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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 September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ___________________to______________________
Commission file number 0-16730
ALL-COMM MEDIA CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0085608
- ----------------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
400 Corporate Pointe, Suite 780
Culver City, California 90230
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Registrant's telephone number, including area code: (310) 342-2800
----------------
Securities registered pursuant to Section 12(b) of the Act: None
----------------
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $.01 per share
--------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- ------
As of November 12, 1996, there were 5,105,407 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
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1 Interim Condensed Consolidated Financial Statements
(unaudited)
Condensed Consolidated Balance Sheets -
September 30, 1996 and June 30, 1996 3
Condensed Consolidated Statements of Operations -
Three months ended September 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows -
Three months ended September 30, 1996 and 1995 5
Notes to Interim Condensed Consolidated Financial
Statements 6-9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9-12
PART II - OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders 13
Item 6 Exhibits and Reports of Form 8-K
(a) Exhibits 14
(b) Reports on Form 8-K 15
Signatures 16
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)
ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
September 30, 1996 June 30, 1996
ASSETS (as restated) (as restated)
- ------ ------------ ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,180,129 $ 1,393,044
Accounts receivable, net of
allowance for doubtful accounts
of $6,000 at September 30
and $34,906 at June 30 1,864,425 2,681,748
Land held for sale at cost 921,465
Other current assets 560,968 107,658
------------ ------------
Total current assets 3,605,522 5,103,915
Property and equipment at cost, net 494,031 299,045
Intangible assets at cost, net 7,755,414 7,851,060
Other assets 35,846 47,046
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Total assets $ 11,890,813 $ 13,301,066
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 102,224 $ 500,000
Trade accounts payable 317,228 470,706
Accrued salaries and wages 420,773 706,039
Other accrued expenses 485,404 758,112
Income taxes payable 10,000
Long-term obligations to
related party, current portion 700,000 583,333
Related party payable 425,000
------------ ------------
Total current liabilities 2,025,629 3,453,190
Long-term obligations to related
party less current portion 1,341,667 1,516,667
Other liabilities 111,105 80,315
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Total liabilities 3,478,401 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; 2,000 shares of
Series C Convertible Preferred
Stock issued and outstanding 1,667,434 1,306,358
------------ ------------
Stockholders' equity:
Convertible preferred stock, $.01
par value; 50,000 shares authorized,
8,200 redeemable shares outstanding -- --
Common stock - authorized 6,250,000
shares of $.01 par value at June 30,
1996, increased in August 1996 to
36,250,000; 3,303,207 and 3,198,534
shares issued, respectively 33,032 31,985
Additional paid-in capital 14,967,396 13,173,520
Accumulated deficit (8,119,981) (6,125,500)
Less 11,800 shares of common stock
in treasury, at cost (135,469) (135,469)
------------ ------------
Total stockholders' equity 6,744,978 6,944,536
------------ ------------
Total liabilities and stockholders'
equity $ 11,890,813 $ 13,301,066
============ ============
</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 MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(as restated)
<S> <C> <C>
Revenues $ 3,932,030 $ 3,926,438
----------- -----------
Operating costs and expenses:
Salaries and benefits 4,953,499 3,161,669
Direct costs 145,230 129,713
Selling, general and administrative 544,636 386,575
Professional fees 168,187 145,428
Amortization of intangible assets 95,646 90,226
----------- -----------
Total operating costs and expenses 5,907,198 3,913,611
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Income (loss) from operations (1,975,168) 12,827
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Other income (expense):
Gain from sale of land 90,021
Interest income 9,561 3,244
Interest expense (114,917) (98,802)
----------- -----------
Total (15,335) (95,558)
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Loss before income taxes (1,990,503) (82,731)
Provision for income taxes (3,978) (53,295)
----------- -----------
Net loss $(1,994,481) $ (136,026)
=========== ===========
Net loss per common share $ (.62) $ (.05)
=========== ===========
Weighted average common and common
equivalent shares outstanding 3,214,884 3,016,028
=========== ===========
</TABLE>
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 THREE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(unaudited)
<TABLE>
<CAPTION>
1996 1995
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Operating activities: (as restated)
<S> <C> <C>
Net loss $(1,994,481) $ (136,026)
Adjustments to reconcile loss to net cash
provided by (used in) operating activities:
Gain from sale of land (90,021)
Depreciation 38,086 44,863
Amortization 95,646 90,226
Option issuances to two principal
executive officers 1,650,000
Warrant issuances to consultants 76,000
Accrued interest on redeemable
convertible preferred stock 66,500
Changes in assets and liabilities:
Accounts receivable 817,323 208,627
Other current assets (128,310) (9,326)
Other assets (6,500) (4,087)
Trade accounts payable (153,478) (28,106)
Accrued expenses and other
current liabilities (749,942) (64,249)
Income taxes payable (10,000) (19,838)
----------- -----------
Net cash provided by (used in)
operating activities (389,177) 82,084
----------- -----------
Investing activities:
Net proceeds from sale of land 860,443
Proceeds from issuances of warrants 5,000
Purchase of property and equipment (233,072) (13,696)
Payments relating to acquisition of
Alliance and SD&A (40,806)
----------- -----------
Net cash provided by (used in)
investing activities 632,371 (54,502)
----------- -----------
Financing activities:
Repayments of bank loans (397,776) (19,588)
Repayments of notes payable other (18,000)
Repayment of acquisition debt (58,333) (375,000)
----------- -----------
Net cash used in financing activities (456,109) (412,588)
----------- -----------
Net decrease in cash and cash equivalents (212,915) (385,006)
Cash and cash equivalents at beginning
of period 1,393,044 1,217,772
----------- -----------
Cash and cash equivalents at end of period $ 1,180,129 $ 832,766
=========== ===========
</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 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 September 1996, the Company incurred approximately $325,000 in accrued
professional fees related to acquisitions and registration statement preparation
which were deferred as of September 30, 1996.
Accrued and unpaid interest on shares of Redeemable Convertible Preferred Stock
during the three months ended September 30, 1996 totaled $66,500 which are
payable in common stock.
See Notes to Condensed Consolidated Financial Statements.
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ALL-COMM MEDIA CORPORATION AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited Interim Condensed Consolidated Financial
Statements include the accounts of All-Comm Media Corporation and Subsidiaries
(the "Company"). They have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-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 month period ended September 30, 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. Primary and fully diluted loss per share are
the same in the periods presented.
3. ACQUISITION OF ALLIANCE MEDIA CORPORATION AND STEPHEN DUNN &
ASSOCIATES, INC.
On April 25, 1995, the Company acquired all of the outstanding common
shares of Alliance Media Corporation ("Alliance") which simultaneously acquired
Stephen Dunn & Associates, Inc. ("SD&A").
These acquisitions were accounted for using the purchase method. The
operating results of these acquisitions are included in the results of
operations from the date of acquisition.
4. LONG-TERM OBLIGATIONS TO RELATED PARTY
In connection with the acquisition of SD&A on April 25, 1995, Alliance
issued promissory notes totaling $4,500,000 to SD&A's current president and
former sole shareholder. The notes bore interest at the prime rate, not to
exceed 10% or drop below 8%, payable monthly. Principal payments were due
quarterly, and originally $1,500,000 was due in quarterly installments during
fiscal 1996. During 1996, principal payments of $2,400,000 were made and the
long-term obligations were restructured such that the remaining obligations of
$2,100,000 are now payable at $58,333 per month, plus interest at 8%, starting
September 19, 1996.
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5. INCOME TAXES
In the three month periods ended September 30, 1996 and 1995, the income
tax provision totaled $4,000 and $53,000 on losses from operations of $1,991,000
and $83,000, respectively. The 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.
6. 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, a bond
measure was passed by Clark County, Nevada authorities, 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
to, and liability assumed by, an unaffiliated third party, by auction, 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 (the fair market value of the stock as of the
effective date of the grant), and the remaining 150,000 each were granted at an
exercise price of $3.00 per share. The options vest and are exercisable
immediately and expire on July 1, 2001. In connection with the grant of these
options, the Company incurred a non-recurring, non-cash charge of $1,650,000 to
compensation expense. (See Note 9).
8. SUBSEQUENT EVENTS
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 shall be due and payable, together with interest thereon
at the rate of 6% per annum, 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 an exchange rate of $5.38
per share. Metro develops and markets information-based services, used primarily
in direct marketing by a variety of commercial and not-for-profit organizations,
principally in the United States.
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 relates to an underwritten public
offering (the "Underwritten Offering") of 2,100,000 shares of Common Stock, of
which 1,750,000 shares are being offered by the Company and 350,000 are being
offered by certain
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stockholders of the Company. It also relates to the sale of 1,381,056 shares
(the "Delayed 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. Of
such Delayed Shares, 1,291,588 shares will be subject to "lock up" provisions
that prohibit resale of such shares for a period of nine months from the date of
consummation of the Underwritten Offering.
In connection with the Company's filing on Form SB-2, the Convertible
Preferred Stock in the accompanying financial statements has been reclassified
in accordance with the Securities and Exchange Commission's requirements.
Accordingly, the Redeemable Convertible Preferred Stock is no longer presented
as part of stockholders' equity and its initial carrying value is being
increased to its redemption value by periodic accretions against paid in
capital. (See Note 9).
The Company and certain of its securityholders have agreed, on December
23, 1996, to effect 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"), will be 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"), will be repurchased for
promissory notes in an aggregate principal amount of $1.0 million, which
promissory notes will bear interest at a rate of 8% per annum and will be
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 will mature June 7, 1998; (iii) all accrued interest on the Series B
Preferred Stock and the Series C Preferred Stock will be converted into 88,840
shares of Common Stock; (iv) warrants related to the Series C Preferred Stock,
currently exercisable for 3,000,000 shares of Common Stock, will be exchanged
for 600,000 shares of Common Stock; (v) agreements with certain of the Company's
securityholders to issue, upon consummation of the Underwritten Offering,
warrants exercisable for 1,038,503 shares of Common Stock in consideration for
such securityholders' agreement to certain lock-up arrangements will be
rescinded at no cost to the Company; and (vi) options held by two of the
Company's principal executive officers to purchase 300,000 shares of common
stock will be cancelled 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, estimated to be $8.5 million. This dividend will not impact net income
(loss), but will impact net income (loss) attributable to common stockholders in
the calculation of earnings per share.
In connection with the Underwritten Offering, the Company will incur a
non-recurring non-cash charge estimated to be $75,000 in the fiscal quarter in
which the Underwritten Offering is consummated, as a result of the issuance by
the Company of warrants exercisable for an aggregate of up to 160,414 shares of
Common Stock to certain stockholders of the Company as consideration for the
agreement of such stockholders to certain lock-up arrangements.
9. RESTATEMENTS FOR CORRECTIONS OF ERRORS
The accompanying financial statements for the three months ended September
30, 1996 have been 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.
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The net loss attributable to common stockholders was originally reported at
$344,481 and related net loss per share was $(0.11).
Subsequently, the Company has 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 has 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 has increased the net loss 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 contains 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 accompanying financial statements have been restated
accordingly. In conjunction with this, previously recorded dividends of $66,500
have been reclassified as interest and the net loss of $277,981 increased to
$344,481. These was no impact on earnings per share, as the dividends had
previously increased the net loss attributable to common stockholders to
$344,481.
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 month period ended September 30, 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").
The Company operates 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 8 to the condensed consolidated
financial statements included in this Form 10-QSB, in October 1996 the Company
purchased 100% of the stock of Metro Services Group, Inc. ("Metro"). This
acquisition will be reflected in the consolidated financial statements using the
purchase method of accounting starting in October 1996. Metro develops and
markets information-based services used primarily in direct marketing by a
variety of commercial and not-for-profit organizations.
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Results of Operations for the Three Months Ended September 30, 1996, Compared to
the Three Months Ended September 30, 1995
Revenues of $3,932,000 in the three months ended September 30, 1996 (the
"current period") increased by $6,000 over revenues of $3,926,000 in the three
months ended September 30, 1995 (the "prior period"). Revenues from on-site
telemarketing and telefundraising campaigns totaled $3,417,000 and $3,421,000,
respectively, or 86.9% and 87.1% of revenues in the current and prior periods,
respectively. Revenues from off-site campaigns totaled $516,000 and $505,000,
respectively, or 13.1% and 12.9% of revenues, respectively, in the current and
prior periods. During the three months ended September 30, 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 $4,953,000 in the current period increased by
$1,792,000 over the prior period total of $3,161,000. Salaries and benefits also
increased as a percentage of revenues, from 80.5% in the prior period, to 126.0%
in the current period. Telemarketing sales labor expense increased by $152,000
in the current period. This increase was largely due to commencement of on-site
campaigns for new clients in the current period (which generally require a
higher labor expense in the early years). Off-site and administrative salaries
at SD&A increased by $58,000, the majority of which, $32,000, was attributable
to hiring of new telemarketing sales representatives to staff the newly
relocated and expanded Berkeley calling center, and the balance of which
included the hiring of a human resources director. These increases were
partially offset by a $68,000 reduction in parent company administrative
salaries in the current period as compared to the prior period. 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
such 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 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 $145,000 in the current period increased by $15,000 over
direct costs of $130,000 in the prior period, primarily attributable to higher
telephone costs incurred for off-site campaigns.
Selling, general and administrative expenses of $545,000 in the current
period increased by $158,000, or 41%, over comparable expenses of $387,000 in
the prior period. Of the increase, $101,000 was attributable to SD&A and $57,000
to corporate administration. At SD&A, travel expense increased by $47,000 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,
$11,000 was a one-time moving and additional rent expense due to relocating the
off-site calling center in August 1996 and the remaining increase of $43,000
resulted principally from an increase in printing, promotion and advertising
expenses. At the parent company level, public relations expenses increased by
$41,000 due to the hiring of a new firm in the current period. Parent company
travel expenses increased by $12,000 due to increased acquisition and financing
efforts. Directors fees of $9,000 were incurred for a September 1996 meeting; no
such meeting was held in the prior period. Net decreases of $5,000 resulted from
reductions in director and officer insurance premiums and other miscellaneous
items.
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Professional fees of $168,000 in the current period, associated with
various valuation studies and analysis relating to financial matters, increased
by $23,000 over professional fees of $145,000 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. 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 $96,000 in the current period
increased by $6,000 over amortization of $90,000 in the prior period.
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 $115,000 in the current period increased by $16,000
compared to $99,000 in the prior period due to amounts payable to the holders of
the Series B Preferred Stock and Series C Preferred Stock in the current period,
principal payments on the SD&A seller debt and reductions in the interest rate.
The provision for income taxes of $4,000 in the current period decreased
by $49,000 compared to $53,000 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. As a result of the
foregoing factors, the Company's net loss increased from $136,000 ($0.05 per
share) in the prior period to $1,994,481 ($0.62 per share) in the current
period.
Capital Resources and Liquidity
At September 30, 1996 and June 30, 1996, on a consolidated basis the
Company had cash and cash equivalents of $1,180,000 and $1,393,000,
respectively, and accounts receivable net of allowances of $1,864,000 and
$2,682,000, respectively.
The Company generated losses from operations of $1,994,000 in the current
period and used net cash in operating activities of $389,000. These losses in
the current period were due primarily to 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 first fiscal quarters, at
September 30, 1996, accounts receivable relating to the SD&A operation decreased
$817,000 and trade accounts payable and accrued liabilities decreased $903,000
compared to levels at June 30, 1996.
In part due to certain seasonal marketing patterns and subscriptions,
revenues are expected to decrease during the second and third fiscal quarters.
Starting in October 1996, the Company will recognize revenues of Metro. The
fourth calendar quarter, which is the Company's second fiscal quarter, has
historically been Metro's strongest. The Company cannot predict the degree to
which, on a consolidated basis, these trends will continue.
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In the current period, net cash of $632,000 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 $233,000 resulted primarily from the
Company's relocation and expansion of its Berkeley calling center in August
1996.
In the current period financing activities used $456,000. The Company has
a $500,000 line of credit with a bank which was fully drawn as of June 30, 1996.
During the current period the Company repaid $398,000 on the line. The Company
is exploring the possible increase or replacement of such line of credit with a
larger credit facility. No assurance can be given that the Company will be able
to obtain such a replacement credit facility, or that any such replacement
credit facility will be larger than the existing facility.
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.
Amortization expense will increase starting in October 1996 with the
inclusion of Metro operating results and recognition of goodwill arising from
that acquisition. 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 relates to an offering of 2,100,000
shares of Common Stock, of which 1,750,000 shares are being offered by the
Company and 350,000 are being offered by certain stockholders of the Company
(the "Offering"). It also relates to the sale of 1,381,056 shares of Common
Stock by certain selling stockholders. 1,291,588 shares will be subject to "lock
up" provisions that prohibit resale of such shares for a period of nine months
from the Company's offering.
In connection with the offering, the Company will incur a non-recurring
non-cash charge estimated to be $75,000 million in the fiscal quarter in which
the offering is consummated, as a result of the issuance by the Company of
warrants exercisable for an aggregate of up to 160,414 shares of Common Stock to
certain stockholders of the Company as consideration for the agreement of such
stockholders to certain lock-up arrangements. There can be no assurance as to
when or whether the Offering will be consummated, or the terms thereof.
The Company believes that the net proceeds of the Offering, if
consummated, together with the funds available from operations, including the
operations of Metro and from the August 1996 sale of the Laughlin, Nevada land,
should be adequate to finance its operations and enable the Company to meet
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.
12
<PAGE> 13
PART II - OTHER INFORMATION
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>
13
<PAGE> 14
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
11.1 Statement Regarding Computation of Net Income D
Per Share
27.1 Financial Data Schedule D
</TABLE>
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.
14
<PAGE> 15
b) Reports on Form 8-K
1. On or about August 16, 1996, the Company filed a Current
Report on Form 8-K regarding the sale of its undeveloped land
in Laughlin, Nevada, for $952,000.
2. 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.
15
<PAGE> 16
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: January 24, 1997
16
<PAGE> 1
Exhibit 11.1
STATEMENTS REGARDING COMPUTATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended September 30
--------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Net loss per share was calculated as follows:
Net loss $(1,994,481) $ (136,026)
Primary:
Weighted average common shares outstanding 3,214,884 3,016,028
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 3,500,731 11,063
Incremental shares under convertible preferred stock 1,907,295
Weighted average common and common equivalent
shares outstanding unless antidilutive 3,214,884 3,016,028
Net loss per common share (.62) (.05)
Fully diluted:
Weighted average common shares outstanding 3,214,884 3,016,028
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 3,500,731 11,063
Incremental shares under convertible preferred stock 1,907,295
Weighted average common and common equivalent
shares outstanding unless antidilutive 3,214,884 3,016,028
Net loss per common share (.62) (.05)
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OF ALL-COMM MEDIA CORPORATION AS OF
AND FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1996 INCLUDED IN THIS REPORT ON
FORM 10-QSB AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,180,129
<SECURITIES> 0
<RECEIVABLES> 1,180,425
<ALLOWANCES> 6,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,605,522
<PP&E> 705,449
<DEPRECIATION> (211,418)
<TOTAL-ASSETS> 11,890,813
<CURRENT-LIABILITIES> 2,025,629
<BONDS> 1,452,772
1,667,434
0
<COMMON> 33,032
<OTHER-SE> 6,711,946
<TOTAL-LIABILITY-AND-EQUITY> 11,890,813
<SALES> 3,932,030
<TOTAL-REVENUES> 3,932,030
<CGS> 145,230
<TOTAL-COSTS> 145,230
<OTHER-EXPENSES> 4,953,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 114,917
<INCOME-PRETAX> (1,990,503)
<INCOME-TAX> 3,978
<INCOME-CONTINUING> (1,994,481)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,994,481)
<EPS-PRIMARY> (.62)
<EPS-DILUTED> (.62)
</TABLE>
