<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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, 1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number:0-21419
NAM CORPORATION
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(Name of small business issuer as specified in its charter)
Delaware 23-2753988
--------------------------------- -------------------
(State of Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
1010 Northern Boulevard
Great Neck, New York, New York 11021
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(Address of Principal Executive Offices)
(516) 829-4343
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(Issuer's Telephone Number, Including Area Code)
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 registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
---- -----
As of December 15, 1996, 3,334,978 shares of common stock of the issuer were
outstanding.
Transitional small business disclosure format (check one):
Yes No X
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NAM CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL SCHEDULES
SEPTEMBER 30, 1996
Page
1. FINANCIAL STATEMENTS
Condensed Balance Sheets of September 30, 1996 1
Condensed Statements of Operations for the first quarter
ended September 30, 1995 and 1996 2
Condensed Statements of Cash Flows for the first quarter
ended September 30, 1995 and 1996 3
Notes to Financial Statements 4
2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED
SEPTEMBER 30, 1996 5-7
Other Information 8
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NAM CORPORATION
BALANCE SHEETS - UNAUDITED
<TABLE>
<CAPTION>
September 30, June 30,
1996 1996
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash (4,808) 31,474
Accounts receivable (net of allowance
for doubtful accounts) 398,449 455,956
Other receivables (21,808) 5,873
Prepaid assets 97,341 53,010
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Total current assets 469,174 546,313
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Furniture and equipment, net 206,070 216,507
Organization costs, net 27,521 29,669
Deferred offering costs 166,812 112,001
Other assets 30,380 34,503
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Total noncurrent assets 430,783 392,680
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Total assets 899,957 938,993
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable 108,575 239,261
Accrued liabilities and dividends payable 315,220 199,571
Accrued payroll and employee benefits 19,779 45,527
Deferred revenues 118,790 126,380
Notes payable - private placement 400,000 400,000
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Total current liabilities 962,364 1,010,739
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STOCKHOLDERS' DEFICIT
Preferred stock ($.001 par value, 5,000,000 shares
authorized; none issued) - -
Common stock ($.001 par value, 15,000,000 shares
authorized; 1,874,978 and 1,813,075 shares
issued respectively) 1,875 1,813
Paid-in capital 28,677 28,739
Accumulated deficit (92,677) (101,990)
Unearned compensation - stock bonus plan (282) (308)
----------- -----------
Total stockholders' deficit (62,407) (71,746)
----------- -----------
Total liabilities and stockholders' deficit 899,957 938,993
=========== ===========
</TABLE>
<PAGE>
NAM CORPORATION
STATEMENTS OF OPERATIONS - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
1996 % 1995 %
---- - ---- -
<S> <C> <C> <C> <C>
REVENUES 813,444 1.00 775,828 1.00
------- ---- ------- ----
OPERATING COSTS AND EXPENSES:
Cost of services 197,082 0.24 174,943 0.23
Sales and marketing expenses 416,302 0.51 355,755 0.46
General and administrative expenses 181,880 0.22 161,481 0.21
------- ---- ------- ----
Total operating costs and expenses 795,264 0.98 692,179 0.89
------- ---- ------- ----
INCOME FROM OPERATIONS 18,180 0.02 83,649 0.11
------ ---- ------ ----
OTHER INCOME (6,852) -0.01 (6,613) -0.01
------- ----- ------- -----
INCOME BEFORE INCOME TAXES 11,328 0.01 77,036 0.10
------ ---- ------ ----
PROVISION FOR INCOME TAXES 2,015 0.00 1,195 0.00
----- ---- ----- ----
NET INCOME 9,313 0.01 75,841 0.10
----- ---- ------ ----
NET INCOME PER COMMON SHARE 0.005 0.00 0.04 0.00
----- ---- ---- ----
WEIGHTED AVERAGE COMMON STOCK AND
COMMON STOCK EQUIVALENTS 1,947,504 1,947,504
--------- ---------
</TABLE>
<PAGE>
NAM CORPORATION
STATEMENTS OF CASH FLOWS - UNAUDITED
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 9,313 77,036
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Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,698 19,895
Earned portion of stock bonus plan 26 191
Increase (decrease) in cash resulting from
changes in operating assets and liabilities:
Accounts receivables 57,507 (63,885)
Other receivables 27,681 36,826
Prepaid expenses (44,331) (38,811)
Other assets (1,000) (13,803)
Accounts payable and accrued liabilities (15,037) 33,184
Accrued payroll and employee benefits (25,748) (7,319)
Deferred revenues (7,590) 14,499
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Net cash provided by operating activities 21,519 57,813
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of furniture and equipment (2,990) (14,719)
Increase in organization costs - (3,417)
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Net cash used in investment activities (2,990) (18,136)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions made to shareholders - (42,000)
Increase in deferred offering costs (54,811) (19,335)
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Net cash used in financing activities (54,811) (61,335)
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Net increase (decrease) in cash (36,282) (21,658)
Cash at beginning of period 31,474 56,070
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Cash at end of period ( 4,808) 34,412
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<PAGE>
NAM CORPORATION
Notes to Consolidated Financial Statements
(Unaudited)
1. The September 30, 1996 balance sheet presented herein was
derived from the audited June 30, 1996 financial statements of
the Company.
2. These financial statements have been prepared in accordance
with generally accepted accounting principles for interim
financial information and with the instruction to Form 10-QSB.
The financial statements should be read in conjunction with
the audited financial statements of the Company for the year
ended June 30, 1996 for a description of the significant
accounting policies, which have continued without change, and
other footnote information.
3. All adjustments which are, in the opinion of management,
necessary for a fair presentation of the results of the
interim periods have been included. The results of the interim
periods are not necessarily indicative of the results for the
full year.
4. The Company completed its initial public offering on November
18, 1996 and the over-allotment on December 3, 1996, which in
the aggregate consisted of 1,460,000 units, realizing
$4,217,049 in net proceeds. Each unit included one share of
common stock and one redeemable warrant exercisable at $6.00
per share.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations contains forward-looking statements which involve
risks and uncertainties. The Company's actual results and experience could
differ materially from those anticipated in these forward-looking statements as
a result of many factors including changes in the market and/or regions
currently served by the Company and in those markets and/or regions that the
Company may expand into; changes in the insurance industry; the Company's
inability to retain current or new hearing officers; and changes in the public
court system.
General
The Company provides alternative dispute resolution ("ADR") services to
insurance companies, law firms, large self-insured corporations and
municipalities. To date, the Company has focused the majority of its marketing
efforts on developing relationships, and expanding existing relationships, with
insurance companies which the Company believes are some of the largest consumers
of ADR services.
The Company opened its first office in March 1992 in New York and has grown
to five locations in New York, Pennsylvania, Massachusetts, Tennessee and South
Carolina.
The Company's objective is to become one of the leading providers of ADR
services nationally. To accomplish this goal, the Company plans to open up new
offices in states where it does not presently have offices, which may include
the acquisition of existing ADR companies. In addition, the Company intends to
increase its marketing of ADR services to litigants in other types of disputes,
including complex commercial issues, construction, employment and worker's
compensation cases.
The Company has experienced net incomes and positive cash flow from
operations each year since January 1993.
First Quarter Ended September 30, 1996 Compared to First Quarter Ended
----------------------------------------------------------------------
September 30, 1995
- ------------------
Revenues. Revenues increased 5% to $813,444 for the first quarter ended
September 30, 1996 from $775,828 for the comparable 1995 period. Management
attributes this growth in sales to increased business with existing as well as
new clients, in light of the atypical growth experienced in the first quarter of
fiscal 1996, due to two large successful pilot programs.
<PAGE>
Costs of Services. Cost of services as a percentage of revenues for the
first quarter ended September 30, 1996 increased to 24% from 23% for the
comparable 1995 period. This increase was attributable to the Company's
increased business resulting in additional hearing officer fees. As volume of
cases heard increases, the cost of services as a percentage of revenue is
expected to decrease.
Sales and Marketing. Sales and marketing costs as a percentage of revenues
for the first quarter ended September 30, 1996 increased to 51% from 46% for the
comparable 1995 period. Much of this increase was related to salaries attributed
to the increase in personnel in staffing the additional offices, which accounted
for an increase of 16%. Management believes that the Company is currently
operating with excess capacity.
General and Administrative. General and administrative costs as a
percentage of revenues for the first quarter ended September 30, 1996 increased
to 22% from 21% for the comparable 1995 period. Much of this increase was
related to office rents, which increased 71%.
Other Expenses, net. Other expenses as a percentage of revenues for the
first quarter ended September 30, 1996 remained unchanged at 1% from the
comparable 1995 period. Other expenses resulted from interest expense from a
past private placement financing. This debt was satisfied in full on
November 20, 1996.
Provision for Income Taxes. The Company did not have taxable federal income
for the quarters ending September 30, 1995 and 1996, due to net operating loss
carryfowards. As of September 30, 1995 and 1996 the Company had net operating
loss carryfowards for federal tax purposes of approximately $275,112 and $78,051
respectively.
Net Income. Net income for the first quarter ended September 30, 1996
decreased to $9,313 from $75,841 for the comparable 1995 period. This decrease
was primarily due to increases in sales and marketing expenses of 5% as a
percentage of revenues. Management believes that the prior period was atypical
due to two large scale pilot ADR programs which were successful but
not repeated.
Liquidity and Capital Resources
At September 30, 1996, the Company had working capital deficit of $493,190
compared to a working capital deficit of $464,426 at June 30, 1996. This change
in working capital was primarily due to the costs associated with the initial
public offering, which closed on November 18, 1996.
<PAGE>
The Company had net cash provided by operating activities of $21,519 for
the first quarter of 1997 and net cash provided by operating activities of
$57,813 for the first quarter of 1996.
The Company had net cash used in investing activities of $2,990 for the
first quarter of 1997, and $18,136 for the first quarter of 1996. The primary
use of cash during these periods for investing activities was for capital
expenditures.
The Company had net cash used in financing activities of $54,811 for the
first quarter of 1997, due to costs associated with the offering and $61,335
for the first quarter of 1996, due to distributions and costs associated with
the offering.
In June 1994, the Company, in a private placement, issued promissory notes
in the aggregate amount of $400,000. The notes bore interest at a rate of 8% per
annum, and were originally due June 30, 1996. Subsequently the due dates of the
notes were extended to December 31, 1996. On November 20, 1996, the notes were
repaid in-full from a portion of the net proceeds of the Company's initial
public offering.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Not applicable.
Item 2. Changes in Securities.
Not applicable.
Item 3. Defaults upon Senior Securities.
Not applicable.
Item 4. Submission of matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Not applicable.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits. See Exhibit 27.
(b) Reports on Form 8-K. None.
SIGNATURES.
In accordance with 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.
NAM CORPORATION
Date: December 18, 1996 By: /s/ Roy Israel
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Roy Israel, President and CEO
Date: December 18, 1996 By: /s/ Charles A. Merola
--------------------------------------------
Charles A. Merola, Vice President and CFO
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<PERIOD-END> SEP-30-1996
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