<PAGE>
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, 1997
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 12, 1997)
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
SEPTEMBER 30, 1997
(UNAUDITED)
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at September 30, 1997
and March 31, 1997 3-4
Statements of operations for
the three months and six months
ended September 30, 1997 5
Statements of operations for
the three months and six months
ended September 30, 1996 6
Statements of cash flows
for the three months ended
September 30, 1997 and 1996 7-8
Notes to consolidated
financial statements 9-15
Item 2. Management's Discussion and Analysis 16-17
PART II. OTHER INFORMATION
Signatures 18
2
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND MARCH 31, 1997
ASSETS
September 30 March 31
1997 1997
(Unaudited)
CURRENT ASSETS __________ __________
Cash $ 47,184 $ 33,422
Trading securities (Note 3) 0 15,000
Accounts receivable 14,970 15,532
Prepaid expenses and other current assets 4,588 6,540
Current portion of non-current receivables
(Note 4) 440,000 440,000
__________ __________
TOTAL CURRENT ASSETS 506,742 510,494
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $147,250
at September 30, 1997 and $131,120 at
March 31, 1997 (Note 5) 67,984 67,843
OTHER ASSETS
Securities available for sale (Note 3) 564,313 963,767
Investments in non-public companies, at cost 30,500 30,500
Non-current receivables (Note 4) 1,401,646 1,479,000
Deposits 1,514 4,900
Certificate of Deposit - Restricted (Note 12) 80,000 80,000
Excess of cost over net assets of acquired companies,
less accumulated amortization of $26,875 at
September 30, 1997 and $23,125 at March 31, 1997 24,375 26,875
__________ __________
TOTAL OTHER ASSETS 2,102,348 2,585,042
__________ __________
TOTAL ASSETS $2,677,074 $3,163,379
========== ==========
See accompanying Notes to Consolidated Financial Statements
3
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30 March 31
1997 1997
(Unaudited)
CURRENT LIABILITIES __________ __________
Loans payable - financial
institution (Note 6) $ 313,516 $ 285,946
Accounts payable 444,551 462,463
Accrued liabilities 63,277 72,565
Current portion of long-term debt (Note 7) 326,064 316,776
Estimated environmental liability (Notes
2 and 12) 149,143 189,315
__________ __________
TOTAL CURRENT LIABILITIES 1,296,551 1,327,065
LONG-TERM DEBT, less current portion
(Note 7) 377,013 821,316
__________ __________
TOTAL LIABILITIES 1,673,564 2,148,381
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 September 30, 1997 and March 31, 1997 32,303 32,303
Additional paid-in capital 7,310,299 7,310,299
Unrealized gain on securities available
for sale 373,078 561,422
Accumulated deficit (6,663,732) (6,840,588)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
__________ __________
TOTAL STOCKHOLDERS' EQUITY 1,003,510 1,014,998
__________ __________
$2,677,074 $3,163,379
========== ==========
See accompanying Notes to Consolidated Financial Statements
4
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED SEPTEMBER 30, 1997
Three Months Six Months
Ended Ended
September 30 September 30
1997 1997
(Unaudited) (Unaudited)
__________ __________
REVENUES
Management and billing fees, net of
allowances $ 105,655 $ 243,662
Income from finance receivables 11,653 46,021
Interest and dividends 18,960 37,722
Net gain on trading securities 0 6,953
Realized gain from sale of securities
available for sale 0 325,348
Profit participation fee 0 20,000
__________ __________
TOTAL REVENUES 136,268 679,706
OPERATING EXPENSES
Selling, general and administrative 239,768 457,166
Interest expense 20,383 45,683
__________ __________
TOTAL OPERATING EXPENSES 260,151 502,849
__________ __________
NET INCOME (LOSS) ($ 123,883) $ 176,857
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
========== ==========
NET INCOME (LOSS) PER COMMON SHARE ($0.04) $0.05
========== ==========
See accompanying Notes to Consolidated Financial Statements
5
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS 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
__________ __________
NET INCOME(LOSS) $ 30,719 $ (45,019)
========== ==========
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
========== ==========
NET INCOME (LOSS) PER COMMON SHARE $ 0.01 $(0.01)
========== ==========
See accompanying Notes to Consolidated Financial Statements
6
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
September 30 September 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 176,857 ($ 45,019)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 19,016 40,862
Realized gain from sales of securities
available for sale (325,348) (131,844)
Changes in operating assets and liabilities:
(Increase) decrease in:
Trading securities 15,000 0
Accounts receivable 562 (15,039)
Prepaid expenses and other current assets 1,952 (2,919)
Increase (decrease) in:
Accounts payable 55,088 79,599
Accrued liabilities 23,253 26,080
Estimated environmental liability (40,173) (13,661)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
OPERATING ACTIVITIES (73,793) (61,942)
__________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes receivable (290,577) (342,239)
Collection of notes receivable 367,931 288,214
Proceeds from sale of investments and
other assets 0 188,844
(Purchase)disposal of property and equipment (16,656) (292)
Deposits and certificates of deposits 3,386 300
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
INVESTING ACTIVITIES 64,084 134,827
__________ _________
See accompanying Notes to Consolidated Financial Statements
7
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
September 30 September 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 27,570 27,905
Proceeds of long-term debt 0 59,000
Repayment of long-term debt (4,099) (3,030)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
FINANCING ACTIVITIES 23,471 83,875
__________ _________
INCREASE (DECREASE)IN CASH 13,762 156,761
CASH - BEGINNING 33,422 47,879
_________ _________
CASH - END $ 47,184 $ 204,640
========= =========
CASH PAID DURING THE PERIODS FOR:
Interest $ 957 $ 872
========= =========
Income Taxes $ 0 $ 0
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
On September 5, 1997, the Company settled certain notes and accounts payable
in the aggregate amount of $536,457 by transferring to the creditors a portion
of the Company's investment in KTI, Inc. The Company realized a gain of
$325,348 from this transfer.
See accompanying Notes to Consolidated Financial Statements
8
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1997, is
incorporated herein by reference.
2. ACQUISITIONS AND DISPOSITIONS
The summary of acquisitions and dispositions 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, 1997, is incorporated
herein by reference.
In a transaction that was effective October 1, 1996, the Company transferred
50% of the outstanding stock and substantially all of the control of
Healthcare Professional Billing Corp.("HPB") to certain key employees of HPB.
Until that time, HPB was a wholly-owned subsidiary the Company. As a result
of the transfer, the subsidiary's financial position, results of operations
and cash flows are not consolidated with that of the Company subsequent to the
transfer date.
Effective October 1, 1996, the investment in HPB including advances to HPB
will be accounted for under the equity method. The summarized financial
information of HPB at September 30, 1997 is as follows:
September 30,1997
_____________
Financial Position:
Current assets $ 49,176
Property and equipment 39,774
Other assets 12,935
________
Total assets $101,885
========
Current liabilities(including
due to the Company of $255,067) $344,205
Long-term obligations (a) 76,246
Stockholders' deficiency (318,566)
________
Total liabilities and stockholders'
deficiency $101,885
========
9
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Six Months
ended
September 30, 1997
______________
Results of Operations:
Revenues $117,136
Operating Expenses 155,725
_______
Net loss $(38,589)
========
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
September 30 March 31
1997 1997
__________ __________
KTI, Inc. $ 527,472 $ 941,934
Other equity investments in public entities 36,841 21,833
__________ __________
$ 564,313 $ 963,767
========== ==========
On June 5, 1997, the Company settled certain notes and accounts payable in the
aggregate amount of $536,457 by transferring to the creditors a portion of the
Company's investment in KTI, Inc. The Company realized a gain of $325,348
from this transfer.
Unrealized gains and losses for marketable equity securities at September 30,
1997 and March 31, 1997 are as follows:
September 30, 1997 March 31, 1997
______________________ ______________________
Current Non-Current Current Non-Current
Aggregate Cost $ 0 $191,235 $ 2,923 $402,345
Aggregate Market Value $ 0 $564,313 $ 15,000 $963,767
Gross Unrealized Gains $ 0 $373,078 $ 12,077 $561,422
Gross Unrealized Losses $ 0 $ 0 $ 0 $ 0
10
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
4. NON-CURRENT RECEIVABLES
Non-current receivables at September 30, 1997 and March 31, 1997 consisted
of the following:
September 30 March 31
1997 1997
__________ __________
Assigned medical billings net of allowances of
which $440,000 of the unpaid is expected to be
collected during the current fiscal year. $1,593,991 $1,718,260
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. 816,508 769,593
__________ __________
2,410,499 2,487,853
Less Allowance for Uncollectible (568,853) (568,853)
__________ __________
1,841,646 1,919,000
Less Current Portion (440,000) (440,000)
__________ __________
$1,401,646 $1,479,000
========== ==========
5. PROPERTY AND EQUIPMENT
Property and equipment at September 30, 1997 and March 31, 1997 consisted of
the following:
Life 1997 1996
__________ __________ __________
Machinery and Equipment 5-10 Years $ 46,823 $ 30,426
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 167,911 168,037
__________ __________
215,234 198,963
Less Accumulated Depreciation (147,250) (131,120)
__________ __________
$ 67,984 $ 67,843
========== ==========
11
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1997 and March 31, 1997, the outstanding balance against
this line of credit totaled $313,516 and $285,946, 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 six months ended September 30,
1997 and the year ended March 31, 1997 was 10.5% and 10.25% respectively,
which was computed based on month-end balance. The approximate average
outstanding monthly balance during the six months ended September 30
1997 and the year ended March 31, 1997 amounted to $320,470 and $201,806,
respectively. This line of credit expires on January 31, 1998.
7. LONG-TERM DEBT
Long-term debt including accrued interest at September 30, 1997 and March 31,
1997 consisted of the following:
September 30 March 31
1997 1997
__________ __________
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) $ 318,888 $ 309,346
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, 1999. 0 159,284
12
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Non-related Parties (all unsecured):
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. 0 9,673
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. 0 57,151
Two notes payable totaling $10,000 principal
plus accrued interest at 10%, all due on December
28, 1998. 11,171 11,258
Note payable of $10,000 principal plus accrued
interest at 10%, all due on February 27, 1999. 0 679
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, 2000. 153,936 166,023
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. 0 82,578
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 1, 1998. 10,912 10,411
Equipment purchase contract with a monthly payment
of $886 and an effective interest rate of 11% payable
through November, 2000. 28,185 31,784
Advances from an available line of credit of
$300,000. The loan bears interest at an annual
rate of 10%. All principal and interest is due
and payable on or before November 1, 1998. 179,985 171,716
Note payable of $60,000 principal plus accrued
interest at 10%, all due on March 12, 2000. 0 60,312
13
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
Advances from an available line of credit of
$100,000. the loan bears interest at annual
of 10%. All principal and interest is due
and payable on or before February 5, 2000. 0 67,877
__________ __________
703,077 1,138,092
Less Current Portion (326,064) (316,776)
__________ __________
$ 377,013 $ 821,316
========== ==========
The amounts of long-term debt maturing in each of the years ending March 31
are as follows: 1998 - $322,048; 1999 - $211,050; 2000 - $9,294;
2001 - $160,685.
On September 5, 1997, the Company settled certain notes and accounts payable
in the aggregate amount of $536,457 by transferring to the creditors a portion
of the Company's investment in KTI, Inc. The Company realized a gain of
$325,348 from this transfer.
8. STOCKHOLDERS' EQUITY
The discussion regarding stockholders' equity 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, 1997, is incorporated
herein by reference.
9. INCOME TAXES
The discussion regarding income taxes 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, 1997, is incorporated herein
by reference.
10. COMMITMENTS AND CONTINGENCIES
The discussion of commitments and contingencies 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, 1997, is
incorporated herein by reference.
14
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
11. RELATED PARTY TRANSACTIONS
The discussion of related party transactions 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, 1997, is incorporated
herein by reference.
12. ALLOWANCE FOR ENVIRONMENTAL LIABILITY
The discussion of environmental liabilities 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, 1997, is incorporated
herein by reference.
15
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SEPTEMBER 30, 1997
Statements of Operations:
Three Months Ended September 30, 1997 Compared to
Three Months Ended September 30, 1996
Revenues totaled $136,268 during the three months ended September 30, 1997,
63% lower than the $365,224 in revenues from the same quarter in the previous
year. Much of this decrease in revenue is attributable to the lack of
realized gains on investments during the current quarter, an amount that
totaled $131,844 during the same time period last year. In addition,
management and billing fees were down by $102,335 as compared to the prior
year's second quarter totals of $207,990, 70% of which is directly
attributable to the October 1, 1996 transfer of 50% of the stock in its
medical billing company to certain key employees. As a result of this
transfer, the Company no longer consolidates that former subsidiary's income
and expenses with its own and now accounts for its remaining interest in that
subsidiary under the equity method. Income from finance receivables jumped to
$11,653 in the current quarter from $1,220 during the same time period in the
previous year. However, this is down from this year's first quarter income
from finance receivables, which totaled $34,368. Interest and dividend income
decreased to $18,960 from $24,170 during the second fiscal quarter of the
previous year.
General and administrative expenses decreased by $67,690 to $239,767 in the
current year's second fiscal quarter. This is entirely attributable to the
medical billing company stock transfer and resulting deconsolidation, as it
had $95,563 in such expenses during the quarter ended September 30, 1996.
Collection costs increased by 97% to $20,754 as compared to the same quarter
last year in an effort to boost collections of the Company's and its clients'
receivables, which resulted in increased collections of 61% as compared to last
year's results. Travel and related expenses also increased this quarter, to
$12,170, a change of $8,801 from the second quarter of last year.
Interest expense decreased 25% to $20,383 as a result of the Company's
June 5, 1997 transfer of a portion of its investment portfolio to reduce its
debt.
MedFin Management Corp. contributed $123,776 in revenues during the current
quarter and $191,500 in non-intercompany expenses during that same time frame.
During the quarter ended September 30, 1996, MedFin's revenues were $151,731
and its non-intercompany expenses totaled $172,096. HLT Holding Corp.
contributed the previously mentioned finance receivable income of $11,653
during the second three months of this fiscal year and $1,220 during the
second fiscal quarter of last year. Non-intercompany expenses for HLT rose
from $3,588 during the quarter ended September 30, 1996 to $4,995 during the
current quarter.
16
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
SEPTEMBER 30, 1997
Liquidity, Capital Resources and Income Taxes:
At September 30, 1997 cash amounted to $47,184, up 41% from the cash balance
of $33,422 at March 31, 1997.
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.
On June 5, 1997, the Company settled certain notes and accounts payable in the
aggregate amount of $536,457 by transferring to the creditors a portion of the
Company's investment in KTI, Inc.
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, 1997, the Company had an operating tax loss carryforward of
approximately $4,800,000.
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.
17
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
/s/ SHANNON C. GRIES DATE: November 13, 1997
Secretary/Treasurer and
Principal Financial Officer
18
<PAGE>
