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 Six Months Ended Commission File Number
August 31, 1997 0-21547
MEISENHEIMER CAPITAL, INC.
46 Quirk Road
Milford, Connecticut 06460
Tel: 203-877-9501
Delaware 06-1101766
(State of Incorporation) (I.R.S. Employer Identification-No.)
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes [root] No
At August 31, 1997, the latest practicable date, there were 4,477,084
shares of Common Stock outstanding, $.01 par value.
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MEISENHEIMER CAPITAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements:
Consolidated Balance Sheet - August 31, 1997..........................3
Consolidated Statement of Operations for the
Three Months and Six Months Ended
August 31, 1997 and 1996......................................4
Consolidated Statement of Cash Flow for the
Six Months Ended May 31, 1997.................................5
Condensed Statement of Stockholders' Equity for the
Six Months Ended May 31, 1997.................................6
Notes to Consolidated Financial Statements............................7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............9
PART II. OTHER INFORMATION........................................10
2
Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
August 31, 1997
Assets
Current :
Cash $13,102
Accounts receivable 59,010
Inventories 119,591
Investments 30,034
Other assets 18,437
------------------
240,174
Property and Equipment, Net 488,389
Goodwill, Net 28,137
Prepaid Barter Units 50,000
Prepaid Advertising Credits 657,812
Investment in Partnership 20,750
$1,485,262
==================
Liabilities and Stockholders' Equity
Liabilities:
Current:
Accounts payable and accrued expenses $258,076
Mortgage payable - current portion 3,449
Capital lease obligations - current portion 53,725
Notes payable - bank credit line 25,000
- shareholders 562,357
$902,607
Mortgage Payable, net of current portion 102,330
Minority Interest 95,000
$1,099,937
------------------
Stockholders' Equity
Common stock, $.01 par value, 10,000,000 shares
authorized; 4,477,084 shares issued and
outstanding 44,771
Additional paid-in-capital 3,367,008
Unrealized loss on available for sale
investments (58,511)
Retained Earnings (deficit) (2,966,943)
385,325
------------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $1,485,262
==================
3
Meisenheimer Capital, Inc. and Subsidiaries
Comparative Consolidated Statement of Operations
For Periods Ending August 31
(Unaudited)
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
8/31/97 8/31/96 8/31/97 8/31/96
Revenues
Net Sales $ 190,042 $ 196,021 386,176 $ 387,078
Franchise fees
and related
revenues 325,481 114,166 457,567 398,124
$ 515,523 $ 310,187 $ 843,743 $ 785,202
Operating Expenses
Cost of
goods sold $ 130,634 $ 140,091 $ 285,855 $ 285,272
Selling, general
and team
expenses 245,571 306,972 465,786 527,618
$ 376,205 $ 447,063 $ 751.641 $ 812,890
Income (loss)
from operations 139,318 (136,876) 92,102 (27,688)
Other Income
(Expense) (10,074) 5,353 (8,957) 4,044
Minority Interest(26,000) 38,000 4,000 (1,000)
Income Tax
Provision (1,750) (3,425) (3,250) (5,825)
Net Income
(Loss) $101,494 ($96,948) $83,895 (30,469)
Earnings Per
Share $0.02 ($0.02) $0.02 ($0.01)
Weighted
Average
Shares
Outstanding 5,012,690 5,005,384 5,012,690 5,005,384
4
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Cash Flow
(Unaudited)
Six Months
Ended
8/31/97
Cash Flows From Operations
Net income $ 83,895
Adjustments to reconcile net income
to net cash provided (used) by operations:
Minority interest (4,000)
Loss on partnership investment 18,750
Prepaid advertising credits (223,750)
Depreciation and amortization 35,350
(Increase) decrease in assets:
Accounts receivable 18,402
Inventories (2,991)
Other (8,342)
(Decrease) increase in liabilities:
Accounts payable and accrued expense 83,457
Net cash provided by operations $ 771
-----------------
Cash Flows From Investing Activities
Purchase of investments (920)
Net cash used by investing activities $ (920)
-----------------
Cash Flows From Financing Activities
Payments on notes payable $ (1,781)
Advances on credit line 25,000
Payments on capital lease obligations (66,838)
Advances from shareholders, net (45,499)
Net cash provided by financing activities $ 1,880
-----------------
Net Increase in Cash $ 1,731
Cash- March 1, 1997 11,371
-----------------
Cash- August 31, 1997 $13,102
=================
5
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
(Unaudited)
Six Months Ended August 31, 1997 and 1996
Additional
August 31, 1996 Common Stock Paid-in
-----------------
Shares Amount Capital Deficit
Balance, March 1, 1996 4,469,528 $44,695 $3,236,908 ($3,019,975)
Issuance of shares with
warrant exercise 535,856 35 3,360
Net loss (30,469)
Balance,
August 31, 1996 5,005,384 $44,730 $3,240,268 ($3,050,444)
=============== =========== ======= ================
August 31, 1997
Balance,
March 1, 1997 4,477,084 $44,771 $3,367,008 ($3,050,838)
Net income 83,895
Balance,
May 31, 1997 4,477,084 $44,771 $3,367,008 ($2,966,943))
=============== ============== ========== ================
6
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Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Six Months Ended August 31, 1997
Note 1 Basis of Presentation
The interim financial statements furnished reflect all adjustments which,
in the opinion of management, are necessary to present a fair presentation of
the financial position at August 31, 1997 and cash flows and results of
operations for the six month period ended August 31, 1997 and 1996. The
financial statements should be read in conjunction with the summary of
significant accounting policies and notes to financial statements included in
the Company's form 10 - KSB for the fiscal year ended February 28, 1997. The
results of operations for the six months ended August 31, 1997 and 1996 are not
necessarily indicative of the results to be expected for the year.
Note 2 Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Meisenheimer Capital, Inc. (MCI) and its subsidiaries Cadcom, Inc. (Cadcom),
Meisenheimer Capital Real Estate Holdings, Inc. (MCREHI), and the United States
Basketball League, Inc. (USBL) (collectively the Company). All subsidiaries,
except the USBL, are 100% owned by MCI. The USBL is a 61.55% owned subsidiary.
All intercompany accounts and balances have been eliminated.
Note 3 Investment in Marketable Securities
The Company has adopted FASB statement number 115, Accounting for Certain
Investments in Debt and Equity Securities. This statement requires that
investments in debt and equity securities be designated as trading, held to
maturity, or available for sale. Management considers the Company's marketable
securities to be available for sale. Available for sale securities are reported
at approximate market value.
Note 4 Inventories
As of August 31, 1997, inventories have been estimated (based upon gross
profit method for manufacturing inventories and upon perpetual inventory records
for USBL inventory).
Inventories consisted of the following as of August 31, 1997:
Raw materials 7,992
Work in process 22,272
Finished goods 73,327
Manufacturing inventory $103,591
USBL inventory 16,000
Total $119,591
Note 5 Earnings Per Share
Earnings per share were computed by dividing net earnings by the weighted
number of shares of common and common stock equivalents outstanding during the
period.
7
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Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Six Months Ended August 31, 1997
Note 6 Related Party Transactions
Spectrum Associates, Spectrum's parent company Synercom, Inc. and MCI are
entities controlled by MCI's president and members of his immediate family. This
group also owns a significant portion of the minority interest in the USBL. In
addition the capital leases are payable to Spectrum Associates. Until February
28, 1992, Cadcom was a 100% subsidiary of Synercom, Inc. Synercom sold its 100%
interest in Cadcom to MCI. As part of this agreement, MCI granted Synercom a
right of first refusal to purchase all of the shares of Cadcom should MCI
purpose to transfer said shares to a third party. This right of first refusal is
effective through February 28, 2002, and is collateralized by all of Cadcom's
assets.
Revenues recorded from related parties, mainly Spectrum Associates,
approximated $230,000 or 27% of total revenue for the six month period ended
August 31, 1997.
Note 7 Income Taxes
Effective December 1, 1993, the Company has adopted FASB Statement number
109, Accounting for Income Taxes, which requires a liability approach to
financial accounting and reporting for income taxes.
As of August 31, 1997, the Company had available approximately $88,100 in
net operating losses available as an offset to future taxable income. A deferred
tax asset has been reduced to zero by an allowance for realization of assets.
Note 8 Mortgage and Notes Payable
On August 16, 1995 the Company gave a mortgage to a bank as collateral for
a 20 year term loan of $120,000 on a commercial building that the Company
acquired. Monthly payments of approximately $1,000, including interest at 7.98%.
On August 12, 1997, the company negotiated a $25,000 credit line with Fleet Bank
at a rate of prime plus 1.5%. The company used the proceeds to retired a capital
lease obligation.
Note 9 Lease Commitments
Cadcom leases certain manufacturing equipment under capital leases. The
Company has capitalized manufacturing equipment in the amount of $365,100.
Future minimum lease payments, net of interest and taxes are $53,725 as of
August 31, 1997.
Cadcom and the USBL lease space in a building owned by MCREHI. All rent
charges, and income, from these intercompany dealings have been eliminated in
consolidation.
8
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Meisenheimer Capital, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Revenues for the six month period ended August 31, 1997, totaled
approximately $843,743. This represented a 7% increase from the corresponding
period ended August 31, 1996. This increase was due, mainly, to the increase of
USBL revenues by approximately $60,000. However, in the six month period ended
August 31, 1997, USBL revenues included $250,000 in initial franchise fees
collected in a noncash transaction for advertising credits. Accordingly,
collections from USBL activities decreased by approximately $195,000 due to the
lack of new franchises. Machined parts sales by the Company's Cadcom subsidiary
remained the same as in prior year period.
Gross profit from machined parts amounted to $100,321 for the six months
ended August 31, 1997, (26% of sales) compared to $101 806 (26% of sales) in the
corresponding period in the prior year.
Selling, general and team expenses approximated $62,000 less than the same
six month period last year. The decrease is mainly attributed to USBL's decrease
in advertising and team expenses.
Interest expense, net of interest income, decreased by approximately $3,000
for the six month period ended August 31, 1997, as compared to the comparable
period in 1996. This reflects decreases in debt obligations and lower investment
balances.
Consolidated net income increased from the six month periods ending August
31, 1996, from a net loss of $(30,469) to same six month period ending August
31, 1997, of a net of $83,895.
Liquidity and Capital Resources
The Company had a net working capital deficit of $(662,433) at August 31, 1997.
The Company's statement of cash flows reflects an overall increase in cash
of $1,731 for the six month period ended August 31, 1997.
The Company is making efforts to revitalize the USBL by seeking additional
equity capital and making new USBL franchisees. In addition, the Company is
seeking to expand its machine shop business (Cadcom) by finding new customers
for its services. The Company also hopes to increase exposure to the USBL to new
potential fans and franchise owners by airing additional games on cable
television. However, there can be no assurance that the Company will be
successful in these efforts.
9
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Meisenheimer Capital, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities
None
Item 3 Defaults on Senior Securities
None
Item 4 Submission of Matters to a Vote of Shareholders
During the six months ended August 31, 1997, there were no matters
submitted to a vote of security holders through the solicitation of proxies or
otherwise.
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
There were no reports filed on Form 8-K.
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MEISENHEIMER CAPITAL, INC.
(Registrant)
/s/ Daniel T. Meisenheimer
Daniel T. Meisenheimer III
Chairman and President
/s/ Richard C. Meisenheimer
Richard C. Meisenheimer
Vice President, Secretary and Director
Date: October 20, 1997
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