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 September 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 November 15, 1996)
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
SEPTEMBER 30, 1996
(UNAUDITED)
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at September 30, 1996
and March 31, 1996 3-4
Statements of operations for
the three and six months ended
September 30, 1996 5
Statements of operations for
the three and six months ended
September 30, 1995 6
Statements of cash flows
for the three months ended
June 30, 1996 and 1995 7-8
Notes to consolidated
financial statements 9-13
Item 2. Management's Discussion and Analysis 14-15
PART II. OTHER INFORMATION
Signatures 16
2
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND MARCH 31, 1996
ASSETS
September 30 March 31
1996 1996
(Unaudited)
CURRENT ASSETS
Cash $ 204,640 $ 47,879
Trading securities (Note 3) 17,600 17,600
Accounts receivable 71,478 56,439
Prepaid expenses and other
current assets 12,739 9,820
Current portion of non-current
receivables (Note 4) 440,000 446,535
____________ ____________
TOTAL CURRENT ASSETS 746,457 578,273
____________ ____________
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of
$262,967 at September 30, 1996 and
$242,891 at March 31, 1996 (Note 5) 75,668 95,452
____________ ____________
OTHER ASSETS
Securities available for sale
(Note 3) 752,041 863,291
Investments in non-public companies,
at cost 30,500 64,500
Non-current receivables (Note 4) 1,423,698 1,336,138
Deposits 7,129 7,429
Certificate of Deposit - Restricted 80,000 80,000
Patents, trademarks and tradenames-at
cost less accumulated amortization
of $8,039 at September 30, 1996 and
$6,943 at March 31, 1996 2,924 4,020
Covenants not to compete, less
accumulated amortization of $376,065
at September 30, 1996 and $358,875 at
March 31, 1996 45,842 63,032
Excess of cost over net assets
of acquired companies, less
accumulated amortization of $20,625
at September 30, 1996 and $18,125 at
March 31, 1996 29,375 31,875
____________ ____________
TOTAL OTHER ASSETS 2,371,509 2,450,285
____________ ____________
$ 3,193,634 $ 3,124,010
============ ============
See accompanying Notes to Consolidated Financial Statements
3
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1996 AND MARCH 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30 March 31
1996 1996
(Unaudited)
CURRENT LIABILITIES
Loans payable - financial
institutions (Note 6) $ 230,297 $ 202,392
Accounts payable 468,718 389,119
Accrued liabilities 72,688 88,195
Current portion of long-term debt
(Note 7) 605,908 430,147
Estimated environmental liability
(Notes 2 and 12) 220,972 234,633
____________ ____________
TOTAL CURRENT LIABILITIES 1,598,583 1,344,486
____________ ____________
LONG-TERM DEBT, LESS CURRENT PORTION
(Note 7) 481,908 560,112
____________ ____________
TOTAL LIABILITIES 2,080,491 1,904,598
____________ ____________
SHAREHOLDERS' EQUITY (Note 8)
Common stock-par value $ 01;
authorized 5,000,000 shares,
issued 3,230,342 shares at
September 30, 1996 and March 31,
1996 32,303 32,303
Additional paid-in capital 7,293,394 7,293,394
Unrealized gain on investments 254,488 315,738
Accumulated deficit (6,418,604) (6,373,585)
Treasury stock at cost - 25,000
shares (48,438) (48,438)
____________ ____________
TOTAL STOCKHOLDERS' EQUITY 1,113,143 1,219,412
____________ ____________
$ 3,193,634 $ 3,124,010
============ ============
See accompanying Notes to Consolidated Financial Statements
4
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1996
Three months Six months
ended ended
September 30 September 30
1996 1996
(Unaudited) (Unaudited)
REVENUES
Management and billing fees,
net of allowances $ 207,990 $ 433,999
Income from finance receivables 1,220 7,685
Interest and dividends 24,170 39,657
Net realized and unrealized gain
(loss) on investments 131,844 131,844
____________ ____________
TOTAL REVENUES 365,224 613,185
____________ ____________
OPERATING EXPENSES
Selling, general and administrative 307,457 605,620
Interest expense 27,048 52,584
____________ ____________
TOTAL OPERATING EXPENSES 334,505 658,204
____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES 30,719 (45,019)
PROVISION FOR INCOME TAXES (Note 9) 0 0
____________ ____________
NET INCOME(LOSS) $ 30,719 $ (45,019)
============ ============
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
============ ============
NET LOSS PER COMMON SHARE $ 0.01 $(0.01)
============ ============
See accompanying Notes to Consolidated Financial Statements
5
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1995
Three months Six months
ended ended
September 30 September 30
1995 1995
(Unaudited) (Unaudited)
REVENUES
Management and billing fees,
net of allowances $ 300,346 $ 532,822
Interest and dividends 20,333 40,005
____________ ____________
TOTAL REVENUES 320,679 572,827
____________ ____________
OPERATING EXPENSES
Selling, general and administrative 388,866 749,861
Interest expense 22,682 41,750
____________ ____________
TOTAL OPERATING EXPENSES 411,548 791,611
____________ ____________
INCOME (LOSS) BEFORE INCOME TAXES (90,869) (218,784)
PROVISION FOR INCOME TAXES (Note 9) 0 0
____________ ____________
NET INCOME(LOSS) $ (90,869) $ (218,784)
============ ============
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
============ ============
NET LOSS PER COMMON SHARE $(0.03) $(0.07)
============ ============
See accompanying Notes to Consolidated Financial Statements
6
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Six months Six months
ended ended
September 30 September 30
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (45,019) $ (218,784)
Adjustments to reconcile net income
to net cash provided (required)
by operating activities:
Depreciation and amortization 40,862 46,193
Provision for bad debts 0 0
(Gain on marketable
securities and other assets (131,844) 0
Deposits (paid) received 300 (3,708)
Changes in operating assets and
liabilities:
Increase in accounts receivable (15,039) (1,511)
(Increase) decrease in prepaid
expenses and other current
assets (2,919) 10,474
Increase in prepaid income taxes 0 0
Increase in accounts payable 79,599 51,924
Increase in accrued liabilities 26,080 50,563
____________ ____________
NET CASH REQUIRED BY OPERATING
ACTIVITIES (47,980) (64,850)
____________ ____________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes
receivable (342,239) (498,992)
Collection of notes receivable 288,214 312,905
Collections from related parties 0 36
Acquisition of securities 0 (130,000)
Proceeds from sale of investments and
other assets 188,844 0
Disposal (acquisition) of property and
equipment (292) 61
Payment of estimated environmental
liability (13,661) (5,404)
____________ ____________
NET CASH PROVIDED (REQUIRED) BY
INVESTING ACTIVITIES 120,866 (321,394)
____________ ____________
See accompanying Notes to Consolidated Financial Statements
7
T H LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
Six months Six months
ended ended
September 30 September 30
1996 1995
(Unaudited) (Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 27,905 40,616
Proceeds of long-term debt 59,000 357,250
Repayment of long-term debt (3,030) (47,638)
____________ ____________
NET CASH PROVIDED BY FINANCING
ACTIVITIES 83,875 350,229
____________ ____________
INCREASE (DECREASE) IN CASH 156,761 (36,015)
CASH - BEGINNING 47,879 46,438
____________ ____________
CASH - END $ 204,640 $ 10,423
____________ ____________
CASH PAID DURING THE PERIODS FOR:
Interest $ 872 $ 1,576
Income Taxes $ 0 $ 0
____________ ____________
See accompanying Notes to Consolidated Financial Statements
8
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 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 September 30, 1996 and the
results of operations and cash flows for the six month periods ended
September 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 September 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.
In addition, the Company is working out the details of a disposal of half of its
interest in its medical billing subsidiary. The Company expects to distribute
this portion of its interest to the employees of the medical billing subsidiary
in a transfer to be effective October 1, 1996.
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.
9
4. NON-CURRENT RECEIVABLES
Notes receivable at September 30, 1996 and March 31, 1996 consisted of
the following:
September 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 was
collected prior to June 10, 1996. $ 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. 1,541,782 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. 666,710 631,740
___________ ___________
2,208,492 2,127,468
Less Allowance for Uncollectible (344,795) (344,795)
___________ ___________
1,863,697 1,782,673
Less Current Portion (440,000) (446,535)
___________ ___________
$1,423,697 $1,336,138
=========== ===========
5. PROPERTY AND EQUIPMENT
Property and equipment at September 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 (262,967) (242,891)
___________ ___________
$ 75,668 $ 95,452
=========== ===========
10
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 September 30, 1996 and March 31, 1996, the
outstanding balance against this line of credit totaled $230,297 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 September 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 six months ended September 30, 1996 and
the year ended March 31, 1996, the maximum outstanding balances totaled
$230,297 and $202,392, respectively. The approximate average
outstanding monthly principal balance during the six months ended
September 30, 1996 and the year ended March 31, 1996 amounted to
$194,900 and $90,500, respectively. This line of credit expires on
January 31, 1998.
7. LONG-TERM DEBT
Long-term debt at September 30, 1996 and March 31, 1996 consisted of the
following:
September 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 to this creditor
(See Note 8). $ 300,090 $ 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
11
and interest is due and payable on or
before August 3, 1997. 356,573 341,635
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, 1997. 85,031 81,446
Advances from an available line of credit
of $20,000. The loan bears interest at
an annual rate of 10%. All principal and
interest is due and payable on or before
July 1, 1999. 9,224 0
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. 54,658 52,151
Two notes payable totaling $10,000 principal
plus accrued interest at 10%, all due on
December 28, 1998. 10,759 10,258
Note payable of $10,000 principal plus accrued
interest at 10%, all due on February 27, 1999. 10,592 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. 158,793 102,929
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. 78,938 75,278
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 27, 1998. 10,844 10,342
Equipment purchase contract with a monthly
payment of $330 and an effective interest rate
of 11% payable through January, 1999. 9,754 11,150
Equipment purchase contract with a monthly
payment of $315 and an effective interest rate
of 20% payable through October, 1996. 1,142 2,777
12
___________ ___________
1,087,816 990,258
Less Current Portion (605,908) (430,147)
___________ ___________
$ 481,908 $ 560,112
=========== ===========
The amounts of long-term debt maturing in each of the years ending March
31 are as follows: 1997 - $2,559; 1998 - $900,488; 1999 - $165,790;
2000 - $18,979.
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.
13
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
Statements of Operations:
Quarter Ended September 30, 1996 Compared to
Quarter Ended September 30, 1995
Revenues for the quarter ended September 30, 1996 were $365,224, a 14%
increase from the same period of the prior year, in which revenues
totaled $320,679. This increase included $131,844 in gain on
investments, without which revenues would have decreased by 27%.
Billing and management fees were $92,356 lower in the second quarter of
1996 as compared to the second quarter of 1995, due to the February,
1996 closing of one facility at which Medfin Management Corp. provided
management services. Interest and dividend income increased from
$20,333 in the quarter ended September 30, 1995 to $24,170 in the
current year's second quarter.
General and administrative costs declined an overall 21% when comparing
the second quarter of fiscal 1997 with the corresponding quarter of the
previous year, from $388,866 for the September 30, 1995 quarter to
$307,457 in the first quarter of this year. While lower depreciation
and amortization expense accounted for approximately $2,500 of this
decline, most of the savings can be attributed to the previously
mentioned facility closing. Labor expense showed the greatest absolute
decline of $51,549, a 24% decrease from the $218,857 of the previous
fiscal year's second quarter. Other such decreases included rent
expense, which decreased by 24%, or $7,996, and telephone expense, which
decreased by $2,976, or 32%. Postage and delivery expense was also
lower, dropping to $14,435 from $18,351, a 21% decline. Interest
expense for the quarter totaled 19% higher than that of the previous
year, rising to $27,048 from $22,682.
Medfin Management Corp. contributed $69,769 to the Company's loss in the
first quarter of this fiscal year, a deterioration from the $35,074 loss
that this subsidiary showed in the same quarter of the previous year.
Healthcare Professional Billing Corp. results improved, however. This
subsidiary's net loss for the quarter ended September 30, 1996 totaled
$16,283 versus a $35,983 loss during the same time frame last year. The
parent company's net income increased to $113,130 from an $18,351 loss
in the second quarter of fiscal 1996. This increase was due to the
$131,844 in gain on investments during the current quarter; net income
of the parent corporation would have remained flat otherwise.
Liquidity, Capital Resources and Income Taxes
At September 30, 1996 working capital amounted to $204,640, up from the
working capital balance of $47,879 at March 31, 1996.
MedFin Management, Corp. will continue to require working capital
infusions over the next few months; the Company believes that it has
adequate resources to meet such working capital needs.
14
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.
15
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: November 20, 1996
Secretary/Treasurer and
Principal Financial Officer
16
