<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number
September 30, 1995 0-25596
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SHOP AT HOME, INC.
(Exact name of registrant as specified in its charter)
Tennessee 62-1282758
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5210 Schubert Road
P.O. Box 12600
Knoxville, Tennessee 37912
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number,
including area code (423) 688-0300
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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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Common Stock $.0025 par value 10,246,137
- ----------------------------- ----------------------
(Title of class) (Shares outstanding at
November 10, 1995)
<PAGE> 2
SHOP AT HOME, INC. AND SUBSIDIARIES
INDEX
FIRST QUARTER ENDED SEPTEMBER 30, 1995
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<TABLE>
<S> <C> <C>
PART I FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets - unaudited 3
Condensed Consolidated Statements of Operations - unaudited 4
Condensed Consolidated Statements of Cash Flows - unaudited 5
Notes to Condensed Consolidated Financial Statements - unaudited 6
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7-8
PART II OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K 9
</TABLE>
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SHOP AT HOME, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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ASSETS
<TABLE>
<CAPTION>
September 30, June 30,
1995 1995
(Unaudited) (Audited)
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<S> <C> <C>
Cash $ 577,496 $ 202,146
Accounts receivable 398,916 507,166
Inventories 1,592,914 1,683,472
Prepaid expenses 202,120 159,300
Deferred tax assets 198,572 198,572
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Total current assets 2,970,018 2,750,656
Property & equipment, net 3,894,845 3,937,939
FCC License, net 10,724,478 10,745,106
Goodwill, net 630,468 630,416
Other assets 356,243 93,314
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Total assets $18,576,052 $18,157,431
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</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
<S> <C> <C>
Accounts payable and accrued expenses $ 4,834,677 $ 5,811,341
Current portion - capital leases and long term debt 650,642 1,064,922
Deferred revenue 783,602 495,337
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Total current liabilities 6,268,921 7,371,600
Long-term debt 6,253,388 4,561,192
Deferred income taxes 2,277,302 2,304,301
Redeemable Preferred Stock
$10 par value, 1,000,000 shares authorized,
137,943 and 140,000 shares issued
and outstanding at September 30, 1995 and
June 30, 1995, respectively 1,379,430 1,400,000
Stockholders' equity:
Common stock - $.0025 par value,
30,000,000 shares authorized,
10,246,137 and 10,144,080 shares issued at
September 30, 1995 and June 30, 1995, respectively 25,615 25,360
Additional paid in capital 9,205,647 8,935,332
Accumulated deficit (6,834,251) (6,440,354)
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Total liabilities and stockholders' equity $18,576,052 $18,157,431
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</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
3
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SHOP AT HOME, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
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<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
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(Unaudited) (Unaudited)
<S> <C> <C>
Net revenues $ 7,811,094 $ 6,245,349
Cost of sales 4,631,752 3,824,017
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Gross profit 3,179,342 2,421,332
Other operating income 141,397 0
Operating expenses 3,580,096 2,364,423
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(259,357) 56,909
Interest expense (169,836) (18,747)
Other income 8,296 39,578
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Income (loss) before income taxes (420,897) 77,740
Income tax (expense) benefit 27,000 (2,762)
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Net income (loss) ($393,897) $ 74,978
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Net income (loss) per share ($0.04) $ 0.01
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Weighted average number of shares 10,194,423 11,925,340
=========== ===========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE> 5
SHOP AT HOME, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
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<TABLE>
<CAPTION>
Three Months Ended September 30,
1995 1994
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss) ($393,897) $ 74,978
Non-cash expenses included in net income (loss)
Depreciation and amortization 211,904 105,921
Deferred income taxes (27,000) 0
Changes in current and non-current items
Accounts receivable 108,250 (340,289)
Inventories 90,558 97,643
Prepaid expenses and other assets (42,820) (5,517)
Accounts payable and accrued expenses (976,664) (391,914)
Deferred revenue 288,265 (13,610)
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Net cash used by operations (741,404) (472,788)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment (168,810) (39,024)
Other assets (12,928) (115,000)
FCC licenses 20,576 0
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Net cash used by investing activities (161,162) (154,024)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of debt (722,084) (118,105)
Additional long-term debt 2,000,000 0
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Net cash (used) provided by financing activities 1,277,916 (118,105)
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NET INCREASE (DECREASE) IN CASH 375,350 (744,917)
Cash beginning of period 202,146 1,075,026
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Cash end of period $ 577,496 $ 330,109
========== ==========
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE> 6
SHOP AT HOME, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATE FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 (UNAUDITED)
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NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting only of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of financial condition and results of operations of the interim
period. The condensed consolidated balance sheet data for the fiscal year
ended June 30, 1995 was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting principles.
The accounting policies followed by the Company are set forth in the Company's
financial statements in the Shop at Home, Inc. and Subsidiaries Annual Report
on Form 10-K for the fiscal year ended June 30, 1995.
NOTE 2 - LONG-TERM DEBT
On August 16, 1995, the Company issued its $2,000,000 Variable Rate Convertible
Secured Note due 2000 to Global Network Television, Inc. J. D. Clinton, a
director of the Company, is the sole shareholder and Chairman of Global Network
Television, and that corporation is a principal shareholder of the Company.
The loan bears interest at the prime rate plus 2%, and is payable in 60 monthly
installments. The loan is collateralized by a security interest in the
inventory, accounts receivable, and certain equipment, furniture and fixtures
of the Company, as well as the stock of MFP, Inc., a subsidiary of the Company,
and an assignment of the proceeds of any sale of the Federal Communications
Commission license of Television Station WMFP.
For consideration of the loan, Shop at Home, Inc., issued 100,000 shares of
common stock to Global Network Television, Inc., who then assigned the shares
to Mortgage Funding Corporation. J. D. Clinton, a director of the Company, is
the sole shareholder of Mortgage Funding Corporation.
NOTE 3 - SUBSEQUENT EVENT
On October 10, 1995, the Company entered into a letter of intent with Paxson
Communication Corporation (PCC), which would grant PCC the right to acquire
more than 50% of the outstanding stock of the Company. The transaction is
subject to the approval of the two Companys' Boards of Directors and the
Federal Communication Commission.
Under terms of the proposed agreement, PCC will acquire ownership interest both
from current shareholders and from newly issued shares of the Company. Subject
to regulatory approval, it is anticipated that the transaction will be
consummated in December 1995.
6
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SHOP AT HOME, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 1995, the Company had total current assets of $2,970,000
and total current liabilities of $6,269,000 for negative working capital of
$3,299,000. At June 30, 1995, the Company had current assets of $2,751,000 and
current liabilities of $7,372,000 for a negative working capital of $4,621,000.
The improvement in working capital from June 30 to September 30 was primarily
the result of $2,000,000 of borrowings subsequent to June 30, 1995;
approximately $1,400,000 of which was used to reduce current payables, finance
certain equipment additions, provide working capital, and pay off certain
short-term bank indebtedness. Significant changes affecting net working
capital included an increase in cash of $375,000; a decrease in accounts
receivable of $108,000; a decrease in trade payables and accrued expenses of
$980,000, and an increase in deferred revenue of $288,000.
As of September 30, 1995, the Company has a approximately $100,000 commitment
for capital expenditures.
The Company believes internally generated funds from operations, together with
borrowing and the sale of common stock and warrant rights, if needed, will be
sufficient to meet the Company's capital requirements during the next fiscal
year.
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
The following table sets forth for the periods indicated the percentage
relationship to total revenues of certain items included in the Company's
Condensed Consolidated Statement of Operations.
<TABLE>
<CAPTION>
Three Months Ended
9/30/95 9/30/94
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<S> <C> <C>
Net revenues 100.0% 100.0%
Cost of sales 59.3% 61.2%
Gross profit 40.7% 38.8%
Other operating income 1.8% 0.0%
Operating expenses 45.8% 37.9%
Other income 0.1% 0.6%
Interest expense 2.2% 0.3%
Net income (loss) before income taxes (5.4)% 1.2%
===== =====
</TABLE>
7
<PAGE> 8
The Company's net revenues for the quarter ended September 30, 1995 were
$7,811,000, which was an increase of 25.1% from net revenues of $6,245,000 for
the quarter ended September 30, 1994. This increase was primarily attributable
to expanded carriage during the 1995 period, which is part of the Company's
plan to aggressively increase its market share.
Gross profit margin for the quarter ended September 30, 1995 was 40.7%,
compared to 38.8% in the quarter ended September 30, 1994. The increase was
principally due to better acquisition costs for products and an increase in the
product mix towards sports, general merchandise and jewelry sales which showed
improved margins over the prior year period.
The Company had other operating income in the 1995 quarter primarily as a
result of infomercial income generated in MFP in Boston. The Company's
operating expenses for the quarter ended September 1995 increased $1,216,000 or
51.4%, compared to the same period in 1994. As a percentage of net revenue,
operating expenses increased to 45.8% from 37.9% in the comparable period of
the prior year. This increase was primarily related to and consisted of: a
$400,000 increase in broadcast distribution; a $166,000 increase in salaries
primarily related to order entry personnel, and management additions; a
$107,000 increase in depreciation and amortization; increase in the other
operating expenses such as rent, utilities, etc. related to the operation of
MFP in Boston and KZJL in Houston. In addition, interest expense increased
$151,000 related to the additional debt.
As a result of the foregoing, the Company had a net loss of $394,000 for the
quarter ended September 30, 1995 compared to net income of $75,000 for the
comparable quarter last year.
8
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SHOP AT HOME, INC.
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
a) 27 Financial Data Schedule (for SEC use only).
b) 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 the
undersigned thereunto duly authorized.
/S/ Kent Lillie
- --------------------------------------
Kent E. Lillie, President
Date: November 10, 1995
---------------------------------
/S/ Joseph Nawy
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Joseph Nawy, Vice President Finance
Date: November 10, 1995
--------------------------------
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF SHOP AT HOME, INC. FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 577,496
<SECURITIES> 0
<RECEIVABLES> 398,916
<ALLOWANCES> 0
<INVENTORY> 1,592,914
<CURRENT-ASSETS> 2,970,018
<PP&E> 5,169,666
<DEPRECIATION> 1,274,821
<TOTAL-ASSETS> 18,576,052
<CURRENT-LIABILITIES> 6,268,921
<BONDS> 6,253,388
<COMMON> 25,615
0
1,379,430
<OTHER-SE> 2,371,396
<TOTAL-LIABILITY-AND-EQUITY> 18,576,052
<SALES> 7,811,094
<TOTAL-REVENUES> 7,960,787
<CGS> 4,631,752
<TOTAL-COSTS> 3,580,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 169,836
<INCOME-PRETAX> (420,897)
<INCOME-TAX> (27,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (393,897)
<EPS-PRIMARY> ($0.04)
<EPS-DILUTED> ($0.04)
</TABLE>
