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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, 1997 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, 1997.
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<S> <C> <C>
1/31/97 7/31/96
Unaudited Audited
Assets
Cash and cash equivalents $ 398,000 $ 120,000
Short term investments 1,152,000 1,014,000
Accounts receivable - net 46,000 36,000
Inventories - net 13,000 14,000
Intangible assets, less accumulated
amortization of $1,949,000 and
$1,829,000 as of 1/31/97 and
7/31/96, respectively 4,016,000 4,136,000
Other assets 55,000 47,000
Total assets $5,680,000 $5,367,000
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 160,000 $ 112,000
Accrued expenses 739,000 683,000
Accrued royalties 485,000 466,000
Accrued income taxes 38,000 38,000
Deferred income 217,000 213,000
Common stock payable 203,000 203,000
Total liabilities 1,842,000 1,715,000
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, 3,600,000
as of 1/31/97 and 7/31/96 8,651,000 8,648,000
Less: notes receivable on common stock (118,000) (115,000)
Accumulated deficit (4,695,000) (4,881,000)
Total shareholders' equity 3,838,000 3,652,000
Total liabilities and shareholders' equity $5,680,000 $5,367,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
<TABLE>
<S> <C> <C> <C> <C>
3 mos. ended 3 mos. ended 6 mos. ended 6 mos. ended
1/31/97 1/31/96 1/31/97 1/31/96
Revenues:
Movies, television and theatrical $ 309,000 $ 8,000 $ 658,000 $ 217,000
Video sales, net of returns 49,000 83,000 75,000 126,000
Royalty income 1,000 3,000 28,000 17,000
Magazine - - 1,000 4,000
Other 5,000 9,000 19,000 33,000
Total revenues 364,000 103,000 781,000 397,000
Costs and expenses:
Cost of videocassettes sold 22,000 36,000 37,000 57,000
Royalty expense 13,000 13,000 25,000 20,000
Cost of movies, television and theatrical 53,000 - 53,000 -
Cost of magazine - 55,000 - 55,000
Selling, general and administrative 203,000 178,000 377,000 355,000
Amortization of intangible assets 60,000 60,000 120,000 120,000
Total expenses 351,000 342,000 612,000 607,000
Income (loss) from operations 13,000 (239,000) 169,000 (210,000)
Other income:
Interest income 12,000 20,000 24,000 35,000
Income (loss) before income taxes 25,000 (219,000) 193,000 (175,000)
Provision for income taxes - - 7,000 -
Net income (loss) $25,000 ($219,000) $186,000 ($175,000)
Income per common share:
Net income (loss) per share $0.01 ($0.06) $0.05 ($0.05)
Weighted average number of shares
of common stock outstanding 3,600,000 3,600,000 3,600,000 3,600,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JANUARY 31, 1997 AND 1996
<TABLE>
<S> <C> <C>
1997 1996
Cash flows from operating activities:
Net income (loss) $186,000 ($175,000)
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 (10,000) (21,000)
Inventory 1,000 2,000
Accounts payable 48,000 (32,000)
Accrued expenses 56,000 82,000
Accrued taxes - (2,000)
Accrued royalties 19,000 (41,000)
Deferred revenues 4,000 -
Other assets (8,000) (10,000)
Net cash (used in) provided by
operating activities 416,000 (77,000)
Cash flows from investing activities:
Purchase of short-term investments (671,000) (528,000)
Sale of short-term investments 533,000 575,000
Net cash (used in) provided by investing
activities (138,000) 47,000
Cash flows from financing activities: - -
Net cash used in financing
activities - -
Net increase (decrease) in cash
and cash equivalents 278,000 (30,000)
Cash and cash equivalents,
beginning of period 120,000 301,000
Cash and cash equivalents,
end of period $ 398,000 $ 271,000
</TABLE>
J2 COMMUNICATIONS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JANUARY 31, 1997
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, 1996, as included in the Company's 1996 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, 1996 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 January 31, 1997, and
the results of its operations and cash flows for the periods
ended January 31, 1997 and 1996 respectively, have been made.
Operating results for the three-month and six-month periods ended
January 31, 1997, 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 1997 or 1996.
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, 1997 Versus January 31, 1996
Total revenues for the period were $364,000 compared with
$103,000 in the prior year quarter. Movies, television and
theatrical revenues were $309,000 compared with $8,000 in the
prior year period. In the current quarter there were substantial
payments under a movies-for-cable licensing agreement which did
not occur in the prior year quarter. Video sales of $49,000 were
down from $83,000 recorded in the corresponding 1996 quarter.
The Company has de-emphasized this segment of its business due to
declining profitability.
Selling, general and administrative expenses increased to
$203,000 in the current quarter, compared with $178,000 in the
corresponding prior period. The increase primarily reflects
higher salary costs.
There was no provision for income taxes in the current quarter
because of the utilization of tax loss carryforwards.
The net income for the current quarter was $25,000 equal to $0.01
per share compared with a net loss of $219,000 in the
corresponding prior year quarter, equal to $0.06 per share. The
improvement is primarily due to the increase in revenues from
motion pictures.
Six Months Ended January 31, 1997 Versus January 31, 1996
Total revenues for the period were $781,000 compared with
$397,000 in the prior year period. Movies, television and
theatrical revenues were $658,000 compared with $217,000 in the
prior period. The improvement was due primarily to an increase of
$143,000 in the profit participation from the film "National
Lampoon's Animal House" that was originally released in 1978 and
substantial licensing fee payments under a movies-for-cable
licensing agreement which did not occur in the prior year period.
Video sales of $75,000 were down from $126,000 recorded in the
corresponding 1996 period. 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
49% in the first half of fiscal 1997 compared with 45% in fiscal
1996 due primarily to price discounting in the current period.
Selling, general and administrative expenses increased to
$377,000 in the current period, compared with $355,000 in the
corresponding prior period. The increase primarily reflects
higher salary costs.
There was no significant provision for income taxes in the
current period because of the utilization of tax loss
carryforwards.
The net income for the current period was $186,000 equal to $0.05
per share compared with a net loss of $175,000 in the
corresponding prior year period, equal to $0.05 per share. The
improvement is primarily due to the increase in revenues from
motion pictures.
Liquidity and Capital Resources
Cash and short term investments at January 31, 1997 totaled
$1,550,000, an increase of $416,000 from the July 31, 1996 fiscal
year end. The improvement primarily reflects net income of
$186,000, a non-cash charge of $120,000 for the amortization of
intangible assets, an increase in accrued expenses of $56,000 and
an increase in accounts payable of $48,000.
The Company has no current plans for any significant capital
expenditures in its current line of business and believes that
its current level of cash and cash equivalents, augmented by
internally generated funds, will provide sufficient cash
resources through fiscal 1997.
The Company is considering establishing a restaurant chain to be
called "National Lampoon Cafe". Should it enter this new line of
business, significant capital would be required.
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__3/10/97________ By:______________________
JAMES P. JIMIRRO
Chairman of the Board
President
Date__3/10/97________ By:______________________
BENJAMIN HO
Acting Chief Financial Officer
