<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1996
<PERIOD-END> APR-30-1996
<CASH> 373
<SECURITIES> 818
<RECEIVABLES> 91
<ALLOWANCES> 0
<INVENTORY> 15
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5555
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 8647
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 5555
<SALES> 240
<TOTAL-REVENUES> 740
<CGS> 115
<TOTAL-COSTS> 239
<OTHER-EXPENSES> 724
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (169)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (169)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> 0
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1996 Commission File #0-15284
J2 COMMUNICATIONS
(Exact name of registrant as specified in its charter)
California 95-4053296
(State or other jurisdiction (IRS Employer Identification
incorporation or organization) Number)
10850 Wilshire Blvd., Ste. 1000, Los Angeles, CA 90024
(Address of principal executive office)
Registrant's telephone number, including area code: 310-474-5252
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
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
Number of shares outstanding of each of the issuers classes of
common stock as of the latest practicable date: 3,599,987
common shares, no par value were outstanding as of June 3, 1996.
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C>
<C>
4/30/96 7/31/95
Unaudited Audited
Assets
Cash and cash equivalents $ 373,000 $ 301,000
Short term investments 818,000 954,000
Accounts receivable - net 91,000 19,000
Inventories - net 15,000 17,000
Intangible assets, less accumulated
amortization of $1,768,000 and
$1,588,000 as of 4/30/96 and
7/31/95, respectively 4,196,000 4,376,000
Other assets 62,000 -
Total assets $5,555,000 $5,667,000
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 149,000 $ 109,000
Accrued expenses 766,000 724,000
Accrued royalties 480,000 503,000
Accrued income taxes 29,000 31,000
Deferred income 209,000 209,000
Common stock payable 203,000 203,000
Total liabilities 1,836,000 1,779,000
Shareholders' Equity:
Preferred stock, no par value; authorized
2,000,000 shares; none issued and outstanding -
-
Common stock, no par value; authorized 8,000,000
shares; issued and outstanding, 3,599,987
as of 4/30/96 and 7/31/95 8,647,000 8,643,000
Less: notes receivable on common stock (114,000) (110,000)
Accumulated deficit (4,814,000) (4,645,000)
Total shareholders' equity 3,719,000 3,888,000
Total liabilities and shareholders' equity $5,555,000 $5,667,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED APRIL 30, 1996 AND 1995
<TABLE>
<S> <C> <C> <C>
<C>
3 mos. ended 3 mos. ended 9 mos. ended 9 mos. ended
4/30/96 4/30/95 4/30/96 4/30/95
Revenues:
Movies, television, and theatrical $ 201,000 $ 182,000 $ 417,000 $ 666,000
Video sales, net of returns 115,000 93,000 240,000 262,000
Royalty income 7,000 42,000 25,000 72,000
Magazine 0 0 4,000 5,000
Other 20,000 61,000 54,000 116,000
Total revenues 343,000 378,000 740,000 1,121,000
Costs and expenses:
Cost of videocassettes sold 58,000 33,000 115,000 81,000
Royalty expense 23,000 18,000 43,000 43,000
Cost of movies, television and 26,000 26,000 26,000 26,000
theatrical
Cost of magazine 0 0 55,000 0
Selling, general and administrative 190,000 175,000 544,000 576,000
Amortization of intangible assets 60,000 60,000 180,000 180,000
Total expenses 357,000 312,000 963,000 906,000
Income from operations ( 14,000) 66,000 (223,000) 215,000
Other income:
Interest income 20,000 13,000 54,000 36,000
Income before income taxes 6,000 79,000 (169,000) 251,000
Benefit from income taxes 0 0 0 6,000
Net income $ 6,000 $ 79,000 ($169,000) $257,000
Income per common share:
Net income per share $0.00 $0.02 ($0.05) $0.07
Weighted average number of shares
of common stock outstanding 3,600,000 3,596,000 3,600,000 3,596,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED APRIL 30, 1996 AND 1995
<TABLE>
<S> <C>
<C>
1996 1995
Cash flows from operating activities:
Net (loss) income ($169,000) $257,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Amortization of intangible assets 180,000 180,000
Changes in assets and liabilities:
Accounts receivable, net (72,000) 15,000
Inventory 2,000 (2,000)
Accounts payable 40,000 (98,000)
Accrued expenses 42,000 (49,000)
Accrued taxes (2,000) (25,000)
Accrued royalties (23,000) 8,000
Deferred revenues - (10,000)
Other assets (62,000)
Net cash (used in) provided by
operating activities (64,000) 276,000
Cash flows from investing activities:
Sale (purchase) of short-term 136,000 (252,000)
investments
Net cash provided by (used in) investing
activities 136,000 (252,000)
Cash flows from financing activities:
Payments on notes payable - (42,000)
Proceeds from exercise of stock options - 6,000
Net cash used in financing
activities - (36,000)
Net increase (decrease) in cash
and cash equivalents 72,000 (12,000)
Cash and cash equivalents,
beginning of period 301,000 311,000
Cash and cash equivalents,
end of period $ 373,000 $ 299,000
</TABLE>
J2 COMMUNICATIONS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED APRIL 30, 1996
Item 1
Basis of Financial Statement Presentation
The consolidated financial statements of J2 Communications and
subsidiaries (collectively the "Company") have been prepared in
accordance with generally accepted accounting principles for
interim financial information. Interim financial statements do
not include all of the information and footnotes required by
generally accepted accounting principles for complete year-end
financial statements. The accompanying financial statements
should be read in conjunction with the more detailed financial
statements and related footnotes for the fiscal year ended July
31, 1995, as included in the Company's 1995 Annual Report on Form
10-K (the "Annual Report") filed with the Securities and Exchange
Commission. A signed independent accountant's report relating to
the July 31, 1995 balance sheet is included in the Annual Report.
Significant accounting policies used by the Company are
summarized in Note 1 to the financial statements included in the
Annual Report.
In the opinion of management, all adjustments (which include only
recurring normal adjustments) required for a fair presentation of
the financial position of the Company as of April 30, 1996, and
the results of its operations and cash flows for the periods
ended April 30, 1996 and 1995 respectively, have been made.
Operating results for the three-month and nine-month periods
ended April 30, 1996, are not necessarily indicative of the
operating results for the entire fiscal year.
Earnings Per Share
Earnings per share are calculated using the weighted average
number of common shares outstanding during the period. The
inclusion of outstanding warrants and stock options in the
earnings per share calculation would have no dilutive effect on
the earnings per share in 1996 or 1995.
Shareholders Equity
The increase in common stock during the period relates to accrued
interest on notes receivable on common stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Quarter Ended April 30, 1996 Versus April 30, 1995
Total revenues for the period were $343,000 compared with
$378,000 in the prior year quarter. Movies, television and
theatrical revenues were $201,000 compared with $182,000 in the
prior year due to revenues from a movie licensing agreement being
$16,000 more in the current quarter than in the prior year
quarter which is the primary reason for the increase. Video
sales of $115,000 were up from $93,000 recorded in the
corresponding 1995 quarter due to an increase in sales of the
Company's most popular video. Royalty income from video
licensing fell from $42,000 in last year's quarter to $7,000 in
the current period. In the 1995 quarter a payment from a
licensee of $40,000 was received which related to revenues from
several prior years and is the main reason for the decline. The
Company has de-emphasized the video segment of its business due
to declining profitability. Other income fell to $20,000 in the
current quarter from $61,000 in the prior year period. In the
1995 period $50,000 was received from the licensing of a radio
tape which did not recur in the current quarter.
Cost of videocassettes sold as a percentage of sales increased to
50% in the third quarter of fiscal 1996 compared with 35% in
fiscal 1995 due primarily to price discounting in the current
quarter.
Selling, general and administrative expenses increased to
$190,000 in the current quarter, compared with $175,000 in the
corresponding prior period. The increase primarily reflects a
reversal of a previously established reserve for bad debts of
$58,000 in the prior year third quarter offset in part by a
$32,000 reduction in salary costs.
There was no provision for income taxes in either the current or
prior year quarter because of the utilization of tax loss
carryforwards.
Net income for the current quarter was $6,000 compared with net
income of $79,000 in the corresponding prior year quarter. The
decline was due to lower revenues and higher expenses due
primarily to the reversal of the bad debt reserve in the 1995
quarter and lower salary costs as described above.
Nine Months Ended April 30, 1996 Versus April 30, 1995
Total revenues for the period were $740,000 compared with
$1,121,000 in the prior year period. Movies, television and
theatrical revenues were $417,000 compared with $666,000 in the
prior period. In the prior year payments under a movie licensing
agreement of $430,000 were received which were significantly
higher than the $166,000 received in the current period. Video
sales of $240,000 were reduced from $262,000 recorded in the
corresponding 1995 period. Royalty income from video licensing
fell from $72,000 in the prior year period to $25,000 in the
current period. In 1995, a payment from a video licensee of
$40,000 was received which related to revenues from prior years.
The Company has de-emphasized the video segment of its business
due to declining profitability. Other income fell to $54,000
from $116,000 in the prior year period. In 1995 there was a
payment of $50,000 received from the licensing of a radio tape
that did not recur in the current period.
Cost of videocassettes sold as a percentage of sales increased to
48% in the first nine months of fiscal 1996 compared with 31% in
the comparable period of 1995 due primarily to price discounting
in the current period.
Cost of magazine primarily covers a claim by the distributor of
the magazine for costs associated with prior editions of the
magazine.
Selling, general and administrative expenses were reduced to
$544,000 in the current period, compared with $576,000 in the
corresponding prior period. The decrease primarily reflects
lower salary costs of $129,000, offset in part by higher legal
expenses of $46,000 and the reversal in 1995 of a previously
established reserve for bad debts of $58,000.
There was no provision for income taxes in the current period
because of the utilization of tax loss carryforwards.
The net loss for the current period was $169,000 equal to $0.05
per share compared with net income of $257,000 in the
corresponding prior year period, equal to $0.07 per share. The
loss was due to sharply lower revenues and higher costs
associated with publishing of the magazine, the effect on the
prior year of the reversal of the reserve for bad debts offset in
part by lower salary costs as discussed above.
Liquidity and Capital Resources
Cash and short term investments at April 30, 1996 totaled
$1,191,000, a decrease of $64,000 from the July 31, 1995 fiscal
year end.
For the past several years the Company has not made any
significant capital investment and does not anticipate any
significant capital investment requirements in its current lines
of business. The Company feels its current cash resources
combined with cash generated from operations are sufficient to
cover needs through fiscal 1997. The Company is evaluating the
possibility of entering new lines of business which could require
significant investment. Before embarking on any major new
venture, it may be necessary for the Company to raise funds
through outside sources.
PART II
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
None
Item 3 - Defaults Upon Senior Securities
None
Item 4 - Submission Of Matters For A Vote Of Security Holders
None
Item 5 - Other Information
Not Applicable
Item 6 - Exhibits And Reports On Form 8-K
Exhibit 27 Financial Data Schedule
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by its duly authorized officers.
Date_________________ By:______________________
JAMES P. JIMIRRO
Chairman of the Board
President
Date_________________ By:______________________
GARY G.COWAN
Chief Financial OfficeR
