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 October 31, 1995 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 November 25,
1995.
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
10/31/95 7/31/95
(Unaudited)
Assets
Cash and cash equivalents $ 257,000 $ 301,000
Short term investments 1,094,000 954,000
Accounts receivable - net 28,000 19,000
Inventories - net 19,000 17,000
Intangible assets, less accumulated
amortization of $1,648,000 and
$1,588,000 as of 10/31/95 and
7/31/95, respectively 4,316,000 4,376,000
Total assets $5,714,000 $5,667,000
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 106,000 $ 109,000
Accrued expenses 750,000 724,000
Accrued royalties 483,000 503,000
Accrued income taxes 31,000 31,000
Deferred income 209,000 209,000
Common stock payable 203,000 203,000
Total liabilities 1,782,000 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 10/31/95 and 7/31/95 8,644,000 8,643,000
Less: notes receivable on common stock (111,000) (110,000)
Accumulated deficit (4,601,000) (4,645,000)
Total shareholders' equity 3,932,000 3,888,000
Total liabilities and shareholders' equity $5,714,000 $5,667,000
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED OCTOBER 31, 1995 AND 1994
1995 1994
Revenues:
Movies, television, and theatrical $ 209,000 $ 204,000
Video sales, net of returns 43,000 42,000
Royalty income 14,000 26,000
Magazine 4,000 3,000
Other 24,000 44,000
Total revenues 294,000 319,000
Costs and expenses:
Cost of videocassettes sold 21,000 14,000
Royalty expense 7,000 6,000
Selling, general and administrative 177,000 190,000
Amortization of intangible assets 60,000 60,000
Total expenses 265,000 270,000
Income from operations 29,000 49,000
Other income:
Interest income 15,000 12,000
Income before benefit from
income taxes 44,000 61,000
Benefit from income taxes - (9,000)
Net income $ 44,000 $ 70,000
Net income per common share:
Net income per share $ 0.01 $ 0.02
Weighted average number of shares
of common stock outstanding 3,600,000 3,602,000
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED OCTOBER 31, 1995 AND 1994
1995 1994
Cash flows from operating activities:
Net income $ 44,000 $ 70,000
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Amortization of intangible assets 60,000 60,000
Changes in assets and liabilities:
Accounts receivable, net (9,000) 18,000
Inventory (2,000) 2,000
Accounts payable (3,000) (46,000)
Accrued expenses 26,000 (42,000)
Accrued royalties (20,000) (14,000)
Deferred revenues - (9,000)
Other - (2,000)
Net cash provided by operating
activities 96,000 37,000
Cash flows from investing activities:
Purchase of short-term investments (140,000) (230,000)
Net cash used in investing
activities (140,000) (230,000)
Cash flows from financing activities:
Payments on notes payable - (21,000)
Proceeds from exercise of stock options - 2,000
Net cash used in financing
activities - (19,000)
Net decrease in cash
and cash equivalents (44,000) (212,000)
Cash and cash equivalents at
beginning of quarter 301,000 311,000
Cash and cash equivalents
at end of quarter $ 257,000 $ 99,000
J2 COMMUNICATIONS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED OCTOBER 31, 1995
Item 1
General
The condensed financial statements for the three months ended
October 31, 1995 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 1995 or 1994.
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 October 31, 1995 Versus October 31, 1994
Total revenues for the period were $294,000 compared with
$319,000 in the prior year quarter. Movies, television and
theatrical revenues were $209,000 compared with $204,000 in the
prior year period. The majority of income in both quarters was
generated from payments under a movie licensing agreement. Video
sales of $43,000 were approximately the same as the corresponding
1994 quarter. The Company has de-emphasized this segment of its
business due to declining profitability.
Cost of videocassettes sold increased to $21,000 in the first
quarter of fiscal 1995 compared with $14,000 in fiscal 1994 due
primarily to a change in product mix.
Selling, general and administrative expenses were reduced to
$177,000 in the current quarter, compared with $190,000 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.
Net income for the current quarter was $44,000 equal to $0.01 per
share compared with a net income of $70,000 in the correponding
prior year quarter, equal to $0.02 per share. The reduction was
due to lower revenues partially offset by lower expenses.
Liquidity and Capital Resources
Cash and short term investments at October 31, 1995 totaled
$1,351,000, an increase of $96,000 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, augmented by internally generated funds, 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
None
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
