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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 January 31, 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 March 4, 1996.
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C>
<C>
1/31/96 7/31/95
Unaudited Audited
Assets
Cash and cash equivalents $ 271,000 $ 301,000
Short term investments 907,000 954,000
Accounts receivable - net 40,000 19,000
Inventories - net 15,000 17,000
Intangible assets, less accumulated
amortization of $1,708,000 and
$1,588,000 as of 1/31/96 and
7/31/95, respectively 4,256,000 4,376,000
Other assets 10,000 -
Total assets $5,499,000 $5,667,000
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 77,000 $ 109,000
Accrued expenses 806,000 724,000
Accrued royalties 462,000 503,000
Accrued income taxes 29,000 31,000
Deferred income 209,000 209,000
Common stock payable 203,000 203,000
Total liabilities 1,786,000 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 1/31/96 and 7/31/95 8,646,000 8,643,000
Less: notes receivable on common stock (113,000) (110,000)
Accumulated deficit (4,820,000) (4,645,000)
Total shareholders' equity 3,713,000 3,888,000
Total liabilities and shareholders' equity $5,499,000 $5,667,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND SIX MONTHS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<S> <C> <C> <C>
<C>
3 mos. ended 3 mos. ended 6 mos. ended 6 mos. ended
1/31/96 1/31/95 1/31/96 1/31/95
Revenues:
Movies, television, and theatrical $ 8,000 $ 280,000 $ 217,000 $ 484,000
Video sales, net of returns 83,000 127,000 126,000 169,000
Royalty income 3,000 4,000 17,000 30,000
Magazine - 2,000 4,000 5,000
Other 9,000 11,000 33,000 55,000
Total revenues 103,000 424,000 397,000 743,000
Costs and expenses:
Cost of videocassettes sold 36,000 34,000 57,000 49,000
Royalty expense 13,000 19,000 20,000 25,000
Cost of magazine 55,000 - 55,000 -
Selling, general and administrative 178,000 211,000 355,000 401,000
Amortization of intangible assets 60,000 60,000 120,000 120,000
Total expenses 342,000 324,000 607,000 595,000
(Loss) income from operations (239,000) 100,000 (210,000) 148,000
Other income:
Interest income 20,000 11,000 35,000 23,000
(Loss) income before income taxes (219,000) 111,000 (175,000) 171,000
Provision for (benefit from)
income taxes - 2,000 - (7,000)
Net (Loss) income ($219,000) $109,000 ($175,000) $178,000
Income per common share:
Net (Loss) income per share ($0.06) $0.03 ($0.05) $0.05
Weighted average number of shares
of common stock outstanding 3,600,000 3,595,000 3,600,000 3,596,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS(UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1996 AND 1995
<TABLE>
<S> <C>
<C>
1996 1995
Cash flows from operating activities:
Net (loss) income ($175,000) $178,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Amortization of intangible assets 120,000 120,000
Changes in assets and liabilities:
Accounts receivable, net (21,000) (3,000)
Inventory 2,000 -
Accounts payable (32,000) (73,000)
Accrued expenses 82,000 -
Accrued taxes (2,000) (25,000)
Accrued royalties (41,000) (1,000)
Deferred revenues - (10,000)
Other assets (10,000) 1,000
Net cash (used in) provided by
operating activities (77,000) 187,000
Cash flows from investing activities:
Redemption(purchase) of short-term 47,000 (285,000)
investments
Net cash provided by (used in) investing
activities 47,000 (285,000)
Cash flows from financing activities:
Payments on notes payable - (42,000)
Proceeds from exercise of stock options - 5,000
Net cash used in financing
activities - (37,000)
Net decrease in cash
and cash equivalents (30,000) (135,000)
Cash and cash equivalents,
beginning of period 301,000 311,000
Cash and cash equivalents,
end of period $ 271,000 $ 176,000
</TABLE>
J2 COMMUNICATIONS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1996
Item 1
General
The condensed financial statements for the six months ended
January 31, 1996 are unaudited, but in the opinion of management,
all accruals considered necessary for a fair presentation of
financial position and results of operations have been made.
These consolidated financial statements should be read in
conjunction with the financial statements in the Company's Form
10-K for the year ended July 31, 1995. Certain information and
footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to
the rules and regulations of the Securities and Exchange
Commission. The results of operations for the periods presented
are not necessarily indicative of the results to be expected for
the entire 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 January 31, 1996 Versus January 31, 1995
Total revenues for the period were $103,000 compared with
$424,000 in the prior year quarter. Movies, television and
theatrical revenues were $8,000 compared with $280,000 in the
prior year period. In the prior year quarter there were
substantial payments under a movie licensing agreement which were
not repeated in the current quarter. Video sales of $83,000 were
down from $127,000 recorded in the corresponding 1995 quarter.
In the prior year quarter there was a successful promotion of a
popular video. The Company has de-emphasized this segment of its
business due to declining profitability.
Cost of videocassettes sold as a percentage of sales increased to
43% in the second quarter of fiscal 1996 compared with 27% in
fiscal 1995 due primarily to price discounting in the current
quarter.
Cost of magazine primarily covered the claim by the distributor
of the magazine for costs associated with prior editions of the
magazine.
Selling, general and administrative expenses were reduced to
$178,000 in the current quarter, compared with $211,000 in the
corresponding prior period. The decrease primarily reflects
lower salary costs.
There was no provision for income taxes in the current quarter
because of the utilization of tax loss carryforwards.
The net loss for the current quarter was $219,000 equal to $0.06
per share compared with net income of $109,000 in the
corresponding prior year quarter, equal to $0.03 per share. The
loss was due to sharply lower revenues and higher costs
associated with publishing of the magazine only partially offset
by lower other expenses.
Six Months Ended January 31, 1996 Versus January 31, 1995
Total revenues for the period were $397,000 compared with
$743,000 in the prior year period. Movies, television and
theatrical revenues were $217,000 compared with $484,000 in the
prior period. In the prior year there were substantial payments
under a movie licensing agreement which were down significantly
in the current period. Video sales of $126,000 were down from
$169,000 recorded in the corresponding 1995 period. In the prior
year period there was a successful promotion of a popular video.
The Company has de-emphasized this segment of its business due to
declining profitability.
Cost of videocassettes sold as a percentage of sales increased to
45% in the first half of fiscal 1996 compared with 29% in fiscal
1995 due primarily to price discounting in the current period.
Cost of magazine primarily covered the claim by the distributor
of the magazine for costs associated with prior editions of the
magazine.
Selling, general and administrative expenses were reduced to
$355,000 in the current period, compared with $401,000 in the
corresponding prior period. The decrease primarily reflects
lower salary costs.
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 $175,000 equal to $0.05
per share compared with net income of $178,000 in the
corresponding prior year period, equal to $0.05 per share. The
loss was due to sharply lower revenues and higher costs
associated with publishing of the magazine only partially offset
by lower other expenses.
Liquidity and Capital Resources
Cash and short term investments at January 31, 1996 totaled
$1,178,000, a decrease of $77,000 from the July 31, 1995 fiscal
year end.
The Company has no current plans for any significant capital
expenditures and believes that its current level of cash and cash
equivalents will provide sufficient cash resources through fiscal
1996.
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
