UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1997
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: None
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 12, 1997, there were 11,426,764 shares of the Registrant's common
stock outstanding.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-QSB/A REPORT
MARCH 31, 1997
PART I - FINANCIAL INFORMATION Page
- ------------------------------ ----
Item 1 Interim Condensed Consolidated Financial Statements
(unaudited)
Condensed Consolidated Balance Sheets -
March 31, 1997 and June 30, 1996 3
Condensed Consolidated Statements of Operations -
Three and Nine months ended March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows -
Nine months ended March 31, 1997 and 1996 5
Notes to Interim Condensed Consolidated Financial
Statements 6-11
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 12-18
PART II - OTHER INFORMATION
- ---------------------------
Item 6 Exhibits and Reports of Form 8-K
(a) Exhibits 19-20
(b) Reports on Form 8-K 20
Signatures 20
Exhibit 11 Statements Regarding Computation of Net Loss Per Share
Exhibit 27 Financial Data Schedule
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Interim Condensed Consolidated Financial Statements (unaudited)
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
March 31, 1997 June 30, 1996
ASSETS (as restated) (as restated)
-------------- -------------
Current assets:
Cash and cash equivalents $ 482,660 $ 1,393,044
Accounts receivable, net of allowance for
doubtful accounts of $26,000 at March 31
and $34,906 at June 30 4,609,997 2,681,748
Land held for sale at cost 921,465
Other current assets 198,066 107,658
----------- -----------
Total current assets 5,290,723 5,103,915
Property and equipment at cost, net 769,283 299,045
Intangible assets at cost, net 15,627,719 7,851,060
Other assets 100,285 47,046
----------- -----------
Total assets $21,788,010 $13,301,066
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 787,676 $ 500,000
Promissory notes, current portion 504,303
Trade accounts payable 3,638,251 470,706
Accrued salaries and wages 473,998 706,039
Other accrued expenses 913,639 758,112
Income taxes payable 17,880 10,000
Long-term obligations to related party,
current portion 816,667 583,333
Related party payable 425,000
----------- -----------
Total current liabilities 7,152,414 3,453,190
Notes payable on repurchase of Series C
Preferred Stock 1,000,000
Notes payable to related parties 997,857
Promissory notes, less current portion 203,171
Long-term obligations to related parties less
current portion 991,666 1,516,667
Other liabilities 221,731 80,315
----------- -----------
Total liabilities 10,566,839 5,050,172
----------- -----------
Commitments and contingencies:
Redeemable convertible preferred stock, $.01 par
value; consisting of 6,200 shares of Series B
Convertible Preferred Stock issued and
outstanding at June 30, none at March 31;
2,000 shares of Series C Convertible
Preferred Stock issued and outstanding at
June 30, none at March 31 1,306,358
-----------
Stockholders' equity:
Convertible preferred stock, $.01 par value;
50,000 shares authorized, 8,200 redeemable
shares outstanding at June 30, none at
March 31
Common stock - authorized 6,250,000 shares of
$.01 par value at June 30, 1996, increased
in August 1996 to 36,250,000; 11,438,564 and
3,198,534 shares issued, respectively 114,386 31,985
Additional paid-in capital 25,103,565 13,173,520
Receivables from stockholders (1,999,500)
Accumulated deficit (11,861,811) (6,125,500)
Less 11,800 shares of common stock in treasury,
at cost (135,469) (135,469)
----------- -----------
Total stockholders' equity 11,221,171 6,944,536
----------- -----------
Total liabilities and stockholders' equity $21,788,010 $13,301,066
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
---- ---- ---- ----
(as restated) (as restated)
<S> <C> <C> <C> <C>
Revenues $ 6,300,538 $3,723,945 $16,146,217 $10,609,781
----------- ---------- ----------- -----------
Operating costs and expenses:
Salaries and benefits 3,660,568 3,124,469 10,487,878 9,055,015
Non-recurring compensation expense
on option grants 1,650,000
Direct costs 1,847,493 203,822 3,789,313 526,345
Restructuring costs 1,019,474 1,019,474
Selling, general and administrative 812,262 469,479 2,178,910 1,395,650
Professional fees 215,410 148,291 544,058 364,066
Amortization of intangible assets 208,149 90,061 511,945 271,363
----------- ---------- ----------- -----------
Total operating costs and expenses 7,763,356 4,036,122 20,181,578 11,612,439
----------- ---------- ----------- -----------
Loss from operations (1,462,818) (312,177) (4,035,361) (1,002,658)
----------- ---------- ----------- -----------
Other income (expense):
Discounts on warrant exercises (113,203) (113,203)
Withdrawn public offering costs (1,307,472) (1,307,472)
Gain from sale of land 90,021
Interest income 437 840 14,972 6,854
Interest expense (105,082) (97,911) (353,246) (293,903)
----------- ---------- ----------- -----------
Sub total (1,525,320) (97,071) (1,668,928) (287,049)
----------- ---------- ----------- -----------
Loss before income taxes (2,988,138) (409,248) (5,704,289) (1,289,707)
Provision for income taxes (8,083) (12,628) (32,022) (38,703)
----------- ---------- ----------- -----------
Net loss $(2,996,221) $ (421,876) $(5,736,311) $(1,328,410)
=========== ========== =========== ===========
Net loss attributable to common
stockholders* $(7,971,721) $ (421,876) $(20,538,331) $(1,328,410)
=========== ========== =========== ===========
Net loss per common share $(.96) $(.14) $(3.64) $(.44)
===== ===== ====== =====
Weighted average common and common
equivalent shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624
=========== ========== =========== ===========
</TABLE>
* The nine months ended March 31, 1997 includes the impact of non-recurring
dividends on preferred stock for (a) $8.5 million non-cash dividend on
conversion of Series B Preferred Stock; (b) $573,000 on repurchase of Series C
Preferred Stock; (c) periodic non-cash accretions on preferred stock; and (d)
$5.0 million in discounts on warrant exercises (see Note 9 and 13).
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND 1996
(unaudited)
1997 1996
---- ----
Operating activities:
Net cash used in operating activities $(1,671,411) $(117,647)
----------- ---------
Investing activities:
Net proceeds from sale of land 860,443
Proceeds from issuances of warrants 5,000
Purchases of property and equipment (424,918) (82,313)
Payments relating to acquisition of Alliance
and SD&A (58,050)
Acquisition of Metro, net of cash acquired
of $349,446 185,963
----------- ---------
Net cash provided by (used in) investing
activities 626,488 (140,363)
----------- ---------
Financing activities:
Repayment on line of credit (504,000)
Proceeds from bank loans and line of credit 875,000 350,000
Repayments of bank loans (10,419) (49,694)
Proceeds from land option 150,000
Repayments of notes payable other (54,000)
Repayment of acquisition debt (291,667) (750,000)
Proceeds from exercises of common stock warrants 65,625 120,000
----------- ---------
Net cash provided by (used in) financing activities 134,539 (233,694)
----------- ---------
Net decrease in cash and cash equivalents (910,384) (491,704)
Cash and cash equivalents at beginning of period 1,393,044 1,217,772
----------- ---------
Cash and cash equivalents at end of period $ 482,660 $ 726,068
=========== =========
Supplemental schedule of non cash investing and financing activities:
- ---------------------------------------------------------------------
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 $92,702.
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.
In September 1996, the Company issued 96,748 shares of common stock, valued
at $425,000, as an earn out payment to the former owner of SD&A for achieving
certain targeted earnings for the fiscal year ended June 30, 1996.
In October 1996, the Company issued 1,814,000 shares of its common stock
and $1,000,000 face value in debt to acquire 100% of the outstanding stock of
Metro Services Group, Inc. The debt was discounted to $920,000.
On December 23, 1996, the Company issued 3,168,857 shares of its common
stock and $1,000,000 face value in debt as part of a recapitalization. 6,200
shares of Redeemable Series B Preferred Stock were converted into 2,480,000
common shares; 2,000 shares of Redeemable Series C Preferred Stock were
repurchased for $1,000,000 in notes; warrants for 3,000,000 shares were
exchanged for 600,000 common shares and $145,753 in accrued interest was
converted into 88,857 common shares. (See Note 9).
In February 1997, the Company entered into a promissory note payable for
legal services totaling $207,950.
In March 1997, the Company entered into promissory notes payable for
executive management settlement agreements totaling $499,000.
At March 31, 1997, $1,999,500 was receivable from stockholders on warrant
exercises.
See Notes to Condensed Consolidated Financial Statements.
<PAGE>
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-QSB and Item 310(b) of Regulation S-B. 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 presentation have been included. Operating
results for the three and nine month periods ended March 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending June 30, 1997. 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, 1996. Certain
reclassifications have been made in the fiscal 1996 interim financial statements
to conform with the fiscal 1997 presentation. Certain amounts have been
reclassified to conform with industry standards.
2. NET LOSS PER COMMON SHARE
- -----------------------------
Net 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. The net loss is reduced by dividends to
preferred stockholders to determine the net loss attributable to common
stockholders. Primary and fully diluted loss per share are the same in the
periods presented.
For the nine months ended March 31, 1997, preferred dividends included
periodic non-cash increases to accrete the carrying value up to the redemption
value, as well as non-recurring dividends incurred as part of the
recapitalization described in Note 9, and warrant discounts as described in
Notes 12 and 13.
3. ACQUISITION OF METRO SERVICES GROUP, INC.
- ---------------------------------------------
Effective as of October 1, 1996, the Company acquired Metro Services Group,
Inc. ("Metro") pursuant to a merger agreement. In exchange for all of the then
outstanding shares of Metro, the Company issued 1,814,000 shares of its common
stock valued at $7,256,000 and promissory notes (the "Notes") totaling
$1,000,000. The Notes, which have a stated interest rate of 6%, were discounted
to $920,000 to reflect an estimated effective interest rate of 10%. The Notes
are due and payable, together with interest thereon, on June 30, 1998, subject
to earlier repayment, at the option of the holder, upon completion by the
Company of a public offering of its equity securities. The Notes are convertible
on or before maturity, at the option of the holder, into shares of common stock
at a conversion rate of $5.38 per share. Metro develops and markets
information-based services, used primarily in direct marketing by a variety of
commercial and tax-exempt organizations, principally in the United States.
The acquisition was accounted for using the purchase method of accounting.
The purchase price was allocated to assets acquired based on their estimated
fair value. This treatment resulted in approximately $7.3 million of costs in
excess of net assets acquired, after recording covenants not to compete of
$650,000 and proprietary software of $250,000. Such excess is being amortized
over the expected period of benefit of forty years. The covenants and software
are amortized over their expected benefit periods of three and five years
respectively.
The operating results of this acquisition are included in the consolidated
results of operations from the date of acquisition. The following summary,
prepared on a pro forma basis, combines the consolidated results of operations
as if Metro had been acquired as of the beginning of the periods presented,
after including the impact of certain adjustments, such as amortization of
intangibles and increased interest on acquisition debt. The net loss for the
nine months ended March 31, 1997 includes the non-cash compensation expense of
$1,650,000 recorded on the grant of options in September, 1996, as well as the
$1,307,000 in withdrawn offering costs and $1,019,000 in restructuring costs, as
discussed in notes 8, 10, and 11. Net loss to common stockholders includes $14.8
million of warrant discounts, non-cash dividends and accretion on preferred
stock in the current period.
Unaudited
For the nine months ended March 31,
1997 1996
---- ----
(as restated)
Revenues $ 18,360,000 $16,721,000
Net loss $(5,757,000) $(1,309,000)
Net loss to common $(20,538,000) $(1,309,000)
Loss per common share $(3.29) $(.27)
The unaudited pro forma information is provided for informational purposes
only. It is based on historical information and is not necessarily indicative of
future results of operation of the combined entities.
4. CREDIT FACILITIES
- ---------------------
In December 1996, Stephen Dunn & Associates, Inc. ("SD&A"), a wholly-owned
subsidiary of the Company, renewed its credit facility with a commercial bank,
increasing its line of credit commitment from $500,000 to a maximum of $750,000.
Interest on the outstanding principal is payable monthly at the bank's reference
rate plus 1/2%. The line must be repaid in full for at least thirty consecutive
days during each twelve month period and it matures on September 30, 1997,
renewable at the discretion of the bank. Outstandings on the line of credit
totaled $746,000 at March 31, 1997.
The credit facility also provides for a term loan totaling $125,000 payable
in 35 equal monthly principal installments of $3,473 beginning January 31, 1997.
Interest is payable monthly at the bank's reference rate plus 3/4%. The
outstanding principal balance as of March 31, 1997 is $114,581.
In April, 1997, Metro entered into a two-year renewable credit facility
with a lender for a line of credit commitment of up to a maximum of $1,500,000.
Interest on outstanding principal will be payable monthly at the Chase Manhattan
reference rate plus 1 1/2%.
5. PROMISSORY NOTES
- --------------------
On February 26, 1997, the Company entered into a demand promissory note in
the amount of $207,950, payable to a law firm for professional services related
to the Company's withdrawn public offering. (See note 10). Interest is payable
monthly at the rate of 7% per annum. As of March 31, 1997, no payments had been
made on the note. In May 1997, the note and accumulated interest thereon were
repaid in full.
In March 1997, as part of a restructuring, the Company entered into two
non-interest bearing promissory notes with two former executive officers.
(See Note 11).
6. INCOME TAXES
- ----------------
In the three months ended March 31, 1997 and 1996, the income tax provision
totaled $8,000 and $13,000, respectively. In the nine month periods ended March
31, 1997 and 1996, the income tax provisions totaled $32,000 and $39,000,
respectively. The current period provisions resulted from state and local income
taxes incurred on taxable income at the operating subsidiary level which could
not be offset by losses incurred at the corporate level.
7. GAIN FROM SALE OF LAND
- --------------------------
The Company, through its wholly-owned subsidiary, All-Comm Holdings, Inc.,
owned approximately seven acres of undeveloped land in Laughlin, Nevada, which
had a carrying value of $921,465 as of June 30, 1996. During fiscal 1996, Clark
County, Nevada authorities passed a bond measure, resulting in a special
assessment to fund improvements which would benefit the land. The principal
balance assessed to the Company totaled $154,814 plus interest at 6.4% and was
payable in semi-annual installments over twenty years. The principal was
capitalized by the Company in fiscal 1996. On August 16, 1996, the land was sold
by auction to, and liability assumed by, an unaffiliated third party for
$952,000 in cash, resulting in a net gain after commissions and other selling
costs of approximately $90,000.
8. STOCK OPTIONS
- -----------------
On September 26, 1996, the Board of Directors approved the increase in the
number of shares available under the 1991 Stock Option Plan by 600,000 shares,
to 1,450,000, and granted options exercisable for 300,000 shares of common
stock, par value $.01 per share (the "Common Stock") to each of the Company's
Chief Executive Officer and Chief Operating Officer. Options exercisable for the
first 150,000 shares were granted to each such officer at an exercise price of
$2.50 per share and the remaining 150,000 each were granted at an exercise price
of $3.00 per share. On December 23, 1996, the $3.00 options were to be canceled
subject to successful completion of an underwritten public offering, as part of
the recapitalization described in Note 9. As described in Note 10, the Offering
was not consummated and, accordingly, the options were not canceled. The options
vest and are exercisable immediately and expire on July 1, 2001. Although the
Company intended to grant the options in May, 1996, when the market price of the
stock was $2.50, at September 26, 1996, the date of Board ratification, the
market price was $5.50. Accordingly, the Company recorded a non-recurring,
non-cash charge of $1,650,000 to compensation expense for the difference between
market price and exercise price of the options for 600,000 shares.
9. RECAPITALIZATION
- --------------------
On December 23, 1996, the Company and certain of its securityholders
effected a recapitalization of the Company's capital stock, whereby: (i) the
Company's Series B Convertible Preferred Stock, par value $.01 per share (the
"Series B Preferred Stock"), was converted, in accordance with its terms without
the payment of additional consideration, into 2,480,000 shares of Common Stock;
(ii) the Company's Series C Convertible Preferred Stock, par value $.01 per
share (the "Series C Preferred Stock"), was repurchased for promissory notes in
an aggregate principal amount of $1.0 million, which promissory notes bore
interest at a rate of 8% per annum and were repayable on demand at any time from
and after the date of the consummation of an underwritten public offering by the
Company of Common Stock, but in any event such notes originally matured June 7,
1998 but were paid in full in April, 1997; (iii) all accrued interest on the
Series B Preferred Stock and the Series C Preferred Stock was converted into
88,857 shares of Common Stock; (iv) warrants related to the Series C Preferred
Stock, currently exercisable for 3,000,000 shares of Common Stock, were
exchanged for 600,000 shares of Common Stock; and (v) options held by two of the
Company's principal executive officers to purchase 300,000 shares of common
stock were to be canceled at no cost to the Company, subject to successful
completion of an underwritten offering. The Offering was not consummated and,
accordingly, the options were not canceled. Upon conversion of the Series B
Preferred Stock and accumulated interest thereon into Common Stock on December
23, 1996, the Company incurred a non-cash, non-recurring dividend for the
difference between the conversion price and the market price of the Common
Stock, totaling $8.5 million. Upon repurchase of the Series C Preferred Stock,
the Company incurred a non-recurring dividend of $573,000 for the difference
between the repurchase price and the accreted book value of the stock at
December 23, 1996. These dividends do not impact net income (loss), but do
impact net income (loss) attributable to common stockholders in the calculation
of earnings per share.
10. WITHDRAWAL OF REGISTRATION STATEMENT
- -----------------------------------------
On October 17, 1996, the Company filed a Form SB-2 registration statement
(the "Registration Statement") with the Securities and Exchange Commission. The
Registration Statement related to an underwritten public offering (the
"Offering") of 2,100,000 shares of Common Stock, of which 1,750,000 shares were
being offered by the Company and 350,000 were being offered by certain
stockholders of the Company. It also related to the sale of 1,381,056 shares of
Common Stock by certain selling stockholders on a delayed basis. Due to market
conditions, on February 11, 1997, the Company withdrew the Registration
Statement. As the Company had intended to refile the Registration Statement,
Offering costs incurred through December 31, 1996, of $1.1 million were deferred
as of December 31, 1996. Subsequently, the Company elected to pursue other
sources of financing and chose not to refile the Registration Statement. As
such, in the quarter ended March 31, 1997, the Company expensed $1.3 million in
Offering costs, including those deferred at December 31, 1996, as well as
additional costs incurred from January 1, 1997 through the date of the
withdrawal.
11. RESTRUCTURING COSTS
- -------------------------
During the quarter ended March 31, 1997, the Company effected certain
corporate restructuring steps, including the decision to reduce corporate
staffing and close its Culver City corporate office, as well as making two
executive management changes. In this connection, restructuring expenses of
$1,019,000 were recorded, including $65,000 in estimated office closing costs
and $954,000 in executive management and other settlement costs. The executive
management settlement agreements include two non-interest bearing promissory
notes with face values of $290,000 and $250,000, respectively, payable in equal
installments over eighteen months starting in May, 1997. These notes have been
discounted to $268,000 and $231,000, respectively, to reflect effective interest
rates of 10%.
12. DISCOUNTS ON WARRANT EXERCISES
- ------------------------------------
In March 1997, to obtain $2.1 million in working capital and reduce the
overhang associated with the existence of outstanding warrants, the Company
accepted offers from certain warrant-holders to exercise their warrants for
3,152,500 shares of common stock at discounted exercise prices. The Company
recognized the dates of acceptance as new measurement dates and, accordingly,
recorded non-cash charges totaling $5.1 million in March 1997 to reflect the
market value of the discounts. Of the total, $113,000 was charged directly to
expense, as the underlying source transaction was debt related, and $4,976,000
was charged directly to stockholders' equity, as the underlying source
transaction was equity (see Note 13). At March 31, 1997, $1,999,500 was not
received by the Company from such exercise of warrants and was, therefore,
classified as receivables from stockholders which reduced stockholders' equity
at March 31, 1997. These amounts were received in full in April 1997.
13. RESTATEMENTS FOR CORRECTIONS OF ERRORS
- -------------------------------------------
The financial statements for the three and nine months ended March 31,
1997, the three months ended September 30, 1996 and year ended June 30, 1996
were restated for corrections of errors.
Of the 3,152,500 total warrants exercised in March, 1997, as discussed in
Note 12, warrants for 3,100,000 shares of Common Stock arose from a June 6, 1996
sale of redeemable convertible preferred stock with attached warrants. As
originally filed in the financial statements for the three and nine months ended
March 31, 1997, the discount of $4,975,500 on these warrants was originally
classified as a charge to expense as the underlying redeemable convertible
preferred stock was classified as mezzanine financing for financial reporting.
Subsequently, it was determined that the warrants and the redeemable convertible
preferred stock are equity instruments and accordingly, the charge was
reclassified from an expense transaction to an equity transaction. There is no
change to the net worth of the Company or to its earnings per share as the
charge affects net loss attributable to common stockholders in the earnings per
share calculation in the same manner as an expense transaction.
As originally filed, the financial statements for the three months ended
September 30, 1996 did not include compensation expense for the stock options
granted to officers (as discussed in Note 8), as the Company intended the
options to be granted in May 1996 when the market price of the stock was $2.50.
The net loss attributable to common stockholders for the three months ended
September 30, 1996 was originally reported at $344,481 and related net loss per
share was $(0.11).
Subsequently, in accordance with Securities and Exchange Commission
requirements it was determined that the grant of these options was not effective
until ratification by the Board on September 26, 1996, when the market price was
$5.50. Accordingly, the Company amended the financial statements for the three
months ended September 30, 1996 to record a non-recurring, non-cash charge of
$1,650,000 for compensation expense in connection with the grant of these
options, which increased the net loss for the quarter to $1,994,481 and net loss
per share to $(0.62).
Additionally, as originally filed, the Company reported its Convertible
Preferred Stock as equity. The Preferred Stock contained two provisions for
mandatory redemption, which the Company had considered remote and not within the
control of the holders. Subsequently, in accordance with the Securities and
Exchange Commission requirements, these securities were reclassified as
mezzanine financing and the September 30, 1996 and June 30, 1996 financial
statements were restated accordingly. In conjunction with this, previously
recorded dividends of $66,500 for the three months ended September 30, 1996 were
reclassified as interest and the net loss of $277,981 increased to $344,481.
Previously recorded dividends of $17,490 for the year ended June 30, 1996 were
reclassified as interest and the net loss of $1,076,833 increased to $1,094,373.
These was no impact on earnings per share, as the dividends had previously
increased the net loss attributable to common stockholders.
14. SUBSEQUENT EVENTS
- ----------------------
As of March 31, 1997, the Company had not made its February 19, 1997 and
March 19, 1997 payments, totaling an aggregate of $140,389, on its debt payable
to the former owner of SD&A. These payments were made in full on April 1, 1997.
In April 1997, the Company obtained $2,046,000, net of fees, from the
private placement of 6% convertible notes, with a face value of $2,200,000. The
notes are payable with interest on April 15, 1999, if not previously converted.
The notes are convertible into shares of the Company's Common Stock at the
lesser of $2.50 per share or 83% of the average closing bid price of the Common
Stock during the last five trading days prior to conversion.
Also in April 1997, the Company repaid in full $1 million in promissory
notes plus interest payable to the former holders of the Company's Series C
Preferred Stock. Although these notes were repaid in April, 1997, they are
classified as non-current liabilities in the March 31, 1997 balance sheet, as
funds for their repayment came from the long-term debt and warrant exercises
described previously.
As discussed in Note 5, in May 1997, the Company repaid in full a demand
promissory note payable to a law firm.
15. NEW ACCOUNTING PRONOUNCEMENT
- ---------------------------------
The Financial Accounting Standards Board recently issued FASB Statement No.
128, "Earnings Per Share" which is effective for financial statements for both
interim and annual periods ending after December 15, 1997. Earlier application
is not permitted; however, restatement of all prior-period earnings per share
data presented is required. The Company has not yet determined the effect FASB
Statement No. 128 will have on its financial statement; however, the adoption is
not expected to have a material impact on the financial position or results of
operations of the Company.
<PAGE>
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, 1997. This should
be read in conjunction with the financial statements and notes thereto, included
in this Report on Form 10-QSB 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, 1996. As more fully described in Note 3 to the consolidated financial
statements included in such 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.
("SD&A").
From April 25, 1995 through September 30, 1996, the Company operated 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 cultural organizations. As more
fully described in Note 3 to the condensed consolidated financial statements
included in this Form 10-QSB, effective October 1, 1996 the Company purchased
100% of the stock of Metro Services Group, Inc. ("Metro"). This acquisition is
reflected in the consolidated financial statements using the purchase method of
accounting starting October 1, 1996. Metro develops and markets
information-based services used primarily in direct marketing by a variety of
commercial and tax-exempt organizations.
Results of Operations for the Three Months Ended March 31, 1997, Compared to
the Three Months Ended March 31, 1996
Revenues of $6,301,000 in the three months ended March 31, 1997 (the
"current period") increased by $2,577,000 over revenues of $3,724,000 in the
three months ended March 31, 1996 (the "prior period"). $2,624,000 of the
increase was attributable to the inclusion of Metro revenues in the current
period. Revenues from on-site telemarketing and telefundraising campaigns
totaled $2,881,000 and $3,134,000, respectively, or 78% and 84% of telemarketing
and telefundraising revenues in the current and prior periods, respectively. The
decrease in on-site revenues was principally due to later start dates in the
current period for certain recurring annual campaigns. Revenues from off-site
campaigns totaled $796,000 and $590,000, respectively, or 22% and 16% of
telemarketing and telefundraising revenues, respectively, in the current and
prior periods. The increase in off-site revenues resulted from a fifty percent
increase in capacity at the Berkeley Calling Center in September, 1996. During
the three months ended March 31, 1997 and 1996, the Company's margins relating
to off-site campaigns were generally higher than margins relating to on-site
campaigns.
Salaries and benefits of $3,661,000 in the current period increased by
$537,000 over the prior period total of $3,124,000. Salaries and benefits
decreased as a percentage of revenues, from 84% in the prior period, to 58% in
the current period. Of the dollar increase, $565,000 was attributable to the
inclusion of Metro in the current period. SD&A salaries and benefits decreased
$26,000 in the current period, largely due to the delays in on-site campaign
start dates compared to the prior period. Parent company administrative salaries
decreased by $2,000 in the current period as compared to the prior period,
principally due to staff head count reductions offset by salary increases for
certain executive management.
Direct costs of $1,847,000 in the current period increased by $1,643,000
over direct costs of $204,000 in the prior period. Metro direct costs,
principally costs of lists rented on behalf of clients, totaled $1,614,000 in
the current period. This was offset by an increase in telemarketing and
telefundraising costs of $29,000, primarily attributable to increased postage
and telephone costs as a result of more off-site campaigns in the current
period.
Restructuring costs of $1,019,000 were incurred in the current period, as
the Company effected certain corporate restructuring steps, including reducing
corporate staff and closing its Culver City corporate office, as well as making
two executive management changes. In this connection, executive management and
other settlement costs of $954,000 and estimated office closing costs of $65,000
were recorded in March 1997.
Selling, general and administrative expenses of $812,000 in the current
period increased by $343,000 over comparable expenses of $469,000 in the prior
period. Of the net increase, $95,000 was attributable to SD&A and $298,000 to
the inclusion of Metro. Corporate administration decreased by $50,000. At SD&A,
increases of $40,000 were attributable to administrative costs, including
depreciation, rent, utilities and insurance, associated with the expansion of
the Berkley Calling Center and administration and regulatory costs relating to
SD&A's new Canadian campaign. Further increases in computer costs, supplies and
depreciation resulted from the purchase and installation of new computer
hardware and software at on-site campaigns. Printing, postage, telephone and
promotion costs increased at SD&A due to corporate promotion requirements, as
well as a January 1997 marketing effort. At the parent company level, the
$50,000 decrease was principally due to expenses incurred in the prior year for
evaluation of a potential acquisition, which was not consummated, and
investigation of related financing sources which were not obtained.
Professional fees of $215,000 in the current period, including $89,000 from
Metro, increased by $67,000 over professional fees of $148,000 in the prior
period. Corporate professional fees increased $44,000 due principally to fees
incurred in investigating and reviewing alternate financing proposals after
withdrawal of the Company's underwritten public offering, as discussed below.
Professional fees at SD&A decreased by $66,000 compared to the prior period,
principally due to legal and accounting costs incurred in several renegotiations
of the debt payable to the former owner of SD&A in the prior period.
Amortization of intangible assets of $208,000 in the current period
increased by $118,000 over amortization of $90,000 in the prior period. Of the
increase, $113,000 is attributable to the amortization of costs in excess of net
tangible assets acquired in the Metro acquisition, including amortization of
$650,000 in covenants not to compete and $250,000 in proprietary software
amortized over three and five years, respectively. The remaining costs are
amortized over their expected period of benefit of forty years. Amortization of
the goodwill and a covenant-not-to-compete associated with the Alliance and SD&A
acquisitions on April 25, 1995 increased in the current period due to an
increase in goodwill of $850,000 as of June 30, 1996 for payments made to the
former owner of SD&A resulting from achievement of defined results of operations
of SD&A for the year then ended.
Discounts on warrant exercises of $113,000 were incurred in the current
period. To reduce the overhang associated with the existence of such warrants
and to obtain working capital subsequent to the withdrawal of its proposed
underwritten public offering, the Company accepted offers from certain
warrant-holders to exercise their warrants for shares of Common Stock at
discounted exercise prices. For the warrants which arose from a previous
financing transaction, the Company recognized the dates of acceptances as new
measurement dates and, accordingly, recorded the non-cash charges to reflect the
market value of the discounts.
Withdrawn public offering costs of $1,307,000 were recorded in the current
period. In October 1996, the Company filed a registration statement on Form SB-2
with the Securities and Exchange Commission relating to an underwritten public
offering of 2,100,000 shares. In February, 1996 the Company withdrew the
registration statement. As the Company had intended to refile the registration
statement, offering costs of $1,122,000 incurred through December 31, 1996 had
been deferred as of that date. Subsequently, the Company chose not to refile the
registration statement. As such, in the current period the Company expensed all
such costs.
Interest expense of $105,000 in the current period increased by $7,000,
net, compared to $98,000 in the prior period. In the current period, increases
of $26,000 resulted from interest payable on notes due to the former owners of
Metro, $20,000 due to amounts payable on promissory notes payable to the fomer
holders of the Company's Series C Redeemable Preferred Stock and $7,000 of other
minor items. This was offset by reductions of $46,000 due to principal payments
on the SD&A seller debt and reductions in the interest rate.
The provision for income taxes of $8,000 in the current period decreased by
$5,000 compared to $13,000 in the prior period. Despite consolidated losses from
continuing operations, the current period provision resulted from state and
local taxes incurred on taxable income at Metro, which could not be offset by
losses incurred at the parent company level.
Results of Operations for the Nine Months Ended March 31, 1997, Compared to
the Nine Months Ended March 31, 1996
Revenues of $16,146,000 in the nine months ended March 31, 1997 (the
"current period") increased by $5,536,000 over revenues of $10,610,000 in the
nine months ended March 31, 1996 (the "prior period"). $5,359,000 of the
increase was attributable to the inclusion of Metro revenues in the current
period, starting October 1, 1996. Revenues from on-site telemarketing and
telefundraising campaigns totaled $8,665,000 and $8,866,000, respectively, or
80% and 84% of revenues in the current and prior periods, respectively. Revenues
from off-site campaigns totaled $2,122,000 and $1,744,000, respectively, or 20%
and 16% of revenues, respectively, in the current and prior periods. The
increase in off-site revenues resulted from a fifty percent increase in capacity
at the Berkeley Calling Center in September, 1996. During the nine months ended
March 31, 1997 and 1996, the Company's margins relating to off-site campaigns
were generally higher than margins relating to on-site campaigns.
Salaries and benefits of $10,488,000 in the current period increased by
$1,433,000 over the prior period total of $9,055,000. Of the increase,
$1,107,000 was attributable to the inclusion of Metro in the current period.
SD&A salaries and benefits increased $374,000 in the current period, largely due
to salary increases and commencement of on-site campaigns for new clients in the
current period (which generally require a higher labor expense in the early
years). These increases were partially offset by a $48,000 reduction in parent
company administrative salaries in the current period as compared to the prior
period, due to staff reductions as well as salary reductions during the three
months ended September 30, 1996. In addition, in the current period, the Company
incurred a non-recurring, non-cash charge of $1,650,000 to compensation expense
relating to options granted to two principal executive officers. Such charge was
incurred because the exercise price of each option, which was based upon the
market price of the common stock on May 30, 1996 (the date which the Company
intended as the effective date of the grant) rather than the market price on
September 26, 1996 (the actual effective date of the grant), was lower than the
market price of the common stock on September 26, 1996.
Direct costs of $3,789,000 in the current period increased by $3,263,000
over direct costs of $526,000 in the prior period. Metro direct costs,
principally costs of lists rented on behalf of clients, totaled $3,240,000 in
the current period. This was offset by an increase in telemarketing and
telefundraising costs of $23,000, primarily attributable to increased postage
and telephone costs as a result of more off-site campaigns in the current
period.
Restructuring costs of $1,019,000 were incurred in the current period due
to corporate restructuring, as previously discussed.
Selling, general and administrative expenses of $2,179,000 in the current
period increased by $783,000, over expenses of $1,396,000 in the prior period.
Of the net increase, $277,000 was attributable to SD&A and $519,000 to the
inclusion of Metro, offset by a decrease of $13,000 in corporate administration.
At SD&A, travel and related expenses increased by $83,000 in the current period
principally as a result of bringing campaign managers to Los Angeles for
training on SD&A's new on-site software. Of the SD&A increase, $38,000 resulted
principally from an increase in printing, promotion and advertising expenses
related to new marketing efforts and $83,000 was incurred for rent, business
taxes and insurance associated with moving and expanding the Berkeley Calling
Center, a new Canadian campaign and other. The remaining net increase of $73,000
was principally due to increases in shipping expenses for new on-site computers,
as well as related increases in computer supplies, telephone, postage and other.
At the parent company level, the net $13,000 decrease included a $95,000
decrease related to acquisitions which were not consummated and investigation of
related financing sources which were not obtained in the prior period. This was
offset by increases in public relations expenses of $58,000 due to the hiring of
a new firm in the current period and rent related expense of $10,000 due to
higher parking and utility charges in the current period. The remaining net
increase of $14,000 in the current period resulted principally from higher
director fees, travel and other.
Professional fees of $544,000 in the current period, including $157,000
from Metro, increased by $180,000 over professional fees of $364,000 in the
prior period. Corporate professional fees increased by $69,000 in the current
period and included a non-recurring charge of approximately $76,000 in
consulting fees attributable to the value of warrants acquired by former
consultants during the period, offset by minor miscellaneous net decreases of
$7,000. Professional fees at SD&A decreased by $46,000 compared to the prior
period, principally due to legal and accounting costs incurred in several
renegotiations of the debt payable to the former owner of SD&A in the prior
period.
Amortization of intangible assets of $512,000 in the current period
increased by $241,000 over amortization of $271,000 in the prior period. Of the
increase, $226,000 is attributable to the amortization of costs in excess of net
tangible assets acquired in the Metro acquisition, including amortization of
$650,000 in covenants not to compete and $250,000 in proprietary software
amortized over three and five years, respectively. The remaining costs are
amortized over their expected period of benefit of forty years. Amortization of
the goodwill and a covenant-not-to-compete associated with the Alliance and SD&A
acquisitions on April 25, 1995 increased in the current period due to an
increase in goodwill of $850,000 as of June 30, 1996 for payments made to the
former owner of SD&A resulting from achievement of defined results of operations
of SD&A for the year then ended.
Discounts on warrant exercises of $113,000 and withdrawn public offering
costs of $1,307,000 were recorded in the current period, as previously
discussed.
The Company recorded a net gain of $90,000 from the sale of the its
undeveloped parcel of land in Laughlin, Nevada in August 1996, which gain was
recorded net of commissions and related selling expenses.
Interest expense of $353,000 in the current period increased by $59,000
compared to $294,000 in the prior period. Of the net increase, $53,000 was
attributable to interest payable on notes due to the former owners of Metro,
$127,000 due to amounts payable to the former holders of the Series B Preferred
Stock and Series C Preferred Stock in the current period and $22,000 on
promissory notes payable to the former holders of the Series C Preferred Stock
and $3,000 of other minor items. This was offset by reductions of $146,000 due
to principal payments on the SD&A seller debt and reductions in the interest
rate.
The provision for income taxes of $32,000 in the current period decreased
by $7,000 compared to $39,000 in the prior period. Despite consolidated losses
from continuing operations, the provision resulted from state and local taxes
incurred on taxable income at the operating subsidiary level which could not be
offset by losses incurred at the parent company level.
Capital Resources and Liquidity
At March 31, 1997 and June 30, 1996, on a consolidated basis the Company
had cash and cash equivalents of $483,000 and $1,393,000, respectively, and
accounts receivable net of allowances of $4,610,000 and $2,682,000,
respectively.
The Company generated net losses of $5,736,311 in the current nine month
period and used net cash in operating activities of $1,671,000. These losses in
the current period included a non-recurring, non-cash charge of $1,650,000 to
compensation expense relating to options granted to two former executive
officers of the Company, as well as $1,019,000 in corporate restructuring costs
designed to substantially reduce corporate overhead and improve profitability of
future operations. The loss also included $1,307,000 in costs incurred on the
Company's withdrawn registration statement.
Due to seasonal decreases in revenues and certain related expenses between
the fourth and third fiscal quarters, at March 31, 1997, accounts receivable
relating to the SD&A operation decreased $836,180 and trade accounts payable and
accrued liabilities decreased $279,000 compared to levels at June 30, 1996.
Primarily due to the seasonal nature of annual subscription renewal
campaigns, telemarketing/ telefundraising revenues are expected to increase
during the fourth fiscal quarter. Historically, the fourth fiscal quarter is the
Company's strongest for telemarketing/telefundraising revenues. Starting in
October 1996, the Company recognized results of operations of Metro. The fourth
calendar quarter, which is the Company's second fiscal quarter, has historically
been Metro's strongest. At March 31, 1997, Metro accounts receivable and payable
had increased $926,000 and $500,000 , respectively, over levels at October 1,
1996 (acquisition date) due to increases in its business. The Company cannot
predict the degree to which, on a consolidated basis, these trends will
continue.
In the current period, net cash of $626,000 was provided from investing
activities. The Company received proceeds of $860,000 from the sale of its land
in Laughlin, Nevada, which was net of commissions and related selling expenses.
Upon the acquisition of Metro, the Company received $186,000 in cash, net of
acquisition costs paid. Purchases of property and equipment of $425,000 resulted
primarily from the Company's relocation and expansion of its Berkeley calling
center in August 1996 and purchases of computer equipment at Metro and SD&A.
The Company intends to continue to expand its business by investing up to
approximately $1.0 million for technology, computer systems, software and
equipment. Financing for this expansion has been obtained from the issuance of
convertible notes and the exercise of outstanding warrants.
In the current period financing activities provided $135,000. SD&A had a
$500,000 line of credit with a bank which was fully drawn as of June 30, 1996.
In December, 1996, SD&A obtained an increase in the line under a revised credit
facility which includes a line of credit up to $750,000 and a term loan totaling
$125,000. As of March 31, 1997, $746,000 was outstanding under the credit
facility and $115,000 under the term loan. In April, 1997, Metro entered into a
two-year renewable credit facility with a lender for a line of credit commitment
up to a maximum of $1,500,000.
In connection with the Metro acquisition, which was affected as of October
1, 1996, the Company issued promissory notes to the former shareholders of Metro
in an aggregate principal amount of $1.0 million. Such notes bear interest at 6%
per annum, are scheduled to mature June 30, 1998 and are convertible at the
option of the holders thereof into 185,874 shares of Common Stock.
As described in footnote 9 to the consolidated financial statements
included in this Report on Form 10-QSB/A, on December 23, 1996, the Company and
certain of its stockholders effected a recapitalization of the Company's capital
stock, whereby: (i) the Company's Series B Convertible Preferred Stock, par
value $.01 per share (the "Series B Preferred Stock"), was converted, in
accordance with its terms without the payment of additional consideration, into
2,480,000 shares of Common Stock; (ii) the Company's Series C Convertible
Preferred Stock, par value $.01 per share (the "Series C Preferred Stock"), was
repurchased for promissory notes in an aggregate principal amount of $1.0
million, which promissory notes bear interest at a rate of 8% per annum and are
repayable on demand at any time from and after the date of the consummation of
an underwritten public offering by the Company of Common Stock, but in any event
such notes mature June 7, 1998; (iii) all accrued interest on the Series B
Preferred Stock and the Series C Preferred Stock was converted into 88,857
shares of Common Stock; (iv) warrants related to the Series C Preferred Stock,
currently exercisable for 3,000,000 shares of Common Stock, were exchanged for
600,000 shares of Common Stock; and (v) options held by two of the Company's
principal executive officers to purchase 300,000 shares of common stock were to
be canceled at no cost to the Company, subject to completion of an underwritten
public offering. The Offering was not consummated and, accordingly, the options
were not canceled. Upon conversion of the Series B Preferred Stock and
accumulated interest thereon into Common Stock on December 23, 1996, the Company
incurred a non-cash, non-recurring dividend for the difference between the
conversion price and the market price of the Common Stock, totaling $8.5
million. Upon repurchase of the Series C Preferred Stock, the Company incurred a
non-recurring dividend of $573,000 for the difference between the repurchase
price and the accreted book value of the stock at December 23, 1996. The
dividends do not impact net income (loss), but do impact net income (loss)
attributable to common stockholders in the calculation of earnings per share.
On October 17, 1996, the Company filed a Form SB-2 registration statement
(the "Registration Statement") with the Securities and Exchange Commission. The
Registration Statement related to an offering of 2,100,000 shares of Common
Stock, of which 1,750,000 shares were being offered by the Company and 350,000
were being offered by certain stockholders of the Company (the "Offering"). It
also related to the delayed sale of 1,381,056 shares of Common Stock by certain
selling stockholders. Due to market conditions, on February 11, 1997, the
Company withdrew the Registration Statement. As the Company had intended to
refile the Registration Statement, Offering costs incurred through December 31,
1996, of $1.1 million were deferred as of December 31, 1996. Subsequently, the
Company elected to pursue other sources of financing and chose not to refile the
Registration Statement. As such, in the quarter ended March 31, 1997, the
Company expensed $1.3 million in Offering costs, including those deferred at
December 31, 1996, as well as additional costs incurred from January 1, 1997
through the date of the withdrawal.
On February 26, 1997, the Company entered into a demand promissory note in
the amount of $207,950, payable to a law firm for professional services related
to the Company's withdrawn public offering. Interest was payable monthly at the
rate of 7% per annum. In May, 1997, the note was repaid in full.
In March 1997, as part of its corporate restructuring, the Company entered
into non-interest bearing promissory notes payable to two former executive
officers, with face values of $290,000 and $250,000, respectively, payable in
equal monthly installments over eighteen months starting in May 1997.
In March 1997, the Company accepted offers from certain warrant holders for
the exercise of warrants for 3,152,500 shares of common stock at discounted
exercise prices. In April 1997, the Company obtained $2,046,000, net of fees,
from the private placement of 6% convertible notes, with a face value of
$2,200,000. The notes are payable with interest on April 15, 1999, if not
previously converted. The notes are convertible into shares of the Company's
Common Stock at the lesser of $2.50 per share or 83% of the average closing bid
price of the Common Stock during the last five trading days prior to conversion.
The proceeds of $3.9 million from the notes and warrant exercises will be used
for capital expenditures, debt and registration cost repayment and general
corporate purposes.
As of March 31, 1997, the Company had not made its February 19, 1997 and
March 19, 1997 payments, totaling an aggregate of $140,389, on its debt payable
to the former owner of SD&A. These payments were made in full on April 1, 1997.
Additional contingent payments in connection with the acquisition of SD&A,
based on the achievement of certain defined earnings levels, may be due at the
end of fiscal 1997 and 1998, which will continue to increase amortization
expense in subsequent years.
The Company believes that the funds available from operations, including
the operations of Metro, exercise of warrants and issuances of convertible
notes, the new Metro credit line and increase in SD&A credit line should be
adequate to finance its operations, pay its accrued registration costs and
enable the Company to meet operating requirements and interest and debt
obligations through its fiscal year ending June 30, 1998. In conjunction with
the Company's acquisition and growth strategy, additional financing may be
required to complete any such acquisitions and to meet potential contingent
acquisition payments. There can be no assurance, however, that such capital, if
required, will be available on terms acceptable to the Company, if at all.
New Accounting Pronouncement
The Financial Accounting Standards Board recently issued FASB Statement No.
128, "Earnings Per Share" which is effective for financial statements for both
interim and annual periods ending after December 15, 1997. Earlier application
is not permitted; however, restatement of all prior-period earnings per share
data presented is required. The Company has not yet determined the effect FASB
Statement No. 128 will have on its financial statement; however, the adoption is
not expected to have a material impact on the financial position or results of
operations of the Company.
<PAGE>
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
a) Exhibits
Exhibit Exhibit
Number Item (See Notes)(*)
- ------ ---- -------------
2.1 Agreement and Plan of Merger dated as of October 1, 1996 B (2.1)
between All-Comm Media Corporation, Metro Services
Group, Inc., Metro Merger Corp. and the Shareholders
named therein
3.1 Certificate of Designation for Series C Convertible A (3.7)
Preferred Stock
10.1 Form of promissory note of All-Comm Media Corporation B (2.1)
issued to former shareholders of Metro Services Group,
Inc. (included in Exhibit 2.1)
10.2 Form of Registration Rights Agreement dated as of B (2.1)
October __, 1996 between All-Comm Media Corporation and
the Shareholders named therein (included in Exhibit 2.1)
10.3 Amendment No. 1 to the Registration Rights Agreement C
dated as of October 9, 1996
10.4 Form of Employment Agreement between Metro Services B (2.1)
Group, Inc. and Mr. J. Jeremy Barbera (included in
Exhibit 2.1)
10.5 Form of Employment Agreement between Metro Services B (2.1)
Group, Inc. and Mr. Robert M. Budlow (included in
Exhibit 2.1)
10.6 Form of Employment Agreement between Metro Services B (2.1)
Group, Inc. and Ms. Janet Sautkulis (included in
Exhibit 2.1)
10.7 Form of Series C Convertible Preferred Stock Private A (10.26)
Placement Purchase Agreement
10.8 Form of Warrant Certificate Issued to holders of Series A (10.26)
C Convertible Preferred Stock (included in Exhibit 10.7)
10.9 Form of letter dated September 10, 1996 rescinding C
Private Placement Agreement dated June 7, 1996
10.10 Form of Series B Conversion Agreement A (10.30)
10.11 Form of Warrant Cancellation Agreement A (10.31)
10.12 Form of Series C Repurchase and Exchange Agreement A (10.32)
10.13 Form of Option Cancellation Agreement A (10.33)
10.14 Form of Amended and Restated Series B Conversion A (10.34)
Agreement
10.15 Form of Amended and Restated Series C Repurchase and A (10.35)
Exchange Agreement
10.16 Form of Amended and Restated Option Cancellation A (10.36)
Agreement
10.17 Loan Agreement and Credit Facility, dated December 27, D
1996, by and between Stephen Dunn & Associates, Inc.
and 1st Business Bank
10.18 Demand Promissory Note dated February 26, 1997 E
10.19 Security Agreement between Milberg Factors, Inc. and E
Metro Services Group, Inc.
10.20 Severance Agreement with Barry Peters E
10.21 Severance Agreement with E. William Savage E
10.22 Form of Private Placement Purchase Agreement and E
Convertible Note
11 Statement Regarding Computation of Net Loss Per Share F
27 Financial Data Schedule F
Notes relating to Exhibits
A Incorporated by reference to the Company's Registration Statement on Form
SB-2, filed on October 17, 1996.
B Incorporated by reference to the Company's Report on Form 8-K dated October
11, 1996.
C Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended September 30, 1996.
D Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended December 31, 1996.
E Incorporated by reference to the Company's Report on Form 10-QSB for the
quarter ended March 31, 1997.
F Filed herewith.
* Numbers in parentheses next to any of the above letters A and B refer to the
exhibit numbers within each document from which the Exhibit is incorporated
by reference herein.
b) Reports on Form 8-K
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
ALL-COMM MEDIA CORPORATION
(Registrant)
By: /s/ J. Jeremy Barbera
J. Jeremy Barbera
Chairman and Chief Executive Officer
By: /s/ Scott Anderson
Scott Anderson
Chief Financial and Accounting Officer
Date: September 30, 1997
Exhibit 11
STATEMENTS REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31 March 31
1997 1996 1997 1996
---- ---- ---- ----
(as restated) (as restated)
<S> <C> <C> <C> <C>
Net loss per share was calculated as follows:
Net loss $(2,996,221) $ (421,876) $(5,736,311) $(1,328,410)
Periodic non-cash accretions on redeemable
convertible preferred stock (786,803)
Non-cash, non-recurring dividends on
conversions of redeemable preferred B stock (8,466,412)
Non-recurring dividends on repurchase of
redeemable preferred C stock (573,305)
Discounts on warrant exercises (4,975,500) (4,975,500)
Net loss attributable to common stockholders (7,971,721) (421,876) (20,538,331) (1,328,410)
Primary:
Weighted average common shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624
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 425,862 194,714 324,331 99,128
Weighted average common and common
equivalent shares outstanding unless
antidilutive 8,291,764 3,047,543 5,639,573 3,027,624
Net loss per common share (0.96) (.14) (3.64) (.44)
----------- ---------- ----------- -----------
Fully diluted:
Weighted average common shares outstanding 8,291,764 3,047,543 5,639,573 3,027,624
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 425,862 194,714 324,331 99,128
Weighted average common and common
equivalent shares outstanding unles
antidilutive 8,291,764 3,047,543 5,639,573 3,027,624
Net loss per common share (0.96) (.14) (3.64) (.44)
</TABLE>
<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 NINE MONTHS ENDED MARCH 31, 1997 INCLUDED IN THIS
REPORT ON FORM 10-QSB/A AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 482,660
<SECURITIES> 0
<RECEIVABLES> 4,635,997
<ALLOWANCES> (26,000)
<INVENTORY> 0
<CURRENT-ASSETS> 5,290,723
<PP&E> 915,295
<DEPRECIATION> (146,012)
<TOTAL-ASSETS> 2,788,010
<CURRENT-LIABILITIES> 7,152,414
<BONDS> 3,414,425
0
0
<COMMON> 114,386
<OTHER-SE> 11,106,785
<TOTAL-LIABILITY-AND-EQUITY> 21,788,010
<SALES> 16,146,217
<TOTAL-REVENUES> 16,146,217
<CGS> 3,789,313
<TOTAL-COSTS> 3,789,313
<OTHER-EXPENSES> 16,392,265
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 353,246
<INCOME-PRETAX> (5,704,289)
<INCOME-TAX> (32,022)
<INCOME-CONTINUING> (5,736,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,736,311)
<EPS-PRIMARY> (3.64)
<EPS-DILUTED> (3.64)
</TABLE>
