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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarterly Period Ended Commission file number 0-14427
September 30, 1995
_____________________
LA-MAN CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA 38-2286268
(State or other jurisdiction (I.R.S. Employer
of incorporation or other organization) Identification Number)
2180 WEST STATE ROAD 434, SUITE 6136, LONGWOOD, FLORIDA 32779 (407) 865-5995
(Address, including zip code, and telephone number, including area code,
or registrant's office)
_____________________
Indicate by check mark whether the registrant (1) has filed all reports to
be filed by Section 13 of 15(d) of the Securities 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. [x] Yes [ ] No
As of November 11, 1995, 2,654,318.67 shares of Common Stock were
outstanding.
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PART I - FINANCIAL INFORMATION
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30,
1995
-------------
(Unaudited)
ASSETS
Currents assets:
Accounts receivable, net $ 1,524,215
Inventories - Note 2 1,101,798
Prepaid expenses 236,814
-----------
Total current assets 2,862,827
Property, plant and equipment, net 2,291,357
Other assets
Intangibles, net 2,781,064
Leased signs - long-term 451,985
Other 109,413
-----------
3,342,462
-----------
$ 8,496,646
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 872,023
Accrued expenses 700,518
Customer deposits 618,313
Current portion of long term liabilities 825,756
Line of Credit 50,000
-----------
Total current liabilities 3,066,610
Long-term liabilities:
Long-term debt, less current portion 1,143,609
Deferred income 177,074
Obligations under capital leases, less current portion 46,754
-----------
1,367,437
-----------
Stockholders' equity:
Common stock 2,641
Additional paid-in capital 5,828,443
Accumulated deficit (1,768,485)
-----------
Total stockholders' equity 4,062,599
-----------
$ 8,496,646
===========
See accompanying notes to condensed consolidated financial statements
2
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
--------------------------
1995 1994
---------- ----------
Sales $3,166,449 $1,911,968
Cost of sales 1,463,720 905,691
---------- ----------
Gross profit 1,702,729 1,006,277
---------- ----------
Operating expenses 1,483,724 1,021,054
---------- ----------
Income (loss) from operations 219,005 (14,777)
---------- ----------
Other income (expense):
Interest income 10,322 13,867
Interest expense (19,095) (10,210)
Officer termination costs - (95,000)
Other 6,060 (716)
---------- ----------
(2,713) (92,059)
---------- ----------
Income (loss) before income taxes 216,292 (106,836)
Income taxes (15,140) -
---------- ----------
Net income (loss) $ 201,152 $ (106,836)
========== ==========
Net income (loss) per share $ 0.06 $ (0.05)
========== ==========
Weighted average number of shares and
share equivalents outstanding 3,407,440 2,265,839
========== ==========
See accompanying notes to condensed consolidated financial statements.
3
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
------------------------
1995 1994
----------- ----------
Cash flows from operating activities:
Net income (loss) $ 201,152 $(106,836)
Adjustments for non-cash charges 80,472 101,405
Gain on disposal of asset (2,532) -
Changes in assets and liabilities, net of effects of acquisition (330,978) 1,726
---------- ---------
Net cash used for operations (51,886) (3,705)
---------- ---------
Cash flows from investing activities:
Capital expenditures (34,656) (58,662)
Increase in advances to Vision Trust Marketing, Inc. - (59,334)
Patent expenditures (1,136) (1,097)
Payment for Don Bell, net of cash acquired of $59,820 (300,180) -
Proceeds from sale of asset 2,532 -
Other (1,471) 15,125
---------- ---------
Net cash used for investing activities (334,911) (103,968)
Cash flows from financing activities:
Proceeds from issuance of common stock - 120,384
Proceeds from line of credit 50,000 30,000
Net payments on capital lease obligations (7,384) (2,431)
Payments on long-term debt (20,350) -
---------- ---------
Net cash provided by financing activities 22,266 147,953
---------- ---------
Increase (decrease) in cash (364,531) 40,280
Cash, beginning of period 364,531 370,650
---------- ---------
Cash, end of period $ -0- $ 410,930
========== =========
Supplemental non-cash investing and financing activities:
Issuance of common stock for DBI $1,100,000
Issuance of debenture for DBI 750,000
Issuance of common stock for 401K matching contribution 7,215
See accompanying notes to condensed consolidated financial statements.
4
LA-MAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1- BASIS OF PRESENTATION
The financial information included herein is unaudited and does not
include all of the information and disclosures required by generally accepted
accounting principles; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair statement of the Company's financial
position and results of operations for the interim periods. This report should
be read in conjunction with the consolidated financial statements included in
the Company's Annual Report on Form 10-KSB for the year ended June 30, 1995.
The results of operations for the three months ended September 30,
1995 are not necessarily indicative of the results to be expected for the full
year.
In November 1994, the Company completed the purchase of Vision Trust
Marketing, Inc. ("VTM") and in September 1995, the Company completed the
purchase of Don Bell Industries, Inc. ("DBI"). Both VTM's and DBI's results of
operations since acquisition are included in the results for the current fiscal
quarter, whereas VTM's and DBI's operations are not included for the same period
in 1994.
NOTE 2 - INVENTORIES
Inventories at the end of interim periods are based on perpetual
inventory records. Inventories consist of the following:
September 30,
1995
-------------
(Unaudited)
Raw materials and work in progress $ 813,023
Finished goods 161,269
Cartons and supplies 127,506
----------
$1,101,798
==========
NOTE 3- LINE OF CREDIT
The Company has a $350,000 revolving bank line of credit with a
commercial bank which had $50,000 outstanding as of September 30, 1995 and
$200,000 outstanding as of November 11, 1995. Advances on the credit line carry
an interest rate of 1.0% over the bank's prime rate. The line of credit, which
matures on January 31, 1996, is secured by accounts receivable, inventories,
real estate and subsidiary guarantees.
The agreement also requires that the Company maintain a minimum
tangible net worth of
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not less than $1,000,000. With the acquisition of Don Bell Industries, Inc. on
September 7, 1995, the bank reduced the minimum tangible net worth requirement
to $750,000. The bank is also assisting the Company in a plan to refinance its
debt structure which increased with the DBI acquisition.
NOTE 4- LONG-TERM DEBT
Long-term debt consists of the following:
Convertible note with an 8% coupon payable
semi-annually with a five year term payable in equal
annual installments beginning in September 1998. The
note has a call provision starting at 105 in year one
declining to 100 in year five. The note may be converted
into common stock of La-Man Corporation at $5.00 a
share at any time by the holder. $ 750,000
DBI prime plus 2% term loan payable, due in monthly principal
payments of $12,700 plus interest. Collateralized by
property, inventory, equipment, cash and accounts receivable
of the Company. Unpaid principal plus accrued interest is
due July 1998. 416,986
DBI promissory note payable with monthly principal and interest
payments of $4,829, interest at the U.S. Treasury security
yield plus 3.25% adjusted every three years, remaining
principal and interest due April 1, 1996 secured by land
and building. 599,147
DBI mortgage note payable, interest at 9%, monthly principal
and interest payments of $1,420 through April 2008,
secured by certain land. 128,063
DBI promissory note payable, interest at 8% paid monthly,
principal payments of $4,000 and $30,000 due on
demand with six months notice. 34,000
DBI promissory note payable, interest at 8% monthly principal
and interest payment of $1,953 through June 1996, secured
by service and installation vehicles. 17,005
DBI other notes payable monthly at various interest rates
through July 1996, secured by equipment. 18,099
----------
1,963,300
Less current portion 819,691
----------
Total $1,143,609
==========
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NOTE 5- SALE OF STOCK
In July 1994 a consultant to the Company exercised an option for
100,000 shares of common stock at $.95 per share for a net proceeds to the
Company of $95,000. The difference between the valuation of the stock at fair
market value and the exercise price resulted in a corporate expense of $10,000.
The consultant also received options for another 400,000 shares at various
exercise prices and expiring on various dates. All such options expired by
December 1994.
During August 1994, the Company sold 26,373 shares of common stock in
a "Regulation S" offshore offering at a price of $.9625 per share, for net
proceeds to the Company of $25,384.
NOTE 6- EMPLOYEE DEPARTURE COSTS
The Company accrued costs of $95,000 related to the departure of two
executive officers/employees of the Company effective September 28, 1994.
Financial and other terms of these employee departures have been negotiated and
paid as of September 1995.
NOTE 7- ACQUISITIONS
In November 1994, the Company purchased all of the shares of common
stock of Vision Trust Marketing, Inc. (VTM") in consideration for the
cancellation of a note receivable in the amount of $180,195. VTM is an
authorized agent of MCI Telecommunications Corporation ("MCI") and generates
commissions from MCI through the solicitation and sale of MCI long distance
services. The Company also entered into a consulting agreement with the former
shareholder of VTM. Under that consulting agreement, the former owner received
70,000 newly issued shares of registered common stock of the Company under its
1994 Amended and Restated Employee and Consultant Stock Compensation Plan for
services to be rendered over the life of the agreement. The consulting
agreement also calls for the consultant to receive a share of the future
commissions received by VTM from MCI, ranging between 5 and 10 percent based on
certain achieved commission levels. The acquisition has been accounted for by
the purchase method of accounting, and the purchase price of $180,195
approximated the fair value of the net assets acquired including goodwill of
$215,493. The operating results of VTM are included in the Company's
consolidated results of operations from the date of acquisition.
On September 7, 1995, the Company acquired all of the outstanding
common stock, the 8% cumulative preferred stock and $935,091 of notes receivable
of Don Bell Industries, Inc. for a total consideration of $2,210,000 comprised
of the following:
1) Cash of $360,000
2) $750,000 convertible note with the following provisions:
a) Coupon - 8%, payable semiannually
b) Conversion price - $5.00 per share
c) Term- five years payable in equal annual installments beginning
September 1998
d) Call provision - 105 in year one declining to 100 in year five
3) 275,000 shares of common stock
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4) Additional cash, common stock or debt at the Company's option,
contingently issuable should the market price of the Company's
common stock not exceed $4 per share for any consecutive 20-day
period prior to December 31, 1996
The acquisition is being accounted for by the purchase method of
accounting. The operating results of this acquisition are included in the
Company's consolidated results of operations from the date of acquisition.
8
LA-MAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
------- ------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following discussions should be read in conjunction with
management's discussion and analysis of financial condition and results of
operations set forth in the Company's Annual Report on Form 10-KSB for the year
ended June 30, 1995 filed with the Securities and Exchange Commission on
September 28,1995, which discussion is incorporated herein by reference.
THREE MONTHS ENDED SEPTEMBER 30, 1995 VS. SEPTEMBER 30, 1994
- ------------------------------------------------------------
The results of operations for the quarter ended September 30, 1995
include the operations of Vision Trust Marketing, Inc. (VTM") and Don Bell
Industries, Inc. ("DBI") which were acquired in November 1994 and September
1995, respectively, as purchase transactions. VTM's and DBI's operating results
for the three months ended September 30, 1995 are as follows:
VTM DBI
--------- ---------
Sales $ 91,014 $691,752
Cost of Sales 14,278 400,471
-------- --------
Gross Profit 76,736 291,281
-------- --------
Operating Expenses 137,454 141,242
-------- --------
Income from Operations (60,718) 150,039
Interest Income - 3,416
Interest Expense - (16,414)
-------- --------
Income before income taxes $(60,718) $137,041
======== ========
Absent the acquisitions of VTM and DBI, consolidated sales of $2,383,683
represented an increase of $471,715 or 25% over the three months ended September
30, 1994. The gross profit of $1,334,712 was an improvement of $328,435 or 33%.
The gross profit margin improved to 56% versus 53% in the comparative three
month period.
The lubrication and filtration division's sales of $417,786 was a decrease
of $5,501 or 1% with gross profits increasing to $269,640 from $244,996 or a 10%
improvement due principally to a significant improvement in gross margin related
mainly to lower raw material costs. The packaging operations' sales decreased
by $103,764 or 30% to $245,709 in the quarter ending September 30,1995 due to
changes in the sales force and emphasis on higher margin products. The gross
margin percentage increased to 25% from 22% in the prior year, basically due to
emphasizing higher margin sales.
The church and school sign marketing operations' sales of $1,726,223
increased from $1,139,208 in the quarter ending September 30, 1994, an increase
of $587,015 or 52%. A substantial portion of this
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increase is the result of record orders booked in June in advance of a price
increase. The remaining increase is due to the increased trained sales force
added during the year ended June 30, 1995. Gross margins increased to
$1,002,569 from $683,821, an increase of $318,748 or 47% due primarily to the
increased sales.
Excluding VTM and DBI , operating expenses of $1,205,028 for the quarter
represented an increase of $183,974 or 18% as compared to the quarter ending
September 30, 1994. The primary reason for the increase is higher costs related
to the church and school sign marketing operations which incurred greater
selling and support costs related to the substantial increase in revenues. In
addition, corporate expenses increased basically related to the Company's first
annual report, proxy and shareholders meeting.
Other expenses of $2,713 decreased from $92,066 for the three months ended
September 30, 1995, and 1994, respectively. The Company recorded a charge of
$95,000 for costs related to the dismissal of the two officers by the Board of
Directors in September 1994. See Note 6 to Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity and capital resources will be discussed in three broad
categories, namely, operating, investing, and financing activities. The cash
available at June 30, 1995 of $364,531 was completely used at September 30,
1995.
Net cash used for operating activities in the three month period ending
September 30, 1995 was $51,866. Net income of $201,152 and non-cash charges for
depreciation and amortization of $80,472 were more than offset by the net
changes in assets and liabilities of $330,978.
Net cash used for investing activities of $334,911 related almost entirely
to the payment for Don Bell Industries of $360,000 less the cash acquired with
the acquisition of $59,820. The Company also used $34,656 for capital
expenditures in its church and school sign marketing operation.
Net cash provided by financing activities was $22,266. The Company took
down $50,000 of its line of credit and paid $20,350 of the long-term debt
acquired in the acquisition. The Company has since taken down another $150,000
of its line of credit leaving it with an available balance of $150,000 at
November 11, 1995. In connection with the acquisition of Don Bell Industries,
Inc., the Company assumed long term debt of $1,233,550, including a mortgage on
its manufacturing facilities of $600,100, which matures on April 1, 1996. The
manufacturing facilities have a current appraised value of $1,050,000. The
Company intends to refinance all of its present long-term debt to substantially
reduce its current liabilities. The Company's banker has committed to refinance
$504,929 of the acquired debt and the $350,000 line of credit with a revolving
credit and term loan facility of $950,000, subject to securing consent of the
primary mortgage holder for a second mortgage on the manufacturing facilities.
At the same time, the Company and its banker are seeking participant banks in
order to also refinance the primary mortgage when due on April 1, 1996 or
earlier, if the consent to a second mortgage is not obtained. The new debt
agreements should reduce principal and interest payments and together with the
new mortgage on the building and land provide higher available cash to the
Company. The Company and its banker expect to have this refinancing program
completed before April 1, 1996.
10
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ----------------------------
On March 13, 1995, Richard W. Coffman, a director and former executive
officer and employee of the Company, and his two brothers, Roy E. Coffman and
Floyd E. Coffman, filed a petition in the Clark County, Nevada District Court
(the "Coffman Petition"). The Coffman Petition basically alleged that the
plaintiffs owned in the aggregate over 20% of the issued and outstanding common
stock of the Company, that more than 18 months has passed since the Company
conducted a meeting of shareholders for the purpose of electing directors, and
that under Section 78.330, Nevada Revised Statutes ("N.R.S."), the plaintiffs
were entitled to apply to the Clark County, Nevada District Court to exercise
its equity jurisdiction to order the Company to hold a meeting of stockholders
for the purpose of electing directors. Under Section 78.345 N.R.S., if a Nevada
corporation fails to elect directors within 18 months after the last election of
directors, one or more stockholders of the corporation holding stock entitling
them to exercise at least 15% of the voting power of the corporation for the
election of directors may apply to the district court in the county in the State
of Nevada where the registered office of the corporation is located, by petition
filed in that court, for such district court to exercise its jurisdiction in
equity to order the corporation to conduct a meeting of stockholders for the
purpose of electing directors.
On April 21, 1995, the Company filed an answer to the Coffman Petition
denying various allegations contained therein and setting forth various
affirmative defenses to the relief sought by the Coffman Petition, including
without limitation that the relief sought had been rendered moot as the result
of action by the Board of Directors in scheduling a stockholders meeting to be
held on October 31, 1995, and the equitable defenses of unclean hands and
laches. The Company's answer requested that the court dismiss the Coffman
Petition with prejudice and award the Company costs and attorneys fees.
On September 26, 1995, the disputes between the parties to the foregoing
proceeding were settled and the proceeding was dismissed with prejudice by the
Clark County, Nevada District Court.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -------------------------------------------
La-Man Corporation Current Report on Form 8-K dated September 7, 1995
and filed with the Securities and Exchange Commission on September 25, 1995,
with respect to the acquisition by the Company of the outstanding capital stock
of Don Bell Industries, Inc.
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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.
LA-MAN CORPORATION
Date: November 14, 1995 By: /s/ J. William Brandner
----------------------------------------
J. William Brandner, President &
Chief Executive Officer
By: /s/ Otto J. Nicols
----------------------------------------
Otto J. Nicols, Vice President &
Treasurer Chief Financial Officer
and Chief Accounting Officer
12