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, 1999
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 July 30, 1999)
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
JUNE 30, 1999
(UNAUDITED)
INDEX
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Balance sheets at June 30, 1999
and March 31, 1999 3-4
Statements of operations and
comprehensive income for the
three months ended June 30,
1999 and 1998 5
Statements of cash flows
for the three months ended
June 30, 1999 and 1998 6-7
Notes to consolidated
financial statements 8-12
Item 2. Management's Discussion and Analysis 13-15
PART II. OTHER INFORMATION
Signatures 16
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Page 2
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<TABLE>
<CAPTION>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND MARCH 31, 1999
ASSETS
June 30 March 31
1999 1999
(Unaudited) (Audited)
----------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 7,934 $ 20,677
Accounts receivable 8,278 8,278
Prepaid expenses and other current assets 1,875 2,015
Current portion of non-current receivables
(Note 4) 304,915 282,206
----------- ----------
TOTAL CURRENT ASSETS 323,002 313,176
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $123,962 at
June 30, 1999 and $119,958 at March 31, 1999
(Note 5) 24,569 25,544
OTHER ASSETS
Securities available for sale (Note 3) 47,384 45,113
Investments in non-public companies, at cost 500 500
Non-current receivables (Note 4) 1,111,254 1,091,910
Deposits 514 514
----------- ----------
TOTAL OTHER ASSETS 1,159,652 1,138,037
----------- ----------
TOTAL ASSETS $ 1,507,223 $1,476,757
=========== ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements
Page 3
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<TABLE>
<CAPTION>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND MARCH 31, 1999
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30 March 31
1999 1999
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 305,802 $ 284,326
Accrued liabilities 71,803 49,033
Current portion of long-term debt (Note 6) 309,498 302,425
__________ __________
TOTAL CURRENT LIABILITIES 687,103 635,784
LONG-TERM DEBT, less current portion
(Note 6) 4,258 6,749
----------- -----------
TOTAL LIABILITIES 691,361 642,533
COMMITMENTS AND CONTINGENCIES (Note 9)
STOCKHOLDERS' EQUITY (Note 7)
Common stock-par value $.01; authorized
5,000,000 shares, issued 4,742,720 shares
at June 30, 1999 and March 31, 1999 47,427 47,427
Additional paid-in capital 7,764,014 7,764,014
Accumulated other comprehensive income 34,349 32,078
Accumulated deficit (6,981,490) (6,960,857)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 815,862 834,224
----------- -----------
$1,507,223 $1,476,757
=========== ===========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
Page 4
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<TABLE>
<CAPTION>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
June 30 June 30
1999 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
REVENUES
Management fees, net of allowances $ 165,021 $ 181,135
Income from finance receivables 15,440 7,673
Interest and dividends 0 866
Gain from sale of securities
available for sale 0 409,670
----------- -----------
TOTAL REVENUES 181,006 599,344
OPERATING EXPENSES
Selling, general and administrative 194,340 209,173
Interest expense 7,299 10,093
----------- -----------
TOTAL OPERATING EXPENSES 201,639 219,266
----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES (20,633) 380,078
PROVISION FOR INCOME TAXES (Note 8) 0 0
----------- -----------
NET INCOME (LOSS) (20,633) 380,078
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on securities 99,966 141,924
Less: reclassification adjustment
for gains included in net income 0 (409,670)
----------- -----------
TOTAL OTHER COMPREHENSIVE INCOME (LOSS) 99,966 (267,746)
----------- -----------
COMPREHENSIVE INCOME $ 79,333 $ 112,332
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,742,720 4,742,720
=========== ===========
NET INCOME (LOSS) PER COMMON SHARE $ 0.00 $ 0.08
=========== ===========
See accompanying Notes to Consolidated Financial Statements
</TABLE>
Page 5
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
June 30 June 30
1999 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (20,633) $ 380,078
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 4,004 6,487
Realized gain from sales of securities
available for sale 0 (409,670)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 0 4,407
Prepaid expenses and other current assets 140 658
Increase (decrease) in:
Accounts payable 21,476 (28,313)
Accrued liabilities 29,576 (16,430)
Estimated environmental liability 0 (2,702)
----------- -----------
NET CASH PROVIDED BY (REQUIRED BY)
OPERATING ACTIVITIES 34,563 (65,485)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made evidenced by notes receivable (165,021) (181,135)
Collection of notes receivable 122,968 246,775
Proceeds from sale of securities available
for sale 0 530,223
(Purchase)disposal of property and equipment (3,029) (217)
----------- -----------
NET CASH REQUIRED BY
INVESTING ACTIVITIES (45,082) 595,646
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 0 0
See accompanying Notes to Consolidated Financial Statements
</TABLE>
Page 6
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS CONTINUED
THREE MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
June 30 June 30
1999 1998
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
Repayment of long-term debt (2,224) (1,987)
----------- -----------
NET CASH PROVIDED BY (REQUIRED BY)
FINANCING ACTIVITIES (2,224) (1,987)
----------- -----------
INCREASE (DECREASE)IN CASH (12,743) 528,174
CASH - BEGINNING 20,677 24,123
----------- -----------
CASH - END $ 7,934 $ 552,297
=========== ===========
CASH PAID DURING THE PERIODS FOR:
Interest $ 434 $ 10,672
=========== ===========
Income Taxes $ 0 $ 0
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
See accompanying Notes to Consolidated Financial Statements
</TABLE>
Page 7
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
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, 1999, is incorporated
herein by reference.
2. ACQUISITIONS AND DISPOSITIONS
The summary of acquisitions and dispositions of the Company set forth in Note 2,
Notes to Consolidated Financial Statements in the Company's Form 10-KSB (File
No. 2-87738) for the fiscal year ended March 31, 1999, 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, 1999 is as follows:
<TABLE>
<CAPTION>
June 30,1999
------------
<S> <C>
Financial Position:
Current assets $ 48,844
Property and equipment 6,545
Other assets 744
------------
Total assets $ 56,133
============
Current liabilities(including
due to the Company of $262,567) $ 327,708
Long-term obligations (a) 122,700
Stockholders' deficiency (394,275)
------------
Total liabilities and stockholders'
deficiency $ 56,133
============
</TABLE>
Page 8
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
<TABLE>
<CAPTION>
Three Months
Ended
June 30, 1999
-------------
<S> <C>
Results of Operations:
Revenues $ 61,707
Operating Expenses 58,614
-------------
Net loss $ ( 3,093)
=============
</TABLE>
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
<TABLE>
<CAPTION>
June 30 March 31
1999 1999
---------- --------
<S> <C> <C>
KTI, Inc. $ 36,979 $ 34,708
Other equity investments in public entities 10,405 10,405
---------- --------
$ 47,384 $ 45,113
========== ========
</TABLE>
Unrealized gains and losses for marketable equity securities at June 30, 1999
and March 31, 1999 are as follows:
<TABLE>
<CAPTION>
June 30, 1999 March 31, 1999
--------------------- -------------------
Current Non-Current Current Non-Current
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Aggregate Cost $ 0 $ 13,035 $ 0 $ 13,035
Aggregate Market Value $ 0 $ 47,384 $ 0 $ 45,113
Gross Unrealized Gains $ 0 $ 34,349 $ 0 $ 32,078
Gross Unrealized Losses $ 0 $ 0 $ 0 $ 0
</TABLE>
Page 9
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
4. NON-CURRENT RECEIVABLES
Non-current receivables at June 30, 1999 and March 31, 1999 consisted of
the following:
<TABLE>
<CAPTION>
June 30 March 31
1999 1999
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<S> <C> <C>
Assigned medical billings net of allowances of
which $304,915 of the unpaid is expected to be
collected during the current fiscal year. $1,396,415 $1,354,362
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
----------- -----------
2,248,794 2,206,741
Less Allowance for Uncollectible (832,625) (832,625)
----------- -----------
1,416,169 1,374,116
Less Current Portion (304,915) (282,206)
----------- -----------
$1,111,254 $1,091,910
=========== ===========
</TABLE>
5. PROPERTY AND EQUIPMENT
Property and equipment at June 30, 1999 and March 31, 1999 consisted of the
following:
<TABLE>
<CAPTION>
June 30, March 31,
life 1999 1999
---------- ----------- -----------
<S> <C> <C> <C>
Machinery and Equipment 5-10 Years $ 6,730 $ 3,701
Leasehold Improvements 5-10 Years 500 500
Furniture and Fixtures 5-10 Years 141,301 141,301
----------- -----------
148,531 145,502
Less Accumulated Depreciation (123,962) (119,958)
----------- -----------
$ 24,569 $ 25,544
=========== ===========
</TABLE>
Page 10
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
6. LONG-TERM DEBT
Long-term debt including accrued interest at June 30, 1999 and March 31, 1999
consisted of the following:
<TABLE>
<CAPTION>
June 30 March 31
1999 1999
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<S> <C> <C>
Non-related Parties (all unsecured):
Equipment purchase contract with a monthly payment
of $886 and an effective interest rate of 11% payable
through November, 2000. 13,818 16,043
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 October 1, 1999. 157,068 153,461
Note payable of $87,500 principal plus accrued
Interest at 10%, on October 1, 1999. 94,021 91,839
Note payable of $30,000 principal plus accrued
Interest at 10%, on October 1, 1999. 30,690 30,092
Note payable of $10,500 principal plus accrued
Interest at 10%, on October 1, 1999. 11,283 11,021
Note payable of $3,200 principal plus accrued
Interest at 10%, on October 1, 1999. 3,438 3,359
Note payable of $3,200 principal plus accrued
Interest at 10%, on October 1, 1999. 3,438 3,359
----------- ----------
313,756 564,041
Less Current Portion (309,498) (547,999)
----------- ----------
$ 4,258 $ 16,042
=========== ==========
</TABLE>
The amounts of long-term debt maturing in each of the years ending March 31 are
as follows: 2000 - $309,498; 2001 - $4,258.
Page 11
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999
7. STOCKHOLDERS' EQUITY
The discussion regarding stockholders' equity of the Company set forth in Note
8, Notes to Consolidated Financial Statements in the Company's Form 10-KSB (File
No. 2-87738) for the fiscal year ended March 31, 1999, is incorporated herein by
reference.
8. INCOME TAXES
The discussion regarding income taxes of the Company set forth in Note 9, Notes
to Consolidated Financial Statements in the Company's Form 10-KSB (File No.
2-87738) for the fiscal year ended March 31, 1999, is incorporated herein by
reference.
9. COMMITMENTS AND CONTINGENCIES
The discussion of commitments and contingencies of the Company set forth in Note
10, Notes to Consolidated Financial Statements in the Company's Form 10- KSB
(File No. 2-87738) for the fiscal year ended March 31, 1999, is incorporated
herein by reference.
10. RELATED PARTY TRANSACTIONS
The discussion of related party transactions of the Company set forth in Note
11, Notes to Consolidated Financial Statements in the Company's Form 10-KSB
(File No. 2-87738) for the fiscal year ended March 31, 1999, is incorporated
herein by reference.
11. ALLOWANCE FOR ENVIRONMENTAL LIABILITY
The discussion of environmental liabilities of the Company set forth in Note 12,
Notes to Consolidated Financial Statements in the Company's Form 10-KSB (File
No. 2-87738) for the fiscal year ended March 31, 1999, is incorporated herein by
reference.
Page 12
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1999
Statements of Operations:
Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998
Revenues totaled $181,006 during the three months ended June 30, 1999, 70% lower
than the $599,344 in revenues from the same quarter in the previous year.
Realized gains from sale of securities were $0 for the current quarter compared
to $409,670 in the prior year's first quarter. Management fees decreased by 9%
to $165,021 this quarter compared to $181,135 from the same quarter in the
previous year. Income from finance receivables increased from $7,673 during the
three months ended June 30, 1998 to $15,440 for the current quarter. In the
quarter ending June 30, 1996 the Company 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 $14,833 to $194,340 in the
current year's first fiscal quarter. Interest expense decreased by 28% from
$10,093 for the three months ended June 30, 1998 to $7,299 for the current
quarter due to decrease in notes payable.
Medfin Management Corp. contributed $165,021 in revenues during the current
quarter and $134,385 in non-intercompany expenses during that same time frame.
During the quarter ended June 30, 1998, Medfin's revenues were $181,135 and its
non-intercompany expenses totaled $181,567. HLT Holding Corp. contributed the
previously mentioned finance receivable income of $15,440 during the first three
months of this fiscal year compared to $7,674 during the first fiscal quarter of
last year. Non-intercompany expenses for HLT increased slightly to $5,282 during
the current quarter from $4,391 during the quarter ended June 30, 1998.
Liquidity, Capital Resources and Income Taxes:
At June 30, 1999 cash amounted to $7,934, a 62% decrease from the cash balance
of $20,677 at March 31, 1999. This cash was used to fund operations.
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.
Page 13
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1999
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, 1999, the Company had an operating tax loss carry forward 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.
Page 14
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1999
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 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.
Page 15
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
JUNE 30, 1999
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
/s/ Elliot Gerstenhaber DATE: August 04, 1999
- -----------------------
Secretary/Treasurer and
Principal Financial Officer
Page 16
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7934
<SECURITIES> 47384
<RECEIVABLES> 2248794
<ALLOWANCES> (832625)
<INVENTORY> 0
<CURRENT-ASSETS> 323002
<PP&E> 148531
<DEPRECIATION> (123962)
<TOTAL-ASSETS> 1507223
<CURRENT-LIABILITIES> 687103
<BONDS> 0
<COMMON> 47427
0
0
<OTHER-SE> 768435
<TOTAL-LIABILITY-AND-EQUITY> 1507223
<SALES> 0
<TOTAL-REVENUES> 181006
<CGS> 0
<TOTAL-COSTS> 194340
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7299
<INCOME-PRETAX> (20633)
<INCOME-TAX> 0
<INCOME-CONTINUING> (20633)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (20633)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
