SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the Quarterly Period Ended: December 31, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Transition Period From to .
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Commission File Number: 33-27494-FW
New Frontier Media, Inc.
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(Exact name of registrant as specified in its charter)
Colorado 84-1084061
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(State of Incorporation) (I.R.S. Employer I.D. Number)
1050 Walnut, Suite 301, Boulder, Colorado 80302
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(Address of principal executive offices and Zip Code)
(303) 444-0632
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(Registrant's telephone number, including area code)
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:
X YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock:
4,195,200 common shares, including 195,200 Unit Shares, were outstanding as of
December 31, 1996.
<PAGE>
PART I. Item 1. Unaudited Condensed Consolidated Financial Statements.
<TABLE>
<CAPTION>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
December 31, March 31,
1996 1996
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<S> <C> <C>
CURRENT ASSETS
Cash ....................................... $ 985,318 $ 48,523
Accounts Receivable ........................ 267,875 222,276
Inventories ................................ 646,325 354,089
Prepaid distribution rights ................ 98,700 109,763
Common stock subscribed .................... 0 20,000
Income tax receivable ...................... 12,500 72,500
Other ...................................... 38,036 33,727
Total Current Assets .................. 2,048,754 860,878
FURNITURE AND EQUIPMENT, at cost ........... 43,784 39,314
Less: Accumulated depreciation ........ (15,680) (10,479)
Net Furniture and Equipment ........... 28,104 28,835
OTHER ASSETS
Note receivable - officer .................. 43,000 38,000
Accounts receivable - retainage ............ 84,102 77,053
Other ...................................... 39,241 12,583
Total Other Assets .................... 166,343 127,636
TOTAL ASSETS ............................... $ 2,243,201 $ 1,017,349
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
December 31, March 31,
1996 1996
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<S> <C> <C>
CURRENT LIABILITIES
Accounts payable ............................... $ 172,837 $ 186,742
Bank credit line ............................... 211,642 0
Current portion of long term debt .............. 139,573 139,573
Other accrued liabilities ...................... 24,392 15,562
Total Current Liabilities ................. 548,444 341,877
LONG TERM DEBT - Related Parties ............... 0 0
Total Liabilities ......................... $ 548,444 $ 341,877
MINORITY INTEREST .............................. 324,751 0
SHAREHOLDERS' EQUITY (Notes 1 & 2)
Common stock, $.0001 par value, 50,000,000
shares authorized, 4,195,250 and 4,175,250
shares issued and outstanding, respectively .... 420 418
Preferred stock, $.10 par value, 5,000,000
shares authorized, 10,000 shares issued and
outstanding .................................... 1,000 1,000
Additional paid in capital ..................... 1,766,745 847,832
Deficit ........................................ (398,159) (173,778)
Total Shareholders' Equity ................ 1,370,006 675,472
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY ...................... $ 2,243,201 $ 1,017,349
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Nine Months Ended Three Months Ended
December 31 December 31
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
SALES, net ................................... $ 1,946,103 $ 1,935,040 $ 624,009 $ 1,122,607
COST OF SALES ................................ 1,303,692 1,083,863 459,066 580,509
GROSS PROFIT ................................. 642,411 851,177 164,943 542,098
OPERATING EXPENSES
Occupancy and equipment ...................... 115,515 74,576 40,027 30,763
Legal and professional ....................... 41,018 60,393 19,254 36,093
Distribution expense ......................... 350,000 157,500 120,000 105,000
Advertising and promotion .................... 152,460 140,254 75,442 57,245
Salaries, wages and benefits ................. 177,383 58,484 90,137 19,512
Communications ............................... 23,085 18,162 8,525 6,682
Research and Development ..................... 0 71,333 0 53,114
General and Administrative ................... 167,834 102,469 69,405 39,852
Total Operating Expenses ................ 1,027,295 683,171 422,790 348,261
OTHER INCOME (EXPENSE)
Licensing fees and royalties ................. 130,304 110,215 12,492 58,480
Licensing commissions ........................ (23,650) 0 (1,546) 0
Interest income .............................. 21,517 1,408 17,401 1,062
Interest expense ............................. (10,713) 0 (4,755) 0
Total Other Income (Expense) ............ 117,458 111,623 23,592 59,542
Net Income (Loss) before
Income Taxes ............................ (267,426) 279,629 (234,255) 253,379
INCOME TAXES ................................. (2,454) (101,147) 0 (101,147)
NET INCOME (LOSS) ............................ $ (269,880) $ 178,482 $ (234,255) $ 152,232
NET LOSS PER COMMON SHARE
(Note 1) ................................ $ (0.06) $ 0.04 $ (0.06) $ 0.04
WEIGHTED AVG. SHARES
OUTSTANDING ............................. 4,190,111 4,013,333 4,193,167 4,040,000
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended December 31,
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1996 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) ................................ $ (269,880) $ 178,482
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization ............... 5,201 820
Increase (decrease) in accounts payable ..... (13,905) 98,618
(Increase) decrease accounts receivable ..... (52,648) (296,613)
(Increase) decrease in inventories .......... (292,236) (181,391)
(Increase) decrease in income tax receivable 60,000 (46,500)
(Increase) decrease in distribution rights .. 11,063 (42,481)
(Increase) decrease in other assets ......... (30,967) (23,482)
Increase in accrued liabilities ............. 8,830 0
Net cash used in operating activities .. (574,542) (312,547)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture .............. (4,470) (19,033)
Increase in note receivable - officer ............ (5,000) (38,000)
Net cash used in investing activities ....... (9,470) (57,033)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock ......................... 1 480,000
Issuance of preferred stock ...................... 0 65,000
Contribution of capital .......................... 1,309,162 3,629
Bank short term credit line ...................... 211,644 0
Payments of notes payable ........................ 0 (112,000)
Proceeds from notes payable ...................... 0 202,574
Net cash provided by financing activities ... 1,520,807 639,203
NET INCREASE (DECREASE) IN CASH .................. 936,795 269,623
CASH, BEGINNING OF PERIOD ........................ 48,523 677
CASH, END OF PERIOD .............................. $ 985,318 $ 270,300
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
NEW FRONTIER MEDIA, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1996
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business and Consolidation
The Company was incorporated on July 26, 1995 as New Frontier Media, Inc.
and subsequently changed its name to Old Frontier Media, Inc. ( "OFMI" ). On
July 31, 1995, OFMI acquired 100% of the outstanding common stock of Boulder
Interactive Group, Inc. ( "BIG" ) (a developer and publisher of entertainment
and educational computer software on CD-ROM), incorporated on June 3, 1994, for
100% of OFMI's outstanding common stock. In addition, on July 31, 1995 OFMI
capitalized two subsidiaries, David Entertainment, Inc. ("DVD" ) (distributor of
adult laserdisc and digital video disc format titles) and Fuzzy Entertainment,
Inc. ("FUZZY" ) developer and distributor of fine art posters and decorative art
posters.
On September 15, 1995, the shareholders of National Securities Holding
Corporation ("NSHC" ) approved an exchange of common stock of NSHC for the
outstanding common stock of Old Frontier Media, Inc. ( "OFMI" ) and a name
change from NSHC to New Frontier Media, Inc. ( "NFMI" ). As a result of this
transaction, NFMI owns OFMI as a wholly owned subsidiary. OFMI is presently the
only operating subsidiary (through its subsidiaries BIG, DVD, and FUZZY) of
NFMI. The stock exchange between NSHC and OFMI has been considered a reverse
acquisition. Under reverse acquisition accounting, OFMI was considered the
acquirer for accounting and financial reporting purposes, and acquired the
assets and assumed the liabilities of NSHC. The acquisition was accomplished
through the exchange of all the outstanding common stock of OFMI for 3,720,000
shares of common stock and 40,000 shares of preferred stock (after giving effect
to the conversion of the preferred stock to common stock and then giving effect
to a 1-for 2,034.66 reverse stock split of NSHC's common stock) and representing
a controlling interest in NSHC.
The accompanying unaudited condensed consolidated financial statements
include the accounts of NFMI and its wholly-owned subsidiary, OFMI. All
adjustments consisting of normal accruals and elimination of intercompany
accounts and transactions, which in the opinion of management, are necessary for
this presentation, have been reflected in the accompanying financial statements.
On September 20, 1996, Quarto Holdings, Inc. a Delaware corporation,
purchased 30% of the common stock of BIG for $1,250,000 in cash. In addition,
Quarto purchased a warrant from NFMI for $400 cash which allows the right to
purchase up to 400,000 shares of NFMI common stock at an exercise price of $6.00
per share.
Net Loss Per Share of Common Stock
Net loss per share of common stock is based on the weighted average number
of shares of common stock outstanding, giving effect to the reverse acquisition
and reverse stock split of NFMI discussed above. Common stock equivalents are
not included in the weighted average calculation since their effect would be
anti-dilutive.
NOTE 2 SHAREHOLDERS' EQUITY
Net income (loss) per share is based on the weighted average number of
shares of common stock outstanding, giving effect to the reverse acquisition and
the reverse stock split discussed in Note 1 above.
<PAGE>
PART I. Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
(1) Overview
New Frontier Media, Inc. was originally incorporated as Strategic
Acquisitions, Inc.("Strategic") on February 23, 1988 in the State of Colorado.
Strategic undertook a public offering of its stock in May, 1989, as a "blind
pool" company. The Strategic initial public offering was successfully closed in
July, 1989 on the sale of 49,650,000 Units (each unit consisting of one Common
Share and two purchase Warrants) at an offering price of $.01 per Unit. No
Warrants were exercised, and as of August 31, 1989 there were 99,650,000 common
shares of Strategic issued and outstanding.
On September 7, 1989, Strategic completed a reverse acquisition of National
Securities Network, Inc. ("NSN"), a privately-held Colorado corporation and
registered securities broker-dealer. Strategic issued 470,016,000 restricted
common shares to NSN shareholders, in exchange for all of the issued and
outstanding NSN common stock. Shareholders also approved a change of Strategic's
name to National Securities Holding Corporation ("NSHC"). NSHC continued in
operation as a broker-dealer until October 8, 1990, when it ceased operations
and sold its remaining broker-dealer business. NSHC had no operations between
October 8, 1990 and September 15, 1995.
On September 15, 1995, NSHC consummated the acquisition of Old Frontier
Media, Inc.("Old Frontier") in a stock-for-stock exchange. Old Frontier is a
Colorado corporation formed July 26, 1995. NSHC first effected a 2034.66:1
reverse split of all 569,706,000 NSHC Common Shares issued and outstanding,
resulting in 280,000 NSHC Common Shares issued and outstanding prior to the Old
Frontier acquisition. Old Frontier then issued 3,720,000 restricted Common
Shares to Old Frontier shareholders, in return for all of the Old Frontier
Common Stock issued and outstanding. NSHC shareholders also approved a change of
the Company's name to New Frontier Media, Inc. Currently, the Company has
4,195,250 Common Shares and 10,000 Preferred Shares issued and outstanding. The
Company is authorized to issue and total of 50,000,000 Common Shares, par value
$.0001 per share, and 5,000,000 Preferred Shares, par value $.10 per share.
All of the Company's current revenues are derived through its wholly-owned
subsidiary Old Frontier, and through Old Frontier's wholly-owned subsidiaries:
Boulder Interactive Group, Inc. ("BIG"); DaViD Entertainment, Inc. ("DaViD");
and Fuzzy Entertainment, Inc. ("Fuzzy"). The Company's offices are located at
1050 Walnut Street, Suite 301, Boulder,olorado 80302. The telephone number is
(303) 444-0632.
<PAGE>
(2) Results of Operations
The Company currently consists of a publicly-traded holding company (New
Frontier Media, Inc.), and four subsidiaries: Old Frontier Media, the
administrative arm of the Company; Boulder Interactive Group, Inc. (CD-ROM
Publishing); DaViD Entertainment, Inc. (Digital Virtual Disc/Laserdisc content
rights); and Fuzzy Entertainment, Inc. (publisher and distributor of fine art
posters and decorative art posters).
Third Quarter 1996 Compared to Third Quarter 1995
Net revenues decreased to $641,940 in the third quarter of 1996, from
$1,181,864 for the same three-month period the prior year. This reduction in net
sales primarily resulted from a significant decline in sales by Boulder
Interactive Group, Inc. ("BIG"), the Company's software publishing subsidiary,
from $513,135 for the three-month period ended December 31, 1995 to $99,039 for
the same period the following year. This decrease in BIG net revenues was the
result of lack of titles for commercial release. Management believes it has
resolved this problem by virtue of its transaction with Quarto Holdings, Ltd.,
which gives BIG the rights to commercially exploit Quarto's texts.
The Company reported a net pre-tax loss of $(202,642) for the
three-month period ended December 31, 1996, compared with a net pre-tax profit
of $252,703 for the same period the prior year. This loss was the result of a
significant reduction in net sales by BIG, as discussed above.
<PAGE>
First Nine Months of 1996 Compared to First Nine Months of 1995
Revenues
Net sales increased by $11,063, or 0.5%, to $1,946,103 for the nine months
ended December 31, 1996, from $1,935,040 for the same period the prior year,
primarily as a result of the continued expansion of DaViD revenues.
Boulder Interactive Group, Inc. ("BIG")
BIG reported gross sales of $234,333 for the nine-month period ended
December 31, 1996, down $757,534 (76.4%) from the same period the prior year.
Management attributes this gross sales decrease in BIG to a lack of CD-ROM
titles to release and distribute. In September, 1996, BIG concluded a
transaction with Quarto Holdings, Ltd. ("Quarto"), the world's largest
co-edition book publisher, whereby BIG acquired the rights to develop and
exploit Quarto's titles in digital format. Management believes this agreement
with Quarto gives the Company a significant number of titles to develop and
release over the next several years.
Total revenues for BIG, which consist of gross sales and freight income,
less rebates, returns and allowances, fell $812,341 (83.8%) for the nine-month
period ended December 31, 1996, to $156,877, from $969,218 for the same
reporting period the prior year. This decline was due to a decrease in gross
sales in BIG, as discussed above, and an increase in reported returns and
allowances as a percentage of sales. Management believes the amount of returns
and allowances reported for the nine-month period ended December 31, 1995
($44,423, or 4.5% of gross sales), was artificially low, and did not reflect the
industry average of between 20% and 30% for returns and allowances. Management
believes the returns and allowances reported for the nine-month period ended
December 31, 1996 ($76,111, or 32.5% of gross sales) more closely approximates
returns and allowance rates reported within the industry.
DaViD
Total revenues of DaViD, which consist of gross sales less returns and
allowances, were $1,779,644 for the nine-month period ended December 31, 1996,
compared to $965,382 for the same period the prior year. This total revenues
increase of $814,262 (84.4%) is was primarily due to DaViD's releasing titles
during the entire reporting period; the prior year, DaViD had released titles
beginning in August, and had not released titles in every month of the reporting
period.
Fuzzy Entertainment
Total revenues for Fuzzy Entertainment, doing business as In-Sight
Editions, were $9,182 for the nine-month period ended December 31, 1996, up from
$440 for the same period the prior year. Management has begun to capitalize
In-Sight, and move it into the operational stage.
<PAGE>
Other Income
The Company derives other income from licensing and royalties, and interest
income. For the nine-month period ended December 31, 1996, the Company realized
other income of $151,021, consisting of licensing and royalty income of $130,304
and interest income of $20,717. This compares with other income of $111,070,
consisting of licensing and royalty income of $110,215 and interest income of
$855, for the same period the prior year. The change in interest income derives
from the Quarto transaction, and the Company's significantly enhanced cash
position as a result of that transaction.
Cost of Sales
Total cost of sales, which includes cost of goods, inventory adjustments,
freight expense and royalties expense, for the nine-month period ended December
31, 1996 rose slightly to $1,303,692 (67.0% of total revenue), from $1,241,363
(64.2% of total revenue) for the same period the prior year.
BIG
BIG reported total cost of sales of $102,476 (65.3% of total revenue) for
the nine-month period ended December 31, 1996, compared with $534,243 (55.1% of
total revenue) for the same period the prior year. Cost of goods sold for the
nine-month period ended December 31, 1996 were $66,026 (42.1% of total revenue),
compared with $237,258 (24.5 % of total revenue) for the same period the prior
year. The increased cost of sales and cost of goods, as a percentage of total
revenue, resulted from the increase in returns and allowances discussed above,
which negatively impacted total revenue for BIG for the period.
DaViD
DaViD reported total cost of sales of $1,195,474 (67.2% of total revenue)
for the nine-month period ended December 31, 1996, compared with $549,230 (56.9%
of total revenue) for the same period the prior year. This increase was
attributable to an increase in cost of goods, as DaViD acquired content rights
to higher-quality films.
Fuzzy Entertainment
Fuzzy Entertainment reported total cost of sales of $5,742 (62.5% of total
revenue) for the nine-month period ended December 31, 1996, compared with $0 for
the same period the prior year. Fuzzy is doing business as In-Sight Editions,
and began only recently began acquiring rights to printed images for use in fine
art and decorative publishing.
<PAGE>
Gross Profit
For the nine-month period ended December 31, 1996, the Company reported a
gross profit (consisting of total revenue less total cost of sales) of $642,411
(31.4% of total sales and 33.0% of total revenue), compared with a gross profit
of $693,677 (35.5% of total sales and 35.8% of total revenues) for the same
period the prior year. Gross profit fell slightly as a percentage of total sales
and total revenue, primarily due to slightly increased cost of sales and
increased returns and allowances in BIG.
Operating Costs
Operating costs consist of approximately fifteen expense categories, from
accounting to travel and lodging. For the nine-month period ended December 31,
1996, the Company reported total operating costs of $1,050,946, representing
54.0% of total revenues. This compares with total operating costs of $526,676,
or 27.2% of total revenues, for the same period the prior year. This increase in
total operating costs was the result of the the Company staffing up run all
three of its subsidiaries as operating companies. In addition, the increase in
operating costs as a percentage of total revenue resulted from BIG maintaining
its full staff through what Management believes was a temporary sales decline in
BIG.
The Company's largest operating expense categories are: distribution
expense ($350,000 (DaViD only), or 33.3% of total operating expenses); payroll
and taxes ($110,675, or 10.5% of total operating expenses); travel and lodging
($68,287, or 6.5% of total operating expenses); and, rent ($56,438, or 5.3% of
total operating expenses). Every other operating expense category accounts for
less than 5 percent of the Company's total operating costs. In addition, New
Frontier Media, Inc. ("NOOF"), the parent holding company that owns DaViD,
Fuzzy, and 70 percent of BIG, reported total operating costs of $189,632 for the
nine-month period ended December 31, 1996, compared with $62,994 for the same
period the prior year. NOOF's largest operating expense categories are payroll
and taxes ($24,412, or 12.9% of total NOOF operating expenses), consulting
($23,603, or 12.4% of total NOOF operating expenses), travel and lodging
($19,480, or 10.3% of total NOOF operating expenses), auto expense ($17,978, or
9.5% of total NOOF operating expenses) and legal ($17,707, or 9.3% of total NOOF
operating expenses).
<PAGE>
BIG
BIG reported total operating costs of $409,174 (260.8% of total BIG
revenue) for the nine-month period ended December 31, 1996, compared with
$457,779 (47.2% of total BIG revenue) for the same period the prior year. As
reported in "Revenues", above, BIG experienced a significant decline in total
revenue for the nine-month period ended December 31, 1996, primarily due to a
lack of commercially marketable titles. Management believes this sales decline
has been reversed with the consummation of the Quarto transaction, which gives
BIG the rights to commercially exploit Quarto non-digital material.
The largest operating expense categories for BIG are payroll and taxes
($84,162, or 20.6% of total BIG operating expenses), rent ($45,150, or 11.0% of
total BIG operating expenses), equipment lease ($41,236, or 10.0% of total BIG
operating expenses), advertising ($34,485, or 8.4% of total BIG operating
expenses), and travel and lodging ($32,771, or 8.0% of total BIG operating
expenses).
DaViD
DaViD reported total operating costs of $413,519 (23.2% of total DaViD
revenue) for the nine-month period ended December 31, 1996, compared with
$164,185 (17.0% of total DaViD revenue) for the same period the prior year. The
largest component of operating expense for DaViD remains distribution expense,
which has remained constant as a percentage of total revenue ($350,000, or 19.7%
of total DaViD revenues for the nine-month period ended December 31, 1996,
compared with $157,500, or 16.3% of total DaViD revenues, for the same period
the prior year). Other DaViD operating expenses incurred during the nine-month
period ended December 31, 1996 include printing ($20,471, or 5.0% of total DaViD
operating expenses), legal ($12,485, or 3.0% of total DaViD operating expenses),
and travel and lodging ($11,890, or 2.9% or total DaViD operating expenses).
DaViD did not incur any expenses in these latter categories during the
nine-month period ended December 31, 1995.
Fuzzy Entertainment
Fuzzy Entertainment reported total operating costs of $36,621 for the
nine-month period ended December 31, 1996, compared with $46 for the same period
the prior year. The largest operating expenses incurred by Fuzzy include
consulting expense ($20,991, or 57.3% of total Fuzzy operating expenses), travel
and lodging ($4,146, or 11.3% of total Fuzzy operating expenses), and legal
($3,073, or 8.4% of total Fuzzy operating expenses).
<PAGE>
Other Income and Expenses
The Company reported total other income of $151,821 and total other
expenses of $10,713, for net other income of $141,108, for the nine-month period
ended December 31, 1996, compared with net other income of $112,628 for the same
period the prior year. The net increase was primarily due to an increase in
interest income, from $1,406 to $21,517, and an increase in licensing and
royalty income, from $110,215 for the period in 1995 to $130,304 for the same
period ended December 31, 1996.
Pre-Tax Earnings (Loss)
The Company reported a net pre-tax loss of $(267,426) for the nine months
ended December 31, 1996, compared with net pre-tax earnings of $279,629 for the
same period the prior year.
NOOF reported a net pre-tax loss of $(190,346) for the nine-month period
ended December 31, 1996, compared with a net pre-tax loss of $(61,776) for the
same period the prior year. Many of the increased expenses incurred by NOOF
during the nine-month period ended December 31, 1996, such as legal,
public/investor relations, and travel and lodging, related to NOOF's status as a
publicly-held company.
BIG reported a net pre-tax loss of $(213,351) for the nine-month period
ended December 31, 1996, compared with net pre-tax earnings of $88,266 for the
same period the prior year. Although BIG actually reduced operating expenses
during the reporting period for 1996, it also suffered a significant decline in
sales, as explained above. Management believes the Company has addressed the
reasons for the sales decline.
DaViD reported net pre-tax earnings of $171,451 for the nine-month period
ended December 31, 1996, compared with pre-tax earnings of $251,967 for the same
period the prior year. Although DaViD's sales nearly doubled from the nine-month
period the previous year, cost of goods increased, and net earnings fell as the
Company allocated expenses to DaViD that had previously been accounted for at
the holding company level. Management believes DaViD will continue to increase
gross sales and earnings over the next several years.
<PAGE>
Net Income (Loss)
The Company paid state income taxes of $2,454 and reported a net after-tax
loss of $(269,880) for the nine-month period ended December 31, 1996, compared
with a net after-tax profit of $178,482 for the same period the prior year. As
explained above, the after-tax loss applicable to this reporting period is
primarily the result of losses suffered by BIG.
Financial Condition, Liquidity and Capital Resources
The Company reported an increase in negative net cash flow from operating
activities, from $(312,547) for the nine-month period ended December 31, 1995 to
$(574,542) for the same period in 1996. Cash outflows from investing activities
were $(9,470) for the nine-month period ended December 31, 1996, compared to
$(57,003) for the same period in 1995. Most importantly, net cash provided by
financing activities increased significantly for the nine-months ended December
31, 1996 to $1,520,807, from $639,203 for the comparable period the prior year,
primarily as a result of the purchase of 30 percent of the Company's Boulder
Interactive Group subsidiary by Quarto Holdings, Inc., as reported in the
Company's Form 8-K filed with the Securities and Exchange Commission on
September 27, 1996, and as a result of a bank short term line of credit to the
Company. As a direct result of those transactions, the Company had cash of
$985,318 at the close of the nine-month period ended December 31, 1996, compared
to $270,300 for the same period in 1995. Management believes the Company has the
ability to satisfy its cash expenditure requirements from cash provided by
financing activities. In addition, management believes the Company will realize
positive net cash flows from operating activities in the near future.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is currently aware of no legal proceedings against it, or any
legal proceedings to which it is a party.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
EX-27 Financial Data Schedule for the Period Ended 12/31/96 filed
herewith.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NEW FRONTIER MEDIA, INC.
March 11, 1997 By: /S/ MARK H. KRELOFF
Mark H. Kreloff, President
March 11, 1997 By: /S/ MICHAEL WEINER
Michael Weiner, Secretary and Treasurer
March 11, 1997 By: /S/ SCOTT WUSSOW
Scott Wussow, Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Page No.
- ------- -------
EX-27 Financial Data Schedule for Period Ended 12/31/96
[ARTICLE] 5
[MULTIPLIER] 1
<TABLE>
<S> <C> <C>
[PERIOD-TYPE] 9-MOS 3-MOS
[FISCAL-YEAR-END] MAR-31-1997 MAR-31-1997
[PERIOD-START] APR-01-1996 OCT-01-1996
[PERIOD-END] DEC-31-1996 DEC-31-1996
[CASH] 985,318 985,318
[SECURITIES] 0 0
[RECEIVABLES] 267,875 267,875
[ALLOWANCES] 0 0
[INVENTORY] 646,325 646,325
[CURRENT-ASSETS] 2,048,754 2,048,754
[PP&E] 43,784 43,784
[DEPRECIATION] 15,680 15,680
[TOTAL-ASSETS] 2,243,201 2,243,201
[CURRENT-LIABILITIES] 548,444 548,444
[BONDS] 0 0
[PREFERRED-MANDATORY] 0 0
[PREFERRED] 1,000 1,000
[COMMON] 420 420
[OTHER-SE] 1,766,748 1,766,748
[TOTAL-LIABILITY-AND-EQUITY] 2,243,201 2,243,201
[SALES] 2,048,823 641,940
[TOTAL-REVENUES] 2,098,024 641,940
[CGS] 1,303,692 453,326
[TOTAL-COSTS] 2,354,638 846,604
[OTHER-EXPENSES] 0 0
[LOSS-PROVISION] 0 0
[INTEREST-EXPENSE] 10,713 0
[INCOME-PRETAX] (267,426) (202,642)
[INCOME-TAX] 2,454 0
[INCOME-CONTINUING] 0 0
[DISCONTINUED] 0 0
[EXTRAORDINARY] 0 0
[CHANGES] 0 0
[NET-INCOME] (269,880) (202,642)
[EPS-PRIMARY] (0.06) (0.05)
[EPS-DILUTED] (0.06) (0.05)
</TABLE>
