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 September 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 October 31, 1995, 4,319,902 shares of common stock were
outstanding.
The total number of pages in this form 10-Q is 12 pages.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
Form 10-QSB
INDEX
Page Number
Part I. Financial Information
Item I. Financial Statements
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994 3-4
Consolidated Statements of Income
for the three month and nine month periods
ended September 30, 1995 and 1994 5
Consolidated Statements of Stockholders'
Equity December 31, 1994 and September 30, 1995
Consolidated Statement of Cash Flows for the
nine month periods ended September 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
September 30, December 31,
ASSETS 1995 1994
Current assets:
Cash $ 54,579 $130,182
Accounts receivable 537,340 496,255
Current portion of net investment
in sales-type leases 2,244,219 2,078,813
Current portion of notes
receivable-Tribute contracts 263,997 449,306
Inventories 1,603,328 1,396,474
Prepaid expense and other 17,305 170,604
__________ _________
Total 4,720,768 4,721,634
Property and Equipment (net)
Rental equipment 1,289,272 1,120,874
Operating equipment and
leasehold improvements 2,087,983 1,952,683
Total 3,377,255 3,073,557
Other assets
Non-current portion of net investment
in sales-type leases 15,538,818 14,395,846
Non-current portion notes receivable-
Tribute contracts 144,984 246,796
Non-current portion of
term contracts 148,379 217,716
Notes and advance due from related
parties 424,375 424,375
Total 16,256,556 15,284,733
Total Assets $24,354,579 $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)
September 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
Current liabilities:
Accounts payable:
Trade $ 772,905 $ 663,980
Reorganization costs 133,757 148,270
Accrued expenses:
Payroll & related taxes 464,878 134,230
Sales commissions 110,480 44,918
Interest 305,313 210,002
Current maturities of
long-term debt 10,548,630 9,833,911
Advance rental collections 13,919 42,527
Total 12,349,882 11,077,838
Liabilities due after one year:
Maintenance on Tribute contracts 45,067 60,262
Long-term debt 10,163,733 9,305,883
Advance collections on
rental accounts 59,725 62,563
Deferred income taxes 720,145 923,545
Total 10,988,670 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 784,518 1,418,324
Total 1,016,027 1,649,833
Total Liabilities & Equity $24,354,579 $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 Nine months ended
September 30, September 30,
Revenues: 1995 1994 1995 1994
New music installations 1,546,142 1,764,550 5,050,828 4,640,553
Renewal contracts 73,075 54,990 308,958 199,231
Tribute contracts 182,900 152,514 534,499 554,839
Direct sales and other 173,670 244,573 533,421 601,708
Finance 547,677 418,658 1,607,928 1,236,380
Service 139,236 132,860 401,667 402,441
Rental 125,414 134,192 393,635 371,994
Total 2,788,114 2,902,337 8,830,936 8,007,146
Costs and Expenses:
Cost of sales 532,461 736,377 1,861,123 2,181,041
Selling, general and
administrative 1,202,050 964,859 3,407,038 2,964,690
Maintenance 157,474 222,032 620,836 700,087
Total 1,891,985 1,923,268 5,888,997 5,845,818
Income from operations 896,129 979,069 2,941,939 2,161,328
Other expense:
Interest (552,714)(483,886)(1,664,788)(1,408,730)
Cancellation of sales-
type leases:
Systems replaced with
CD equipment (358,912)(422,668)(1,559,506)(1,166,518)
Removed systems (219,585)(137,898) (554,851) (334,328)
Total (1,131,211)(1,044,452)(3,779,145)(2,909,576)
Loss before income
taxes (235,082) ( 65,383) (837,206) (748,248)
Provision for income
taxes ( 88,000) ( 20,100) (203,400) (253,600)
Net loss $ (147,082)$ ( 45,283) $(633,806)$ (494,648)
Weighted average common
shares outstanding 4,319,902 4,319,902 4,319,902 4,319,902
Loss per share of
common stock $ (.03) $ (.01) $ (.15) $ (.11)
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 September 30, 1995
Common Stock Additional
Paid-in Retained
Shares Amount Capital Earnings
BALANCE, December 31, 1994 4,319,902 $30,240 $201,269 $1,418,324
Net loss for the nine months
ended September 30, 1995 - - - (633,806)
BALANCE, September 30,1995 4,319,902 $30,240 $201,269 $784,518
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
Nine Months Ended September 30,
1995 1994
Net cash flow from operating
activities $(313,774) $ 994,747
Cash flows from investing activities:
Additions-rental equipment (441,398) (413,412)
Additions-music and
video libraries (115,063) (135,869)
Additions-operating equipment (219,142) (99,577)
Total (775,603) (648,858)
Cash flows from financing activities:
Proceeds from sale of contracts
2,383,356 434,625
Principal payments on funds received
from sale of contracts (690,493) (246,318)
Proceeds from borrowing 175,228 105,245
Payments of long term debt (854,316) (718,786)
Total 1,013,775 (425,232)
Increase/(Decrease) in Cash (75,603) (79,343)
Cash at beginning of period 130,182 142,546
Cash at end of period $ 54,579 $ 63,203
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
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 $114,223 less for the three months and $823,790
for the nine months ended September 30, 1995 or 4% decrease for
three months but 10% 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 92 new installations were completed in the
third quarter of 1995 compared with 159 for the same period in
1994. This resulted in an increase of total installations for the
nine months ended September 30, 1995 to 428 new music systems
compared with 336 systems for the same period of 1994. The decline
in revenues from new installations was partially offset by a
increase in revenues from renewal agreements. 94 expiring lease
agreements were renewed during the three quarters of 1995 compared
with 68 renewal agreements in 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 nine-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 third quarter of
1995 is 33% compared to 38% for the same period of 1994 and 33% for
the nine months ended September 30, 1995 compared with 42% for the
same period of 1994.
Selling, general and administrative costs increased to 43% of gross
sales for the third quarter ended September 30, 1995 compared to
39% for the same period of the prior year and 39% for the nine
months ended September 30, 1995 compared with 37% for the same
period of 1994. The increase in costs reflects 1994 audit expenses
paid 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 8% in the third quarter ended September
30, 1995 compared to the same period of the prior year and
increased 11% in the nine 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 third quarter of 1995 by $66,828
over the same period of the prior year and $256,058 for the nine
months ended September 30, 1995 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 decreased
in the third quarter of 1995 over the same period of the
prior year but still show an increase on a year to date basis.
This increase was offset by a reduction in book value of the
individual tape systems replaced.
The effect of the above changes resulted in an increase in the net
loss during the quarter ended September 30, 1995 of $147,082
compared to a net loss of $45,283 for the same period of the prior
year and a net loss of $633,806 for the nine months ended September
30, 1995 compared to a net loss of $494,648 for the same period of
the prior year.
BALANCE SHEET: The net investment in sales-type leases increased
$1,142,972 in the first nine 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 $287,121 in the
first nine months of 1995. The decline reflects the expiration of
tribute contracts in excess of new contracts added.
<PAGE>
Inventories increased $206,854 during the nine-months ended
September 30, 1995. This reflects the anticipated increase in
installations resulting from the new sales orders for installations
written in the first three-quarters 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 $636,417 during the nine-months ended
September 30, 1995 but decreased $239,917 during the third quarter.
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 borrowing. The new borrowing 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 constitute an "Event of
Default" and as of this date, no other "Event of Default" has
occurred.
<PAGE>
Opinion of Management
The balance sheet as of September 30, 1995 and the related
statements of income, changes in stockholders' equity and cash
flows for the three month periods and nine month periods ended
September 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 November 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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