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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarter ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________________ to ____________________
Commission file number 0-16730
ALL-COMM MEDIA CORPORATION
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(Exact name of registrant as specified in its charter)
Nevada 88-0085608
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
400 Corporate Pointe, Suite 780
Culver City, California 90230
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(Address of principal executive offices) (Zip Code)
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(Former name, former address and former fiscal year, if changed since last
report)
Registrant's telephone number, including area code: (310) 342-2800
--------------
Securities registered pursuant to Section 12(b) of the Act: None
----
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of February 14, 1997, there were 8,274,264 shares of the Registrant's common
stock outstanding.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
FORM 10-QSB REPORT
DECEMBER 31, 1996
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Page
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PART I - FINANCIAL INFORMATION
Item 1 Interim Condensed Consolidated Financial Statements
(unaudited)
Condensed Consolidated Balance Sheets -
December 31, 1996 and June 30, 1996 3
Condensed Consolidated Statements of Operations -
Three and Six months ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Six months ended December 31, 1996 and 1995 5
Notes to Interim Condensed Consolidated Financial
Statements 6-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-15
PART II - OTHER INFORMATION
Item 2 Changes in Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 6 Exhibits and Reports of Form 8-K
(a) Exhibits 17-18
(b) Reports on Form 8-K 18
Signatures 19
Exhibit 10.7 Loan Agreement and Credit Facility dated
December 27, 1996 by and between Stephen
Dunn & Associates, Inc. and 1/st/ Business Bank
Exhibit 11.1 Statements Regarding Computation of Net Loss Per Share
Exhibit 27.1 Financial Data Schedule
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1 - INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
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<CAPTION>
June 30, 1996
December 31, 1996 (as restated)
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ASSETS
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Current assets:
Cash and cash equivalents $ 771,949 $ 1,393,044
Accounts receivable, net of allowance for doubtful accounts of
$46,000 at December 31 and $34,906 at June 30 4,261,321 2,681,748
Land held for sale at cost 921,465
Other current assets 275,482 107,658
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Total current assets 5,308,752 5,103,915
Property and equipment at cost, net 776,396 299,045
Intangible assets at cost, net 15,780,867 7,851,060
Deferred registration costs 1,122,579
Other assets 104,598 47,046
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Total assets $23,093,192 $13,301,066
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities:
Short-term borrowings $ 750,000 $ 500,000
Notes payable on repurchase of Series C Preferred Stock 1,000,000
Notes payable to related parties 931,428
Trade accounts payable 2,741,444 470,706
Accrued salaries and wages 566,201 706,039
Other accrued expenses 878,230 758,112
Income taxes payable 18,880 10,000
Long-term obligations to related party, current portion 700,000 583,333
Related party payable 425,000
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Total current liabilities 7,586,183 3,453,190
Long-term obligations to related parties less current portion 1,209,667 1,516,667
Other liabilities 228,776 80,315
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Total liabilities 9,024,626 5,050,172
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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 December 31; 2,000 shares of Series C Convertible
Preferred Stock issued and outstanding at June 30, none at December 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 December 31 - -
Common stock - authorized 6,250,000 shares of $.01 par value at
June 30, 1996, increased in August 1996 to 36,250,000;
8,286,064 and 3,198,534 shares issued, respectively 82,861 31,985
Additional paid-in capital 22,986,755 13,173,520
Accumulated deficit (8,865,581) (6,125,500)
Less 11,800 shares of common stock in treasury, at cost (135,469) (135,469)
----------- -----------
Total stockholders' equity 14,068,566 6,944,536
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Total liabilities and stockholders' equity $23,093,192 $13,301,066
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</TABLE>
See Notes to 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, 1996 AND 1995
(unaudited)
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<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1996 1995 1996 1995
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Revenues $ 5,913,649 $2,959,398 $ 9,845,679 $6,885,836
------------ ---------- ------------ ----------
Operating costs and expenses:
Salaries and benefits 3,523,811 2,744,970 6,827,310 5,930,546
Non-recurring compensation expense
on option grants 1,650,000
Direct costs 1,796,590 259,810 1,941,820 389,522
Selling, general and administrative 822,012 495,178 1,366,648 857,846
Professional fees 160,461 71,672 328,648 217,101
Amortization of intangible assets 208,150 91,076 303,796 181,302
------------ ---------- ------------ ----------
Total operating costs and expenses 6,511,024 3,662,706 12,418,222 7,576,317
------------ ---------- ------------ ----------
Loss from operations (597,375) (703,308) (2,572,543) (690,481)
------------ ---------- ------------ ----------
Other income (expense):
Gain from sale of land 90,021
Interest income 4,974 2,770 14,535 6,014
Interest expense (133,247) (97,190) (248,164) (195,992)
------------ ---------- ------------ ----------
Total (128,273) (94,420) (143,608) (189,978)
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Loss before income taxes (725,648) (797,728) (2,716,151) (880,459)
Benefit (provision) for income taxes (19,961) 27,220 (23,939) (26,075)
------------ ---------- ------------ ----------
Net loss $ (745,609) $ (770,508) $ (2,740,090) $ (906,534)
------------ ---------- ------------ ----------
Net loss attributable to common
stockholders* $(10,154,049) $ (770,508) $(12,566,610) $ (906,534)
------------ ---------- ------------ ----------
Net loss per common share $(1.87) $(.25) $(2.91) $(.30)
------------ ---------- ------------ ----------
Weighted average common and common
equivalent shares outstanding 5,423,871 3,022,542 4,319,377 3,019,417
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</TABLE>
* 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; and (c) periodic non-cash
accretions on preferred stock (see Note 8).
See Notes to 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, 1996 AND 1995
(unaudited)
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1996 1995
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Operating activities:
Net cash used in operating activities $(1,053,700) $ (303,054)
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Investing activities:
Net proceeds from sale of land 860,443
Proceeds from issuances of warrants 5,000
Purchase of property and equipment (340,703) (34,628)
Payments relating to acquisition of Alliance and SD&A (47,747)
Acquisition of Metro, net of cash acquired of $349,446 262,346
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Net cash provided by (used in) investing activities 787,086 (82,375)
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Financing activities:
Proceeds from (repayments of) bank loans 375,000 (39,177)
Payments on deferred registration costs (496,148)
Proceeds from land option 150,000
Repayments of notes payable other (36,000)
Repayment of acquisition debt (233,333) (650,000)
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Net cash used in financing activities (354,481) (575,177)
----------- ----------
Net decrease in cash and cash equivalents (621,095) (960,606)
Cash and cash equivalents at beginning of period 1,393,044 1,217,772
----------- ----------
Cash and cash equivalents at end of period $ 771,949 $ 257,166
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</TABLE>
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; 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 8).
Deferred registration costs of $607,000 remained unpaid at December 31, 1996.
See Notes to Condensed Consolidated Financial Statements.
5
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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-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 six month periods ended December 31, 1996 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 three and six months ended December 31, 1996, 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 8.
3. ACQUISITION OF METRO SERVICES GROUP, INC.
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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
shall be 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
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$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 and the non-cash
compensation expense of $1,650,000 recorded on the grant of options in 1996.
<TABLE>
<CAPTION>
Unaudited
---------
For the six months ended December 31,
1996 1995
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Revenues $12,072,688 $11,429,435
Net loss $(2,760,881) $ (629,426)
Loss per common share $ (.53) $ (.13)
</TABLE>
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 FACILITY
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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. The line of credit was fully
used at December 31, 1996.
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 entire
loan is outstanding as of December 31, 1996.
5. INCOME TAXES
- ----------------
In the three months ended December 31, 1996 and 1995, the income tax benefit
(provision) totaled ($20,000) and $27,000, respectively. In the six month
periods ended December 31, 1996 and 1995, the income tax provisions totaled
$24,000 and $26,000, 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. An income tax benefit at SD&A for each of the three months ended
December 31, 1996 and 1995 resulted from reversal of prior quarters income tax
provision at SD&A due to current quarter taxable losses. The benefit in 1996
was offset by a provision at Metro.
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6. GAIN FROM SALE OF LAND
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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.
7. 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 canceled
as part of the recapitalization described in Note 8. The remaining 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. No benefit
was recognized on cancellation of the options for 300,000 as part of the
recapitalization.
8. RECAPITALIZATION
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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 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 canceled at no cost to the Company. 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
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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.
9. SUBSEQUENT EVENTS
- ---------------------
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 pursuant to Rule
415 of the Securities Act of 1933, as amended, none of whom are members of, or
affiliated with, the Board or management. On February 11, 1997, the Company
withdrew the Registration Statement. The Company currently intends to refile the
Registration Statement. As such, Offering costs incurred through December 31,
1996, of $1.1 million have been deferred as of December 31, 1996. Additional
costs estimated to approximate $265,000 were incurred from January 1, 1997
through the date of the withdrawal. Such costs will be deferred in accordance
with the Company's intention to refile the Registration Statement.
The notes payable to the former shareholders of Metro with an accreted value
of $931,000, and the $1,000,000 in notes payable on repurchase of the Series C
Preferred Stock are payable in full at maturity in June 1998 or, at the option
of the holders, out of the proceeds of an underwritten offering. As the Company
intends to pursue an offering, these notes have been classified as current
liabilities.
10. RESTATEMENTS FOR CORRECTIONS OF ERRORS
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The financial statements for the three months ended September 30, 1996 and
year ended June 30, 1996 were restated for corrections of two errors.
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 7), 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
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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.
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 periods ended December 31, 1996. 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 December 31, 1996, Compared to
- -------------------------------------------------------------------------------
the Three Months Ended December 31, 1995
- ----------------------------------------
Revenues of $5,914,000 in the three months ended December 31, 1996 (the
"current period") increased by $2,955,000 over revenues of $2,959,000 in the
three months ended December 31, 1995 (the "prior period"). $2,736,000 of the
increase was attributable to the inclusion of Metro revenues in the current
period. Revenues from on-site telemarketing and telefundraising campaigns
totaled $2,367,000 and $2,309,000, respectively, or 74% and 78% of telemarketing
and telefundraising revenues in the current and prior periods, respectively.
Revenues from off-site campaigns totaled $811,000 and $650,000, respectively, or
26% and 22% 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 December 31, 1996 and 1995, the Company's
margins relating to off-site campaigns were generally higher than margins
relating to on-site campaigns.
Salaries and benefits of $3,524,000 in the current period increased by
$779,000 over the prior period total of $2,745,000. Salaries and benefits
decreased as a percentage of revenues, from 93% in the prior period, to 60% in
the current period. Of the dollar increase, $543,000 was attributable to the
inclusion of Metro in the current period. SD&A salaries and benefits increased
$219,000 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). Parent company
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administrative salaries increased by $17,000 in the current period as compared
to the prior period, principally due to salary increases offset by staff
reductions.
Direct costs of $1,797,000 in the current period increased by $1,537,000 over
direct costs of $260,000 in the prior period. Metro direct costs, principally
costs of lists rented on behalf of clients, totaled $1,625,000 in the current
period. This was offset by a decrease in telemarketing and telefundraising
costs of $88,000, primarily attributable to savings in postage as a result of
more off-site clients handling their own mailing campaigns in the current year.
Selling, general and administrative expenses of $822,000 in the current
period increased by $327,000 over comparable expenses of $495,000 in the prior
period. Of the net increase, $112,000 was attributable to SD&A and $251,000 to
the inclusion of Metro. Corporate administration decreased by $36,000. At
SD&A, travel, training and related expenses increased by $50,000 in the current
period as campaign managers were brought to Los Angeles for training on SD&A's
new on-site software and new computer equipment and supplies were shipped to
campaign sites. The remaining increases were principally attributable to
administrative costs, including 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. At the parent company level,
the $36,000 decrease was principally due to prior year identification and
evaluation of potential acquisitions and finalization of issues related to prior
operations of the Company.
Professional fees of $160,000 in the current period, including $68,000 from
Metro, increased by $88,000 over professional fees of $72,000 in the prior
period. The current period included accounting and legal fees incurred for
research on tax and labor issues.
Amortization of intangible assets of $208,000 in the current period increased
by $117,000 over amortization of $91,000 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.
Interest expense of $134,000 in the current period increased by $37,000
compared to $97,000 in the prior period. Of the net increase, $27,000 was
attributable to interest payable on notes due to the former owners of Metro and
$60,000 due to amounts payable to the holders of the Series B Redeemable
Preferred Stock and Series C Preferred Stock in the current period. This was
offset by reductions of $48,000 due to principal payments on the SD&A seller
debt and reductions in the interest rate and $2,000 of other minor items.
The provision for income taxes of $20,000 in the current period increased by
$47,000 compared to a net benefit of $27,000 in the prior period. Despite
consolidated losses from continuing operations, the 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. In each period, a tax
benefit was recorded at SD&A resulting from the reversal of prior quarters
income tax provisions due to current quarters taxable loss at SD&A.
11
<PAGE>
Results of Operations for the Six Months Ended December 31, 1996, Compared to
- -----------------------------------------------------------------------------
the Six Months Ended December 31, 1995
- --------------------------------------
Revenues of $9,846,000 in the six months ended December 31, 1996 (the
"current period") increased by $2,960,000 over revenues of $6,886,000 in the six
months ended December 31, 1995 (the "prior period"). $2,736,000 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 $5,784,000 and $5,731,000, respectively, or
81% and 83% of revenues in the current and prior periods, respectively.
Revenues from off-site campaigns totaled $1,327,000 and $1,155,000,
respectively, or 19% and 17% 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 six months ended December 31, 1996 and 1995, the Company's margins relating
to off-site campaigns were generally higher than margins relating to on-site
campaigns.
Salaries and benefits of $8,477,000 in the current period increased by
$2,546,000 over the prior period total of $5,931,000. Of the increase, $543,000
was attributable to the inclusion of Metro in the current period. SD&A salaries
and benefits increased $398,000 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 $45,000 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 $1,942,000 in the current period increased by $1,552,000 over
direct costs of $390,000 in the prior period. Metro direct cost, principally
costs of lists rented on behalf of clients, totaled $1,625,000 in the current
period. This was offset by a decrease in telemarketing and telefundraising
costs of $73,000, primarily attributable to savings in postage as a result of
more off-site clients handling their own mailing campaigns in the current year.
Selling, general and administrative expenses of $1,367,000 in the current
period increased by $509,000, over expenses of $858,000 in the prior period. Of
the increase, $211,000 was attributable to SD&A, $251,000 to the inclusion of
Metro and $47,000 to corporate administration. At SD&A, travel expense
increased by $75,000 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, $34,000 resulted principally from an increase in printing,
promotion and advertising expenses and $59,000 was incurred for rent, business
taxes and insurance associated with moving the Berkeley Calling Center, a new
Canadian campaign and other. The remaining net increase of $44,000 was
principally due to increases in shipping expenses for new on-site computers, as
well as related increases in computer supplies and other. At the parent company
level, public relations expenses increased by $44,000 due to the hiring of a new
firm in the current period. Parent company travel expenses increased by $14,000
due to increased acquisition and financing efforts. Net decreases of $11,000
resulted from prior year finalization of issues relating to prior operations of
the Company and investigation of potential acquisitions.
12
<PAGE>
Professional fees of $329,000 in the current period, including $68,000 from
Metro, increased by $112,000 over professional fees of $217,000 in the prior
period. The current period 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, as well as fees incurred for various
valuation studies and analysis relating to financial matters. The prior period
included accounting and legal fees incurred for finalization of issues related
to prior operations of the Company.
Amortization of intangible assets of $304,000 in the current period increased
by $123,000 over amortization of $181,000 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.
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 $247,000 in the current period increased by $51,000
compared to $196,000 in the prior period. Of the net increase, $27,000 was
attributable to interest payable on notes due to the former owners of Metro and
$127,000 due to amounts payable to the holders of the Series B Preferred Stock
and Series C Preferred Stock in the current period. This was offset by
reductions of $100,000 due to principal payments on the SD&A seller debt and
reductions in the interest rate and $3,000 of other minor items.
The provision for income taxes of $24,000 in the current period decreased by
$2,000 compared to $26,000 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 December 31, 1996 and June 30, 1996, on a consolidated basis the Company
had cash and cash equivalents of $772,000 and $1,393,000, respectively, and
accounts receivable net of allowances of $4,261,000 and $2,682,000,
respectively.
The Company generated losses from operations of $2,740,000 in the current six
month period and used net cash in operating activities of $791,000. 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 principal
executive officers of the Company. Due to seasonal decreases in revenues and
certain related expenses between the fourth and second fiscal quarters, at
December 31, 1996, accounts receivable relating to the SD&A operation decreased
$1,006,000 and trade accounts payable and accrued liabilities decreased $217,000
compared to levels at June 30, 1996.
13
<PAGE>
In part due to certain seasonal marketing patterns and subscriptions,
telemarketing/telefundraising revenues are expected to increase slightly during
the third 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. Metro accounts receivable and payable increased
$748,000 and $299,000, respectively, over levels at October 1, 1996
(acquisition date) due to seasonal increases in its business. The Company
cannot predict the degree to which, on a consolidated basis, these trends will
continue.
During the six months ended December 31, 1996, in connection with efforts to
effect an underwritten offering, the Company incurred offering costs of $1.1
million, as well as incurring additional administrative costs. The Company has
now taken steps to significantly reduce expenses at the corporate staff level
and intends to implement a program of further cost reductions at the operational
level.
In the current period, net cash of $525,000 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.
Purchases of property and equipment of $341,000 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 $1.7 million for technology, computer systems, software and
equipment. Financing for this expansion is expected to be obtained from the
sale of common stock and, if applicable, the exercise of outstanding warrants
and/or options.
In the current period financing activities used $354,000. The Company had a
$500,000 line of credit with a bank which was fully drawn as of June 30, 1996.
The Company obtained an increase in the line with a revised credit facility
which included a line of credit up to $750,000 and a term loan totaling
$125,000. As of December 31, 1996, the credit facility was fully drawn. The
Company intends to pursue a further increase in the credit facility during the
current fiscal year, however, there can be no assurance that any such increase
will be obtained.
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 8 to the consolidated financial statements included
in this Report on Form 10-QSB, 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
14
<PAGE>
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 will be canceled at no cost to the Company. 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.
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.
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. On February 11, 1997, the Company withdrew the
Registration Statement. As the Company intends to refile the Registration
Statement, $1.1 million in offering costs have been deferred as of December 31,
1996. Additional offering costs estimated to approximate $265,000 were incurred
from January 1, 1997 through the date of the withdrawal. Such costs will be
deferred pending completion of the offering.
Subsequent to withdrawal of the Registration Statement, the Company entered
into discussions with certain warrant holders for the exercise of warrants for
one million shares of common stock at their current exercise price of $2.50 per
share. If these warrants are exercised, the proceeds of $2.5 million would be
used for capital expenditures, debt repayment and general corporate purposes.
Such warrants are currently exercisable for unregistered shares of the Company's
common stock and contain registration rights. There can be no assurance that
such warrants will be exercised.
The Company believes that the funds available from operations, including the
operations of Metro, together with any net proceeds from the Offering, exercise
of warrants or increases in credit lines, together with the funds available from
operations, including the operations of Metro, 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. Further, there can be no assurances that
the Offering will be consummated, or that stockholders will exercise warrants,
or that an increase in credit lines will be obtained.
15
<PAGE>
PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES
- ------------------------------
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 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 canceled at no cost to the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
On August 14, 1996 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 increase the number of authorized shares of Common Stock of the
Company from 6,250,000 shares to 36,250,000 shares. The shares voted were as
follows:
<TABLE>
<S> <C>
For 2,276,607
Against 99,424
Abstentions 2,419
Broker non-votes None
</TABLE>
16
<PAGE>
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
a) Exhibits
<TABLE>
<CAPTION>
Exhibit Exhibit
Number Item --------------
- ------- ----- (See Notes) (*)
<S> <C> <C>
2.1 Agreement and Plan of Merger dated as of B (2.1)
October 1, 1996 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 A (3.7)
Convertible Preferred Stock
10.1 Form of promissory note of All-Comm Media B (2.1)
Corporation issued to former shareholders
of Metro Services Group, Inc. (included in
Exhibit 2.1)
10.2 Form of Registration Rights Agreement dated B (2.1)
as of 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 C
Agreement dated as of October 9, 1996
10.4 Form of Employment Agreement between Metro B (2.1)
Services Group, Inc. and Mr. J. Jeremy
Barbera (included in Exhibit 2.1)
10.5 Form of Employment Agreement between Metro B (2.1)
Services Group, Inc. and Mr. Robert M. Budlow
(included in Exhibit 2.1)
10.6 Form of Employment Agreement between Metro B (2.1)
Services Group, Inc. and Ms. Janet Sautkulis
(included in Exhibit 2.1)
10.7 Form of Series C Convertible Preferred Stock A (10.26)
Private Placement Purchase Agreement
10.8 Form of Warrant Certificate Issued to holders A (10.26)
of Series C Convertible Preferred Stock
(included in Exhibit 10.7)
10.9 Form of letter dated September 10, 1996 C
rescinding 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 A (10.32)
Agreement
10.13 Form of Option Cancellation Agreement A (10.33)
10.14 Form of Amended and Restated Series B A (10.34)
Conversion Agreement
10.15 Form of Amended and Restated Series C A (10.35)
Repurchase and Exchange Agreement
10.16 Form of Amended and Restated Option A (10.36)
Cancellation Agreement
10.17 Loan Agreement and Credit Facility, dated D
December 27, 1996, by and between Stephen
Dunn & Associates, Inc. and 1/st/ Business
Bank
11.1 Statement Regarding Computation of Net Income D
Per Share
27.1 Financial Data Schedule D
</TABLE>
17
<PAGE>
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 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
1. On or about October 11, 1996, the Company filed a Current Report on Form
8-K regarding the acquisition of Metro Services Group, Inc. ("Metro") for
1,814,000 shares of the Company's common stock, par value $.01 per share,
valued at $7,256,000, and promissory notes having an aggregate face value
of $1,000,000. Audited financial statements of Metro were incorporated by
reference to the Company's Form SB-2 Registration Statement filed on
October 17, 1996 and included: balance sheets as at December 31, 1995 and
June 30, 1996 (unaudited); statements of operations for the years ended
December 31, 1995 and 1994 and the (unaudited) six months ended June 30,
1996 and 1995; statements of shareholders' equity deficit or the years
ended December 31, 1995 and 1994 and the (unaudited) six months ended
June 30, 1996; statements of cash flows for the years ended December 31,
1995 and 1994 and the (unaudited) six months ended June 30, 1996 and
1995; and the related notes thereto.
2. On or about November 26, 1996, the Company filed a Current Report on
Form 8-K regarding recapitalization of the Company's capital stock.
18
<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/ Barry Peters
-------------------------
Barry Peters
Chairman of the Board and
Chief Executive Officer
Date: February 18, 1997
19
<PAGE>
December 27, 1996 Exhibit 10.7
Mr. Tom Scheir
Executive Vice President
Stephen Dunn & Associates, Inc.
1728 Abbot Kinney Blvd.
Venice, CA 90291-4839
RE: Loan Agreement
This Agreement ("Agreement") is made and entered into as of December 27, 1996 by
and between STEPHEN DUNN & ASSOCIATES, INC., a California Corporation and all
its subsidiaries ("Borrower"), and 1ST BUSINESS BANK, a California banking
corporation ("Bank").
SECTION I: THE CREDIT FACILITY
-------------------
1.1 LINE OF CREDIT. This will confirm the availability until September 30,
--------------
1997, a line of credit commitment ("Line") not to exceed Seven Hundred Fifty
Thousand dollars ($750,000) by Bank to Borrower for its normal short-term
working capital requirements.
Upon the request of Borrower, made at any time and from time to time during the
term hereof and so long as no Event of Default has occurred under this
Agreement, Bank shall lend to Borrower, up to Sixty Five percent (65%) of the
net amount of Borrower's Eligible Accounts (as defined herein) provided,
however, that in no event shall Bank be obligated to make advances to Borrower
whenever the aggregate amount of advances exceeds or would exceed, at any one
time the sum of Seven Hundred Fifty Thousand dollars ($750,000).
For purposes of this Agreement, the term "Accounts" shall mean and include all
presently existing and hereafter arising accounts of Borrower as defined in the
Bank's General Security Agreement which is attached as Exhibit A to this
Agreement.
For purposes of this Agreement, the term "Eligible Accounts" shall mean and
include those Accounts which are due and payable pursuant to the written terms
for payment expressly set forth on the face of the invoices corresponding to
such Accounts, within Ninety (90) Days or less from the date of invoice, or
within Sixty (60) Days or less from the due date expressly set forth on the
invoice corresponding to such Accounts, whichever is less, and have been validly
assigned to Bank and strictly comply with all of Borrower's warranties and
representations to Bank, but Eligible Accounts shall not include the following:
(a) Accounts with respect to which the account debtor is an officer, employee or
agent of Borrower; (b) Accounts with respect to which goods are placed on
consignment, guaranteed sale or other terms by reason of which the payment by
the account debtor may be conditional; (c) Accounts with respect to which the
account debtor is not a resident of the United States; (d) Accounts with respect
to which the account debtor is the United States or any department, agent, or
instrumentality of the United States; (e) Accounts with respect to which the
account debtor is a subsidiary of, related to, affiliated or has common officers
or directors with Borrower; (f) Accounts with respect to which Borrower is or
may become liable to the account debtor for goods sold or services rendered by
the account debtor to Borrower; (g) that portion of the Accounts owed by any
single account debtor which exceeds ten (10) percent of all the accounts; and
(h) Accounts deemed ineligible as defined in this Agreement.
For purposes of this Agreement, the Bank may deem ineligible "Ineligible
Accounts" any Account owing by an account debtor if (a) any Account of that
account debtor does not comply with Borrower's representations and warranties
stated in Section III of this Agreement; (b) thirty percent (30%) or more of the
aggregate dollar amount of the Account of that account debtor is not paid by
that account debtor within the lesser of Ninety (90) days from the date of
invoice or Sixty (60) days from the due date expressly set forth in the invoices
corresponding to such Accounts; (c) that account debtor disputes liability or
makes any claim with respect to any of its Accounts; (d) any Insolvency
Proceeding is filed by or against that account debtor or; (e) that account
debtor becomes insolvent, fails or goes out of business.
20
<PAGE>
At maturity on September 30, 1997, and from time to time thereafter, the Bank
may, in its sole and absolute discretion, renew the Line on such terms and on
such conditions as the bank may require. In the event the Bank requires terms
and/or conditions, including but not limited to a change in financial covenants,
inconsistent with this Agreement, this Agreement shall be amended and modified
by the parties hereto as a condition precedent to any such renewal or renewals.
Borrower shall execute Bank's standard revolving promissory note (the "Note"),
and each disbursement in a minimum amount of at least $50,000, under the Note
shall be made during the availability period in accordance with the Bank form of
authorization to disburse executed by the Borrower. The Bank shall enter each
amount borrowed and repaid on the back of the Note and such entries shall be
prima facie evidence of the amount of the Line outstanding. Bank may use an
alternate method to evidence the amount of the Line outstanding. Borrower
agrees that for at least 30 consecutive days during each twelve month period,
loan under the revolving line of credit shall be repaid in full.
1.2 LINE OF CREDIT INTEREST. Interest on the outstanding principal balance on
-----------------------
the Note shall be payable monthly beginning on the last day of the month in
which the loan funds. Interest on the Note shall be payable at 1st Business
Bank's Reference Rate of Interest plus 1/2%, which is the rate announced by Bank
from time to time at its Corporate Headquarters as its Reference Rate, and which
shall vary concurrently with any change in such rate as announced by bank.
Interest hereunder shall be calculated on the basis of a 360 day year on the
actual number of days elapsed.
1.3 TERM LOAN. Subject to the terms of this agreement, this will confirm the
---------
availability of a term loan ("Term Loan") in the amount of One Hundred Twenty-
five Thousand and no/100 Dollars ($125,000) payable in 35 equal monthly
principal installments of $3,473.00 each beginning January 31, 1997. All
principal and interest remaining unpaid on this term loan on December 31, 1999,
shall become immediately due and payable.
The term loan proceeds shall be used to finance capital assets for the
Borrower's Berkeley facility. The Term Loan shall be evidenced by a Promissory
Note (the "Term Note") on the form used by Bank for such purposes.
1.4 TERM LOAN INTEREST. Interest on the Term Note shall be payable monthly
------------------
beginning on the last day of the month in which the loan funds. Interest on the
Term Note shall be payable at 1st Business Bank's Reference Rate of Interest
plus 3/4%, which is the rate announced by Bank from time to time at its
Corporate Headquarters as its Reference Rate, and which shall vary concurrently
with any change in such rate as announced by Bank. Interest hereunder shall be
calculated on the basis of a 360 day year on the actual number of days elapsed.
1.5 DEFINITION. The Line as evidenced by the Note and the Term Loan as
----------
evidenced by the Term Note shall hereafter be referred to collectively "Loan" or
"Loans".
1.6 SECURITY. Borrower shall grant or cause to be granted to Bank a first
--------
priority security interest on the following assets subject only to such
exceptions as are acceptable to Bank: Accounts, Inventory, Equipment, General
Intangibles, and any Money, Deposit accounts or other assets of Borrower in
which Bank receives a security interest or which hereafter comes into the
possession or control of Bank.
Security for the payment and performance of all sums and all other obligations
under the Loan shall be evidenced by the documents executed by Borrower and/or
accommodation pledgor in connection with the Loan, as required by Bank.
Collateral shall be security for all obligations to Bank. Bank shall be named
as Loss Payee on the insurance policies covering such collateral. Copies of
such policies showing Bank as Loss Payee shall be delivered to Bank within
thirty (30) days of the date of this Agreement.
SECTION II. CONDITIONS PRECEDENT TO THE LOAN
--------------------------------
Before Bank is obligated to make any advance, Bank must receive all of the
following, each of which must be in form and substance satisfactory to Bank:
21
<PAGE>
2.1 LINE OF CREDIT. The original, executed Note;
--------------
2.2 TERM LOAN. The original, executed Term Note;
---------
2.3 BORROWING RESOLUTION. Borrower shall have provided Bank with certified
--------------------
copies of resolutions duly adopted by the Board of Directors of Borrower,
authorizing this Agreement and all things required of Borrower pursuant to this
Agreement. Such resolutions shall also designate the persons who are authorized
to act on Borrower's behalf in connection with this Agreement and to do the
things required of Borrower pursuant to this Agreement;
2.4 SECURITY INSTRUMENTS / FINANCING STATEMENTS. Original, executed security
-------------------------------------------
agreement(s) and financing statement(s) covering the collateral securing the
Loan;
2.5 EVIDENCE OF SECURITY. Evidence that the security interests and liens in
--------------------
favor of Bank are valid, enforceable, and prior to the rights and interest of
others except those consented to in writing by Bank;
2.6 EVIDENCE OF INSURANCE. Evidence acceptable to the bank that the property
---------------------
to be provided as collateral is covered by adequate insurance with companies
acceptable to Bank and that the Bank is loss payee under such insurance.
2.7 GUARANTEES. Continuing guarantees on the Bank's standard form in favor of
----------
Bank, executed by:
Borrower's parent company, All-Comm Media Corporation, Inc., the "Guarantor",
in the amount of Eight Hundred Seventy Five Thousand and no/100 Dollars
($875,000);
2.8 SUBSIDIARIES. In the event of a creation or acquisition of a subsidiary,
------------
Borrower will cause said subsidiary to provide Bank with guarantee and other
necessary documents to perfect a first priority security interest in its assets
as required by Bank.
2.9 BORROWER'S CERTIFICATE. Prior to the disbursement of Loan proceeds,
----------------------
Borrower shall execute a certificate that 1) all representations and warranties
as listed are true and correct, 2) no event of default has occurred. This
document shall be executed by a duly authorized officer.
2.10 EVIDENCE OF AUTHORITY. Evidence that the execution, delivery and
---------------------
performance by Borrower of this Agreement and the execution, delivery and
performance by Borrower and any corporate guarantor or corporate subordinating
creditor of any instrument or agreement required under this Agreement, as
appropriate, have been duly authorized by a certified copy of a resolution of
the Board of Directors of such corporation(s).
SECTION III. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants (and each request for an advance shall be
deemed a continuing representation and warranty made by Borrower on the date of
such request) that:
3.1 ORGANIZATION / AUTHORIZATION / POWER. Borrower is a California Corporation
------------------------------------
duly organized and existing under the laws of the state of its organization and
the execution, delivery and performance of this Agreement are within Borrower's
powers, have been duly authorized, and are not in conflict with the terms of any
organization papers of Borrower;
3.2 AUTHORITY TO BORROW. The execution, delivery and performance of this
-------------------
Agreement are not in conflict with any law or any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower is bound or
affected;
3.3 CONDITIONS TO FUTURE DISBURSEMENTS. On the date any disbursement is
----------------------------------
requested by Borrower under the loan facility set forth in Section I: (i) all
representations and warranties contained in Section III hereof shall be true and
correct as if made on such date; and (ii) there shall not exist, after giving
effect to such disbursement, any event,
22
<PAGE>
condition or act which contributes an Event of Default or which with notice,
lapse of time or both, would constitute an Event of Default;
3.4 FINANCIAL STATEMENT. All financial information submitted by Borrower to
-------------------
Bank, has been prepared according to Generally Acceptable Accounting Principles
on an accrual basis. In addition, Borrower represents and warrants that the
financial statements presented to Bank, whether previously or in the future, is
and will be true and correct in all material respects upon submission and is and
will be complete upon submission insofar as may be necessary to give Bank a true
and accurate knowledge of the subject matter thereof;
3.5 QUALIFICATION. Borrower is properly licensed and in good standing in each
-------------
state in which Borrower is doing business, and Borrower has qualified under, and
complied with, where required, the fictitious name statute of each state in
which Borrower is doing business;
3.6 LITIGATION. There is no litigation or proceeding pending or threatened
----------
against Borrower or any of its property, the results of which, if decided
adversely, might substantially affect the financial condition, property, or
business of Borrower in an adverse manner or result in liability in excess of
Borrower's insurance coverage;
3.7 DEFAULT. There is no event which is, or with notice of lapse of time or
-------
both would be, an Event of Default under the Agreement;
3.8 ERISA. As of the date hereof all Borrower's defined benefit pension plans,
-----
as defined in the Employees Retirement Income Security Act of 1974 and amended
("ERISA"), meet the minimum funding standards of Section 302 of ERISA, with no
occurrences of Reportable Events or Prohibited Transactions as Defined in ERISA
with respect to any such plan.
SECTION IV: COVENANTS
---------
Borrower agrees, so long as the Loan is available and until full and final
payment of the Loan, Borrower will:
4.1 USE OF PROCEEDS. Use the net proceeds of the Loans only for general
---------------
corporate purposes in the conduct of the business in which it is presently
engaged or in which it presently proposes to engage and, in regard to the Term
Loan proceeds, for the purpose set forth in section 1.3 of the Agreement;
4.2 TANGIBLE NET WORTH. Maintain at all times, a minimum Tangible Net Worth of
------------------
One Million Dollars ($1,000,000) on a consolidated basis. Calculations to
determine compliance with this Section shall be made as of the end of each
fiscal quarter. "Tangible Net Worth" as used herein, shall mean book net worth
after deducting patents, trade names, trademarks, goodwill, intangible assets,
cost in excess of book value of acquired companies, unamortized debt discount
and expense, organization expenses, due from officers, stockholders, employees,
affiliate(s), subsidiary(s), and parent company ("All-Comm Media Corporation"),
and capitalized research and development;
4.3 DEBT TO TANGIBLE NET WORTH. Maintain a ratio of Total Liabilities to
--------------------------
Tangible Net Worth of not greater than 1.5 to 1.0, as measured at the end of
each fiscal quarter. "Total Liabilities" as used herein shall mean those
liabilities which are so classified by Borrowe's certified public accountant in
accordance with Generally Accepted Accounting Principles, except that debt
subordinated to Bank shall be excluded from Total Liabilities;
4.4 WORKING CAPITAL; CURRENT RATIO. Maintain a minimum Net Working Capital
------------------------------
equal to at least Nine Hundred Thousand Dollars ($900,000) and a ratio of
Current Assets over Current Liabilities of at least 1.5 to 1.0, both on a
consolidated basis. "Net Working Capital", as used herein, shall mean the
excess of Current Assets over Current Liabilities of Borrower (and its
Subsidiaries). "Current Assets" and "Current Liabilities", as used herein,
shall mean those assets and liabilities which are so classified by the
Borrower's certified public accountant in accordance with generally accepted
accounting principles, except that prepaid assets, and any amounts due from
Employees, Affiliates, Officers, Related Parties, and other like current assets
shall be excluded from Current Assets for purposes of this calculation;
23
<PAGE>
4.5 PROFITABILITY. Maintain during the term of this Agreement, a minimum net
-------------
income equal to at least Two Hundred Thousand Dollars ($200,000) for Borrower's
fiscal year ending 6/30/97 and for each subsequent fiscal year thereafter. Net
income for purposes of this Agreement shall mean net income after taxes, as
calculated by Generally Accepted Accounting Principles, less the sum of any
dividends paid by Borrower during the preceding twelve (12) month period;
4.6 CASH FLOW. Beginning 12/31/96, Borrower shall maintain a minimum net cash
---------
flow equal to at least Four Hundred Percent (400%) of debt service, if any.
Calculations to determine compliance with this section shall be made as of the
end of each fiscal quarter and on a consolidated basis.
"Net Cash Flow" as used herein, shall mean the sum of: (i) net income of
Borrower, after taxes and dividends, earned during the previous twelve (12)
months ending with the applicable fiscal quarter, plus; (ii) the amount of
depreciation and amortization charges, computed for the previous twelve (12)
months ending with the applicable fiscal quarter.
"Debt Service" as used herein, shall mean the sum of; (i) the principal
payments due within the twelve (12) months of the applicable fiscal quarter end
on all long term debt, plus; (ii) rental payments due within twelve (12) months
or the applicable fiscal quarter end on all long term capital leases. "Long
term Debt" and "Long Term Capital Leases", as used herein, shall mean those debt
and lease obligations or renewals or extensions thereof whose original terms
exceed one (1) year.
4.7 FIXED OR CAPITAL ASSETS. Not, in any single fiscal year of Borrower,
-----------------------
expend or incur obligations of more than Two Hundred Seventy Thousand Dollars
($270,000) for the acquisition of Fixed or Capital Assets, without the Bank's
consent in writing.
4.8 LEASE OBLIGATIONS. Not, in any single fiscal year of Borrower, enter into
-----------------
the lease of any personal or real property which would cause Borrower's
aggregate annual obligations in excess of that amount reflected on the June 30,
1996 financial statement;
4.9 NOTICE. Give written notice to Bank within fifteen (15) days of:
------
Any litigation affecting Borrower where the amount is Fifty Thousand
Dollars ($50,000) or more;
Any substantial dispute which may exist between Borrower and any
governmental regulatory body or law enforcement authority;
Any Event of Default under the Loans or any event which upon notice or a
lapse of time or both, would become an Event of Default;
Any other matter which has resulted or might result in a material adverse
change in Borrower's financial condition or operations; and
Any change in Borrower's name or principal place of business;
4.10 INTERIM FINANCIAL STATEMENTS. Furnish within 30 days after the close of
----------------------------
each fiscal quarter, its financial statement as of the close of that quarter
prepared internally by Borrower's chief financial officer in accordance with
generally accepted accounting principles and signed by Borrower's chief
financial officer;
4.11 ANNUAL FINANCIAL STATEMENT. Furnish within 90 days after the close of
--------------------------
each fiscal year, a copy of its financial statement prepared on an AUDITED basis
in accordance with generally accepted accounting principles applied on a basis
consistent with the previous year by its independent Certified Public Accountant
selected by Borrower and reasonably satisfactory to Bank. For purposes of this
covenant, the annual audited statement of All-
24
<PAGE>
Comm Media Corporation will satisfy this requirement, providing such audited
statement includes consolidating statements of Borrower;
4.12 GUARANTOR FINANCIAL STATEMENT. Borrower shall cause Guarantor to submit
-----------------------------
no later than 90 days after the end of each calendar year, the Guarantor's
Audited financial statements and Form 10-K Annual Report, and to submit no later
than 60 days after the end of each calendar quarter, the Guarantor's Form 10-Q
Quarterly Report.
4.13 DEPOSITORY RELATIONSHIP. Maintain its primary banking deposit
-----------------------
relationship with Bank while any loans are outstanding and while any loan
commitment exists with Bank with the exception of a local depository account(s)
for change orders, payroll, petty cash needs, and/or merchant bank card
deposits;
4.14 PHYSICAL MAINTENANCE OF ASSETS. Maintain and preserve all material
------------------------------
rights, privileges franchises now enjoyed, conduct Borrower's business in an
orderly, efficient and customary manner, keep all Borrower's properties in good
working order and condition, and from time to time make all needed repairs,
renewals or replacements so that the efficiency of Borrower's properties shall
be fully maintained and preserved;
4.15 INSURANCE. Maintain and keep in adequate amounts such insurance, with
---------
carriers reasonably acceptable to Bank, which is usual in the business carried
on by Borrower. Bank shall be shown as loss payee on insurance policies;
4.16 RECORDS. Maintain adequate books, accounts and records and prepare all
-------
financial statements required hereunder in accordance with generally accepted
accounting principles and practices consistently applied, and in compliance with
the regulations of any governmental regulatory body having jurisdiction over
Borrower or Borrower's business and permit employees or agents of Bank at any
reasonable time to inspect Borrower's properties and to examine or audit
Borrower's books, accounts and records and make copies and memoranda thereof;
4.17 REPORTS UNDER PENSION PLANS. For all Borrower's defined benefit pension
---------------------------
plans as defined in the Employees Retirement Income Security Act of 1974, as
amended, ("ERISA"), meet, at all times, the minimum funding standards of Section
302 of ERISA, and no Reportable Event or Prohibited Transaction as defined in
ERISA will occur with respect to any such plan;
4.18 COMPLIANCE WITH LAWS, ETC. At all times comply with, or cause to be
--------------------------
complied with, all laws, statutes, rules, directions of any governmental
authority having jurisdiction over Borrower or Borrower's business.
4.19 LOANS / ADVANCES / GUARANTEES. Except as herein provided, or in the
-----------------------------
ordinary course of business as currently conducted; not make any loans or
advances, become a guarantor or surety, pledge its credit or properties in any
manner, or extend credit to a parent corporation or any other entity;
4.20 ENCUMBRANCES AND LIENS. Not create, assume or suffer to exist any
----------------------
mortgage, encumbrance. security interest, pledge, or other lien, securing a
charge or obligation, on or in any of Borrower's property, real or personal,
whether now owned or hereafter acquired, except as approved, in writing, by
Bank, except for such transactions as may be incurred in the ordinary course of
business and except for any mortgage debt outstanding as of the date of this
Agreement;
4.21 BORROWINGS. Not sell or discount any receivables or evidence of
----------
indebtedness except to Bank; borrow any money, incur directly or indirectly, any
liabilities for borrowed money, except pursuant to agreements made with the
Bank;
4.22 LIQUIDATION OR MERGER. Neither liquidate, dissolve, enter into any
---------------------
consolidation, merger, partnership or other combination; nor convey, sell or
lease all or the greater part of its assets or business; not purchase or lease
all or the greater part of the assets or business of another;
25
<PAGE>
4.23 UNRELATED BUSINESS ACTIVITIES. Not engage in any business activities or
-----------------------------
operations substantially different from or unrelated to present business
activities and operations.
SECTION V. EVENTS OF DEFAULT
-----------------
The occurrences of any of the following events ("Events of Default") shall
terminate any obligation on the part of Bank to make or continue the Loans and,
at the option of Bank, shall make all sums of interest and principal outstanding
under the Loans immediately due and payable, without notice of default,
presentment or demand for payment, protest or notice of nonpayment or dishonor
or other notices or demands of any kind or character;
5.1 PRINCIPAL AND INTEREST PAYMENT. Borrower shall default in the due and
------------------------------
punctual payment of the principal of or the interest on the Loan(s) or any
renewal thereof and such default shall not be cured within ten (10) days after
the occurrence thereof; or
5.2 FALSE REPRESENTATIONS. Any representation or warranty made by Borrower
---------------------
herein or in any certificate or financial or other statement heretofore or
hereafter furnished by Borrower or its officers or any Guarantor shall prove to
be in any material respect false and misleading; or
5.3 VIOLATION OF COVENANTS. Default shall be made by Borrower in the due
----------------------
performance or observance of any covenant or condition of the Loans and such
default shall not, within ten (10) days after Borrower has knowledge thereof
have been cured; or
5.4 INSOLVENCY. The filing by Borrower of any petition under the bankruptcy
----------
reorganization, arrangement, insolvency or other debtor's relief laws, or the
filing against Borrower of any such petition or the appointment of a receiver,
trustee or liquidator of all or a substantial part of Borrower's assets if the
filing against Borrower is not dismissed within thirty (30) days thereafter; or
5.5 ASSIGNMENT. The making by Borrower of an assignment for the benefit of
----------
creditors; or
5.6 SUSPENSION OF BUSINESS. The voluntary suspension of business by Borrower;
----------------------
or
5.7 REVOCATION OF GUARANTEE / SUBORDINATION. Any guarantee or subordination
---------------------------------------
agreement required hereunder is breached or becomes ineffective, or any
Guarantor or subordinating creditor disavows or attempts to terminate such
guarantee or subordination agreement; or
5.8 MATERIAL ADVERSE CHANGE. It in the opinion of Bark, there is a materially
-----------------------
adverse change in the financial condition of Borrower or any Guarantor, or for
any reason Bank believes that the prospect of payment or performance pursuant to
the Loans, any other indebtedness of Borrower to Bank, or any other agreement or
instrument required by Bank in connection with the Loans has been impaired; or
5.9 MANAGEMENT CONTROL. If there is a change in senior management (defined as
------------------
Tom Scheir or Bill Savage), or in ownership or control of any of the issued and
outstanding common stock of the Borrower; or
5.10 DEFAULTS UNDER OTHER AGREEMENTS. Borrower shall commit or do or fail to
-------------------------------
commit Agreements or do, any act or thing which would constitute an event of
default under any of the terms of any other agreement, document or instrument
executed, or to be executed by it and concerning the obligation to pay money; or
5.11 MANDATORY DEFAULT PROVISION. Notwithstanding anything to the contrary
---------------------------
contained herein, Bank shall have no duty to make advances under the Loans or
otherwise during any cure period provided for above.
SECTION VI MISCELLANEOUS
-------------
6.1 APPLICABLE LAW. The Loans, and any instrument or agreement required under
--------------
it, shall be governed by and construed under the laws of the State of
California.
26
<PAGE>
6.2 DOCUMENTATION. All advances or loans shall be evidenced by Bank's standard
-------------
forms of documentation and the terms and conditions of this letter are
supplemental to such documentation. However, in the event of any conflict
between the terms of any of the documents and this Agreement, the terms of the
document shall prevail. The Bank's rights herein are cumulative, and the
exclusion of a right for one document when contained in another is not intended
to be a waiver.
6.3 LITIGATION AND ATTORNEYS' FEES. Borrower will pay promptly to Bank without
------------------------------
demand, attorneys' fees including but not limited to the reasonable estimate of
the allocated costs and expenses of in-house legal counsel and legal staff and
all costs and other expenses paid or incurred by Bank in collecting or
compromising the Loans or in enforcing or exercising its rights or remedies
created by, connected with or provided in the Agreement or any other agreement
or instrument required by Bank in connection with the Loans, whether or not suit
is filed. If suit is filed, only the prevailing party shall be entitled to
attorneys' fees and court costs.
ACCEPTANCE:
If you agree to accept the terms of this Agreement, please sign the Agreement
and return it on or before the expiration date of this Agreement which is
September 30, 1997.
1ST BUSINESS BANK
By: /s/ Steven D. Sefton By: /s/ Robert W. Kummer, Jr.
---------------------- ---------------------------
Steven D. Sefton Robert W. Kummer, Jr.
Vice President Chairman
- --------------------------------------------------------------------------------
AGREED AND ACCEPTED THIS 27TH DAY OF DECEMBER, 1996:
STEPHEN DUNN & ASSOCIATES, INC.
By: /s/ Tom Scheir
-------------------------
Tom Scheir
Executive Vice President
Address where notices to Bank Address where notices to Borrower
are to be sent: are to be sent:
1st Business Bank Stephen Dunn & Assoc.,Inc.
601 West 5th Street 1728 Abbot Kinney Blvd.
Los Angeles, CA 90071 Venice, CA 90291-4839
27
<PAGE>
Exhibit 11.1
STATEMENTS REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31 December 31
---------------------------- ---------------------------
1996 1995 1996 1995
------------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Net loss per share was calculated as follows:
Net loss $ (745,609) $ (770,508) $ (2,740,090) $ (906,534)
Periodic non-cash accretions on redeemable
convertible preferred stock (368,723) (786,803)
Non-cash, non-recurring dividends on
conversions of redeemable preferred B stock (8,466,412) (8,466,412)
Non-recurring dividends on repurchase of
redeemable preferred C stock (573,305) (573,305)
Net loss attributable to common stockholders (10,154,049) (770,508) (12,566,610) (906,534)
Primary:
Weighted average common shares outstanding 5,423,871 3,022,542 4,319,377 3,019,407
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 2,076,221 50,854 2,115,340 41,609
Weighted average common and common
equivalent shares outstanding unless antidilutive 5,423,871 3,022,542 4,319,377 3,019,407
Net loss per common share (1.87) (.25) (2.91) (.30)
Fully diluted:
Weighted average common shares outstanding 5,423,871 3,022,542 4,319,377 3,019,417
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 2,076,221 59,098 2,115,340 41,609
Weighted average common and common
equivalent shares outstanding unless antidilutive 5,423,871 3,022,542 4,319,377 3,019,417
Net loss per common share (1.87) (.25) (2.91) (.30)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<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 SIX MONTHS ENDED DECEMBER 31, 1996 INCLUDED IN THIS REPORT ON FORM
10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
</LEGEND>
<CURRENCY> U.S DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 771,949
<SECURITIES> 0
<RECEIVABLES> 430,731
<ALLOWANCES> 46,000
<INVENTORY> 0
<CURRENT-ASSETS> 5,308,752
<PP&E> 880,302
<DEPRECIATION> (103,906)
<TOTAL-ASSETS> 23,093,192
<CURRENT-LIABILITIES> 5,654,755
<BONDS> 0
0
0
<COMMON> 82,861
<OTHER-SE> 13,985,705
<TOTAL-LIABILITY-AND-EQUITY> 23,093,192
<SALES> 9,845,679
<TOTAL-REVENUES> 9,845,679
<CGS> 1,941,820
<TOTAL-COSTS> 1,941,820
<OTHER-EXPENSES> 10,476,402
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 248,164
<INCOME-PRETAX> (2,716,151)
<INCOME-TAX> 23,939
<INCOME-CONTINUING> (2,740,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,740,090)
<EPS-PRIMARY> $(2.91)
<EPS-DILUTED> $(2.91)
</TABLE>
