Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington D.C.
(X) Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Commission File No. 0-26884
Ended March 31, 2000
NETTER DIGITAL ENTERTAINMENT, INC.
(exact name of registrant as specified in charter)
Delaware 95-3392054
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
5125 Lankershim Blvd.
North Hollywood, California 91601
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: 818/753-1990
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange 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.
YES X NO ___
As of May 19, 2000 the Registrant had 3,623,382 shares of its Common Stock,
$.01 par value, issued and outstanding.
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
FORM 10-Q
March 31, 2000
INDEX
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements (Unaudited) NUMBER
------
Consolidated Balance Sheets as of
March 31, 2000 and June 30, 1999 3
Consolidated Statements of Operations for
the three-month and nine-month periods ended
March 31, 2000 and March 31, 1999 4
Consolidated Statements of Cash Flows for the
nine-month periods ended March 31, 2000
and March 31, 1999. 5
Notes to Consolidated Financial Statements 6-7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-11
Item 3. Quantitative and Qualitative Disclosures About 11
Market Risk
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Page 2 of 12
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, JUNE 30,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
CURRENT ASSETS:
Cash and cash equivalents $ 188,966 $ 63,086
Accounts receivable 398,671 781,835
Inventory 194,010 220,930
Production costs, net 278,737 350,881
Other 61,656 63,961
Deferred tax asset 178,000 150,000
Net assets, discontinued operations 1,562,720 1,782,605
-------------- -------------
TOTAL CURRENT ASSETS 2,862,760 3,413,298
EQUIPMENT, net 3,571,298 3,108,890
DEPOSITS AND OTHER ASSETS 420,122 336,669
-------------- -------------
$ 6,854,180 $ 6,858,857
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and production fee advances $ 2,446,001 $ 1,244,051
Accrued expenses 76,583 95,979
Deferred revenue 423,452 160,228
Current portion of capital lease obligations 1,092,994 997,040
Notes Payable 450,000 450,000
-------------- -------------
TOTAL CURRENT LIABILITIES 4,489,030 2,947,298
CAPITAL LEASE OBLIGATIONS 534,365 1,000,339
NOTE PAYABLE (net of discount of $180,000 and $220,000, 840,000 780,000
respectively)
MINORITY INTEREST 500 500
-------------- -------------
STOCKHOLDERS' EQUITY :
Preferred stock, $.001 par value, 2,000,000 shares
authorized; 63,171 and 57,286 shares issued and 406,017 353,200
outstanding, respectively
Common stock, $.01 par value, 20,000,000 shares
authorized; 3,363,251 and 3,334,405 shares issued
and outstanding, respectively 33,633 33,344
Additional paid-in capital 5,010,883 4,966,171
Deficit (4,460,248) (3,221,995)
-------------- -------------
TOTAL STOCKHOLDERS EQUITY 990,285 2,130,720
-------------- -------------
$ 6,854,180 $ 6,858,857
============== =============
<FN>
<FN1>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
Page 3 of 12
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------- --------------------------
2000 1999 2000 1999
--------------------------- ---------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES: $ 3,489,996 $ 6,383,205 $ 9,997,153 $ 19,884,974
EXPENSES:
Production 3,235,587 5,643,781 8,531,360 17,440,134
General and administrative 708,480 688,134 2,223,208 2,016,644
------------ ------------ ------------ ------------
TOTAL EXPENSES 3,944,067 6,331,915 10,754,568 19,456,778
------------ ------------ ------------ ------------
OPERATING INCOME (LOSS) (454,071) 51,290 (757,415) 428,196
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE):
Interest income 1,079 2,081 1,932 8,088
Other income 10,625 - 16,875 -
Interest (expense) (123,569) (48,775) (291,076) (136,371)
------------ ------------ ------------ ------------
TOTAL OTHER (EXPENSE) (111,865) (46,694) (272,269) (128,283)
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES (565,936) 4,596 (1,029,684) 299,913
PROVISION FOR INCOME TAXES - - - 80,000
------------ ------------ ------------ ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS $ (565,936) $ 4,596 $ (1,029,684) $ 219,913
DISCONTINUED OPERATIONS
Loss from operation of Videssence, Inc.
(net of income tax benefit) - - - (670,806)
Provision for loss on the divestiture
of Videssence - - - (1,880,956)
------------ ------------ ------------ ------------
LOSS FROM DISCONTINUED OPERATIONS - - - (2,551,762)
____________ ____________ ____________ ____________
NET INCOME/(LOSS) $ (565,936) $ 4,596 $ (1,029,684) $ (2,331,849)
Cumulative preferred stock dividend 13,941 12,588 40,676 38,961
------------ ------------ ------------ ------------
Net Loss to common shareholders $ (579,877) $ (7,992) $ (1,070,360) $ (2,370,810)
============ ============ ============ ============
Basic and diluted earnings (loss) per share:
Continuing operations, including
preferred dividends $ (0.17) $ (0.00) $ (0.32) $ 0.05
Discontinued operations - - - (0.76)
------------ ------------ ------------ ------------
Net loss, per share $ (0.17) $ (0.00) $ (0.32) $ (0.71)
============ ============ ============ ============
Weighted average common shares outstanding 3,363,251 3,334,405 3,344,020 3,334,405
============ ============ ============ ============
<FN>
<FN1>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
Page 4 of 12
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended March 31,
--------------------------------
2000 1999
--------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,029,684) $ (2,331,849)
-------------- --------------
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 730,723 627,650
Amortization 138,234 52,156
Provision for loss of discontinued operations - 1,880,956 -
Changes in operating assets and liabilities:
Decrease in accounts receivable 383,164 63,927
Decrease in due from officer - 155,897
Decrease/(increase) in other current assets 2,305 (84,709)
(Increase) in deferred tax asset (28,000) -
Decrease/(increase) in inventory 26,920 (66,816)
Decrease/(increase) in production costs 72,144 (134,555)
(Increase) in deposits and other assets (83,453) (33,831)
Increase/(decrease) in accounts payable 1,201,950 (406,452)
(Decrease) in accrued expenses (19,396) (66,239)
Increase/(decrease) in deferred revenue 263,224 (740,211)
Decrease in net assets from
discontinued operations 57,000 215,009
--------------- ------------
2,744,815 1,462,782
--------------- ------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 1,715,131 (869,067)
--------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (766,950) (60,579)
--------------- ------------
NET CASH USED IN INVESTING ACTIVITIES (766,950) (60,579)
--------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of capital lease obligations (822,301) (676,765)
Drawdown from funding facility - 425,000
--------------- ------------
NET CASH USED IN FINANCING ACTIVITIES (822,301) (251,765)
--------------- ------------
NET INCREASE (DECREASE) IN CASH 125,880 (1,181,411)
Cash, beginning of period 63,086 1,634,809
--------------- -------------
Cash, end of period $ 188,966 $ 453,398
=============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Cash paid for interest $ 140,147 $ 136,371
Cash paid for income taxes $ 3,518 $ 89,453
Noncash activity:
Stock dividend $ 40,141 $ 38,961
Purchase of equipment through leases payable $ 336,595 $ 773,460
<FN>
<FN1>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
Page 5 of 12
NETTER DIGITAL ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PREPARATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and in accordance with the instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all
of the information and disclosures required for annual financial statements.
These financial statements should be read in conjunction with the consolidated
financial statements and related footnotes for the year ended June 30, 1999
included in the Form 10-K for the year then ended.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of March 31, 2000 and June 30, 1999, and the results of
operations and cash flows for the three-month and nine-month periods ended
March 31, 2000 and 1999 have been included.
The results of operations for the three-month and nine-month periods ended
March 31, 2000, are not necessarily indicative of the results to be expected
for the full fiscal year. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's Form
10-K as filed with the Securities and Exchange Commission for the year ended
June 30, 1999.
FINANCIAL CONDITION
The Company has incurred losses of approximately $1,030,000 and $3,318,000 for
the nine-months ended March 31, 2000 and year ended June 30, 1999, respectively.
The Company's cash flow position has been substantially degraded, causing the
Company to lag with respect to its financial obligations. The Company currently
has only one project in production and is unable to meet its current cash
requirements on an on-going basis. Management is engaged in active discussions
for additional projects and additional financing to address its immediate and
future cash flow needs.
DISCONTINUED OPERATIONS
Effective the quarter ended December 31, 1998, the Board of Directors voted
to classify and operate the Company's Videssence subsidiary as a discontinued
operation. The Company's Board of Directors and financial advisors have
determined that at this time the Company's best strategy for growth is to focus
directly on its core entertainment business and to divest its non-entertainment
business activities. Accordingly, the Board has instructed management to
divest the Videssence subsidiary, which manufactures and distributes media
lighting products. The Company is reviewing how to best capitalize on its
investment in Videssence and currently is in negotiations with a potential
buyer for the Videssence operation. Of course, there can be no assurance that
the Company will consummate a sale of the Videssence operation with this
buyer or any other buyer on terms acceptable to the Company. In the quarter
ended December 31, 1998, the Company accrued a provision for an estimated
anticipated loss on the divestiture of the Videssence operation of
approximately $1.9 million which includes $750,000 for pretax operating
losses during the phase-out period. Actual results could differ from this
estimate. The results of operations for this business have been reclassified to
discontinued operations for all periods in the accompanying unaudited
consolidated financial statements.
Page 6 of 12
Summarized results of the discontinued operation are as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
------------ ------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales $ 492,401 $ 761,373 $ 1,840,490 $ 2,161,391
Cost and expenses 576,348 1,343,960 1,921,310 3,471,784
------- --------- --------- ---------
Income (loss) before
income taxes (83,947) (582,587) (80,820) (1,310,393)
Income tax (benefit) - - - (57,000)
------- --------- --------- ---------
Income (loss) from
discontinued operations ($83,947) ($582,587) ($80,820)($1,253,393)
======= ========= ========= =========
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
General
The Company is engaged in two primary business activities:
- - Production. The Company is engaged in the acquisition, development and
production of television series, made-for-television movies, documentaries,
theatrical motion pictures and multimedia products (collectively and
individually referred to as the "Productions" or "Projects"). The Company
specializes in producing both live-action Projects ("live-action") which
incorporate traditional sets and human actors in conjunction with computer
generated images ("CGI") as well as 100% CGI animated Projects ("computer
animated"). On the live-action side, the Company has produced the award winning
series "Babylon 5," the follow-on series entitled "Crusade," and associated
television movies. As for computer animated shows, in the 1999 fiscal year, the
Company completed the first season of the children's series, "Voltron: The Third
Dimension" ("Voltron"), putting it at the forefront of the fully animated or
animation intensive production market for television. During the 2000 fiscal
year, the Company has been engaged in the production of two all new computer
animated television series, including a contract providing for approximately
$8.0 million in revenues to the Company in fiscal 2000 to produce 26 one-half
hour episodes of an animated television series based on one of England's most
popular comic books. The Company may undertake a Production which is sold or
licensed under a production contract with a major entertainment studio or
distributor, or it may be contracted by an outside entity to fully produce a
project on the entity's behalf. Under both scenarios, the costs of the
Production are borne by the buyer, licensor or contracting party, often severely
limiting the possibility of additional revenues above the contracted amount.
The Company is now seeking to expand on this model by undertaking projects which
it can retain greater equity ownership in, allowing it to share in all revenue
streams in perpetuity (see "Liquidity and Capital Resources" below).
- - Production Services. In support of its own Productions, in which it is
responsible for the complete production or a significant portion of a
production, as with "Babylon 5," "Crusade," and "Voltron," the Company has
developed significant expertise in computer graphics production, digital post-
production and various other digital imaging techniques. The quality and
popularity of these Productions in conjunction with the cutting-edge techniques
employed in their creation has created industry-wide recognition of the
Company's creative and technical skills. To more fully exploit these skills,
the Company formed the Production Services division to support the active market
that exists for projects requiring creative, high-quality, and cost-effective
digital graphics and effects. This division provides CGI services consisting of
computer animation and visual effects to outside clients with such needs. Since
its inception, this division has provided services in the feature film,
television production, television promotion, industrial/corporate video and
television commercial segments. In the first quarter of fiscal 2000, the
Company completed work on its biggest contract to date, the creation of all of
the visual effects for the major motion picture, "Bats" that was released for
theatrical distribution by Destination Films in October 1999. In the third
quarter of fiscal 2000, the Company began work on effects for two new projects,
the mini-series "Dune" and "Imposter."
Results of Operations
Revenues. The Company's revenues for the third quarter and nine-month period
ended March 31, 2000 were approximately $3.5 million and $10.0 million,
respectively, for a decrease of 45.3% and 49.7% as compared to the comparable
prior year periods. This decrease resulted primarily from a change in the
Project mix to a greater percentage of fully animated productions. In general,
live-action television Productions are significantly more expensive to produce
and generate significantly more revenue than fully animated television series.
However, the Company usually realizes substantially higher gross margins through
the production of fully animated television series as the greatest margins are
usually derived from those Projects with the greatest amount of computer
animation and effects in relation to their total budgets (see "Gross Profit"
below). In the three-month and nine-month periods of fiscal 2000, revenues from
live-action productions decreased $4.9 million and $15.3 million, respectively,
from the comparable prior year periods as the Company was not in production on
any of these projects. This decrease was partially offset by an increase in
revenues from its animated series of $2.0 million and $5.4 million for the
three-month and nine-month periods ended March 31, 2000 as compared to the prior
year periods as the Company's prior year work on "Voltron" was replaced by its
two new contracts for television animated series.
Gross Profit. The Company's gross profit for the quarter ended March 31, 2000
decreased to $254,00, or 7.3% of net revenues, from $739,000, or 11.6% of net
revenues, in the same prior year period. For the nine-month period ended March
31, 2000, gross profit decreased to $1,466,000 from $2,445,000, but increased
as a percentage of net revenues to 14.7% from 12.3% in the same prior year
period. The decrease in gross profits in both periods of this fiscal year
resulted primarily from cost overruns on the Company's current productions (see
"Liquidity and Capital Resources"). Despite these overruns, the gross profit
percentage increased for the nine-months ended March 31, 2000, as expected, due
to the change in Project mix, as described above.
General and Administrative Expenses. General and administrative ("G&A")
expenses were approximately $708,000, or 20.3% of net revenues, for the three-
month period ended March 31, 2000, as compared to $688,000, or 10.8% of net
revenues, for the same prior year period. For the nine-month period ended March
31, 2000, G&A expenses were approximately $2,223,000, or 22.2% of net revenues,
as compared to $2,017,000, or 10.1% of net revenues, for the same prior year
period. The increase in actual expenses resulted from an increase in overhead
to support the increases in overall staff required for the current two
productions. Further, as described above, the decrease in revenues for the
three and nine-month periods ended March 31, 2000, as compared to the same
periods in the prior fiscal year, contributed to the increase in G&A expenses as
a percentage of net revenues.
Other Income and Expenses. Interest expense increased to approximately $123,569
and $291,076 for the three-months and nine-months ended March 31, 2000,
respectively, from approximately $48,775 and $136,371 in the same prior year
periods due to the Company's further utilization of capital lease lines for
continued expansion of its computer animation and visual effects facilities and
the amortization of discount on notes payable.
Discontinued Operations. Effective the quarter ended December 31, 1998, the
Board of Directors voted to classify and operate the Company's Videssence
subsidiary as a discontinued operation. The Company's Board of Directors and
financial advisors determined that the Company's best strategy for growth is to
focus directly on its core entertainment business and to divest its non-
entertainment business activities. Accordingly, the Board has instructed
management to divest the Videssence subsidiary, which manufactures and
distributes media lighting products. The Company is reviewing how to best
capitalize on its recent investment in Videssence and currently is in
negotiations with a potential buyer for the Videssence operation.
Of course, there can be no assurance that the Company will consummate a sale of
the Videssence operation with this buyer or any other buyer on terms acceptable
to the Company. In the quarter ended December 31, 1998, the Company accrued a
provision for an estimated anticipated loss on the divestiture of the Videssence
operation of approximately $1.9 million which includes $750,000 for pretax
operating losses during the phase-out period. Actual results could differ from
this estimate. The results of operations for this business have been
reclassified to discontinued operations for all periods in the accompanying
unaudited consolidated financial statements.
Pretax results of the Videssence operation for the quarter and nine-months ended
March 31, 2000 were a loss of $84,000 and $81,000, respectively, as compared to
pretax losses of $583,000 and $1,310,000 for the same respective prior year
periods. The primary factor leading to this increase compared to last year was
a streamlining of operations consisting of cost reductions and efficiency
increases. For a further summary of the operating results of Videssence, see
the section entitled "Discontinued Operations" in the "Notes to Consolidated
Financial Statements."
Liquidity and Capital Resources
The Company has funded its operations to date primarily through cash flows from
operations, its initial public offering of Common Stock and Warrants completed
in November 1995, which generated net proceeds of approximately $3.2 million,
and a February 1997 preferred stock placement which raised $424,000 in gross
proceeds. On March 29, 1999, the Company obtained a $1.0 million funding
facility (the "Facility") from AIB Investments Pty Limited. By May 14, 1999,
the entire $1.0 million in principal had been drawn down on the Facility and is
evidenced by non-interest bearing Senior Subordinated Convertible Notes, due
March 29, 2002. On June 10, 1999, the Company entered into a short-term note
with Allco Finance Group for $450,000 with interest bearing 10% annually. This
note is due on demand subsequent to June 30, 2000.
With respect to production costs for particular entertainment Projects, the
Company has customarily entered into production contracts with studios,
networks, distributors, and other production entities who cover 100% of the
production funding. In these instances, the production funds are received by
the Company during the production stage of a Project. To date, the Company has
been able to secure production financing from a major studio, network or
distributor for its Projects or has been able to secure production contracts
with others. While the Company believes that similar financing arrangements can
be made for future productions, there can be no assurance that the Company will
be successful in obtaining such production financing or contracts. In that
event, the Company would have to secure alternative sources for financing
Projects. Moreover, as the Company continues to develop new forms of high
technology production activities and projects for new entertainment ancillary
markets, it may elect to make additional overhead and equity commitments for
these new projects. These potential, new financial commitments, if pursued,
could create additional risk for the Company as to whether it will recover
the costs of its investment and generate a profit.
In the quarter ended September 30, 1999, the Company began production on two all
new, 100% CGI animated television series to air in fiscal 2000. On one of these
series, the Company experienced substantial budget and schedule overruns which
directly contributed to the second and third quarters' net losses. The Company
is no longer in production on this series. The Company has also experienced
substantial budget and schedule overruns on its second series, the series based
on one of England's popular comic books. The Company is working with the
customer to minimize the overall overruns but expects to absorb a portion of the
additional costs over the duration of the Project (scheduled for completion in
early 2001). These overruns have substantially degraded the Company's cash flow
position, causing the Company to lag with respect to its financial obligations.
As the Company only has one production currently contracted, the Company is
unable to meet all of its current cash requirements on an on-going basis. The
Company is engaged in active discussions on several potential new Projects,
including Internet and feature film projects, and is actively pursuing a
potential source of additional financing. While management is pursuing the
finalization of one or more of these efforts, thus, addressing its immediate
cash flow shortfall, there can be no assurance that this will occur within the
time required. If the Company is unable to contract for an additional Project
generating comparable revenues, or if the Company is not able to obtain
additional financing, the Company's financial condition and operations will be
materially adversely affected and the Company will not have sufficient funds to
continue its ongoing operations beyond a period of approximately 30 days.
At that time, the Company may be compelled to seek protection under the
Bankruptcy Act.
Cash provided by operating activities was approximately $1,715,000 for the nine-
months ended March 31, 2000. Adjustments to net loss were comprised principally
of an increase in accounts payable, stemming from purchased equipment and a lag
in payment of certain financial obligations; a decrease in accounts receivable,
due to collections related to completed productions; and an increase in deferred
revenue as the Company received cash infusions for its new productions.
Cash used in investing activities was approximately $767,000 for the nine-months
ended March 31, 2000 representing purchases of new equipment which have not yet
been placed on a lease line.
Cash used in financing activities was approximately $822,000 for the nine-months
ended March 31, 2000 as cash was used for principal payments on its capital
leases.
The Company has approximately $1.6 million of outstanding capital leases as of
March 31, 2000. The Company uses capital leases primarily for equipment
additions to its in-house post-production and graphics/animation facilities.
Forward-Looking Statements
The foregoing discussion contains "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Act of 1934, as amended. There are risks and
uncertainties that could cause future events and results to differ materially
from those anticipated by management in the forward-looking statements included
in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to certain market risks that are inherent in the
Company's financial instruments arising from transactions that are entered into
in the normal course of business. The Company is subject to interest rate risk
on its $450,000 short-term note payable, obtained in June 1999, which has a
fixed interest rate of 10%. Similarly, when the Company enters into capital
leases, these leases have fixed interest rates based on the prevailing rates at
the date of contract. The Company runs the risk that market rates will decline
and the required payments will exceed those based on current market rates.
There is no interest rate risk with the Company's $1.0 million long-term notes
payables as these notes are interest free. Under its current policies, the
Company does not use interest rate derivative instruments to manage its exposure
to interest rate changes. The Company generally does not transact business in
foreign currencies and is therefore generally not exposed to financial market
risk resulting from fluctuations in foreign currency exchange rates.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a.) Exhibits
Exhibit Description
27 Financial Data Schedule. (1)
- ----------------------
(1) Filed herewith.
(b.) Reports on Form 8-K
None.
SIGNATURE
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.
NETTER DIGITAL ENTERTAINMENT, INC.
Registrant
Dated: May 19, 2000 By: /s/Chad Kalebic
Chad Kalebic
Chief Financial Officer
Page 12 of 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 188,966
<SECURITIES> 0
<RECEIVABLES> 398,671
<ALLOWANCES> 0
<INVENTORY> 194,010
<CURRENT-ASSETS> 2,862,760
<PP&E> 5,781,894
<DEPRECIATION> (2,210,596)
<TOTAL-ASSETS> 6,854,180
<CURRENT-LIABILITIES> 4,489,030
<BONDS> 0
0
406,017
<COMMON> 33,633
<OTHER-SE> 5,010,883
<TOTAL-LIABILITY-AND-EQUITY> 6,854,180
<SALES> 0
<TOTAL-REVENUES> 9,997,153
<CGS> 0
<TOTAL-COSTS> 8,531,360
<OTHER-EXPENSES> 2,223,208
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 291,076
<INCOME-PRETAX> (1,029,684)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,029,684)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,029,684)
<EPS-BASIC> (0.32)
<EPS-DILUTED> (0.32)
</TABLE>
