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 28, 1997
[ ] 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 April 15, 1997: 7,910,848 shares, $ .01 par value common
stock
Transitional Small Business Disclosure Format (check one) Yes ___ No ___
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 28, 1997........................ 3
Unaudited Consolidated Statements of
Operations for the three months ended
February 28, 1997 and February 29, 1996..... 5
Unaudited Consolidated Statements of Cash
Flows for the three months ended
February 28, 1997 and February 29, 1996..... 6
Notes to Consolidated Financial Statements.. 8
Item 2. Management's Discussion and Analysis
or Plan of Operation........................ 9
PART II. Other Information........................... 10
Item 2. Changes in Securities....................... 10
Item 6. Exhibits and Reports on Form 8-K............ 10
Signatures............................................................. 11
2
<PAGE>
PART I
Item 1. FINANCIAL STATEMENTS
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Assets:
Current Assets:
Cash ...................................................... $ 301,978
Restricted cash .......................................... 196,390
Accounts receivable [less: allowance for
doubtful accounts of $957,115] .......................... 3,820,316
Due from related parties .................................. 19,826
Other ..................................................... 146,530
----------
Total Current Assets ...................................... 4,485,040
Property and equipment at cost- net of
accumulated depreciation of $912,185 ....................... 501,180
Goodwill - net ............................................. 3,302,255
Other - net ................................................ 100,225
----------
Total Assets .............................................. $8,388,700
==========
</TABLE>
3
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET AS OF FEBRUARY 28, 1997
(UNAUDITED)
<TABLE>
<S> <C>
Liabilities and Stockholders' Equity:
Current liabilities:
Accounts payable ............................................. $ 968,845
Accrued expenses ............................................. 780,570
Accrued payroll and payroll taxes ............................ 331,319
Note payable ................................................. 900,000
Unearned Revenue ............................................. 122,653
Due to related parties ....................................... 55,688
------------
Total current liabilities .................................... 3,159,075
------------
Related party - long term debt ................................ 961,333
------------
Minority interest ............................................ 114,228
------------
Stockholders' Equity:
Preferred Stock, $1.00 Par Value; 500,000 Shares Authorized:
$2,527,000 aggregate liquidation value ....................... 200,399
Common Stock, $.01 Par Value; Authorized 100,000,000
Shares; 8,061,848 Shares Issued ............................... 80,618
Paid-in-Capital Preferred Stock .............................. 2,151,740
Paid-in-Capital Common Stock ................................. 14,112,414
(Deficit) .................................................... (11,982,378)
-------------
Total ....................................................... $ 4,562,793
Less: Treasury Stock [151,000 Shares]-
At Cost ............................................ (408,729)
-------------
Total Stockholders' Equity .................................... 4,154,064
-------------
Total Liabilities and Stockholders' Equity .................... $ 8,388,700
============
</TABLE>
4
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
------------------
February 28,1997 February 29,1996
---------------- ----------------
Unaudited
---------
<S> <C> <C>
Net Revenues ............................. $ 3,629,827 $ 3,531,415
----------- -----------
Expenses:
Direct Mechanical Costs ................. 1,323,421 1,511,188
Salaries, Benefits and
Outside Labor Costs .................. 2,283,925 2,307,153
Rent, Occupancy & Utilities ............. 227,574 241,444
Provisions for Doubtful Accounts ........ 94,500 45,000
General and Administrative .............. 573,530 515,449
----------- -----------
Total Expenses .......................... 4,502,950 4,620,234
----------- -----------
Operating Income (Loss) Before
Interest Expense and Interest
Income .................................. (873,123) (1,088,819)
Interest Expense ......................... (52,554) (19,591)
Interest Income .......................... -- --
----------- -----------
Net (Loss) ............................... $ (925,677) $(1,108,410)
=========== ===========
Net (Loss) Per Share ..................... $ (.12) $ (.14)
=========== ===========
Weighted Average Shares
Outstanding .............................. 7,907,015 7,813,516
=========== ===========
</TABLE>
5
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
February 28,1997 February 29,1996
---------------- ----------------
Unaudited
---------
<S> <C> <C>
Operating Activities:
Net (Loss) ............................. $ (925,677) $(1,108,410)
----------- -----------
Adjustments to Reconcile Net
(Loss) to Net Cash Provided
by Operating Activities:
Depreciation and Amortization ........ 122,538 107,621
Provision for Losses on Accounts
Receivable .......................... 94,500 45,000
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts
Receivable .......................... (52,411) 421,708
(Increase) in Other Current
Assets .............................. (16,085) (8,958)
(Increase) in Due from Related Parties. (5,826) 229
Increase in Due to Related Parties ... 4,000 11,997
Decrease in Other Assets. 10,664 6,952
Increase in Accounts Payable
and Accrued Expenses ............... 8,039 301,306
(Decrease) in Payroll Taxes Payable ... (122,320) (184,399)
----------- -----------
Total Adjustments ...................... 43,099 701,456
----------- -----------
Net Cash Used By Operating Activities.... (882,578) (406,954)
Forward
</TABLE>
6
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
------------------
February 28,1997 February 29,1996
---------------- ----------------
Unaudited
---------
<S> <C> <C>
Net Cash Used By - Operating
Activities - Forwarded .............. (882,578) (406,954)
=========== ===========
Investing Activities:
Capital Expenditures ................. (25,865) (29,456)
----------- -----------
Net Cash Provided (Used) by
Investing Activities ................. (25,865) (29,456)
----------- -----------
Financing Activities:
Principal Payments Note Payable ...... (275,000) --
Proceeds from Exercise of Warrants ... -- 7,498
Dividend on Preferred Stock .......... (9,466) (10,340)
Proceeds from Exercise of Stock
Options ............................ -- 12,500
Proceeds from Notes Payable .......... -- 400,000
----------- -----------
Net Cash (Used) Provided by Financing
Activities ........................... (284,466) 409,658
----------- -----------
Net Increase (Decrease) in Cash ........ (1,192,909) (26,752)
Cash - Beginning of Periods ............ 1,494,887 54,474
----------- -----------
Cash - End of Periods .................. $ 301,978 $ 27,722
=========== ===========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest ........................... $ 51,483 $ 13,660
Income Taxes ....................... -- --
</TABLE>
7
<PAGE>
NEWS COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Basis of Presentation:
The Consolidated Balance Sheet as of February 28, 1997 and the Consolidated
Statements of Operations for the three-month periods ended February 28, 1997 and
February 29, 1996, 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, 1996 and the related audited financial
statements included therein.
Certain 1996 balances have been reclassified to conform to current year
presentation.
B. Loss per Share:
Loss per share is based on the weighted average number of shares outstanding
during the periods.
C. Accounting Pronouncements:
In October 1995 the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for
Stock-Based Compensation". The Company has not adopted the new accounting
standards for its employee stock-based compensation plans. However, pro forma
disclosure of net income and earnings per share will be made in the Company's
financial statements for the year ending November 30, 1997.
The FASB issued SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of," in March 1995. SFAS No. 121
established accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. In the first quarter of 1997 the Company adopted this statement
and determined that no impairment loss needs to be recognized.
In February 1997 the FASB issued SFAS No. 128, "Earnings Per Share". SFAS
No. 128 specifies revised computational guidelines, presentation and disclosure
requirements for earnings per share and supersedes Accounting Principal Board
Opinion No. 15. SFAS No. 128 is effective for financial statements issued for
periods ending after December 15, 1997, including interim periods. Earlier
application is not permitted, however, upon adoption SFAS No. 128 requires
restatement of all prior period earnings per share information. The Company has
not yet determined the impact SFAS No. 128 would have on earnings per share.
8
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations:
News Communications, Inc. publishes various weekly community newspapers and
related targeted audience publications.
The Company reduced its loss for the first quarter by $183,000 (16%) from
($1,108,000) in 1996 to ($925,000) in 1997. Operating loss before interest
expense decreased $216,000 (20%) from ($1.089,000) in 1996 to ($873,000) in 1997
even after taking into account that the Company modified its assumptions in
estimating its provision for doubtful accounts, causing an increase of $49,500
(110%) from $45,000 in 1996 to $94,500 in 1997.The increase in interest expense
of $33,000 (168%) from $19,591 in 1996 to $52,544 in 1997 was a result of
increased bank loans and the loan from shareholder being outstanding in 1997.
Total revenues for the Company were $3,630,000 for the first quarter of
1997, an increase of almost $100,000 (3%) from $3,531,000 in 1996. The increase
in revenues was primarily a result of Dan's Papers' capitalization on an ever
growing market in the Long Island posh resort area, the Hamptons, and
positioning itself as the advertising standard on Long Island's east end
($102,000, 37%), Brooklyn Skyline's expansion into a fifth zone ($57,000,
21%), offset by a decrease in lower profit margin printing revenue ($88,000,
13%).
Direct mechanical costs had increases due to expansions during 1996;
however, these were offset by budget cuts and decreased prices for newsprint.
Direct mechanical costs decreased $188,000 (12%) from $1,511,000 in 1996 to
$1,323,000 in 1997.
Liquidity and Capital Resources:
At February 28, 1997, the Company had an excess of current assets over
current liabilities in the amount of approximately $1,326,000. During the
quarter ended February 28, 1997, the Company repaid $275,000 of bank loans from
cash on hand at the beginning of the fiscal year.
Management believes that the Company's operations will generate positive
cash flow for the fiscal year ending November 30, 1997. Although there can be no
assurances to this effect, management is confident that it has available a
variety of funding and revenue to meet its cash needs.
9
<PAGE>
PART II
OTHER INFORMATION
Item 2. CHANGES IN SECURITIES
The following securities were issued by the Company during the period
covered by this report and were not registered under the Securities Act of 1933,
as amended (the "Act"). Each of the transactions is claimed to be exempt from
registration with the Securities Exchange Commission pursuant to Section 4(2) of
the Act as transactions by an issuer not involving a public offering. All
of such securities are deemed to be restricted securities for the purposes of
the Act.
(i) On or about January 7, 1997, 23,809 shares of Common Stock and Warrants
to purchase an additional 23,809 shares of Common Stock (exercisable at $2.10
per share) were issued to Leonore Novak upon conversion by her of 50 shares of
the Company's 8% Convertible Preferred Stock.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
27 - Financial Data Schedule
B. Reports on Form 8-K - None
10
<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: April 16, 1997 By:/s/ Michael Schenkler
---------------------
Michael Schenkler, President
Date: April 16, 1997 By:/s/ Robert Berkowitz
--------------------
Robert Berkowitz, Controller
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-Mos
<FISCAL-YEAR-END> Nov-30-1997
<PERIOD-START> Dec-01-1996
<PERIOD-END> Feb-28-1997
<CASH> 301,978
<SECURITIES> 0
<RECEIVABLES> 4,777,431
<ALLOWANCES> 912,185
<INVENTORY> 0
<CURRENT-ASSETS> 4,485,040
<PP&E> 1,413,365
<DEPRECIATION> 912,185
<TOTAL-ASSETS> 8,388,700
<CURRENT-LIABILITIES> 3,159,075
<BONDS> 0
200,399
0
<COMMON> 80,618
<OTHER-SE> 3,873,047
<TOTAL-LIABILITY-AND-EQUITY> 8,388,700
<SALES> 3,629,827
<TOTAL-REVENUES> 3,629,827
<CGS> 0
<TOTAL-COSTS> 4,502,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (52,554)
<INCOME-PRETAX> (925,677)
<INCOME-TAX> 0
<INCOME-CONTINUING> (925,677)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (925,677)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
