FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ............. to ............
Commission file number: 0-3338
NMC CORP.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-1558317
- - ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
477 Madison Avenue, Suite 701
New York, New York 10022
---------------------------------------
(Address of principal executive offices)
(Zip Code)
212-207-4560
(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At December 1, 1996 there were 1,136,677 shares of Common Stock, $.06 2/3
par value, outstanding.
<PAGE>
NMC CORP.
INDEX
Page No.
--------
Part I -- Financial Information 1
Item 1. Financial Statements
Consolidated Balance Sheets as of
October 31, 1996 (unaudited) and
July 31, 1996 2-3
Consolidated Statements of Operations
for the Three Months Ended October 31,
1996 and 1995 (unaudited) 4
Consolidated Statements of Cash Flows
for the Three Months Ended October 31,
1996 and 1995 (unaudited) 5-6
Notes to Consolidated Financial
Statements (unaudited) 7-10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 11-13
Part II -- Other Information
Item 4. Submission of Matters to a Vote of
Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
consolidated financial statements pursuant to the rules and regulations of the
Securities and Exchange Commission. It is suggested that the following
consolidated financial statements be read in conjunction with the year-end
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended July 31, 1996.
The results of operations for the three month period ended October 31,
1996, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
-1-
<PAGE>
NMC CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
October 31, July 31,
1996 1996
----------- ----------
(Unaudited)
Current Assets:
Cash $ 24,477 $ 15,592
Accounts receivable -- less allowance
for doubtful accounts of $19,440 and
$9,000 565,486 587,696
Inventories 11,199 13,468
Prepaid expenses and sundry
receivables 79,411 132,823
---------- ----------
Total Current Assets 680,573 749,579
---------- ----------
Property, plant and equipment -- net 1,525,387 1,437,612
Unamortized excess of cost over fair
value of assets acquired 965,694 979,595
Deferred costs 22,283 18,868
---------- ----------
TOTAL ASSETS $3,193,937 $3,185,654
========== ==========
(Continued)
See notes to consolidated financial statements.
-2-
<PAGE>
NMC CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
October 31, July 31,
1996 1996
----------- ----------
(Unaudited)
Current Liabilities:
Short-term borrowings $ 1,162,142 $1,251,373
Current portion of long-term debt 32,121 27,343
Current portion of capital lease
obligations 371,270 380,897
Accounts payable 299,506 333,153
Accrued expenses 340,836 274,811
Customer deposits 119,464 105,873
Deferred revenue 153,938 138,312
Due to officer 237,500 200,000
Income taxes payable 7,970 7,970
----------- ----------
Total Current Liabilities 2,724,747 2,719,732
----------- ----------
Long-term debt 61,468 68,944
Deferred revenues 5,312 7,392
----------- ----------
Total Liabilities 2,791,527 2,796,068
----------- ----------
Minority interest in consolidated
subsidiary 586,411 543,461
Stockholders' Deficiency:
Preferred stock, par value $1; authorized
500,000 shares (involuntary liquidation
value $777,912):
Convertible Series B, at redemption
value; issued and outstanding 65,141
shares 130,282 130,282
Cumulative Series C, par value $1,
issued and outstanding 64,763 shares 64,763 64,763
Common, par value $.06-2/3; authorized
20,000,000 shares; issued and outstanding
1,086,677 and 986,677 shares 72,481 65,811
Additional paid-in capital 7,461,440 7,368,110
Deficit (7,931,908) (7,792,894)
Foreign currency translation adjustment 18,941 10,053
----------- ----------
Total Stockholders' Deficiency (184,001) (153,875)
----------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS'
DEFICIENCY $ 3,193,937 $3,185,654
=========== ==========
See notes to consolidated financial statements.
-3-
<PAGE>
NMC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
October 31,
-------------------------
1996 1995
--------- ---------
Revenues:
Sales $ 541,670 $ 198,964
--------- ---------
Costs and Expenses:
Cost of sales 233,793 54,026
Selling, general and administrative expenses 392,432 199,440
Interest expense 42,991 9,599
--------- ---------
669,216 263,065
--------- ---------
(Loss) before income tax provision (127,546) (64,101)
Minority interest in net income of
consolidated subsidiary 11,468 --
--------- ---------
(Loss) before income tax provision (139,014) (64,101)
Income tax provision -- --
--------- ---------
Net (loss) $(139,014) $ (64,101)
========= =========
(Loss) per common share $ (.14) $ (.07)
========= =========
Weighted average number of common
shares outstanding 987,764 936,677
========= =========
See notes to consolidated financial statements.
-4-
<PAGE>
NMC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
October 31,
------------------------
1996 1995
--------- ---------
Cash flows from operating activities:
Net (loss) $(139,014) $ (64,101)
Adjustments to reconcile net (loss) to
net cash from operating activities:
Depreciation and amortization 106,110 25,325
Reserve for bad debts 10,440 --
Minority interest in income of
consolidated subsidiary 11,468 --
Unpaid executive compensation 37,500 --
Changes in operating assets and
liabilities 135,566 (78,291)
--------- ---------
Net Cash Provided by (used in)
Operating Activities 162,070 (117,067)
--------- ---------
Cash flows from investing activities:
Purchase of property, plant and
equipment (158,422) (17,110)
--------- ---------
Cash flows from financing activities:
Proceeds from borrowings 317,500 155,000
Repayments of borrowings (321,151) (7,162)
--------- ---------
Net Cash (Used in) provided by
Financing Activities (3,651) 147,838
--------- ---------
Foreign currency translation adjustment 12,015 (11,225)
--------- ---------
Net increase in cash and cash
equivalents 8,885 2,436
Cash and Cash Equivalents -- beginning
of period 15,592 14,043
--------- ---------
Cash and Cash Equivalents -- end of
period $ 24,477 $ 16,479
========= =========
(Continued)
See notes to consolidated financial statements
-5-
<PAGE>
NMC CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
Three Months Ended
October 31,
------------------------
1996 1995
--------- ---------
Changes in operating assets and liabilities:
Decrease in accounts receivable $ 11,770 $ 14,563
(Increase) decrease in inventories 2,269 (6,298)
Decrease in prepaid expenses and sundry
receceivables 53,412 30,545
(Increase) in deferred costs (3,415) (153,695)
Increase (decrease) in accounts payable (33,647) 10,901
Increase in accrued expenses 78,040 14,122
(Decrease) in income taxes payable -- (810)
Increase in deferred revenue 13,546 12,381
Increase in customer deposits 13,591 --
--------- ---------
$ 135,566 $ (78,291)
========= =========
Supplemental Information:
Cash paid during the year for:
Interest $ 16,626 $ 347
========= =========
Income taxes $ -- $ --
========= =========
Supplementary information of non-cash
investing and financing activities:
Conversion of convertible debt to common stock $ 100,000
=========
See notes to consolidated financial statements.
-6-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The consolidated balance sheet as of October 31, 1996, the consolidated
statement of operations for the three months ended October 31, 1996 and 1995,
and the consolidated statement of cash flows for the periods then ended have
been prepared by NMC Corp. and Subsidiary ("The Company" or "NMC") and are
unaudited. In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows for all periods presented have
been made. Certain items in the October 31, 1995 financial statements have been
reclassified to conform to October 31, 1996 classifications. The information for
July 31, 1996 was derived from audited financial statements.
2. The Board of Directors authorized a 1-10 reverse stock split effective as of
April 17, 1995. All share and per share data for prior periods presented have
been restated to reflect the reverse stock split.
3. On October 4, 1996, the Company signed an agreement in principle, subject to
a definitive executed agreement, to acquire Select Acquisitions, Inc.
("Select"), the holding company for All American Recreation, Inc., which intends
to develop and manage golf courses, skating rinks and community related housing.
Select also intends to operate two recycling plastic facilities in North
Carolina. Under the terms of the agreement, shareholders of Select will receive
approximately 5.9 million shares of the Company's common stock based on
receiving 2.11 shares of the Company's common stock for each of the shares of
Select stock outstanding, which approximates 2.8 million shares. The combined
Company's business will be plastics recycling, recreation development, and
distribution of bottled mineral water.
4. The accompanying consolidated financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company has experienced recurring losses and negative cash flows from
operations through October 31, 1996. In addition, losses and negative cash flows
from operations have continued throughout the period subsequent to October 31,
1996.
The Company's only operations relate to Krystal which is the Company's only
source of cash flow. Management estimates that this cash flow should be
sufficient to support Krystal's operations during the next twelve (12) months.
Additional funds will be required to pay for the cost of NMC's operations, which
will approximate $300,000 annually.
On November 1, 1995, Krystal acquired substantially all the net assets of
Water Express ("Water Express"), a company located in London, England engaged in
the sale of bottled water. The Company believes the cash flows from the Water
Express acquisition will be sufficient to fund its operations in the future.
Should NMC use any funds from Krystal to fund NMC's operations, the Company's
fifty (50%) percent equity partner must approve such a distribution and is
entitled to an equal distribution.
-7-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Company's continued existence is dependent upon its ability to obtain
needed working capital through additional equity and/or debt financing and
positive cash flows from the Company's recent acquisitions. Management is
actively seeking additional capital to ensure the continuation of its
operations. However, there is no assurance that additional capital will be
obtained. In addition, the Company has an outstanding line-of-credit in the
amount of $528,000 which is due no later than March 31, 1997, and has borrowed
$200,000 from an unaffiliated third party during March, 1995, of which $100,000
was converted to common stock upon the exercise of a warrant to purchase common
stock of NMC Corp. on October 31, 1996, and the balance is due no later than
July 31, 1997. Both loans are secured by the fifty (50%) percent interest of
Krystal owned by the Company. If the loans are not repaid, the Company could
lose its only revenue generating operation. These matters raise substantial
doubt about the ability of the Company to continue as a going concern.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or the amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.
5. In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation". The standard encourages, but
does not require, companies to recognize compensation expense of grants for
stock, stock options and other equity instruments to employees based on fair
value accounting rules. SFAS No. 123 requires companies that choose not to adopt
the new fair value accounting rules to disclose pro forma net income and
earnings per share under the new method. The standard is effective for fiscal
years beginning after December 15, 1995. The Company has not yet determined if
it will adopt the accounting provisions of SFAS No. 123 or only the disclosure
provision. However, the Company does not believe that adoption of SFAS No. 123
will have a significant effect on its results of operations.
6. (Loss) per common share is computed using the weighted average number of
common shares outstanding during the year. The convertible preferred stock and
exercise of warrants are not considered common share equivalents for purposes of
the computation of earnings per share because their effect is antidilutive.
7. On November 1, 1995, Krystal acquired substantially all the net assets of
Water Express, a water distribution company in the United Kingdom in exchange
for the issuance of 363,155 shares of the common stock of Krystal, approximately
$379,000 in cash, and a promissory note of approximately $125,000. The total
purchase price approximated $1,085,000. As of this date, the Company's ownership
equity in Krystal has been reduced to fifty (50%) percent. The non-NMC interest
represents the minority stockholder's proportionate share of the equity of
Krystal.
-8-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The acquisition has been accounted for using the purchase method of
accounting, and, accordingly the purchase price was allocated to the assets
purchased and the liabilities assumed based upon the fair values at the date of
acquisition. The fair value of the assets acquired was $1,260,000 and the
liabilities assumed totalled $360,000 resulting in goodwill of approximately
$185,000, which will be amortized principally over twenty (20) years. The
operating results of the acquired business is included in the consolidated
statement of operations from the date of acquisition.
Proforma unaudited operating information for the three months ended October
31, 1995 of NMC, Krystal and Water Express assuming the business combinations
had occurred at the beginning of the respective year in which Krystal and Water
Express were acquired is as follows:
Three Months Ended
October 31,
1995
------------------
Net sales $364,623
Net (loss) (24,715)
Net (loss) per share (.03)
8. Property, plant and equipment consists of the following:
October 31, July 31,
1996 1996
---------- ----------
Machinery and equipment $1,845,048 $1,652,225
Leasehold improvements 6,197 6,197
Master tapes 20,001 20,001
---------- ----------
1,871,246 1,678,423
Less accumulated depreciation and amortization 345,859 240,811
---------- ----------
Net Property, Plant and Equipment $1,525,387 $1,437,612
========== ==========
-9-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
9. Short-term debt consists of the following:
October 31, July 31,
1996 1996
---------- ----------
Secured note, due March 20, 1997
interest at 7.5% per year (1) $ 100,000 $ 100,000
Secured note, due the earlier of
March 31, 1997 or within three (3)
days after the closing of a secondary
offering of the Company's
securities, interest at 18% per
year (2) 528,000 649,692
Secured note, due the earlier of
July 31, 1997 or within ten (10) days
after the closing of a secondary
offering of the Company's securities,
interest at 10% per year (3) 100,000 200,000
Secured note, due on demand, interest
at 5% per year (4) 76,593 71,593
Unsecured note, due on demand,
interest at 5% per year (5) 108,651 103,541
Unsecured note, due on demand, interest
at 5% per year (6) 243,418 120,416
Unsecured notes, due on demand,
interest at 5% per year 5,480 6,131
---------- ----------
$1,162,142 $1,251,373
========== ==========
Long-term debt is as follows:
October 31, July 31,
1996 1996
---------- ----------
Secured notes payable, due July, 1997
through April, 2000, interest at 9%
per year $ 93,589 $ 96,287
Less current maturities 32,121 27,343
---------- ----------
$ 61,468 $ 68,944
========== ==========
The scheduled repayment of long-term debt is as follows:
Years Ending July 31,
- - ---------------------
1997 $27,343
1998 32,334
1999 16,322
2000 20,288
Thereafter --
-------
$96,287
=======
-10-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) The note payable due Republic Bank is collateralized by a certificate of
deposit of an affiliate of Mrs. Barbara Greenfield ("Mrs. Greenfield"), wife
of Mr. Marvin E. Greenfield ("Mr. Greenfield"), the Company's President and
Chief Executive Officer.
(2) On December 8, 1995, NMC and Krystal entered into separate loan agreements
with Ballydine Investments Limited ("Ballydine") for a combined
line-of-credit ("line-of-credit") of up to $750,000. The line-of-credit is
guaranteed by NMC and is secured by the fifty (50%) percent of Krystal owned
by the Company. Any amount that Krystal borrows is secured by an English
debenture ("Security Agreement") from Krystal which encumbers all of
Krystal's assets in favor of Ballydine. The lien on this collateral is
superior to prior liens given to other lenders, including the affiliated
entities.
On September 30, 1996, Krystal paid Ballydine $286,000 which liquidated the
liability to Ballydine from Krystal. The lien on the assets of Krystal by
Ballydine was released. The monies were advanced from the shareholders of
Krystal to repay the loan. The advances from the shareholders are due on
demand if there is sufficient cash flow to pay the shareholders.
The amount due Ballydine from NMC in the amount of $528,000 was extended to
the earlier of March 31, 1997 or within three (3) days after the closing of
a secondary offering of the Company's securities.
As additional consideration for the line-of-credit, the Company has issued
9.9% of the outstanding, fully diluted shares of the Company, or 108,414
shares, in the form of a warrant exercisable at $.001 per share, with
registration rights.
(3) The secured note to an affiliated third party is collateralized by all of
the common stock of Krystal owned by the Company subordinated to the
line-of-credit.
(4) The secured note payable to Mrs. Greenfield is also collateralized by all of
the common stock of Krystal owned by the Company. The security interest is
subordinate to the line-of-credit and the third party lender.
(5) The unsecured note is payable to Mrs. Greenfield representing advances made
by Mrs. Greenfield to Krystal.
(6) The unsecured note is payable to the fifty (50%) percent owner of Krystal in
connection with the acquisition of Water Express by Krystal.
-11-
<PAGE>
NMC CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
10. On November 21, 1996, NMC entered into an agreement with Matthew Mitchison,
NMC's fifty (50%) percent equity partner in Krystal. The agreement grants NMC
the right to acquire the shares of Krystal owned by Mitchison no later than
March 31, 1997 for a purchase price of approximately $1,600,000. Included as
part of the agreement is a release of any claims between the parties.
NMC has also granted the same option to Mitchison for the purchase of
the shares of Krystal owned by NMC.
-12-
<PAGE>
Item 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1996 VS. THREE MONTHS ENDED OCTOBER 31, 1995
The Company currently operates its business through Krystal. On November 1,
1995, Krystal acquired substantially all the net assets of Water Express. The
operating results of Water Express have been included in the consolidated
statement of operations from the date of acquisition.
Revenues from sales increased 172.3% to $541,670 during the three months
ended October 31, 1996 from $198,964 for the three months ended October 31,
1995. The increase is primarily due to the inclusion of Water Express in the
settlement of operations, an increase in the number of customers and more demand
for the Company's product.
Cost of sales increased 332.7% to $233,793 during the three months ended
October 31, 1996 from $54,026 for the three months ended October 31, 1995 due to
the reasons explained above.
Selling, general and administrative expenses increased 96.8% to $392,432
for the three months ended October 31, 1996 from $199,440 for the three months
ended October 31, 1995. The increase is primarily due to a the inclusion of
Water Express in the statement of operations, an expansion of the Company's
marketing program, increase in officers compensation and increases in
depreciation of equipment and amortization of goodwill in connection with the
Water Express acquisition.
Interest expense increased to $42,991 for the three months ended October
31, 1996 from $9,599 for the three months ended October 31, 1995. The increase
is attributable to the increase in debt incurred by the Company in the three
months ended October 31, 1996 as discussed below in "Liquidity and Capital
Resources".
The net loss increased 116.9% to $139,014 for the three months ended
October 31, 1996 from $64,101 for the three months ended October 31, 1995. The
Company attributes the increase primarily to the increase in interest expense
and the increase in officers compensation. The improved operations of Krystal
have not been able to offset the overhead of the Company at its corporate
offices.
LIQUIDITY AND CAPITAL RESOURCES
NMC currently has no operations other than those relating to Krystal's
business which will, therefore, provide the Company's only source of cash flow
for the foreseeable future. Management estimates that this cash flow should be
sufficient to support Krystal's operations during the next 12 months. This
estimate is based on existing water dispenser unit lease commitments and
projected water sales which, in turn, are based on historical per unit water
usage. Additional funds will be required to pay for the cost of NMC's
operations.
-13-
<PAGE>
Item 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
Krystal acquired substantially all the net assets of Water Express in
exchange for the issuance of 363,155 shares of the common stock of Krystal,
approximately $379,000 in cash, and a promissory note of approximately $125,000.
As of this date, the Company's ownership equity in Krystal has been reduced to
fifty (50%) percent.
On November 21, 1996, NMC entered into an agreement with Matthew Mitchison,
NMC's fifty (50%) percent equity partner in Krystal. The agreement grants NMC
the right to acquire the shares of Krystal owned by Mitchison no later than
March 31, 1997 for a purchase price of approximately $1,600,000. Included as
part of the agreement is a release of any claim between the two parties. The
Company will attempt to finance the acquisition through various financing
sources. No agreement or letter of intent has been consummated between the
Company and any financing sources and there is no assurance they ever will. NMC
has also granted the same option to Mitchison for the purchase of the shares of
Krystal owned by NMC.
On October 4, 1996, the Company signed an agreement in principle, subject
to a definitive executed agreement, to acquire Select Acquisitions, Inc.
("Select"), the holding company for All American Recreation, Inc. which intends
to develop and manage golf courses, skating rinks and community related housing.
Select also intends to operate two recycling plastic facilities in North
Carolina. Under the terms of the agreement, shareholders of Select will receive
approximately 5.9 shares of the Company's common stock for each of the shares of
Select stock outstanding, which approximates 2.8 million shares. The combined
Company's business will be plastics recycling, recreation development and
distribution of bottled mineral water. Should the proposed merger take place,
the Company will need substantial funds to finance its operations. As of the
date hereof, the Company has no letter of intent for a proposed public equity
financing or any document setting forth the terms of any financing. No assurance
can be given that an equity financing will ever be consummated.
On December 8, 1995 NMC and Krystal entered into separate loan agreements
with Ballydine Investments Limited ("Ballydine") for a line-of-credit
("line-of-credit") of up to $750,000. The line-of-credit is guaranteed by NMC
and is secured by the fifty (50%) percent of Krystal owned by the Company. Any
amount that Krystal borrows is secured by an English debenture ("Security
Agreement") from Krystal which encumber all of Krystal's assets in favor of
Ballydine. The lien on this collateral is superior to prior liens given to other
lenders, including affiliated entities.
On September 30, 1996, Krystal paid Ballydine $286,000 which liquidated the
liability to Ballydine from Krystal. The lien on the assets of Krystal by
Ballydine was released. The monies were advanced from the shareholders of
Krystal to repay the loan. The advances from the shareholders are due on demand
if there is sufficient cash flows to pay the shareholders.
The amount due Ballydine from NMC in the amount of $528,000 was extended to
the earlier of March 31, 1997 or within three (3) days after the closing of a
secondary offering of the Company's securities. As additional consideration for
the line-of-credit, the Company has issued 9.9% of the outstanding fully
diluted shares of the Company, or 108,414 shares, in the form of a warrant
exercisable at $.001 per share, with registration rights.
-14-
<PAGE>
Item 2. MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (Continued)
LIQUIDITY AND CAPITAL RESOURCES (Continued)
The Company's continued existence is dependent upon its ability to obtain
needed working capital through additional equity and/or debt financing and
positive cash flows from the Company's recent acquisition. Management is
actively seeking additional capital to ensure the continuation of its
operations. However, there is no assurance that additional capital will be
obtained. In addition, the Company has an outstanding line-of-credit in the
amount of $528,000 which is due no later than March 31, 1997, and has borrowed
$200,000 from an unaffiliated third party during March, 1995, of which $100,000
was converted into common stock upon the exercise of a warrant to purchase
common stock of NMC Corp. on October 31, 1996, and the balance is due no later
than July 31, 1997. Both loans are secured by the fifty (50%) percent interest
of Krystal owned by the Company. If the loans are not repaid, the Company could
lose its only revenue generating operation. Management estimates the cash flow
from Krystal's operations will also be sufficient to support the corporate
overhead of NMC during the next twelve (12) months. The cash flow from Krystal's
operations are based on projections prepared internally by the management of
Krystal. No assurance can be given that these projections will be realized.
Should NMC use any funds from Krystal to fund NMC's operations, the Company's
fifty (50%) percent equity partner must approve such a distribution and is
entitled to an equal distribution.
-15-
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
See Item 3 of the Company's Form 10-K for the year
ended July 31, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed by
the registrant during the quarter ended October 31,
1996.
-16-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
NMC CORP.
------------------------------------
(Registrant)
Date: December 12, 1996 By: /s/ MARVIN GREENFIELD
------------------------------------
Marvin Greenfield,
President and Treasurer
Duly Authorized Officer of the
Registrant (Principal Financial
Officer)
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NMC CORP.
AND SUBSIDIARY FINANCIAL STATEMENTS AT OCTOBER 31, 1996 AND THE THREE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> OCT-31-1996
<CASH> 24,477
<SECURITIES> 0
<RECEIVABLES> 584,926
<ALLOWANCES> 19,440
<INVENTORY> 11,199
<CURRENT-ASSETS> 680,573
<PP&E> 1,871,246
<DEPRECIATION> 345,859
<TOTAL-ASSETS> 3,193,937
<CURRENT-LIABILITIES> 2,724,747
<BONDS> 0
0
257,521
<COMMON> 72,481
<OTHER-SE> (451,527)
<TOTAL-LIABILITY-AND-EQUITY> 3,193,937
<SALES> 541,670
<TOTAL-REVENUES> 541,670
<CGS> 233,793
<TOTAL-COSTS> 626,225
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,991
<INCOME-PRETAX> (139,014)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139,014)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> 0
</TABLE>
