SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES ACT OF 1934
For the Quarterly Period Ended
September 30, 1996 Commission file number 0-14427
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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 November 7, 1996, 3,280,915 shares of Common Stock were outstanding.
PART I - FINANCIAL INFORMATION
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
September 30,
1996
-------------
(Unaudited)
ASSETS
Currents assets:
Cash $ 28,295
Accounts receivable, net 1,947,568
Inventories - trade (Note 2) 1,060,649
Prepaid expenses 314,934
Deferred tax assets 146,275
Costs and estimated earnings in excess of
billings on uncompleted contracts (Note 3) 87,171
-----------
Total current assets 3,584,892
-----------
Property, plant and equipment, net 2,795,644
-----------
Other assets
Intangibles, net 2,502,343
Other 435,720
-----------
2,938,063
-----------
$ 9,318,599
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 994,589
Accrued expenses 711,823
Customer deposits 556,177
Deferred income 43,770
Current portion of long-term liabilities 127,122
-----------
Total current liabilities 2,433,481
-----------
Long-term liabilities:
Long-term debt, less current portion 2,113,820
Deferred income 29,190
Obligations under capital leases, less current portion 26,240
-----------
Total liabilities 4,602,731
-----------
Stockholders' equity:
Common stock 3,281
Additional paid-in capital 6,351,541
Accumulated deficit (1,638,954)
-----------
Total stockholders' equity 4,715,868
-----------
$ 9,318,599
===========
See accompanying notes to condensed consolidated financial statements.
2
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
September 30,
-------------------------
1996 1995
---------- -----------
Sales $4,278,801 $2,920,740
Cost of sales 2,288,197 1,274,478
---------- ----------
Gross profit 1,990,604 1,646,262
Operating expenses 1,848,357 1,397,229
---------- ----------
Income from operations 142,247 249,033
---------- ----------
Other income (expense):
Interest income 23,879 10,292
Interest expense (49,710) (19,095)
Other (771) 6,060
---------- ----------
(26,602) (2,743)
---------- ----------
Income from continuing operation
before income taxes 115,645 246,290
Provision for income taxes - (15,140)
---------- ----------
Income from continuing operations 115,645 231,150
Discontinued operations:
Loss from operations of discontinued
packaging operations - (29,998)
---------- ----------
Net income $ 115,645 $ 201,152
========== ==========
Income (loss) per share:
Continuing operations $ 0.04 $ 0.09
Discontinued operations - (0.01)
---------- ----------
Net income income per share $ 0.04 $ 0.08
========== ==========
Weighted average number of shares 3,218,879 2,555,967
========== ==========
See accompanying notes to condensed consolidated financial statements.
3
LA-MAN CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
September 30,
----------------------
1996 1995
--------- ----------
Cash flows from operating activities:
Net income from continuing operations $ 115,645 $ 231,150
Adjustments for non-cash charges 123,219 77,346
Gain on disposal of asset (1,143) (2,532)
Changes in assets and liabilities, net of
effects of acquisition and disposition (474,488) (295,018)
Operating activities provided by (used for)
discontinued operations 6,380 (62,832)
-------- ---------
Net cash used for operating activities (230,387) (51,886)
-------- ---------
Cash flows from investing activities:
Capital expenditures (85,200) (34,656)
Patent expenditures (1,302) (1,136)
Payment for Don Bell, net of cash
acquired of $59,820 - (300,180)
Proceeds from sales of assets 1,143 2,532
Other (31,805) (1,471)
-------- ---------
Net cash used for investing activities (117,164) (334,911)
-------- ---------
Cash flows from financing activities:
Proceeds from exercise of common stock warrants 18,750 -
Proceeds from line of credit 275,100 50,000
Net payments on capital lease obligations (4,347) (7,384)
Payments on long-term debt (26,384) (20,350)
-------- ---------
Net cash provided by financing activities 263,119 22,266
-------- ---------
Decrease in cash (84,432) (364,531)
Cash, beginning of period 112,727 364,531
-------- ---------
Cash, end of period $ 28,295 $ -0-
======== =========
Supplemental non-cash investing and
financing activities:
Issuance of common stock for DBI - $1,100,000
Issuance of 8% convertible note for DBI - 750,000
Issuance of common stock for 401(k)
matching contribution $ 21,735 7,215
Issuance of common stock in connection
with 5% stock dividend 152,768
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 presentation 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, 1996.
The results of operations for the three months ended September 30,
1996 are not necessarily indicative of the results to be expected for the full
year.
In September 1995, the Company completed the purchase of Don Bell
Industries, Inc. ("DBI"). DBI's results of operations since acquisition are
included in the results for the current and prior fiscal quarter.
NOTE 2 - INVENTORIES
Inventories at the end of interim periods are based on perpetual
inventory records. Inventories consist of the following at September 30, 1996:
Raw materials and work in progress $ 915,193
Finished goods 145,456
----------
$1,060,649
==========
NOTE 3- UNCOMPLETED CONTRACTS
The costs and estimated earnings in excess of billings on uncompleted
contracts, consists of the following at September 30, 1996:
Costs incurred on uncompleted contracts $ 1,173,178
Estimated earnings 98,599
----------
1,271,777
Billings to date (1,184,606)
-----------
$ 87,171
===========
5
NOTE 4- REVOLVING LINE OF CREDIT
The Company has a $500,000 revolving bank line of credit. Advances on
the credit line carry an interest rate of 1% over prime. The line of credit
matures December 27, 1997, and is collateralized by property, accounts
receivable and inventory. The agreement providing for the line of credit has
covenants which require the Company to maintain certain financial and operating
ratios, including tangible net worth and interest coverage ratio requirements.
At September 30, 1996 the Company had outstanding advances on this line of
credit of $275,100, which amount is included in long-term debt.
NOTE 5- 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.
NOTE 6- DISCONTINUED OPERATIONS
During August 1996, the Company made a strategic decision to
discontinue the operations of Heritage Packaging Services, Inc. ("Heritage"),
its package wholesaling subsidiary. On August 27, 1996, the Company sold
substantially all of Heritage's accounts receivable, inventory and fixed assets
for cash proceeds of $35,000 and the assumption of certain liabilities. During
the year ended June 30, 1996, the Company made an accrual in the aggregate
amount of $115,000 providing for a $57,764 loss on the sale of the net assets of
Heritage, with the remainder providing for estimated losses on operations and
close- down costs.
NOTE 7- CAPITAL STOCK
On July 12, 1996, the Company authorized a 5 percent stock dividend,
which was issued August 7, 1996 to holders of record on July 26, 1996. The
dividend resulted in the issuance of an additional 152,768 shares of the
Company's common stock valued at $1 per share. Net income per share for the
quarter ended September 30, 1995 has been retroactively restated to reflect the
effect of this stock dividend.
6
During the quarter ended September 30, 1996, a total of 52,521
warrants to purchase common stock were exercised at a price of $.357 per share
for cash proceeds to the Company of $18,750. In addition, 16,961 shares of
common stock valued at $21,735 were issued in connection with the Company's
401(k) Plan's matching contribution.
NOTE 8- SUBSEQUENT EVENT
On October 29, 1996, representatives of MCI orally advised Vision
Trust Marketing, Inc., a wholly-owned subsidiary of the Company, that MCI has
determined to terminate its agent program. Vision operates a long-distance
telemarketing operation as an agent of MCI under an agreement that allows MCI to
terminate the agreement on at least 90 days' prior written notice. Vision has
not yet received written notice of termination from MCI, but is evaluating the
potential impact of MCI's pending termination of its agent program and is
exploring various alternative plans.
(THE REMAINDER OF THE PAGE INTENTIONALLY LEFT BLANK)
7
LA-MAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
The following discussion 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, 1996 filed with the Securities and Exchange Commission on
September 26,1996, which discussion is incorporated herein by reference.
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995
- ------------------------------------------------------------
The Company's consolidated sales of $4,278,801 for the quarter ended
September 30, 1996 increased $1,358,061 or 46% over the prior quarter ended
September 30, 1995. Operating income of $142,247 for the quarter represented a
decline of $106,786 over the prior quarter operations of $249,033. Income from
continuing operations of $115,645 declined from $231,150. Net income of
$115,645 was a decline of $85,507 over the prior quarter's income of $201,152.
Earnings per share from continuing operations of $.04 for the quarter
ended September 30, 1996 dropped from $.09 in the September 30, 1995 quarter.
Net income per share dropped to $.04 from $.08 per share. A contributing factor
in the decrease in earnings per share was the increase in the weighted average
number of shares outstanding, which increased 662,912 shares or 26% in the
quarter ended September 30, 1996 as compared to the quarter ended September 30,
1995, an impact of $.02 per share. The higher number of shares outstanding
resulted primarily from the conversion of warrants, the DBI acquisition and
shares issued to the La-Man Corporation 401(k) plan.
The results of operations for the quarter ended September 30, 1996
include the operations of Don Bell Industries, Inc. ("DBI"), which was acquired
in September 1995, and accounted for as a purchase transaction. DBI's operating
results for the three months ended September 30, 1996 and the one month ended
September 30, 1995 are as follows:
1996 1995
----------- ----------
Sales $1,955,441 $691,752
Cost of Sales 1,370,529 400,471
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Gross Profit 584,912 291,281
Operating Expenses 444,046 141,242
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Income from Operations 140,866 150,039
Interest Income 17,192 3,416
Interest Expense (49,209) (16,414)
---------- --------
Income before income taxes $ 108,849 $137,041
========== ========
8
Absent the acquisition of DBI, consolidated sales of $2,323,360
represented an increase of $94,372 or 4% over the three months ended September
30, 1995. The gross profit of $1,405,692 was an improvement of $ 50,711 or 4%.
The gross profit margin of 61% was unchanged with the comparative three month
period.
The filtration division's sales of $438,259 was an increase of $26,505
or 7%, with gross margin decreasing to $263,617 from $275,676 due to product
mix.
The church and school sign marketing operations' sales of $1,820,137
increased from $1,726,223 in the quarter ending September 30, 1995, an increase
of $93,914 or 5.5% . Gross margins increased to $1,088,121 from $1,002,569, an
increase of $85,552 or 9%, due to the sales increase and a price increase, which
became effective late in the first quarter of 1996.
The long-distance telemarketing operations' sales of $ 64,964
decreased from $91,014 in the quarter ending September 30, 1995. Operating loss
also increased to $155,990 from $60,718 in the quarter ending September 30,
1995. In October, 1996 the Company was notified by MCI that it is canceling its
agent program. (See Note 7 to the Company's Condensed Consolidated Financial
Statements).
Excluding DBI, operating expenses of $1,404,311 for the quarter
represented an increase of $148,324 or 12% as compared to the quarter ending
September 30, 1995. The primary reason for the increase was higher
telemarketing expenses at both the church and school sign operations and the MCI
long-distance operations. The addition of new support staff and salary
increases also contributed to the increase.
Other expenses -net of $26,602 for the three-months ended September
30, 1996 increased from $2,743 for the three months ended September 30, 1995
primarily due to interest expense related to the DBI acquisition partially
offset by higher interest income.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Liquidity and capital resources will be discussed in three broad
categories, namely, operating, investing and financing activities. Cash
available at June 30, 1996 and September 30, 1996 was $112,727 and $28,295,
respectively.
Net cash used for operating activities in the three- month period
ending September 30, 1996 was $230,387. Net income of $115,645 and non-cash
charges for depreciation and amortization of $123,219 were more than offset by
the net changes in assets and liabilities of $474,488 and amounts provided by
discontinued operations of $6,380.
Net cash used for investing activities was $117,164. Capital
expenditures which amounted to $85,200 was the principle item.
Net cash provided by financing activities was $263,119. The Company
took down $275,100 of its line of credit. Also, the Company made payments on
long-term debt of $26,384 and received $18,750 from the conversion of 52,521
warrants to common stock. At November 7, 1996 there was $375,100 outstanding on
the line of credit.
9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
- ----------------------------
Not applicable
ITEM 2. CHANGES IN SECURITIES
- -------------------------------
"(c) During the period covered by this Report, the Company issued 16,691
shares of its common stock to the La-Man Corporation 401(k) Plan as its employer
contribution (see Note 7 to the Condensed Consolidated Financial Statements
included in Part I of this Report) on the basis that such issuance did not
involve a "sale" within the meaning of the Securities Act of 1933, as amended,
and, therefore, was exempt from the registration requirements of such act."
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- -----------------------------------------
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY - HOLDERS
- -------------------------------------------------------------
Not applicable
ITEM 5. OTHER INFORMATION
- ---------------------------
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
- -----------------------------------------------
La-Man Corporation Current Report on Form 8-K filed with the Securities and
Exchange Commission on September 11, 1996 with respect to the sale of assets of
Heritage Packaging Services, Inc., an Indiana subsidiary of La-Man Corporation,
to Midwest Packaging Products, Inc.
10
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 7, 1996 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
11