<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended.......................September 30, 2000
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from.................to.................
Commission file number 000-25067
PRIVATE MEDIA GROUP, INC.
(Exact Name of Small Business Issuer as Specified in its Charter)
Nevada 87-0365673
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization) Number)
Carrettera de Rubi 22-26, 08190 Sant Cugat del Valles, Barcelona, Spain
(Address of principal executive offices)
34-93-590-7070
--------------
Issuer's telephone number
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock
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
--- ---
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
Class Outstanding at November 13, 2000
----- --------------------------------
Common Stock, par value $.001 27,570,495
Transitional Small Business Disclosure Format: Yes No X
----- ----
<PAGE>
PART I.
Item 1. Financial Statements
PRIVATE MEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December September 30,
31, (Unaudited)
-------------- --------------------------
1999 2000 2000
-------------- ------------ ----------
SEK SEK USD
(in thousands)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.................... 7,370 9,248 955
Trade accounts receivable.................... 67,992 90,155 9,314
Related party receivable..................... 6,821 7,268 751
Inventories - net (Note 2)................... 40,209 56,081 5,793
Prepaid expenses and other current assets.... 15,973 31,554 3,260
-------------- ------------ ----------
TOTAL CURRENT ASSETS......................... 138,365 194,305 20,073
Library of photographs and videos - net...... 83,885 91,397 9,442
Property, plant and equipment - net.......... 11,973 12,868 1,329
Goodwill (Note 3)............................ - 17,993 1,859
Other assets................................. 26,585 37,443 3,868
-------------- ------------ ----------
TOTAL ASSETS................................. 260,808 354,006 36,571
============== ============ ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Short-term borrowings........................ 475 0 0
Accounts payable trade....................... 21,177 31,290 3,232
Income taxes payable......................... 797 1,017 105
Deferred tax liability....................... 755 30 3
Accrued other liabilities.................... 6,439 6,696 692
-------------- ------------ ----------
TOTAL CURRENT LIABILITIES.................... 29,644 39,033 4,032
SHAREHOLDERS' EQUITY
4.00 Series A Convertible Preferred Stock
10,000,000 shares authorized, 7,000,000
shares issued and outstanding............... - - -
Common Stock, $.001 par value, 100,000,000
shares authorized 26,601,867 and 27,493,245
issued and outstanding at December 31, 1999
and September 30, 2000, respectively........ 8,003 8,307 858
Warrants..................................... - 9,696 1,002
Additional paid-in capital................... 32,716 73,599 7,603
Stock dividends to be distributed............ 9,368 3,389 350
Retained earnings............................ 180,660 219,015 22,626
Accumulated other comprehensive income....... 416 967 100
-------------- ------------ ----------
TOTAL SHAREHOLDERS' EQUITY................... 231,163 314,973 32,538
-------------- ------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY... 260,808 354,006 36,571
============== ============ ==========
</TABLE>
See accompanying notes to consolidated statements.
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<PAGE>
PRIVATE MEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
Three-months ended Nine-months ended
September 30, September 30,
(unaudited) (unaudited)
--------------------------- -----------------------------------------
1999 2000 1999 2000 2000
----------- ----------- ---------- ----------- -----------
SEK SEK SEK SEK USD
(in thousands)
<S> <C> <C> <C> <C> <C>
Net sales......................... 41,896 65,714 125,283 179,153 18,508
Cost of sales..................... 19,816 21,492 62,654 70,772 7,311
----------- ----------- ---------- ----------- -----------
Gross profit...................... 22,080 44,222 62,629 108,380 11,196
Selling, general and
administrative expenses.......... 13,358 22,600 41,821 61,461 6,349
----------- ----------- ---------- ----------- -----------
Operating profit.................. 8,722 21,622 20,808 46,919 4,847
Interest expense.................. 73 854 348 1,186 122
Interest income................... 61 246 282 3,146 325
----------- ----------- ---------- ----------- -----------
Income before income tax.......... 8,710 21,013 20,743 48,880 5,050
Income taxes...................... 490 535 491 1,014 105
----------- ----------- ---------- ----------- -----------
Net income........................ 8,219 20,478 20,252 47,865 4,945
----------- ----------- ---------- ----------- -----------
Other comprehensive income:
Foreign currency adjustments...... (298) 92 (418) 551 57
----------- ----------- ---------- ----------- -----------
Comprehensive income.............. 7,921 20,570 19,834 48,416 5,002
=========== =========== ========== =========== ===========
Net income per share:
Basic............................. 0.32 0.75 0.79 1.77 0.18
=========== =========== ========== =========== ===========
Diluted........................... 0.17 0.42 0.42 0.97 0.10
=========== =========== ========== =========== ===========
</TABLE>
See accompanying notes to consolidated statements.
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<PAGE>
PRIVATE MEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine-months ended
September 30,
(unaudited)
-------------------------------------------------
1999 2000 2000
---------------- ------------ ----------
SEK SEK USD
(in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................. 20,252 47,865 4,945
Adjustment to reconcile net income to net
cash flows from operating activities:
Deferred Taxes.......................... - (725) (75)
Depreciation............................ 2,308 3,998 413
Amortization of photographs and videos.. 21,958 18,668 1,929
Effects of changes in operating assets and
liabilities:
Trade accounts receivable.................. (5,272) (19,068) (1,970)
Related party receivable................ (1,021) (447) (46)
Inventories............................. (5,959) (11,583) (1,197)
Prepaid expenses and other current
assets................................ (20,149) (14,801) (1,529)
Accounts payable trade.................. 3,858 9,766 1,009
Income taxes payable.................... (844) (358) (37)
Accrued other liabilities............... 2,995 33 3
---------------- ------------ ----------
Net cash provided by operating activities.. 18,126 33,348 3,445
Cash flows from investing activities:
Investment in library of photographs and
videos.................................... 24,836 26,180 2,705
Capital expenditures....................... 5,537 1,937 200
Investments in other assets................ 1,775 10,858 1,122
Cash acquired in acquisition............... - 673 70
---------------- ------------ ----------
Net cash used in investing activities...... 32,148 39,648 4,096
Cash flow from financing activities:
Conversion of warrants..................... 14,855 8,103 837
Long-term loan (repayments on loan)........ (394) - -
Short-term borrowings (repayments)......... (1,735) (475) (49)
---------------- ------------ ----------
Net cash (used in) provided by financing
activities................................ 12,726 7,627 788
Foreign currency translation adjustment.... (418) 551 57
---------------- ------------ ----------
Net (decrease) increase in cash and cash
equivalents............................... (1,714) 1,878 194
Cash and cash equivalents at beginning of
the period................................ 4,165 7,370 761
---------------- ------------ ----------
Cash and cash equivalents at end of the
period................................... 2,451 9,248 955
================ ============ ==========
Cash paid for interest..................... 268 818 85
================ ============ ==========
Cash paid for taxes........................ 257 811 84
================ ============ ==========
</TABLE>
See accompanying notes to consolidated statements.
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<PAGE>
PRIVATE MEDIA GROUP, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with United States generally accepted accounting
principles ("U.S. GAAP") for interim financial information. Accordingly they do
not include all of the information and footnotes required by U.S. GAAP for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation of financial position and results of operations have been included.
Operating results for the nine months period ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on form
10-KSB for the year ended December 31, 1999.
The accompanying financial statements have been presented in Swedish Kronor
("SEK") which is the principal currency in which Private Media Group, Inc.
generate their cash flows.
Solely for the convenience of the reader, the accompanying consolidated
financial statements as of September 30, 2000 and for the nine months then ended
have been translated into United States dollars ("USD") at the rate of SEK 9.68
per USD 1.00 the exchange rate of the Swedish Riksbank on September 30, 2000.
The translations should not be construed as a representation that the amounts
shown could have been, or could be, converted into US dollars at that or any
other rate.
2. Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -------------------
1999 2000
------------------- -------------------
SEK SEK
(in thousands)
<S> <C> <C>
Magazines................................................ 19,798 22,084
Video cassettes.......................................... 15,214 21,290
DVDs..................................................... 3,106 11,974
Other.................................................... 2,090 1,453
------------------- -------------------
40,209 56,801
=================== ===================
</TABLE>
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<PAGE>
PRIVATE MEDIA GROUP, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
3. Acquisition
On January 28, 2000, the Company acquired all of the outstanding shares of
Extasy Video B.V. ("Extasy") for total consideration of SEK 27,275,192. The
consideration consisted of 208,464 shares of the Company's common stock and
warrants to purchase 208,464 of the Company's common stock. The warrants are
exercisable during the period January 28, 2001 to January 28, 2004 at an
exercise price of USD 9.63. The excess of the purchase price over the fair
market value of the net assets acquired has resulted in goodwill of SEK
17,441,970. The aforementioned share values have been adjusted for the stock
dividend of May 30, 2000 (see note 5).
The allocation of the purchase price is as follows:
<TABLE>
<CAPTION>
SEK
-------------------
<S> <C>
Current assets........................................... 8,614,530
Fixed assets............................................. 3,141,461
Current liabilities...................................... (1,922,768)
Goodwill................................................. 17,441,970
-------------------
27,275,192
===================
</TABLE>
The acquisition has been accounted for using the purchase method of accounting
and, accordingly, the operating results of Extasy has been included in the
Company's consolidated financial statements since the date of acquisition.
Goodwill is being amortized on a straight line basis over 10 years.
The following unaudited pro forma information for the nine months ended
September 30, 1999 and 2000 assumes the acquisition occurred on January 1, 1999.
Share values have been adjusted for the stock dividend of May 30, 2000 (see note
5).
The amounts are expressed in thousands except net income per share.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------------- --------------------------------
1999 2000 1999 2000
------------- -------------- -------------- --------------
SEK SEK SEK SEK
(in thousands)
<S> <C> <C> <C> <C>
Revenues.................... 46,232 65,714 134,636 180,708
Net income.................. 8,387 20,478 20,801 47,679
Net income per share:
Basic....................... 0.32 0.75 0.81 1.76
============= ============== ============== ==============
Diluted..................... 0.17 0.42 0.44 0.97
============= ============== ============== ==============
</TABLE>
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<PAGE>
PRIVATE MEDIA GROUP, INC.
NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
4. Earnings per share
The following table sets forth the computation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Three-months ended Nine-months ended
September 30, September 30,
---------------------------------- ----------------------------------
1999 2000 1999 2000
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Numerator:
Net income (SEK in thousands)................. 8,219 20,478 20,252 47,865
=============== =============== =============== ===============
Denominator:
Denominator for basic earnings per share -
Weighted average shares...................... 25,893,867 27,173,869 25,476,672 27,110,716
Effect of dilutive securities:
Preferred stock............................ 21,000,000 21,000,000 21,000,000 21,000,000
Common stock warrants...................... 940,176 675,250 907,941 1,027,825
Stock dividends to be distributed.......... 69,912 56,395 69,912 56,395
--------------- --------------- --------------- ---------------
Denominator for diluted earnings per share -
weighted average shares and assumed
conversions.................................. 47,903,955 48,905,514 47,454,528 49,194,935
=============== =============== =============== ===============
Earnings per share (SEK)
Basic......................................... 0.32 0.75 0.79 1.77
=============== =============== =============== ===============
Diluted....................................... 0.17 0.42 0.42 0.97
=============== =============== =============== ===============
</TABLE>
Share values have been adjusted for the 3:1 stock dividend for the
Company's Common Stock effective May 30, 2000 (see note 5).
5. Stock Dividend
The Company implemented a 3:1 stock dividend whereby each holder of record
of Common Stock on May 30, 2000, received two additional shares of Common Stock
for each share owned on the record date. Corresponding adjustments have been
made to the Warrants and Options outstanding on the record date as well as the
Series A Preferred Stock to reflect the dividend distribution. Accordingly, all
share values reflected in the financial statements have been adjusted to give
effect to the stock dividend.
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Report contains forward-looking statements that involve risk and
uncertainties. The Company's actual results could differ materially from those
anticipated in such forward looking statements as a result of certain factors,
including those set forth elsewhere in this Report.
The Company's principal currency is Swedish Kronor ("SEK"). Solely for
the convenience of the reader, the accompanying financial information has been
translated into United States dollars ("USD") at the rate of SEK 9.68 per USD
1.00, the exchange rate of the Swedish Riksbank on September 30, 2000. The
translations should not be construed as a representation that the amounts shown
could have been, or could be, converted into U.S. dollars at that or any other
rate.
Three months ended September 30, 2000 compared to the three months ended
September 30, 1999
Net sales. The Company reported net sales of SEK 65.7 million for the three
months ended September 30, 2000 which, compared to net sales of SEK 41.9 million
for the three months ended September 30, 1999, represents an increase of SEK
23.8 million, or 56.9%. The increase was mainly attributable to the Broadcast,
DVD and Internet sales, offset by a decrease in CD-Rom and video sales. The
acquisition of Extasy B.V. also added to net sales for the period although part
of Extasy's gross sales was eliminated as inter-company transactions. Sales of
magazines remained approximately the same in 2000 as in 1999. DVD sales for the
three months ended September 30, 2000 was SEK 13.7 million, which compared to
the three-month 1999 period represents an increase of 478%. During the year 2000
the Company is releasing 50 new titles and 50 back-catalogue titles. Internet
sales for the three months ended September 30, 2000 increased 168% to SEK 12.6
million compared to the three months ended September 30, 1999. Broadcast sales
increased 858% to SEK 7.3 million compared to the three months ended September
30, 1999. The management believes that the growth in DVD, Internet and Broadcast
sales will continue in 2000 and 2001. The total new media division, including
DVD, Internet and Broadcast sales increased 329% to SEK 25.8 million compared to
the three months ended September 30, 1999. The net sales reported does not
include revenue from the agreements made and announced during the year
concerning the Private Gold broadcasting joint venture. Net sales arising from
the agreements will be reported according to US GAAP.
Cost of Sales. The Company reported cost of sales of SEK 21.5 million for the
three months ended September 30, 2000 which, compared to cost of sales of SEK
19.8 million for the three months ended September 30, 1999, represents a
increase of SEK 1.7 million, or 8.5%. The gross profit for the three months
ended September 30, 2000 was SEK 44.2 million, or 67.3% of net sales which,
compared to gross profit for the three months ended September 30, 1999 of SEK
22.1 million, or 52.7% of net sales, represents an increase of 14.6% in gross
profit in relation to net sales. The increase is the result of product mix with
better margins on Broadcast, DVD and Internet sales.
Selling, general and administrative expenses. The Company reported selling,
general and administrative expenses of SEK 22.6 million for the three months
ended September 30, 2000 which, compared to selling, general and administrative
expenses of SEK 13.4 million for the three months ended September 30, 1999,
represents an increase of SEK 9.2 million, or 69.2%. The increase was primarily
attributable to the Company's investment in Internet related activities and the
start-up of DVD. The investment expenses associated with Internet and DVD
activities are expected to continue in 2000.
Interest expense. The Company reported interest expense of SEK 0.9 million
for the three months ended September 30, 2000 which, compared to interest
expense of SEK 0.1 million for the three months ended
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<PAGE>
September 30, 1999, represents an increase of SEK 0.8 million. The small
increase is the result of higher average short-term borrowings outstanding in
2000 compared to 1999.
Income taxes. The Company reported income tax expenses of SEK 0.5 million as
compared to an income tax expense of SEK 0.5 million for the three months ended
September 30, 1999.
Net income. The Company reported net income of SEK 20.5 million as compared
to SEK 8.2 million for the three months ended September 30, 1999. The increase
in net income in 2000 of SEK 12.3 million, or 149.2% was primarily attributable
to increased sales and better margins on new media.
Nine months ended September 30, 2000 compared to the nine months ended September
30, 1999
Net sales. The Company reported net sales of SEK 179.2 million for the nine
months ended September 30, 2000 which, compared to net sales of SEK 125.3
million for the nine months ended September 30, 1999, represents an increase of
SEK 53.9 million, or 43%. The increase was mainly attributable to the Broadcast,
DVD and Internet sales, offset by a decrease in CD-Rom and video sales. The
acquisition of Extasy B.V. also added to net sales for the period although part
of Extasy's gross sales was eliminated as intercompany transactions. Sales of
magazines remained approximately the same in 2000 as in 1999. DVD sales for the
nine months ended September 30, 2000 was SEK 33.0 million and should not be
compared with the nine-month 1999 period since the Company released only a few
titles in the same period last year and the market was not ready. During the
year 2000 the Company is releasing 50 new titles and 50 back-catalogue titles.
Internet sales for the nine months ended September 30, 2000 increased 212% to
SEK 30.6 million compared to the nine months ended September 30, 1999. Broadcast
sales increased 451% to SEK 12.7 million compared to the nine months ended
September 30, 1999. The management believes that the growth in DVD, Internet and
Broadcast sales will continue in 2000 and 2001. The total new media division,
including DVD, Internet and Broadcast sales increased SEK 60.3 million, or 379%,
to SEK 76.3 million compared to the nine months ended September 30, 1999.
Cost of Sales. The Company reported cost of sales of SEK 70.8 million for the
nine months ended September 30, 2000 which, compared to cost of sales of SEK
62.7 million for the nine months ended September 30, 1999, represents a increase
of SEK 8.1 million, or 13.0%. The gross profit for the nine months ended
September 30, 2000 was SEK 108.4 million, or 60.5% of net sales which, compared
to gross profit for the nine months ended September 30, 1999 of SEK 62.6
million, or 50.0% of net sales, represents an increase of 10.5% in gross profit
in relation to net sales. The increase is the result of product mix with better
margins on Broadcast, DVD and Internet sales.
Selling, general and administrative expenses. The Company reported selling,
general and administrative expenses of SEK 61.5 million for the nine months
ended September 30, 2000 which, compared to selling, general and administrative
expenses of SEK 41.8 million for the nine months ended September 30, 1999,
represents an increase of SEK 19.6 million, or 47.0%. The increase was primarily
attributable to the Company's investment in Internet related activities and the
start-up of DVD. The investment expenses associated with Internet and DVD
activities are expected to continue in 2000.
Interest expense. The Company reported interest expense of SEK 1.2 million
for the nine months ended September 30, 2000 which, compared to interest expense
of SEK 0.3 million for the nine months ended September 30, 1999, represents an
increase of SEK 0.8 million. The increase is the result of higher average short-
term borrowings outstanding in 2000 compared to 1999.
-9-
<PAGE>
Income taxes. The Company reported income tax expenses of SEK 1.0 million as
compared to an income tax expense of SEK 0.5 million for the nine months ended
September 30, 1999.
Net income. The Company reported net income of SEK 47.9 million as compared
to SEK 20.3 million for the nine months ended September 30, 1999. The increase
in net income in 2000 of SEK 27.6 million, or 136% was primarily attributable to
increased sales and better margins on new media.
Liquidity & Capital Resources
The Company reported a working capital surplus of SEK 155.3 million at
September 30, 2000, an increase of SEK 46.6 million compared to the year ended
December 31, 1999. The increase is principally attributable to increased
accounts receivable, inventories and prepaid expenses and other current assets.
Net cash provided by operating activities was SEK 33.3 million for the nine
months ended September 30, 2000 was primarily the result of net income and
adjustments to reconcile net income to net cash flows from operating activities.
The net income of SEK 47.9 million and the adjustments to reconcile net income
to net cash flows from operating activities, representing amortization of
photographs and videos of SEK 18.7 million and depreciation of SEK 4.0 million
offset by deferred taxes of SEK 0.7 million, provided a total of SEK 69.8
million. The total of SEK 69.8 million was then primarily reduced by the
increases in trade accounts receivable, related party receivable, inventories,
prepaid expenses and other current assets and income taxes payable totaling SEK
46.3 million, offset by SEK 9.8 million from accounts payable trade and accrued
other liabilities. Net cash provided by operating activities was SEK 18.1
million for the nine months ended September 30, 1999. The increase in cash
provided by operating activities in 2000 compared to 1999 is principally the
result of net income and adjustments to reconcile net income to net cash flows
from operating activities.
Net cash used in investing activities for the nine months ended September 30,
2000 was SEK 39.6 million. The investing activities were principally investment
in library of photographs and videos of SEK 26.2 million which was carried out
in order to maintain the 2000 and 2001 release schedules. In addition to
investment in library of photographs and videos, SEK 1.9 million was invested in
capital expenditures and SEK 10.9 million in other assets. The increase over the
comparable nine-month 1999 period was principally due to increased investments
in library of photographs in order to maintain inventory levels and increased
investments in other assets represented primarily by loans to Private Circle,
Inc.
Net cash provided by financing activities for the nine months ended September
30, 2000 was SEK 7.6 million represented primarily by conversion of warrants.
The decrease over the comparable nine-month 1999 period was primarily due to
less conversion of warrants.
The Company has historically relied on positive cash flows from operations
and equity financing to finance working capital needs and investing activities.
The Company expects to have adequate working capital for the next twelve months.
During this period the Company intends to rely on positive cash flows from
operations and equity financing to finance working capital needs and necessary
investing activities. The Company's long-term expansion plans will require
additional sources of funding. The Company plans to meet these funding
requirements through a combination of increases in short-term credit lines,
additional long-term borrowings and/or equity financing.
-10-
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
EX-27 - Financial Data Schedule
b. Reports on Form 8-K:
None.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIVATE MEDIA GROUP, INC.
(Registrant)
Date: November 13, 2000 By:/s/ Johan Gillborg
------------------------
Johan Gillborg
Chief Financial Officer
(Principal Financial and Accounting Officer)
-12-
<PAGE>
INDEX TO EXHIBITS
EX-27 Financial Data Schedule
-13-
