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 - February 29, 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 May 15, 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 February 29, 1996..................................... 3
Unaudited Consolidated Statements of
Operations for the three months ended
February 29, 1996 and February 28, 1995.................. 5
Unaudited Consolidated Statements of Cash
Flows for the three months ended
February 29, 1996 and February 28, 1995................. 6
Notes to Consolidated Financial Statements.............. 9
Item 2. Management's Discussion and Analysis
or Plan of Operation.................................... 10
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 FEBRUARY 29, 1996
(UNAUDITED)
Assets:
Current Assets:
Cash and Cash Equivalents ................................. $ 27,722
Accounts Receivable [Less: Allowance for
Doubtful Accounts of $1,439,314] ........................ 4,263,973
Due From Related Parties .................................. 119,004
Other Current Assets ...................................... 87,028
----------
Total Current Assets ...................................... 4,497,727
Property and Equipment at Cost- Net of
Accumulated Depreciation of $715,974 ....................... 650,551
Goodwill - Net ............................................. 3,594,710
Other Assets ............................................... 147,227
----------
Total Assets .............................................. $8,890,215
==========
3
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 29, 1996
(UNAUDITED)
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts Payable ............................................. $ 1,469,254
Accrued Expenses ............................................. 562,815
Accrued Payroll .............................................. 137,753
Due to Related Parties ....................................... 41,179
Notes Payable ................................................ 924,000
------------
Total Current Liabilities .................................... 3,135,001
------------
Minority Interest ............................................ 47,788
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; 7,971,415 Shares Issued ............................... 79,714
Paid-in-Capital Preferred Stock .............................. 519,873
Paid-in-Capital Common Stock ................................. 13,743,316
(Deficit) .................................................... (8,227,197)
Total ....................................................... $ 6,116,155
Less: Treasury Stock [151,000 Shares]-
At Cost ............................................ (408,729)
Total Stockholders' Equity .................................. 5,707,426
Total Liabilities and Stockholders' Equity .................. $8,890,215
==========
4
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NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended
February 29,1996 February 28,1995
Unaudited
<S> <C> <C>
Net Revenues ....................................................................... $ 3,631,462 $ 3,369,111
----------- -----------
Expenses:
Direct Mechanical Costs ........................................................... 1,611,235 1,341,775
Salaries, Benefits and
Outside Labor Costs ............................................................ 2,307,153 2,178,223
Rent, Occupancy & Utilities ....................................................... 241,444 190,708
Provisions for Doubtful Accounts .................................................. 45,000 36,000
General and Administrative ........................................................ 515,449 523,815
----------- -----------
Total Expenses .................................................................... 4,720,281 4,270,521
----------- -----------
Operating Income (Loss) Before Interest
Expense and Interest Income ....................................................... (1,088,819) (901,410)
Interest Expense ................................................................... (19,591) (6,475)
Interest Income .................................................................... -- 8,037
----------- -----------
Net Income (Loss) .................................................................. $(1,108,410) $ (899,848)
=========== ===========
Net Income (Loss) Per Share ........................................................ $ (.14) $ (.12)
=========== ===========
Weighted Average Shares
Outstanding ........................................................................ 7,969,540 7,768,776
=========== ===========
</TABLE>
5
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
February 29,1996 February 28,1995
Unaudited
<S> <C> <C>
Operating Activities:
Net (Loss) ..................................................................... $(1,108,410) $ (899,848)
----------- -----------
Adjustments to Reconcile Net
(Loss) to Net Cash Provided
by Operating Activities:
Depreciation and Amortization ................................................. 107,621 126,372
Provision for Losses on Accounts
Receivable ................................................................... 45,000 36,000
Change in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable ................................................................... 421,708 (52,388)
(Increase) Decrease in Other Current
Assets ....................................................................... (8,958) (7,503)
(Increase) in Due from Related Parties ........................................ 229 (12,475)
Increase in (Due) to Related Parties ......................................... 11,997 --
Decrease (Increase) in Other Assets ............................. 6,952 12,849
(Increase) Decrease in Goodwill ............................................... -- (5,225)
Increase (Decrease) in Accounts Payable
and Accrued Expenses ......................................................... 301,306 (57,256)
Increase (Decrease) in Payroll Taxes Payable ................................. (184,399) 414
Increase (Decrease) in Other Current Liabilities ............................. -- 115,448
----------- -----------
Total Adjustments ............................................................. 701,456 156,236
----------- -----------
Net (Deficit) - Operating Activities - ......................................... (406,954) (743,612)
Forward
</TABLE>
6
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
February 29,1996 February 28,1995
Unaudited
<S> <C> <C>
Net (Deficit) - Operating Activities -
Forwarded .................................................................... (406,954) (743,612)
========= =========
Investing Activities:
Sale of Marketable Securities ................................................... -- 872,607
Capital Expenditures ............................................................ (29,456) (50,783)
--------- ---------
Net Cash Provided (Used) by Investing Activities ................................. (29,456) 821,824
--------- ---------
Financing Activities:
Principal Payments Long-Term Debt .............................................. -- (75,747)
Proceeds from Exercise of Warrants ............................................. 7,498 9,216
Dividend on Preferred Stock .................................................... (10,340) (10,340)
Proceeds from Exercise of Stock Options ........................................ 12,500 --
Proceeds from Notes Payable .................................................... 400,000 --
--------- ---------
Net Cash (Used) Provided by Financing Activities ................................. 409,658 (76,871)
--------- ---------
Net Increase (Decrease) in Cash .................................................. (26,752) 1,341
Cash - Beginning of Periods ...................................................... 54,474 842,857
--------- ---------
Cash - End of Periods ............................................................ $ 27,722 $ 844,198
========= =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest ...................................................................... $ 13,660 $ 9,547
Income Taxes .................................................................. -- --
</TABLE>
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
7
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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.
8
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The Consolidated Balance Sheet as of February 29, 1996 and the Consolidated
Statements of Operations for the three-month periods ended February 29, 1996 and
February 28, 1995, 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. The results of operations for 1995 have been restated to reflect additional
expenses and loss.
C. Loss per Share:
Loss per share is based on the weighted average number of shares outstanding
during the periods.
9
<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 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
(Westside Publications), 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 months ended February 29, 1996 and February
28, 1995 is unaudited.
10
<PAGE>
<TABLE>
Three Months Ended
February 29,1996 February 28,1995
Unaudited (3)
<S> <C> <C>
Net Revenues:
Queens Tribune .............................................................. $ 689,552 $ 668,868
Dan's Papers ................................................................ 277,136 234,067
Manhattan Spirit ............................................................ 373,406 369,436
Our Town .................................................................... 338,251 386,515
The Bronx Press Review ...................................................... 215,369 226,167
Nassau Newspapers ........................................................... 636,133 584,572
The Hill .................................................................... 277,118 177,482
Manhattan File .............................................................. 334,143 316,721
Brooklyn Skyline ............................................................ 272,422 203,469
Westside Publications ....................................................... 217,932 201,814
----------- -----------
Total Net Revenues ........................................................... $ 3,631,462 $ 3,369,111
=========== ===========
Income (Loss) Publications Before Goodwill:
Queens Tribune .............................................................. $ 29,847 $ 113,325
Dan's Papers ................................................................ (99,714) (74,203)
Manhattan Spirit ............................................................ 1,708 (17,059)
Our Town .................................................................... 11,161 33,245
The Bronx Press Review ...................................................... (23,206) (12,021)
Nassau Newspapers ........................................................... (145,169) (100,504)
-----------
The Hill .................................................................... (218,799) (271,040)
Manhattan File .............................................................. (164,390) (152,311)
Brooklyn Skyline ............................................................ (41,244) (52,921)
Westside Publications ....................................................... (35,309) 1,841
----------- -----------
Income (Loss) - Publications ................................................. $ (685,115) $ (531,648)
=========== ===========
Income (Loss) Publications After Goodwill (1):
Queens Tribune .............................................................. $ 3,130 $ 86,608
Dan's Papers ................................................................ (112,389) (86,878)
Manhattan Spirit ............................................................ 1,708 (17,059)
Our Town .................................................................... (2,300) 19,784
The Bronx Press Review ...................................................... (26,768) (15,583)
Nassau Newspapers ........................................................... (153,630) (108,253)
The Hill .................................................................... (218,799) (271,040)
Manhattan File .............................................................. (165,190) (152,311)
Brooklyn Skyline ............................................................ (42,774) (54,315)
11
<PAGE>
Westside Publications ....................................................... (39,383) (1,420)
----------- -----------
Income (Loss)-Publications ................................................... $ (756,395) $ (600,467)
=========== ===========
Parent Company Expenses:
Personnel, Rent, General and Administrative ................................. 332,424 300,943
Interest (2) ................................................................ 19,591 (1,562)
----------- -----------
Total Parent Company Expenses ............................................... 352,015 299,381
----------- -----------
Net Income (Loss) ............................................................ $(1,108,410) $ (899,848)
=========== ===========
<FN>
(1) Reflects expense for amortization of goodwill by publication as follows:
Three Months Ended
February 29,1996 February 28,1995
Queens Tribune $ 26,717 $ 26,717
Dan's Papers 12,675 12,675
Our Town 13,461 13,461
The Bronx Press Review 3,562 3,562
Nassau Newspapers 8,461 7,749
Brooklyn Skyline 1,530 1,394
Manhattan File 800 ----
Westside Publications 4,074 3,261
$ 71,280 $ 68,819
(2) Net of interest income of $8,037 for the three months ended February 28,
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 February 29,
12
<PAGE>
1996 and February 28, 1995.
Three Months Ended February 29, 1996 and February 28, 1995
Net Revenues:
In spite of facing the most severe winter weather conditions in the
Greater Metropolitan area's history, total revenues for the Company were up
almost 8%. Queens Tribune revenues were up as a result of the expansion with the
Bayside Trib at Home edition; this growth was offset by the lower revenues from
the moving of the anniversary edition, the years largest billing issue, into the
second quarter in 1996, netting a 3% revenue increase. Dan's Papers continues to
increase its market share resulting in an 18% increase in revenues. The Hill
increased revenue 56% as it continues to capture a greater market share.
Brooklyn Skyline revenue was up 34% as a result of increased display and
classifieds sales efforts and expansion with a fifth edition to complete the
distribution along Brooklyn's southern tier. Nassau Newspapers continued it's
growth with a 9% increase in revenue. Our Town was most severely affected by the
worst winter in New York City's history, and had a decrease in revenue of 12%.
All other publications had moderate changes to their revenues.
Income (Loss) - Publications:
As a result of severe weather conditions and the skyrocketing paper
costs, loss from Publications increased 29%. Queens Tribune income was down 74%,
as a result of the shifting of its anniversary issue into the second quarter and
start-up costs associated with its Bayside Trib at Home expansion. Increased
losses at Dan's Papers (34%), and Bronx Press Review (93%) were as a result of
the increased newsprint costs and increased payroll compounded by the sales and
cost problems created by the severe winter. Nassau Newspapers increased its loss
(44%) as a result of increased newsprint prices and the start-up costs
associated with its expansion with Long Island Lifestyles. Westside Publications
showed a loss as it was affected by the weather, newsprint prices and a
transition period as it continues to be developed from its acquisition. The Hill
decreased its loss (19%) as it continues its growth and increase in market
share.
13
<PAGE>
The Company has come through the worst winter in the area's history in
good condition. The newsprint price increases peaked in the first quarter and
decreases in price started in the middle of the second quarter. The Company has
already started reaping the benefits of these lower print costs.
In addition, management began a series of budget cuts during the second
quarter whic will save the Company more than $1,200,000 on an annual basis.
Parent Company Expenses:
The increase in parent company expenses before interest (10%) was
primarily a result of increased costs required for the continuing corporate
growth and expansion.
Liquidity and Capital Resources:
At February 28, 1995, the Company had an excess of current assets over
current liabilities in the amount of approximately $1,363,000. During the
quarter ended February 29, 1996, the Company obtained $400,000 from bank loans.
An additional $175,000 was obtained through April 17, 1996 and the Chairman of
the Board has personally guaranteed its payment to the bank.
In order to reduce its accounts payable, the Company has arranged for a
$1,000,000 loan from its largest shareholder. Management believes that the
Company's operations will generate positive cash flow for the fiscal year ending
November 30, 1996 and is confident that it has sufficient funds to meet its cash
needs.
14
<PAGE>
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits - None
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.
(Registrant)
Date: May 16, 1996 By:/s/ Michael Schenkler
---------------------
Michael Schenkler, President
Date: May 16, 1996 By:/s/ Robert Berkowitz
--------------------
Robert Berkowitz, Controller
16
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> FEB-29-1996
<CASH> 27,722
<SECURITIES> 0
<RECEIVABLES> 5,703,287
<ALLOWANCES> 1,439,314
<INVENTORY> 0
<CURRENT-ASSETS> 4,497,727
<PP&E> 1,366,525
<DEPRECIATION> 715,974
<TOTAL-ASSETS> 8,890,215
<CURRENT-LIABILITIES> 3,135,001
<BONDS> 0
<COMMON> 79,714
449
0
<OTHER-SE> 5,627,263
<TOTAL-LIABILITY-AND-EQUITY> 8,890,215
<SALES> 3,631,462
<TOTAL-REVENUES> 3,631,462
<CGS> 0
<TOTAL-COSTS> 4,720,281
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (19,591)
<INCOME-PRETAX> (1,108,410)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,108,410)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,108,410)
<EPS-PRIMARY> (.14)
<EPS-DILUTED> (.14)
</TABLE>
