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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB/A
AMENDMENT NO. 1
TO
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
December 31, 1995
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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 February 9, 1996, 2,690,943.67 shares of Common Stock were
outstanding.
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PART I - FINANCIAL INFORMATION
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31,
1995
------------
(Unaudited)
ASSETS
Current assets:
Accounts receivable, net $ 1,657,119
Inventories - Note 2 1,046,480
Prepaid expenses 339,899
-----------
Total current assets 3,043,498
Property, plant and equipment, net 2,202,079
Other assets
Intangibles, net 2,753,721
Leased signs - long-term 445,550
Other 136,337
-----------
3,335,608
-----------
$ 8,581,185
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 779,142
Accrued expenses 650,437
Customer deposits 501,284
Current portion of long term liabilities 80,948
-----------
Total current liabilities 2,011,811
Long-term liabilities:
Long-term debt, less current portion 2,186,014
Deferred income 140,508
Obligations under capital leases, less current portion 44,950
-----------
2,371,472
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Stockholders' equity:
Common stock 2,654
Additional paid-in capital 5,843,196
Accumulated deficit (1,647,948)
-----------
Total stockholders' equity 4,197,902
-----------
$ 8,581,185
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See accompanying notes to condensed consolidated financial statements
2
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
December 31, December 31,
---------------------- -----------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
Sales $6,863,085 $3,983,069 $3,696,636 $2,071,101
Cost of sales 3,328,034 1,847,761 1,864,314 942,070
---------- ---------- ---------- ----------
Gross Profit 3,535,051 2,135,308 1,832,322 1,129,031
---------- ---------- ---------- ----------
Operating expenses:
Selling 1,273,383 635,825 694,857 343,432
General and administrative 1,863,536 1,371,931 968,700 651,828
Engineering 23,635 17,244 13,273 8,686
---------- ---------- ---------- ----------
3,160,554 2,025,000 1,676,830 1,003,946
---------- ---------- ---------- ----------
Income from operations 374,497 110,308 155,492 125,085
---------- ---------- ---------- ----------
Other income (expense):
Interest income 30,191 19,988 19,869 6,121
Interest expense (87,866) (20,751) (64,495) (10,541)
Officer termination costs - (95,000) - -
Gain on sale of equipment 12,532 - 10,000 -
Other 7,475 4,989 (329) 5,705
---------- ---------- ---------- ----------
(37,668) (90,774) (34,955) 1,285
---------- ---------- ---------- ----------
Income before income taxes 336,829 19,534 120,537 126,370
Income taxes 15,140 - - -
---------- ---------- ---------- ----------
Net income $ 321,689 $ 19,534 $ 120,537 $ 126,370
========== ========== ========== ==========
Net income per share $.13 $.01 $.05 $.05
========== ========== ========== ==========
Weighted average number of shares
outstanding 2,555,012 2,294,754 2,654,318 2,323,160
========== ========== ========== ==========
See accompanying notes to condensed consolidated financial statements.
3
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
-----------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 321,689 $ 19,534
Adjustments for non cash charges 228,617 206,320
Changes in assets and liabilities (773,640) (218,203)
Gain on disposal of asset (12,532) (5,700)
---------- ---------
Net cash provided by (used for) operations (235,866) 1,951
---------- ---------
Cash flows used for investing activities:
Capital expenditures (56,306) (107,581)
Decrease in advances to Vision Trust Marketing, Inc. - 106,056
Purchase of Vision Trust Marketing, Inc.(net of cash acquired) - (259,597)
Patent expenditures (1,794) (1,592)
Proceeds from sale of asset 12,532 5,700
Payment for Don Bell, net of cash acquired of $59,820 (300,180) -
Other (108,176) 18,202
---------- ---------
Net cash used for investing activities: (453,924) (238,812)
---------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock - 120,384
Proceeds from revolving line of credit 289,117 115,000
Payment for purchase of outstanding warrants - (2,500)
Net payments on capital lease obligations (18,573) (7,242)
Increase(Decrease) in notes payable and debt 54,715 (299,997)
---------- ---------
Net cash provided by (used for) financing activities 325,259 (74,355)
---------- ---------
Decrease in cash (364,531) (311,216)
Cash, beginning of period 364,531 370,650
---------- ---------
Cash, end of period $ -0- $ 59,434
========== =========
Supplemental non-cash investing and financing activities:
Issuance of common stock for DBI 1,100,000
Issuance of convertible note for DBI 750,000
Issuance of common stock for 401K matching contribution 21,984
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; 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 results for the interim periods. This report should be read in
conjunction with the financial statements included in the Company's Annual
Report on Form 10-KSB for the year ended June 30, 1995 and Form 10-QSB for the
first quarter ended September 30, 1995.
The results of operations for the six months and three months ended
December 31, 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") See Note 7. Both VTM's and DBI's
results of operations since acquisition are included in the results for the
current fiscal quarter and six months ended December 31, 1995, whereas VTM's
operations were immaterial in the 1994 periods and DBI's operations are not
included for the same periods in 1994.
NOTE 2 - INVENTORIES
Inventories at the end of interim periods are based on perpetual
inventory records. Inventories consist of the following:
December 31,
1995
------------
(Unaudited)
Raw materials and work in progress $ 771,629
Finished goods 171,781
Cartons and supplies 103,070
----------
$1,046,480
==========
NOTE 3- LINE OF CREDIT AND REFINANCING
In December, 1995, the Company completed the refinancing of its line
of credit and a major portion of the debt assumed in the acquisition of DBI in
September of 1995.
The Company entered into a $500,000 revolving line of credit with a
two year term ending December 27, 1997 with interest adjustable at 1 percent
over the prime rate published in the Wall Street Journal.The revolving line of
credit requires interest to be paid monthly with the principal due at the end of
the loan. It also entered into a $250,000 five year term loan ending December
27, 2000 with interest adjustable at 2 percent over the prime rate published in
the Wall Street Journal. The term loan requires $4,166.67 of principal and
interest to be paid monthly. These loans require the Company to maintain a
tangible net worth of $750,000 which increases to $1,500,000 at June 30, 1996, a
3 to 1 interest coverage and a cash flow coverage of 2.5 to 1 at each fiscal
year end. The loans are secured by accounts receivables, inventories, real
estate and subsidiary guarantees.
At the same time the Company entered into a new mortgage loan secured
by the DBI building and land in the amount of $840,000. The mortgage loan is
based on a twenty year amortization with a five year term and has an adjustable
interest rate of 1-1/2 percent over the prime rate published in
5
the Wall Street Journal. At the current prime rate, the monthly payment of
principal and interest is $8,106.18.
Concurrent with this financing the Company paid off its old line of
credit, and the DBI long-term debt except for the $126,675 mortgage secured by
certain land. The outstanding balance on the revolving line of credit was
$289,117 at December 31, 1995 and $339,117 at February 9, 1996.
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
Mortgage loan secured by DBI land and building with
monthly principal and interest payments of $8,106.18.
Interest is adjustable and based on 1 1/2 percent over the prime
rate quoted in the Wall Street Journal. The remaining principal
is due December 27, 2000. 840,000
Term loan with 60 monthly payments of $4,166.67 plus
interest adjustable at 2 percent over the prime rate quoted in the
Wall Street Journal. Secured by receivables, inventory, real estate
and subsidiary guarantees. 250,000
Revolving line of credit up to $500,000 maturing on December
27, 1997 with interest of 1 percent over the prime rate quoted
in the Wall Street Journal payable monthly. 289,117
DBI mortgage note payable, interest at 9%, monthly principal
and interest payments of $1,420 through April 2008, secured
by certain land. 126,675
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2,255,792
Less current portion 69,778
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Total $2,186,014
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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 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.
In January 1996, two SD warrant holders converted 26,250 warrants to
common stock of the Company at an exercise price of $.75 per share for net
proceeds to the Company of $19,687.50.
6
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 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
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.
7
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.
SIX MONTHS ENDED DECEMBER 31, 1995 VS. DECEMBER 31. 1994
- --------------------------------------------------------
The results of operations for the six months ended December 31, 1995
include the operations of VTM and DBI which were acquired in November 1994 and
September 1995, respectively, as purchase transactions. VTM's and DBI's
operating results for the six months ended December 31, 1995 are as follows:
VTM DBI
---------------------------
( In 000's )
Sales $ 249 $2,162
Cost of Sales 40 1,327
------ ------
Gross Profit 209 835
------ ------
Operating Expenses 321 525
------ ------
Income (Loss) from Operations (112) 310
Interest Income - 18
Interest Expense - (78)
Gain on Sale of Equipment - 10
------ ------
Income (Loss) before income taxes ($112) $ 260
====== ======
Sales for the six months ended December 31, 1995 were $6,863,085, an
increase of $2,880,016 or 72%. Net income increased to $321,689 as compared to
the prior six months net income of $19,534. Earnings per share was $.13 in the
current six month period versus $.01 in the prior year.
Absent the acquisitions of VTM and DBI, consolidated sales of
$4,451,660 represented an increase of $468,591 or 12% over the six months ended
December 31, 1994. For the same period operating income increased $66,231 to
$176,539 or 60%. The gross profit of $2,490,646 was an improvement of $355,338
or 17% over the comparable period in 1994. The gross profit margin improved to
56% versus 54%.
The lubrication and filtration division's sales of $798,284 was a
decrease of $46,740 or 6%. Gross profits of $485,239 was a decrease of $13,920
or 3%. A higher gross margin percentage of 61% prevented a further profit
erosion from the sales decline. The packaging operations' sales decreased
$209,492 or 31% to $462,454 due to a complete turnover of the sales force. The
Company is optimistic that the recent changes made in management will improve
this operation in the near future.
The church and school sign marketing operations' sales of $3,243,173
increased from
8
$2,471,966 or 31%. The increase was basically due to record orders booked in
June in advance of a price increase and the increase in the trained sales force
added in the prior year. Gross margins increased in line with the sales
increase.
Excluding VTM and DBI, operating expenses of $2,314,107 in the six
months ended December 31, 1995 represented an increase of $289,107 or 14% as
compared to the six months ended December 31, 1994. The primary reason for the
increase was higher costs related to the church and sign marketing operations
which incurred greater selling and support costs related to the increase in
revenues. In addition, corporate expenses increased related to the Company's
annual report, proxy statement and shareholders meeting.
Other expenses of $37,668 decreased from $90,774 for the six months
ended December 31, 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. Other
expenses increased in 1995 due primarily to interest expense related to the
assumption and issuance of debt with the DBI acquisition.
THREE MONTHS ENDED DECEMBER 31, 1995 VS. DECEMBER 31, 1994
- ----------------------------------------------------------
The results of operations for the quarter ended December 31, 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 December 31, 1995 are as follows:
VTM DBI
----------------------------
( In 000's)
Sales $ 158 $1,470
Cost of Sales 25 926
------ ------
Gross Profit 133 544
------ ------
Operating Expenses 184 384
------ ------
Income (Loss) from Operations (51) 160
Interest Income - 15
Interest Expense - (62)
Gain on Sale of Equipment - 10
------ ------
Income (Loss) before income taxes ($ 51) $ 123
====== ======
Absent the acquisitions of VTM and DBI, consolidated sales of
$2,067,977 were flat with the three months ended December 31, 1994. The gross
profit of $1,155,934 was an improvement of $26,903 or 2%. The gross profit
margin improved to 56% versus 55% in the comparative three month period.
The lubrication and filtration division's sales of $380,498 was a
decrease of $36,442 or 9% with gross profits decreasing to $215,599 from
$254,164. The gross margin percentage decreased to 57% from 61% due to product
mix. The packaging operations' sales decreased by $105,727 or 33% to $216,745 in
the quarter ending December 31,1995 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 period.
9
The church and school sign marketing operations' sales of $1,516,950
increased from $1,332,758 in the quarter ending December 31, 1994, an increase
of $184,192 or 14% due primarily to the increased trained sales force added in
the prior year. Gross margins increased to $887,123 from $800,831, an increase
of $86,292 or 11% due primarily to the increased sales.
Excluding VTM and DBI , operating expenses of $1,109,079 for the
quarter represented an increase of $105,133 or 10% as compared to the quarter
ending December 31, 1994. The primary reason for the increase was 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.
Other expenses of $34,955 increased from income of $1,285 for the
three months ended December 31, 1995, and 1994, respectively, due primarily to
higher interest costs related to the acquisition of Don Bell Industries, Inc.
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 December 31, 1995.
Net cash used for operating activities in the six month period ending
December 31, 1995 was $235,866. Net income of $321,689 and non-cash charges for
depreciation and amortization of $228,617 were more than offset by the net
changes in assets and liabilities of $773,640.
Net cash used for investing activities of $453,924 related largely to
the payment for DBI of $360,000 less the cash acquired with the acquisition of
$59,820. The Company also used $56,301 for capital expenditures primarily in
its church and school sign marketing operation and $108,176 in Other which
included the costs of debt refinancing which was approximately half of the
amount.
Net cash provided by financing activities was $325,259. The Company
took down $289,117 of its new $500,000 revolving line of credit. The Company
has since taken down another $50,000 of its line of credit leaving it with an
available balance of $160,883 at February 9, 1996.
The Company completed its debt refinancing in December 1995 by
entering into a $500,000 two year term revolving line of credit, a new mortgage
on DBI's principal manufacturing facility in the amount of $840,000 based on a
twenty year amortization for a five year term and entering into a $250,000 five
year term loan repayable at $4,166.67 a month plus interest. See Note 3 to
Financial Statements.
10
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 VOTE OF SECURITY - HOLDERS.
- ------------------------------------------------------------------
(a) The Company held its 1995 annual meeting of shareholders (the "1995
Annual Meeting") on October 31, 1995.
(b) Proxies for the 1995 Annual Meeting were solicitated by the Comapny's
management pursuant to Regulation 14A under the Exchange Act, there was no
solicitation in opposition to management's nominees for election of directors as
listed in the Company's October 6, 1995 Proxy Statement delivered in connection
with the 1995 Annual Meeting, and all of such nomunees were elected.
(c) At the Annual Meeting, 10 persons were elected to seve as directors of
the Company until the next annual meeting. The shareholders ratified the
appointment of BDO Seidman, LLP, as independent auditors of the Company for the
June 30, 1996 fiscal year. The number of votes cast for, against or withheld,
as well as the number of abstentions (including broker non-votes), as to each of
such matters was as follows:
VOTES VOTES VOTES VOTES
FOR AGAINST WITHHELD ABSTAINING
--------- ------- -------- ----------
Gary Bell 2,151,422 0 7,148 165,563
J.William Brandner 2,153,655 0 4,915 165,563
Ithiel C. Clemmons 2,151,655 0 6,915 165,563
Edwin M. Freakley 2,151,422 0 7,148 165,563
Thomas N. Grant 2,151,422 0 7,148 165,563
Philip Howe Hoard 2,153,622 0 4,948 165,563
Otto J. Nicols 2,151,422 0 4,915 165,563
Robert M. Smither 2,151,422 0 7,148 165,563
J. Melvin Stewart 2,153,422 0 5,148 165,563
Max D. Tavernier 2,153,389 0 5,181 165,563
Ratification of
appointment of
BDO Seidman 2,146,808 2,732 N/A 174,593
ITEM 5. OTHER INFORMATION.
- ---------------------------
Not applicable
11
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -----------------------------------------------
La-Man Corporation Current Report on Form 8-K dated December 27, 1995 and filed
with the Securities and Exchange Commission on January 12, 1996, with respect to
the refinancing of certain indebtedness of La-Man Corporation and its
subsidiaries.
12
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: February 9, 1996 By: J. William Brandner
______________________________________
J. William Brandner, President &
Chief Executive Officer
By: Otto J. Nicols
______________________________________
Otto J. Nicols, Vice President &
Treasurer, Chief Financial Officer
and Chief Accounting Officer
13