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, 2000.
[ ] 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 $605,521.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant is approximately $493,619 as of June 15, 2000.
4,742,720
_________
(Number of shares of common stock outstanding as of June 15, 2000)
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. 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 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, 2000 amounted to $863,592 and write-offs totaled $1,283,299
leaving a balance of $492,119 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
$7,559, including all utilities.
ITEM 3.
LEGAL PROCEEDINGS
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, 2000 are as follows:
For the Quarter Ended High Low
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
June 30, 1999 1/8 1/8
September 30, 1999 1/8 1/8
December 31, 1999 1/8 1/8
March 31, 2000 1/8 1/8
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, 2000 the Company had approximately 138 shareholders of record.
Cede & Co. was the registered holder of 965,600 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, 2000.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Statements of Operations:
Fiscal Year Ended March 31, 2000 Compared to Fiscal Year Ended March 31, 1999
Revenues totaled $605,521 during the fiscal year ended March 31, 2000, 45%
lower than the prior year's revenues of $1,106,404. The gain on investments
decreased to $0 from the previous year's $447,589 when there had been a gain
attributed to sales of its investment in KTI, Inc. to settle certain notes
and accounts payable. Income from Finance Receivables also decreased 40% due to
decreased collections on past receivables. Interest expense increased $56,343
from the prior years $34,637 due to an increase in notes payable. General
and Administrative expenses decreased 40% to $681,920 mainly due to
Uncollectible accounts expense decreasing and lower employee expenses.
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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 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.
Liquidity, Capital Resources and Income Taxes
At March 31, 2000 cash amounted to $9,081, 56% less than the cash balance of
$20,677 at March 31, 1999.
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
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, 2000, the Company had an operating tax loss carryforward of
approximately $5,365,000.
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
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 most of the Company's
revenue. The version of the system the Company owned was not Year 2000
compliant. However the vendor of this system updated the version with one that
is fully Year 2000 compliant without charge.
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.
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.
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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 60 1988 Director
Elliot Gerstenhaber 54 1996 Director/Secretary/Treasurer
Richard Farkas 74 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.
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, 2000, 1999, and 1998.
Name and Restricted
Principal Stock
Position Year Salary Awards
N/A 2000 $ 0 $ 0
N/A 1999 $ 0 $ 0
Edmond C. Nagel, President 1998 $45,833 $ 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
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
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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,
1999 and 2000.
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 Expired
Ramanathan Prakash 10,000 1994 $2.00 Expired
Russell Molina 5,000 1994 $2.00 Expired
Allen Goldstone 15,000 1994 $2.00 Expired
Sandy Schwartz 15,000 1994 $2.00 Expired
Brenda Heartfield 50,000 1994 $1.50 Expired
---------
Total Issued 515,000
Less Canceled Shares (270,000)
Less Expired (145,000)
---------
Total Outstanding 100,000
=========
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, 2000:
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 916,840 19.3%
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
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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 529,893 11.2%
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-
Edmond Nagel (3) 195,601 4.1%
Directors and Officers
as Group 5 persons 3,507,681 73.9%
(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, 2000 and March 31, 1999, the Company incurred
management fees for facilities and services provided by GTD Capital Holdings
Management Company in the amount of $79,200 and $79,200 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.
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,
2000.
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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, 2000 and 1999
Consolidated Statements of Operations
Years Ended March 31, 2000 and 1999
Consolidated Statements of Changes in Stockholders' Equity
Years Ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows
Years Ended March 31, 2000 and 1999
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, 2000.
(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.*
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 28, 2000
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 28, 2000
Dibo Attar Executive Officer)
/s/ Elliot Gerstenhaber Secretary/Treasurer June 28, 2000
Elliot Gerstenhaber (Principal Accounting &
Financial Officer)
/s/ Dibo Attar Director June 28, 2000
Dibo Attar
/s/ Elliot Gerstenhaber Director June 28, 2000
Elliot Gerstenhaber
/s/ Richard P. Farkas Director June 28, 2000
Richard P. Farkas
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
Report of Independent Auditor F-2
Consolidated Balance Sheets
As of March 31, 2000 and 1999 F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)
Years Ended March 31, 2000 and 1999 F-4
Consolidated Statements of Stockholders' Equity
Years Ended March 31, 2000 and 1999 F-5
Consolidated Statements of Cash Flows
Years Ended March 31, 2000 and 1999 F-6
Notes to Consolidated Financial Statements F-7
<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, 2000 and 1999, 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, 2000 and 1999, 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 28, 2000
F-2
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T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND MARCH 31, 1999
ASSETS
2000 1999
---------- ----------
CURRENT ASSETS
Cash $ 9,081 $ 20,677
Accounts receivable 0 8,278
Prepaid expenses and other current assets 0 2,015
Current portion of non-current receivables
(Note 4) 275,023 282,206
---------- ----------
TOTAL CURRENT ASSETS 284,104 313,176
PROPERTY AND EQUIPMENT AT COST,
less accumulated depreciation of $138,581 at
March 31, 2000 and $119,958 at March 31, 1999
(Note 5) 9,950 25,544
OTHER ASSETS
Securities available for sale (Notes 3 and 10) 1,265,770 45,113
Investments in non-public companies (Note 10) 833,659 500
Non-current receivables (Note 4) 1,080,933 1,091,910
Deposits 6,514 514
---------- ----------
TOTAL OTHER ASSETS 3,186,786 1,138,037
---------- ----------
TOTAL ASSETS $3,480,930 $1,476,757
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 308,631 $ 284,326
Accrued liabilities 136,408 49,033
Current portion of long-term debt (Note 6) 1,987,265 302,425
--------- --------
TOTAL CURRENT LIABILITIES 2,432,304 635,784
LONG-TERM LIABILITIES
Long-term debt, less current portion
(Note 6) 310,826 6,749
--------- --------
TOTAL LONG-TERM LIABILITIES 310,826 6,749
TOTAL LIABILITIES 2,743,130 642,533
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 March 31, 2000 and 1999 47,427 47,427
Additional paid-in capital 7,764,014 7,764,014
Unrealized gain on investments 68,396 32,078
Accumulated deficit (7,093,599) (6,960,857)
Treasury stock at cost - 25,000 shares (48,438) (48,438)
--------- -----------
TOTAL STOCKHOLDERS' EQUITY 737,800 834,224
--------- -----------
$3,480,930 $ 1,476,758
============ ===========
See accompanying Notes to Consolidated Financial Statements
F-3
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
2000 1999
--------- --------
REVENUES
Management and billing fees, net of
allowances $ 589,105 $ 629,371
Income from finance receivables 15,440 25,835
Interest and dividends 0 3,608
Realized gain from sales of securities
available for sale 0 447,589
Miscellaneous income 976 0
---------- ---------
TOTAL REVENUES 605,521 1,106,404
OPERATING EXPENSES
Selling, general and administrative 681,920 1,128,269
Interest expense 56,343 34,637
---------- ----------
TOTAL OPERATING EXPENSES 738,263 1,162,906
--------- ----------
LOSS BEFORE INCOME TAXES ( 132,742) ( 56,502)
PROVISION FOR INCOME TAXES (Note 8) 0 0
---------- --------
NET LOSS ( 132,742) ( 56,502)
OTHER COMPREHENSIVE INCOME:
Unrealized gain (loss) on securities 36,317 97,695
Less: reclassification adjustment for
Gain included in net income 0 ( 447,589)
---------- -----------
TOTAL OTHER COMPREHENSIVE INCOME 36,317 ( 349,894)
---------- -----------
COMPREHENSIVE INCOME (LOSS) ($ 96,425)($ 406,396)
=========== ===========
PER SHARE DATA:
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 4,717,720 4,717,720
============ ===========
BASIC LOSS PER COMMON SHARE ($ 0.03)($ 0.01)
============ ===========
See accompanying Notes to Consolidated Financial Statements
F-4
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
BALANCE
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
--------- ------- ---------- ------------ ------- ------ --------- -----------
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
--------- ------- ---------- ------------ ------- ------ --------- -----------
Unrealized gain on securities
available for sale 36,318 36,318
Net loss (132,742) (132,741)
--------- ------- ---------- ------------ ------- ------ --------- -----------
BALANCE, March 31, 2000:
4,742,720 $47,427 $7,764,014 ($7,093,599)$ 68,396 25,000 ($48,438) $ 737,800
========= ======= ========== ============ ======= ====== ========= ===========
See accompanying Notes to Consolidated Financial Statements
F-5
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED MARCH 31, 2000 AND MARCH 31, 1999
2000 1999
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($ 132,742)($ 56,502)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 18,623 45,336
Provision for bad debts 75,000 264,084
Realized gain from sales of securities avaiable
for sale 0 (447,589)
Loss on Disposition of Assets 0 1,413
Deposits (paid) received (6,000) 0
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable 8,278 929
Prepaid expenses and other current assets 2,015 1,608
Increase (decrease) in:
Accounts payable 24,305 (12,203)
Accrued liabilities 177,597 (149,908)
Estimated environmental liability 0 (43,235)
--------- --------
NET CASH REQUIRED BY
OPERATING ACTIVITIES 167,076 (396,067)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in 50% owned corporation 0 (7,500)
Loans made evidenced by notes receivable (594,808) (629,371)
Collection of notes receivable 537,968 647,516
Acquisition of investments in non-public companies (833,659) 0
Acquisition of securities available for sale (1,219,166 0
Deposits and certificates of deposits 0 81,000
Proceeds from sale of securities
available for sale 0 580,700
Proceeds from sales of investments
in non-public companies 0 0
Acquisition of property and equipment (3,029) 3,381
--------- --------
NET CASH USED IN
INVESTING ACTIVITIES (2,112,694) 675,726
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds of loans payable - financial
institution 0 (40,000)
Proceeds of long-term debt 1,953,816 30,000
Repayment of long-term debt (19,794) (273,104)
---------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,934,022 (283,104)
---------- ---------
INCREASE (DECREASE)IN CASH (11,596) (3,446)
CASH - BEGINNING 20,677 24,123
---------- ---------
CASH - END $ 9,081 $ 20,677
========== =========
CASH PAID DURING THE PERIODS FOR:
Interest $ 1,341 $ 135,259
========== =========
See accompanying Notes to Consolidated Financial Statements
F-6
<PAGE>
T.H. LEHMAN & CO., INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000 AND 1999
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.
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 requirements 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.
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. The company only has one
segment, the medical business management.
F-7
<PAGE>
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 unaudited financial information of HPB at March 31, 2000
and March 31, 1999 is as follows:
March 31, 2000 March 31,1999
-------------- -------------
Financial Position:
Current Assets $ 62,927 $ 43,578
Property and equipment 1,080 9,466
--------- ----------
Total assets $ 64,007 $ 53,044
========= =========
Current liabilities(including
due to the Company of $262,567) $ 339,719 $ 327,712
Long-term obligations (a) 122,700 122,700
Stockholders' deficiency (398,412) (397,368)
--------- ----------
Total liabilities and stockholders'
deficiency $ 64,007 $ 53,044
========= ==========
Results of Operation:
Revenues $ 254,615 $ 190,642
Operating Expenses 255,658 218,609
--------- ---------
Net loss $ ( 1,043) $ (27,967)
========= =========
(a) Certain creditors of HPB are also creditors of the Company.
3. SECURITIES AVAILABLE FOR SALE
2000 1999
--------- ---------
Casella Waste Systems, Inc. (formerly KTI, Inc.) $ 9,926 $ 34,708
KSW, Inc. 21,966 10,405
KSW, Inc. 14,250 0
KSW, Inc. 254,917 0
Netsmart Technologies, Inc 14,711 0
OptiSystems Solutions, Ltd. 950,000 0
--------- ---------
$1,265,770 $ 45,113
========= =========
Unrealized gains and losses for marketable equity securities at March 31, 2000
and 1999 are as follows:
2000 1999
--------------------- ---------------------
Current Non-Current Current Non-Current
Aggregate Cost $ 1,083,416 $ 13,035 $ 0 $ 13,035
Aggregate Market Value $ 1,233,878 $ 31,892 $ 0 $ 45,113
Gross Unrealized Gains $ 150,462 $ 18,857 $ 0 $ 32,078
Less: Portion to Note Holders $ 102,187 $ 0 $ 0 $ 0
Add: Unrealized Gain in
Non-public companies $ 1,264 $ 0 $ 0 $ 0
Net Unrealized Gains $ 49,540 $ 18,857 $ 0 $ 32,078
F-8
<PAGE>
4. NON-CURRENT RECEIVABLES
Non-current receivables at March 31, 2000 and March 31, 1999 consisted of
the following:
2000 1999
----------- -----------
Assigned medical billings net of allowances of
which $275,023 of the unpaid is expected to be
collected during the current fiscal year. $1,411,202 $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 are expected to be collected
during the current fiscal year, nor is interest
being accrued. 852,379 852,379
----------- -----------
2,263,581 2,206,741
Less Allowance for Uncollectible (907,625) (832,625)
----------- -----------
1,355,956 1,374,116
Less Current Portion (275,023) (282,206)
----------- -----------
$1,080,933 $1,091,910
=========== ===========
5. PROPERTY AND EQUIPMENT
Property and equipment at March 31, 2000 and March 31, 1999 consisted of the
following:
Life 2000 1999
----------- ----------
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 (138,581) (119,958)
----------- ----------
$ 9,950 $ 25,544
=========== ==========
6. LONG-TERM DEBT
Long-term debt including accrued interest at March 31, 2000 and March 31, 1999
consisted of the following:
2000 1999
----------- ----------
Related Party:
Note payable of $12,000 principal plus accrued
interest at 8%, all due on February 1, 2001 for
acquisition of certain public shares. (Note 10) 12,155 0
Note payable of $214,666 principal plus accrued
interest at 8%, all due on February 1, 2001 for
acquisition of certain public shares. (Note 10) 217,442 0
Note payable of $856,250 principal plus accrued
interest at 8%, all due on February 1, 2001 for
acquisition of certain public shares. (Note 10) 867,323 0
Note payable of $252,901 principal plus accrued
interest at 8%, all due on March 14, 2001 for
acquisition of certain non-public shares. (Note 10) 253,844 0
Note payable of $575,699 principal plus accrued
interest at 8%, all due on January 3, 2001 for
acquisition of certain non-public shares. (Note 10) 586,802 0
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. 6,749 16,043
F-9
<PAGE>
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, 2001. 167,965 153,462
Note payable of $87,500 principal plus accrued
interest at 10%, all due on October 1, 2001. 100,613 91,839
Note payable of $40,500 principal plus accrued
interest at 8%, all due on October 1, 2001. 44,571 30,092
Note payable of $10,500 principal plus accrued
interest at 10%, all due on October 1, 2001. 0 11,021
Note payable of $3,200 principal plus accrued
interest at 10%, all due on October 1, 2001. 3,680 3,359
Note payable of $3,200 principal plus accrued
interest at 10%, all due on October 1, 2001. 3,680 3,359
Note payable of $31,800 principal plus accrued
interest at 10%, all due on October 1, 2001. 33,267 0
----------- ----------
2,298,091 309,174
Less Current Portion (1,987,265) (302,425)
----------- ----------
$ 310,826 $ 6,749
========== ==========
The amounts of long-term debt maturing in each of the years ending March 31 are
as follows: 2001 - $1,987,265; 2002 - $310,826.
7. 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; 10,000 shares cancelled in 1997) were issued to the
officers of the Company, 50,000 shares (cancelled in 1997) were issued to
the directors of the Company, and 50,000 shares (cancelled in 1997)were
issued to a consultant who was formerly an officer of the Company.
At March 31, 2000, 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, 2000, all of these options have expired.
8. INCOME TAXES
At March 31, 2000, for income tax reporting purposes, the Company has a
consolidated net operating loss carryforward of approximately $5,365,000
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.
9. 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: 2001 -
$52,913.
Rent expense amounted to $95,243 and $93,017 for the years ended March 31, 2000
and 1999, 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.
F-10
<PAGE>
10. 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 $79,200 for the years ended March 31, 2000 and 1999,
respectively.
During the first quarter of 2000 the Company entered into a series of
transactions with various entities controlled by its major shareholder. Under
these transactions, the Company acquired shares of two publicly traded companies
and two private companies for temporary investment purposes only. These shares
were acquired at the fair market value at the date of the acquisition. The
fair market value for the publicly traded shares was calculated at the then
quoted per share price. The privately held shares were value based on the
percentage of the company acquired multiplied by the estimated net book value
of the company acquired.
The company acquired these shares by issuing 8% interest bearing unsecured
notes. Under the terms of the notes the Company is to repay the notes
upon the earliest occurrence of either one year or upon the sale of the
respective shares as follows:
If upon sale of the shares the Company will pay all principal, accrued
interest and 75% of the gain from the sale of the respective shares.
If the Company does not sell the shares, after one year it will exchange
the shares held for all amounts due under the respective notes even if the then
value of the shares are less than the outstanding amounts due, including
accrued interest.
The shares acquired consist of 113,333 shares of KSW, Inc. for $226,666;
100,000 shares of Optisystems Solutions, Ltd. for $856,250; 536,158 shares of
Canada Wood Holdings, Inc. for $575,698.58; and 175 shares of Commercial
Bancshares, Inc. for $252,901.25.
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.
F-11
<PAGE>