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 Three Months Ended Commission File Number
May 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 [xx] No
At May 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 - May 31, 1997............................................3
Consolidated Statement of Operations for the
Three Months Ended May 31, 1997 and 1996.............................................4
Consolidated Statement of Cash Flow for the
Three Months Ended May 31, 1997 and 1996.............................................5
Condensed Statement of Stockholders' Equity for the
Three Months Ended May 31, 1997 and 1996.............................................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
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2
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Balance Sheet
(Unaudited)
May 31, 1997
Assets
Current Assets
Cash $23,871
Accounts receivable 73,843
Inventories 113,217
Investments 31,260
Other assets 13,942
256,133
Property and Equipment, Net 503,234
Goodwill, Net 28,341
Prepaid Barter Units 50,000
Prepaid Advertising Credits 434,062
Investment in Partnership 30,125
$1,301,895
Liabilities and Stockholders' Equity
Liabilities
Current Liabilities
Accounts payable and accrued expenses $229,703
Mortgage payable - current portion 3,449
Capital lease obligations - current portion 79,166
Notes payable - shareholders 513,451
825,769
Capital Lease Obligation, net of current amount 18,922
Mortgage Payable, net of current amount 103,147
Minority Interest 69,000
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 (58,285)
Deficit (3,068,437)
285,057
$1,301,895
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Operations
(Unaudited)
Three Months Three Months
Ended Ended
5/31/97 5/31/96
Revenues
Net Sales $196,134 $191,057
Franchise fees and related revenues 132,086 283,958
328,220 475,015
Operating Expenses
Cost of goods sold 155,221 145,181
Selling, general and team expenses 220,215 220,646
375,436 365,827
Income (loss) from operations (47,216) 109,188
Other Income (Expense)
Interest expense (6,227) (10,531)
Interest income 160 1,289
Other income 7,184 7,933
1,117 (1,309)
Minority Interest (30,000) 39,000
Income Tax Provision 1,500 2,400
Net Income (Loss) ($17,599) $66,479
Earnings Per Share ($0.00) $0.01
Weighted Average Shares Outstanding 4,477,084 5,005,384
3
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Cash Flow
(Unaudited)
Three Months Three Months
Ended Ended
5/31/97 5/31/96
Cash Flows From Operations
Net income (loss) ($17,599) $66,479
Adjustments to reconcile net income (loss)
to net cash provided (used) by operations:
Minority interest (30,000) 39,000
Loss on partnership investment 9,375
Prepaid advertising credits (250,000)
Depreciation and amortization 20,301 21,421
(Increase) decrease in assets:
Accounts receivable 3,569 14,233
Inventories 3,383 (10,256)
Other (3,847) (21,297)
(Decrease) increase in liabilities:
Accounts payable and accrued expense 55,084 75,160
Net cash (used in) provided by operations 40,266 (65,260)
Cash Flows From Investing Activities
Purchase of property and equipment
Purchase of investments (920) (20,100)
Proceeds from sales of investments 0 3,375
Net cash (used in) provided by investing activities 920) (16,725)
Cash Flows From Financing Activities
Payments on notes payable 0 (12,100)
Payments on mortgage payable (964) (3,790)
Payment on bridge loan payable
Payments on capital lease obligation (22,475) (20,492)
Advances to (payments from) shareholders, net (3,407) (107,199)
Net cash (used in) provided by financing
activities (26,846) (143,581)
Net Increase (Decrease) in Cash 12,500 (225,566)
Cash, beginning of period 11,371 278,188
Cash, end of period $23,871 $52,622
Supplemental Disclosures
Interest paid $4,413 $10,531
Taxes paid $0 $0
4
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Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
(Unaudited)
Three Months Ended May 31, 1997 and 1996
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Additional
May 31, 1996 Common Stock Paid-in
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Shares Amount Capital Deficit
Balance, March 1, 1996 4,469,528 $44,695 $3,236,908 ($3,019,975)
Issuance of shares in connection
with warrant exercise 1,500 15 3,360
Net income 66,479
Balance, May 31, 1996 4,471,028 $44,710 $3,240,268 ($2,953,496)
=============== ============== =================================
May 31, 1997
Balance, March 1, 1997 4,477,084 $44,771 $3,367,008 ($3,050,838)
Net (loss) (17,599)
Balance, May 31, 1997 4,477,084 $44,771 $3,367,008 ($3,068,437)
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5
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Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended May 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, cash flows and results of operations for the three month
period ended May 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 three months ended
May 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 May 31, 1997, inventories have been estimated (based upon gross
profit method for manufacturing inventories and upon inventory records for USBL
inventory).
Inventories consisted of the following as of May 31, 1997:
Raw materials $ 7,500
Work in process 20,900
Finished goods 68,817
Manufacturing inventory 97,217
USBL inventory 16,000
Total $113,217
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6
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Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended May 31, 1997
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. Options and warrants were excluded from the May 31, 1997 computation
since they are antidilutive.
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 $236,000 or 72% of total revenue for the three month period ended
May 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 May 31, 1997, the Company had available approximately $168,000 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%
.
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 $98,088 as of May
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.
7
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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 three month period ended May 31, 1997 totaled
approximately $328,000. This represented a 31% decrease from the corresponding
period ended May 31, 1996. This decrease was due, mainly, to the fall of USBL
revenues by approximately $152,000. However, in the three month period ended May
31, 1996, USBL revenues included $250,000 in initial franchise fees collected in
a noncash transaction for advertising credits. Accordingly, Cash collections
from USBL activities increased by approximately $98,000. Machined parts sales by
the Company's Cadcom subsidiary increased slightly in the current quarter (from
the same quarter last year) by over $5,000.
Gross profit from machined parts amounted to $40,913 for the three months
ended May 31, 1997 (21% of sales) compared to $45,876 (24% of sales) in the
corresponding period in the prior year. The decrease in gross margin is
principally attributable to a small increase in manufacturing overhead.
Selling, general and team expenses approximated $220,000 for both the three
month period ending May 31, 1997 and May 31, 1996. Expenses remained consistent
for both periods.
Interest expense, net of interest income, decreased by approximately $3,000
for the three month period ended May 31, 1997 as compared to the comparable
period in 1996. This reflects decreases in debt obligations and lower investment
balances.
Consolidated net income decreased from May 31, 1996 from a net income of
$66,479 to a loss of $17,599 (a $84,078 decrease). Almost all of this decrease
is attributable to the drop in USBL revenues.
Liquidity and Capital Resources
The Company had a net working capital deficit of $(569,636) at May 31, 1997.
The Company's statement of cash flows reflects an overall increase in cash
of $12,500 for the three month period ended May 31, 1997. Cash flows from
operations increased approximately $105,000 from the three month period ended
May 31, 1996.
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.
8
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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 three months ended May 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: July 30, 1997
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