<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
-----------------------------
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File No. 0-27934
KATZ DIGITAL TECHNOLOGIES, INC.
(Exact name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3871120
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
Twenty One Penn Plaza, New York, New York 10001
(Address of Principal Executive Offices) (Zip Code)
(212) 594-4800
(Issuer's Telephone Number
Including Area Code)
Check whether the Issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Issuer was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.
Yes: X No:_____
State the number of shares outstanding of each of the Issuer's classes
of common stock, as of November 11, 1996
<TABLE>
<CAPTION>
Class Number of Shares
- ----- ----------------
<S> <C>
Common Stock, $.001 par value 4,425,000
---------
</TABLE>
Transitional Small Business Disclosure Format:
Yes:______ No: X
<PAGE> 2
KATZ DIGITAL TECHNOLOGIES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
QUARTER ENDED SEPTEMBER 30, 1996
ITEMS IN FORM 10-QSB
<TABLE>
<CAPTION>
Facing Page Page
Part I
<S> <C> <C>
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II
Item 1. Legal Proceedings None
Item 2. Changes in Securities None
Item 3. Default Upon Senior Securities None
Item 4. Submission of Matters to a Vote of Security Holders None
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 16
Signatures
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE> 4
KATZ DIGITAL TECHNOLOGIES, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS DECEMBER 31, September30,
1995 1996
CURRENT ASSETS (Unaudited)
- -------------- ---- -----------
<S> <C> <C>
Cash $ 200,729 $ 3,624,106
Certificate of deposit 233,600 235,689
Accounts receivable, net of allowance for doubtful
accounts of $61,238 and $86,238 at December 31, 1995
and September 30, 1996, respectively 1,980,002 3,245,715
Work-in-process inventory 7,290 80,123
Pre-paid expenses and other current assets 137,663 164,215
----------- -----------
Total current assets 2,559,284 7,349,848
Property and Equipment - Net 1,629,288 3,514,298
Deferred Pension Costs 108,664 295,533
Goodwill 50,000 1,108,336
Other Assets 60,805 58,133
=========== ===========
$ 4,408,041 $12,326,148
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 517,630 $ 1,222,150
Current portion of obligations under capital leases 451,535 702,465
Income taxes payable 59,165 --
Deferred taxes payable 210,000 130,000
Due to stockholders -- 567,286
----------- -----------
Total current liabilities 1,238,330 2,621,901
Deferred taxes payable -- 601,000
Other deferred liabilities -- 240,694
Obligations under capital leases, net of current
portion 672,121 1,593,696
----------- -----------
Total liabilities 1,910,451 5,057,291
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY
Preferred stock, $.001 par value; 5,000 shares
authorized; no shares issued -- --
Common stock $.001 par value; 25,000,000 shares
authorized; 2,800,000 shares issued and
outstanding at December 31, 1995 and 4,425,000 at
September 30, 1996 2,800 4,425
Additional paid in capital -- 6,860,267
Retained earnings 2,494,790 404,165
----------- -----------
Total stockholders' equity 2,497,590 7,268,857
----------- -----------
$ 4,408,041 $12,326,148
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
4
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KATZ DIGITAL TECHNOLOGIES, INC.
STATEMENTS OF EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 2,534,383 $ 3,906,584 $ 7,806,587 $ 11,204,938
Cost of goods sold 1,135,092 2,055,291 3,387,012 5,673,928
------------ ------------ ------------ ------------
Gross Profit 1,399,291 1,851,293 4,419,575 5,531,010
Operating Expenses
Selling, general and
administrative 869,432 1,682,902 2,844,717 4,457,757
------------ ------------ ------------ ------------
Total operating
expenses 869,432 1,682,902 2,844,717 4,457,757
------------ ------------ ------------ ------------
Operating income 529,859 168,391 1,574,858 1,073,253
Interest expense, net 31,033 18,109 75,846 49,220
------------ ------------ ------------ ------------
Earnings before
provision for income
taxes 498,826 150,282 1,499,012 1,024,033
Income taxes (including
$723,000 nonrecurring
provision relating
termination of
Subchapter S Status on
March 25, 1996) 49,171 70,414 156,837 1,091,318
------------ ------------ ------------ ------------
Net earnings (loss) $ 449,655 $ 79,868 $ 1,342,175 $ (67,285)
============ ============ ============ ============
Pro forma data
Historical income
before provision
for income taxes $ 498,826 $ 150,282 $ 1,499,012 $ 1,024,033
Provision for
income taxes 243,272 70,414 $ 732,193 $ 481,881
------------ ------------ ------------ ------------
Pro forma Net earnings $ 255,554 $ 79,868 $ 766,819 542,152
============ ============ ============ ============
Earnings per share:
Pro forma earnings
per share $ 0.09 $ 0.02 $ 0.26 $ 0.14
============ ============ ============ ============
Weighted average
shares outstanding: 2,954,443 4,477,211 2,954,443 3,986,336
============ ============ ============ ============
</TABLE>
5
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KATZ DIGITAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 1,342,175 $ (67,285)
Adjustments to reconcile net
earnings to net cash provided by
operating activities
Depreciation and amortization 366,896 712,183
Increase (decrease) in cash
flows from changes in operating
assets and liabilities
Accounts receivable (65,644) (1,265,713)
Work-in-process inventory -- (72,833)
Other current assets 35,222 (26,552)
Other assets (10,428) 2,672
Accounts payable and accrued
expenses 128,295 704,520
Income taxes payable (30,000) (59,165)
Deferred taxes payable 7,000 521,000
Other deferred liabilities -- 240,694
Net pension liability (165,077) (186,869)
----------- -----------
Net cash provided by operating
activities 1,608,439 502,652
----------- -----------
Cash flows from investing activities
Purchase of property and equipment (167,945) (889,956)
Purchase of Certificate of Deposit (233,600) (2,089)
Purchase of The Sarabande Press, Inc. -- (1,090,678)
Net cash used in investing
activities (401,545) (1,982,723)
----------- -----------
Cash flows from financing activities
Distributions to stockholders (1,176,964) (956,054)
Payment of obligations under
capital leases (253,567) (502,390)
Net proceeds from public offering -- 6,361,892
Net cash provided by (used in)
financing activities (1,430,531) 4,903,448
Net increase (decrease) in cash
and cash equivalents (223,637) 3,423,377
Cash - beginning of period $ 456,642 $ 200,729
----------- -----------
Cash - end of period $ 233,005 $ 3,624,106
=========== ===========
Supplemental disclosures of cash
flow information:
Cash paid during the year for
Interest $ 82,111 $ 141,056
=========== ===========
Income taxes $ 118,070 $ 628,734
=========== ===========
</TABLE>
Supplemental disclosures of noncash investing and financing activities: Capital
lease obligations of $658,048 and $1,674,895 were incurred in the nine months
ended September 30, 1995 and 1996, respectively, when the Company entered into
new leases for equipment.
6
<PAGE> 7
KATZ DIGITAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF REPRESENTATION
Katz Digital Technologies, Inc. (the "Company") was formed in December
1995 and is incorporated in the state of Delaware. In December 1995, Katz
Graphics Corporation, which was formed in August 1991, and Katz Digital
Technologies, Inc., which was formed in November 1986, and which were both New
York corporations, were merged with and into the Company (the "Merger"). The
Merger was accounted for in a manner similar to a pooling of interests and,
accordingly, the accompanying financial statements include the accounts of Katz
Graphics Corporation and Katz Digital Technologies, Inc. for all periods
presented. Assets and liabilities were recorded at net book value.
The Company provides a broad range of digital prepress and digital
short-run printing services to produce full-color and black and white printed
materials to a wide variety of market segments, principally in the New York City
area.
The summarized financial information included herein does not include
all disclosures required to be included in a complete set of financial
statements prepared in conformity with generally accepted accounting principles.
Such disclosures were included with the financial statements of the Company at
December 31, 1995 and for the year then ended included in the Registration
Statement on Form SB-2 (Registration No. 333-1190) and related prospectus as
declared effective by the Securities and Exchange Commission on March 25, 1996
(the "public offering"). Such statements should be read in conjunction with the
data herein.
The financial information contains all adjustments (consisting of
normal recurring accruals) which, in the opinion of management, are deemed
necessary for a fair presentation of the results for the interim periods. The
results for the interim periods are not necessarily indicative of results that
may be expected for the full fiscal year.
NOTE B - TERMINATION OF S CORPORATION STATUS AND PRO FORMA INFORMATION
Pro Forma Information
Prior to the consummation of the public offering, the Company filed its
Federal and state income tax returns under the provisions of Subchapter S of the
Internal Revenue Code. Accordingly, no provision was provided in the
accompanying financial statements for Federal and certain state income taxes for
the S Corporation periods, since the income of the Company was taxable directly
to its stockholders. On March 26, 1996 the Company converted to a C Corporation,
adopted the accrual basis of accounting, and is subject to both Federal and
state income taxes. Accordingly, $723,000 additional federal and state income
7
<PAGE> 8
taxes, applicable to temporary differences in the recognition of income and
expenses for financial accounting and income tax reporting purposes existing at
March 26, 1996 have been recorded and charged to operations for the nine months
ended September 30, 1996. Such charge is solely from the termination of the
Subchapter S status and is nonrecurring.
The pro forma adjustment in the statement of earnings reflects a
provision for income taxes based upon pro forma pretax earnings as if the
Company had been subject to Federal and additional state and local income taxes
which it is not currently subject to. The pro forma income tax provision has
been prepared in accordance with SFAS No. 109.
Pro Forma Earnings Per Share
Pro Forma earnings per share are based on the weighted average number
of common and common equivalent shares outstanding during the period. The shares
outstanding for the period give retroactive effect to the Merger and
recapitalization of the Company as well as 154,443 shares deemed to be
outstanding, which represent the approximate number of shares deemed to be sold
by the Company (at an assumed initial public offering price of $5.00 per share)
to fund the portion of the $1,127,786 distribution of retained earnings in
excess of undrawn earnings.
NOTE C - STOCKHOLDERS' EQUITY
Initial Public Offering
On March 26, 1996, the Company consummated an initial public offering
of 1,600,000 shares of its Common Stock at a price of $5.00 per share. The net
proceeds to the Company from the offering were approximately $6,400,000. In
connection with the public offering, the Company declared to its principal
stockholders an S corporation dividend of retained earnings in excess of
$500,000.
NOTE D - STOCK OPTION PLAN
In February 1996, the Board of Directors and Stockholders approved the
adoption of a stock option plan (the "Plan"). The Plan provides for the grant of
options to purchase up to 350,000 shares of the Company's common stock. These
options may be granted to employees, officers of the Company, non-employee
directors of the Company and consultants and advisors to the Company. The Plan
provides for granting of options to purchase the Company's stock at not less
than the fair market value of such shares on the date of the grant.
The Plan provides for a one-time automatic grant of an option to
purchase 20,000 shares of common stock at the market value of the common stock
on the date of the grant to those non-employee directors serving on the Board of
Directors on the date that the Plan was
8
<PAGE> 9
adopted and also to those persons who become non-employee directors of the
Company in the future, upon their appointment or election as directors of the
Company. The Plan also provides for an annual grant to each non-employee
director of the Company of options to purchase 5,000 shares at the market value
of the common stock of the Company on the date of each grant.
To date, the Company granted options to purchase an aggregate of
293,000 shares of common stock under the Plan at prices ranging from $4.50 to
$5.75 per share.
NOTE E - ACQUISITION OF THE SARABANDE PRESS, INC.
On August 1, 1996, the Company completed the acquisition of certain of
the assets of The Sarabande Press, Inc. ("Sarabande"), a digital pre-press firm
located in New York City, for a maximum aggregate purchase price of $1,900,000,
including up to $400,000 of the Company's Common Stock. The final purchase price
will be determined based upon the sales of Sarabande for the twelve months
following the closing.
The acquisition of Sarabande has been treated as a "purchase" for the
purposes of generally accepted accounting principles, with the purchase
allocated based on the fair value of the assets acquired and liabilities
assumed. Approximately $990,678 was allocated to goodwill.
The unaudited pro forma results of operations, which reflects the
purchase of Sarabande into the Company as if the combination occurred as of the
beginning of each period, are as follows:
<TABLE>
<CAPTION>
For the Nine Months Ending September 30,
----------------------------------------
1995 1996
---- ----
<S> <C> <C>
Net Sales $9,708,864 12,631,904
Net Earnings $1,669,844 173,769
Pro Forma Net Earnings(1) $ 942,829 662,027
Pro Forma Net Earnings
Per Share(1) $ .32 .17
</TABLE>
- --------
(1) Also adjusted to reflect additional income taxes which the Company
was not subject to because of its status as an S Corporation.
9
<PAGE> 10
NOTE F - SUBSEQUENT EVENT
On June 27, 1996, the Company entered into a letter of intent to
acquire substantially all of the assets of Boris Image Group, Inc., a
photographic and digital printing service firm located in Boston. On October 18,
1996, the Company terminated acquisition discussions.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
Katz Digital Technologies, Inc. (the "Company") provides a broad range
of digital prepress and digital shortrun printing services to produce full-color
and black and white printed materials. The Company was organized in 1987 as a
typography brokerage business and, in February 1991, discontinued substantially
all of its typography brokerage operations and commenced offering digital
prepress services. The Company commenced offering digital short-run printing
services in February 1994 with its Cactus printing system and recently expanded
such capabilities by adding Indigo and Heidelberg printing capabilities in
February 1995 and February 1996 respectively.
In December 1995, the Company effected a merger of its two predecessor
New York corporations into a newly-formed Delaware corporation for the sole
purpose of relocating its state of incorporation from New York to Delaware.
On March 26, 1995, the Company consummated an initial public offering
of 1,600,000 shares of its common stock at a price of $5.00 per share, resulting
in net proceeds to the Company of approximately $6,400,000 (the "Offering").
On August 1, 1996, the Company acquired certain of the assets of The
Sarabande Press, Inc. ("Sarabande"), a digital pre-press firm located in New
York City (the "Sarabande Acquisition").
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO THE QUARTER ENDED SEPTEMBER 30,
1995
Net Sales for the quarter ended September 30, 1996 were $3,906,584, an
increase of $1,372,201 or 54.1% compared to $2,534,383 for the quarter ended
September 30, 1995. The increase in net sales was primarily attributable to
increased digital short-run printing, which in the aggregate accounted for
approximately $721,000 or 52.5% of such increase, and an industry trend towards
digital printing services compared to more conventional printing processes. Net
sales also increased due to increased sales efforts and the completion of the
Sarabande Acquisition on August 1, 1996, which accounted for approximately 29.6%
of the increase. The increase in net sales is attributable to increases in the
amount of services provided, rather than increases in the prices charged by the
Company for it services, since the prices for such services did not increase
during the quarter ended September 30, 1996, as compared to the quarter ended
September 30, 1995.
Cost of goods sold for the quarter ended September 30, 1996 was
$2,055,291, an increase of $920,199, or 81.1%, as compared to $1,135,092 for the
quarter ended September
11
<PAGE> 12
30, 1995. The increase was attributable to increased production personnel for
the Company's Heidelberg printing press, which generally has higher costs of
sales as compared to other services provided by the Company, increased
production personnel in other digital short-run printing services and increased
overhead and other costs associated with the Company's fulfillment of increased
orders for the Company's services. Cost of goods sold also increased by
approximately 24.4% as a result of the Sarabande Acquisition.
Selling, general and administrative expenses for the quarter ended
September 30, 1996 were $1,682,902 an increase of $813,470 or 93.6%, as compared
to $869,432 for the quarter ended September 30, 1995. The increase was primarily
attributable to increased overhead costs associated with the Company's move to
larger headquarters coupled with additional management personnel to manage the
increased space and expanded sales force. In addition, the Sarabande Acquisition
accounted for 15.5% of the increase.
Net interest expense for the quarter ended September 30, 1996 was
$18,109 as compared to interest expense of $31,033 for the quarter ended
September 30, 1995, a decrease of $12,924. The decrease is due to increased
interest income derived from the investment of the proceeds from the Company's
initial public offering, offset by additional interest costs associated with
additional equipment leases.
As a result of the foregoing, the Company had net earnings of $79,868
for the quarter ended September 30, 1996 as compared to $449,655 for the quarter
ended September 30, 1995. On a pro forma basis net earnings for the quarter
ended September 30, 1996 would have been $79,868 as compared to $255,554 for the
quarter ended September 30, 1995.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1995
Net sales for the nine months ended September 30, 1996 were
$11,204,938, an increase of $3,398,351, or 43.5% compared to $7,806,587 for the
nine months ended September 30, 1995. The increase in net sales was primarily
attributable to increased digital short-run printing, which in the aggregate
accounted for approximately $1,922,500 or 56.6% of such increase, and an
industry trend towards digital printing services compared to more conventional
printing presses. In addition, the Company introduced the Heidelberg printing
press in late February 1996, which accounted for approximately $606,000 of net
sales during the nine months ended September 30, 1996. Net sales also increased
due to increased sales efforts, the addition of new sales representatives and
the Sarabande Acquisition, which accounted for 11.9% of the increase. The
increase in net sales is generally attributable to increases in the amount of
services provided, rather than increases in the prices charged by the Company
for its services, since the prices for such services did not increase during the
nine months ended September 30, 1996.
Cost of goods sold for the nine months ended September 30, 1996 was
$5,673,928, an increase of $2,286,914, or 67.5%, as compared to $3,387,014 for
the nine months ended
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September 30, 1995. The increase was attributable to increased production
personnel and start up costs for the Company's new Heidelberg printing press,
which generally has higher costs of sales as compared to other services provided
by the Company, increased production personnel in other digital short-run
printing services, additional costs associated with the Company's fulfillment of
increased orders for the Company's services and severe weather conditions which
hampered production efforts during the Company's move to its headquarters in
January 1996. Cost of goods sold also increased 9.8% as a result of the
Sarabande Acquisition.
Selling, general and administrative expenses for the nine month period
ended September 30, 1996 were $4,457,757, an increase of $1,613,040, or 56.7%,
as compared to $2,844,717 for the nine months ended September 30, 1995. This
increase was primarily attributable to increased overhead costs associated with
the Company's move to larger headquarters coupled with additional management
personnel to manage the increased space and expanded sales force. In addition,
the Sarabande Acquisition accounted for 7.8% of the increase.
Net interest expense for the nine months ended September 30, 1996 was
$49,220 for the nine months ended September 30, 1996, a decrease of $26,626, or
35.1%, as compared to interest expense of $75,846 for the nine months ended
September 30, 1995. The decrease is due to interest income derived from the
investment of the proceeds from the Company's initial public offering, offset by
additional interest costs associated with additional equipment leases.
Included in income taxes for the nine months ended September 30, 1996,
is a nonrecurring charge of $723,000 for additional federal and state income
taxes resulting from the termination of Subchapter S status.
As a result of the foregoing, the Company had a net loss of $67,285 for
the nine months ended September 30, 1996, as compared to net earnings of
$1,342,175 for the nine months ended September 30, 1995. Excluding the
nonrecurring provision relating to the termination of the Company's Subchapter S
on March 25, 1996 of $723,000, pro forma net income would have been $542,152 for
the nine months ended September 30, 1996 as compared to pro forma net earnings
of $766,819 for the nine months ended September 30, 1995.
LIQUIDITY AND CAPITAL RESOURCES
On March 26, 1996 the Company consummated an initial public offering of
an aggregate of 1,600,000 shares of its Common Stock at a price of $5.00 per
share. Net proceeds from the offering were approximately $6,400,000. Prior to
the offering, the Company historically financed its working capital requirements
principally through cash flow from operations and the use of its credit
facility.
13
<PAGE> 14
Net cash provided by operating activities was $502,652 for the nine
months ended September 30, 1996. The increase in cash provided by operating
activities during the nine months ended September 30, 1996 was primarily
attributable to depreciation and amortization, and an increase in accounts
payable and accrued expenses, partially offset by an increase in accounts
receivable. Net cash used in investing activities for the nine months ended
September 30, 1996 was $1,982,723 and reflects the Company's purchase of
property and equipment and the Sarabande Acquisition. Net cash provided by
financing activities for the nine months ended September 30, 1996 was $4,903,448
and reflects stockholder distributions of $956,054 and payments of capital lease
obligation of $502,390. At September 30, 1996, the Company had cash of
$3,624,106.
Net cash provided by operating activities was $1,608,439 for the nine
months ended September 30, 1995. The increase in cash provided by operating
activities during the nine months ended September 30, 1995 was attributable to
net earnings, depreciation and amortization, and increases in accounts payable
and accrued expenses, partially offset by an increase in accounts receivable.
Net cash used in investing activities for the nine months ended September 30,
1995 was $401,545 and reflects the purchase of property and equipment. Net cash
used in financing activities for nine months ended September 30, 1995 was
$1,430,531 and reflected stockholder distributions of $1,176,964 and payments of
capital lease obligations of $253,567.
In September 1996, the Company obtained a $2,000,000 line of credit
(the "Credit Line") from European American Bank ("EAB"). The Credit Line bears
interest at a prime rate plus 1/2% and is available until June 30, 1997. The
Credit Line provides for the issuance of term loans in amounts not to exceed
$400,000 in the aggregate, which bear interest at prime rate plus 1%. The
aggregate of all amounts outstanding under the Credit Line may not exceed
$2,000,000. At September 30, 1996, the Company had $0 outstanding under the
Credit line. The Company, in April 1996, used a portion of the net proceeds of
the Offering to repay the amount of its borrowings under the Credit Line. The
Company, however, intends to use, from time to time, as the need arises, the
amounts available under its credit line. The Company has pledged to EAB all of
its accounts receivable, machinery, equipment, fixtures and furnishings to
secure its obligations under the Credit Line and has also pledged a certificate
of deposit in the amount of $233,600 to secure its obligations under the letter
of credit.
Prior to the public offering, the Company had elected to be taxed as an
S corporation and, accordingly, was not subject to Federal income taxes. Net
income had been taxed for Federal income taxes purposes directly to the
Company's stockholders. On March 26, 1996 the Company converted to a C
corporation, adopted the accrual basis of accounting and became subject to both
Federal and additional state income taxes. From January 1, 1996 through March
25, 1996, the Company made S corporation distributions in the aggregate amount
of approximately $387,400. The Company declared an S corporation distribution to
its principal stockholders of its retained earnings in excess of $500,000 on
March 25, 1996
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<PAGE> 15
(the "Stockholder Notes"). Distributions were made pursuant to the Stockholder
Notes in monthly installments of $100,000, commencing one month after the date
of the Offering.
On August 1, 1996, the Company completed the acquisition of certain of
the assets of Sarabande for a maximum aggregate purchase price of $1,900,000,
including up to $400,000 of the Company's Common Stock. The final purchase price
will be determined based upon the sales of Sarabande for the twelve months
following the closing. The $1,000,000 paid at closing is included in investing
activities.
The Company's primary cash requirements have been to expand its
operations, fund the cost of its capital leases and pay overhead costs in
connection with the operation of its business. The Company anticipates, based on
currently proposed plans and assumptions relating to its operations, that the
proceeds from the public offering of 1,600,000 shares of its common stock,
together with projected cash flow from operations and available cash resources,
including the Credit Line, will be sufficient to satisfy its anticipated cash
requirements for at least twelve months.
15
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PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation (1)
3.2 By-Laws (1)
4.1 Form of Common Stock Certificate (1)
4.2 Form of Underwriter's Warrant Agreement (1)
------------------
(1) Filed as an exhibit to the Registrants Registration Statement
on Form SB-2 (File No. 333-1190) and the amendments thereto,
incorporated herein by reference.
(b) REPORT ON FORM 8-K
The Company filed a report on Form 8-K with the Securities and
Exchange Commission (the "Commission") on August 14, 1996, in
connection with the purchase of certain of the assets of The
Sarabande Press, Inc., without the required financial
statements as it was impractical to do so at that time. On
October 15, 1996, the Company filed a report on Form 8-K/A
with the Commission providing such required financial
information.
16
<PAGE> 17
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant has caused this report to be signed on its behalf by the undersigned,
thereto duly authorized.
Registrant:
KATZ DIGITAL TECHNOLOGIES, INC.
Dated: November 13, 1996 By: /s/ Gary Katz
-----------------------------
Gary Katz
President & Chief Executive Officer
Dated: November 13, 1996 By: /s/ Geoffrey Barsky
-----------------------------
Geoffrey Barsky
Acting Chief Financial Officer
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE KATZ
DIGITAL TECHNOLOGIES, INC. FINANCIAL STATEMENTS AS PRESENTED IN THE COMPANY'S
FORM 10-QSB FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 3,624,106
<SECURITIES> 235,689
<RECEIVABLES> 3,245,715
<ALLOWANCES> 86,238
<INVENTORY> 80,123
<CURRENT-ASSETS> 7,349,848
<PP&E> 3,514,298
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,326,148
<CURRENT-LIABILITIES> 2,621,901
<BONDS> 0
0
0
<COMMON> 4,425
<OTHER-SE> 7,264,432
<TOTAL-LIABILITY-AND-EQUITY> 12,326,148
<SALES> 11,204,938
<TOTAL-REVENUES> 11,204,938
<CGS> 5,673,928
<TOTAL-COSTS> 4,457,757
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 49,220
<INCOME-PRETAX> 1,024,033
<INCOME-TAX> 1,091,318<F1>
<INCOME-CONTINUING> (67,285)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (67,285)
<EPS-PRIMARY> (.02)
<EPS-DILUTED> 0
<FN>
<F1>THE PROVISION FOR INCOME TAXES INCLUDES A ONE TIME CHARGE OF $723,000
RELATING TO ADDITIONAL FEDERAL, STATE AND LOCAL INCOME TAXES APPLICABLE TO
TEMPORARY DIFFERENCES IN THE RECOGNITION OF INCOME AND EXPENSES FOR FINANCIAL
ACCOUNTING AND INCOME TAX REPORTING PURPOSES EXISTING AT MARCH 26, 1996. SUCH
CHARGE HAS BEEN RECORDED AND CHARGED TO OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996.
</FN>
</TABLE>
