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, 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 August 18, 1997)
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
JUNE 30, 1997
(UNAUDITED)
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at June 30, 1997
and March 31, 1997 3-4
Statements of operations for
the three months ended June 30,
1997 and 1996 5
Statements of cash flows
for the three months ended
June 30, 1997 and 1996 6-7
Notes to consolidated
financial statements 8-14
Item 2. Management's Discussion and Analysis 15-16
PART II. OTHER INFORMATION
Signatures 17
2
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND MARCH 31, 1997
ASSETS
June 30 March 31
1997 1997
(Unaudited)
CURRENT ASSETS __________ __________
Cash $ 38,858 $ 33,422
Trading securities (Note 3) 0 15,000
Accounts receivable 15,482 15,532
Prepaid expenses and other current assets 4,078 6,540
Current portion of non-current receivables
(Note 4) 440,000 440,000
__________ __________
TOTAL CURRENT ASSETS 498,418 510,494
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $138,551 at
June 30, 1997 and $131,120 at March 31, 1997
(Note 5) 59,988 67,843
OTHER ASSETS
Securities available for sale (Note 3) 357,891 963,767
Investments in non-public companies, at cost 30,500 30,500
Non-current receivables (Note 4) 1,508,251 1,479,000
Deposits 1,000 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 $24,375 at
June 30, 1997 and $23,125 at March 31, 1997 25,625 26,875
__________ __________
TOTAL OTHER ASSETS 2,003,267 2,585,042
__________ __________
TOTAL ASSETS $2,561,673 $3,163,379
========== ==========
See accompanying Notes to Consolidated Financial Statements
3
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND MARCH 31, 1997
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 March 31
1997 1997
(Unaudited)
CURRENT LIABILITIES __________ __________
Loans payable - financial
institution (Note 6) $ 306,629 $ 285,946
Accounts payable 414,783 462,463
Accrued liabilities 55,066 72,565
Current portion of long-term debt (Note 7) 321,497 316,776
Estimated environmental liability (Notes
2 and 12) 172,097 189,315
__________ __________
TOTAL CURRENT LIABILITIES 1,270,072 1,327,065
LONG-TERM DEBT, less current portion
(Note 7) 370,780 821,316
__________ __________
TOTAL LIABILITIES 1,640,852 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 June 30, 1997 and March 31, 1997 32,303 32,303
Additional paid-in capital 7,310,300 7,310,300
Unrealized gain on securities available
for sale 166,656 561,422
Accumulated deficit (6,540,000) (6,840,588)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
__________ __________
TOTAL STOCKHOLDERS' EQUITY 920,821 1,014,998
__________ __________
$2,561,673 $3,163,379
========== ==========
See accompanying Notes to Consolidated Financial Statements
4
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
June 30 June 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
REVENUES
Management and billing fees, net of
allowances $ 138,007 $ 226,009
Income from finance receivables 34,368 6,465
Interest and dividends 18,762 15,487
Net gain on trading securities 6,953 0
Realized gain from sale of securities
available for sale 325,348 0
Profit participation fee 20,000 0
__________ __________
TOTAL REVENUES 543,438 247,961
OPERATING EXPENSES
Selling, general and administrative 217,548 298,163
Interest expense 25,299 25,536
__________ __________
TOTAL OPERATING EXPENSES 242,847 323,699
__________ __________
NET INCOME (LOSS) $ 300,591 ($ 75,738)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,230,342 3,230,342
========== ==========
NET INCOME (LOSS) PER COMMON SHARE $0.09 ($0.02)
========== ==========
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, 1997 AND JUNE 30, 1996
June 30 June 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 300,591 ($ 75,738)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 9,066 20,226
Realized gain from sales of securities
available for sale (325,348) 0
Changes in operating assets and liabilities:
(Increase) decrease in:
Trading securities 15,000 0
Accounts receivable 50 (14,885)
Prepaid expenses and other current assets 2,462 2,135
Increase (decrease) in:
Accounts payable 25,320 50,504
Accrued liabilities 2,419 25,016
Estimated environmental liability (17,218) (10,959)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
OPERATING ACTIVITIES 12,342 (3,701)
__________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes receivable (164,801) (181,674)
Collection of notes receivable 135,550 117,334
(Purchase)disposal of property and equipment 36 (292)
Deposits and certificates of deposits 3,900 1,000
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
INVESTING ACTIVITIES (25,315) (63,633)
__________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 20,683 12,788
See accompanying Notes to Consolidated Financial Statements
6
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
June 30 June 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
Proceeds of long-term debt 0 20,000
Repayment of long-term debt (2,274) (1,511)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
FINANCING ACTIVITIES 18,409 31,277
__________ _________
INCREASE (DECREASE)IN CASH 5,436 (36,057)
CASH - BEGINNING 33,422 47,879
_________ _________
CASH - END $ 38,858 $ 11,822
========= =========
CASH PAID DURING THE PERIODS FOR:
Interest $ 957 $ 456
========= =========
Income Taxes $ 0 $ 0
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
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.
See accompanying Notes to Consolidated Financial Statements
7
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1997 is as follows:
June 30,1997
_____________
Financial Position:
Current assets $ 71,723
Property and equipment 33,729
Other assets 22,079
________
Total assets $127,531
========
Current liabilities(including
due to the Company of $255,067) $336,338
Long-term obligations (a) 87,036
Stockholders' deficiency (295,843)
________
Total liabilities and stockholders'
deficiency $127,531
=========
8
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
Three Months
Ended
June 30, 1997
______________
Results of Operations:
Revenues $ 60,863
Operating Expenses 76,729
_______
Net loss $(15,866)
=======
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
June 30 March 31
1997 1997
__________ __________
KTI, Inc. $333,330 $941,934
Other equity investments in public entities 24,561 21,833
__________ __________
$357,891 $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 June 30, 1997
and March 31, 1997 are as follows:
June 30, 1997 March 31, 1997
______________________ ______________________
Current Non-Current Current Non-Current
Aggregate Cost $ 0 $191,235 $ 2,923 $402,345
Aggregate Market Value $ 0 $357,891 $ 15,000 $963,767
Gross Unrealized Gains $ 0 $166,656 $ 12,077 $561,422
Gross Unrealized Losses $ 0 $ 0 $ 0 $ 0
9
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
4. NON-CURRENT RECEIVABLES
Non-current receivables at June 30, 1997 and March 31, 1997 consisted of
the following:
June 30 March 31
1997 1996
__________ __________
Assigned medical billings net of allowances of
which $440,000 of the unpaid is expected to be
collected during the current fiscal year. $1,720,717 $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. 796,387 769,593
__________ __________
2,517,104 2,487,853
Less Allowance for Uncollectible (568,853) (568,853)
__________ __________
1,948,251 1,919,000
Less Current Portion (440,000) (440,000)
__________ __________
$1,508,251 $1,479,000
========== ==========
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1997 and March 31, 1997 consisted of the
following:
Life 1997 1996
__________ __________ __________
Machinery and Equipment 5-10 Years $ 30,426 $ 30,426
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 167,613 168,037
__________ __________
198,539 198,963
Less Accumulated Depreciation (138,551) (131,120)
__________ __________
$ 59,988 $ 67,843
========== ==========
10
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1997 and March 31, 1997, the outstanding balance against this
line of credit totaled $306,627 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 three months ended June 30, 1997 and
the year ended March 31, 1997 was 10.25% and 10.5% respectively, which was
computed based on month-end balance. The approximate average outstanding
monthly balance during the three months ended June 30, 1997 and the year ended
March 31, 1997 amounted to $294,995 and $201,806, respectively. This line of
credit expires on January 31, 1998.
7. LONG-TERM DEBT
Long-term debt including accrued interest at June 30, 1997 and March 31, 1997
consisted of the following:
June 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) $ 314,067 $ 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
11
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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. 10,931 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. 150,281 166,023
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. 500 82,578
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 1, 1998. 10,660 10,411
Equipment purchase contract with a monthly payment
of $886 and an effective interest rate of 11% payable
through November, 2000. 30,010 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 Novemeber 1, 1998. 175,828 171,716
Note payable of $60,000 principal plus accrued
interest at 10%, all due on March 12, 2000. 0 60,312
12
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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
__________ __________
692,277 1,138,092
Less Current Portion (321,497) (316,776)
__________ __________
$ 370,780 $ 821,316
========== ==========
The amounts of long-term debt maturing in each of the years ending March 31
are as follows: 1998 - $321,497; 1999 - $197,419; 2000 - $0;
2001 - $172,861.
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.
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.
13
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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.
14
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1997
Statements of Operations:
Three Months Ended June 30, 1997 Compared to
Three Months Ended June 30, 1996
Revenues totaled $543,438 during the three months ended June 30, 1997, 119%
higher than the $247,961 in revenues from the same quarter in the previous
year. All increase in revenue is attributable to realized gains on
investments and profit participation, which totaled $352,301 for the current
quarter. Management and billing fees were down by $88,002 as compared to the
prior year's first quarter totals of $226,009, 75% 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. Income from finance receivables jumped to
$34,368 in the current quarter from $6,465 during the same time period in the
previous year. It was during this quarter of last year that the Company
recouped its cost basis in these acquired receivables and began recognizing
income on the collection of these receivables. Interest and dividend income
rose slightly to $18,762 from $15,487 during the first fiscal quarter of the
previous year.
General and administrative expenses decreased by $80,615 to $217,548 in the
current year's first fiscal quarter. This is entirely attributable to the
medical billing company stock transfer and resulting deconsolidation, as it
had $86,344 in such expenses during the quarted ended June 30, 1996. Interest
expense remained relatively unchanged, despite the Company's June 5, 1997
transfer of a portion of its investment portfolio to reduce its debt.
However, the payment of this debt is expected to result in lower interest
expense over the rest of the current fiscal year.
Medfin Management Corp. contributed $155,901 in revenues during the current
quarter and $181,329 in non-intercompany expenses during that same time frame.
During the quarter ended June 30, 1996, Medfin's revenues were $175,303 and
its non-intercompany expenses totaled $170,091. HLT Holding Corp. contributed
the previously mentioned finance receivable income of $34,368 during the first
three months of this fiscal year and $6,465 during the first fiscal quarter of
last year. Non-intercompany expenses for HLT rose from $6,386 during the
quarter ended June 30, 1996 to $10,728 during the current quarter.
Liquidity, Capital Resources and Income Taxes:
At June 30, 1997 cash amounted to $38,858, up 228% from the cash balance of
$11,822 at March 31, 1997.
15
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 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.
16
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
/s/ SHANNON C. GRIES DATE: August 18, 1997
Secretary/Treasurer and
Principal Financial Officer
17
