U.S. 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 June 30, 1996
Commission file number
2-87738
T.H. LEHMAN & CO., INCORPORATED
(Name of small business issuer in its charter)
Delaware 22-2442356
(state or other jurisdiction (I.R.S./Employer
of incorporation or organization Identification Number)
4900 Woodway, Suite 650, Houston, Texas 77056
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: (713) 621-8404
Securities registered under Section 12(b) of the Exchange Act:
Common Stock, $.01 Par.
(Title of Class)
Securities registered under Section 12(g) of the Exchange Act: None.
Check whether the issuer (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 ___
3,230,342
(Number of shares of common stock outstanding as of August 19, 1996)
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
JUNE 30, 1996
(UNAUDITED)
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at June 30, 1996
and March 31, 1996 3-4
Statements of operations for
the three months ended June 30,
1996 and 1995 5
Statements of cash flows
for the three months ended
June 30, 1996 and 1995 6-7
Notes to consolidated
financial statements 8-12
Item 2. Management's Discussion and Analysis 13-14
PART II. OTHER INFORMATION
Signatures 15
2
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND MARCH 31, 1996
ASSETS
June 30 March 31
1996 1996
(Unaudited)
CURRENT ASSETS
Cash $ 11,822 $ 47,879
Trading securities (Note 3) 17,600 17,600
Accounts receivable 71,324 56,439
Prepaid expenses and other
current assets 7,685 9,820
Current portion of non-current
receivables (Note 4) 440,000 446,535
____________ ____________
TOTAL CURRENT ASSETS 548,431 578,273
____________ ____________
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of
$252,724 at June 30, 1996 and
$242,891 at March 31, 1996 (Note 5) 85,912 95,452
____________ ____________
OTHER ASSETS
Securities available for sale
(Note 3) 863,291 863,291
Investments in non-public companies,
at cost 64,500 64,500
Non-current receivables (Note 4) 1,407,013 1,336,138
Deposits 6,429 7,429
Certificate of Deposit - Restricted 80,000 80,000
Patents, trademarks and tradenames-at
cost less accumulated amortization
of $7,491 at June 30, 1996 and
$6,943 at March 31, 1996 3,472 4,020
Covenants not to compete, less
accumulated amortization of $367,470
at June 30, 1996 and $358,875 at
March 31, 1996 54,437 63,032
Excess of cost over net assets
of acquired companies, less
accumulated amortization of $19,375
at June 30, 1996 and $18,125 at
March 31, 1996 30,625 31,875
____________ ____________
TOTAL OTHER ASSETS 2,509,767 2,450,285
____________ ____________
$ 3,144,110 $ 3,124,010
============ ============
See accompanying Notes to Consolidated Financial Statements
3
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND MARCH 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30 March 31
1996 1996
CURRENT LIABILITIES
Loans payable - financial
institutions (Note 6) $ 215,180 $ 202,392
Accounts payable 439,623 389,119
Accrued liabilities 93,053 88,195
Current portion of long-term debt
(Note 7) 564,050 430,147
Estimated environmental liability
(Notes 2 and 12) 223,674 234,633
____________ ____________
TOTAL CURRENT LIABILITIES 1,535,580 1,344,486
____________ ____________
LONG-TERM DEBT, LESS CURRENT PORTION
(Note 7) 464,856 560,112
____________ ____________
TOTAL LIABILITIES 2,000,436 1,904,598
____________ ____________
SHAREHOLDERS' EQUITY (Note 8)
Common stock-par value $ 01;
authorized 5,000,000 shares,
issued 3,230,342 shares at
June 30, 1996 and March 31,
1996 32,303 32,303
Additional paid-in capital 7,293,394 7,293,394
Unrealized gain on investments 315,738 315,738
Accumulated deficit (6,449,323) (6,373,585)
Treasury stock at cost - 25,000
shares (48,438) (48,438)
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 1,143,675 1,219,412
____________ ____________
$ 3,144,110 $ 3,124,010
============ ============
See accompanying Notes to Consolidated Financial Statements
4
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Three months Three months
ended ended
June 30 June 30
1996 1995
REVENUES
Management and billing fees,
net of allowances $ 226,009 $ 232,476
Income from finance receivables 6,465 0
Interest and dividends 15,487 19,672
____________ ____________
TOTAL REVENUES 247,961 252,148
____________ ____________
OPERATING EXPENSES
Selling, general and administrative 298,163 360,994
Interest expense 25,536 19,068
____________ ____________
TOTAL OPERATING EXPENSES 323,699 380,062
____________ ____________
LOSS BEFORE INCOME TAXES (75,738) (127,914)
PROVISION FOR INCOME TAXES (Note 9) 0 0
____________ ____________
NET LOSS $ (75,738) $ (127,914)
============ ============
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
============ ============
NET LOSS PER COMMON SHARE $(0.02) $(0.04)
============ ============
See accompanying Notes to Consolidated Financial Statements
5
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Three months Three months
ended ended
June 30 June 30
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (75,738) $ (127,914)
Adjustments to reconcile net income
to net cash provided (required)
by operating activities:
Depreciation and amortization 20,226 23,094
Provision for bad debts 0 0
(Gain) loss on marketable
securities and other assets 0 0
Deposits (paid) received 1,000 450
Shares issued for services 0 0
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable (14,885) 10,343
(Increase) decrease in prepaid
expenses and other current
assets 2,135 (3,304)
(Increase) decrease in prepaid
income taxes 0 0
Increase (decrease) in accounts
payable 50,504 21,826
Increase (decrease) in accrued
liabilities 25,016 23,734
____________ ____________
NET CASH PROVIDED (REQUIRED) BY
OPERATING ACTIVITIES 8,258 (51,772)
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes
receivable (181,674) (209,776)
Collection of notes receivable 117,334 163,709
Acquisition of securities 0 0
Proceeds from sale of investments and
other assets 0 0
(Acquisition) of property and equipment (292) (694)
Payment of estimated environmental
liability (10,959) (2,702)
____________ ____________
NET CASH REQUIRED BY INVESTING
ACTIVITIES (75,592) (49,463)
____________ ____________
See accompanying Notes to Consolidated Financial Statements
6
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
Three months Three months
ended ended
June 30 June 30
1996 1995
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 12,788 12,156
Proceeds of long-term debt 20,000 55,000
Repayment of long-term debt (1,511) (1,736)
NET CASH PROVIDED BY FINANCING
ACTIVITIES 31,277 65,420
____________ ____________
INCREASE (DECREASE) IN CASH (36,057) (35,815)
CASH - BEGINNING 47,879 46,438
____________ ____________
CASH - END $ 11,822 $ 10,623
____________ ____________
CASH PAID DURING THE PERIODS FOR:
Interest $ 456 $ 215
Income Taxes $ 0 $ 0
____________ ____________
See accompanying Notes to Consolidated Financial Statements
7
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
(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 June 30, 1996 and the
results of operations and cash flows for the three month periods ended
June 30, 1996 and 1995. 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 three month period ending June 30, 1996
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, 1996.
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, 1996,
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, 1996,
is incorporated herein by reference.
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, 1996,
is incorporated herein by reference.
8
4. NON-CURRENT RECEIVABLES
Notes receivable at June 30, 1996 and March 31, 1996 consisted of the
following:
June 30 March 31
1996 1996
__________ __________
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. $ 0 $ 6,535
Assigned medical billings net of
allowances of which $440,000 of the
unpaid is expected to be collected
during the current fiscal year. 1,540,796 1,489,193
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. 651,012 631,740
___________ ___________
2,191,808 2,127,468
Less Allowance for Uncollectible (344,795) (344,795)
___________ ___________
1,847,013 1,782,673
Less Current Portion (440,000) (446,535)
___________ ___________
$1,407,013 $1,336,138
=========== ===========
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1996 and March 31, 1996 consisted of
the following:
Life June 30 March 31
__________ __________ __________
Machinery and Equipment 5-10 Years $ 4,484 $ 4,484
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 333,651 333,359
___________ ___________
338,635 338,343
Less Accumulated Depreciation (252,723) (242,891)
___________ ___________
$ 85,912 $ 95,452
=========== ===========
9
6. LOANS PAYABLE - FINANCIAL INSTITUTION
Pursuant to an agreement dated October 4, 1991 and modified March, 1993
and March, 1994, the Company has received loans from a Netherlands
corporation, consisting of various advances from an available line of
credit of $400,000. As of June 30, 1996 and March 31, 1996, the
outstanding balance against this line of credit totaled $215,180 and
$202,392, 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 June 30, 1996 and the year ended March 31,
1996 was 10.25% and 10.5% respectively, which was computed based on
month-end balance. During the quarter ended June 30, 1996 and year
ended March 31, 1996, the maximum outstanding balances totaled $215,180
and $202,392, respectively. The approximate average outstanding monthly
balance during the quarter ended June 30, 1996 and the year ended March
31, 1996 amounted to $188,500 and $90,500, respectively. This line of
credit expires on January 31, 1998.
7. LONG-TERM DEBT
Long-term debt at June 30, 1996 and March 31, 1996 consisted of the
following:
June 30 March 31
1996 1996
__________ __________
Related Party:
Advances from an unsecured 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 tothis creditor
(See Note 8). $ 295,412 $ 290,785
Non-related Parties (all unsecured):
Advances from an available line of credit
of $400,000. The loan bears interest at
an annual rate of 10%. All principal
10
and interest is due and payable on or
before August 3, 1996. 349,063 341,635
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. 83,229 81,446
Two notes payable totaling $45,000
principal plus accrued interest at 6%,
all due on January 27, 1997. 1,418 1,418
Advances from three available lines of
credit which total $200,000. The loans bear
interest at an annual rate of 10%. All
principal and interest is due and payable
on or before October 26, 1998. 53,397 52,151
Two notes payable totaling $10,000 principal
plus accrued interest at 10%, all due on
December 28, 1998. 10,507 10,258
Note payable of $10,000 principal plus accrued
interest at 10%, all due on February 27, 1999. 10,340 10,090
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. 125,434 102,929
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. 77,098 75,278
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 17, 1998. 10,592 10,342
Equipment purchase contract with a monthly
payment of $330 and an effective interest rate
of 11% payable through January, 1999. 10,462 11,150
Equipment purchase contract with a monthly
payment of $315 and an effective interest rate
of 20% payable through October, 1996. 1,954 2,777
___________ ___________
1,028,906 990,258
Less Current Portion (564,050) (430,147)
___________ ___________
$ 464,856 $ 560,112
=========== ===========
11
The amounts of long-term debt maturing in each of the years ending March
31 are as follows: 1997 - $438,616; 1998 - $420,846; 1999 - $169,444.
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, 1996,
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, 1996, is
incorporated herein by reference.
10. COMMITMENTS AND CONTINGENCIES
The discussion regarding income taxes 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, 1996, is
incorporated herein by reference.
11. RELATED PARTY TRANSACTIONS
The discussion regarding income taxes 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, 1996, is
incorporated herein by reference.
12. ALLOWANCE FOR ENVIRONMENTAL LIABILITY
The discussion regarding income taxes 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, 1996, is
incorporated herein by reference.
12
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Statements of Operations:
Quarter Ended June 30, 1996 Compared to
Quarter Ended June 30, 1995
Revenues for the quarter ended June 30, 1996 were $247,961, a 2%
decrease from the same period of the prior year, in which revenues
totaled $252,148. Contributing to this decrease, billing and management
fees were $6,467 lower in the first quarter of 1996 as compared to the
first quarter of 1995, due to the February, 1996 closing of one facility
at which Medfin Management Corp. provided management services. The
Company received $6,465 in income on previously purchased finance
receivables during the quarter ended June 30, 1996, however, serving to
offset this decline. Interest and dividend income decreased from
$19,672 in the quarter ended June 30, 1995 to $15,487 in the current
year's first quarter, causing the overall decline in revenues.
General and administrative costs declined an overall 17% when comparing
the first quarter of fiscal 1996 with the corresponding quarter of the
previous year, from $360,994 for the June 30, 1995 quarter to $298,163
in the first quarter of this year. While lower depreciation and
amortization expense accounted for approximately $2,900 of this decline,
most of the savings can be attributed to the previously mentioned
facility closing. Labor expense showed the greatest absolute decline of
$42,340, a 21% decrease from the $202,963 of the previous fiscal year's
first quarter. Other such decreases included rent expense, which
decreased by 12%, or $3,738, and telephone expense, which decreased by
$3,882, or 39%. Postage expense was also lower, dropping to $6,695 from
$9,034, a 26% decline. Interest expense totaled 34% higher than that of
the previous year, rising to $25,536 from $19,068.
Medfin Management Corp. contributed $41,428 to the Company's loss in the
first quarter of this fiscal year, a significant improvement over the
$80,161 loss that this subsidiary showed in the same quarter of the
previous year. An expansion of Healthcare Professional Billing Corp.'s
client base has served to improve its results as well. This
subsidiary's net loss for the quarter ended June 30, 1996 totaled
$16,559 versus a $26,294 loss during the same time frame last year. The
parent company had a 7% decline in its separate net income to a loss of
$22,224 from $20,801 in the previous year's first quarter.
Liquidity, Capital Resources and Income Taxes
At March 31, 1996 working capital amounted to $11,822, down from the
working capital balance of $47,879 at March 31, 1995.
MedFin Management, Corp. will continue to require working capital
infusions over the next few months, as the outstanding receivable
13
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, 1996, the Company had an operating tax loss carryforward of
approximately $4,400,000. The Company's effective tax rate for
financial statement purposes for fiscal year 1996 is negligible based
upon continuing losses, 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.
14
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
/s/ SHANNON C. GRIES DATE: August 20, 1996
Secretary/Treasurer and
Principal Financial Officer
15
