UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
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 0-16371
NAMSCO CORPORATION
(Exact name of registrant as specified in its charter)
Utah 87-0430312
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
E. 122 Montgomery
SPOKANE, WA. 99207
(Address of principal executive offices) (Zip code)
(509) 327-7784
(Registrant's telephone number,
including area code)
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
As of July 31, 1995, 4,319,902 shares of common stock were
outstanding.
The total number of pages in this form 10-Q is 10 pages.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
Form 10-QSB
INDEX
Page Number
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets
June 30, 1995 and December 31, 1994
3-4
Consolidated Statements of Income
for the three month and six month periods
ended June 30, 1995 and 1994
5
Consolidated Statements of Stockholders'
Equity December 31, 1994 and June 30, 1995
Consolidated Statement of Cash Flows for the
six month periods ended June 30, 1995
and 1994
7
Notes to Financial Statements
8-13
Item II. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
14-15
Part II. Other Information and Signatures
16-17
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30,December 31,
ASSETS 1995 1994
Current assets:
Cash $ 126,523 $130,182
Accounts receivable 518,548 496,255
Current portion of net investment
in sales-type leases 2,179,438 2,078,813
Current portion of notes
receivable-Tribute contracts 305,734 449,306
Inventories 1,555,867 1,396,474
Prepaid expense and other 76,061 170,604
__________ _________
Total 4,762,171 4,721,634
Property and Equipment (net)
Rental equipment 1,282,056 1,120,874
Operating equipment and
leasehold improvements 1,945,653 1,952,683
Total 3,227,709 3,073,557
Other assets
Non-current portion of net investment
in sales-type leases 15,090,277 14,395,846
Non-current portion notes receivable-
Tribute contracts 167,905 246,796
Non-current portion of
term contracts 158,629 217,716
Notes and advance due from related
parties 424,375 424,375
Total 15,841,186 15,284,733
Total Assets $23,831,066 $23,079,924
Notes to the financial statements for the year ended December 31,
1994 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDER'S EQUITY
June 30, December 31,
1995 1994
Current liabilities:
Accounts payable:
Trade $ 754,095 $ 663,980
Reorganization costs 133,757 148,270
Accrued expenses:
Payroll & related taxes 350,627 134,230
Sales commissions 109,441 44,918
Interest 336,446 210,002
Current maturities of
long-term debt 11,124,953 9,833,911
Advance rental collections 21,594 42,527
Total 12,830,913 11,077,838
Liabilities due after one year:
Maintenance on Tribute contracts 45,067 60,262
Long-term debt 8,891,174 9,305,883
Advance collections on
rental accounts 92,658 62,563
Deferred income taxes 808,145 923,545
Total 9,837,044 10,352,253
Commitments and contingencies
Stockholders' Equity
Common stock,$.007 par value;
Authorized, 15,000,000 shares; issued
and outstanding, 4,319,902
30,240 30,240
Additional paid-in capital 201,269 201,269
Retained earnings 931,600 1,418,324
Total 1,163,109 1,649,833
Total Liabilities & Equity $23,831,066 $23,079,924
Notes to the financial statements for the year ended December 31,
1994 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Three months ended Six months ended
June 30, June 30,
REVENUES: 1995 1994 1995 1994
New music installations 2,128,017 1,618,305 3,504,686 2,876,003
Renewal contracts 115,081 115,698 235,883 144,242
Tribute contracts 171,402 236,814 351,599 402,325
Direct sales and other 173,966 170,304 359,751 357,135
Finance 529,167 401,232 1,060,251 817,722
Service 132,184 134,291 263,645 269,581
Rental 132,694 135,368 267,007 237,802
Total 3,382,511 2,812,012 6,042,822 5,104,810
COSTS AND EXPENSES:
Cost of sales 742,161 679,878 1,328,663 1,446,664
Selling, general and
administrative 1,090,334 1,134,912 2,204,988 1,999,832
Maintenance 229,867 272,665 463,362 476,055
Total 2,062,362 2,087,455 3,997,013 3,922,551
Income from operations 1,320,149 724,557 2,045,809 1,182,259
Other expense:
Interest (590,060) (472,271)(1,112,073) (924,846)
Cancellation of sales-
type leases:
Systems replaced with
CD equipment (914,772) (311,273)(1,200,594) (743,850)
Removed systems (156,434) (154,817) (335,266) (196,431)
Total (1,661,266) (938,361)(2,647,933) (1,865,127)
Loss before income
taxes (341,117) (213,804) (602,124) (682,868)
Provision for income
taxes ( 26,700) ( 74,000) (115,400) (233,500)
Net loss (314,417) (139,804) (486,724) (449,368)
Weighted average common
shares outstanding 4,319,902 4,319,902 4,319,902 4,319,902
Loss per share of
common stock $ (.07) $ (.03) $ (.11) $ (.07)
Notes to the financial statements for the year ended December 31,
1994 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
December 31, 1994 and June 30, 1995
Common Stock Additional
Paid-in
Retained
Shares Amount Capital
Earnings
BALANCE, December 31, 1994 4,319,902 $30,240 $201,267
$1,418,324
Net loss for the six months
ended June 30, 1995 - - -
(486,724)
BALANCE, June 30, 1995 4,319,902 $30,240 $201,267
$931,600
Notes to the financial statements for the year ended December 31,
1994 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30,
1995 1994
Net cash flow from operating
activities $(244,215) $ 468,975
Cash flows from investing activities:
Additions-rental equipment (324,683) (131,450)
Additions-music and
video libraries (72,444) (38,917)
Additions-operating equipment (53,129) -
Total (450,256) (170,367)
Cash flows from financing activities:
Proceeds from sale of contracts 1,553,581 185,403
Principal payments on funds received
from sale of contracts (312,436) (125,152)
Proceeds from borrowing 19,065 -
Payments of long term debt (569,398) (332,241)
Total 690,812 (271,990)
Increase/(Decrease) in Cash (3,659) 26,618
Cash at beginning of period 130,182 142,546
Cash at end of period $126,523 $169,164
Notes to the financial statements for the year ended December 31,
1993 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
Note to Financial Statements
Note 1- Compliance with terms of Secured Credit Agreement and
Implementation of "standstill period" by Secured Creditor.
The Company is in default under the terms of the credit agreement
with a bank. As a result, the entire debt to the bank has been
classified as a current liability. The default is related to
non-compliance with the provisions for maintaining positive cash
flow, timely payment of taxes and a limitation on capital
expenditures. The bank has not waived the non-compliance. The
Company has made all regularly scheduled payments to the bank.
Due to non-compliance, the secured creditor has continued the
"standstill periods" which restrict payments on amounts due on the
Senior Convertible Debentures as well as payments to unsecured
creditors during the "standstill period". The current "standstill
period" expires on November 5, 1995. At that time, no additional
"standstill periods" can be implemented and all unsecured
creditors, including holders of Senior Convertible Debentures, are
entitled to receive payment for all amounts due them on or after
that date.
Item II
Management's Discussion and Analysis of Financial Condition and
Results of
Operations
Liquidity and Capital Resources
The Company's primary source of cash flow is from the collection of
monthly service fees on the 3,900 (approx) music playback systems,
1,700 (approx) music library agreements and 600 (approx) tribute
programs currently in place in funeral homes. Customers have the
option of paying cash, financing or leasing new music
installations. Lease and sale agreements are sold (discounted) to
a finance company to provide the funds to cover the costs
associated with installing new music playback systems and tribute
programs that are not paid in full at the time of the installation.
The discounted amount realized from the sale of the agreement is
approximately the same as the cash sale price for the equipment.
The Company has secured financing from an additional financing
source to assure that it will have the financing to continue new
installations of its music systems and tribute programs.
Indications are that other sources are available.
<PAGE>
Results of Operations
Total revenues are $570,499 for the three months and $938,012 for
the six months ended June 30, 1995 or 18% greater than total
revenues for the same period of the prior year. The increase is
the result of increases in the price of new music installations and
the number of renewal agreements for the period. The amount of
finance income recognized from the net investment in sales-type
leases also increased reflecting the gross increase in the number
of new systems installed. A total of 202 new installations were
completed in the second quarter of 1995 compared with 134 for the
same period in 1994. This resulted in an increase of total
installations for the six months ended June 30, 1995 to 336 new
music systems compared with 313 systems for the same period of
1994. The increase in revenues from new installations was partially
offset by a decline in revenues from renewal agreements. Only 27
expiring lease agreements were renewed during the second quarter of
1995 compared with 41 renewal agreements in the same period of
1994. A total of 60 renewal agreements were completed in the first
half of 1995 compared to the renewal of 52 renewals for the same
period of 1994. The expiring agreements that are not renewed under
term agreements represent customers that continue to be billed
as monthly rentals which is reflected in the increase of rental
accounts.
The decrease in cost of sales as a percent of new music and tribute
installations reflects the change instituted in 1994 to make a less
expensive cabinet style available to existing users of tape
playback systems that wished to convert to CD playback systems.
The majority of the new CD music installations in the later part of
1994 and during the first six-months of 1995 were the new
"conversion" style cabinet that is less expensive to manufacture
and less costly to ship. Cost of sales for the second quarter of
1995 is 30% compared to 34% for the same period of 1994 and 32% for
the six months ended June 30, 1995 compared with 40% for the same
period of 1994.
Selling, general and administrative costs decreased to 32% of gross
sales for the second quarter ended June 30, 1995 compared to 40%
for the same period of the prior year and 36% for the six months
ended June 30, 1995 compared with 39% for the same period of 1994.
The increase in costs reflects 1994 audit expenses expensed in 1995
along with an increase in sales expenses. In the month of March,
1995, a total of 117 orders were written for new CD music
installations and the commissions due were accrued even though the
CD systems were not installed during the month. Also, two sales
meetings were held during the first quarter of 1995 to discuss
changes in equipment and pricing that was effective March 1, 1995
compared to one sales meeting during the same
period of 1994.
<PAGE>
Maintenance costs decreased 16% in the second quarter ended June
30, 1995 compared to the same period of the prior year but
increased 10% in the six month period. This is primarily
attributable to the cost of meetings held in 1995 that were not
held in 1994 with service and installation personnel to review
installation and service procedures. These costs will not be
incurred again during 1995.
Interest expense increased in the second quarter of 1995 by
$117,789 over the same period of the prior year and $187,227 for
the six months ended June 30, 1994 over the previous year
reflecting the increase in debt from the sale of contracts to a
finance company. Also, the effective interest rate on funds
from the finance company is higher than the interest rate for debt
that is being currently reduced.
The book value of replaced systems is charged to other expense in
the period the replacement installation is made. The book value
for equipment under lease includes the recorded residual value and
the present value of future payments that are cancelled at the time
of the replacement. The value of rental equipment removed is the
undepreciated book value of the rental equipment. The number of
tape playback systems replaced by new CD playback systems increased
in the second quarter of 1995 over the same period of the
prior year. This increase was offset by a reduction in book value
of the individual tape systems replaced.
The effect of the above changes resulted in a increase in the net
loss during the quarter ended June 30, 1995 of $314,416 compared to
a net loss of $139,804 for the same period of the prior year and a
net loss of $486,724 for the six months ended June 30, 1995
compared to a net loss of $449,368 for the same period of the prior
year.
BALANCE SHEET: The net investment in sales-type leases increased
$795,056 in the first six months of 1995. This reflects the
addition of new lease agreements at rates greater than the expiring
or replaced lease agreements. More emphasis has been placed on
writing lease agreements with fewer orders for the outright
purchase of the CD playback equipment. This has resulted in
more leases of equipment for new CD playback installations.
The receivables from tribute contracts declined $222,463 in the
first six months of 1995. The decline reflects the expiration of
tribute contracts in excess of new contracts added.
<PAGE>
Inventories increased $159,393 during the six-months ended June 30,
1995. This reflects the anticipated increase in installations
resulting from the new sales orders for installations written in
the first half of 1995. A new ready to assemble (RTA) cabinet
design was made in March, 1995 and material to build the cabinet
was brought in at that time. Cabinets in stock that are being
replaced by the new RTA cabinet will be installed before the new
RTA cabinet is used.
Total term debt increased $876,334 during the six-months ended June
30, 1995. This reflects the addition of $164,372 to long-term debt
for interest due on Senior Convertible Debentures that was set
aside by the "standstill period" ending on March 10, 1995 as well
as other new borrowings. The new borrowings represent the proceeds
from the sale of lease agreements to a finance company.
Part II. Other Information
Item 3. Defaults upon Senior Securities
Payment of interest on Senior Convertible Debentures was suspended
by the continuation of "standstill periods" invoked by the secured
creditor as provided in the Plan of Reorganization. The initial
"standstill period" began on March 10, 1994 and has been continued
through November 5, 1995. The Plan of Reorganization provides that
the suspension of interest payments do not consutitute an "Event of
Default" and as of this date, no other "Event of Default" has
occured.
<PAGE>
Opinion of Management
The balance sheet as of June 30, 1995 and the related statements of
income, changes in stockholders' equity and cash flows for the
three month periods and six month periods ended June 30, 1995 and
1994 are unaudited. In the opinion of Management, all adjustments
necessary for a fair presentation of such financial statements have
been included. Such adjustments consisted only of normal recurring
items. Interim results are not necessarily indicative of results
for a full year. It is suggested that these financial statements
be read in conjunction with the financial statements and notes
thereto included in the Company's latest 10-KSB filing with the
SEC. A copy of the form 10-KSB can be obtained by contacting the
corporate office and requesting a copy.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date August 15, 1995 /s/ Merrill P. Womach
Merrill P. Womach
President and Chief Executive Officer
Acting Secretary and Treasurer
(Principal Executive Officer)
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