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UNITED STATES
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.
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For Quarter Ended March 31, 1995 Commission File No. 0-17349
VENTURA ENTERTAINMENT GROUP LTD.
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(Exact name of registrant as specified in its charter)
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<S> <C>
Delaware 95-4165135
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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11466 San Vicente Boulevard, Los Angeles, California 90049
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (310) 820-0607
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 preceeding 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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
<TABLE>
<S> <C>
Common stock -- May 8, 1995 9,917,501
Class C Warrants -- May 8, 1995 699,957
Class D Warrants -- May 8, 1995 699,957
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VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
1995 1994
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(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 812,393 $ 3,439,459
Accounts and Notes Receivable 2,674,615 1,369,786
Expenditures billable to clients 773,517 780,008
Advances to employees 75,985 94,178
Prepaid expenses and other 327,037 327,174
----------- -----------
Total current assets 4,663,547 6,010,605
Television advertising time 471,605 474,705
Property and equipment, at cost, less
accumulated depreciation 561,150 391,722
Cost of broadcast acquisitions in process 1,387,791 497,403
Deferred financing costs, net of amortization 38,500 741,884
Other assets, net 875,805 224,848
Goodwill, net of amortization 6,729,221 5,989,877
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Total Assets $14,727,619 $14,331,044
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 2,740,419 $ 2,113,520
Notes payable 1,422,923 935,000
Current portion of long-term debt 213,207 212,690
Advances from clients 1,537,414 1,311,092
Deferred revenues 2,789,946 2,440,013
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Total current liabilities 8,703,909 7,012,315
Long-term debt 1,759,486 1,792,688
Unamortized portion of rent abatement 404,770 403,666
Redeemable preferred stock of subsidiary 950,000 950,000
Convertible debentures due 2001 0 2,750,000
Minority interest (114,308) (17,862)
Shareholders' Equity:
Preferred stock, Series B 0 1
Common stock 9,917 7,708
Additional paid-in capital 6,111,028 3,881,957
Accumulated deficit since July 25, 1994 (3,097,183) (2,449,429)
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Total shareholders' equity 3,023,762 1,440,237
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Total Liabilities and Shareholders' Equity $14,727,619 $14,331,044
----------- -----------
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See Notes to Condensed Consolidated Financial Statements
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<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
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<CAPTION>
Three Months ended March 31
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1995 1994
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<S> <C> <C>
Revenues $4,540,542 $ 630,564
Operating expenses 5,162,570 1,209,041
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Operating (loss) (622,028) (578,477)
Other income (expense):
Interest expense, net (42,753) (43,335)
Loss on return of television advertising
time (75,000)
Minority/Interest in losses
of subsidiaries 96,446
Amortization of Goodwill (79,419)
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(25,726) (118,335)
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(Loss) from continuing operations (647,754) (696,812)
(Loss) from discontinued operations 0 (291,190)
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Net (loss) (647,754) (988,002)
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Dividend requirement of
Preferred Stock (8,000) (66,000)
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Net (loss) applicable to common
shareholders (655,754) $(1,054,002)
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Net (loss) per share (.08) $ (.46)
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Weighted average number of
shares outstanding 8,461,499 2,278,750*
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*Restated to reflect the July 25, 1994 Recapitalization
See Notes to Condensed Consolidated Financial Statements
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VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
----------------------------------------------------------------
(Unaudited)
Additional Accumulated
Preferred Common Paid-in Deficit since
Stock Stock Capital July 25, 1994 Net
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<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994...................... $ 1 $7,708 $3,881,957 $(2,449,429) $1,440,237
Convertible Debentures due 2001................. 1,290 2,035,989 2,037,279
Conversion of Series B Preferred Stock.......... (1) 769 (768)
Issuance of Shares for Acquisitions............. 115 149,885 150,000
Issuance of Shares for Service.................. 35 43,965 44,000
Net (loss)...................................... (647,754) (647,754)
--- ------ ---------- ------------- ----------
Balance March 31, 1995.......................... 0 $9,917 $6,111,028 $(3,097,183) $3,023,762
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See Notes to Condensed Consolidated Financial Statements.
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<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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<CAPTION>
Three months ended March 31
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1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (647,754) $(988,002)
Adjustments to reconcile net loss to cash
(used) by operating activities:
Depreciation and amortization 121,022 63,550
Discontinued Operations 0 193,038
Loss on return on television advertising time 0 75,000
Minority interest in loss of subsidiaries (96,446) 0
Rent abatement 1,104 0
Changes in assets and liabilities:
Accounts receivable (1,199,506) (111,000)
Expenditures billable to clients 6,491 0
Prepaid expenses 15,880 (7,939)
Accounts payable and accrued expenses 586,092 (20,268)
Advances from clients 226,322 0
Deferred revenues 340,058 66,250
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Net cash (used) by operating activities (646,737) (713,493)
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Cash flows used in investing activities:
Purchase of plant and equipment (164,050) (129,880)
Cash received in acquisition 28,921
Costs of broadcast acquisition in process (890,388)
Other assets (620,794)
Cash paid out in acquisition (300,000)
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Net cash used in investing activities (1,946,311) (129,880)
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Cash flows used in financing activities:
Proceeds from borrowing 410,282
Payment on notes payable (1,333)
Payment on long term debt (32,685)
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Net cash used in financing activities (34,018) 410,282
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Net increase (decrease) in cash (2,627,066) 433,091
Cash at beginning of period 3,439,459 514,872
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Cash at end of period $ 812,393 $ 81,781
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</TABLE>
See Notes to Condensed Consolidated Financial Statements.
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VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
March 31, 1995
(1) Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
accruals) which are, in the opinion of management, necessary to present fairly
the results of operations for the periods presented. The information contained
in this Form 10-Q should be read in conjunction with the audited financial
statements as of December 31, 1994, filed as part of the Company's Annual Report
on Form 10-K.
(2) Acquisitions
During the quarter the Company issued 115,117 shares of its common stock, paid
$100,000 in cash and assumed $400,000 in debt in conjunction with the
acquisition of two privately held companies in an effort to expand its
management and business base in motor sports and media consulting. These
acquisitions have been treated as purchases and operations for the quarter ended
March 31, include the activity of each for the period since the respective
acquisition.
The Company also completed due diligence and negotiated acquisition agreements
to acquire two additional privately held companies for a combination of the
issuance of 100,000 shares of common stock and the assumption of approximately
$1,800,000 in debt. These acquisitions are expected to be completed within 30
days and are expected to complete the Company's base business expansion plans
for 1995.
The Company's 80% owned subsidiary, Soundview Media, completed the purchase of
WHOA-TV, the ABC affiliate in Montgomery, Alabama, on April 11, 1995. Soundview
also received FCC approval to acquire WTWG-TV, the NBC affiliate in Tallahassee,
Florida. The closing is scheduled for August 8, 1995. The Company has no
assurance it will be able to obtain the necessary financing to complete this
transaction.
In November, 1994, the Company signed a letter of intent to acquire all of the
issued and outstanding shares of American Communications and Television
Corporation (ACTV) subject to the execution of a definitive acquisition
agreement. ACTV is the owner of the WTGS-TV Channel 28 in Savannah, Georgia and
other broadcast interest. On March 10, 1995, the Company entered into a
definitive acquisition agreement which provided among other terms and conditions
for the issuance of 2,875,000 shares of the Company's common stock at a
predetermined value of $4.00 per share, the assumption of $4,000,000 of debt,
the approval of the FCC and the
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Company's ability to provide financing satisfactory to the Seller on or
before April 1. On May 4, 1995, the Sellers notified the Company that the
Company had not provided financing satisfactory to the Seller and terminated
the purchase agreement. By mutual agreement, the Company and the Seller have
agreed to explore negotiated financing alternatives to the previously negotiated
acquisition agreement. The Company has paid the Seller $387,000 as a
refundable deposit until the completion of these negotiations. The Company
negotiated for the purchase of any or all of the broadcast interest of ACTV.
The Company has no assurance it will be able to renegotiate an agreement or
provide financing satisfactory to the Seller in this transaction.
In March, 1995, the Company's 80% owned subsidiary, Soundview Media Investments,
signed letters of intent to acquire three Fox affiliates located in the
Northwest. The letters of intent were subject to the negotiation and execution
of a definitive agreement. The Company did not reach an agreement as to the
terms and conditions related to each of the acquisitions. The letters of intent
have expired and the Company is not currently negotiating for these properties.
The Company currently has $1,387,791 of its resources allocated to the cost of
broadcast acquisitions in process.
(3) Conversion of Debentures due 2001
The Convertible Debentures due 2001 related to borrowings from a foreign bank.
The entire amount was converted to 1,100,000 shares of common in March 1995. The
Company transferred 294,000 shares of Harmony Holdings Inc. to the bank and
issued 190,000 shares of the Company's common stock as a result of the
conversion and the penalty payment required by the agreement.
(4) Related Party Transactions
In March 1995, the Company paid Media One, Inc. a $100,000 brokerage fee related
to the acquisition of Soundview. Frank Woods, a Director, is also Chairman of
the Board of Media One, Inc.
In connection with the proposed acquisition of WTGS-TV Savannah, Georgia (Note
2) the Company advanced the seller $387,000 as a refundable deposit. Mr. Coy
Eklund, a director and Mr. Carleton Burtt, the COO are Chairman and President,
respectively of the Seller, Trivest Financial Services Inc.
Mr. Donald Lifton, the Corporate Secretary is a principal shareholder of one
of the privately held companies the Company is negotiating to buy as discussed
in Note 2.
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(5) Subsequent Events
As stated in Note 2 on April 11, 1995, the Company completed the acquisition of
WHOA-TV Montgomery, Alabama. The purchase price included the assumption of
$7,000,000 of debt and the issuance of preferred shares by a subsidiary. The
debt may be reduced to $4,000,000 if paid by December 31, 1995 or $5,000,000 if
paid by December 31, 1996. The preferred shares represent 10% of the operating
subsidiary and have the right to be exchanged for other undetermined shares or a
buy out in the future for cash. In addition, the Company was required to make
$500,000 available for working capital for the station. Revenues and broadcast
cash flow for the year ended December 31, 1994 were $2,680,000 and $186,000
respectively.
In connection with the acquisition of Kaleidoscope the Company agreed to secure,
By May 1, 1995 releases on behalf of a former Kaleidoscope shareholder from his
guarantee of $935,000 of bank loans, a $221,000 letter of credit and a $106,000
bank loan made to an unrelated party. As the Company has not completed the
financing necessary to implement its business plan, to date, the releases have
not been secured. The guarantor has notified the Company concerning its failure
to secure the releases by May 1, 1995 and indicated that on May 25, 1995 he
would review the alternatives available to him. If the Company does not secure
the releases, the guarantor has the right to reacquire the shares of two
subsidiaries the Company acquired as part of the Kaleidoscope transactions.
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PART I. ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Ventura Entertainment Group Ltd. ('Ventura' or the 'Company') is a diversified
broadcast, marketing and corporate communications services company. As of
December 30, 1994, the Company acquired 80% of Soundview Media Investment, Inc.,
('Soundview'), a development stage company established for the purpose of
acquiring broadcast properties. In November 1994 the Company acquired a 51%
interest in Greenwich Entertainment Group, Inc., a development stage company in
the out-of-home motion simulation entertainment business.
The Company is engaged in the business of marketing corporate services, owning
broadcasting properties and marketing events. The Company provides related
corporate services including creating and managing corporate sponsorships,
specialty video productions, corporate promotions including product placement,
facilities and production design, and the distribution of television programs.
Results of Operations
Three months ended March 31, 1995, compared to three months ended March 31, 1994
Revenues for the three months ended March 31, 1995 were $4,540,542 compared to
$630,564 for the similar period in 1994. Included in the revenues for 1995 are
$3,785,234 from Kaleidoscope, acquired as of August 1, 1994. Operating expenses
for the three months ended March 31, 1995 were $5,162,570 compared with
$1,209,041 in the similar period in 1994. Kaleidoscope's operations account for
$3,458,132 of the operating expenses for the three months ended March 31, 1995.
In addition, in 1995, Soundview had operating expenses of $307,671 and no
revenue and Greenwich Entertainment had $73,385 of operating expenses and no
revenue.
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Liquidity and Capital Resources
As of March 31, 1995, the Company had cash of $812,393, the Company also had
total current assets of $4,663,547 and current liabilities of $8,703,909, or a
working capital deficiency of $4,040,362. Included in current liabilities is
$2,789,946 of deferred revenue of which $2,413,000 will be recognized upon the
utilization of media time to be acquired by the Company in connection with a
barter advertising agreement.
The Company's barter agreement with a vehicle manufacturer obligates it to
acquire certain media time to be used by this manufacturer. Upon its utilization
of this advertising time, this vehicle manufacturer has agreed to pay the
Company an additional $2,000,000. To the extent that these future payments are
less than the cost of the media time to be acquired, the Company will be
required to utilize its resources.
At December 31, 1994, the Company had outstanding 60 shares of Series B Stock
which were entitled to an aggregate annual dividend of $48,000. At the option of
the Company, such dividends are payable in shares of Common Stock. Subsequent to
December 31, 1994, the 60 shares of Series B Stock (including accumulated
dividends thereon) were converted into an aggregate of 768,881 shares of Common
Stock.
Pursuant to employment agreements, certain of the executive officers and other
key employees of the Company are entitled to minimum base compensation
aggregating approximately $2,035,000 for the year ending December 31, 1995. The
Company's leases and other commitments provide for minimum annual payments of
approximately $750,000.
In connection with the acquisition of Kaleidoscope, the Company guaranteed an
aggregate of $750,000 of Kaleidoscope's debt due to one of Kaleidoscope's former
shareholders. The Company has also agreed to obtain releases on behalf of this
shareholder from approximately $1,251,000 of debt guaranteed by him. The Company
has not obtained such releases and the former shareholder has issued notice to
the company regarding this failure. The Company has not made any other
arrangements for sources of external financing, such as bank lines of credit.
The Company has no commitments for capital expenditures other than a
construction contract for office facilities for the operations in North
Carolina, which has been financed with a mortgage.
For the quarter ended March 31, 1995 the Company used $646,000 of cash in its
operations, including $306,000 for its broadcast subsidiary and $72,000 for
Greenwich Entertainment. The Company's investments in broadcast assets,
acquisitions, equipment and other assets amounted to $1,946,000 for the quarter.
Payments on notes and long term debt were $34,000. All of the above was financed
with cash on hand at December 31, 1994.
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The Company has experienced substantial growth in its revenues, operations and
employee base, and has undergone substantial changes in its business that have
placed significant demands on the Company's management, working capital and
financial resources. The Company's continued revenue growth and current
expansion plans are expected to place a significant strain on the Company's
financial and management operations. The ability of the Company to successfully
meet its obligations, revenue growth and complete its expansion plans will
depend in part upon the Company's ability to continue to improve and expand its
management and financial control systems, to attract, retain and motivate key
employees, and to raise additional capital. There can be no assurance that the
Company will be successful in these regards.
If the Company does not operate on a positive cash flow basis and its present
resources are not sufficient to absorb any cash losses, the Company will need to
obtain financing through the debt or equity markets. In order to fulfill its
overall plan and its financial obligations, the Company is pursuing several
financing alternatives. However, there can be no assurance that any financing
will occur.
Inflation
Inflation has not had a significant effect on the Company.
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PART II -- OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
None
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<PAGE>
PART II -- OTHER INFORMATION
ITEM 5. Other Information
In November, 1994, the Company signed a letter of intent to acquire all of the
issued and outstanding shares of American Communications and Television
Corporation (ACTV) subject to the execution of a definitive acquisition
agreement. ACTV is the owner of the WTGS-TV Channel 28 in Savannah, Georgia and
other broadcast interest. On March 10, 1995, the Company entered into a
definitive acquisition agreement which provided among other terms and conditions
for the issuance of 2,875,000 shares of the Company's common stock at a
predetermined value of $4.00 per share, the assumption of $4,000,000 of debt,
the approval of the FCC and the Company's ability to provide financing
satisfactory to the Seller on or before April 1. On May 4, 1995, the Sellers
notified the Company that the Company had not provided financing satisfactory to
the Seller and terminated the purchase agreement. By mutual agreement, the
Company and the Seller have agreed to explore negotiated financing alternatives
to the previously negotiated acquisition agreement. The Company has paid the
Seller $387,000 as a refundable deposit until the completion of these
negotiations. The Company negotiated for the purchase of any or all of the
broadcast interest of ACTV. The Company has no assurance it will be able to
renegotiate an agreement or provide financing satisfactory to the Seller in this
transaction.
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PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
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None
b. Reports on Form 8-K
-------------------
March 23, 1995 regarding acquisition of American Communication and
Television, Inc.
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.
VENTURA ENTERTAINMENT GROUP LTD.
s/b Floyd W. Kephart
--------------------------------
Floyd W. Kephart
Chairman of the Board & Chief
Executive Officer
s/b David H. Ward
--------------------------------
David H. Ward
Chief Financial Officer
Date: May 15, 1995
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 812
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<RECEIVABLES> 3,524
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<TOTAL-ASSETS> 14,728
<CURRENT-LIABILITIES> 8,704
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<COMMON> 10
950
0
<OTHER-SE> 3,014
<TOTAL-LIABILITY-AND-EQUITY> 14,728
<SALES> 4,541
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