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 Nine Months Ended Commission File Number
November 30, 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 X
No
As of November 17, 1997, the latest practicable date, there were 4,477,084
shares of Common Stock outstanding, $.01 par value.
<PAGE>
MEISENHEIMER CAPITAL, INC.
INDEX
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Financial Statements:
Consolidated Balance Sheet - November 30, 1997.................3
Consolidated Statement of Operations for the
Three Months and Nine Months Ended
November 30, 1997 and 1996.....................................4
Consolidated Statement of Cash Flow for the
Nine Months Ended November 30, 1997............................5
Condensed Statement of Stockholders' Equity for the
Nine Months Ended November 30, 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
<PAGE>
<TABLE>
Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Balance Sheet
As of November 30, 1997
(Unaudited)
<CAPTION>
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current:
Cash $ 8,984
Accounts receivable 186,887
Inventories 144,476
Investments 28,204
Other current assets 11,462
-----------------
$ 380,013
Property and Equipment, Net 468,874
Goodwill, Net 27,933
Prepaid Barter Units 50,000
Prepaid Advertising Credits 657,812
Investment in Partnership 11,375
----------------
TOTAL ASSETS $ 1,596,007
================
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current:
Accounts payable and accrued Expenses $ 271,764
Mortgage payable - current portion 3,449
Capital lease obligations - current portion 46,290
Notes payable - bank credit line 25,000
- shareholders 597,407
-----------------
$ 943,910
Mortgage Payable, net of current portion 101,426
Minority Interest 130,000
----------------
$ 1,175,336
----------------
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................................. (61,341)
Retained Earnings (deficit) (2,929,767)
-----------------
$ 420,671
----------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $ 1,596,007
================
</TABLE>
3
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<TABLE>
Meisenheimer Capital, Inc. and Subsidiaries
Comparative Consolidated Statement of Operations
For Periods Ending November 30
(Unaudited)
- --------------------------------------------- ------------------ ------------------ ------------------ -----------------
<CAPTION>
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
11/30/97 11/30/96 11/30/97 11/30/96
------------------ ------------------ ------------------ -----------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Net Sales $ 191,091 $ 197,684 $ 577,267 $ 584,762
Franchise fees and related revenues 294,536 83,853 752,103 481,977
$ 485,627 $ 281,537 $1,329,370 $1,066,739
---------------- ---------------- --------------- -----------------
Operating Expenses
Cost of goods sold $ 135,835 $ 132,164 $ 421,690 $ 417,436
Selling, general and team expenses 262,728 114,908 728,514 642,526
$ 398,563 $ 247,072 $1,150,204 $1,059,962
Income (loss) from operations 87,064 34,465 179,166 6,777
---------------- ---------------- --------------- -----------------
Other Income (Expense) (16,315) (13,169) (25,272) (9,125)
Minority Interest (35,000) (10,000) (31,000) (11,000)
Income Tax Provision 1,427 (5,000) (1,823) (10,825)
Net Income (Loss) $37,176 $6,296 $121,071 ($24,173)
================ ================ =============== =================
Earnings Per Share $0.01 $0.00 $0.02 $0.00
================ ================ =============== =================
Weighted Average Shares Outstanding 5,012,690 5,005,384 5,012,690 5,005,384
================ ================ =============== =================
</TABLE>
4
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Cash Flows
(Unaudited)
- -----------------------------------------------------------------------------
Nine Months
Ended
11/30/97
------------------
Cash Flows from Operations:
Net income $ 121,071
Adjustments to reconcile net income to net cash
provided (used) by operations:
Minority interest 31,000
Loss on partnership investment 28,125
Prepaid advertising credits (223,750)
Depreciation and amortization 57,039
(Increase) decrease in assets:
Accounts receivable (109,475)
Inventories (27,876)
Other (3,336)
(Decrease) increase in liabilities:
Accounts payable and accrued expenses 97,144
Net cash provided by operations $ (30,058)
------------------
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 $ (2,685)
Advances on credit line 25,000
Payments on capital lease obligations (74,273)
Advances from shareholders, net 80,549
Net cash provided by financing activities $ 28,591
------------------
Net Increase in Cash $ (2,387)
------------------
Cash - March 1, 1997 11,371
------------------
Cash - November 30, 1997 $ 8,984
==================
5
<PAGE>
<TABLE>
Meisenheimer Capital, Inc. and Subsidiaries
Consolidated Statement of Stockholders' Equity
For Nine Months Ending November 30, 1997 and 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Common Stock Additional
Paid-in Deficit
Shares Amount Capital
---------------------------------------- -------------------- --------------------
<S> <C> <C>
NOVEMBER 30, 1996
Balance, March 1, 1996 4,469,528 $ 44,695 $ 3,236,908 $ (3,019,975)
Issuance of shares with warrant
exercise............................. 1,500 15 3,360
Issuance of shares by subsidiary to
minority holders.......................... 60,000
Net Loss (24,173)
------------------ ------------------ -------------------- --------------------
Balance, November 30, 1996 4,471,028 $ 44,710 $ 3,300,268 $ (3,044,148)
================== ================== ==================== ====================
NOVEMBER 30, 1997
Balance, March 1, 1997 4,477,084 $ 44,771 $ 3,367,008 $ (3,050,838)
Net income 121,071
------------------ ------------------ -------------------- --------------------
Balance, November 30, 1997 4,477,084 $ 44,771 $ 3,367,008 $ (2,929,767)
================== ================== ==================== ====================
</TABLE>
6
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended November 30, 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 November 30, 1997 and cash flows and results of operations
for the nine month period ended November 30, 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 nine months ended November 30, 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 November 30, 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 November 30, 1997:
Raw materials 7,542
Work in process 21,814
Finished goods 86,620
------
Manufacturing inventory $115,976
USBL inventory 28,500
Total $144,476
7
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Nine Months Ended November 30, 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.
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
$575,000 or 43% of total revenue for the nine month period ended November 30,
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 November 30, 1997, the Company had available approximately $142,763 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 $46,290 as of November 30,
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
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Revenues for the nine month period ended November 30, 1997, totaled $1,329,370.
This represented a 25% increase from the corresponding period ended November 30,
1996. This increase was due, mainly, to the increase of USBL revenues by
approximately $270,000, including $250,000 in initial franchise fees collected
in a noncash transaction for advertising credits. Machined parts sales by the
Company's Cadcom subsidiary remained substantially, the same as in prior year
period.
Gross profit from machined parts amounted to $155,577 for the nine months ended
November 30, 1997, (27% of sales) compared to $167,326 (29% of sales) in the
corresponding period in the prior year.
Selling, general and team expenses were $85,988 more than the same nine month
period last year. The increase is mainly attributed to USBL's increase in
advertising and team expenses.
Interest expense, net of interest income, decreased by approximately $13,000 for
the nine month period ended November 30, 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 nine month periods ending November
30, 1996, from a net loss of $(24,173) to the same nine month period ending
November 30, 1997, of a net income of $121,071.
Liquidity and Capital Resources
The Company had a net working capital deficit of $(563,897) at November 30,
1997.
The Company's statement of cash flows reflects an overall decrease in cash of
$(2,387) for the nine month period ended November 30, 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
<PAGE>
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 nine months ended November 30, 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.
10
<PAGE>
SIGNATURES
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 III
Chairman and President
/s/
Richard C. Meisenheimer
Vice President, Secretary and Director
Date: January 20, 1998
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