<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 33-80935
NETWORK EVENT THEATER, INC.
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(Exact name of Small Business issuer as specified in its charter)
Delaware 13-3864111
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
149 Fifth Avenue, New York, New York 10010
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (212) 779-2740
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- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed from last
report)
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 and Exchange Act of 1934
during the preceding 12 months (or such shorter period that the registrant was
required to file such reports), and (2) has been subject of such filing
requirements for the past 90 days.
Yes No X
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At May 14, 1996 there were 8,654,440 shares of Common Stock, $.01 par value
outstanding.
<PAGE>
INDEX
Page
Part I. Financial Information
Item 1. Financial Statements
Condensed Balance Sheets 2
Condensed Statements of Operations 3
Condensed Statements of Cash Flows 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition or Plan of Operation 7
Part II. Signatures 9
<PAGE>
NETWORK EVENT THEATER, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995 (1)
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(Unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and Cash Equivalents $ 244,256 $ 790,705
Investments 0 0
Receivables 200 0
Deposits 17,019 9,426
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Total Current Assets 261,475 800,131
Property and Equipment, gross $ 3,152,612 $ 2,877,315
Less Accumulated Depreciation 509,125 346,110
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Property and Equipment, net $ 2,643,487 $ 2,531,205
Other Assets:
Organization Costs, net $ 64,498 $ 70,361
Deferred offering costs 240,630 207,164
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Total Other Assets $ 305,128 $ 277,525
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$ 3,210,090 $ 3,608,861
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Loans $ 500,000 0
Accounts Payable and Accrued Expenses $ 483,015 $ 541,762
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Total Liabilities: $ 983,015 $ 541,762
Stockholder's equity:
Common stock, $.01 par value, 17,000,000 shares
authorized, 6,354,440 shares issued
and outstanding $ 63,544 $ 63,544
Additional paid-in capital 6,461,466 6,461,466
Deficit accumulated during the development stage (4,297,935) (3,457,911)
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Total stockholders' equity 2,227,075 3,067,099
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$ 3,210,090 $ 3,608,861
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</TABLE>
(1) The balance sheet at December 31, 1995 is derived from audited financial
statements at that date. See notes to condensed financial statements.
<PAGE>
NETWORK EVENT THEATER, INC.
CONDENSED STATEMENTS OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
Period From
For the Three Months Ended Inception to
March 31, March 31, March 31,
1996 1995 1996
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Revenues $630 $ 0 $ 670
Expenses:
<S> <C> <C> <C>
Selling, general and administrative expenses $670,280 $426,705 $3,870,297
Depreciation and amortization 170,640 84,027 563,656
--------- --------- -----------
Total Expenses: 840,920 510,732 4,433,953
Income (loss) from operations: (840,290) (510,732) (4,433,283)
Other income (expense):
Interest income 266 31,076 135,348
Net loss ($840,024) ($479,656) ($4,297,935)
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Net loss per common share ($0.13) ($.08) ($.68)
Weighted average common shares outstanding 6,354,440 6,004,440 6,354,440
--------- --------- -----------
</TABLE>
See notes to condensed financial statements.
<PAGE>
NETWORK EVENT THEATER, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
<TABLE>
<CAPTION>
Period From
For the Three Months Ended Inception to
March 31, March 31, March 31,
1996 1995 1996
----------- ----------- -----------
Cash flows from operating activities
<S> <C> <C> <C>
Net loss ($ 840,024) ($ 479,656) ($4,297,935)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 170,638 84,027 563,654
Fair value of common stock issued for services 0 60,000 210,000
Change in assets and liabilities:
(Increase) decrease in other assets (7,793) 0 (17,219)
Increase (decrease) in accounts
payable and accrued expenses (66,371) 38,520 475,391
----------- ----------- -----------
Net cash used in operating activities (743,550) (297,109) (3,066,109)
Cash flows from investing activities
Purchase of property and equipment (275,297) (60,063) (3,152,612)
Organization costs 5,863 5,863 (111,404)
Purchase of investments 0 0 (987,100)
Proceeds from sale or gain in value of investments 0 1,256 987,100
----------- ----------- -----------
Net cash used in investing activities (269,434) (52,943) (3,264,016)
Cash flows from financing activities
Loan(s) $ 500,000 0 $ 500,000
Deferred offering costs (33,466) 0 (240,630)
Capital contributions, net of expenses 0 1,865,000 6,315,010
----------- ----------- -----------
Net cash provided by financing activities 466,534 1,865,000 6,574,380
Net increase (decrease) in cash
and cash equivalents (546,450) 1,514,948 244,255
Cash and cash equivalents at beginning of period 790,705 1,909,412 --
Cash and cash equivalents at end of period $ 244,255 $ 3,423,104 244,255
</TABLE>
See notes to condensed financial statements.
<PAGE>
NETWORK EVENT THEATER, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
MARCH 31, 1996
NOTE A- ORGANIZATION AND BASIS OF PRESENTATION
Network Event Theater, Inc. (the "Company") was incorporated under the laws of
the State of Delaware on December 14, 1995 to become the successor to the
business of Universal Access Network, L.P. (the "Partnership"), a Delaware
limited partnership organized in August 1993. The partners of the Partnership
exchanged their partnership interests for 6,354,440 shares of common stock of
the Company in April 1996. As of March 31, 1996, the Company had not commenced
operations and had no assets or liabilities. The accompanying financial
statements of the Company retroactively reflect the reorganization described
above with respect to the equity capitalization of the Company. References to
the Company and the accompanying financial statements include the activities of
its predecessor, the Partnership.
The Company was organized to develop, own and operate Network Event Theater, a
satellite entertainment network for college campuses. Network Event Theater is
designed to deliver entertainment programming events via satellite to a
nationwide network of electronically-linked campus theaters for display through
high resolution projectors on large screens. The Company intends to offer a
variety of programming events through its network, consisting primarily of music
concerts, motion pictures, sports, special pay-per-view events and educational
seminars, targeting college student audiences.
The Company is currently in the development stage. As such, operations have
focused on financial planning, raising capital, developing markets, signing
schools to contracts, installing projection and satellite equipment, and
commencing principal operations. At December 31, 1994 and March 31, 1996, the
Company had contracts with 3 and 30 schools, respectively. Each contract sets
forth, among other items, 1) the terms of the contract, 2) the Company's
obligations with regard to the installation and maintenance of equipment at a
specific campus venue, 3) the Company's obligation to broadcast events at the
venue, 4) the school's obligation to provide the Company exclusive broadcast
rights at the venue, 5) the school's obligation to set aside a certain number of
dates for the Company's exclusive use of the campus venue, and 6) the school's
overall obligation to provide marketing, promotional and technical assistance in
support of the Company's programs. The Company has not generated any operating
revenues other than limited revenues from preliminary test marketing activities.
The Company has incurred and will continue to incur substantial expenses in
connection with the purchase and installation of its satellite transmission and
projection equipment and the expansion of the network, accounting for
significant losses.
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310 of regulation
S-B. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for fair presentation have been
included. The results of operations for the interim periods are not necessarily
indicative of the results that may be attained for an entire year. For more
information, refer to the financial statements and footnotes on the form SB-2 as
filed and amended as of April 2, 1996.
<PAGE>
NOTE B- SUBSEQUENT EVENT
In April 1996, an initial public offering of 2,300,000 shares of the Company's
common stock increased the Company's equity by $10,205,100 (net of the
Underwriter's fees). The Company's common stock and warrants are traded on the
NASDAQ Small Cap Market under the symbols "NETS" and "NETSW", respectively. The
proceeds from the offering were partially used to reduce accounts payable and
repay the $500,000 bridge loan (plus accrued interest) which was borrowed by the
Company in March 1996. Additional uses of proceeds are for the network
expansion, marketing and promotion, program acquisition, equipment, working
capital and general corporate purposes. The Company's stockholder equity at
March 31, 1996 when adjusted to include the effects of the initial public
offering is as follows:
Common Stock $ 86,544
Additional paid in capital $16,248,566
Accumulated Deficit ($ 4,297,935)
Total Stockholders Equity $ 12,037,175
NOTE C- EARNINGS PER COMMON SHARE
Earnings per common share are computed on the basis of weighted number of shares
outstanding. No effect has been given to outstanding warrants and options since
they are not considered common stock equivalents because their assumed exercise
would be antidilutive.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR PLAN OF OPERATION
PLAN OF OPERATION
The Company was organized in December 1995 as the successor to the business of
the Partnership and is in the development stage. Since its inception, the
Company has been engaged principally in organizational activities, including
developing a business plan, entering into contracts with schools, hiring
personnel, acquiring and installing equipment, engaging in market testing
activities and undertaking preliminary activities for the commencement of
operations.
The Company has not generated any operating revenues, other than limited
revenues from preliminary market testing activities, and will not generate any
meaningful revenues until after the Company successfully completes market
testing and the installation of its network in a significant number of campus
theaters, which the Company does not anticipate will occur until the second half
of 1996. The Company believes that generation of any meaningful revenues is
dependent upon, among other things, the Company's ability to install its network
in an additional 25 campus theaters. For the period August 23, 1993 (inception)
to March 31, 1996, the Company incurred a cumulative net loss of approximately
$4,297,935. The Company has continued to incur significant losses and
anticipates that it will continue to incur significant losses until, at the
earliest, the Company's network generates sufficient revenues to offset the
substantial up-front capital expenditures and operating costs associated with
network expansion. To date, a significant portion of the Company's expenses have
consisted of selling, general and administrative expenses, including salaries
and fees payable to employees and consultants, rent, professional fees and
costs associated with marketing the Company's network to school administrators
and coordinating event promotion with student organizations. There can be no
assurance that the Company will attract and retain a sufficient number of
schools and obtain the programming necessary to generate meaningful revenues or
achieve profitable operations.
Business Development
The Company's proposed plan of operation and prospects will be largely dependent
upon the Company's ability to enter into agreements with a significant number of
colleges and universities; establish and maintain satisfactory relationships
with college administrators and student organizations; successfully obtain and
install satellite transmission, projection and audio equipment on a timely and
cost effective basis; and successfully expand its network to attract programmers
willing to provide currently popular programming suitable for college student
audiences on commercially reasonable terms. The Company currently has five
employees engaged in marketing the Company's network to colleges and
universities. The Company anticipates that it will use a portion of the funds
raised through the public offering to hire additional employees to market the
Company's network. The Company is focusing its initial marketing efforts on
enlisting the 100 largest colleges and universities. These 100 institutions have
a combined enrollment of approximately 2.8 million students. According to the
1995 Digest of Education Statistics prepared by the United States Department of
Education, there are approximately 3600 colleges and universities in the United
States with a combined enrollment of approximately 14 million students, a large
target market representing significant personal spending power.
The Company will seek to install its equipment in 25 to 40 additional campus
theaters during the following twelve months. The number of installations will be
dependent upon the number of school contracts the Company is able to enter into.
The Company anticipates that the average cost to acquire and install equipment
<PAGE>
in each campus theater will be approximately $100,000. In order to reduce the
Company's up-front capital requirements associated with the expansion of its
network, the Company may seek to lease rather than purchase a portion of its
network equipment. There can be no assurance that the Company will be able to
obtain such equipment leasing under satisfactory terms and conditions.
During the next twelve months, the Company will seek to acquire rights to
special events and to develop relationships with program providers, such as
motion picture and record companies, pay-per-view operators and broadcast
networks. In connection with program acquisition, the Company anticipates that
it will enter into revenue sharing arrangements or license agreements pursuant
to which the Company would pay a license fee or royalty for programming with
strong appeal to college audiences..
Liquidity and Capital Resources
The Company's primary capital requirements have been to fund the purchase and
installation of network equipment on college campuses. The Company prior to
April 1996 financed its capital requirements through private placements of
$6,500,000.
In March 1996, the Company borrowed $500,000 under a promissory note which
accrued interest at an annual rate of 8%, and was due on the earlier of March
1997 or the closing of the Company's initial public offering of common stock.
The initial public offering was completed in April 1996 which increased the
Company's equity; $10,205,100 was raised, not including administrative expenses
associated with the offering. The $500,000 loan was repaid upon the Company's
receipt of the offering's proceeds.
The capital requirements relating to implementation of the Company's business
plan will be significant. Based on the Company's current proposed plans and
assumptions relating to the business plan and network, the Company anticipates
that the proceeds of the April 1996 initial public offering will be sufficient
to enable the Company to install its equipment in 25 - 40 additional campus
theaters (at an estimated cost of $100,000 per theater) and to otherwise satisfy
its contemplated cash requirements for the following 12 months.
The Company's strategy is to continue to expand the network and finance future
growth. A substantial portion of the proceeds from the initial public offering
will be used for these purposes, as detailed in the Company's Prospectus dated
April 2, 1996. In addition, any implementation of the Company's business plan
beyond the next twelve months or the origination of Company produced events will
require capital resources substantially greater than the proceeds from the
initial public offering. The availability of additional capital sources is
dependent upon prevailing market conditions, interest rates and the financial
condition of the Company.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
May 14, 1996
By:/s/ Harlan D. Peltz
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Harlan D. Peltz
Chairman of the Board and
Chief Executive Officer
By:/s/ Lawrence Kieves
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Lawrence Kieves
President and
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 244,256
<SECURITIES> 0
<RECEIVABLES> 200
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 261,475
<PP&E> 3,152,612
<DEPRECIATION> 509,125
<TOTAL-ASSETS> 3,210,090
<CURRENT-LIABILITIES> 983,015
<BONDS> 0
0
0
<COMMON> 63,544
<OTHER-SE> 2,163,531
<TOTAL-LIABILITY-AND-EQUITY> 3,210,090
<SALES> 630
<TOTAL-REVENUES> 630
<CGS> 170,640
<TOTAL-COSTS> 170,640
<OTHER-EXPENSES> 670,280
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (266)
<INCOME-PRETAX> (840,024)
<INCOME-TAX> 0
<INCOME-CONTINUING> (840,024)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (840,024)
<EPS-PRIMARY> ($.13)
<EPS-DILUTED> ($.13)
</TABLE>
