<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------- -------
Commission file number 0-15392
Faircom Inc.
(Exact name of registrant as specified in its charter)
Delaware 87-0394057
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Glen Head Road, Old Brookville, New York 11545
(Address of principal executive offices)
(516) 676-2644
(Registrant's telephone number, including area code)
Not Applicable
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 May 5, 1995:
Common Stock, par value $.01 7,378,199
---------------------------- ------------------
(Title of each class) (Number of Shares)
<PAGE> 2
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1995 March 31, 1994
----------- -----------
<S> <C> <C>
Gross broadcasting revenues $ 1,066,603 $ 1,111,830
Less: agency commissions (123,280) (116,483)
----------- -----------
Net broadcasting revenues 943,323 995,347
----------- -----------
Programming and
technical expenses 263,943 247,995
Selling, general and
administrative expenses 417,074 412,149
Depreciation and amortization 60,000 72,900
Corporate expenses 71,531 33,762
----------- -----------
Total operating expenses 812,548 766,806
----------- -----------
Income from operations 130,775 228,541
Interest expense (203,997) (178,790)
Other income 27,534 2,449
----------- -----------
Income (loss) before preferred
stock dividend requirement of
subsidiaries and provision for
appraisal rights (45,688) 52,200
Preferred stock dividend require-
ment of subsidiaries -- 59,055
----------- -----------
Net loss $ (45,688) $ (6,855)
=========== ===========
Net loss per common share $ (0.01) $ (0.00)
=========== ===========
Weighted average shares
outstanding used in per
share computation 7,378,199 7,378,199
=========== ===========
</TABLE>
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<PAGE> 3
FAIRCOM INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
-------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 144,948 $ 252,276
Accounts receivable (less allowance
of $20,000 for possible losses in
1995 and 1994) 727,255 956,321
Prepaid expenses 48,151 37,507
-------------- -------------
Total current assets 920,354 1,246,104
-------------- -------------
Property and equipment, at cost 6,067,630 5,940,485
Less accumulated depreciation and
amortization (4,794,484) (4,758,483)
-------------- -------------
Property and equipment, net 1,273,146 1,182,002
-------------- -------------
Intangible assets (net of accumulated
amortization of $416,435 in 1995 and
$401,435 in 1994) 1,727,002 1,742,002
Other assets:
Deferred financing costs 239,806 248,805
Other 70,000 70,000
-------------- -------------
2,036,808 2,060,807
-------------- -------------
$ 4,230,308 $ 4,488,913
============== =============
LIABILITIES AND CAPITAL DEFICIT
Current liabilities:
Accounts payable $ 47,925 $ 45,039
Accrued expenses and liabilities 246,961 285,651
Taxes payable 76,275 121,068
Current portion of interest payable 242,149 187,975
Current portion of long-term debt 491,201 490,142
Current portion of obligations under
capital leases 20,662 20,662
-------------- -------------
Total current liabilities 1,125,173 1,150,537
-------------- -------------
Long-term debt, less current portion 8,197,883 8,347,547
Interest payable, less current portion 586,191 618,628
Obligations under capital leases,
less current portion 14,346 19,798
Appraisal rights liability 712,000 712,000
-------------- -------------
Total liabilities 10,635,593 10,848,510
-------------- -------------
Capital Deficit:
Common stock, $.01 par value, 35,000,0000
shares authorized, 7,378,199 shares
issued and outstanding 73,782 73,782
Additional paid-in capital 2,605,813 2,605,813
Deficit (9,084,880) (9,039,192)
-------------- -------------
Total capital deficit (6,405,285) (6,359,597)
-------------- -------------
$ 4,230,308 $ 4,488,913
============== =============
</TABLE>
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<PAGE> 4
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (45,688) $ (6,855)
--------- ----------
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Depreciation and amortization 60,000 72,900
Preferred stock dividend
requirement of subsidiaries -- 59,055
Increase (decrease) in cash flows
from changes in operating
assets and liabilities:
Accounts receivable 229,066 95,915
Prepaid expenses (10,644) (13,905)
Other assets -- (1,997)
Accounts payable 2,886 (14,400)
Accrued expenses and
liabilities (38,690) (12,345)
Taxes payable (44,793) --
Interest payable 21,737 (1,580)
--------- ----------
Total adjustments 219,562 183,643
--------- ----------
Net cash provided by
operating activities $ 173,874 $ 176,788
--------- ----------
</TABLE>
-4-
<PAGE> 5
FAIRCOM INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash flows from investing activities:
Capital expenditures $(127,145) $ (7,129)
--------- ----------
Net cash used in
investing activities (127,145) (7,129)
--------- ----------
Cash flows from financing activities:
Principal payments on long-term
debt (148,605) (169,101)
Principal payments under capital
lease obligations (5,452) (9,889)
Payments for deferred financing
costs -- (10,000)
--------- ----------
Net cash used in
financing activities (154,057) (188,990)
--------- ----------
Net decrease in cash and cash
equivalents (107,328) (19,331)
Cash and cash equivalents at
beginning of period 252,276 211,179
--------- ----------
Cash and cash equivalents at
end of period $ 144,948 $ 191,848
========= ==========
</TABLE>
-5-
<PAGE> 6
FAIRCOM INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for completed financial statements. In the opinion of management, the statements
include all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of the results for the interim periods. The
results of operations for any interim period are not necessarily indicative of
the results for a full year.
It is suggested that these consolidated financial statements
be read in conjunction with the financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994, as filed with the Commission.
2. Net Loss Per Common Share
Fully diluted net loss per common share is not presented
because the effects of the assumed conversion of the Company's Subordinated
Senior Convertible Note would be antidilutive.
-6-
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The Company's net broadcasting revenues decreased 5.2% to $943,000 in the
three months ended March 31, 1995 from $995,000 in the three months ended March
31, 1994. Net revenues decreased as a result of the absence in the 1995 period
of any net revenues from a radio station in Southampton, New York, formerly
owned by the Company and sold in August 1994. This decrease was offset in part
by increased net revenues at the Company's Flint, Michigan radio stations.
Operating expenses before depreciation, amortization and corporate
expenses increased by 3.2% to $681,000 in the three months ended March 31, 1995
from $660,000 in the three months ended March 31, 1994. This increase resulted
from higher operating expenses in the Company's Flint radio stations, offset in
part by the absence in the 1995 period of operating expenses in the Southampton
station formerly owned by the Company.
Net broadcasting revenues in excess of operating expenses before
depreciation, amortization and corporate expenses (operating cash flow)
decreased 21.7% to $262,000 in the three months ended March 31, 1995 from
$335,000 in the three months ended March 31, 1994. This decrease resulted from
the absence in the 1995 period of any operating cash flow from the former
Southampton station, offset in part by increased operating cash flow from the
Flint stations.
Corporate expenses increased by 111.9% to $72,000 in the three months
ended March 31, 1995 from $34,000 in the comparable period of 1994 as a result
of higher payments for employee compensation and professional fees in the 1995
period.
Interest expense increased by 14.1% to $204,000 in the three months ended
March 31, 1995 from $179,000 in the comparable period in 1994. This increase
resulted from higher principal amounts of interest bearing debt outstanding and
higher interest rates during the 1995 period.
Preferred stock dividend requirement of subsidiaries decreased by 100.0%
to zero in the three months ended March 31, 1995 from $59,000 in the comparable
period of 1994. This decrease resulted from the extinguishment of the preferred
stock in a former subsidiary of the Company as a result of the sale of the
Company's former station in Southampton in August 1994.
As a result principally of lower net broadcasting revenues and higher
operating, corporate and interest expenses, offset in part by the elimination of
the preferred stock dividend requirement, net loss increased to $46,000 in the
three months ended March 31, 1995 from a net loss of $7,000 in the first quarter
of 1994.
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<PAGE> 8
Liquidity and Capital Resources
In the three months ended March 31, 1995, net cash provided by operating
activities was $174,000 compared with $177,000 in the comparable 1994 period.
Net decrease in cash and cash equivalents was $107,000 in 1995 compared with a
net decrease of $19,000 in 1994. The net decrease in cash and cash equivalents
was due primarily to capital expenditures in the 1995 period for a building
addition for increased sales and office space and for studio alterations at the
Company's Flint facilities.
Historically, the Company's net cash provided by operating activities is
lower in its first and second quarters, and the Company expects such net cash to
increase in the balance of 1995.
Based upon current interest rates, the Company believes its interest
expense for the balance of 1995 will be approximately $817,000. Scheduled debt
principal payments are $368,000. Corporate expenses and capital expenditures for
the remainder of 1995 are estimated to be approximately $278,000 and $33,000,
respectively. The Company expects to be able to meet such interest expense, debt
repayment, corporate expenses and capital expenditures, aggregating $1,496,000,
from net cash provided by operations and current cash balances.
The Company is examining various alternatives for obtaining funds for
station acquisitions. No assurance can be given that the Company will
successfully consummate any such financing.
-8-
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 Financial Data Schedule
All other items of this Part are inapplicable.
-9-
<PAGE> 10
SIGNATURE
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.
FAIRCOM INC.
(Registrant)
s/ Joel M. Fairman
------------------------------
Joel M. Fairman
Chairman of the Board
President and Treasurer
(Principal Executive Officer
and Chief Financial Officer)
Date: May 10, 1995
-10-
<PAGE> 11
EXHIBIT INDEX
Exhibit 27 - Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 144,948
<SECURITIES> 0
<RECEIVABLES> 747,255
<ALLOWANCES> 20,000
<INVENTORY> 0
<CURRENT-ASSETS> 920,354
<PP&E> 6,067,630
<DEPRECIATION> 4,794,484
<TOTAL-ASSETS> 4,230,308
<CURRENT-LIABILITIES> 1,125,173
<BONDS> 8,197,883
<COMMON> 73,782
0
0
<OTHER-SE> 2,605,813
<TOTAL-LIABILITY-AND-EQUITY> 4,230,308
<SALES> 0
<TOTAL-REVENUES> 1,066,603
<CGS> 0
<TOTAL-COSTS> 935,828
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203,997
<INCOME-PRETAX> (45,688)
<INCOME-TAX> 0
<INCOME-CONTINUING> (45,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (45,688)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
