<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of
1934 For the quarterly period ended September 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
Commission file number 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
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(Address of Principal Executive Offices)
(212) 594-4800
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(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 Exchange Act during the past 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
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State the number of shares outstanding of each of the issuer's classes
of common equity, as of the last practicable date: 4,503,745 as of November 3,
1997
Class Number of Shares
Common Stock, $.001 par value 4,503,745
Transitional Small Business Disclosure Format (check one):
Yes No X
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KATZ DIGITAL TECHNOLOGIES, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-QSB
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
QUARTER ENDED SEPTEMBER 30, 1997
ITEMS IN FORM 10-QSB
Facing Page
Page
Part I
Item 1. Financial Statements 3
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II
Item 1. Legal Proceedings None
Item 2. Changes in Securities and Use of Proceeds 12
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 13
Signatures
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PART I
Item 1. Financial Statements
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<TABLE>
<CAPTION>
KATZ DIGITAL TECHNOLOGIES, INC.
BALANCE SHEETS
September 30, 1997
(Unaudited) December 31, 1996
----------- -----------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,848,389 $ 3,428,175
Accounts receivable, net of allowance for doubtful accounts of $326,738
and $94,738 at September 30, 1997 and December 31, 1996, respectively 5,358,367 3,216,386
Work-in-process inventory 81,612 69,328
Prepaid expenses and other current assets 161,733 163,514
-----------------------------------------
Total Current Assets 7,450,101 6,877,403
PROPERTY AND EQUIPMENT - NET 4,000,766 3,568,853
OTHER ASSETS 68,239 80,333
GOODWILL - NET 2,395,933 1,140,819
----------------------------------------
$ 13,915,039 $ 11,667,408
=========================================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,822,798 $ 1,160,254
Current portion of notes payable 166,665 -
Current portion of obligations under capital leases 726,683 699,029
Income taxes payable 92,372 66,151
Deferred taxes payable 164,690 114,000
Due to stockholders - 339,912
-----------------------------------------
Total Current Liabilities 2,973,208 2,379,346
DEFERRED CREDITS 381,360 265,520
DEFERRED TAXES PAYABLE 303,068 265,000
PENSION LIABILITY 154,450 191,258
NOTES PAYABLE 333,335 -
OBLIGATIONS UNDER CAPITAL LEASES, NET OF
CURRENT PORTION 1,494,958 1,490,323
-----------------------------------------
Total Liabilities 5,640,379 4,591,447
-----------------------------------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value; 5,000 shares authorized;
no shares issued - -
Common stock, $.001 par value; 25,000,000 shares authorized;
4,577,909 and 4,425,000 shares issued and outstanding
at September 30, 1997 and December 31, 1996, respectively 4,578 4,425
Additional paid-in capital 7,323,055 6,860,267
Retained earnings 947,027 211,269
-----------------------------------------
Total Stockholders' Equity 8,274,660 7,075,961
-----------------------------------------
$ 13,915,039 $ 11,667,408
=========================================
The accompanying notes are an integral part of these statements.
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</TABLE>
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<TABLE>
<CAPTION>
KATZ DIGITAL TECHNOLOGIES, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ -------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 5,560,534 $ 3,906,584 $ 14,711,263 $ 11,204,938
Cost of goods sold 2,486,337 1,825,960 6,546,880 4,800,623
------------ ------------ ------------ ------------
Gross profit 3,074,197 2,080,624 8,164,383 6,404,315
Selling, general and administrative expenses 2,420,204 1,912,233 6,635,271 5,331,062
------------ ------------ ------------ ------------
Operating income 653,993 168,391 1,529,112 1,073,253
Interest expense (income) -net 27,021 18,109 76,407 49,220
------------ ------------ ------------ ------------
Earnings before provision for income taxes 626,972 150,282 1,452,705 1,024,033
Provision for income taxes 310,226 70,414 716,945 1,091,318
Net earnings (loss) $ 316,746 $ 79,868 $ 735,760 $ (67,285)
============ ============ ============ ============
Pro forma data
Historical earnings before provision for income taxes $ 626,972 $ 150,282 $ 1,452,705 $ 1,024,033
Provision for income taxes 310,226 70,414 716,945 481,881
------------ ------------ ------------ ------------
Net earnings $ 316,746 $ 79,868 $ 735,760 $ 542,152
============ ============ ============ ============
Net earnings per share $ 0.07 $ 0.02 $ 0.16 $ 0.14
============ ============ ============ ============
Weighted average number of shares outstanding 4,704,957 4,477,211 4,570,816 3,986,336
============ ============ ============ ============
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</TABLE>
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<TABLE>
<CAPTION>
KATZ DIGITAL TECHNOLOGIES, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
September 30,
--------------------------------------------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 735,760 $ (67,285)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation and amortization 991,979 712,183
Deferred credits 115,840 240,694
Deferred taxes (114,000) 521,000
Increase (decrease) in cash flows from changes in
operating assets and liabilities (net of acquisition):
Accounts receivable (1,582,451) (1,265,713)
Work-in-process inventory (12,284) (72,833)
Prepaid expenses and other current assets 23,872 (26,552)
Other assets 12,094 2,672
Accounts payable and accrued expenses 396,760 704,520
Income taxes payable (68,975) (59,165)
Net pension liability (36,808) (186,869)
------------------- -----------------------
Net cash provided by operating activities 456,140 502,652
------------------- -----------------------
Cash flows from investing activities:
Purchase of property and equipment - net (666,756) (889,956)
Purchase of Certificate of Deposit - (2,089)
Purchase of Advanced Digital Services, Inc. (470,023) -
Purchase of The Sarabande Press, Inc. - (1,090,678)
--------------------------------------------
Net cash used in investing activities (1,136,779) (1,982,723)
--------------------------------------------
Cash flows from financing activities:
Distributions to stockholders (339,912) (956,054)
Payments of obligations under capital leases (559,235) (502,390)
Net proceeds from public offering - 6,361,892
------------------- -----------------------
Net cash provided by (used in) financing activities (899,147) 4,903,448
------------------- -----------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (1,579,786) 3,423,377
Cash and cash equivalents - beginning of period 3,428,175 200,729
=================== =======================
Cash and cash equivalents - end of period $1,848,389 $3,624,106
=================== =======================
Supplemental disclosures of cash flow information:
Cash paid during the period for
Interest $ 171,596 $ 141,056
Income taxes $ 797,700 $ 628,734
Supplemental disclosures of noncash investing and financing activities:
Capital lease obligations of $803,524 and $1,674,895 were incurred in the nine month periods ended September 30, 1997
and 1996, respectively, as a result of the Company entering into new equipment leases.
The accompanying notes are an integral part of these statements.
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</TABLE>
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KATZ DIGITAL TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The summarized financial information included herein does not include all
disclosures required 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, 1996 and
for the year then ended in the Company's Form 10K as filed with the Securities
and Exchange Commission. These statements should be read in conjunction with the
data therein.
The financial information included herein 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 period. The
results for the interim periods are not necessarily indicative of results that
may be expected for the full fiscal year. Certain reclassifications have been
made to the prior year statements to conform to the current
year presentation.
NOTE B - TERMINATION OF S CORPORATION STATUS AND PRO FORMA INFORMATION
Prior to the consummation of the Company's initial 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 had been
made in the accompanying financial statements for Federal and certain state
income taxes for the S Corporation periods, since income of the Company was
taxable directly to its stockholders. The Company was however, liable for
certain state and local taxes, which are reflected in the accompanying financial
statements. Upon closing of the public offering, the Company's income tax status
as an S Corporation terminated. The Company converted to a C Corporation,
adopted the accrual basis of accounting and is subject to both Federal and state
corporate income taxes. Accordingly, $723,000 additional Federal and state
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 (the date of the initial public offering), have been recorded
and charged to operations for the nine months ended September 30, 1996. Pro
forma income taxes in 1996 reflect an additional provision for income taxes at
the effective Federal, state and local rates applied to the Company's financial
statement income.
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 ending September 30, 1996, 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 public offering price of $5.00 per share) to
fund the portion of the shareholder distribution in excess of 1995 undrawn
earnings.
NOTE C - NEW ACCOUNTING PRONOUNCEMENT
In February 1997, The Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, Earnings Per Share, which is effective
for financial statements for both interim and annual periods ending after
December 15, 1997. The new Standard eliminates primary and fully diluted
earnings per share and requires presentation of basic and, if applicable,
diluted earnings per share. Basic earnings per share is computed by dividing
income available to common shareholders by the weighted average common shares
outstanding for the period. Diluted earnings per share reflects the weighted
average common shares outstanding and dilutive potential common shares such as
stock options. The pro forma effect of adopting the new standard would not
materially effect reported earnings per share for the periods presented.
The Financial Accounting Standards Board also released Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130),
governing the reporting and display of comprehensive income and its components,
and Statement of Financial Accounting Standards, No. 131, "Disclosures About
Segments of an Enterprise and Related Information" (SFAS 131), requiring that
all public businesses report financial and descriptive information about their
reportable operating segments. Both Statements are applicable to reporting
periods beginning after December 15, 1997. The impact of adopting SFAS No. 130
is not expected to be material to the consolidated financial statements.
Management is currently evaluating the effect of SFAS No. 131 on consolidated
financial statement disclosures.
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<PAGE> 8
NOTE D - ACQUISITIONS
As reported on a Current Report on Form 8-K filed with the Securities and
Exchange Commission on August 13, 1997, on July 31, 1997 the Company completed
its acquisition by merger of Advanced Digital Services, Inc. ("ADS"). The
purchase price of $1,585,673 was composed of $500,000 in cash, $250,000 in 7%
five year notes and 301,818 restricted shares of the Company's common stock. The
final purchase price is subject to adjustment based on Net Worth (as defined in
the Plan and Agreement of Merger, filed as an exhibit to the Form 8-K) pursuant
to an audit of ADS's financial statements, the collectability of certain
accounts receivable and revenues generated by the ADS operations during the
twelve month period following the merger. In addition, concurrent with the
merger, the former shareholders of ADS each entered into five year employment
agreements, as well as agreements imposing certain non-competition and
confidentiality restrictions.
The acquisition of ADS has been treated as a "purchase" for the purposes of
generally accepted accounting principles, with the purchase price allocated
based on the fair value of the assets acquired and liabilities assumed.
Approximately $648,000 was allocated to goodwill.
In conjunction with the 1996 acquisition of The Sarabande Press, Inc. notes
payable, common stock, additional paid in capital and accrued interest totaling
$767,276 with a corresponding amount of goodwill, was recorded in the nine month
period ended September 30, 1997.
NOTE E - PRO FORMA RESULTS
The unaudited pro-forma results of operations, which reflects the purchase of
ADS as if the combination occurred as of the beginning of the period, are as
follows:
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------
1997 1996
---- ----
<S> <C> <C>
Net Sales $16,211,602 $12,865,494
Net Earnings 512,187 95,556
Pro-Forma Net Earnings 512,187 657,667
Pro-Forma Net Earnings Per Share $ .11 $ .14
Weighted average number of shares outstanding 4,805,563 4,805,563
</TABLE>
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<PAGE> 9
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated, the
percentage of net sales represented by certain items reflected in the Company's
statements of operations. The statements of operations contained in the
Company's financial statements and the following table include pro forma
adjustments for income taxes. Certain reclassifications have been made to the
prior year statements to conform to the current year presentation.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
Cost of goods sold 44.7% 46.7% 44.5% 42.8%
Gross profit 55.3% 53.3% 55.5% 57.2%
Selling, general and administrative expenses 43.5% 48.9% 45.1% 47.6%
Net earnings (loss) 5.7% 2.0% 5.0% (.6%)
Pro forma net earnings 5.7% 2.0% 5.0% 4.8%
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1996
Net sales for the three months ended September 30, 1997 were
$5,560,534, an increase of $1,653,950 or 42.3%, compared to $3,906,584 for the
three months ended September 30, 1996. The increase in net sales was primarily
attributable to increased volume of services to existing customers, growth of
the customer base sales from new products and the inclusion of sales from
Advanced Digital Services, Inc.("ADS"), which was acquired on July 31, 1997 (the
"Acquisition")..
Cost of goods sold for the three months ended September 30, 1997 was
$2,486,337, an increase of $660,377, or 36.2%, compared to $1,825,960 for the
three months ended September 30, 1996. The increase in cost of goods sold was
primarily attributable to cost increases for supplies and labor related to the
increased sales.
Gross profit for the three months ended September 30, 1997 was
$3,074,197, an increase of $993,573, or 47.8%, compared to $2,080,624 for the
three months ended September 30, 1996. Gross profit as a percent of net sales
increased to 55.3% for the three months ended September 30, 1997 from 53.3% in
the prior year. The increased gross profit percentage in 1997 was attributable
to the significant increase in sales volume from 1996 to 1997.
Selling, general and administrative expenses for the three months ended
September 30, 1997 were $2,420,204, an increase of $507,971, or 26.6%, compared
to $1,912,233 for the three months ended September 30, 1996. The increase was
primarily attributable to sales related compensation, goodwill
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<PAGE> 10
amortization for the Sarabande acquisition, increased rent related to additional
facilities, and management salaries for added personnel.
Net interest expense for the three months ended September 30, 1997 was
$27,021, an increase of $8,912 compared to $18,109 for the three months ended
September 30, 1996. The increase was due to reduced interest income from the
investment of the reduced balance of unused proceeds from the Company's March
1996 initial public offering of its securities (the "IPO").
As a result of the foregoing, net earnings increased to $316,746 ($.07
per share) for the three months ended September 30, 1997 from $79,868 ($.02 per
share) for the prior comparable period, an increase of $236,878 ($.05 per
share).
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Net sales for the nine months ended September 30, 1997 were
$14,711,263, an increase of $3,506,328 or 31.3%, compared to $11,204,938 for the
nine months ended September 30, 1996. The increase in net sales was primarily
attributable to increased volume of services, including increased sales of
digital short run printing.
Cost of goods sold for the nine months ended September 30, 1997 was
$6,546,880, an increase of $1,746,257, or 36.4%, compared to $4,800,623 for the
nine months ended September 30, 1996. The increase in cost of goods sold was
primarily attributable to production costs added through the Sarabande
acquisition plus increased production wages and supplies related to the greater
volume and changed mix in services.
Gross profit for the nine months ended September 30, 1997 was
$8,164,383, an increase of $1,760,068 or 27.5%, compared to $6,404,315 for the
nine months ended September 30, 1996. Gross profit as a percent of net sales
decreased to 55.5% for the nine months ended September 30, 1997 from 57.2% in
the prior year. The lower gross profit percentage in 1997 was attributable to
the continuing change in the Company's product mix favoring digital short run
printing, which generates a lower gross profit rate than the Company's other
services, increases in production equipment depreciation as a result of major
equipment acquisitions over the last twelve months and increases in the cost of
service contracts for new equipment and equipment for which the initial warranty
period has expired.
Selling, general and administrative expenses for the nine months ended
September 30, 1997 were $6,635,271, an increase of $1,304,209, or 24.5%,
compared to $5,331,062 for the nine months ended September 30, 1996. The
increase was primarily attributable to greater costs for sales related
compensation, management personnel, and costs associated with the Sarabande
acquisition including goodwill amortization.
Net interest expense for the nine months ended September 30, 1997 was
$76,407, an increase of $27,187 or 55.2% compared to $49,220 for the nine months
ended September 30, 1996. The increase in expense was due to decreased interest
income from the investment of unused proceeds from the IPO.
Included in the provision for income taxes for the nine months ended
September 30, 1996 is a non-recurring charge of $723,000 for additional Federal
and state income taxes resulting from the termination of the Company's S
Corporation tax status.
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<PAGE> 11
As a result of the foregoing, net earnings (loss) increased to $735,760
for the nine months ended September 30, 1997 from a loss of $67,285 for the
prior comparable period, an increase of $803,045. Net earnings, after giving
effect to a pro forma adjustment for income tax provisions in 1996, would have
been $735,760 ($.16 per share) and $542,152 ($.14 per share) for the nine months
ended September 30, 1997 and 1996, respectively. The "per share" earnings in
1997 included the effect of a 15% increase in the average number of shares
outstanding in that period. The increase in the number of shares outstanding was
primarily due to the Company's IPO.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had working capital of $4,324,825
substantially unchanged from working capital of $4,498,057 at December 31, 1996.
Net cash provided by operating activities totaled $456,140 for the nine
months ended September 30, 1997 compared to $502,652 in the prior year. The
decrease in the first nine months of 1997 compared to the first nine months of
1996 include increases from the improved earnings from 1996 to 1997 plus
increased depreciation and amortization. These increases were more than offset
by a net increase in operating assets and liabilities, principally growth in
accounts receivable.
Cash flows from investing activities were related to purchases of
property and equipment and the acquisitions of Sarabande and ADS. Cash provided
from financing activities decreased $5,796,139 in the first nine months of 1997
as compared to 1996 as a result of the Company's 1996 IPO partly reduced by the
completion of distributions to the S corporation shareholders in 1997. The net
effect of cash flows from operating activities, investing activities and
financing activities was a net decrease in cash during the first nine months of
1997 of $1,579,786 to an ending balance of $1,848,389.
The Company maintains a $3,000,000 line of credit with a commercial
bank. At September 30, 1997 there were no outstanding borrowings under the line.
The Company believes that current cash balances, current borrowing capacity and
cash generated by operations, will provide sufficient cash to meet its operating
requirements for the next twelve months.
See "Forward Looking Information."
FORWARD LOOKING INFORMATION
This quarterly report on Form 10-QSB contains certain forward-looking
statements and information relating to the Company that are based on the beliefs
of management, as well as assumptions made by and information currently
available to the Company. When used in this document, the words "anticipate,"
"believe," "estimate," and "expect" and similar expressions, as they relate to
the Company, are intended to identify forward-looking statements. Such
statements reflect the current views of the Company with respect to future
events and are subject to certain risks, uncertainties and assumptions,
including those described in this quarterly report on Form 10-QSB. Should one or
more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
described herein as anticipated, believed, estimated or expected. The Company
does not intend to update these forward-looking statements.
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<PAGE> 12
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(c) Recent Sales of Unregistered Securities.
On July 31, 1997, Advanced Digital Services, Inc. ("ADSI") was merged with
and into Katz Digital Acquisition, Inc., a wholly-owned subsidiary of the
Registrant ("KDAI"), pursuant to a Plan and Agreement of Merger (the "Merger
Agreement") by and among the Registrant, ADSI, the former shareholders of ADSI
(the "ADSI Shareholders") and KDAI (the "Merger"). ADSI, based in New York, New
York, provides digital prepress printing services to leading advertising
agencies, publishers and other businesses. Upon effectiveness of the Merger,
KDAI, the surviving corporation (the "Survivor Corporation"), assumed the name
"Advanced Digital Services, Inc." and succeeded to, and will continue to own and
operate, the business and assets of ADSI.
As partial consideration for the Merger, the ADSI Shareholders received
301,818 shares of the Registrant's Common Stock, par value $.001 per share (the
"Merger Shares"). Such consideration is subject to adjustment based on the
collectibility of certain accounts receivable of ADSI and variations from
certain amounts of ADSI's net worth on July 31, 1997, or the revenues generated
by the Survivor Corporation during the first twelve month period following the
Merger, all as more fully specified in the Merger Agreement. The certificates
representing the Merger Shares will be held in escrow pending the final
determination of the Merger consideration.
The number of the Merger Shares (which are subject to adjustment as
described above) was determined by dividing $835,673 by the average closing
price of the Registrant's Common Stock for twenty (20) consecutive trading days
on the NASDAQ National Market ending three (3) business days prior to the date
of consummation of the Merger.
The ADSI Shareholders have agreed not to sell or otherwise transfer the
Merger Shares until February 1, 1999. The Registrant has undertaken to use its
best efforts to prepare and file a Registration Statement with the Securities
and Exchange Commission to allow for the resale of the Merger Shares after such
date pursuant to the Securities Act of 1933, as amended (the "Act").
The issuance of the securities listed above were sold without registration
under the Act, as they did not involve any public
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<PAGE> 13
offering, pursuant to the provisions of Section 4(2) of the Act.
(d) Use of Proceeds.
The Company commenced an initial public offering of its securities on
March 26, 1996 (the "Effective Date"), whereby it received net proceeds of
$6,420,000 (the "Proceeds"). Since the Effective Date, the Company has spent the
following approximate amounts of the Proceeds towards the purposes indicated:
1. Cash Payments In Connection
with the Acquisition of the
Sarabande Press, Inc. and
Advanced Digital Services, Inc. - $1,797,948
2. Working Capital - 4,476,893
The expenditure by the Company of the Proceeds for any other items not
listed above has not changed since the Company's last filed periodic report and,
pursuant to the Act and the rules and regulations promulgated thereby, the
listing of such expenditures is omitted from this report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Description
- ----------- -----------
2.1 Plan and Agreement of Merger by and among the
Registrant, Advanced Digital Services, Inc., the
former shareholders of Advanced Digital
Services, Inc. and Katz Digital Acquisition,
Inc., a wholly owned subsidiary of the
Registrant, with schedules thereto. (1)
2.2 Employment Agreement dated July 31, 1997 by and
between Advanced Digital Services, Inc. and
David Katz. (1)
2.3 Employment Agreement dated July 31, 1997 by and
between Advanced Digital Services, Inc. and Gary
Ritkes. (1)
2.4 Non-Competition Agreement dated July 31, 1997 by
and between the Registrant and David Katz. (1)
2.5 Non-Competition Agreement dated July 31, 1997 by
and between the Registrant and Gary Ritkes. (1)
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<PAGE> 14
3.1 Certificate of Incorporation (2)
3.2 By-Laws (2)
27.1* Financial Data Schedule
------------------
* Filed herewith.
(1) Filed as an exhibit to the Registrant's Current Report on Form 8-K,
filed with the Commission on August 13, 1997 and incorporated herein
by reference.
(2) Filed as an exhibit to the Registrant's Registration
Statement on Form SB-2 (File No. 333-1190) and the
amendments thereto, and incorporated herein by
reference.
(B) REPORTS ON FORM 8-K
On August 13, 1997, the Registrant filed a Current Report on Form 8-K,
reporting the Merger. See "Item 2 - Changes in Securities and Use of Proceeds."
No other Current Reports on Form 8-K were filed by the Registrant during the
quarter ended September 30, 1997.
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<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
KATZ DIGITAL TECHNOLOGIES, INC.
--------------------------------------------
(Registrant)
Date: November 12, 1997 /s/ Gary Katz
--------------------------------------------
Gary Katz
Chairman and Chief Executive Officer
(Principal Executive Officer)
Date: November 12, 1997 /s/ Donald L. Flamm
--------------------------------------------
Donald L. Flamm
Vice President-Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
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