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, 1996
[ ] 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 12, 1996: 7,826,415 shares $ .01 par value common stock
1
<PAGE>
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, 1996...................................... 3
Unaudited Consolidated Statements of
Operations for the three and six months
ended May 31, 1996 and May 31, 1995................... 5
Unaudited Consolidated Statements of Cash
Flows for the three and six months ended
May 31, 1996 and May 31, 1995........................ 6
Notes to Consolidated Financial Statements............ 8
Item 2. Management's Discussion and Analysis
or Plan of Operation.................................. 9
PART II. Other Information.................................... 15
Item 6. Exhibits and Reports on Form 8-K
Signatures............................................ 16
2
<PAGE>
PART I-ITEM 1
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1996
(UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents $ 389,885
Accounts Receivable [Less: Allowance for
Doubtful Accounts of $1,482,314] 5,066,265
Due From Related Parties 123,645
Other Current Assets 167,989
---------
Total Current Assets 5,747,784
Property and Equipment at Cost- Net of
Accumulated Depreciation of $769,964 598,621
Goodwill - Net 3,523,430
Other Assets 124,725
---------
Total Assets $ 9,994,560
=========
3
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF MAY 31, 1996
(UNAUDITED)
Liabilities and Stochholders' Equity:
Current Liabilities:
Accounts Payable $ 1,167,388
Accrued Expenses 610,442
Accrued Payroll and Payroll Taxes 320,914
Notes Payable - Bank 1,175,000
Due to Related Parties 13,567
----------
Total Current Liabilities 3,287,311
----------
Minority Interest 47,788
Notes Payable - Shareholder 1,000,000
----------
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; 7,977,415 Shares Issued 79,774
Paid-in-Capital Preferred Stock 519,873
Paid-in-Capital Common Stock 13,755,256
(Deficit) (8,287,162)
Total $6,068,190
Less: Treasury Stock [151,000 Shares]-
At Cost (408,729)
Total Stockholders' Equity 5,659,461
Total Liabilities and Stockholders' Equity $ 9,994,560
===========
4
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31
-------------------------- -----------------------
1996 1995 1996 1995
---- ---- ---- ----
Unaudited
<S> <C> <C> <C> <C>
Net Revenues $5,028,739 $4,632,504 $8,660,199 $8,001,614
--------- --------- --------- ---------
Expenses:
Direct Mechanical Costs 1,800,726 1,571,528 3,411,961 2,913,303
Salaries, Benefits and
Outside Labor Costs 2,397,526 2,383,379 4,704,679 4,561,602
Rent, Occupancy & Utilities 222,231 196,954 463,675 387,662
Provisions for Doubtful Accounts 43,000 36,000 88,000 72,000
General and Administrative 594,153 722,483 1,109,601 1,246,297
--------- --------- --------- ---------
Total Expenses 5,057,636 4,910,344 9,777,916 9,180,864
--------- --------- --------- ---------
Operating Income (Loss) Before Interest
Expense and Interest Income (28,897) (277,840) (1,117,717) (1,179,250)
Interest Expense (20,727) -- (40,318) (6,475)
Interest Income -- 23,542 -- 31,579
--------- ------- ---------- ---------
Net Income (Loss) $ (49,624) $ (254 298) $ (1,158,035) $(1,154,146)
========= ========= =========== ==========
Net Income (Loss) Per Share $ (.01) $ (.03) $(.15) $( .15)
========= ======== =========== ==========
Weighted Average Shares
Outstanding 7,823,415 7,776,709 7,820,978 7,772,742
========== ========= ========= ===========
</TABLE>
5
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended May 31,
1996 1995
---- ----
Unaudited
<S> <C> <C>
Operating Activities:
Net Income (Loss) $ (1,158,035) $ (1,154,146)
---------- -----------
Adjustments to Reconcile Net
(Loss) to Net Cash Provided
by Operating Activities:
Depreciation and Amortization 232,891 252,636
Provision for Losses on Accounts
Receivable 88,000 72,000
Change in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable (423,584) (764,579)
(Increase) Decrease in Other Current
Assets (89,919) (83,579)
(Increase) in Due from Related Parties ( 4,412) (6,294)
Decrease (Increase) in Other Assets -- (1,051)
(Increase) Decrease in Goodwill 29,454 (4,074)
Increase (Decrease) in Accounts Payable
and Accrued Expenses 47,067 (14,282)
Increase (Decrease) in Payroll Taxes Payable (1,238) (72,789)
Increase (Decrease) in Other Current Liabilities (15,615) 106,980
________ _________
Total Adjustments (137,356) (515,032)
-------- ---------
Net (Deficit) - Operating Activities - (1,295,391) (1,669,178)
Forward
</TABLE>
6
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended May 31,
1996 1995
---- ----
<S> <C> <C>
Unaudited
Net (Deficit) - Operating Activities -
Forwarded (1,295,391) (1,669,178)
========= =========
Investing Activities:
Sale of Marketable Securities -- 924,633
Capital Expenditures (31,516) (87,082)
--------- ---------
Net Cash Provided (Used) by Investing Activities (31,516) 837,551
--------- ---------
Financing Activities:
Principal Payments Long-Term Debt (24,000) (75,747)
Proceeds from Exercise of Warrants 19,498 9,216
Dividend on Preferred Stock (20,680) (20,680)
Proceeds from Exercise of Stock Options 12,500 12,500
Proceeds from Notes Payable - Bank 675,000 225,000
Proceeds from Notes Payable - Shareholder 1,000,000 --
--------- --------
Net Cash Provided by Financing Activities 1,662,318 150,289
--------- --------
Net Increase (Decrease) in Cash 335,411 (681,388)
Cash - Beginning of Periods 54,474 842,857
--------- --------
Cash - End of Periods $ 389,885 $ 161,519
============= ==========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ 24,713 $ 9,547
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.
</TABLE>
7
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The Consolidated Balance Sheet as of May 31, 1996 and the Consolidated
Statements of Operations for the three and six-month periods ended May 31, 1996
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 Form 10-KSB for
the fiscal year ended November 30, 1995 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.
C. The results of operations for 1995 have been restated to reflect additional
expenses and loss.
8
<PAGE>
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 argeted audience publications.
The Company publishes the Dan's Papers, and he 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), 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, 1996 and May 31, 1995 is unaudited.
9
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended May 31, Six Months Ended May 31
1996 1995 (3) 1996 1995 (3)
Unaudited
<S> <C> <C> <C> <C>
Net Revenues:
Queens Tribune $1,001,923 $ 830,624 $1,691,475 $1,499,493
Dan's Papers 821,218 679,817 1,098,354 913,884
Manhattan Spirit 427,107 468,906 800,513 838,341
Our Town 370,532 400,965 708,782 787,480
The Bronx Press/Riverdale Review 250,911 247,912 466,280 474,079
Nassau Newspapers 720,429 664,887 1,356,562 1,249,459
The Hill 414,625 439,130 691,743 616,611
Manhattan File 454,160 359,197 788,303 675,918
Brooklyn Skyline 323,462 247,727 595,883 451,196
Westside Publications 244,372 293,339 462,304 495,153
-------- --------- ---------- ----------
Total Net Revenues $ 5,028,739 $ 4,632,504 $ 8,660,199 $ 8,001,614
=========== ========== ========== ==========
Income (Loss) Publications Before Goodwill:
Queens Tribune $ 242,946 $ 180,518 272,793 293,843
Dan's Papers 223,505 189,173 123,791 114,970
Manhattan Spirit 24,172 37,582 25,880 20,523
Our Town 38,950 46,847 50,111 80,092
The Bronx Press/Riverdale Review 34,456 (2,900) 11,251 (14,921)
Nassau Newspapers 32,458 (84,627) (112,711) (185,131)
The Hill (88,435) (69,068) (307,233) (340,108)
Manhattan File (54,211) (92,620) (218,602) (244,931)
Brooklyn Skyline (12,874) (31,805) (54,119) (84,726)
Westside Publications 9,399 16,473 (25,911) 18,314
---------- ---------- --------- -------
Income (Loss) - Publications $ 450,366 $ 189,573 $ (234,750) $ (342,075)
=========== ========= ========== =========
Income (Loss) Publications After Goodwill (1):
Queens Tribune $ 216,229 $ 153,801 219,359 240,409
Dan's Papers 210,830 176,498 98,441 89,620
Manhattan Spirit 24,172 37,582 25,880 20,523
Our Town 25,489 33,386 23,189 53,170
The Bronx Press/Riverdale Review 30,894 (6,462) 4,127 (22,045)
Nassau Newspapers 23,997 (92,376) (129,633) (200,629)
The Hill (88,435) (69,068) (307,233) (340,108)
Manhattan File (55,011) (92,620) (220,202) (244,931)
Brooklyn Skyline (14,404) (33,199) (57,179) (87,514)
Westside Publications 5,325 13,212 (34,059) 11,792
---------- --------- -------- ----------
Income (Loss)-Publications $ 379,086 $ 120,754 $ (377,310) $ (479,713)
========== ========= ========= ==========
</TABLE>
10
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Parent Company Expenses:
Personnel, Rent, General and Administrative 407,983 398,594 740,407 699,537
Interest (2) 20,727 (23,542) 40,318 (25,104)
--------- --------- ---------- -----------
Total Parent Company Expenses 428,710 375,052 780,725 674,433
--------- --------- ---------- -----------
Net Income (Loss) $ (49,624) $ (254,298) $(1,158,035) $ (1,154,146)
========= =========== ========== ===========
</TABLE>
(1) Reflects expense for amortization of goodwill by publication as follows:
Three Months Ended May 31,
Six Months Ended May 31,
1996 1995 1996
<TABLE>
<S> <C> <C> <C> <C>
1995
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 3,562 7,124 7,124
Nassau Newspapers 8,461 7,749 16,922 15,498
Brooklyn Skyline 1,530 1,394 3,060 2,788
Manhattan File 800 -- 1,600
--
Westside Publications 4,074 3,261 8,148 6,522
------ ------ ------- --------
$ 71,280 $ 68,819 $ 142,560
======== ======== =========
$ 137,638
========
<FN>
(2) Net of interest income of $23,542 for the three months ended May 31, 1995
and $31,579 for the six months ended May 31, 1995.
(3) The results of operations for 1995 have been restated to reflect additional
expenses and loss.
</FN>
</TABLE>
Results of Operations:
The following discussion compares results of operations for the three months
ended and six months ended May 31, 1996 and May 31, 1995.
11
<PAGE>
Three Months Ended May 31, 1996 and May 31, 1995
Net Revenues:
Total revenues from existing publications were up almost 9%. The Queens Tribune
had an increase (21%) due to expansion with the "Bayside Trib at Home" and the
shifting of its anniversary issue to the second quarter. The ddition 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
(8%). Dan's Papers has continued to expand its geographic base further west in
the Long Island posh resort area, the Hamptons, as well as positioning itself as
the advertising standard on Long Island's east end, increasing its revenues
(21%). There were decreases in revenues at the Manhattan Spirit (9%), Our Town
(8%)and Westside (17%), attributed in part to a change in sales management. The
Hill had a decrease (6%) in revenue as a result of frequent periods when
Congress was not in session during the quarter due to a presidential election
year. Manhattan File had an increase (26%) in revenue as a result of an improved
sales effort. Brooklyn Skyline had an increase (31%) due to its expansion into a
fifth zone and an ongoing increased sales effort.
Income (Loss) - Publications:
Net Income from publications increased dramatically as the Company has
started to feel the effect of a series of budget cuts, instituted during the
second quarter, which will save the Company approximately $1.3 million on an
annualized basis In addition, the Company has ongoing negotiations with printers
to take advantage of decreasing newsprint prices. Although the Company wa paying
substantially more for newsprint/printing during this period as compared to the
previous year, during the third quarter printing prices are expected to be lower
than the prior year. The increases in income for the Queens Tribune (34%) and
Dan's Papers (18%), are attributed to their increased revenues and budget cuts.
The Bronx Press Review had a profit compared to a loss last year as a result of
the its budget cuts. The increase in sales for Nassau Newspapers combined with
budget cuts resulted in a profit this year as compared to a loss last year. The
Manhattan Spirit, Our Town and Westside had decreases in income as a result of
decreased revenues. The Hill had an increased loss as a result of lower
revenues. As a result of budget cuts and incresed revenues, Manhattan File
decreased its loss as compared to last year.
The Company is continuing to focus on increasing sales and controlling
costs.
12
<PAGE>
Parent Company Expenses:
The increase in parent company expenses was primarily a result of
increased interest expense.
Six Months Ended May 31, 1996 and May 31, 1995
Net Revenues:
Total revenues from existing publications were up over 8%. The Queens
Tribune had an increase (13%) due to expansion with the "Bayside Trib at Home".
The addition of Long Island Lifestyles, a four col r 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 (9%). Dan's Papers has continued to expand its geographic
base further west in the Long Island posh resort area, the Hamptons, as well as
positioning itself as the advertising standard on Long Island's east end,
increasing its revenues (20%). There were decreases in revenues at the Manhattan
Spirit (5%), Our Town (10%) and Westside (7%), attributed in part to a change in
sales management. The Hill had a increase (12%) in revenue as a result of the
capture of increased market share. Manhattan File had an increase (17%) in
revenue as a result of an improved sales effort. Brooklyn Skyline had an
increase (32%) due to its expansion into a fifth zone and an ongoing increased
sales effort.
Income (Loss) - Publications:
As the Company starts to feel the effect of a series of budget cuts,
instituted during the second quarter, which will save the Company approximately
$1.3 million on an annualized basis the Company has been able to decrease its
loss for the six months. In addition, the Company has ongoing negotiations with
printers to take advantage of decreasing newsprint prices. Although the Company
was paying substantially more for newsprint/printing during this period as
compared to the previous year, during the third quarter printing prices are
expected to be lower than the prior year. The decrease in income for the Queens
Tribune (7%) was due to start-up costs during the first quarter associated with
its Bayside Trib at Home expansion. The Bronx Press Review had a profit compared
to a loss last year as a result of the its budget cuts. The increase in sales
for Nassau Newspapers combined with budget cuts resulted in a smaller loss than
last year. The increased sales for Brooklyn Skyline resulted in a smaller loss
than last year. Our Town had decreased (37%) income as a result of decreased
revenues. The increase in income for Dan's Papers (8%), is attributed to
increased revenues and budget cuts.
13
<PAGE>
The Company is continuing to focus on increasing sales and controlling
costs.
Parent Company Expenses:
The increase in parent company expenses was primarily a result of
increased interest expense.
Liquidity and Capital Resources:
At May 31, 1996, the Company had an excess of current assets over current
liabilities in the amount of approximately $2,460,000. During the quarter ended
May 31, 1996, the Company obtained $175,000 additional bank loans whose payment
to the bank has been guaranteed by the Chairman of the Boar . In May 1996 the
Company obtained a $1,000,000 two-year loan, from its largest shareholder, to be
used primarily for working capital needs resulting from seasonal fluctuations in
cashflow.
Although there can be no assurance, management believes that the Company's
operations will gene ate positive cash flow for the fiscal year ending November
30, 1996 and has sufficient funds to meet its needs.
14
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits
27 - Financial Data Schedule
B. Reports on Form 8-K - None
15
<PAGE>
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.
(Regis rant)
Date: July 15, 1996 By: /s/ Michael Schenkler
----------------------------
Michael Schenkler, President
Date: July 15, 1996 By: /s/ Robert Berkowitz
----------------------------
Robert Berkowitz, Controller
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> MAY-31-1996
<CASH> 389,885
<SECURITIES> 0
<RECEIVABLES> 6,548,579
<ALLOWANCES> 1,482,314
<INVENTORY> 0
<CURRENT-ASSETS> 5,747,784
<PP&E> 1,368,585
<DEPRECIATION> 769,964
<TOTAL-ASSETS> 9,994,560
<CURRENT-LIABILITIES> 3,287,311
<BONDS> 0
<COMMON> 79,774
0
449
<OTHER-SE> 5,579,238
<TOTAL-LIABILITY-AND-EQUITY> 9,994,560
<SALES> 5,028,739
<TOTAL-REVENUES> 5,028,739
<CGS> 0
<TOTAL-COSTS> 5,057,636
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (20,727)
<INCOME-PRETAX> (49,624)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,624)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,624)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
