<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: JANUARY 31, 1997
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: 33-75432C
UNITED MARKET SERVICES COMPANY
-----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
DELAWARE 41-1642910
---------------------------------------- ------------------------------------
(State of incorporation or organization) (IRS Employer Identification Number)
14500 BURNHAVEN DRIVE, SUITE 141
BURNSVILLE, MINNESOTA 55337
-----------------------------------------------------
(Address and zip code of principal executive offices)
612/435-7788
---------------------------
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days:
X YES NO
--- ---
The number of shares outstanding of each of the issuer's classes of common
equity of March 6, 1997:
6,406,728 SHARES OF COMMON STOCK, $0.001 PAR VALUE
---------------------------------------------------
Transitional Small Business Issuer Disclosure Format: YES X NO
---- ----
<PAGE> 2
PART I, ITEM 1. FINANCIAL STATEMENTS
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
October 31, January 31,
1996 1997
----------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash ......................................... $2,398,188 $862,301
Restricted cash .............................. 50,000 50,000
Accounts receivable .......................... 315,888 543,287
Inventories .................................. 38,341 36,085
Prepaid expenses and other ................... 38,516 27,713
Net assets of discontinued operations......... 719,304 197,942
---------- ----------
Total current assets.......................... 3,560,237 1,717,328
Property and equipment
Yard improvements.............................. 5,444,073 5,444,073
Buildings ..................................... 698,310 698,310
Machinery and equipment ....................... 344,516 344,516
Furniture and fixtures ........................ 57,966 57,966
Less: accumulated depreciation ................ (5,374,071) (5,450,071)
---------- ----------
Property and equipment, net.................... 1,170,794 1,094,794
Other assets................................... 432,187 25,833
---------- ----------
Total assets................................... $5,163,218 $2,837,955
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current maturities of long term debt.......... $6,050,000 $ 120,000
Accounts payable.............................. 186,825 210,777
Accrued liabilities:
Litigation................................... 585,000 538,612
Other ....................................... 601,114 347,714
---------- ----------
Total current liabilities.................... 7,422,939 1,202,103
Long-term post retirement obligation........... 280,567 265,000
---------- ----------
Common stockholders' equity (deficit)
Common Stock, $0.001 par value, 10,000,000 shares
authorized, 2,891,277 shares and 5,957,169
issued and outstanding....................... 2,891 5,957
Additional paid-in capital .................. 4,626,624 5,374,400
Accumulated deficit.......................... (7,169,803) (4,025,072)
---------- ----------
Total common stockholders' equity (deficit). (2,540,288) 1,355,285
---------- ----------
Total liabilities and stockholders'
equity (deficit) .......................... $5,163,218 $2,837,955
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE> 3
PART I, ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended January 31,
------------------------------
1996 1997
---------- ----------
<S> <C> <C>
OPERATING REVENUES................................ $2,055,324 $1,942,742
OPERATING EXPENSES:
Labor and related costs ....................... 751,454 673,619
Operating and maintenance costs ............... 923,847 819,859
Selling, general and administrative expenses... 390,729 270,038
Depreciation and amortization expense ......... 159,000 78,500
---------- ----------
Total costs and operating expenses .......... 2,225,030 1,842,016
---------- ----------
OPERATING INCOME (LOSS) .......................... (169,706) 100,726
NET INTEREST EXPENSE ............................. 143,719 3,000
---------- ----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
before extraordinary items ..................... (313,425) 97,726
---------- ----------
INCOME (LOSS) FROM DISCONTINUED OPERATIONS........ (13,736) --
---------- ----------
EXTRAORDINARY GAIN ON EXTINGUISHMENT OF DEBT
(NET OF INCOME TAXES OF $-0-) (NOTE 1) ......... -- 3,047,005
---------- ----------
NET INCOME (LOSS).................................. (327,161) 3,144,731
Dividends accrued on Preferred Stock, not paid. 19,606 --
--------- ----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCK..... ($346,767) $3,144,731
========== ==========
Earnings (loss) per share:
Income (loss) from continuing operations before
extraordinary item.............................. ($0.39) $0.02
Income (loss) from discontinued operations........ (0.02) --
Extraordinary gain on extinguishment of debt...... -- 0.78
--------- ----------
Net income (loss) ................................ (0.41) 0.80
Dividends accrued on Preferred Stock, not paid.... (0.02) --
Net loss attributable to Common Stock............. $ (0.43) $ 0.80
========== ==========
Common weighted shares outstanding ................. 811,777 3,924,349
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
PART I, ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1996 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ......................................... ($327,161) $3,144,731
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Extraordinary gain on extinguishment of debt ........... -- (3,047,005)
Depreciation and amortization .......................... 159,000 78,500
Net cash provided by (used in) discontinued operations.. 40,968 521,362
---------- ----------
Operating cash flow before working capital items........ (127,193) 697,588
Changes in operating assets and liabilities:
Accounts receivable .................................. 285,116 (227,399)
Inventories .......................................... (10,401) 2,256
Prepaid expenses and other ........................... (89,140) 10,803
Checks written not yet presented for payments......... 36,791 --
Accounts payable and other accrued liabilities ....... (448,247) (56,305)
---------- ----------
Net cash provided by (used in) operating activities ($353,074) $426,943
INVESTING ACTIVITIES:
Sales (additions) of property and equipment ............. (12,660) --
FINANCING ACTIVITIES:
Payments on subordinated debt ........................... -- (1,962,830)
---------- ----------
INCREASE (DECREASE) IN CASH ............................... (365,734) (1,535,887)
Cash, beginning of year ................................. 887,976 2,398,188
---------- ----------
Cash, end of period ..................................... $ 522,242 $ 862,301
========== ==========
CASH PAID (RECEIVED) DURING THE PERIOD FOR:
Interest ................................................ $ 355,309 $ --
========== ==========
Income taxes ............................................ $ 1,300 $ 1,300
========== ==========
NON CASH FINANCING ACTIVITIES:
Extinguishment of subordinated debt ..................... -- $3,967,170
Conversion of subordinated debt to equity ............... -- $ 750,842
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE> 5
PART I, ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. ORGANIZATION AND NATURE OF BUSINESS
United Market Services Company (the "Company") operates five stockyards
located in Sioux Falls, South Dakota; Sioux City, Iowa; Omaha, Nebraska; St.
Joseph, Missouri; and Milwaukee, Wisconsin. The Company's stockyards include
four of the eight markets that provide price and volume information for the
daily report published by the Agricultural Marketing Service of the U.S.
Department of Agriculture.
The Company was formed in June 1989, and in October 1989, acquired the
United Stockyards Division of Canal Capital Corporation, a business with over
100 years of history in livestock marketing.
With the current economic circumstances in the cattle industry and the
Company's current financial situation, in April 1996 the Company suspended
financing any new cattle contracts and has closed all existing contracts as of
March 1, 1997. On August 9, 1996, the secured bank loans were repaid and the
credit facility expired August 15, 1996. The Company has not negotiated a new
line of credit agreement.
During the fourth quarter of fiscal 1996, the company informed the
subordinated noteholders that it would not make its quarterly interest payment
due September 1, 1996 and subsequently did not pay the quarterly interest
payments due on December 1, 1996, and March 1, 1997. On November 14, 1996, the
Company made a settlement and exchange offer to the bondholders to accept $331
in cash and the option to receive 717 shares of the Company's common stock in
exchange for each $1,000 outstanding note and the forgiveness of all unpaid
interest on the debt. The offer was to expire December 20, 1996 and was
extended to February 28, 1997. As of February 25, 1997 over 99% of the
bondholders had accepted the offer, and of these, approximately 86% have
accepted the option to receive an equity interest in the Company.
As a result of this restructuring, the Company had, as of January 31,
1997, paid $1,963,000 in cash ,and had written off $404,000 of unamortized
deferred financing costs, $235,000 of accrued interest expense and $5,930,000
of its long-term debt. The Company also issued 3,065,892 shares of common
stock and recognized an extraordinary gain on extinguishment of debt of
$3,047,000. The Company extended the above offer to the remaining of the
bondholders until March 14, 1997, under the same terms and conditions as the
original offer.
Prior to commencement of the settlement and exchange offer, all holders of
the Company's preferred stock converted their preferred stock into shares of
the Company's common stock.
The Company's current financial situation raises substantial doubt about
the Company's ability to continue as a going concern. For the fiscal year
ended October 31, 1996, the Company experienced losses of approximately $4.9
million and significant uncertainties exist regarding the Company's ability to
secure adequate financing to support future operations. The accompanying
financial statements do not include any adjustments that might result should
the Company be unable to continue as a going concern.
NOTE 2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles and pursuant to the rules and regulations of the Securities and
Exchange Commission for interim financial information. They should be read in
conjunction with the annual audited financial statements and accompanying notes
included in the Company's Annual Report on Form 10-KSB for the fiscal year
ended October 31, 1996.
7
<PAGE> 6
PART I, ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2. BASIS OF PRESENTATION(CONTINUED)
The interim financial statements presented herein as of January 31, 1997,
and for the three month period ended January 31, 1996 and 1997, reflect, in the
opinion of management, all adjustments necessary for a fair presentation of
financial position and the results of operations for the periods presented.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from these estimates. The Company's significant
estimates include reserves for inventory losses, accounts receivable and
litigation settlement.
Quarterly operating results are typically affected by seasonal factors
related to the cattle production cycle. As a consequence of these factors, the
results of operations for any interim period are not necessarily indicative of
results for the full year.
8
<PAGE> 7
PART I, ITEM 1. FINANCIAL STATEMENTS (CONTINUED)
UNITED MARKET SERVICES COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
NOTE 3. SEGMENTS OF BUSINESS
Selected data with respect to the Company's principal business segments
are as follows:
<TABLE>
<CAPTION>
Three Months Ended January 31,
1996 1997
---------- ----------
<S> <C> <C>
LIVESTOCK MARKETING
Operating Revenues ................................ $2,055,324 $1,942,742
Operating costs and expenses:
Direct operating costs and expenses............. 1,730,333 1,648,378
Depreciation ................................... 120,000 76,000
---------- ----------
Total operating costs and expenses........... 1,850,333 1,724,378
---------- ----------
Operating income .................................. 204,991 218,364
CORPORATE:
Costs and expenses:
General and administrative expenses............. 335,697 115,138
Interest expense on long term debt.............. 143,719 3,000
Amortization ................................... 39,000 2,500
---------- ----------
Total costs and expenses..................... 518,416 120,638
Income (loss) from continuing operations
before extraordinary item......................... (313,425) 97,726
---------- ----------
Discontinued operations ........................... (13,736) --
Extraordinary gain on extinguishment of debt....... -- 3,047,005
---------- ----------
Net income (loss) ................................. (327,161) 3,144,731
Dividends accrued on Preferred Stock,
not yet paid................................... 19,606 --
---------- ----------
Net income (loss) attributable to Common Stock..... ($346,767) $3,144,731
========== ==========
CAPITAL EXPENDITURES
Livestock marketing:
Additions to property and equipment............. ($12,660) $ --
========== ==========
ANIMAL UNITS HANDLED .............................. 273,711 222,194
========== ==========
</TABLE>
9
<PAGE> 8
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
Stockyard animal unit volumes and revenues continue to decline in direct
response to the difficult markets and corresponding decline in numbers of
smaller farmer/producers. Animal unit volumes were 18.8% lower than last
year's first quarter. The extreme pressure on producer costs, principally
higher corn prices, has caused severe distress for some of Company's cattle and
hog customers, resulting in fewer smaller producers who are the typical
stockyards customer.
With the continued upheaval and uncertainty in the grain and cattle
markets, management judged that it was not economically prudent for the Company
to continue financing new cattle purchases in the current environment.
Consequently, the Company notified its existing customers in April, 1996, that
it was suspending its cattle finance business and the Company closed all
financing contracts as of March 1, 1997.
During the third quarter 1996, the Company recorded an additional $400,000
reserve reflecting a ruling by the Minnesota Court of Appeals allowing punitive
damages related to a September 1995 jury award (See Part II, Item I Legal
Proceedings). An appeal to the Minnesota Supreme Court was made on January 15,
1997, and the outcome is expected to be known by April 15, 1997.
During the fourth quarter of fiscal 1996, the Company informed the
subordinated noteholders that it would not make its quarterly interest payment
due September 1, 1996, and subsequently did not pay the quarterly interest
payments due on December 1, 1996 and March 1, 1997. On November 14, 1996, the
Company made a settlement and exchange offer to the bondholders to accept $331
in cash and the option to receive 717 shares of the Company's common stock in
exchange for each $1,000 outstanding note and the forgiveness of all unpaid
interest on the debt. The offer expired on December 20, 1996 and was extended
to February 28, 1997. As of February 25, 1997 over 99% of the bondholders had
accepted the offer, and of these, approximately 86% have accepted the option to
receive an equity interest in the Company.
As a result of this restructuring, the Company had paid as of January 31,
1997 $1,963,000 in cash, wrote off $404,000 of unamortized deferred financing
costs, $235,000 of accrued interest expense and $5,930,000 of its long-term
debt. The Company also issued 3,065,892 shares of common stock and recognized
an extraordinary gain on extinguishment of debt of $3,047,000. The Company
extended the above offer to the remaining bondholders until March 14, 1997,
under the same terms and conditions as the original offer.
Prior to commencement of the settlement and exchange offer, all holders of
the Company's preferred stock converted their preferred stock into shares of
the Company's common stock.
10
<PAGE> 9
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
OPERATING RESULTS FOR THE THREE MONTH PERIODS ENDED JANUARY 31, 1996 AND 1997
Livestock Marketing
- -------------------
Operating Revenues. For the three months ended January 31, 1997, the
Company's livestock marketing revenues, principally yardage and commission
revenues, were $1,942,742 down 5.5% from the $2,055,324 of such business
recorded in the comparable 1996 period. This decrease in revenues relates
primarily to a 18.8% reduction in the animal marketing units handled from
273,711 for the first quarter of 1996 to 222,194 for the same period in 1997,
principally due to the significant volume reduction at the Sioux City and Omaha
markets.
Direct Operating Costs and Expenses. Operating costs and expenses in the
Company's livestock marketing segment include labor and benefits, operating and
maintenance expenses, depreciation, and unit-level general and administrative
costs. For the first quarter of fiscal 1997, these costs and expenses totaled
$1,724,378, a decrease of 6.8% from 1996's comparable figure of $1,850,333,
partially reflecting the decreased volume of business. Depreciation expense
decreased 36.7% from $120,000 in 1996 to $76,000 in first quarter 1997,
primarily due to a 1996 writedown of impaired assets at all locations.
Operating Income. Overall, as a result of the aforementioned factors,
operating income from the livestock marketing operations of $218,364 in the
first quarter of 1997 represented an increase of 6.5% from the $204,991 of such
income recorded in the 1996 period.
Corporate
- ---------
Total Costs and Expenses. Corporate level costs and expenses are defined
to include general and administrative costs, interest expense on the Company's
long-term debt, and amortization of the offering costs associated with such
debt. Total costs and expenses for the first quarter of 1997 were $120,638,
down 76.7% from the $518,416 of such cost recorded in the comparable period in
1996. General and administrative expenses for the first quarter of 1997
totaled $115,138 a decrease of 65.7% from the $335,697 of such costs reported
in 1996. Included in the first quarter 1996 was a $52,063 restructuring
expense charge. Interest expense on long-term debt totaled $3,000 in 1997 and
$143,719 in 1996. Amortization expense was $2,500 in 1997 and $39,000 in 1996,
as a result of the write off of the deferred financing costs.
Income (Loss) from Continuing Operations Before Extraordinary Item. Due
to the factors discussed above, the operating net income reported for the first
quarter of 1997 from continuing operations was $97,726, compared to an
operating loss of $313,425 reported in 1996.
Discontinued operations. Loss from discontinued operations of $13,736 in
first quarter 1996 reflects management's decision to exit the cattle leasing
business in the second quarter of 1996.
Income Taxes. The Company recorded no income tax expense during the first
quarter of 1996 or 1997 .
Extraordinary Item. Extraordinary item of $3,047,005 reflects the
restructuring of the Company's subordinated debt. The principal components of
the extraordinary gain are as follows:
<TABLE>
<CAPTION>
<S> <C>
Extinguishment of subordinated debt $5,930,000
Cash payments to former noteholders (1,962,830)
Writeoff of deferred bond costs (403,854)
Forgiveness of accrued interest 234,531
----------
Subtotal 3,797,847
Conversion of debt to equity (750,842)
----------
Net extraordinary gain $3,047,005
==========
</TABLE>
The Company estimates that taxes related to the extraordinary gain will be
minimal as the debt extinguishment will be offset directly against the net
operating losses.
11
<PAGE> 10
PART I, ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Net Income (Loss); Net Income (Loss) Attributable to Common Stock. Net
income reported for the first quarter of 1997 was $3,144,731, compared to a net
loss of $346,767 reported in the comparable 1996 period.
Net income or loss attributable to the Company's Common Stock was affected
by dividends accrued on its Cumulative Redeemable Convertible Preferred Stock
(the "Preferred Stock"), 1,568,500 shares of which were outstanding as of
January 31, 1996. Dividends accumulated at a rate of $0.05 per share per year.
During the first quarter of 1996 the Company recorded $19,606 related to this
dividend requirement. There were no dividend requirements on either the
Company's 1994 Series Redeemable Convertible Preferred Stock (the "1994
Preferred Stock") or its 1995 Series Redeemable Convertible Preferred Stock
(the "1995 Preferred Stock").
Liquidity and Capital Resources
- -------------------------------
The following table sets forth, as of the dates indicated, certain balance
sheet items as a percentage of total assets and the percentage increase or
decrease in such items from the prior date.
<TABLE>
<CAPTION>
Oct 31 Jan 31,
1996 1997 1996 vs.1997
------ ---- ------------
<S> <C> <C> <C>
Discontinued operations ..................... 13.9% 7.0% (72.5%)
Livestock Marketing:
Net identifiable assets................. 30.3 60.0 8.8
Corporate
Cash.................................... 47.4 32.2 (62.7)
Other assets............................ 8.4 0.9 (94.0)
Current liabilities..................... 143.8 42.4 (83.8)
Long-term post retirement obligation.... 5.4 9.9 --
Common stockholders' equity (deficit)........ (49.2) 47.8 N/A
</TABLE>
See recent developments for a discussion concerning the Company's
liquidity position and capital resources.
PART II, ITEM 1. LEGAL PROCEEDINGS
Orville Molenaar v. United Cattle Company v. Michael J. Frank, Case No.
C2-94-10225 (Minn. D. Ct.). Orville Molenaar has sued UCC in state court for
conversion of cattle he alleges to own. This action relates to cattle Mr.
Molenaar allegedly placed with Michael J. Frank. Mr. Molenaar claims that
cattle he owned were part of the cattle UCC recovered from Mr. Frank pursuant
to the certain replevin orders dated October 11, 1994. UCC filed a third party
complaint against Mr. Frank in this action. On September 14, 1995, a jury
determined that UCC committed conversion and was liable for $59,375 in
compensatory damages and $400,000 in punitive damages. On October 19, 1995,
the punitive damages were vacated by the court and the compensatory claim was
upheld. On December 20, 1995, UCC was granted summary judgment in its third
party action against Mr. Frank for indemnification, and UCC was awarded $59,375
in damages plus $9,000 for attorneys fees. Mr. Molenaar filed an appeal with
the Minnesota Court of Appeals seeking to overturn the vacating of the punitive
damages, and UCC filed a cross-appeal with respect to the compensatory damage
award. In an order dated July 30, 1996, the Court of Appeals reversed the
trial court's decision to vacate the punitive damages award and denied UCC's
cross-appeal. The Court of Appeals remanded the matter to the district court
to determine whether the amount of the jury's punitive damages award was
excessive. On January 15, 1997, the district court held a hearing on that
issue, at which time UCC asked the court to reduce the award to a nominal
amount based on UCC's financial situation. A decision is expected by April 15,
1997. On February 28, 1997, United Cattle Company obtained a settlement with
Mr. Frank for $35,000, releasing Mr. Frank's judgement by UCC.
12
<PAGE> 11
PART II, ITEM 2. CHANGES IN SECURITIES
On November 14, 1996, the Company made a settlement and exchange offer to
the bondholders to accept $331 in cash and the option to receive 717 shares of
the Company's common stock in exchange for each $1,000 outstanding note and the
forgiveness of all unpaid interest on the notes. As of February 25, 1997, over
99% of the bondholders have accepted the offer, and of these, approximately 86%
have accepted the option to receive an equity interest in the Company.
Since February 29, 1996, the Company has continued to be out of compliance
with Article Ten, Section 1012 of the Indenture governing the terms of the
notes with respect to maintenance of minimum net worth. The Company also
defaulted on the interest payments which were due on September 1, 1996,
December 1, 1996 and March 1, 1997.
PART II, ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Since February 29, 1996, the Company has continued to be out of compliance
with Article Ten, Section 1012 of the Indenture governing the terms of its
outstanding Subordinated Notes with respect to the maintenance of a minimum net
worth. In addition, the Company defaulted on its quarterly interest payment
due September 1, 1996, December 1, 1996 and March 1, 1997. During the Quarter
Ended January 31, 1997, the Company commenced a settlement and exchange offer
and offered to exchange $331 in cash and an optional 717 shares for each $1,000
principal amount of outstanding Subordinated Notes. As of February 25, 1997,
over 99% of the noteholders had accepted the offer and the total principal
amount of Subordinated Notes currently outstanding is $40,000.
PART II, ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
None
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended
January 31, 1997.
13
<PAGE> 12
SIGNATURES
In accordance with the requirements of the Exchange Act, the issuer caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED MARKET SERVICES COMPANY
Dated: March 14, 1997 By: /s/Dean Bachelor
---------------- -----------------------------
Dean Bachelor
Chief Executive Officer
(Principal Executive Officer)
Dated: March 14, 1997 By: /s/H. M. Blair
---------------- -----------------------------
H.M. Blair
Controller and Assistant Treasurer
(Principal Financial Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 912,301
<SECURITIES> 0
<RECEIVABLES> 543,287
<ALLOWANCES> 0
<INVENTORY> 36,085
<CURRENT-ASSETS> 1,717,328
<PP&E> 6,544,865
<DEPRECIATION> 5,450,071
<TOTAL-ASSETS> 2,837,955
<CURRENT-LIABILITIES> 1,212,103
<BONDS> 0
0
0
<COMMON> 5,380,357
<OTHER-SE> (4,025,072)
<TOTAL-LIABILITY-AND-EQUITY> 2,837,955
<SALES> 0
<TOTAL-REVENUES> 1,942,742
<CGS> 0
<TOTAL-COSTS> 1,493,478
<OTHER-EXPENSES> 348,538
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,000
<INCOME-PRETAX> 97,726
<INCOME-TAX> 0
<INCOME-CONTINUING> 97,726
<DISCONTINUED> 0
<EXTRAORDINARY> 3,047,005
<CHANGES> 0
<NET-INCOME> 3,144,731
<EPS-PRIMARY> .80
<EPS-DILUTED> .80
</TABLE>
