UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended - May 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 0-18299
NEWS COMMUNICATIONS, INC.
(Exact name of small business issuer as specified in its charter)
Nevada 13-3346991
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
174-15 Horace Harding Expwy., Fresh Meadows, New York 11365
(Address of principal executive offices)
(718) 357-3380
(Issuer's telephone number)
(Former name, former address and former fiscal
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 12, 13 or 15 (d) of the Exchange Act during the past 12 months (or
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 __
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of July 13, 1995:7,783,376 shares $ .01 par value common stock
FORM 10-QSB
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE
PART I. Financial Information
Item 1. Financial Statements
Unaudited Consolidated Balance Sheet
at May 31, 1995............................. 3
Unaudited Consolidated Statements of
Operations for the three and six months
ended May 31, 1995 and May 31, 1994..... 5
Unaudited Consolidated Statements of Cash
Flows for the three and six months ended
May 31, 1995 and May 31, 1994........ 6
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
or Plan of Operation.......................... 9
PART II. Other Information....................... 14
Item 6. Exhibits and Reports on Form 8-K
Signatures....................................................... 15
PART I-ITEM 1
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1995
(UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents $ 161,519
Accounts Receivable [Less: Allowance for
Doubtful Accounts of $990,828] 4,455,715
Due From Related Parties 86,414
Other Current Assets 245,782
Total Current Assets 4,949,430
Property and Equipment at Cost- Net of
Accumulated Depreciation of $600,799 674,944
Goodwill - Net 3,767,849
Other Assets 181,348
Total Assets $ 9,573,571
Liabilities and Stochholders' Equity:
Current Liabilities:
Accounts Payable $ 520,512
Accrued Expenses 176,598
Accrued Payroll Taxes 58,077
Notes Payable - Bank 225,000
Other Current Liabilities 113,419
Total Current Liabilities 1,093,606
Stockholders' Equity:
Preferred Stock, $1.00 Par Value; 500,000 Shares Authorized:
10% Convertible Preferred Stock, 1,250 Shares Authorized;
32 Issued and Outstanding, $500 Per Share Per Annum
Cumulative Dividends, $160,000 Liquidation Value $ 32
8% Convertible Preferred Stock, 500 Shares Authorized,
217 Issued and Outstanding, $80 Per Share Per Annum
Cumulative Dividends, $217,000 Liquidation Value 217
12% Convertible Preferred Stock, 200 Shares Authorized,
200 Issued and Outstanding, $120 Per Share Per Annum
Cumulative Dividends, $200,000 Liquidation Value 200
Common Stock, $.01 Par Value; Authorized 100,000,000
Shares; 7,930,576 Shares Issued 79,306
Paid-in-Capital Preferred Stock 519,873
Paid-in-Capital Common Stock 13,670,123
(Deficit) (5,381,057)
Total $8,888,694
Less: Treasury Stock [151,000 Shares]-
At Cost (408,729)
Total Stockholders' Equity 8,479,965
Total Liabilities and Stockholders' Equity $ 9,573,571
<TABLE>
<CAPTION>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended May 31, Six Months Ended May 31
1995 1994 1995 1994
Unaudited
<S> <C> <C> <C> <C>
Net Revenues $4,556,686 $3,146,464 $7,940,797 $5,343,616
Expenses:
Direct Mechanical Costs 1,256,515 946,069 2,477,223 1,669,338
Salaries, Benefits and
Outside Labor Costs 2,174,756 1,405,424 4,238,258 2,631,193
Rent, Occupancy & Utilities 196,954 122,567 387,662 226,802
Provisions for Doubtful Accounts 36,000 56,000 72,000 89,000
General and Administrative 722,482 356,994 1,246,297 674,846
Total Expenses 4,386,707 2,887,054 8,421,440 5,291,179
Operating Income (Loss) Before Interest
Expense and Interest Income 169,979 259,410 (480,643) 52,437
Interest Expense ---- (6,875) (6,475) (13,750)
Interest Income 23,542 19,113 31,579 32,639
Net Income (Loss) $ 193,521 $ 271,648 $ (455,539) $ 71,326
Net Income (Loss) Per Share $ .02 $ .03 $(.06) $ .01
Weighted Average Shares
Outstanding 7,776,709 7,624,586 7,772,742 7,379,113
</TABLE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended May 31,
1995 1994
Unaudited
Operating Activities:
Net Income (Loss) $ (455,539) $ 71,326
Adjustments to Reconcile Net
(Loss) to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 252,636 172,293
Provision for Losses on Accounts
Receivable 72,000 89,000
Change in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (764,579) (574,428)
(Increase) Decrease in Other Current
Assets (83,579) (221,120)
(Increase) in Due from Related Parties ( 6,294) ----
Decrease (Increase) in Other Assets (1,051) (3,403)
(Increase) Decrease in Goodwill (4,074) ----
Increase (Decrease) in Accounts Payable
and Accrued Expenses (712,889) (85,099)
Increase (Decrease) in Payroll
Taxes Payable (72,789) (78,462)
Increase (Decrease) in Other
Current Liabilities 106,980 5,315
________ _________
Total Adjustments (1,213,639) (695,904)
Net (Deficit) - Operating Activities - (1,669,178) (624,578)
Investing Activities:
Purchase of the Nassau Newspapers ---- (313,000)
Purchase of Bronx Press Review ---- (17,551)
Sale of Marketable Securities 924,633 ----
Capital Expenditures (87,082) (7,039)
Net Cash Provided (Used) by
Investing Activities 837,551 (337,590)
Financing Activities:
Principal Payments Long-Term Debt (75,747) (470,250)
Proceeds from Exercise of Warrants 9,216 2,039,385
Dividend on Preferred Stock (20,680) (20,680)
Proceeds from Exercise of Stock Options 12,500 1,000
Proceeds from Notes Payable - Bank 225,000 ----
__________ ___________
Net Cash Provided by Financing Activities 150,289 1,549,455
Net Increase (Decrease) in Cash (681,338) 587,287
Cash - Beginning of Periods 842,857 2,832,858
Cash - End of Periods $ 161,519 $ 3,420,145
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 9,547 $ 1,747
Income Taxes ---- ----
Supplemental Schedule of Non-Cash Investing and Financing Activities:
On December 9, 1993 the Company acquired certain assets of Long Island
News Group and MB Publishing Co., publishers of eight paid weekly newspapers
in Nassau County, New York (the "Nassau Newspapers"). The net purchase price
consisted of cash and stock valued at approximately $655,000. The cash
portion ($313,000) was paid at the time of acquisition with the stock to be
issued in annual installments beginning in December 1996.
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The Consolidated Balance Sheet as of May 31, 1995 and the Consolidated
Statements of Operations for the three and six-month periods ended May 31,
1995 and May 31, 1994, and the Consolidated Statements of Cash Flows have
been prepared by the company without audit. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary to
present fairly the financial position, results of operations and cash flow
have been made. The results for the interim periods are not necessarily
indicative of the results for a full year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been consolidated or omitted. These consolidated
financial statements should be read in conjunction with the company's annual
report on Form 10-KSB for the fiscal year ended November 30, 1994 and the
related audited financial statements included therein.
B. Loss per Share:
Loss per share is based on the weighted average number of shares
outstanding during the periods.
PART I-ITEM 2
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
News Communications, Inc. publishes various weekly community newspapers
and related targeted audience publications.
The Company publishes the Dan's Papers, and the Montauk Pioneer, Our Town,
the Manhattan Spirit, the Chelsea Clinton News, and the Westsider, the Queens
Tribune, the Bronx Press Review, (and the Riverdale Review and Westchester
Lifestyles), the Nassau Newspapers, (including Lynbrook USA, Malverne Times,
Rockville Centre News & Owl, Valley Stream MAILeader, Independent Voice of
Long Beach, Oceanside & Island Park, Rockville Centre-Oceanside Beacon,
Baldwin Citizen, East Rockaway Observer, six editions of the Long Island
Market and Long Island Lifestyles) and the Brooklyn Skyline - all weekly
regional newspapers. The Company also publishes a monthly glossy magazine,
Manhattan File, and The Hill, a weekly newspaper devoted to coverage of the
United States Congress. The following table sets forth, for the periods
indicated, certain information relating to each of the Company's publications
and to certain expenses incurred by the parent company, News Communications,
Inc. The numbers set forth below reflect the operations of the following
acquired or start-up publications from the dates indicated: Bronx Press
Review - December 1992; Nassau Newspapers - December 1993; Brooklyn Skyline -
August 1994; Manhattan File - August 1994; The Hill - September 1994; Westside
Publications - September 1994. The information for the three and six months
ended May 31, 1995 and May 31, 1994 is unaudited.
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31
1995 1994 1995 1994
Unaudited
<S> <C> <C> <C> <C>
Net Revenues:
Existing Publications:
Queens Tribune $754,806 $ 724,721 $1,423,675 $1,391,394
Dan's Papers 679,817 594,123 913,884 780,489
Manhattan Spirit 468,906 525,409 838,341 870,777
Our Town 400,965 420,278 787,480 792,822
The Bronx Press Review 247,912 318,025 474,079 521,385
Nassau Newspapers 664,887 563,908 1,264,459 986,749
Total Net Revenues -
Existing Publications 3,217,293 3,146,464 5,701,919 5,343,616
Acquisitions and Start-ups:
The Hill 439,130 ---- 616,611 ----
Manhattan File 359,197 ---- 675,918 ----
Brooklyn Skyline 247,727 ---- 451,196 ----
Westside Publications 293,339 ---- 495,153 ----
Total Net Revenues
Acquisitions and Start-ups 1,339,393 ---- 2,238,878 5,343,616
Total Net Revenues $4,556,686 $3,146,464 $7,940,797 $5,433,616
Income (Loss) Publications Before Goodwill:
Existing Publications:
Queens Tribune $ 234,153 $ 258,080 382,892 389,471
Dan's Papers 233,402 158,199 165,411 79,393
Manhattan Spirit 42,971 43,108 56,995 53,444
Our Town 79,429 82,703 143,584 146,417
The Bronx Press Review 11,316 52,041 3,948 53,867
Nassau Newspapers 19,333 24,012 22,704 (18,679)
Income - Existing Publications 620,604 618,143 775,534 703,913
Acquisitions and Start-ups:
The Hill (38,010) ---- (300,220) ----
Manhattan File 9,355 ---- (136,803) ----
Brooklyn Skyline 1,476 ---- (37,478) ----
Westside Publications 25,045 ---- 30,769 ----
Income (Loss) Acquisitions
and Start-ups (2,134) ---- (443,732) ----
Income (Loss) - Publications $ 618,470 $ 618,143 $ 331,802 $703,913
Income (Loss) Publications After Goodwill (1):
Existing Publications:
Queens Tribune $207,436 $ 231,363 329,458 336,037
Dan's Papers 220,727 43,108 140,061 54,043
Manhattan Spirit 42,971 145,524 56,995 53,444
Our Town 65,968 69,242 116,662 119,495
The Bronx Press Review 7,754 49,541 (3,176) 48,867
Nassau Newspapers 11,584 16,512 7,206 (33,679)
Income - Existing Publications 556,440 555,290 647,206 578,207
Acquisitions and Start-ups:
The Hill (38,010) ---- (300,220) ----
Manhattan File 9,355 ---- (136,803) ----
Brooklyn Skyline 82 ---- (40,266) ----
Westside Publications 21,784 ---- 24,247 ----
Income (Loss) Acquisitions
and Start-ups (6,789) ---- (453,042) ----
Income (Loss)-Publications $ 549,651 $ 555,290 $ 194,164 $ 578,207
Parent Company Expenses:
Personnel, Rent, General
and Administrative 379,672 295,880 674,807 525,770
Interest (2) (23,542) (12,238) (25,104) (18,889)
Total Parent Company Expenses 356,130 283,642 649,703 506,881
Net Income (Loss) $ 193,521 $ 271,648 $(455,539) $ 71,326
</TABLE>
<TABLE>
<CAPTION>
(1) Reflects expense for amortization of goodwill by publication as follows:
Three Months Ended May 31, Six Months Ended May 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Queens Tribune $26,717 $26,717 $53,434 $ 53,434
Dan's Papers 12,675 12,675 25,350 25,350
Our Town 13,461 13,461 26,922 26,922
The Bronx Press Review 3,562 2,500 7,124 5,000
Nassau Newspapers 7,749 7,500 15,498 15,000
Brooklyn Skyline 1,394 --- 2,788 ----
Westside Publications 3,261 --- 6,522 ----
$68,819 $62,853 $137,638 $ 125,706
(2) Net of interest income of $23,542 and $19,113 for the three months ended
May 31, 1995 and 1994 respectively and $31,579 and $$32,639 for the six
months ended May 31, 1995 and 1994 respectively.
Results of Operations:
The following discussion compares results of operations for the three months
ended and six months ended May 31, 1995 and May 31, 1994.
Three Months Ended May 31, 1995 and May 31, 1994
Net Revenues:
Total revenues from existing publications were up just over 2%. The
Queens Tribune had an increase (4%) due to an ongoing increased sales effort.
The addition of Long Island Lifestyles, a four color lifestyle section which
is included in all the existing Nassau Newspapers publications has enabled
advertisers to make an effective regional buy and helped increase revenues
for the Nassau Newspapers (18%). Dan's Papers has continued to expand its
geographic base to the north fork of Long Island and further west in the
Hamptons, increasing its revenues (14%). There were decreases in revenues at
the Manhattan Spirit (10%) and Our Town (5%), attributed in part to a change
in sales management. The Bronx Press Review revenues were even after
adjusting for the sale of its building last year. The additional revenues
generated by the acquisitions and start-ups has brought the total revenues
for the quarter to more than $4,500,000, an increase of 45%.
Income (Loss) - Publications:
Net Income from existing publications remained the same, even as
newsprint prices have continued increasing. The Company has been engaging in
ongoing negotiations with paper suppliers and reviewing contracts with
printers which has enabled it to continue to maintain profits. The decrease
in income for the Queens Tribune is attributed primarily to expansion with
a new door-to-door edition in the affluent Bayside area of Queens. Dan's
Papers had an increase (47%) as a result of the increase in revenues and
tighter financial controls. The Bronx Press Review had a smaller profit
compared to last year as a result of the gain on the sale of its building
last year. The increase in sales for Nassau Newspapers showed a slightly
lower profit than last year as a result of its expansion with Long Island
Lifestyles. The Manhattan Spirit and Our Town both were able to maintain
last years profit levels. The Hill had a small loss for the three months, but
all the other start-ups and aquisitions showed profits. The Company is
continuing to focus on increasing sales and controlling costs.
Parent Company Expenses:
The increase in parent company expenses (28%) was primarily a result of
increased rent and personnel costs required for the continuing corporate
growth and expansion.
Six Months Ended May 31, 1995 and May 31, 1994
Net Revenues:
Total revenues from existing publications were up over 6%. The addition
of Long Island Lifestyles, a four color lifestyle section which is included
in all the existing Nassau Newspapers publications has enabled advertisers to
make an effective regional buy and helped increase revenues for the Nassau
Newspapers (28%). The Queens Tribune has expanded with an edition in the
affluent Bayside section of Queens and will be realizing additional revenues
in future periods. Dan's Papers has continued to expand its geographic base
to the north fork of Long Island and further west in the Hamptons, increasing
its revenues (17%). The additional revenues generated by the acquisitions and
start-ups has brought the total revenues for the six months to almost
$8,000,000, an increase of 46%.
Income (Loss) - Publications:
Net Income from existing publications increased by more than 10%. Dan's
Papers had an increase (109%) as a result of the increase in revenues and
tighter financial controls. The Bronx Press Review had a slight profit
compared to last year as a result of the sale of its building last year. The
increase in sales for Nassau Newspapers resulted in a profit this year as
compared to a loss of almost $20,000 last year. All other existing
publications were able to maintain last years profit levels. The Company is
continuing to focus on increasing sales and controlling costs. As newsprint
prices have increased, the Company has been engaging in ongoing negotiations
with paper suppliers and reviewing contracts with printers which has enabled
it to continue to increase profits .
Parent Company Expenses:
The increase in parent company expenses (28%) was primarily a result of
increased rent and personnel costs required for the continuing corporate
growth and expansion.
Liquidity and Capital Resources:
At May 31, 1995, the Company had an excess of current assets over current
liabilities in the amount of approximately $3,855,000. In January 1995,
$85,000 was used to pay notes and accrued interest incurred with the
acquisition of the Bronx Press Review. In May 1995 the Company obtained a
$500,000 working capital line of credit, from a bank, to be used to offset
seasonal fluctuations in cashflow.
Although there can be no assurance, management believes that the Company's
operations will generate positive cash flow for the fiscal year ending
November 30, 1995. It is the opinion of management that the line of credit
and cash on hand and from operations are expected to be sufficient to meet
the Company's cash needs on an ongoing basis.
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - None
B. Reports on Form 8-K - None
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
NEWS COMMUNICATIONS, INC.
(Registrant)
Date: July 14, 1995 By:/s/ Michael Schenkler
Michael Schenkler, President
Date: July 14, 1995 By:/s/ Robert Berkowitz
Robert Berkowitz, Controller
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENTS OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1995
<PERIOD-END> MAY-31-1995
<CASH> 161,519
<SECURITIES> 0
<RECEIVABLES> 5,446,543
<ALLOWANCES> 990,828
<INVENTORY> 0
<CURRENT-ASSETS> 4,949,430
<PP&E> 1,275,743
<DEPRECIATION> 600,799
<TOTAL-ASSETS> 9,573,571
<CURRENT-LIABILITIES> 1,093,606
<BONDS> 0
<COMMON> 79,306
449
0
<OTHER-SE> 14,189,996
<TOTAL-LIABILITY-AND-EQUITY> 9,573,571
<SALES> 7,940,797
<TOTAL-REVENUES> 7,940,797
<CGS> 0
<TOTAL-COSTS> 8,421,440
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (25,104)
<INCOME-PRETAX> (455,539)
<INCOME-TAX> 0
<INCOME-CONTINUING> (455,539)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (455,539)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> 0
</TABLE>
