U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 [FEE REQUIRED]
For the fiscal year ended March 31, 1999.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
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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 .
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this Form 10-KSB. [X]
Issuer's revenues for its most recent fiscal year were $1,106,404.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant is approximately $1,964,478 as of June 15, 1999.
4,742,720
_________
(Number of shares of common stock outstanding as of June 15, 1999)
PART I
BUSINESS ITEM 1. DESCRIPTION OF BUSINESS
Introduction:
T.H. Lehman & Co., Incorporated (referred to as the "Company or Registrant"),
was organized in March, 1983 as a Small Business Development Company ("SBDC")
and was an SBDC until April, 1988. From April, 1988 to August, 1990 it operated
through subsidiaries as a broker/dealer and investment advisor. Effective
October 27, 1989, the Company acquired all of the outstanding stock of Self
Powered Lighting, Inc. a New York corporation with offices in Elmsford, New York
("SPL") from an entity affiliated with two of the Company's directors. Effective
July 1, 1993 the Company sold all of the outstanding stock of SPL to
Helionetics, Inc. See Item 12. "Certain Relationships and Related Transactions"
for a description of SPL's business and the acquisition transaction. Although it
is no longer an SBDC and has sold its broker/dealer and investment advisory
business, the Company continues to maintain certain of its investments. During
1992 the Company entered the business of medical accounts receivable financing
and furnishing medical providers with non-medical management services.
Medical Financial Services:
The Company in August 1992 began operations in the area of medical financial
services, such services being provided through specific subsidiaries. The
primary focus of these operations is the financing and collection of accounts
receivable generated by medical practitioners through their provision of
diagnostic services and patient treatment. However, some of these subsidiaries
offer substantial additional services to medical practitioners. The services are
marketed both on an integrated and on an unbundled basis to doctors, depending
upon their individual needs. Initially, this is being accomplished through the
following operating entities:
MedFin Management Corp. was created to provide medical practitioners with non-
medical general and administrative functions such as accounting, marketing,
management, non-medical staffing, facilities, equipment, and billing and
collection of receivables. Revenues are derived from fees charged for these
services. Presently, the company has one client, which operates a multi-
specialty clinic in the Los Angeles, California area. This client concentrates
its practice on workers' compensation medicine and treatment for personal injury
victims, providing services primarily on a lien basis.
MedFin Management Corporation receives, as a fee for its clinic management
services, revenues that are indirectly related to the overall collections of its
client practitioners' receivables. MedFin Management Corporation also
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provides working capital on an as-needed basis to those clients with receivables
as collateral for such advances and UCC filings made thereon. However, the
Company is not engaged in the practice of medicine which, for non- doctor
controlled entities, is not legally allowed in California.
As a further adjunct to the financing/management services provided through
subsidiaries to medical practitioners, effective February 1, 1993, the Company
purchased Healthcare Professional Billing Corp. (HPB), in Broomfield, Colorado a
billing and collection service that is utilized by doctors in the metropolitan
Denver and surrounding areas. The purchase price was $354,080, consisting of
$140,000 in cash and the balance of $214,080 in notes payable.
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. to certain key employees of that company. Until that
time, Healthcare Professional Billing Corp. was a wholly-owned subsidiary of 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's subsequent to the transfer date.
MedFin Capital Resources, Inc. and HLT Holding Corporation were established to
engage in the purchase of medical accounts receivable as well as the secured
lending of funds to doctors against their receivables. This is accomplished via
bulk purchases of accounts receivable, often in conjunction with commitments for
purchases of future receivables generated or advances against such future
receivables.
HLT Holding Corporation has, purchased one accounts receivable portfolio that
was derived from medical services provided to plaintiffs, an August 1992
transaction consisting of gross account balances of $2,639,010. Consideration
given amounted to $250,000 cash and $500,000 in notes payable. Gross collections
through March, 1999 amounted to $848,152 and write-offs totaled $1,267,653
leaving a balance of $523,205 face value with an expected nominal realization.
Environmental Matters:
The company is subject to various laws and regulations with respect to employee
health and safety and the protection of the environment. The Company believes
that it is in substantial compliance with such laws and regulations. See
Footnote 12: Allowance for Environmental Liability.
Employees:
The Company employs 8 persons in the medical management field who are engaged in
executive, administrative and clerical positions. The Company believes that its
employee relations are satisfactory. Employees are not subject to any collective
bargaining agreement and work stoppages have not yet materially affected the
Company's business.
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ITEM 2.
DESCRIPTION OF PROPERTY
The Company presently has an administrative sharing arrangement which, among
other things, provides use of other office facilities in Houston, Texas. MedFin
Management Corporation leases office space in Burbank, California under an
operating lease that expires on October 31, 2000. Monthly rental payments are
$7,351, including all utilities.
ITEM 3.
LEGAL PROCEEDINGS
The company was involved in a lawsuit in respect to the ownership of a note
payable that originally expired on December 31, 1997. The note was extended to
June 30, 1998 by what the Company considers to be the rightful Owner of that
note. The lawsuit was settled on June 8, 1998 for $10,000.
The note has been paid in full.
Medfin Management was involved in a lawsuit in respect to default of a lease.
The lawsuit was settled on March 24,1998 for $9,500. Payment was made on April
14, 1998.
Neither the Company nor its subsidiaries is currently party to any other
material legal proceeding.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There has not been an annual meeting held since November 1991.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
a) Market Information
The Company's Common Stock (symbol THLM) is traded in the Over-The-Counter
Market, on the Electronic Bulletin Board. The range of high and low bid
quotations as reported by the NASDAQ Inter-Dealer Quotation System for the two
year period ended March 31, 1999 are as follows:
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For the Quarter Ended High Low
June 30, 1997 1/2 1/2
September 30, 1997 1/2 1/2
December 31, 1997 1/2 1/2
March 31, 1998 1/2 1/2
June 30, 1998 1/2 1/2
September 30, 1998 1/2 1/2
December 31, 1998 1/2 1/2
March 31, 1999 1/2 1/2
The above quotations do not include commissions, markups, or markdowns and may
not represent actual transactions.
On August 15, 1994, the Company was delisted from the NASDAQ Small Cap Market as
a result of failing to timely file the annual report.
b) Number of Holders of Common Stock
As of June 15, 1999 the Company had approximately 138 shareholders of record.
Cede & Co. was the registered holder of 640,548 shares. Because many of the
shares are registered in street name, the Company believes that there are a
substantially greater number of beneficial owners.
c) Dividends on Common Stock
The Company's Board of Directors does not currently intend to pay cash dividends
and has not paid any in the two year period ended March 31, 1999.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Statements of Operations:
Fiscal Year Ended March 31, 1999 Compared to Fiscal Year Ended March 31, 1998
Revenues totaled $1,106,404 during the fiscal year ended March 31, 1999, 5%
higher than the prior year's revenues of $1,057,377. The gain on investments
increased to $447,589 from the previous year's $391,576 with the entire gain
being attributed to sales of its investment in KTI, Inc. to settle certain notes
and accounts payable in the aggregate amount of $400,920. Also, Management fees
increased to $629,371 from the prior year's $516,034 due to increased patient
activity. Although total revenue was slightly up due to the gain on investments
and income from Management fees, other revenues were down. Interest and
dividends were $3,608 compared to $75,594 for the previous year due to the
discontinuance of interest being recorded on a certain note receivable. Interest
expense decreased to $34,637 from the prior years $84,736 due to a decrease in
notes payable. General and Administrative expenses increased
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9% to $1,128,269 mainly due to Uncollectible accounts expense increasing and
being partially offset by lower employee expenses. Collection costs also
decreased 68% to $20,808 in 1999 from $64,337 in 1998.
Fiscal Year Ended March 31, 1998 Compared to Fiscal Year Ended March 31, 1997
Revenues totaled $1,057,377 during the fiscal year ended March 31, 1998, 3%
higher than the prior year's revenues of $1,023,101. The gain on investments
increased to $391,576 from the previous year's $168,250 however the majority of
the gain totaling $325,348 was realized when the Company transferred a portion
of its investment in KTI, Inc. to settle certain notes and accounts payable in
the aggregate amount of $536,547. Also, income from finance receivables
increased to $54,073 from the prior year's $28,243 due to improved collection
strategies. Although total revenue was slightly up due to the gain on
investments and income from finance receivables, other revenues were down.
Billing fees were $0 compared to $138,050 for the previous year as a result of
the Company's October 1, 1996 transfer of 50% of the stock of its medical
billing company to certain key employees. Management fees were also lower, down
12% to $516,034 from the previous year.
Lower expenses helped offset the decrease in management and billing fees.
Interest expense decreased to $84,736 from the prior years $102,358 due to
decrease in notes payable. General and Administrative expenses decreased 25% to
$1,036,408. Lower employee expenses accounted for approximately one-third of the
decline from $558,204 in fiscal 1997 to $447,017 in fiscal 1998. Delivery,
postage, telephone and management fees experienced significant reductions. A
portion of these reductions can be attributed to the transfer of 50% of the
medical billing subsidiary's stock to the employees of that subsidiary. Although
the majority of expenses decreased, legal fees increased to $39,929 from the
prior year's $2,228 due to the lawsuits mentioned under legal proceedings.
Collection cost increased 48% to $64,337 in 1998 from $30,879 in 1997 in an
effort to boost collections of the Company's and it's Clients receivables, which
results in increased collections of 54% as compared to last year.
Liquidity, Capital Resources and Income Taxes
At March 31, 1999 cash amounted to $20,677, 14% less than the cash balance of
$24,123 at March 31, 1998.
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.
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
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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, 1998, the Company had an operating tax loss carryforward of
approximately $5,235,000.
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.
Year 2000 Issue
Many existing computer systems and programs, process transactions using two
digits rather than four digits for the year of a transaction. Unless the
hardware and/or the software have been or will be modified, a significant number
of those computer systems and programs may process a transaction with a date of
the year 2000 as the year "00", which could cause the system or the program to
fail or create erroneous results before, on or after January 1, 2000 (the "Year
2000 issue"). The Company has recently explored the effect of the Year 2000
issue in connection with its management information systems, computerized
accounting system, and all of the Company's personal computers.
The Company purchased a medical practice management system (including software,
hardware needed to utilize the system, licensing, training and support) for
approximately $30,000 in 1996. This system is specifically designed for the
management of medical practices, which accounts for approximately 75% of the
Company's revenue. The version of the system the Company owns is not Year 2000
compliant. However the vendor of this system has an updated version that is
fully Year 2000 compliant available, which can convert the existing data. The
cost of the upgrade is $13,000 including new hardware needed to utilize the
system. The Company plans to purchase and install the upgrade no later than
September 1999.
The Company's financial statements are produced by the management company of
T.H. Lehman & Co., Inc. which uses a licensed financial and general ledger
software program which is currently Year 2000 compliant.
The Company utilizes personal computers that utilizes Microsoft Windows 95 or
higher. The Company believes that the Windows operating system is Year 2000
compliant.
The Company is in process of contacting all of the entities with which it does
business and all third party payors to verify that they are in
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the process of preparing for the Year 2000 issue. The Company believes that all
of the entities with which it does business will become Year 2000 compliant. In
the case of the third party payors (Insurance companies) not becoming Year 2000
compliant in a timely manner there would be an adverse impact of the Company's
cash flow. ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data are listed at "ITEM 13: EXHIBITS
AND REPORTS ON FORM 10-KSB" in this document.
(See Index Exhibits Part IV Item 13 (a) Financial Statements: F1)
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The Directors and Executive Officers of the Company are as follows:
Name Age Director Since Position
Dibo Attar 59 1988 Director
Elliot Gerstenhaber 53 1996 Director/Secretary/Treasurer
Richard Farkas 73 1996 Director
On December 5, 1997, Edmond Nagel resigned as President of the Company. As of
the date of filing this report, the Company is still searching for his re-
placement.
The term of office of each director is until the next Annual Meeting of
Shareholders, or until such time as their successors shall have been duly
elected and qualified. Officers serve at the pleasure of the board. There are no
family relationships between any of the Company's directors or officers.
Background of Officers and Directors:
Dibo Attar's principal business is an investor and a consultant to domestic and
international companies. Mr. Attar is a director of Newpark Resources, Inc., a
public company which is engaged in providing oil field services. He is also a
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director of KTI, Inc., a public company which is engaged in the sale of electric
power from incineration of municipal solid waste.
Richard P. Farkas is a graduate of Princeton and Yale Universities and attended
New Jersey Law School. He held corporate executive and operating positions with
major international companies prior to acquiring his own paper products company,
which was later sold to a major consumer products company. He then founded IMC
International Management Consultants, Inc., which operates out of several
domestic and European offices providing services to multi-national corporations
ranging in annual revenue size from $5 million to $4 billion.
Elliot Gerstenhaber is a 1968 graduate of the University of Pennsylvania. He
received a juris doctorate degree from South Texas College of Law in 1975. He
recently left the private practice of law to develop real estate throughout the
southeastern United States. He is President of Segue, Inc., a privately-held
company.
ITEM 10. EXECUTIVE COMPENSATION
Compensation of Officers and Directors:
Set forth below is the aggregate remuneration paid to the Company's officers
during the fiscal years ended March 31, 1999, 1998, and 1997.
Name and Restricted
Principal Stock
Position Year Salary Awards
Edmond C. Nagel, President 1999 $ 0 $ 0
1998 $45,833 $ 0
1997 $72,917 $ 0
Stock Options:
In November 1990 the Board of Directors adopted, and subsequently on November 8,
1991 shareholders approved, the adoption of the 1990 Stock Option Plan ("1990
Plan"), under which options will be granted for an aggregate of 500,000 shares
of Common Stock prior to November 20, 2000. Such Plan resulted in the
termination of the 1988 Stock Option Plan. Certain options were granted to
officers and directors of the Company under the 1990 Stock Option Plan which was
approved by the shareholders. All employees of the Company and its subsidiaries,
as well as directors, officers and third parties providing services to the
Company or its subsidiaries are eligible to participate in the 1990 Plan.
All shares available under the 1990 Plan are subject to adjustments that may be
made for a merger, recapitalization, stock dividend, stock split or other
similar change affecting the number of outstanding shares of Common Stock.
Shares subject to an option that lapses, terminates or is forfeited will be
available for future options or awards.
Options granted may either be Incentive Stock Options ("ISO") pursuant to which
the recipient receives tax benefits or non-incentive stock options. The 1990
Plan provides, among other things, that options may be granted to purchase
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shares of Common Stock at a price per share fixed by the Board of Directors and,
in the case of an ISO, at not less than the fair market value of the applicable
class of the Company's Common Stock on the date of option grant (110% of such
fair market value in the case of optionee's holding 10% or more of the combined
voting rights of the Company's securities). The Board of Directors or a
committee appointed or elected by the Board of one or more Board members (the
"Committee") may determine the persons to whom options are to be granted and the
number of shares subject to each option. Options may be exercised by the payment
in full in cash or by, with approval of the Board of Directors, payment of par
value with a note for the balance.
The Board may at any time amend, suspend, or discontinue the Plan, provided that
certain amendments may not be made by the Board without approval of the
stockholders. Amendments may not alter an outstanding option without the consent
of the optionee.
At the time of adoption of the Plan the Company issued ten-year Stock Options
with an exercise price at $1.50 to purchase 350,000 shares of which 350,000
shares were issued to officers, a consultant and directors. At the date of the
award the high bid price of the Common Stock was $.75. All outstanding employee
options are exercisable at $1.50 per share and all are non-incentive options.
60,000 options were granted during the year ended March 31, 1993 at exercise
prices ranging from $1.50 to $2.00 per share expiring through 2000. 105,000
options were granted during the fiscal year ended March 31, 1995 at exercise
prices of both $1.50 per share and $2.00 per share which expires in five years.
No options were granted during the fiscal year ended March 31, 1996, 1997, 1998
and 1999.
Following is a list of all stock options granted:
Number of When Exercise Current
Name Options Issued Price Status
Julio Henriquez 100,000 1990 $1.50 Canceled
Edmond Nagel 100,000 1990 $1.50 Outstanding
Charles Olson, Jr. 50,000 1990 $1.50 Canceled
Ivor Braka 25,000 1990 $1.50 Canceled
Vincent Galano, Sr. 50,000 1990 $1.50 Canceled
Rodolfo Oeschslin 25,000 1990 $1.50 Canceled
Lee R. Mathis 5,000 1992 $1.90 Expired
Mark S. Cox 20,000 1992 $2.00 Canceled
Murray Husarsky 20,000 1992 $2.00 Expired
Brenda Heartfield 10,000 1992 $1.50 Expired
Julio Henriquez 5,000 1993 $2.00 Expired
Linda Carroll 10,000 1994 $1.50 Outstanding
Ramanathan Prakash 10,000 1994 $2.00 Outstanding
Russell Molina 5,000 1994 $2.00 Outstanding
Allen Goldstone 15,000 1994 $2.00 Outstanding
Sandy Schwartz 15,000 1994 $2.00 Outstanding
Brenda Heartfield 50,000 1994 $1.50 Outstanding
---------
Total Issued 515,000
Less Canceled Shares (270,000)
Less Expired ( 40,000)
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Total Outstanding 205,000
=========
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table lists, to the best of the Company's knowledge, the
beneficial stock ownership of those persons owning beneficially more than 5% of
the Company's outstanding common stock, as well as the stock ownership of
executive officers and each director as of June 15, 1999:
Name and Address Of Amount and Nature Of Percent of Class
Beneficial Owner Beneficial Owner
Title of Class
(a) Common Stock
Monahan Corporation, N.V. (4)
Landhuis Joonchi 1,218,077 25.7%
Kaya Richard J. Beaujon z/n
P.O. Box 837
Curacao, Netherlands Antilles
Burton, N.V. (4)
Landhuis Joonchi 281,383 5.9%
Kaya Richard J. Beaujon z/n
P.O. Box 837
Curacao, Netherlands Antilles
Greenwich Securities, Ltd. (1)
Via Canc. Molo II 985,800 20.8%
CH-6501
Bellinzona, Switzerland 6901
Millingway, Inc. (2)
c/o Capital Holdings, Inc. 598,164 12.6%
4900 Woodway, Suite 650
Houston, TX 77056
The Bridge Fund N.V. (4)
Landhuis Joonchi 519,893 11.0%
Kaya Richard J. Beaujon z/n
P.O. Box 837
Curacao, Netherlands, Antilles
(b) Security Ownership of Management
Dibo Attar (1) (2) -0-
Elliot Gerstenhaber -0-
Richard Farkas -0-
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Edmond Nagel (3) 215,601 4.5%
Directors and Officers
as Group 5 persons 3,818,918 80.5%
(1) (2) (3) (4)
Notes to Table of Beneficial Owners and Management:
(1) The securities of Greenwich Securities, Ltd. are owned by the Ezra and Linda
Attar Family Foundation, which is a family trust organized under the laws of
Lichenstein. Mr. Dibo Attar, a director, has the sole voting and investment
power with respect to the common stock owned by Greenwich Securities Ltd.
(2) Dibo Attar is a consultant to Capital Holdings, Inc., parent to Millingway,
Inc.
(3) Does not include 100,000 stock options which are fully vested and held by
Edmond Nagel.
(4) Monahan Corporation, N.V., Burton, N.V., and The Bridge Fund, N.V. are each
Netherlands Antilles corporations whose shareholders comprise groups of European
investors, none of which are otherwise affiliated with the Company. None of the
individual shareholders holds an effective ownership of the Company exceeding
4.9%.
Except as otherwise indicated, the address for each of the above persons is c/o
T.H. Lehman & Co., Incorporated, 4900 Woodway, Suite 650, Houston, Texas 77056.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the years ended March 31, 1999 and March 31, 1998, the Company incurred
management fees for facilities and services provided by GTD Capital Holdings
Management Company in the amount of $79,200 and $79,800 respectively. Such
services are believed to have been provided on terms no less favorable than
available from a third party.
Mr. Dibo Attar, a director and an indirect principal shareholder of the Company
is a consultant to Capital Holdings, Inc., the parent of Millingway, Inc. and
GTD Capital Holding Management Company. During the year ended March 31, 1992,
the Company entered into a two year line of credit for $450,000 with Sogevalor
S.A. In exchange for the funding commitment, the Company issued a Common Stock
Purchase Warrant Certificate for the purchase of 100,000 shares of common stock
at $1.25 originally expiring February 13, 1994. The company was involved in a
dispute in respect to ownership of this note payable that originally expired on
December 31, 1997. The note and the warrant certificate were extended to June
30, 1998 by what the Company considered to be the rightful owner of that note,
however another party filed a lawsuit demanding immediate payment on the note.
The lawsuit was settled on June 8, 1998 for $10,000 and payment of the note
payable was made in full on July 16, 1998 and the warrants have expired.
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Stock Transaction Reports by Officers, Directors and 10% Stockholders:
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's directors, executive officers and holders of more than 10% of the
Company's common stock to file with the Commission initial reports of ownership
and reports of changes in ownership of common stock and other equity securities
of the Company. To the Company's knowledge, based solely on copies of reports
furnished to the Company and information furnished by the reporting persons,
each officer, director and 10% stockholder of the Company was in compliance with
all reporting requirements under Section 16(a) for the year ended March 31,
1999.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 10-KSB
The following documents are filed as a part of this report:
Independent Auditor's Report
Consolidated Balance Sheets
As of March 31, 1999 and 1998
Consolidated Statements of Operations
Years Ended March 31, 1999 and 1998
Consolidated Statements of Changes in Stockholders' Equity
Years Ended March 31, 1999 and 1998
Consolidated Statements of Cash Flows
Years Ended March 31, 1999 and 1998
Notes to Consolidated Financial Statements
(a) Financial Statements - See Index to Financial Statements at Page F-1.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the
quarter ended March 31, 1999.
(c) Exhibits:
Exhibit No. Exhibit
3.1 Certificate of Incorporation of T.H. Lehman & Co., Incorporated
(the Company) as amended.*
3.2 By-laws of the Company. Incorporated by reference from the
Company's Form 8-A dated October 31, 1984 for Registration of
Certain Classes of Securities Pursuant to Section 12(b) or (g) of
the Securities Exchange Act of 1934.*
4.1 Stock Purchase Agreement, dated February 23, 1988, by and between
the Company and Greenwich Securities, Inc. incorporated by
reference from the Company's Current Report on Form 8-K dated May
10, 1988.*
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10.1 Acquisition Agreement, dated December 28, 1988, by and between the
Company and Greenwich Securities, Inc. incorporated by reference
from the Company's Current Report on Form 8-K dated May 10, 1988.*
10.2 Letter Agreement, dated April 30, 1990, between the Company and
Millingway, Inc. amending the Acquisition Agreement, dated
December 28, 1989.*
10.4 Employment Agreement, dated as of January 2, 1990, between SPL and
Julio Henriquez.*
10.6 Agreement, dated March 14, 1991, by Convergent Solutions, Inc.,
Vincent Galano, Ralph Reda, Thomas Borsanko, The Company, Dibo
Attar, and Attar ISERP (Profit Sharing Plan).*
10.7 Sales contract dated October 8, 1993 by and between the Company and
Helionetics, Inc. incorporated by reference from the Company's
current report on Form 8-K dated July 1, 1993.*
*These items have been previously submitted and are therefore incorporated only
by reference.
Individual financial statements of the Company are not furnished because
consolidated financial statements are furnished.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
T.H. Lehman & Co., Incorporated
Dibo Attar, Acting Principal Executive Officer
Date: June 18, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Capacities Date
/s/ Dibo Attar (Acting Principal June 18, 1999
Dibo Attar Executive Officer)
/s/ Elliot Gerstenhaber Secretary/Treasurer June 18, 1999
Elliot Gerstenhaber (Principal Accounting &
Financial Officer)
/s/ Dibo Attar Director June 18, 1999
Dibo Attar
/s/ Elliot Gerstenhaber Director June 18, 1999
Elliot Gerstenhaber
/s/ Richard P. Farkas Director June 18, 1999
Richard P. Farkas
Page 15
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditor F-2
Consolidated Balance Sheets
As of March 31, 1999 and 1998 F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)
Years Ended March 31, 1999 and 1998 F-5
Consolidated Statements of Stockholders' Equity
Years Ended March 31, 1999 and 1998 F-6
Consolidated Statements of Cash Flows
Years Ended March 31, 1999 and 1998 F-7
Notes to Consolidated Financial Statements F-9
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITOR
To the Board of Directors
T.H. Lehman & Co., Incorporated
I have audited the consolidated balance sheets of T.H. Lehman & Co.,
Incorporated and subsidiaries as of March 31, 1999 and 1998, and the related
consolidated statements of operations and comprehensive income (loss),
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audits.
I conducted my audits in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audits provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of T.H.
Lehman & Co., Incorporated and subsidiaries as of March 31, 1999 and 1998, and
the consolidated results of their operations, stockholders'equity and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Jeffrey S. Gilbert, CPA
Los Angeles, California
June 4, 1999
F-2
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND MARCH 31, 1998
ASSETS
1999 1998
---------- ----------
CURRENT ASSETS
Cash $ 20,677 $ 24,123
Accounts receivable 8,278 9,207
Prepaid expenses and other current assets 2,015 3,623
Current portion of non-current receivables
(Note 4) 282,206 416,659
---------- ----------
TOTAL CURRENT ASSETS 313,176 453,612
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $119,958 at
March 31, 1999 and $164,360 at March 31, 1998
(Note 5) 25,544 52,384
OTHER ASSETS
Securities available for sale (Note 3) 45,113 523,039
Investments in non-public companies, at cost 500 500
Non-current receivables (Note 4) 1,091,910 1,235,602
Deposits 514 1,514
Excess of cost over net assets of acquired companies,
less accumulated amortization of $50,000 at
March 31, 1999 and $28,125 at March 31, 1998 0 21,875
---------- ----------
TOTAL OTHER ASSETS 1,138,037 1,862,530
---------- ----------
TOTAL ASSETS $1,476,757 $2,368,526
========== ==========
See accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND MARCH 31, 1998
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
------------ ------------
CURRENT LIABILITIES
Loans payable - financial
institution (Note 6) $ 0 $ 40,000
Accounts payable 284,326 402,930
Accrued liabilities 49,033 82,778
Current portion of long-term debt (Note 7) 302,425 547,999
Estimated environmental liability (Notes
2 and 12) 0 43,235
------------ ------------
TOTAL CURRENT LIABILITIES 635,784 1,116,942
LONG-TERM LIABILITIES
Long-term debt, less current portion
(Note 7) 6,749 16,042
------------ ------------
TOTAL LONG-TERM LIABILITIES 6,749 16,042
TOTAL LIABILITIES 642,533 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 March 31, 1999 and 1998 47,427 47,427
Additional paid-in capital 7,764,014 7,764,014
Unrealized gain on investments 32,078 376,894
Accumulated deficit (6,960,857) (6,904,355)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 834,224 1,235,542
------------ ------------
$ 1,476,757 $ 2,368,526
============ ============
See accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
1999 1998
------------ -----------
REVENUES
Management and billing fees, net of
allowances $ 629,371 $ 516,034
Income from finance receivables 25,835 54,073
Interest and dividends 3,608 75,594
Net gain on trading securities 0 6,953
Realized gain from sales of securities
available for sale 447,589 384,623
Realized gain from sales of investment in
non-public companies 0 0
Miscellaneous Income 0 0
Profit participation fee 0 20,000
------------ -----------
TOTAL REVENUES 1,106,404 1,057,377
OPERATING EXPENSES
Selling, general and administrative 1,128,269 1,036,408
Interest expense 34,637 84,736
------------ -----------
TOTAL OPERATING EXPENSES 1,162,906 1,121,144
------------ -----------
LOSS BEFORE INCOME TAXES ( 56,502) ( 63,767)
PROVISION FOR INCOME TAXES (Note 9) 0 0
------------ -----------
NET LOSS ( 56,502) ( 63,767)
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on securities 97,695 200,095
Less: reclassification adjustment for
Gain included in net income ( 447,589) ( 384,623)
------------ -----------
TOTAL OTHER COMPREHENSIVE INCOME ( 349,894) ( 184,528)
------------ -----------
COMPREHENSIVE INCOME (LOSS) ($ 406,396) ($ 248,295)
============ ===========
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,742,720 3,356,374
============ ===========
BASIC LOSS PER COMMON SHARE ($ 0.01) ($ 0.02)
============ ===========
See accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
BALANCE, March 31, 1997
Common Stock Unreal. Treasury Stock
________________ Additional Gain on --------------
Shares Paid-in Accumulated Sec Avail. for Shares
Issued Amount Capital Deficit for sale Held Amount Total
- --------- ------- ---------- ------------ ------- ------ --------- -----------
3,230,342 $32,303 $7,310,299 ($6,840,588)$561,422 25,000 ($48,438) $1,014,998
Unrealized gain on securities
available for sale: (184,528) (184,528)
Shares issued in settlement
Of certain notes and
Account payable
1,512,378 15,124 453,715 468,839
Net loss (63,767) (63,767)
- --------- ------- ---------- ------------ ------- ------ --------- -----------
BALANCE, March 31, 1998:
4,742,720 $47,427 $7,764,014 ($6,904,355)$376,894 25,000 ($48,438) $1,235,542
- --------- ------- ---------- ------------ ------- ------ --------- -----------
Unrealized gain on securities
available for sale (344,816) (344,816)
Net loss (56,502) (56,502)
- --------- ------- ---------- ------------ ------- ------ --------- -----------
BALANCE, March 31, 1999:
4,742,720 $47,427 $7,764,014 ($6,960,857)$ 32,078 25,000 ($48,438) $ 834,224
========= ======= ========== ============ ======= ====== ========= ===========
See accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
1999 1998
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ($ 56,502) ($ 63,767)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 45,336 38,626
Provision for bad debts 264,084 0
Realized gain from sales of securities
available for sale partially exchanged
for debt relief 0 (384,623)
Loss on Disposition of Assets 1,413 38
Deposits (paid) received
Changes in operating assets and liabilities:
(Increase) decrease in:
Trading Securities 0 5,000
Accounts receivable 929 6,325
Prepaid expenses and other current assets 1,608 2,917
Increase (decrease) in:
Accounts payable (12,203) 38,467
Accrued liabilities (149,908) 91,165
Estimated environmental liability (43,235) (146,081)
---------- ----------
NET CASH REQUIRED BY
OPERATING ACTIVITIES (396,067) (401,933)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in 50% owned corporation (7,500) 0
Loans made evidenced by notes receivable (629,371) (517,475)
Collection of notes receivable 647,516 784,215
Deposits and certificates of deposits 81,000 3,386
Proceeds from sale of securities
available for sale 580,700 0
Proceeds from sales of investments
in non-public companies 0 134,365
Acquisition of property and equipment 3,381 (18,205)
---------- ----------
NET CASH USED IN
INVESTING ACTIVITIES 675,726 386,286
---------- ----------
See accompanying Notes to Consolidated Financial Statements
F-7
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
YEARS ENDED MARCH 31, 1999 AND MARCH 31, 1998
1999 1998
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution (40,000) 14,278
Proceeds of long-term debt 30,000 0
Repayment of long-term debt (273,104) ( 7,930)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 6,348 256,612
---------- ---------
INCREASE (DECREASE)IN CASH (3,446) (9,299)
CASH - BEGINNING 24,123 33,422
---------- ---------
CASH - END $ 20,677 $ 24,123
========== =========
CASH PAID DURING THE PERIODS FOR:
Interest $ 135,259 $ 16,098
========== =========
Income Taxes $ - $ -
========== =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Non Cash Transaction:
Debt relieved in exchange for
investments available for sale $ 0 $ 536,457
========= =========
Debt relieved in exchange for
common stock $ 0 $ 468,839
========= =========
See accompanying Notes to Consolidated Financial Statements
F-8
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999 AND 1998
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of the Business - T.H. Lehman & Co., Incorporated, a Delaware
corporation, provides medical business management services including billing and
collection in California through one of its wholly-owned subsidiaries.
Principles of Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Securities - Marketable securities that are bought and held principally for the
purpose of selling them in the near term are classified as trading securities
and reported at fair value, with unrealized gains and losses included in
earnings. Marketable securities not classified as either investment securities
which are held to maturity or trading securities are classified as securities
available for sale and reported at fair value, with unrealized gains and losses
affecting comprehensive income and reported in a separate component of
stockholders' equity. Average cost is used to determine cost when calculating
realized gains or losses from sales of securities available for sale.
Investment in 50% owned Corporation - Investment in 50% owned corporation is
accounted for under the equity method.
Receivables - Assigned medical billings represent the contractual percentage of
medical provider receivables of medical practices to which the Company provides
management services. Revenues are recognized when the medical services are
provided, according to the contractual percentage after uncollectible
allowances.
Property and Equipment - Property and equipment is stated at cost. Depreciation
is computed over the estimated useful lives of the assets using both the
accelerated and straight-line methods. Expenditures for repairs and maintenance
are charged to expense as incurred, while expenditures for betterments and
renewals are capitalized.
Property and equipment are reviewed for impairment whenever events or
circumstances indicate that the asset's undiscounted expected cash flows are not
sufficient to recover its carrying amount. The company measures an impairment
loss by comparing the fair value of the asset to its carrying amount. Fair value
of an asset is calculated as the present value of expected future cash flows.
F-9
<PAGE>
Stock-Based Compensation - The Company elected to account for employee stock
options based on the provisions of APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and adopted only the disclosure require- ments of SFAS No.
123, "Accounting for Stock-Based Compensation".
Basic Loss Per Share - Basic loss per common share is calculated by dividing
earnings available to common stockholders by the weighted average number of
common shares outstanding during the period.
Excess of Cost Over Net Assets of Acquired Companies - Excess of cost over net
assets of companies acquired was being amortized on a straight-line basis over
periods not exceeding ten years.
Recent Accounting Pronouncements - The Company has adopted SFAS No. 130,
"Reporting Comprehensive Income", and SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information", in fiscal year ended March 31, 1999.
Components of comprehensive income for the Company include items such as net
income and changes in the value of available-for-sale securities. SFAS No. 131
requires segments to be determined based on how management measures performance
and makes decisions about allocating resources.
2. ACQUISITIONS AND DISPOSITIONS
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. The summarized financial information of HPB at March 31, 1999 and March
31, 1998 is as follows:
March 31, 1999 March 31,1998
-------------- -------------
Financial Position:
Current Assets $ 43,578 $ 31,417
Property and equipment 9,466 26,335
--------- ----------
Total assets $ 53,044 $ 57,752
========= ==========
Current liabilities(including
due to the Company of $262,567) $327,712 $ 352,138
Long-term obligations (a) 122,700 74,573
Stockholders' deficiency (397,368) (368,959)
--------- ----------
Total liabilities and stockholders'
deficiency $ 53,044 $ 57,752
========= ==========
F-10
<PAGE>
March 31, 1999 March 31,1998
-------------- -------------
Results of Operation:
Revenues $190,642 $203,370
Operating Expenses 218,609 292,352
--------- ---------
Net loss $(27,967) $(88,982)
========= =========
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
1999 1998
--------- ---------
KTI, Inc. $ 34,708 $496,448
Other equity investments in public entities 10,405 26,591
--------- ---------
$ 45,113 $523,039
========= =========
Unrealized gains and losses for marketable equity securities at March 31, 1999
and 1998 are as follows:
1999 1998
--------------------- ---------------------
Current Non-Current Current Non-Current
Aggregate Cost $ 0 $ 13,035 $ 0 $146,145
Aggregate Market Value $ 0 $ 45,113 $ 0 $523,039
Gross Unrealized Gains $ 0 $ 32,078 $ 0 $376,894
Gross Unrealized Losses $ 0 $ 0 $ 0 $ 0
4. NON-CURRENT RECEIVABLES
Non-current receivables at March 31, 1999 and March 31, 1998 consisted of
the following:
1999 1998
----------- -----------
Assigned medical billings net of allowances of
which $282,206 of the unpaid is expected to be
collected during the current fiscal year. $1,354,362 $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
----------- -----------
F-11
<PAGE>
2,206,741 2,265,327
Less Allowance for Uncollectible (832,625) (613,066)
----------- -----------
1,374,116 1,652,261
Less Current Portion (282,206) (416,659)
----------- -----------
$1,091,910 $1,235,602
=========== ===========
5. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 1999 and March 31, 1998 consisted of the
following:
Life 1999 1998
----------- ----------
Machinery and Equipment 5-10 Years $ 3,701 $ 48,207
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 141,301 168,037
----------- ----------
145,502 216,744
Less Accumulated Depreciation (119,958) (164,360)
----------- ----------
$ 25,544 $ 52,384
=========== ==========
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 March 31, 1999 and March 31, 1998, the outstanding balance
against this line of credit totaled $0 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 years ended March 31, 1999 and 1998 was
0.0% and 10.5% respectively, which was computed based on month-end balance. The
approximate average outstanding monthly balance during the years ended March 31,
1999 and 1998 amounted to $16,667 and $215,686, respectively. This line of
credit expires on January 31, 2001.
During the fiscal year ended March 31, 1999 the Company reduced $40,000 of this
indebteness plus $418,320 of long term debt (see Note 7).
7. LONG-TERM DEBT
Long-term debt including accrued interest at March 31, 1999 and March 31, 1998
consisted of the following:
F-12
<PAGE>
1999 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
June 30, 1998. 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 June, 1998 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). This was paid in full
on July 16, 1998 and the warrants expired. $ 0 $ 328,423
Non-related Parties (all unsecured):
Two notes payable totaling $10,000 principal
plus accrued interest at 10%, all due on December
28, 1998. 0 11,645
Note payable of $10,000 principal plus accrued
interest at 10%, all due on November 1, 1998. 0 11,411
Equipment purchase contract with a monthly payment
of $886 and an effective interest rate of 11% payable
through November, 2000. 16,043 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 November 1, 1998. 0 188,210
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. 153,461 0
Note payable of $87,500 principal plus accrued
interest at 10%, all due on October 1, 1999. 91,839 0
Note payable of $30,000 principal plus accrued
interest at 8%, all due on October 1, 1999. 30,092 0
Note payable of $10,500 principal plus accrued
interest at 10%, all due on October 1, 1999. 11,021 0
Note payable of $3,200 principal plus accrued
interest at 10%, all due on October 1, 1999. 3,359 0
F-13
<PAGE>
Note payable of $3,200 principal plus accrued
interest at 10%, all due on October 1, 1999. 3,359 0
----------- ----------
309,174 564,041
Less Current Portion (302,425) (547,999)
----------- ----------
$ 6,749 $ 16,042
========== ==========
The amounts of long-term debt maturing in each of the years ending March 31 are
as follows: 2000 - $302,425; 2001 - $6,749.
During the fiscal year ended March 31, 1998 the Company reached agreements with
certain of the above creditors to accept 42,054 shares of common stock in KTI
and 87,499 warrants in KTI to reduce the outstanding debt of $362,000 plus an
additional $174,457 in accrued liabilities and payables.
8. STOCKHOLDERS' EQUITY
In November, 1991, the Company adopted a new stock option plan (1990 Plan),
under which options will be granted for an aggregate of 500,000 shares of common
stock prior to November 20, 2000. Options granted may either be incentive stock
options, pursuant to which the recipient receives tax benefits, or non-incentive
stock options. At the time of the adoption of the 1990 Plan, the Company issued
ten-year non-incentive stock options with an exercise price of $1.50 to purchase
350,000 shares of which 250,000 shares (100,000 shares canceled in 1993; 40,000
shares expired in 1994; 170,000 shares cancelled in 1997) were issued to the
officers of the Company, 50,000 shares were issued to the directors of the
Company, and 50,000 shares were issued to a consultant who was formerly an
officer of the Company. At March 31, 1999, 100,000 of the options are still
outstanding.
In June, 1994, the Company issued 105,000 additional options which are
exercisable at prices ranging from $1.50 to $2.00 per share for five years. At
March 31, 1999, 105,000 of these options are still outstanding.
9. INCOME TAXES
At March 31, 1999, for income tax reporting purposes, the Company has a
consolidated net operating loss carryforward of approximately $5,235,000
available to reduce future taxable income, if any, expiring through 2014. As a
result of a 51% change in ownership in a prior year, certain of the net
operating loss will be subject to an annual limitation and may not be fully
utilized in any one year. Because of histories of losses, the estimate for
future tax benefits has been offset by an equal asset valuation allowance.
10. COMMITMENTS AND CONTINGENCIES
Leases - The Company leases medical provider facility and a billing facility
under noncancelable operating leases expiring October 31, 2000. Minimum annual
future rentals on each of the years ending March 31 are as follows: 2000 -
$72,200.
F-14
<PAGE>
Rent expense amounted to $93,017 and $92,150 for the years ended March 31, 1999
and 1998, respectively.
Medical Management Agreement - The Company has entered into an agreement with a
medical provider whereby the Company provides management and marketing services
and the leasing of facilities, furniture, fixtures and equipment for a fee equal
to 70% of the provider's medical fee revenues (net of allowance for
uncollectible accounts). The agreement is automatically renewed from year to
year unless either party gives 90 days notice of non-renewal prior to the
renewal term.
11. RELATED PARTY TRANSACTIONS
The Company has its corporate headquarters in Houston, Texas, where it shares
office space and personnel with an entity for which a principal stockholder and
director of the Company serves as a consultant. The Company has entered into
agreements with this entity whereby that entity will provide various accounting,
administrative and managerial services for the Company for stipulated monthly
fees. The agreements are for 12 months and they automatically renew for an
additional 12 month period if not terminated within 60 days of the end of the
current term. The Company incurred fees to this entity under the agreements
totaling $79,200 and $79,800 for the years ended March 31, 1999 and 1998,
respectively.
Dibo Attar, a director of the Company, is also a director of KTI, Inc. (see Note
3)
Certain of the Company's creditors (See Note 7) are related as a result of one
of the Company's directors and principal stockholders being a consultant to
these entities.
12. ALLOWANCE FOR ENVIRONMENTAL LIABILITY
The Company, in conjunction with the sale of its manufacturing subsidiary,
incurred an obligation to assume any and all historic environmental liabilities
that may have occurred, whether known or unknown. The Company did not have any
environmental liability insurance coverage. The Company had initially set up a
provision of $275,000 to cover environmental liabilities arising from the
contamination of waste delivered to a disposal contractor of tritium waste which
was generated during the manufacture of luminescent signage. The Company
provided for an additional provisional of $123,748 as of March 31, 1997. During
the fiscal years ended March 31, 1999 and 1998 the Company charged $43,235 and
$146,080, respectively, against this provision. As of March 31, 1999 all
previous environmental matters have been cleared and management of the Company
does not anticipate further liability.
F-15
<PAGE>
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 20677
<SECURITIES> 45113
<RECEIVABLES> 2215019
<ALLOWANCES> (832625)
<INVENTORY> 0
<CURRENT-ASSETS> 313176
<PP&E> 145002
<DEPRECIATION> (119958)
<TOTAL-ASSETS> 1476757
<CURRENT-LIABILITIES> 635784
<BONDS> 0
<COMMON> 47427
0
0
<OTHER-SE> 786797
<TOTAL-LIABILITY-AND-EQUITY> 1476757
<SALES> 0
<TOTAL-REVENUES> 1106404
<CGS> 0
<TOTAL-COSTS> 1162906
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34637
<INCOME-PRETAX> (56502)
<INCOME-TAX> 0
<INCOME-CONTINUING> (56502)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (56502)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
