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, 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 June 3, 1997.
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<S> <C> <C>
4/30/97 7/31/96
Unaudited Audited
Assets
Cash and cash equivalents $ 411,000 $ 120,000
Short term investments 1,245,000 1,014,000
Accounts receivable - net 54,000 36,000
Inventories - net 12,000 14,000
Intangible assets, less accumulated
amortization of $2,009,000 and
$1,829,000 as of 4/30/97 and
7/31/96, respectively 3,956,000 4,136,000
Other assets 25,000 47,000
Total assets $5,703,000 $5,367,000
Liabilities and Shareholders' Equity
Liabilities:
Accounts payable $ 213,000 $ 112,000
Accrued expenses 693,000 683,000
Accrued royalties 469,000 466,000
Accrued income taxes 38,000 38,000
Deferred revenues 217,000 213,000
Common stock payable 203,000 203,000
Total liabilities 1,833,000 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 4/30/97
and 7/31/96 8,653,000 8,648,000
Less: notes receivable on common stock (120,000) (115,000)
Accumulated deficit (4,663,000) (4,881,000)
Total shareholders' equity 3,870,000 3,652,000
Total liabilities and shareholders'
equity $5,703,000 $5,367,000
</TABLE>
J2 COMMUNICATIONS AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS AND NINE MONTHS ENDED APRIL 30, 1997 AND 1996
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3 mos. 3 mos. 9 mos. 9 mos.
ended ended ended ended
4/30/97 4/30/96 4/30/97 4/30/96
Revenues:
Movies, television, and
theatrical $ 234,000 $ 201,000 $ 893,000 $ 417,000
Video sales, net of returns 23,000 115,000 98,000 240,000
Royalty income 22,000 7,000 50,000 25,000
Magazine 55,000 - 56,000 4,000
Other 18,000 20,000 37,000 54,000
Total revenues 352,000 343,000 1,134,000 740,000
Costs and expenses:
Cost of videocassettes sold 9,000 58,000 46,000 115,000
Royalty expense 8,000 23,000 34,000 43,000
Cost of movies, television and - 26,000 53,000 26,000
theatrical
Cost of magazine 39,000 - 39,000 55,000
Selling,general and administrative 220,000 190,000 595,000 544,000
Amortization of intangible assets 60,000 60,000 180,000 180,000
Total expenses 336,000 357,000 947,000 963,000
Income (loss) from operations 16,000 (14,000) 187,000 (223,000)
Other income:
Interest income 15,000 20,000 38,000 54,000
Income (loss) before income taxes 31,000 6,000 225,000 (169,000)
Provision for income taxes - - 7,000 -
Net income (loss) $ 31,000 $ 6,000 $218,000 ($169,000)
Income per common share:
Net income (loss) per share $0.01 $0.00 $0.06 ($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)
NINE MONTHS ENDED APRIL 30, 1997 AND 1996
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1997 1996
Cash flows from operating activities:
Net income (loss) $ 218,000 ($ 169,000)
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 (18,000) (72,000)
Inventory 2,000 2,000
Accounts payable 101,000 40,000
Accrued expenses 10,000 42,000
Accrued taxes - (2,000)
Accrued royalties 3,000 (23,000)
Deferred revenues 4,000 -
Other assets 22,000 (62,000)
Net cash provided by (used in)
operating activities 522,000 (64,000)
Cash flows from investing activities:
Purchase of short-term
investments (1,053,000) (723,000)
Sale of short-term
investments 822,000 859,000
Net cash provided by (used in)
investing activities (231,000) 136,000
Cash flows from financing activities:
- -
Net cash used in financing
activities - -
Net increase in cash
and cash equivalents 291,000 72,000
Cash and cash equivalents,
beginning of period 120,000 301,000
Cash and cash equivalents,
end of period $ 411,000 $ 373,000
</TABLE>
J2 COMMUNICATIONS
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED APRIL 30, 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 and with the instruction to Rule
10-01 of Regulation S-X. 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 April 30, 1997, and
the results of its operations and cash flows for the periods
ended April 30, 1997 and 1996 respectively, have been made.
Operating results for the three-month and nine-month periods
ended April 30, 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 April 30, 1997 Versus April 30, 1996
Total revenues for the period were $352,000 compared with
$343,000 in the prior year quarter. Movies, television and
theatrical revenues were $234,000 compared with $201,000 in the
prior year quarter. The improvement was due primarily to a
settlement of disputes with a former officer and director of
National Lampoon, Inc. ("NLI") with regard to the film "Vegas
Vacation." Video sales of $23,000 were down from $115,000
recorded in the corresponding 1996 quarter. The decrease was due
to the expiration of the distribution rights for a popular title
and the Company's de-emphasis on this segment of its business due
to declining profitability. Royalty income from video licensing
increased from $7,000 in last year's quarter to $22,000 in the
current period primarily due to a sale of the distribution rights
of a title. Magazine income of $55,000 in the current quarter
represents the billings of the spring issue of National Lampoon
magazine which were suspended in the prior year quarter.
Cost of videocassettes sold as a percentage of sales decreased to
39% in the third quarter of fiscal 1997 compared with 50% in
fiscal 1996 due primarily to price discounting on volume sales in
the prior year quarter.
Selling, general and administrative expenses increased to
$220,000 in the current quarter, compared with $190,000 in the
corresponding prior period. The increase primarily reflects
higher salary costs, an increase in legal expenses, a rise in
broker's commissions in connection with movies and leasing cost
of a Company automobile.
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 $31,000 equal to $0.01 per
share compared with net income of $6,000 in the corresponding
prior year quarter. The improvement was primarily due to the
increase in revenues from motion pictures and magazine income.
Nine Months Ended April 30, 1997 Versus April 30, 1996
Total revenues for the period were $1,134,000 compared with
$740,000 in the prior year period. Movies, television and
theatrical revenues were $893,000 compared with $417,000 in the
prior period. The improvement was due primarily to an increase
of $152,000 in profit participation from the film "National
Lampoon's ANIMAL HOUSE" that was originally released in 1978,
substantially higher licensing fee payments under a movie-for-
cable licensing agreement, strong profit participation from the
film "National Lampoon's VACATION" which was not received in the
corresponding period of last year and the settlement of disputes
with a former officer and director of NLI with regard to the film
"VEGAS VACATION." Video sales of $98,000 were reduced from
$240,000 recorded in the corresponding 1996 period. The Company
has de-emphasized the video segment of its business due to
declining profitability. Royalty income from video licensing
rose from $25,000 in the prior year period to $50,000 primarily
due to a sale of the distribution rights of a title in the
current period. Other income fell to $37,000 from $54,000 in the
prior year period due to more merchandise licensing activities in
the prior year period.
Cost of magazine declined to $39,000 from $55,000 in the prior
year period. In the prior year period, a claim by the
distributor of the magazine for costs associated with prior
editions of the magazine was reserved.
Selling, general and administrative expenses increased to
$595,000 in the current period, compared with $544,000 in the
corresponding prior period. The increase primarily reflects
higher salary costs, an increase in legal expenses, a rise in
broker's commissions in connection with movies and leasing cost
of a Company automobile.
There was no significant provision for income taxes in the
current period because of the utilization of tax loss
carryforwards.
Net income for the current period was $218,000 equal to $0.06 per
share compared with a net loss of $169,000 in the corresponding
prior year period, equal to $0.05 per share. The improvement was
primarily due to sharply higher revenues from motion pictures and
magazine offset by lower video sales and higher selling, general
and administrative costs discussed above.
Liquidity and Capital Resources
Cash and short term investments at April 30, 1997 totaled
$1,656,000, an increase of $522,000 from the July 31, 1996 fiscal
year end. The improvement primarily reflects net income of
$218,000, a non-cash charge of $180,000 for amortization of
intangible assets and an increase in accounts payable of
$101,000.
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_________________ By:______________________
JAMES P. JIMIRRO
Chairman of the Board
President
Date_________________ By:______________________
BENJAMIN HO
Acting Chief Financial Officer
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0
0
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