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, 1998
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 ___
4,472,720
(Number of shares of common stock outstanding as of August 11, 1998)
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
JUNE 30, 1998
(UNAUDITED)
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at June 30, 1998
and March 31, 1998 3-4
Statements of operations and
comprehensive income for the
three months ended June 30,
1998 and 1997 5
Statements of cash flows
for the three months ended
June 30, 1998 and 1997 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, 1998 AND MARCH 31, 1998
ASSETS
June 30 March 31
1998 1998
(Unaudited)
CURRENT ASSETS __________ __________
Cash $ 552,297 $ 24,123
Accounts receivable 4,800 9,207
Prepaid expenses and other current assets 2,965 3,623
Current portion of non-current receivables
(Note 4) 413,045 416,659
__________ __________
TOTAL CURRENT ASSETS 973,107 453,612
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $103,665 at
June 30, 1998 and $164,360 at March 31, 1998
(Note 5) 47,364 52,384
OTHER ASSETS
Securities available for sale (Note 3) 134,740 523,039
Investments in non-public companies, at cost 500 500
Non-current receivables (Note 4) 1,173,575 1,235,602
Deposits 1,514 1,514
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 20,625 21,875
__________ __________
TOTAL OTHER ASSETS 1,458,318 1,862,530
__________ __________
TOTAL ASSETS $2,431,425 $2,368,526
========== ==========
See accompanying Notes to Consolidated Financial Statements
3
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 March 31
1998 1998
(Unaudited)
CURRENT LIABILITIES __________ __________
Loans payable - financial
institution (Note 6) $ 40,000 $ 40,000
Accounts payable 374,617 402,930
Accrued liabilities 66,982 82,778
Current portion of long-term debt (Note 7) 545,379 547,999
Estimated environmental liability (Notes
2 and 12) 40,532 43,235
__________ __________
TOTAL CURRENT LIABILITIES 1,067,510 1,116,942
LONG-TERM DEBT, less current portion
(Note 7) 16,042 16,042
__________ __________
TOTAL LIABILITIES 1,083,552 1,132,984
COMMITMENTS AND CONTINGENCIES (Note 10)
STOCKHOLDERS' EQUITY (Note 8)
Common stock-par value $.01; authorized
5,000,000 shares, issued 4,742,720 shares
at June 30, 1998 and March 31, 1998 47,427 47,427
Additional paid-in capital 7,764,014 7,764,014
Accumulated other comprehensive income 109,148 376,894
Accumulated deficit (6,524,278) (6,904,355)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
__________ __________
TOTAL STOCKHOLDERS' EQUITY 1,347,873 1,235,542
__________ __________
$2,431,425 $2,368,526
========== ==========
See accompanying Notes to Consolidated Financial Statements
4
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
June 30 June 30
1998 1997
(Unaudited) (Unaudited)
__________ __________
REVENUES
Management fees, net of allowances $ 181,135 $ 138,007
Income from finance receivables 7,673 34,368
Interest and dividends 866 18,762
Net gain on trading securities 6,953
gain from sale of securities
available for sale 409,670 325,348
Profit participation fee 0 20,000
__________ __________
TOTAL REVENUES 599,344 543,438
OPERATING EXPENSES
Selling, general and administrative 209,173 217,548
Interest expense 10,093 25,299
__________ __________
TOTAL OPERATING EXPENSES 219,266 242,847
__________ __________
NET INCOME: 380,078 300,591
__________ __________
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on securities 141,924 (69,418)
Loss: reclassification adjustment
for gains included in net income (409,670) (325,348)
__________ __________
COMPREHENSIVE INCOME (LOSS) $ 112,332 $ (94,175)
========== ==========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,742,720 3,230,342
========== ==========
NET INCOME PER COMMON SHARE $0.08 $0.09
========== ==========
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, 1998 AND JUNE 30, 1997
June 30 June 30
1998 1997
(Unaudited) (Unaudited)
__________ __________
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ 380,078 $ 300,591
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 6,487 9,066
Realized gain from sales of securities
available for sale (409,670) (325,348)
Changes in operating assets and liabilities:
(Increase) decrease in:
Trading securities 15,000
Accounts receivable 4,407 50
Prepaid expenses and other current assets 658 2,462
Increase (decrease) in:
Accounts payable (28,313) 25,320
Accrued liabilities (16,430) 2,419
Estimated environmental liability (2,702) (17,218)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
OPERATING ACTIVITIES (65,485) 12,342
__________ _________
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes receivable (181,135) (164,801)
Collection of notes receivable 246,775 135,550
Deposits and certificates of deposits 3,900
Proceeds from sale of securities available
for sale 530,223
(Purchase)disposal of property and equipment (217) 36
__________ _________
NET CASH REQUIRED BY
INVESTING ACTIVITIES 595,646 (25,315)
__________ _________
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 0 $20,683
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, 1998 AND JUNE 30, 1997
June 30 June 30
1997 1996
(Unaudited) (Unaudited)
__________ __________
Repayment of long-term debt (1,987) (2,274)
__________ _________
NET CASH PROVIDED BY (REQUIRED BY)
FINANCING ACTIVITIES (1,987) 18,409
__________ _________
INCREASE (DECREASE)IN CASH 528,174 5,436
CASH - BEGINNING 24,123 33,422
_________ _________
CASH - END $ 552,297 $ 38,858
========= =========
CASH PAID DURING THE PERIODS FOR:
Interest $ 10,672 $ 957
========= =========
Income Taxes $ 0 $ 0
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
See accompanying Notes to Consolidated Financial Statements
7
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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, 1998, 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, 1998, 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 30,1998
_____________
Financial Position:
Current assets $ 39,202
Property and equipment 20,211
Other assets 744
________
Total assets $ 60,157
========
Current liabilities(including
due to the Company of $255,067) $362,714
Long-term obligations (a) 73,701
Stockholders' deficiency (376,258)
________
Total liabilities and stockholders'
deficiency $ 60,157
=========
8
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
Three Months
Ended
June 30, 1998
______________
Results of Operations:
Revenues $ 46,490
Operating Expenses 53,346
_______
Net loss $( 6,856)
=======
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
June 30 March 31
1998 1998
__________ __________
KTI, Inc. $110,179 $496,448
Other equity investments in public entities 24,561 26,591
__________ __________
$134,740 $523,039
========== ==========
Unrealized gains and losses for marketable equity securities at June 30, 1998
and March 31, 1998 are as follows:
June 30, 1998 March 31, 1998
______________________ ______________________
Current Non-Current Current Non-Current
Aggregate Cost $ 0 $ 25,592 $ 0 $146,145
Aggregate Market Value $ 0 $134,740 $ 0 $523,039
Gross Unrealized Gains $ 0 $109,148 $ 0 $376,894
Gross Unrealized Losses $ 0 $ 0 $ 0 $ 0
9
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
4. NON-CURRENT RECEIVABLES
Non-current receivables at June 30, 1998 and March 31, 1998 consisted of
the following:
June 30 March 31
1998 1998
__________ __________
Assigned medical billings net of allowances of
which $413,045 of the unpaid is expected to be
collected during the current fiscal year. $1,337,852 $1,412,948
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. 852,379 852,379
__________ __________
2,190,231 2,265,327
Less Allowance for Uncollectible (603,611) (613,066)
__________ __________
1,586,620 1,652,261
Less Current Portion (413,045) (416,659)
__________ __________
$1,173,575 $1,235,602
========== ==========
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1998 and March 31, 1998 consisted of the
following: June 30, March 31,
life 1998 1998
__________ __________ __________
Machinery and Equipment 5-10 Years $ 48,207 $ 48,207
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 102,322 168,037
__________ __________
151,029 216,744
Less Accumulated Depreciation (103,665) (164,360)
__________ __________
$ 47,364 $ 52,384
========== ==========
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, March,
1994 and January 31, 1998, 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, 1998 and March 31, 1998, the outstanding balance
against this line of credit totaled $40,000 and $40,000, 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 monthly balance during the
three months ended June 30, 1998 and the year ended March 31, 1998 amounted to
$40,000 and $40,000, respectively. This line of credit expires on January 31,
2000.
7. LONG-TERM DEBT
Long-term debt including accrued interest at June 30, 1998 and March 31, 1998
consisted of the following:
June 30 March 31
1998 1998
__________ __________
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) $ 323,191 $ 328,423
11
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
Non-related Parties (all unsecured):
Two notes payable totaling $10,000 principal
plus accrued interest at 10%, all due on December
28, 1998. 11,881 11,645
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 1, 1998. 11,660 11,411
Equipment purchase contract with a monthly payment
of $886 and an effective interest rate of 11% payable
through November, 2000. 22,367 24,352
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. 192,322 188,210
__________ __________
561,421 564,041
Less Current Portion (545,379) (547,999)
__________ __________
$ 16,042 $ 16,042
========== ==========
The amounts of long-term debt maturing in each of the years ending March 31
are as follows: 1999 - $545,379; 2000 - $9,294; 2001 - $6,748.
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, 1998, 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, 1998, is incorporated herein
by reference.
13
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1998
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, 1998, is
incorporated herein by reference.
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, 1998, 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, 1998, is incorporated
herein by reference.
Statements of Operations:
Three Months Ended June 30, 1998 Compared to
Three Months Ended June 30, 1997
Revenues totaled $599,344 during the three months ended June 30, 1998, 10%
higher than the $543,438 in revenues from the same quarter in the previous
year. Realized gains from sale of securities and profit participation
increased by $57,369 to $409,670 for the current quarter compared to
$352,301 in the prior year's first quarter. Interest and dividends
decreased significantly from $18,762 during the three months ended June
30, 1997 to $866 for the current quarter because interest is no longer
being accrued on a note which provides working capital to a client of
Medfin Management. The client's receivables serves as collateral on
this note. Management fees increased by 31% to $181,135 this quarter
compared to $138,007 from the same quarter in the previous year.
Management fees earned by the medical management company are calculated
on a percentage of adjusted revenues of the medical corporation that
it manages, the medical corporation had an increase in receivables due
to more referrals. Income from finance receivables decreased from
$34,368 during the three months ended June 30, 1997 to $7,673 for the
current quarter. In the quarter ending June 30, 1996 the Company
14
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1998
recouped its cost basis in these acquired receivables and began
recognizing income on the collection of these receivables. Since these
receivables are dated, the company does not expect a large return,
therefore the income from finance receivables will probably remain low.
General and administrative expenses decreased by $8,375 to $209,173
in the current year's first fiscal quarter. This is attributable to
the reduction in collection cost due to the hiring of an in-house
collector. Interest expense decreased by more than half from $25,299
for the three months ended June 30, 1997 to $10,093 for the current
quarter due to decrease in notes payable.
Medfin Management Corp. contributed $181,135 in revenues during the current
quarter and $181,567in non-intercompany expenses during that same time frame.
During the quarter ended June 30, 1997, Medfin's revenues were $155,901 and
its non-intercompany expenses totaled $181,329. HLT Holding Corp. contributed
the previously mentioned finance receivable income of $7,674 during the first
three months of this fiscal year and $34,368 during the first fiscal quarter of
last year. Non-intercompany expenses for HLT declined from $4,391 during the
current quarter from $10,728 during the quarter ended June 30, 1997.
Liquidity, Capital Resources and Income Taxes:
At June 30, 1998 cash amounted to $552,297,a dramatic increase from the cash
balance of $24,123 at March 31, 1998, due to the sale of securities. This cash
will be used to pay debt.
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.
15
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1997
The Company has no existing funding commitments and is presently under no
contractual obligation to make any investment or acquisition.
At March 31, 1998, the Company had an operating tax loss carry forward of
approximately $5,179,000.
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/ Elliot Gerstenhaber DATE: August 11, 1998
Secretary/Treasurer and
Principal Financial Officer
17
