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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended March 31, 1996
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
---------------- -------------------
Commission file number 0-16730
ALL-COMM MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Nevada 88-0085608
(State or other jurisdiction (I.R.S. Employer Identification No.]
of incorporation or organization)
400 Corporate Pointe, Suite 780
Culver City, California 90230
(Address of principal executive offices] (Zip Code)
- - --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report]
Registrant's telephone number, including area code: (310) 342-2800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of May 10, 1996, there were 3,186,734 shares of the Registrant's common stock
outstanding.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-Q REPORT
MARCH 31, 1996
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1 Interim Condensed Consolidated Financial Statements
(unaudited):
Condensed Consolidated Balance Sheets -
March 31, 1996 and June 30, 1995 3
Condensed Consolidated Statements of Operations -
Three and nine months ended March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 1996 and 1995 5
Notes to Interim Condensed Consolidated Financial
Statements 6-9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-16
Item 4 Submission of Matters to a Vote of Security Holders 17
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports of Form 8-K
(a) Exhibits 18
(b) Reports on Form 8-K 18
Signatures 19
Exhibit 10.5 Amendment to Option Agreement 20
Exhibit 10.6 Memorandums of Understanding 21-29
Exhibit 11 Statements Regarding Computation of Net 30
Income (Loss) Per Share
Exhibit 27 Financial Data Schedule 31-32
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
March 31 June 30
ASSETS 1996 1995
------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 726,068 $ 1,217,772
Accounts receivable, net of allowance for doubtful
accounts of $40,552 at March 31 and June 30 1,696,951 2,067,977
Other current assets 96,907 116,468
------------ ------------
Total current assets 2,519,926 3,402,217
Property and equipment at cost, net 289,214 344,154
Land held for sale at cost 921,465 766,651
Intangible assets at cost, net 7,091,235 7,272,769
Other assets 55,145 38,700
------------ ------------
Total assets $ 10,876,985 $ 11,824,491
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Note payable to bank $ 350,000 $ 49,694
Note payable other 18,000 72,000
Trade accounts payable 621,074 365,638
Accrued salaries and wages 700,767 641,507
Other accrued expenses 678,856 683,954
Income taxes payable 94,565
Current portion of long term obligations to related party 2,250,000 1,500,000
Related party payable 183,701
------------ ------------
Total current liabilities 4,618,697 3,591,059
Long term obligations to related party less current portion 1,875,000 3,000,000
Other liabilities 400,916 68,900
------------ ------------
Total liabilities 6,894,613 6,659,959
------------ ------------
Commitments and contingencies
Stockholders' equity:
Class B convertible preferred stock - authorized 50,000 shares of $.01 par
value; none issued
Common stock - authorized 6,250,000 shares of $.01 par value; 3,109,343 and
3,028,092 shares issued, respectively 31,094 30,281
Additional paid-in capital 10,446,284 10,300,847
Accumulated deficit (6,359,537) (5,031,127)
Less 11,800 shares of common stock in treasury,
at cost (135,469) (135,469)
------------ ------------
Total stockholders' equity 3,982,372 5,164,532
------------ ------------
Total liabilities and stockholders' equity $ 10,876,985 $ 11,824,491
============ ============
</TABLE>
See Notes to Interim Condensed Consolidated Financial Statements.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 3,723,945 $ 10,609,781
Cost of sales 2,620,576 7,503,141
------------ ------------
Gross profit 1,103,369 3,106,640
Operating Expenses:
Selling, general and administrative (1,325,485) $ (233,481) (3,837,935) $ (677,876)
Amortization of intangible assets (90,061) (271,363)
------------ ------------ ------------ ------------
Loss from operations (312,177) (233,481) (1,002,658) (677,876)
------------ ------------ ------------ ------------
Other income (expense):
Non-recurring gain from sales of
securities 64,791 1,595,685
Loan commitment fee (300,000)
Interest income 840 6,808 6,854 10,490
Interest expense (97,911) (293,903) (18,276)
Other, net 301 318
------------ ------------ ------------ ------------
Total (97,071) 71,900 (287,049) 1,288,217
------------ ------------ ------------ ------------
Income (loss) from continuing
operations before income taxes (409,248) (161,581) (1,289,707) 610,341
Provision for income taxes (12,628) (38,703)
------------ ------------ ------------ ------------
Income (loss) from continuing operations
before discontinued operations (421,876) (161,581) (1,328,410) 610,341
Gain on sale of discontinued operations 493,425 361,137
Loss from discontinued operations (929) (54,766)
------------ ------------ ------------ ------------
Net income (loss) (421,876) 330,915 (1,328,410) 916,712
Accumulated deficit:
Beginning of period (5,937,661) (4,555,727) (5,031,127) (5,141,524)
------------ ------------ ------------ ------------
End of period $ (6,359,537) $ (4,224,812) $ (6,359,537) $ (4,224,812)
============ ============ ============ ============
Income (loss) per share:
From continuing operations $ (.14) $ (.11) $ (.44) $ .42
From discontinued operations ---- .33 ---- .21
------------ ------------ ------------ ------------
Income (loss) per share $ (.14) $ .22 $ (.44) $ .63
============ ============ ============ ============
Weighted average common and common
equivalent shares outstanding 3,047,543 1,478,207 3,027,624 1,465,849
============ ============ ============ ============
</TABLE>
Primary and fully diluted income (loss) per share are the same for each period
presented above, except for the nine months ended March 31, 1995, whereby fully
diluted income (loss) per share from continuing operations, discontinued
operations and net income was $.41, $.21 and $.62, respectively.
See Notes to Interim Condensed Consolidated Financial Statements.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Operating activities:
Net income (loss) $(1,328,410) $ 916,712
Adjustments to reconcile loss to net cash used in operating activities:
Gains from sales of securities (1,595,685)
Gain on sale of STI (361,137)
Depreciation 137,253 20,957
Amortization 271,363
Changes in assets and liabilities:
Accounts receivable 371,026
Other current assets 49,461 19,676
Other assets (16,445) 29,324
Trade accounts payable 255,436 1,370
Accrued expenses and other current liabilities 237,234 (14,190)
Income taxes payable (94,565)
Discontinued operations, net (174,544)
----------- -----------
Net cash used in operating activities (117,647) (1,157,517)
----------- -----------
Investing activities:
Proceeds from sales of investments in securities 2,678,861
Purchase of investment in securities (1,043,176)
Proceeds from sale of STI 800,000
Proceeds from exercise of options 19,688
Purchase of property and equipment (82,313)
Payments relating to acquisition of Alliance and SD&A (58,050)
----------- -----------
Net cash provided by (used in) investing activities (140,363) 2,455,373
----------- -----------
Financing activities:
Proceeds from bank loans 350,000
Repayments of bank loans (49,694) (150,000)
Proceeds from note payable other 1,000,000
Proceeds from land option 150,000
Repayments of notes payable other (54,000) (1,054,000)
Repayment of related party obligations (750,000) (350,000)
Proceeds from sales of common stock 120,000
----------- -----------
Net cash used in financing activities (233,694) (554,000)
----------- -----------
Net increase (decrease) in cash and cash equivalents (491,704) 743,856
Cash and cash equivalents at beginning of period 1,217,772 419,149
----------- -----------
Cash and cash equivalents at end of period $ 726,068 $ 1,163,005
=========== ===========
Supplemental disclosures of cash flow data:
Cash paid during the period for:
Interest $ 120,589 $ 18,276
Loan commitment fee $ 300,000
Income tax paid $ 123,400
</TABLE>
Supplemental non cash investing and financing activities information:
The Company issued 37,500 shares of common stock valued at $150,000 in
fiscal 1995 in settlement of a fiscal 1994 liability for early
termination of a consulting agreement.
In October 1995, in accordance with the acquisition agreement between
Alliance Media Corporation and the former owner of SD&A the purchase
price was increased by $85,699.
In October 1995, the Company issued 6,250 shares of common stock in
settlement of a liability of $26,250.
In November 1995, a special county bond measure with principal totaling
$154,814 was assessed on the Company's land and was recorded as a land
improvement, offset by a liability in accrued other expenses.
See Notes to Interim Condensed Consolidated Financial Statements.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited Interim Condensed Consolidated Financial
Statements include the accounts of All-Comm Media Corporation and Subsidiaries
(the "Company"). They have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. 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 a fair representation have been included. Operating results for
the three and nine month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the fiscal year ending June
30, 1996. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the fiscal year ended June 30, 1995. Certain reclassifications have
been made in the fiscal 1995 interim financial statements to conform with the
fiscal 1996 presentation.
2. NET INCOME PER COMMON SHARE
Net income (loss) per common share is computed based upon the weighted
average number of shares outstanding during the periods presented and common
stock equivalents unless antidilutive. Primary and fully diluted income (loss)
per share are the same in the periods presented, except as noted.
3. ACQUISITION OF ALLIANCE MEDIA CORPORATION AND STEPHEN DUNN & ASSOCIATES,
INC.
On April 25, 1995, the Company acquired all of the outstanding common
shares of Alliance Media Corporation ("Alliance") and its wholly owned
subsidiary, Stephen Dunn & Associates, Inc. ("SD&A").
These acquisitions were accounted for using the purchase method. The
operating results of these acquisitions are included in the results of
operations from the date of acquisition.
4. DISCONTINUED OPERATIONS
On March 8, 1995, the Company completed the sale of Sports-Tech
International ("STI") pursuant to a definitive agreement dated December 7, 1994.
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Concurrent with the closing of the sale of STI, all operations of High
School Gridiron Report ("HSGR") were ceased. Accordingly, STI and HSGR are
reported as discontinued operations in fiscal 1995, and the consolidated
financial statements have been reclassified to report separately the net assets,
operating results, gain on disposition and cash flows of these operations.
Revenues of these discontinued operations for the three and nine months
ended March 31, 1995 were $73,906 and $1,147,829, respectively.
5. OTHER LIABILITIES
On October 6, 1995, the Company entered into an option agreement with
certain parties unrelated to the Company whereby, in consideration of payment to
the Company of $150,000, the option holder may purchase undeveloped land in
Laughlin, Nevada owned by the Company for $2.0 million. Under certain
circumstances, the Company and the option holders have the right to,
respectively, buy back or sell back the option. Also, as part of the
transaction, the Company issued a warrant to the option holder to acquire a
total of 30,000 shares of the Company's common stock at an exercise price of
$2.50 per share. The payment has been treated as a current liability until
expiration of the option or exercise of rights under the option provision. On
April 9, 1996, the option period was extended from April 8, 1996 to July 8, 1996
and additional warrants were issued to acquire a total of 22,500 shares of the
Company's common stock at an exercise price of $1.60 per share.
In November 1995, a bond measure was passed by Clark County, Nevada
authorities, resulting in a special assessment to fund improvements which will
benefit the Company's land in Laughlin, Nevada. The principal balance assessed
to the Company totals $154,814, plus interest at 6.4%, and is payable in
semi-annual installments over twenty years. On April 29, 1996, the Company
engaged a marketing firm to sell the land (see Note 12).
6. LONG TERM OBLIGATIONS TO RELATED PARTY
In October 1995, the Company restructured its long term obligations
relating to the acquisition of SD&A, whereby $375,000 and related interest
payments due in the second quarter of fiscal 1996 became payable over a twelve
month period commencing January, 1996 together with interest at 10%. In January,
1996 the Company initiated the negotiation of financing arrangements which
required the terms of these obligations to be further modified whereby the
$375,000 and related interest payments due January 1, 1996, principal and
interest payments due January 1 and February 1, 1996 relating to the rescheduled
October 1, 1995 payments and the February 1 and March 1, 1996 interest payments
on the remaining debt were to become due on February 29, 1996, or at the time
the Company completed its financing arrangements. Such arrangements were not
completed by February 29, 1996. As such, the terms were further modified in
order to pay the former owner accrued unpaid interest due from September 1, 1995
through a partial prepayment for June 1996 in the amount of $250,000. The funds
were derived by borrowing $350,000 on a line of credit and $200,000 with
interest at 10% from SD&A's former owner, which was loaned to the parent Company
and is payable June 30, 1996. All other principal and interest payments due,
including an April 1, 1996 principal
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payment of $375,000, were rescheduled until the earlier of June 30, 1996, or at
the time the Company completes satisfactory financing arrangements.
7. STOCK OPTIONS
On November 3, 1995, the Board of Directors approved the increase in the
number of shares available under the 1991 Stock Option Plan by 600,000 shares,
to 850,000 shares. As of December 1, 1995, the Board of Directors of the Company
granted options to purchase 407,003 shares of Common Stock to 90 officers and
employees of the Company and its subsidiaries at $2.00 per share, the
approximate fair market value of the Company's stock at that date. These options
are exercisable over seven years. Options to purchase 389,921 shares of common
stock are exercisable immediately. The remaining vest over periods of up to six
years. None of these options have been exercised or canceled as of March 31,
1996. The Company intends to continue its policy of providing equity incentives
to employees.
8. INCOME TAXES
In the three and nine month periods ended March 31, 1996, the income tax
provisions on continuing operations totaled $12,628 and $38,703, respectively,
on losses from continuing operations of $409,248 and $1,289,707, respectively.
The provisions resulted from state and local income taxes incurred on taxable
income at the subsidiary level not reduced by losses incurred at other levels on
which no tax benefits were available. The effective state tax rate of 13.6% is
higher than the estimated state statutory rate of 10% due to reversal of
deferred taxable income and increase in the tax valuation allowance. No
provision was necessary on income from continuing operations for the three and
nine months ended March 31, 1995 due to available net operating loss
carryforwards.
9. TERMINATION OF POTENTIAL ACQUISITION
In March, 1996, the Company entered into a stock purchase agreement to
acquire the majority of outstanding stock of a privately-owned database
marketing company. The agreement was subject to a number of conditions,
including additional due diligence investigation and obtaining adequate
financing. The agreement expired on March 31, 1996.
10. RELATED PARTY TRANSACTIONS
In March 1996, the Company sold 75,000 shares of its common stock to
related parties for $120,000.
11. NEW ACCOUNTING PROCEDURES
Adoption of the Financial Accounting Standards Board ("FASB") Statement
of Financial Accounting No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", which is effective for
financial statements for fiscal years beginning after December 15, 1995, is not
anticipated to have a material effect on the Company's consolidated financial
statements.
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The FASB recently issued Statement of Financial Accounting No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), which is effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under SFAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees". Entities electing to remain with the accounting in
APB Opinion No. 25 will be required to make pro forma disclosure of net income
and earnings per share as if the provisions of SFAS 123 had been applied. The
company is in the process of evaluating SFAS 123. The potential impact on the
Company by adopting the new standard has not been quantified at this time. The
Company must implement SFAS 123 no later than July 1, 1996.
12. SUBSEQUENT EVENTS
The Company is currently in the process of privately placing an offering
of equity securities and convertible debentures. If completed, the proceeds will
be used to reduce amounts payable to the former owner of SD&A, for general
corporate purposes and, if sufficient, to finance a possible future acquisition.
There can be no assurance, however, that the private placement will be
completed.
On April 4, 1996 SD&A borrowed $200,000 from its former owner at 10%,
payable June 30, 1996.
On April 29, 1996, the Company entered into an agreement with a real
estate marketing agency to effect the sale of the Company's undeveloped land in
Laughlin, Nevada. The agreement calls for the agency to dispose of the property
through a negotiated private sale or a public auction on or before June 30,
1996.
On May 9, 1996, the Company completed the private placement of 10,000
shares of convertible preferred stock for $750,000 with an institutional
investor, less fees and closing costs estimated to be $75,000. The convertible
preferred stock is convertible into common shares of the Company at the lesser
of the price paid per share divided by $2.50, or 80% of the closing bid price of
the company's common stock for the five trading days immediately prior to the
conversion date, and is subject to certain restrictions. The holder of shares of
convertible preferred stock shall be entitled to receive cumulative annual
dividends at the rate of $3.75 per share per annum payable in stock and/or cash,
at the sole discretion of the Company. In connection with the transaction, the
Company will issue warrants for 100,000 shares of common stock exercisable at
$3.00 for four years.
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Introduction
This discussion summarizes the significant factors affecting the
consolidated operating results, financial condition and cash flows of the
Company for the three and nine month periods ended March 31, 1996. This should
be read in conjunction with the financial statements and notes thereto, included
in this Report on Form 10-Q and the Company's financial statements and notes
thereto, included in the Company's Annual Report on Form 10-K for the year ended
June 30, 1995. As more fully described in Footnote 3 to the consolidated
financial statements included in the Company's 1995 Annual Report on Form 10-K,
on April 25, 1995, the Company purchased 100% of the stock of Alliance Media
Corporation which had simultaneously acquired Stephen Dunn & Associates, Inc.
The management and board of directors of Alliance were elected as management and
board of directors of the Company and the former management and directors ceased
their association with the Company. These acquisitions have been reflected in
the consolidated financial statements using the purchase method of accounting.
Accordingly, the Consolidated Statement of Operations and Consolidated Statement
of Cash Flows include the operations of Alliance and SD&A from April 25, 1995.
Also, as more fully described in Footnote 5 to the consolidated financial
statements included in the Company's 1995 Annual Report on Form 10-K, in fiscal
1995, the Company discontinued the operations of Sports-Tech International, Inc.
and High School Gridiron Report. In December, 1994 the Company agreed to sell
Sports-Tech International and closed the HSGR operation. The Consolidated
Financial Statements have been reclassified to report the net assets, operating
results, gain on disposition and cash flows of these operations as discontinued
operations. With the disposition of the STI operations, closure of the HSGR
operations, and the acquisition of Alliance and change of management and
directors, the Company is now operating as a direct marketing services provider
with its initial concentration in a telemarketing and telefundraising company
that specializes in direct marketing services for the arts, educational and
other institutional tax-exempt organizations.
Results of Operations for the three month period ended March 31, 1996, compared
to the three month period ended March 31, 1995
Continuing Operations: Sales and cost of sales totaled approximately
$3,724,000 and $2,621,000, respectively, for the three months ended March 31,
1996 (the "current period") as compared with no similar amounts incurred in the
three months ended March 31, 1995 (the "prior period"). These increases are due
to the inclusion of SD&A operations for the current period. In the current
period, net sales from telemarketing and telefundraising totaled $3,134,000 and
sales from off-site campaigns totaled $590,000. Due to the seasonal nature of
SD&A's telemarketing and telefundraising business, revenues and cost of sales
have increased in the current quarter as compared to $2,959,000 and $2,250,000
in the quarter ended December 31, 1995 (the "last" or "prior" quarter) and are
expected to increase again in the next fiscal quarter. Historically,
telemarketing and telefundraising revenues are seasonal in
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nature, with a substantially larger portion of revenues and profits occurring in
the first and fourth fiscal quarters.
Cost of sales represents labor, telephone and mailing expenses directly
related to telemarketing, telefundraising and off-site campaign services. As a
percentage of relative net sales, gross profit relating to telemarketing and
telefundraising and off-site campaigns totaled 29% and 46%, respectively, for
the current period. In the prior quarter, gross profit relating to telemarketing
and telefundraising and offsite campaigns totaled 23% and 26%, respectively. The
increase is due to calendar year end incentive bonuses paid to SD&A employees in
excess of amounts accrued in prior periods, as well as a shift in the mix of the
business, which coincides with the historical seasonal nature of the business.
Selling, general and administrative expenses include all selling, general
and administrative expenses of SD&A and the expense of central services the
Company provides to manage its divisional operation, SD&A, and previously its
discontinued operations, STI and HSGR, and include corporate management,
accounting and finance, general administration and legal services. As a result
of the Company's new corporate strategy, it now also includes expenses relating
to the identification, evaluation and negotiation of potential acquisitions and
required financing arrangements. As a result of these activities, corporate
general and administrative expenses increased $1,092,000 to $1,325,000 in the
current period, as compared with $233,000 in the prior period.
Approximately $918,000 of the increase resulted from the inclusion of
SD&A selling, general and administrative expenses for the current period, which
did not exist prior to the merger with Alliance Media, and salary expenses
associated with the new management and employees who joined the Company upon
resignation of the prior management and its board of directors which caused
$98,000 of the increase. Legal expenses decreased $32,000 while accounting and
tax fees have increased approximately $34,000 in the current period. Prior year
expenses included investigation of the pending Alliance merger. Current period
expenses include efforts involved in the planning and execution of the new
corporate strategy, acquisition related due diligence and related legal document
preparation. The Company incurred $20,000 in costs to secure a financing source
in the current period. Consulting, directors' fees and public relations
increased by $9,000 due to efforts involved in implementing the Company's new
strategy. Amortization of prepaid directors and officers insurance premium
increased approximately $7,000 due to an increase in coverage. Rent, office
expenses and depreciation expense increased by approximately $7,000 as the
Company began to close down its offices in the prior period with the sale of
STI, its only active subsidiary. Other expenses including travel, postage,
delivery, auto and telephone increased by $31,000, principally due to the
Company's new corporate strategy and related acquisition and due diligence
matters.
General and administrative expenses decreased approximately $63,000 to
$1,325,000, as compared with the prior quarter. SD&A expenses decreased by
approximately $104,000, principally due to higher than budgeted year end bonuses
and severance in the prior quarter, as well as seasonal year end costs.
Corporate level expenses increased by approximately $41,000 principally from
acquisition related due diligence.
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Loss before interest, taxes, depreciation and amortization totaled
approximately $176,000 in the current quarter, as compared with $566,000 in the
prior quarter.
Pretax operating income associated with the SD&A operation totaled
approximately $197,000 in the current quarter. Pretax corporate expenses totaled
approximately $606,000, including $187,000 in corporate depreciation,
amortization and interest expense. Pretax operating loss from the SD&A operation
totaled approximately $245,000 in the prior quarter and corporate expenses
totaled $553,000, including $190,000 in corporate depreciation, amortization and
interest.
Amortization of intangible assets totaled approximately $91,000 in the
current and prior quarter and related to the amortization of the
covenant-not-to-compete and goodwill, over five years and forty years,
respectively, acquired in the Alliance and SD&A transaction.
A non-recurring net gain from sales of securities totaled approximately
$65,000 in the prior period and resulted from disposal of shares acquired by the
exercise of a common stock purchase warrant held as an investment. See the
related discussion for the nine month periods ended March 31, 1996 and 1995 for
additional information.
Interest expense increased approximately $98,000 in the current period
and related to the acquisition of $4,500,000 of debt in the Alliance and SD&A
acquisition and is comparable to the $97,000 incurred in the prior quarter.
In the current period, the income tax provision on continuing operations
totaled $13,000 on losses from continuing operations of $409,000. The income tax
provision resulted from state and local taxes incurred on taxable income at the
subsidiary level not reduced by losses at other levels on which no tax benefits
were available.
Discontinued Operations: The gain on sale of, and loss from, discontinued
operations in the prior period relates to the STI and HSGR operations which were
either sold or closed in fiscal 1995. No amounts related to discontinued
operations were incurred in the current period.
Results of Operations for the nine months ended March 31, 1996, compared to the
nine months ended March 31, 1995
Continuing Operations: Sales and cost of sales totaled approximately
$10,610,000 and $7,503,000, respectively, for the nine months ended March 31,
1996 (the "current period") as compared with no similar amounts incurred in the
nine months ended March 31, 1995 (the "prior period"). These increases are due
to the inclusion of SD&A operations for the current period. In the current
period, net sales from telemarketing and telefundraising totaled $8,866,000 and
sales from off-site campaigns totaled $1,744,000.
Cost of sales represents labor and telephone expenses directly related to
telemarketing, telefundraising and off-site campaign services. As a percentage
of
12
<PAGE> 13
relative net sales, gross profit relating to telemarketing and telefundraising
and off-site campaigns totaled 28% and 36%, respectively, for the current
period.
General and administrative expenses increased $3,160,000 to $3,838,000 in
the current fiscal period as compared with $678,000 in the prior period.
Approximately $2,737,000 of the increase resulted from the inclusion of
SD&A selling, general and administrative expenses for the current period, which
did not exist before the merger with Alliance Media, and salary expenses
associated with the new management and employees who joined the Company upon
resignation of the prior management and its board of directors which caused
$270,000 of the increase. Legal expenses decreased $60,000 in the current
period. Prior year expenses included preliminary preparation of a registration
statement and investigation of the pending Alliance merger. Current period
expenses included finalization of issues related to prior operations of the
Company, as well as efforts involved in the planning and execution of the new
corporate strategy, including acquisition related document preparation.
Consulting, directors' fees and public relations increased by $52,000 due to
efforts involved in implementing this strategy. Accounting and tax fees have
increased approximately $97,000 due to reporting requirements surrounding the
acquisition of Alliance and SD&A, the disposition of STI, a special valuation
project and acquisition related due diligence. Amortization of prepaid directors
and officers insurance premium increased approximately $21,000 due to an
increase in coverage. The Company incurred $20,000 in costs to investigate a
financing source in the current period. Rent, office expenses and depreciation
expense decreased by $15,000 as the Company maintained two corporate offices in
the prior period and now only maintains one. Transfer agent costs increased
$13,000 principally due to work performed in conjunction with issuing shares
under the Company's one for four reverse stock split. Other expenses including
travel, postage, delivery, auto and telephone increased by $25,000 principally
due to the Company's new corporate strategy and related acquisition and due
diligence matters.
Loss before interest, taxes, depreciation and amortization totaled
approximately $594,000 in the current nine month period.
Pretax operating income from SD&A operations totaled approximately
$369,000 in the current nine month period and corporate expenses totaled
$1,372,000, including $562,000 in corporate depreciation, amortization and
interest expense.
Amortization of intangible assets totaled approximately $271,000 in the
current period and related to the amortization of the covenant-not-to-compete
and goodwill, over five years and forty years, respectively, acquired in the
Alliance and SD&A transaction.
A non-recurring net gain from sales of securities totaled $1,596,000 in
the prior period and resulted from the exercise by the Company of a common stock
purchase warrant held as an investment. In July, 1994, the Company borrowed
$1,000,000 to fund the exercise of the warrant. The loan was collateralized by a
pledge of the warrant shares pursuant to the terms of a pledge agreement. The
parties to the $1,000,000 loan included, among others, the Company's former
chairman, former president, a former director and a shareholder, who each
provided $200,000. The
13
<PAGE> 14
other lenders were non-affiliates. The lenders received the repayment of the
$1,000,000 loan, interest at 7.75% totaling $9,000 and a $300,000 commitment fee
from the proceeds of the subsequent stock sales. The $300,000 loan commitment
fee was an inducement to this group of investors, who are no longer associated
with the Company, to provide the money necessary to exercise the warrant before
its expiration on July 31, 1994.
Interest expense increased approximately $276,000 in the current period
and related to the acquisition of $4,500,000 of debt in the Alliance and SD&A
acquisition.
In the current period, the income tax provision on continuing operations
totaled approximately $39,000 on losses from continuing operations of
approximately $1,290,000. The effective state tax rate of 13.6% on taxable
income is higher than the estimated state statutory rate of 10% due to reversal
of deferred taxable income and increase in the tax valuation allowance. The
provision resulted from state and local taxes incurred on taxable income at the
subsidiary level not reduced by losses incurred at other levels on which no tax
benefits were available.
Discontinued Operations: The gain on sale of, and loss from, discontinued
operations in the prior period relates to the STI and HSGR operations which were
either sold or closed in fiscal 1995. No amounts related to discontinued
operations were incurred in the current period.
Capital Resources and Liquidity
During the nine month period ended March 31, 1995 the Company used net
cash in operations of approximately $1,158,000 and $1,054,000 to pay down notes
payable. The Company financed these cash needs through the sale of equity
investments which totaled $2,679,000 and borrowings of $1,000,000. As previously
discussed, these equity securities were acquired when the Company exercised a
common stock purchase warrant for payment of $1,000,000.
In the current period, the Company used net cash for operating activities
of approximately $118,000. Due to seasonal decreases in sales, accounts
receivable relating to the SD&A operation have decreased $371,000 in the current
period. Trade accounts payable and accrued liabilities have increased $493,000,
principally due to acquisition, financing and other professional fees.
Additional cash was used in the current period at the corporate and SD&A level
to pay $750,000 of obligations due to the sole selling shareholder arising from
the acquisition of SD&A, $104,000 to pay down note and loan obligations and
$140,000 to pay for fixed assets and acquisition related costs.
The Company increased its cash balances by entering into an option
agreement whereby, in consideration of a cash payment to the Company of
$150,000, the option holder may purchase the Company's undeveloped land in
Laughlin, Nevada, for $2,000,000. Under certain conditions, the Company and the
Option Holders have the right to, respectively, buy back or sell back the
option. This agreement expired on April 8, 1996, and was extended until July 8,
1996. The Company is seeking additional cash resources through the sale of this
land.
14
<PAGE> 15
In March 1996, the Company sold 75,000 shares of its common stock to
related parties for $120,000.
In October 1995, the long term obligations due to the sole selling
shareholder of SD&A were restructured so that the October 1, 1995 payment of
$375,000 and interest due in the second quarter of fiscal 1996 was to be paid
over a twelve month period commencing January 1996, together with interest at
10%. In January, 1996 the terms of these obligations were further modified
whereby the $375,000 and related interest payments due January 1, 1996,
principal and interest payments due January 1 and the February 1 and March 1,
1996 relating to the deferred October 1, 1995 payments and February 1, 1996
interest payment on the remaining debt were due on February 29, 1996, or
earlier, if the Company completed certain financing arrangements.
Such arrangements were not completed by February 29, 1996 and the terms
were further modified whereby SD&A, by borrowing $350,000 on its line of credit
and $200,000 with interest at 10% from its former owner, loaned the parent
Company $500,000, payable June 30, 1996. $250,000 of the loan was used to pay
the former owner accrued interest due him from September 1, 1995 through a
partial prepayment for June 1996. The January 1, 1996 and April 1, 1996
principal payments, as well as all principal and interest payments due monthly
from January 31, 1996 to May 31, 1996 were deferred until June 30, 1996, or
earlier, if the Company completes certain financing.
As per the modified agreement, if the amounts due the former owner,
totaling approximately $977,000, and the amounts due to SD&A by the parent
Company, totaling approximately $555,000, are not paid in full by June 30, 1996,
certain buyback provisions are triggered without a grace period, allowing the
former owner to repurchase the SD&A shares from the Company. An additional
principal payment of $375,000 is due on July 1, 1996 to the former owner of
SD&A.
In March, 1996 the Company entered into a stock purchase agreement to
acquire the majority of the outstanding stock of a privately-owned database
marketing company. The agreement was subject to a number of conditions,
including additional due diligence investigation and obtaining adequate
financing. The agreement expired on March 31, 1996.
The Company is currently in the process of privately placing equity
securities and convertible debentures. Subject to its completion, the proceeds
will be used to reduce principal and interest amounts payable to the former
owner of SD&A, for general corporate purposes and, if sufficient, to finance a
possible future acquisition. There can be no assurance, however, that the
private placement will be completed.
On May 9, 1996, the Company completed the private placement of 10,000
shares of convertible preferred stock for $750,000 with an institutional
investor, less fees and closing costs estimated to be $75,000. The convertible
preferred stock is convertible into common shares of the Company at the lesser
of the price paid per share divided by $2.50, or 80% of the closing bid price of
the company's common stock for the five trading days immediately prior to the
conversion date, and is subject to certain restrictions. The holder of shares of
convertible preferred stock shall be entitled to receive cumulative annual
dividends at the rate of
15
<PAGE> 16
$3.75 per share per annum payable in stock and/or cash, at the sole discretion
of the Company. In connection with the transaction, the Company will issue
warrants for 100,000 shares of common stock exercisable at $3.00 for four years.
The Company believes that funds available from operations, from the
prospective sale of the Laughlin land and the ongoing ability to raise funds
through private placements of equity or debt securities will be adequate to
finance its operations and meet interest and debt obligations in the next twelve
months. There can be no assurance, however, that subsidiary operations will
generate sufficient cash flows, that the revolving line of credit will be
finalized, that the Laughlin, Nevada land will be sold, or that funds will be
available through a private placement of equity or debt securities at terms
acceptable to the Company, if at all. Also, if funds are not available on a
timely basis, the Company may seek to negotiate the modification of debt
obligations, as well as effecting reductions in corporate expenses to meet its
cash needs.
The Company is also currently involved in acquisition discussions with
various entities. The Company expects these acquisitions will require cash
payments, plus issuance of common stock and notes payable to the sellers, as
well as contingent payments based on future operating profits and performance.
Such acquisitions will be dependent on market conditions to the extent the
Company intends to finance the cash portions of the purchase prices of these
acquisitions, as well as to obtain additional working capital, through the
issuance of common or preferred stock and/or convertible indebtedness. Although
the Company believes that it will be successful in obtaining the financing
necessary to complete the acquisitions now contemplated, and those in the
future, there can be no assurance that such capital will be available at terms
acceptable to the Company, or at all, or that acquisitions will be completed.
New Accounting Pronouncements
Adoption of the Financial Accounting Standard Board ("FASB") Statement of
Financial Accounting No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of", which is effective for
financial statements for fiscal years beginning after December 15, 1995, is not
anticipated to have a material effect on the Company's consolidated financial
statements.
The FASB recently issued Statement of Financial Accounting No. 123,
"Accounting for Stock-Based Compensation" (SFAS 123), which is effective for
financial statements for fiscal years beginning after December 15, 1995. SFAS
123 establishes new financial accounting and reporting standards for stock-based
compensation plans. Entities will be allowed to measure compensation cost for
stock-based compensation under SFAS 123 or APB Opinion No. 25, "Accounting for
Stock Issued to Employees." Entities electing to remain with the accounting in
APB Opinion No. 25 will be required to make pro forma disclosure of net income
and earnings per share as if the provisions of SFAS 123 had been applied. The
Company is in the process of evaluating SFAS 123. The potential impact on the
Company by adopting the new standard has not been quantified at this time. The
Company must implement SFAS 123 no later than July 1, 1996.
16
<PAGE> 17
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 22, 1995, the Company held a Special Meeting of Shareholders to
vote on management's proposal to amend the Company's Amended and Restated
Articles of Incorporation to change the name of the Company to All-Comm Media
Corporation. The shares voted were as follows, after giving effect to the
one-for-four reverse stock split:
<TABLE>
<S> <C>
For 2,022,870
Against 1,946
Abstentions 2,725
Broker non-votes None
</TABLE>
17
<PAGE> 18
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
A) Exhibits
3. Certificate of Amendment to the Articles of Incorporation (a)
10. Option Agreement (b)
10.5 Amendment to Option Agreement
10.6 Memorandums of Understanding
11. Statement Regarding Computation of Net Income per Share
27. Financial Data Schedule
(a) Incorporated by reference from Exhibit 3(iii) to the Company's Form
10-K for the year ended June 30, 1995. (b) Incorporated by reference from
Exhibit 10.4 to the Company's Form 10-K for the year ended June 30, 1995.
B) Reports on Form 8-K
1. On October 23, 1995, the Company disclosed the closing of an Option
Agreement for the purchase of the Company's undeveloped land in
Laughlin, Nevada for $2,000,000.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
ALL-COMM MEDIA CORPORATION.
(Registrant)
By /s/ Barry Peters
--------------------------------------------
Barry Peters
Chairman of the Board and Chief Executive Officer
Date: May 13, 1996
19
<PAGE> 1
Exhibit 10.5
April 9, 1996
Messrs. Gerald Yellin, Joseph LaRocca
and Augustus LaRocca
c/o Bear Stearns & Co., Inc.
245 Park Avenue
New York, NY 10167
Re: Option Agreement dated October 1, 1995 - Amendment
Gentlemen:
This letter will serve to confirm our understanding that the Option Agreement on
the land in Laughlin, NV has expired. It is hereby agreed that All-Comm Media
shall pay the amount due under the put ($150,000) on July 8th, 1996, instead of
April 8, 1996.
In consideration for the extension, All-Comm shall pay $7,500 in interest and
issue a warrant certificate for 22,500 shares of the Company's common stock, at
an exercise price of $1.60 per share.
If this is your understanding, please execute and return one copy of this
letter. Thank you.
Sincerely,
/s/ E. William Savage
- - ----------------------
E. William Savage
President & COO Agreed by:
/s/ Gerald Yellin
------------------------------------
Gerald Yellin
BP/ac /s/ Augustus LaRocca
------------------------------------
Augustus LaRocca
/s/ Joseph LaRocca
------------------------------------
Joseph LaRocca
20
<PAGE> 1
Exhibit 10.6
ALL-COMM MEDIA CORPORATION
MEMORANDUM OF UNDERSTANDING
- - --------------------------------------------------------------------------------
This is to confirm our understanding that we hereby agree to amend the
payments due to Stephen Dunn from All-Comm Media Corporation in the following
manner:
1. The stated principal payment of $375,000 due October 1, 1995 is
hereby agreed to be amortized and paid over a 12-month period commencing January
1996, at a rate of 10 percent interest per annum. The 12 month payments will be
$33,792.67 or $405,512.04 in the aggregate A schedule attached hereto.
2. The interest payments of approximately $30,000 per month due on
October 1, 1995, November 1, 1995 and December 1, 1995, are hereby agreed to be
paid upon the earlier of: (i) the date that All-Comm Media Corporation
consummates a proposed financing of its unimproved real property located in
Laughlin, Nevada; or (ii) the date that All-Comm Media Corporation consummates
any equity financing in excess of $500,000; or (iii) if neither (i) nor (ii)
above is accomplished by December 31, 1995, the sum of the interest payments
then due shall be amortized and paid, with interest at ten percent per annum,
over a twelve month period commencing in January, 1996 in the same manner as the
principal payments in Paragraph 1. Above. The unpaid sum of interest payments so
deferred shall be paid in full, with interest, on the date of any financing of
the Laughlin, Nevada property or of any property or of any All-Comm Media
Corporation equity financing in excess of $500,000.
3. The parties agree that the "Excess Net Worth Payment" shall be equal
to $375,000 and that Stephen Dunn shall be entitled to be paid such amount
forthwith by Stephen Dunn & Associates, Inc. Notwithstanding any other covenant
or agreement on the part of Stephen Dunn to the contrary contained in the Stock
Purchase Agreement, the Operating Covenants Agreement or any other agreement
between the parties hereto.
4. Other than the above amendments, and such specific conditions as may
apply to the interest rate change and changes in the due dates of principal and
interest, the terms of the payments due Stephen Dunn by All-Comm Media
Corporation shall remain unchanged.
Agreed and accepted Agreed and accepted
this 1st day of October, 1995 this 1st day of October, 1995
by: /s/ E. William Savage by: /s/ Stephen Dunn
---------------------------- -------------------------------
E. William Savage, President Stephen Dunn
and Chief Operating Officer
All-Comm Media Corporation
21
<PAGE> 2
PRINCIPAL PAYMENT AMORTIZATION SCHEDULE
Principal: $375,000 due October 1, 1995
Interest Rate: 10% per annum on unpaid principal
Payment Schedule: No payments through December 31, 1995. Principal and
interest payable in 12 equal monthly installments
thereafter. Principal and interest due at December 31,
1995 is $384,375.
<TABLE>
<CAPTION>
1996 Payments: Date Principal Interest Total
----------------------------------------------------------------
<S> <C> <C> <C> <C>
01/31/96 $30,589.55 $3,203.12 $33,792.67
02/29/96 $30,844.46 $2,948.21 $33,792.67
03/31/96 $31,101.50 $2,691.17 $33,792.67
04/30/96 $31,360.67 $2,432.00 $33,792.67
05/31/96 $31,622.01 $2,170.66 $33,792.67
06/30/96 $31,885.53 $1,907.14 $33,792.67
07/31/96 $32,151.24 $1,641.43 $33,792.67
08/31/96 $32,419.17 $1,373.50 $33,792.67
09/30/96 $32,689.33 $1,103.34 $33,792.67
10/31/96 $32,961.74 $ 830.93 $33,792.67
11/30/96 $33,236.42 $ 556.25 $33,792.67
12/31/96 $33,513.38 $ 279.29 $33,792.67
----------- ----------- -----------
TOTALS: $384,375.00 $21,137.04 $405,512.04
</TABLE>
22
<PAGE> 3
ALL-COMM MEDIA CORPORATION
SECOND MEMORANDUM OF UNDERSTANDING
- - --------------------------------------------------------------------------------
This is to confirm our understanding that we hereby agree to amend for
a second time certain of the provisions of that certain Stock Purchase
Agreement, dated January 31, 1995 (the "Purchase Agreement"), between All-Comm
Media Corporation (formerly Alliance Media Corporation) (hereinafter "All-Comm")
and Stephen Dunn (hereinafter "Dunn") in each of the following respects:
1. Notwithstanding the provisions of Section 2.1(t) of the Operating
Covenants Agreement (as defined in Section 2(e) of the Purchase Agreement), Dunn
agrees to cause Stephen Dunn & Associates, Inc. (Hereinafter SD&A") to enter
into a tax allocation agreement (hereinafter the "Tax Treaty") with All-Comm,
effective retroactive to April 25, 1995, pursuant to which All-Comm's actual
federal and state income tax liability for all past and future fiscal periods,
as determined in good faith by Coopers & Lybrand and approved by Dunn (which
approval shall not be unreasonably withheld), will be allocable between SD&A and
All-Comm and each of All-Comm's other subsidiaries, if any.
2. Notwithstanding the provisions of Section 2.1(a) of the Operating
Covenants Agreement, Dunn agrees that SD&A will make a cash distribution to
All-Comm in an amount equal to $125,000 concurrently with the execution and
delivery of this document by the parties. In this regard, Dunn and All-Comm
acknowledge and agree that such $125,000 payment may be greater or less than the
amount of federal and state income tax liability properly allocable to SD&A for
all fiscal periods through and including December 31, 1995 pursuant to the Tax
Treaty to be entered into between SD&A and All-Comm pursuant to the provisions
of Section 1 hereof.
3. All-Comm and Dunn agree that, for purposes of determining SD&A's
Working Capital and Working Capital Limit (as such terms are defined in Section
2.1(a) of the Operating Covenants Agreements) pursuant to the provisions of
Sections 2.1(a) and 2.2(a) of Operating Covenants Agreement, SD&A shall only be
required to calculate and record its actual federal and state income tax
liability as part of a consolidated group pursuant to the Tax Treat as opposed
to calculating and recording its federal and state income tax liability as a
stand-alone entity.
4. From and after the Substantial Payment Date (as defined in Section
4.2 of the Operating Covenants Agreement), Dunn hereby agrees that the interest
rate on all payments due from All-Comm to Dunn pursuant to Section 2(a) (ii) of
the Purchase Agreement and Exhibit 2(a) (ii) to the Purchase Agreement shall be
reduced to the lesser of: (a) eight percent (8%) simple interest non-compounded
per annum; or (b) the simple interest rate per annum non-compounded announced,
from time to time, by Bank of America NT&SA, at its downtown Los Angeles,
California headquarters, as its "prime" or "reference" rate.
5. Notwithstanding any contrary provision in the Purchase Agreement or
the Operating Covenants Agreement, Dunn hereby agrees to cause SD&A to pay the
amount of the invoices heretofore submitted by Coopers & Lybrand to All-Comm
whether or not such invoiced amounts are properly allocable to SD&A as opposed
to All-Comm pursuant to the Purchase Agreement and/or the
23
<PAGE> 4
Operating Covenants Agreement. Notwithstanding the foregoing, such payment by
SD&A shall not affect, in any manner whatsoever, the calculation of SD&A's
pre-tax earnings pursuant to the provisions of Section 2(f) (ii) (B) of the
Purchase Agreement for the first Post-Closing Year (as defined in Section 2(d)
of the Purchase Agreement).
6. Notwithstanding any contrary provisions set forth in Section 4.1 of
the Operating Covenants Agreements, All-Comm hereby agrees that the amount to
be payable by Dunn pursuant to such Section 4.1 of the Operating Covenants
Agreement as the repurchase price for the Shares (as defined in recital A of the
Operating Covenants Agreement) shall be credited by an amount equal to the sum
of: (a) the $125,000 distributed by SD&A by All-Comm pursuant to Section 2 of
this document; and (b) all amounts paid by SD&A to All-Comm pursuant to Section
5 of this document to the extent that such amounts exceed the amounts properly
allocable to SD&A as opposed to All-Comm pursuant to the Purchase Agreement
and/or the Operating Covenants Agreement as determined in good faith by Coopers
& Lybrand and approved by Dunn (which approval shall not be unreasonably
withheld).
7. In consideration of Dunn's agreements set forth in Sections 1
through 6 hereof, All-Comm agrees to use its best efforts to raise $7,500,000 in
additional financing pursuant to a private placement of its notes and warrants
to sophisticated investors located by Cruttenden Roth and, upon the successful
consummation of such private placement as shall be necessary to cause the
Substantial Payment Date to have occurred as a result of such payments and/or
prepayments.
8. Except as set forth herein, all of the terms and provisions of the
Purchase Agreement and the Operating Covenants Agreement, as heretofore amended,
between All-Comm and Dunn shall remain in full force and effect.
Agreed and accepted Agreed and accepted
as of January 9, 1996 as of January 9, 1996
ALL-COMM MEDIA CORPORATION
(formerly Alliance Media Corporation)
By: /s/ E. William Savage By: /s/ Stephen Dunn
------------------------------ ------------------------------
E. William Savage, President Stephen Dunn
and Chief Operating Officer
24
<PAGE> 5
ALL-COMM MEDIA CORPORATION
AMENDMENT TO SECOND MEMORANDUM OF UNDERSTANDING
This is to confirm our understanding that we hereby amend the Second Memorandum
of Understanding dated January 9, 1996 between All-Comm Media Corporation and
Stephen Dunn in the following manner:
The stated principal payment of $375,000 due January 1, 1996
and related interest thereto is hereby agreed to be due and
payable on the earlier of February 29, 1996 or the Substantial
Payment Date referred to in Paragraph 7 of the Second
Memorandum of Understanding.
Except as set forth herein, all of the terms and provisions of the Purchase
Agreement and the Operating Covenants Agreement, as heretofore amended, between
All-Comm Media Corporation and Stephen Dunn remain in full force and effect.
Agreed and accepted Agreed and accepted
as of January 9, 1996 as of January 9, 1996
ALL-COMM MEDIA CORPORATION
By: /s/ E. William Savage /s/ Stephen Dunn
----------------------------- ------------------------------------
E. William Savage, President Stephen Dunn
and Chief Operating Officer
25
<PAGE> 6
ALL-COMM MEDIA CORPORATION
THIRD MEMORANDUM OF UNDERSTANDING
- - --------------------------------------------------------------------------------
This is to confirm our understanding that we hereby agree to amend for a third
time, effective as of February 29, 1996 and in memorialization of the agreements
reached as of such date, certain of the provisions of that certain Stock
Purchase Agreement, dated January 31, 1995 (the "Purchase Agreement"), between
All-Comm Media Corporation (formerly Alliance Media Corporation) (hereinafter
"All-Comm") in each of the following respects:
1. Notwithstanding any contrary provisions contained in Sections 2.1 or
2.2 of the Operating Covenants Agreement (as defined in Section 2 (e) of the
Purchase Agreement), Dunn agrees to cause Stephen Dunn & Associates, Inc.
(Hereinafter "SD&A") to loan All-Comm an additional $500,000 on or prior to
April 5, 1996. Such loan shall: (i) bear interest on unpaid principal at a rate
equal to 10% per annum; and (ii) be all due and payable on the earlier of June
30, 1996 or 10 days after the date that All-Comm successfully completes its
proposing financing through Cruttenden Roth. Stephen Dunn may loan a portion of
such $500,000 from his personal funds, which loan shall also bear interest on
unpaid principal at a rate equal to 10% per annum and shall also be due and
payable by no later than June 30, 1996. In consideration of such $500,000 loan,
All-Comm agrees to pay Dunn a $3,257.36 loan processing fee in accordance with
the provisions of Section 2 hereof.
2. All-Comm hereby agrees that $250,000 of such $500,000 loan shall be
used to pay Stephen Dunn $250,000 in accrued but unpaid interest due him, as a
prepayment of interest to be due him pursuant to the Purchase Agreement and in
satisfaction of the $3,257.36 loan processing fee described in Section 1 hereof,
all as set forth in Schedule "A" attached hereto. The remaining $250,000 of such
$500,000 loan shall be used by All-Comm to pay professional fees which are more
than 90 days in age, make certain payments due with respect to All-Comm's
Laughlin real property and/or provide working capital for All-Comm's corporate
staff.
3. All-Comm and Dunn hereby agree that SD&A shall be responsible for
paying or reimbursing Dunn for all legal and accounting fees and expenses
incurred by Dunn after April 25, 1995 which relate to: (a) any discussions
and/or negotiations resulting in any amendments or proposed amendments to the
Purchase Agreement, the Operating Covenants Agreement and/or any other agreement
between All-Comm and Dunn; or (b) the issue of whether or not it was advisable
for All-Comm to make an election pursuant to Section 338 of the Internal Revenue
Code as a result of All-Comm's acquisition of the SD&A stock from Dunn and the
effects of such election on SD&A and/or Dunn (collectively the "Post-Closing
Professional Expenses").
4. Notwithstanding any contrary provisions contained in Section 4.1 of
the Operating Covenants Agreement, All-Comm hereby agrees that the amount to be
payable by Dunn pursuant to such Section 4.1 of the Operations Covenants
Agreement as the repurchase price for the Shares (as defined in Recital A of the
Operating Covenants Agreement) shall, in addition to the credits referred to in
Section 6 of the parties' Second Memorandum of Understanding, dated January 9,
1996, as itself amended (collectively the "Second Memorandum"), but subject to
the provisions of Section 6 hereof, be further credited by an
26
<PAGE> 7
amount equal to the sum of: (i) the $500,000 (and all accrued interest thereon)
loaned by SD&A to All-Comm pursuant to Section 2 of this document; (ii) the
$35,000 (and all accrued but unpaid interest thereon) heretofore loaned by SD&A
to All-Comm pursuant to that certain Promissory Note, dated February 15, 1996;
(iii) an amount equal to 10% per annum on the $125,000 heretofore advanced by
SD&A to All-Comm pursuant to Section 2 of the Second Memorandum, from the date
of such advance through June 30, 1996; and (iv) the aggregate amount of the
Post-Closing Professional Expenses as determined pursuant to Section 7 below.
All-Comm and Dunn hereby further reconfirm that, in the event that Dunn
exercises his repurchase rights in respect of the Shares pursuant to Section 4.1
of the Operating Covenants Agreements after a default by All-Comm pursuant to
Section 5 hereof or any other default, neither Dunn or SD&A, on the one hand,
nor All-Comm, on the other hand, shall have any further rights or obligations to
the other party or parties under the Purchase Agreement, as heretofore and
herein amended, the Operating Covenants Agreements, as heretofore and herein
amended, any employment agreement between SD&A and Dunn or otherwise.
5. Notwithstanding any contrary provisions contained in the Purchase
Agreement, the Operating Covenants Agreement or any other agreement or amendment
thereto between All-Comm and Dunn, All-Comm and Dunn hereby agree that: (i)
except as specifically provided in Section 2 hereof, All-Comm shall not be
obligated to pay any installments of principal and/or interest otherwise due
Dunn pursuant to the Purchase Agreement prior to June 30, 1996 (or previously
deferred pursuant to any prior amendment thereto) until the earlier of June 30,
1996 or 10 days after the closing of the proposed Cruttenden Roth financing
referred to in Section 7 of the Second Memorandum or the closing of any other
financing in lieu of such Cruttenden Roth financing; and (ii) All-Comm shall be
deemed to be in default in respect of its obligation to Dunn if such principal
and/or interest payments are not paid by June 30, 1996 (notwithstanding the
60-day grace period otherwise provided for in the Purchase Agreement, the
Operating Covenants Agreement or any other agreement between All-Comm and Dunn)
which, among other things, shall thereafter entitle Dun to repurchase the SD&A
shares from All-Comm pursuant to Section 4.1 of the Operating Covenants
Agreement. Notwithstanding the foregoing provisions of this Section 5, all
interest accruals on unpaid installments of principal and/or interest on all
obligations of All-Comm due Dunn pursuant to the Purchase Agreement, as
heretofore and herein amended, shall continue to accrue as set forth in the
applicable provision of the Purchase Agreement, as heretofore and herein
amended.
6. All-Comm and Dunn agree that the allocation between SD&A and
All-Comm of the $77,595 in accounting fees heretofore paid directly by SD&A to
Coopers & Lybrand on All-Comm's behalf (or advanced by SD&A to All-Comm for
purpose of paying such accounting fees) in respect of All-Comm's most
recently-completed fiscal year, as required by Section 6 of the Second
Memorandum, shall be determined in good faith by Coopers & Lybrand and approved
by Dunn (which approval shall not be unreasonably withheld) by no later than
April 30, 1996 and shall be set forth in a writing signed by All-Comm and Dunn.
In the event that such allocation is not so determined and set forth in a
writing signed by all-Comm and Dunn by April 30,1996, All-Comm and Dunn agree
that the amount of Coopers & Lybrand's accounting fees properly allocable to
SD&A and All-Comm shall be deemed to be $27,595 and $50,000, respectively.
7. All-Comm and Dunn agree that the amount of the Post-Closing
Professional Fees through March 31, 1996 shall be mutually agreed upon in
writing by All-Comm and Dunn by no later than April 30, 1996. In the event that
the amount of the Post-Closing Professional Fees is not so mutually agreed upon
by April 30, 1996, All-Comm and Dunn agree the amount of the Post-Closing
Professional Fees through March 31, 1996 shall be deemed to be $60,000.
27
<PAGE> 8
8. In the event that Dunn exercises his right to repurchase the Shares
from All-Comm on or after July 1, 1996, All-Comm agrees that it shall be
required to file, and will file, consolidated federal and combined state income
tax returns for itself, SD&A and all of its other active subsidiaries in respect
of the fiscal year ended June 30, 1996 and any subsequent stub periods and that
All-Comm (and not SD&A) shall be solely responsible for Paying , and will pay,
any and all federal and state income tax liabilities of such group (including
any interest and penalties) in respect of such fiscal year and any stub period
thereafter irrespective of any prior tax treaty executed or otherwise agreed to
by All-Comm, Dunn and/or SD&A. Notwithstanding the foregoing, Dunn agrees to
cause SD&A to cooperate with All-Comm in connection with All-Comm's preparation
and filing of such federal and state income tax returns in respect of such
fiscal year and any subsequent stub period.
9. All-Comm represents that this Third Memorandum of Understandings as
well as all prior amendments to the Purchase Agreement and the Operating
Covenants Agreement have been duly authorized by all necessary corporate action
on its part.
10. Except as set forth herein, all of the terms and provisions of the
Purchase Agreement and the Operating Covenants Agreement, as heretofore amended,
between All-Comm and Dunn (including, but not limited to, the provisions of
Section 7 of the Second Memorandum) shall remain in full force and effect.
All-Comm and Dunn agree that, in the event that any of the provisions hereof are
deemed to be inconsistent with the provisions of the Purchase Agreement and the
Operating Covenants Agreement, each as heretofore amended, the provisions of
this Third Memorandum of Understanding shall prevail over any such inconsistent
provisions of the Purchase Agreement and the Operating Covenants Agreement, each
as heretofore amended.
ALL-COMM MEDIA CORPORATION
(formerly Alliance Media Corporation)
By: /s/ E. William Savage /s/ Stephen Dunn
---------------------------- -----------------
E. William Savage, President Stephen Dunn
and Chief Operating Officer
28
<PAGE> 9
ALL-COMM MEDIA CORPORATION
THIRD MEMORANDUM OF UNDERSTANDING
SCHEDULE "A"
<TABLE>
<CAPTION>
PRINCIPAL PERIOD DUE # OF INTEREST ACCRUED
AMOUNT DATE DAYS RATE INTEREST
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
4,125,000 09/01/95 - 09/30/95 10/01/95 30 8.75% $29,666.10
* 3,750,000 10/01/95 - 10/31/95 11/01/95 31 8.75% 27,868.15
3,750,000 11/01/95 - 11/30/95 12/01/95 30 8.75% 26,969.18
3,750,000 12/01/95 - 12/19/95 01/01/96 19 8.75% 17,080.48
3,750,000 12/20/95 - 12/31/95 01/01/96 12 8.50% 10,479.45
3,750,000 01/01/96 - 01/31/96 02/01/96 31 8.50% 27,071.92
3,750,000 02/01/96 - 02/29/96 03/01/96 28 ** 8.25% 23,732.88
3,750,000 03/01/96 - 03/31/96 04/01/96 31 8.25% 26,275.68
3,750,000 04/01/96 - 04/30/96 05/01/96 30 8.25% 25,428.08
3,750,000 05/01/96 - 05/31/96 06/01/96 31 8.25% 26,275.68
-----------
SUBTOTAL 240,847.60
INTEREST DUE ON PAST-DUE INTEREST - EXHIBIT 2(A)(II) 4,111.61
LOAN PROCESSING FEE 3,257.36
PREPAID INTEREST PARTIAL FOR JUNE 1996 1,783.43
-----------
TOTAL $250,000.00
===========
</TABLE>
* REDUCTION IN PRINCIPAL COVERED IN MEMORANDUM OF UNDERSTANDING DATED OCTOBER 1,
1995, AND 3 PAYMENTS OF $33,792.67 EACH ARE CURRENTLY LATE AND IN ARREARS.
** NOTE USED 28 DAYS AND 365 DAY YEAR FOR CONSISTENCY.
29
<PAGE> 1
Exhibit 11
STATEMENTS REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1996 1995 1996 1995
------------------------ ------------------------
<S> <C> <C> <C> <C>
Net income (loss) per share was calculated as follows:
Primary:
Income (loss) from continuing operations before
discontinued operations $ (421,876) $ (161,581) $(1,328,410) $ 610,341
Income (loss) from discontinued operations 492,496 306,371
---------- ---------- ----------- ----------
Net income (loss) $ (421,876) $ 330,915 $(1,328,410) $ 916,712
========== ========== =========== ==========
Weighted average common shares outstanding 3,047,543 1,463,784 3,027,624 1,459,304
Incremental shares under stock options computed
under the treasury stock method using the
average market price of the issuer's common
stock during the periods 194,714 14,423 99,128 6,545
Weighted average common and common
equivalent shares outstanding unless
antidilutive 3,047,543 1,478,207 3,027,624 1,465,849
Income (loss) per share from continuing
operations $ (.14) $ (.11) (.44) .42
Income (loss) per share from discontinued
operations .33 .21
Net income (loss) per share (.14) .22 (.44) .63
Fully diluted:
Income (loss) from continuing operations before
discontinued operations $ (421,876) $ (161,581) $(1,328,410) $ 610,341
Income (loss) from discontinued operations 492,496 306,371
---------- ---------- ----------- ----------
Net income (loss) $ (421,876) $ 330,915 $(1,328,410) $ 916,712
========== ========== =========== ==========
Weighted average common shares outstanding 3,047,543 1,463,784 3,027,624 1,459,304
Incremental shares under stock options computed
under the treasury stock method using the market price of the issuer's
common stock at the end of the periods if higher than the average
market price 194,714 20,460 99,128 20,460
Weighted average common and common equivalent
shares outstanding unless antidilutive 3,047,543 1,484,244 3,027,624 1,479,764
Income (loss) per share from continuing operations $ (.14) $ (.11) $ (.44) $ .41
Income (loss) per share from discontinued
operations .33 .21
Net income (loss) per share (.14) .22 (.44) .62
</TABLE>
30
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF
AND FOR THE THREE MONTHS ENDED MARCH 31, 1996 INCLUDED IN THIS REPORT ON FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 726,068
<SECURITIES> 0
<RECEIVABLES> 1,737,503
<ALLOWANCES> (40,552)
<INVENTORY> 0
<CURRENT-ASSETS> 2,519,926
<PP&E> 461,641
<DEPRECIATION> (172,427)
<TOTAL-ASSETS> 10,876,985
<CURRENT-LIABILITIES> 4,618,697
<BONDS> 1,875,000
0
0
<COMMON> 31,094
<OTHER-SE> 3,951,278
<TOTAL-LIABILITY-AND-EQUITY> 10,876,985
<SALES> 3,723,945
<TOTAL-REVENUES> 3,723,945
<CGS> 2,620,576
<TOTAL-COSTS> 2,620,576
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97,911
<INCOME-PRETAX> (409,248)
<INCOME-TAX> (12,628)
<INCOME-CONTINUING> (421,876)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421,876)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
