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 March 31, 1996
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 1, 1996, 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
March 31, 1996 and December 31, 1995 3-4
Consolidated Statements of Income
for the three month periods ended
March 31, 1996 and 1995 5
Consolidated Statements of Stockholders'
Equity
December 31, 1995 and March 31, 1996 6
Consolidated Statement of Cash Flows for the
three month periods ended March 31, 1996
and 1995 7
Notes to Financial Statements 8-10
Item II. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 10
Part II. Other Information and Signatures 10
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
ASSETS 1996 1995
Current assets:
Cash $ 59,882 $ 75,279
Accounts receivable 461,205 441,529
Current portion of net investment
in sales-type leases 2,429,632 3,287,954
Current portion of notes
receivable-Tribute contracts 192,187 280,337
Inventories 1,524,026 1,459,593
Prepaid expense and other (140,429) 100,882
__________ _________
Total 4,526,503 5,645,574
Property and Equipment (net)
Rental equipment 778,797 964,454
Operating equipment and
leasehold improvements 2,636,293 2,691,544
Total 3,415,090 3,655,998
Other assets
Non-current portion of net investment
in sales-type leases 16,822,599 15,968,714
Non-current portion notes receivable-
Tribute contracts 105,546 83,857
Non-current portion of
term contracts 139,688 184,867
Notes and advance due from related
parties 424,375 424,375
Total 17,492,208 16,661,813
Total Assets $25,433,801 $25,963,385
Notes to the financial statements for the year ended December 31,
1996 should be read in conjunction with these interim financial
statements and are not repeated here.
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
March 31, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
Current liabilities:
Accounts payable:
Trade $ 1,158,835 $ 1,200,272
Reorganization costs 133,758
Accrued expenses:
Payroll & related taxes 304,847 457,251
Sales commissions 7,969 34,278
Interest 257,098 174,388
Current maturities of
long-term debt 16,631,828 10,014,279
Advance rental collections 19,798
Total 18,514,133 11,880,468
Liabilities due after one year:
Maintenance on Tribute contracts 66,000
Long-term debt 5,003,727 11,758,099
Advance collections on
rental accounts 84,951 1,856
Deferred income taxes 1,294,545 1,439,345
Total 6,383,223 13,265,300
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 304,936 586,108
Total 536,445 817,617
Total Liabilities & Equity $25,433,801 $25,963,385
Notes to the financial statements for the year ended December 31,
1995 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 March 31,
Revenues: 1996 1995
New music installations $ 719,373 $ 1,376,669
Renewal contracts 546,972 120,802
Tribute contracts 372,661 180,197
Direct sales and other 188,534 188,067
Finance 537,747 531,084
Service 135,091 131,461
Rental 112,880 132,031
Other income 18,392 0
Total 2,631,650 2,660,311
Costs and Expenses:
Cost of sales 508,447 586,501
Selling, general and
administrative 1,001,981 1,114,654
Maintenance 274,950 233,496
Total 1,785,378 1,934,651
Income from operations 846,272 725,660
Other expense:
Interest 657,648 522,013
Cancellation of sales-type leases
Systems replaced with
CD equipment 440,566 285,822
Removed systems 174,030 178,833
Total 1,272,244 986,668
Loss before income taxes (425,972) (261,008)
Provision for income taxes (144,800) (88,700)
Net loss $ (281,172) $ (172,308)
Weighted average common
shares outstanding 4,319,902 4,319,902
Loss per share of common stock $ (.07) $ (.04)
Notes to the financial statements for the year ended December 31,
1995 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, 1995 and March 31, 1996
Common Stock Additional
Paid-in Retained
Shares Amount Capital Earnings
BALANCE,
December 31, 1995
4,319,902 $30,240 $201,267 $586,108
Net loss for the three months
ended March 31, 1996
- - - (281,172)
BALANCE, March 31, 1996
4,319,902 $30,240 $201,267 $304,936
Notes to the financial statements for the year ended December 31,
1995 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
Three Months Ended March 31,
1996 1995
Net cash flow from operating
activities $179,465 $84,759
Cash flows from investing activities:
Additions-rental equipment (161,657) (141,978)
Additions-music and
video libraries - (36,111)
Additions-operating equipment (11,051) (23,522)
Total (172,708) (201,611)
Cash flows from financing activities:
Proceeds from sale of contracts 2,589,834 593,194
Principal payments on funds received
from sale of contracts (441,876) (145,072)
Proceeds from borrowing - 19,065
Payments of long term debt (2,080,530) (323,962)
Payments on contracts and
prefiling obligations (89,582) -
Total (22,154) 143,225
Increase (Decrease) in cash (15,397) 26,373
Cash at beginning of period 75,279 130,182
Cash at end of period $ 59,882 $156,555
Notes to the financial statements for the year ended December 31,
1995 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.
The Company is in default under the terms of the credit agreement
with "secured lender", hereafter refered to as lender. As a
result, the entire debt to the lender 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 lender has
not waived the non-compliance. The Company has made all regularly
scheduled payments to the lender.
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 3,800 (approx) music playback systems,
1,700 (approx) music library agreements and 700 (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 been in contact with additional financing sources
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.
During the first quarter of 1996, the Company initiated a plan to
pay down the secured lender. Contracts classified under the "net
investment in sales type leases" were discounted to net present
value and the proceeds were paid direct to the lender in the amount
of $1,964,946 for a significant reduction in the amount due the
secured lender.
Results of Operations
Total revenues for the quarter ended March 31, 1995 are $28,661
less than total revenues for the same period of the prior year, a
decrease of 1%. The decrease is the result of decreases in the
number of new 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 in the previous quarter. A total of 83 new
installations were completed in the first quarter of 1996 compared
with 134 installations in 1995. A total of 180 renewal agreements
were completed in the first quarter of 1996 compared to the renewal
of 33 expiring lease agreements in 1995. The expiring agreements
that are not renewed under term agreements represent customers that
continue to be billed as monthly rentals.
<PAGE>
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 quarter of 1995 were the new "conversion"
style cabinet that is less expensive to manufacture and less costly
to ship. Cost of sales for the first quarter of 1996 is 28%
compared to 34% for the same period of 1995 with less new
installations but an increase in renewal upgrades to CD units.
Selling, general and administrative costs decreased to 38% of gross
sales for the quarter ended March 31, 1996 compared to 41% for the
same period of the prior year. The decrease in costs reflects
management's effort to control expenditures. In the first quarter
of 1996, an increased effort was made to upgrade existing tape
installations by the addition of CD units and thereby retain the
customer base.
Maintenance costs increased 18% in the first quarter ended March
31, 1996 compared to the same period of the prior year. The
increase is primarily attributable to the number of installations
of CD units in 1995.
Interest expense increased in the first quarter of 1996 by $135,635
over the same period of the prior 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 book value of removed systems charged to operations is made up
of the same costs as replaced systems. During the quarter ended
March 31, 1996, the number of removed systems increased to 73 tape
playback systems from 74 systems for the same period of the prior
year, reflecting a decrease of 1%.
The effect of the above changes resulted in an increase in the net
loss during the quarter ended March 31, 1996 compared to the net
loss for the same period of the prior year. The majority of the the
increase in the loss is in the increased interest expense and the
write off of the residual amount of replaced tape systems.
Balance Sheet
The net investment in sales-type leases decreased $4,437 in the
first quarter of 1996. This reflects the addition of new lease
agreements at rates approximately equal to 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 approximately the same
number of leases of equipment for new CD playback installations.
The receivables from tribute contracts declined $66,461 in the
first quarter of 1995. The decline reflects the expiration of
tribute contracts in excess of new contracts added.
Inventories increased $64,433 during the quarter ended March 31,
1996. This reflects the anticipated increase in installations
resulting from the new sales orders and CD upgrades written in the
first quarter of 1996.
Total term debt increased $31,767 during the quarter ended March
31, 1996. This reflects the addition of $2,147,959 to notes
payable for leases plus the of long term debt to the secured
lender by $2,080,530., along with a $59,521 reduction in contracts
payable. The difference is made up of minor increases and
decreases in long term liabilities.
Part II. Other Information
Item 3. Defaults upon Senior Securities
The last "standstill period" instituted by the secured lender as
provided under the Plan of reorganization whereby no payments can
be made to the holders of Senior Convertible Debentures ended on
November 6, 1995 and some interest payments have been made through
March 31, 1996. The Plan of Reorganization provides for an "Event
of Default" and as of this date, unpaid interest on subordinated
debt and unpaid payments under plan to unsecured creditors and
taxing agencies also constitute an "Event of Default".
Opinion of Management
The balance sheet as of March 31, 1996 and the related statements
of income, changes in stockholders' equity and cash flows for the
three month periods ended March 31, 1996 and 1995 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 May 11, 1995 /s/ Merrill P. Womach
Merrill P. Womach
President and Chief
Executive Officer
Acting Secretary and Treasurer
(Principal Executive Officer)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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