
