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, 1998 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
No X
As of January 6, 1999, 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 - May 31, 1998...........................3
Consolidated Statement of Operations for the
Three Months Ended May 31, 1998 and 1997............................4
Consolidated Statement of Stockholders' Equity for the
Three Months Ended May 31, 1998 and 1997............................5
Condensed Statement of Cash Flows for the
Three Months Ended May 31, 1998 and 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>
<CAPTION>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
As of May 31, 1998
(Unaudited)
ASSETS
Current Assets:
<S> <C>
Accounts receivable $ 144,351
Inventories 107,695
Investments 115,126
Other current assets 3,615
------------
Total Current Assets 370,787
Property and equipment, net 442,565
Goodwill, net 27,525
Prepaid advertising credits 746,562
------------
TOTAL ASSETS $ 1,587,439
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Bank overdraft $ 15,410
Accounts payable and accrued expenses 217,985
Note and mortgage payable - current portion 8,874
Capital lease obligations 26,961
Loans payable - stockholders 597,967
Taxes payable 4,000
------------
Total Current Liabilities 871,197
Note and mortgage payable, net of current portion 116,431
Minority interest 228,000
Total Liabilities 1,215,628
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
Treasury stock, at cost, 1,000 shares (686)
Unrealized loss on available for sale
securities (104,400)
Deficit (2,934,882)
Total Stockholders' Equity 371,811
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,587,439
= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
<TABLE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
Comparative Consolidated Statement of Operations
(Unaudited)
<CAPTION>
Three Months Three Months
Ended Ended
05/31/98 05/31/97
Revenues
<S> <C> <C>
Net Sales $ 196,966 $ 196,134
Franchise fees and related revenues 381,194 132,086
------------- -------------
578,160 328,220
------------- -------------
Operating Expenses
Cost of goods sold 140,189 155,221
Selling, general and team expenses 143,049 220,215
------------- -------------
283,238 375,436
------------- -------------
Income (loss) from operations 294,922 (47,216)
------------- --------------
Other Income (Expense)
Interest expense (3,942) (6,227)
Interest income 152 160
Other income 1,345 7,184
Minority Interest 100,000 (30,000)
Income Tax Provision 4,000 1,500
------------- -------------
Net Income (Loss) $ 188,477 $ (17,599)
============= ==============
Earnings Per Share $ 0.04 $ 0.00
================ ===============
Weighted Average Shares Outstanding 4,477,084 4,477,084
============= =============
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
<TABLE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity
For Three Months Ending May 31, 1998 and 1997
(Unaudited)
<CAPTION>
Unrealized
Common Stock Additional Treasury Stock Loss on
Paid-in Available for
Shares Amount Capital Shares Amount Sale Securities Deficit
------------- --------- ------------ ------- ------ --------------- --------------
MAY 31, 1997
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 1, 1997 4,477,084 $44,771 $3,367,008 0 $ 0 $(62,078) $ (3,050,838)
Marketable securities 3.793
valuation adjustment
Net Loss 0 0 (17.599)
------------- --------- ------------ ------- ------ --------------- --------------
Balance, May 31, 1997 4,477,084 $44,771 $3,367,008 0 $ 0 $(58,285) $ (3,068,437)
========= ======= ========== = === ========= ===============
Unrealized
Common Stock Additional Treasury Stock Loss on
Paid-in Available for
Shares Amount Capital Shares Amount Sale Securities Deficit
------------- --------- ------------ ------- ------ --------------- --------------
MAY 31, 1998
Balance, March 1, 1998 4,477,084 $44,771 $3,367,008 1,000 $686 $ 0 $(3,123,359)
Marketable securities (104,400)
valuation adjustment
Net Income 188,477
------------- --------- ------------ ------- ------ --------------- --------------
Balance, May 31, 1998 4,477,084 $44,771 $3,367,008 1,000 $686 $(104,400) $(2,934,882)
========= ======= ========== ===== ==== ========== ===============
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
<TABLE>
MEISENHEIMER CAPITAL, INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
(Unaudited)
<CAPTION>
Three Months Three Months
Ended 5/31/98 Ended 5/31/98
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $ 188,477 $ (17,599)
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Minority interest 100,000 (30,000)
Loss on Partnership investment 0 9,375
Depreciation and amortization 15,534 20,301
(Increase) decrease in assets:
Accounts receivable (53,210) 3,569
Inventories (14,079) 3,383
Other current assets 2,472 (3,847)
Prepaid advertising credits (62,500) 0
(Decrease) increase in liabilities:
Accounts payable and accrued expenses (7,978) 55,084
Taxes payable 4,000 0
Net Cash Provided by Operations 172,716 40,266
------- -------
Cash Flows from Investing Activities:
Purchase of property and equipment (5,523) 0
Purchase of investments (90,600) (920)
Net cash (used) in investing activities (96,123) (920)
------ ---
Cash Flows from Financing Activities:
Payments on note and mortgage payable (2,350) (964)
Payments on capital lease obligations (11,727) (22,475)
Payments to shareholders, net (10,086) (3,407)
Unrealized loss on available for sale securities (104,400) 0
Net cash (used) in financing activities (128,563) (26,846)
------- ------
Net (decrease) increase in cash (51,970) 12,500
------ ------
Cash, beginning of period 36,560 11,371
------ ------
(Overdraft) Cash, end of period $ (15,410) $ 23,871
====== ======
Supplemental Disclosures
Interest Paid $ 3,942 $ 4,413
</TABLE>
See Notes to Consolidated Financial Statements
6
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended May 31, 1998
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 May 31, 1998 and cash flows and results of operations for
the three month period ended May 31, 1998 and 1997. 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, 1998. The results of operations for
the three months ended May 31, 1998 and 1997 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. The Company recorded a charge to operations of
$104,400 for the three months ended February 28, 1998.
Note 4 Inventories
As of May 31, 1998, 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 May 31, 1998:
Raw Materials $ 5,728
Work in Process 16,012
Finished Goods 65,855
Manufacturing Inventory 87,595
USBL Inventory 20,100
Total $ 107,695
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
<PAGE>
Meisenheimer Capital, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
Three Months Ended May 31, 1998
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
$185,227 or 32% of total revenue for the three month period ended May 31, 1998.
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, 1998, the Company had available approximately $1,400,000 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%. 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 $26,961 as of May 31,
1998.
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 three month period ended May 31, 1998, totaled $578,160. This
represented a 76% increase from the corresponding period ended May 31, 1997.
This increase was due, mainly, to the increase of USBL revenues from non cash
transactions consisting of initial franchise fees amounting to $62,500 for
advertising credits and the sale of an additional franchise for $225,000 for
marketable securities. 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 $56,771 for the three months ended
May 31, 1998, (29% of sales) compared to $40,913 (21% of sales) in the
corresponding period in the prior year.
Selling, general and team expenses were $77,166 less than the same three month
period last year. The decrease is mainly attributed to management reducing
overhead expenses.
Interest Expense, net of interest income, decreased by approximately $2,277 for
the three month period ended May 31, 1998, as compared to the comparable period
in 1997. This reflects decreases in debt obligations.
Consolidated net income increased from the three month period ending May 31,
1997, from a net loss of ($17,599) to the same three month period ending May 31,
1998, of a net income of $188,477.
Liquidity and Capital Resources
The Company had a net working capital deficit of $500,410 at May 31, 1998.
The Company's statement of cash flows reflects an overall decrease in cash of
$51,970 for the three month period ended May 31, 1998.
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 three months ended May 31, 1998, 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
Daniel T. Meisenheimer III
Chairman and President
/s/ Richard C. Meisenheimer
Richard C. Meisenheimer
Vice President, Secretary and Director
Date: January 8, 1999
