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, 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 July 31, 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
June 30, 1996 and December 31, 1995
3-4
Consolidated Statements of Income
for the three month and six month periods
ended June 30, 1996 and 1995
5
Consolidated Statements of Stockholders'
Equity December 31, 1995 and June 30, 1996
Consolidated Statement of Cash Flows for the
six month periods ended June 30, 1996
and 1995 7
Notes to Financial Statements 8
Item II. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-10
Part II.
Other Information and Signatures 10-11
<PAGE>
NAMSCO CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
June 30,December 31,
ASSETS 1996 1995
Current assets:
Cash $ 17,249 $ 75,279
Accounts receivable 705,003 441,529
Current portion of net investment
in sales-type leases 2,439,204 3,287,954
Current portion of notes
receivable-Tribute contracts 38,843 280,337
Inventories 1,488,062 1,459,593
Prepaid expense and other (158,316) 100,882
__________ _________
Total 4,530,045 5,645,574
Property and Equipment (net)
Rental equipment 547,047 964,454
Operating equipment and
leasehold improvements 2,664,194 2,691,544
Total 3,211,241 3,655,998
Other assets
Non-current portion of net investment
in sales-type leases 16,888,880 15,968,714
Non-current portion notes receivable-
Tribute contracts 21,332 83,857
Non-current portion of
term contracts 53,574 184,867
Notes and advance due from related
parties 412,375 424,375
Total 17,376,161 16,661,813
Total Assets $25,117,447 $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 BALANCE SHEETS
(Continued)
June 30, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
Current liabilities:
Accounts payable:
Trade $1,539,824 $1,200,272
Reorganization costs 133,757
Accrued expenses:
Payroll & related taxes 282,086 457,251
Sales commissions 34,278
Interest 324,185 174,388
Current maturities of
long-term debt 16,555,921 9,889,035
Advance rental collections 7,313 59,546
Total 18,843,086 11,880,468
Liabilities due after one year:
Maintenance on Tribute contracts 45,067 66,000
Long-term debt 4,786,793 11,758,099
Advance collections on
rental accounts 31,379 1,439,345
Deferred income taxes 1,127,145 1,439,345
Total 5,990,384 13,265,300
Commitments and contingencies
Stockholders' Equity
Common stock,$.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 52,468 586,108
Total 283,977 817,617
Total Liabilities & Equity $25,117,447 $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 Six months ended
June 30, June 30,
Revenues: 1996 1995 1996 1995
New music installations $614,095 2,128,017 1,333,468 3,504,686
Renewal contracts 336,891 115,081 883,863 235,883
Tribute contracts 462,576 171,402 835,237 351,599
Direct sales and other 171,459 173,966 359,994 359,751
Finance 609,728 529,167 1,147,475 1,060,251
Service 119,005 134,291 254,095 263,645
Rental 144,678 132,694 275,950 267,007
Total 2,458,432 3,382,511 5,090,082 6,042,822
Costs and Expenses:
Cost of sales 477,277 742,161 985,724 1,328,663
Selling, general and
administrative 918,373 1,090,334 1,920,353 2,204,988
Maintenance 209,979 229,867 484,930 463,362
Total 1,605,629 2,062,362 3,391,007 3,997,013
Income from operations 852,803 1,320,149 1,699,075 2,045,809
Other expense:
Interest (627,320) (590,060)(1,284,967)(1,112,073)
Cancellation of sales-
type leases:
Systems replaced with
CD equipment (396,657) (914,772) (837,223) (1,200,594)
Removed systems (248,694) (156,434) (422,724) (335,266)
Total (1,272,671)(1,661,266)(2,544,914)(2,647,933)
Loss before income
taxes (419,868) (341,117) (845,839) (602,124)
Provision for income
taxes ( 167,400) ( 26,700) (312,200) (115,400)
Net loss $ (252,468) (314,417) (533,639) (486,724)
Weighted average common
shares outstanding 4,319,902 4,319,902 4,319,902 4,319,902
Loss per share of
common stock $ (.06) $ (.07) $ (.12) $ (.11)
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 June 30, 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 six months
ended June 30, 1996 - - - (533,639)
BALANCE, June 30, 1996 4,319,902 $30,240 $201,267 $52,469
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
Six Months Ended June 30,
1996 1995
Net cash flow from operating
activities (675,899) (244,215)
Cash flows from investing
activities:
Additions-rental equipment (369,407) (324,683)
Additions-music and
video libraries 60,409 (72,444)
Additions-operating equipment 16,699 (53,129)
Total (292,299) (450,256)
Cash flows from financing activities:
Proceeds from sale of contracts 3,884,663 1,553,581
Principal payments on funds received
from sale of contracts (798,268) (312,436)
Proceeds from borrowing 20,120 19,065
Payments on contracts and
prefiling obligations (183,996)
Payments of long term debt (3,248,089) (569,398)
Total (325,570) 690,812
Increase/(Decrease) in Cash (58,030) (3,659)
Cash at beginning of period 75,279 130,185
Cash at end of period $17,249 $126,523
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 a "replacement secured lender". hereafter referred 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 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.
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 $3,132,505 during the first and second quarters for a
significant reduction in the amount due the secured lender.
Results of Operations
Total revenues are $924,080 for the three months and $952,740 for
the six months ended June 30, 1996 or 16% less than total revenues
for the same period of the 1994. A total of 69 new installations
were completed in the second quarter of 1996 compared with 202 for
the same period in 1995. This resulted in an decrease of total
installations for the six months ended June 30, 1996 to 152 new
music systems compared with 336 systems for the same period of
1995. The decrease in revenues from new installations was partially
offset by an increase in revenues from renewal agreements and
increase in tribute sales. 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.
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
1996 is 30% compared to 34% for the same period of 1995 and 29% for
the six months ended June 30, 1996 compared with 40% for the same
period of 1995.
Selling, general and administrative costs increased to 37% of gross
sales for the second quarter ended June 30, 1996 compared to 32%
for the same period of the prior year and 38% for the six months
ended June 30, 1996 compared with 36% for the same period of 1995.
The increase in costs reflects an increase in sales expenses. In
the first and second quarters 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 decreased 9% in the second quarter ended June 30,
1996 compared to the same period of the prior year but increased 5%
in the six month period. This is primarily attributable to the
number of installations of CD units in 1995.
Interest expense increased in the second quarter of 1996 by $37,260
over the same period of the prior year and $172,094 for the six
months ended June 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 book value of removed systems charged to operations is made up
of the same costs as replaced systems. During the quarter ended
June 30, 1996, the number of tape playback systems removed
increased to 142 tape playback systems from 59 systems for the same
period of the prior year. Management believes that this increase in
removals was caused by a letter that had been sent out by the
secured lender to all funeral home accounts.
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 $75,854 in the
first six months of 1996. 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 $237,558 in the
first six months of 1996. The decline reflects the expiration of
tribute contracts in excess of new contracts added.
Inventories decreased $35,964 during the six-months ended June 30,
1996 with more emphasis on control.
Total term debt decreased $304,420 during the six-months ended June
30, 1996. During this six month period the long term debt of the
secured lender was reduced by $3,248,089., along with $122,397
reduction in contracts payable. 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
The last "standstill period" instituted by the secured creditor as
provided in 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
June 30, 1996. The Plan of Reorganization provides for "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".
<PAGE>
Opinion of Management
The balance sheet as of June 30, 1996 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, 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 November 15, 1996 /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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