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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 December 31, 1995
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
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(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
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Securities registered pursuant to Section 12(b) of the Act: None
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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 February 12, 1996, there were 3,022,543 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
DECEMBER 31, 1995
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C> <C>
Item 1 Interim Condensed Consolidated Financial Statements
(unaudited)
Condensed Consolidated Balance Sheets -
December 31, 1995 and June 30, 1995 3
Condensed Consolidated Statements of Operations -
Three and Six months ended December 31, 1995 and 1994 4
Condensed Consolidated Statements of Cash Flows -
Six months ended December 31, 1995 and 1994 5
Notes to Interim Condensed Consolidated Financial
Statements 6-8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-15
Item 4 Submission of Matters to a Vote of Security Holders 15
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports of Form 8-K
(a) Exhibits 16
(b) Reports on Form 8-K 16
Signatures 17
Exhibit 11 Statements Regarding Computation of Net
Income (Loss) Per Share 18
Exhibit 27 Financial Data Schedule 19-20
</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>
December 31 June 30
ASSETS 1995 1995
- ------ -------------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 257,166 $ 1,217,772
Accounts receivable, net of allowance for doubtful accounts of $40,552
at December 31 and June 30 1,575,347 2,067,977
Other current assets 116,362 116,468
------------ ------------
Total current assets 1,948,875 3,402,217
Property and equipment at cost, net 288,019 344,154
Land held for sale at cost 766,651 766,651
Intangible assets at cost, net 7,181,296 7,272,769
Other assets 104,161 38,700
------------ ------------
Total assets $ 10,289,002 $ 11,824,491
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Note payable to bank $ 10,517 $ 49,694
Note payable other 36,000 72,000
Trade accounts payable 538,455 365,638
Accrued salaries and wages 383,376 641,507
Other accrued expenses 615,208 683,954
Income taxes payable 94,565
Current portion of long term obligations to related party 1,875,000 1,500,000
Related party payable 100,000 183,701
------------ ------------
Total current liabilities 3,558,556 3,591,059
Long term obligations to related party less current portion 2,250,000 3,000,000
Other liabilities 196,198 68,900
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Total liabilities 6,004,754 6,659,959
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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; 3,034,342
and 3,028,092 shares issued, respectively 30,343 30,281
Additional paid-in capital 10,327,035 10,300,847
Accumulated deficit (5,937,661) (5,031,127)
Less 11,800 shares of common stock in treasury, at cost (135,469) (135,469)
------------ ------------
Total stockholders' equity 4,284,248 5,164,532
------------ ------------
Total liabilities and stockholders' equity $ 10,289,002 $ 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 SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 2,959,398 $ 6,885,836
Cost of sales 2,250,194 4,949,565
----------- -----------
Gross profit 709,204 1,936,271
Operating Expenses:
Selling, general and administrative (1,321,436) $ (203,478) (2,445,450) $ (444,395)
Amortization of intangible assets (91,076) (181,302)
----------- ----------- ----------- -----------
Loss from operations (703,308) (203,478) (690,481) (444,395)
----------- ----------- ----------- -----------
Other income (expense):
Non-recurring gain from sales of
securities 195,481 1,530,894
Loan commitment fee (300,000)
Interest income 2,770 3,547 6,014 3,682
Interest expense (97,190) (195,992) (18,276)
Other, net 17 17
----------- ----------- ----------- -----------
Total (94,420) 199,045 (189,978) 1,216,317
----------- ----------- ----------- -----------
Income (loss) from continuing
operations before income taxes (797,728) (4,433) (880,459) 771,922
Benefit (provision) for income taxes 27,220 (26,075)
----------- ----------- ----------- -----------
Income (loss) from continuing operations
before discontinued operations (770,508) (4,433) (906,534) 771,922
Loss from discontinued operations (144,984) (186,125)
----------- ----------- ----------- -----------
Net income (loss) $ (770,508) $ (149,417) $ (906,534) $ 585,797
=========== =========== =========== ===========
Income (loss) per share:
From continuing operations $ (.25) $ (.00) $ (.30) $ .53
From discontinued operations (.10) (.13)
----------- ----------- ----------- -----------
Income (loss) per share $ (.25) $ (.10) $ (.30) $ .40
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding 3,022,542 1,462,533 3,019,417 1,462,293
=========== =========== =========== ===========
</TABLE>
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 SIX MONTHS ENDED DECEMBER 31, 1995 AND 1994
(unaudited)
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (906,534) $ 585,797
Adjustments to reconcile loss to net cash used in operating activities:
Gains from sales of securities (1,530,894)
Depreciation 90,763 17,796
Amortization 181,302
Changes in assets and liabilities:
Accounts receivable 492,630
Other current assets 30,006 21,202
Other assets (5,461) 23,240
Trade accounts payable 216,434 22,645
Accrued expenses and other current liabilities (307,629) (78,354)
Income taxes payable (94,565)
Discontinued operations, net 133,708
----------- -----------
Net cash used in operating activities (303,054) (804,860)
----------- -----------
Investing activities:
Proceeds from sales of investments in securities 2,304,820
Purchase of investment in securities (1,043,176)
Advance payment from pending sale of STI 300,000
Purchase of property and equipment (34,628) (507)
Payments relating to acquisition of Alliance and SD&A (47,747)
Investing activities of discontinued operations, net (5,845)
----------- -----------
Net cash provided by (used in) investing activities (82,375) 1,555,292
----------- -----------
Financing activities:
Repayments of bank loans (39,177) (150,000)
Proceeds from note payable other 1,000,000
Proceeds from land option 150,000
Repayments of notes payable other (36,000) (1,036,000)
Repayment of related party obligations (650,000) (350,000)
Financing activities of discontinued operations, net (13,290)
----------- -----------
Net cash used in financing activities (575,177) (549,290)
----------- -----------
Net increase (decrease) in cash and cash equivalents (960,606) 201,142
Cash and cash equivalents at beginning of period 1,217,772 419,149
----------- -----------
Cash and cash equivalents at end of period $ 257,166 $ 620,291
=========== ===========
Supplemental disclosures of cash flow data:
Cash paid during the period for:
Interest $ 111,133 $ 18,276
Loan commitment fee $ 300,000
Income tax paid $ 89,925
</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.
Deferred financing costs of $60,000 remained unpaid at December 31, 1995.
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 six month period ended December 31, 1995 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.
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 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 six months
ended December 31, 1994 were $129,365 and $1,073,923, 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. The term of the option
expires on April 8, 1996. 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, for a period of four years, a total of 30,000 shares
of the Company's common stock at an exercise price of $2.50 per share. The
agreement calls for the Company to include these securities in the next shelf
registration statement. The payment has been treated as a current liability
until expiration of the option or exercise of rights under the option provision.
6. LONG TERM OBLIGATIONS TO RELATED PARTY
In October 1995, in connection with restructuring the long term
obligations related to the acquisition of SD&A, terms were modified to include
$375,000 and related interest payments due in the second quarter of fiscal 1996
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 February 1, 1996 relating to
the deferred October 1, 1995 payments and the February 1 and March 1, 1996
interest payment on the remaining debt are now due on February 29, 1996, or at
the time the Company completes certain financing arrangements referred to in
Note 10.
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 December 31,
1995. The Company intends to continue its strategy of providing equity
incentives to a broad range of key employees.
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8. INCOME TAXES
In the three month period ended December 31, 1995, the income tax benefit
on continuing operations totaled $27,220 on losses from continuing operations of
$797,728. The income tax benefit resulted from the reversal of the prior
quarters income tax provision due to the current quarters taxable loss at the
subsidiary level. The $26,075 provision for the six months ended December 31,
1995 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 six months
ended December 31, 1994 due to available net operating loss carryforwards.
9. POTENTIAL ACQUISITION
On December 20, 1995, the Company signed a non-binding letter of intent
to acquire a privately-owned database marketing company. Terms of the
acquisition call for cash, notes and stock, as well as contingent payments based
on operating profits and performance. Consummation of the acquisition is subject
to a number of conditions, including the negotiation of a definitive agreement,
additional due diligence investigation and obtaining adequate financing, and may
be completed in the first quarter of calendar 1996. There can be no assurance,
however, that this acquisition will be completed.
10. SUBSEQUENT EVENTS
The Company is currently in the process of privately placing $7.5 million
of debentures. If completed, the proceeds will be used to finance the
acquisition of the company described in Note 9, reduce amounts payable to the
former owner of Stephen Dunn & Associates and for general corporate purposes.
The completion of this private placement is dependent upon the successful
acquisition of the company previously described and the successful placement of
the debentures. There can be no assurance, however, that the private placement
will be completed.
On February 9, 1996 the Company received a loan commitment for a $2.0
million revolving credit line, based on outstanding eligible accounts
receivable, for operating requirements and to replace amounts outstanding under
another credit line. The line requires quarterly facility fees, terminates after
one year and is collateralized by accounts receivable. Advances under the line
will be at the institutions reference rate plus 3%. The completion of the loan
is dependent upon the satisfactory completion of loan documentation.
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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 six month period ended December 31, 1995. 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 the 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 December 31, 1995,
compared to the three month period ended December 31, 1994
Continuing Operations: Sales and cost of sales totaled approximately
$2,959,000 and $2,250,000, respectively, for the three months ended December 31,
1995 (the "current period") as compared with no similar amounts incurred in the
three months ended December 31, 1994 (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 $2,309,000 and
sales from off-site campaigns totaled $650,000. Due to the seasonal nature of
SD&A's telemarketing and telefundraising business, revenues and cost of sales
have declined in the current quarter as compared to $3,926,000 and $2,699,000 in
the quarter ended September 30, 1995 (the "last" or "prior" quarter) and are
expected to increase in the next fiscal quarter. Historically, telemarketing and
telefundraising revenues are
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seasonal in 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 23% and 26%, respectively, for
the current period. In the prior quarter, gross profit relating to telemarketing
and telefundraising and offsite campaigns totaled 30% and 37%, respectively. The
decline is due to 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 seasonality 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 and evaluation of potential acquisitions. Corporate
general and administrative expenses increased $1,118,000 to $1,321,000 in the
current period, as compared with $203,000 in the prior period.
Approximately $955,000 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
$100,000 of the increase. Legal expenses decreased $17,000 while accounting and
tax fees have increased approximately $16,000 in the current period. Prior year
expenses included preliminary preparation of a registration statement and
investigation of the pending Alliance merger. Current period expenses also
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, a special valuation project and acquisition related due diligence.
Consulting, directors' fees and public relations increased by $31,000 due to
efforts involved in implementing this 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
decreased by approximately $8,000 as the Company maintained two corporate
offices in the prior period and now only maintains one. Other expenses including
travel, postage, delivery, auto and telephone increased by $34,000 principally
due to the Company's new corporate strategy and related acquisition and due
diligence matters.
General and administrative expenses increased approximately $197,000 to
$1,321,000, as compared with the prior quarter. Approximately $158,000 of the
increase occurred at SD&A, principally due to higher than budgeted year end
bonuses accrued in prior periods and severance, as well as seasonal year end
costs. Approximately $39,000 of the increase was incurred at the corporate level
principally from a special valuation project and acquisition related due
diligence.
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Income (loss) before interest, taxes, depreciation and amortization
totaled approximately $(566,000) in the current quarter, as compared with
$148,000 in the prior quarter.
Pretax operating loss associated with the SD&A operation totaled
approximately $245,000 in the current quarter. Pretax corporate expenses
totaled $553,000, including $190,000 in corporate depreciation, amortization and
interest expense. Pretax operating income from the SD&A operation totaled
approximately $425,000 in the prior quarter and corporate expenses totaled
$507,000, including $191,000 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 $195,000 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 six month periods ended December 31, 1995 and 1994 for additional
information.
Interest expense increased approximately $97,000 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 $99,000 incurred in the prior quarter.
In the current period, the income tax benefit on continuing operations
totaled $27,000 on losses from continuing operations of $798,000. The income tax
benefit resulted from the reversal of the prior quarter income tax provision
due to the current quarter taxable loss at the subsidiary level.
Discontinued Operations: The 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 six months ended December 31, 1995, compared
to the six months ended December 31, 1994
Continuing Operations: Sales and cost of sales totaled approximately
$6,886,000 and $4,950,000, respectively, for the six months ended December 31,
1995 (the "current period") as compared with no similar amounts incurred in the
six months ended December 31, 1994 (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 $5,731,000 and
sales from off-site campaigns totaled $1,155,000.
Cost of sales represents labor and telephone 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 28% and 31%, respectively, for
the current period.
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General and administrative expenses increased $2,001,000 to $2,445,000 in
the current fiscal period as compared with $444,000 in the prior period.
Approximately $1,752,000 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
$172,000 of the increase. Legal expenses decreased $28,000 in the current
period. Prior year expenses included preliminary preparation of a registration
statement. 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. Consulting, directors' fees and public
relations increased by $38,000 due to efforts involved in implementing this
strategy. Accounting and tax fees have increased approximately $40,000 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 $14,000 due to an increase in coverage. Rent, office
expenses and depreciation expense decreased by $22,000 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
$22,000 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 $418,000 in the current six month period.
Pretax operating income from the SD&A operation totaled approximately
$180,000 in the current six month period and corporate expenses totaled
$1,060,000, including $375,000 in corporate depreciation, amortization and
interest expense.
Amortization of intangible assets totaled approximately $181,000 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 $1,531,000 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 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
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Company, to provide the money necessary to exercise the warrant before its
expiration on July 31, 1994.
Interest expense increased approximately $178,000 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 $26,000 on losses from continuing operations of $880,000. 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 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 six month period ended December 31, 1994 the Company used net
cash in operations of $805,000 and $1,536,000 to pay down notes payable. The
Company financed these cash needs through the sale of equity investments which
totaled $2,305,000 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 $303,000. Due to seasonal decreases in sales, accounts
receivable relating to the SD&A operation have decreased $493,000 in the current
period and trade accounts payable and accrued liabilities have decreased
$91,000. Additional cash was used in the current period at the corporate and
SD&A level to pay $650,000 of obligations due to the sole selling shareholder
arising from the acquisition of SD&A, $75,000 to pay down note and loan
obligations and $82,000 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 expires on April 8, 1996. The Company is also seeking to
increase its cash balances through the sale of this land.
In October 1995, the long term obligations due to the sole selling share
holder 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 will 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
13
<PAGE> 14
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
are now due on February 29, 1996, or earlier, if the Company completes the
financing discussed below.
The Company has entered into a non-binding letter of intent to acquire
a privately-owned database marketing company. Terms of the acquisition call for
cash, notes and stock, as well as contingent payments based on operating
profits and performance. Consummation of the acquisition is subject to a number
of conditions, including the negotiation of a definitive agreement, additional
due diligence investigation and obtaining adequate financing. The agreement
calls for completion of a definitive agreement and financing arrangements.
In connection with this acquisition, the Company is currently in the
process of privately placing $7.5 million of debentures. Subject to its
completion, the proceeds will be used to finance the acquisition described
above, reduce principal and interest amounts payable to the former owner of
Stephen Dunn & Associates, Inc. and for general corporate purposes. The
completion of this private placement is dependent upon the completion of the
acquisition described above.
On February 9, 1996 the Company received a commitment for a $2.0 million
revolving credit line, based on outstanding eligible accounts receivable, for
operating requirements and to replace amounts outstanding under another credit
line. The line requires quarterly facility fees, terminates after one year and
will be collateralized by accounts receivable. Advances under the line will be
at the institutions reference rate plus 3%. The line is dependent upon
successful completion of loan documentation and various other conditions. There
can be no assurance, however, that this revolving credit line will be obtained.
The Company believes that funds available from operations, from the
prospective revolving line of credit, from the potential sale of the Laughlin
land, and the ongoing ability to raise funds through a private placement
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
14
<PAGE> 15
obtaining the financing necessary to complete the acquisitions now contemplated,
and those in the future, there can be no assurances that such capital will be
available at terms acceptable to the Company, or at all, or that the
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 SFAS 123 no later than July 1, 1996.
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:
For 2,022,870
Against 1,946
Abstentions 2,725
Broker non-votes None
15
<PAGE> 16
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)
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 10.3 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.
16
<PAGE> 17
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: February 20, 1996
17
<PAGE> 1
Exhibit 11
STATEMENTS REGARDING COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
-------------------------- -------------------------
December 31 December 31
-------------------------- -------------------------
1995 1994 1995 1994
-------------------------- -------------------------
<S> <C> <C> <C> <C>
Net income (loss) per share was calculated as follows:
Primary:
Income (loss) from continuing operations before
discontinued operations $ (770,508) $ (4,433) $ (906,534) $ 771,922
Income (loss) from discontinued operations (144,984) (186,125)
----------- ----------- ----------- ----------
Net income (loss) $ (770,508) $ (149,417) $ (906,534) $ 585,797)
=========== =========== =========== ==========
Weighted average common shares outstanding 3,022,542 1,462,533 3,019,417 1,450,033
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 50,854 178 41,609
Weighted average common and common
equivalent shares outstanding unless
antidilutive 3,022,542 1,462,533 3,019,417 1,450,033
Income (loss) per share from continuing
operations (.25) .00 (.30) .53
Income (loss) per share from discontinued
operations (.10) (.13)
Net income (loss) per share (.25) (.10) (.30) .40
Fully diluted:
Income (loss) from continuing operations before
discontinued operations $ (770,508) $ (4,433) $ (906,534) $ 771,922
Income (loss) from discontinued operations -- (144,984) (186,125)
----------- ----------- ----------- ----------
Net income (loss) $ (770,508) $ (149,417) $ (906,534) $ 585,797
=========== =========== =========== ==========
Weighted average common shares outstanding 3,022,542 1,462,533 3,019,417 1,450,033
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 59,098 12,260 41,609 12,260
Weighted average common and common equiva-
lent shares outstanding unless antidilutive 3,022,542 1,462,533 3,019,417 1,462,293
Income (loss) per share from continuing operations (.25) .00 (.30) .53
Income (loss) per share from discontinued
operations (.10) (.13)
Net income (loss) per share (.25) (.10) (.30) .40
</TABLE>
18
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 257,166
<SECURITIES> 0
<RECEIVABLES> 1,615,899
<ALLOWANCES> 40,552
<INVENTORY> 0
<CURRENT-ASSETS> 1,948,875
<PP&E> 412,233
<DEPRECIATION> (124,214)
<TOTAL-ASSETS> 10,289,002
<CURRENT-LIABILITIES> 3,558,556
<BONDS> 2,250,000
0
0
<COMMON> 30,343
<OTHER-SE> 4,253,905
<TOTAL-LIABILITY-AND-EQUITY> 10,289,002
<SALES> 2,959,398
<TOTAL-REVENUES> 2,959,398
<CGS> 2,250,194
<TOTAL-COSTS> 2,250,194
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 97,190
<INCOME-PRETAX> (797,728)
<INCOME-TAX> 27,220
<INCOME-CONTINUING> (770,508)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (770,508)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
