<PAGE>
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, 1997
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: 33-27494-FM
New Frontier Media, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Colorado 84-1064061
------------------------ -----------------------------
(State of Incorporation) (I.R.S. Employer I.D. Number)
1050 Walnut, Suite 301, Boulder, Colorado 80302
----------------------------------------------------
(Address of principal executive offices and Zip Code
(303) 444-0632
----------------------------------------------------
(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 report(s), and (2) has been subject to such
filing requirements for the past 90 days.
[ } YES {X} NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes
of common stock;
4,186,568 common shares, including 189,000 Unit Shares, were outstanding as of
December 31, 1997.
<PAGE>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
December 31, March 31,
1997 1997
---------------- ----------------
<S> <C> <C>
CURRENT ASSETS
Cash $ 89,363 $ 109,387
Investment in certificates of deposit 250,000 750,000
Accounts receivable 192,336 212,370
Inventories 787,147 659,503
Prepaid distribution rights 76,050 82,250
Other 133,338 68,225
---------------- ----------------
Total Current Assets 1,528,234 1,881,735
---------------- ----------------
FURNITURE & EQUIPMENT, at cost 123,395 65,552
Less: Accumulated depreciation (35,218) (22,661)
---------------- ----------------
Net Furniture & Equipment 88,177 42,891
---------------- ----------------
OTHER ASSETS
Note receivable - officer 38,000 38,000
Accounts receivable - retainage 107,189 88,844
Deferred acquisition costs 174,712 0
Deferred stock offering costs 451,363 0
Other 125,158 135,001
---------------- ----------------
Total Other Assets 896,422 261,845
---------------- ----------------
TOTAL ASSETS $ 2,512,833 $ 2,186,471
================ ================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 3 -
<PAGE>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
December 31, March 31,
1997 1997
---------------- ----------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 432,774 $ 125,928
Accounts payable - related parties 35,915 0
Leases payable 5,808 5,139
Bank credit Line 247,000 341,274
Notes payable 750,000 0
Current portion of long term debt 139,573 139,573
Other accrued liabilities 54,953 45,416
---------------- ----------------
Total Current Liabilities 1,666,023 657,330
---------------- ----------------
LONG TERM DEBT - Leases Payable 8,316 12,926
---------------- ----------------
Total Liabilities 1,674,339 670,256
---------------- ----------------
MINORITY INTEREST 233,679 305,443
---------------- ----------------
SHAREHOLDERS' EQUITY (Notes 1 & 2)
Common stock, $.0001 par value, 50,000,000 shares
authorized, 4,186,568 and 4,189,000, shares issued
and outstanding, respectively 420 419
Preferred stock, $.10 par value, 5,000,000 shares authorized:
Class A, zero and 10,000 shares issued 0 1,000
and outstanding, respectively
Class B, zero and 5,000 shares issued and outstanding 0 500
and outstanding, respectively
Additional paid in capital 1,736,048 1,768,661
Deficit (1,131,653) (559,808)
---------------- ----------------
Total Shareholders' Equity 604,815 1,210,772
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 2,512,833 $ 2,186,471
================ ================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 4 -
<PAGE>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
December 31, December 31,
------------------------------------ -------------------------------------
1997 1996 1997 1996
--------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
SALES, net $ 1,163,492 $ 1,946,103 $ 435,717 $ 624,009
COST OF SALES 700,004 1,303,692 192,951 459,066
--------------- --------------- --------------- ----------------
GROSS PROFIT 463,488 642,411 242,766 164,943
--------------- --------------- --------------- ----------------
OPERATING EXPENSES
Occupancy and equipment 135,711 115,515 46,983 40,027
Legal and professional 58,104 41,018 18,197 19,254
Distribution expense 120,000 350,000 0 120,000
Advertising and promotion 235,383 152,460 89,402 75,442
Salaries, wages and benefits 400,040 177,383 177,443 90,137
Communications 34,690 23,085 13,340 8,525
Research and Development 7,048 0 0 0
Consulting 42,092 51,015 11,083 25,424
General and administrative 151,200 116,819 57,252 43,981
--------------- --------------- --------------- ----------------
Total Operating Expenses 1,184,268 1,027,295 413,700 422,790
--------------- --------------- --------------- ----------------
OTHER INCOME (EXPENSE)
Licensing Fees and royalties 109,830 130,304 14,547 12,492
Licensing commissions (19,253) (23,650) (3,855) (1,546)
Interest income 29,182 21,517 7,917 17,401
Interest expense (42,585) (10,713) (17,182) (4,755)
--------------- --------------- --------------- ----------------
Total Other Income 77,174 117,458 1,427 23,592
--------------- --------------- --------------- ----------------
Net Loss before income taxes
and Minority Interest (643,606) (267,426) (169,507) (234,255)
--------------- --------------- --------------- ----------------
INCOME TAXES 0 (2,454) 0 0
--------------- --------------- --------------- ----------------
Net Loss before Minority Interest (643,606) (269,880) (169,507) (234,255)
Minority Interest in Loss of Subsidiary 71,764 0 28,985 0
--------------- --------------- --------------- ----------------
NET LOSS $ (571,842) $ (269,880) $ (140,522) $ (234,255)
=============== =============== =============== ================
NET LOSS PER COMMON SHARE (Note 1) $ (0.14) $ (0.06) $ (0.03) $ (0.06)
=============== =============== =============== ================
WEIGHTED AVERAGE SHARES OUTSTANDING 4,195,025 4,190,111 4,193,235 4,193,167
=============== =============== =============== ================
</TABLE>
See notes to unaudited condensed consolidated financial statements.
- 5 -
<PAGE>
NEW FRONTIER MEDIA, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------------------
1997 1996
---------------- ----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (571,842) $ (269,880)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 12,557 5,201
Issuance of common stock for services 15,000 0
Increase (decrease) in accounts payable 342,761 (13,905)
(Increase) decrease accounts receivable 1,689 (52,648)
(Increase) decrease in inventories (127,644) (292,236)
(Increase) decrease in income tax receivable 0 60,000
(Increase) decrease in distribution rights 6,200 11,063
(Increase) decrease in other assets (30,270) (35,967)
Decrease in minority interest (71,764) 0
Increase (decrease) in other accrued liabilities 9,537 8,830
---------------- ----------------
Net cash used in operating activities (413,776) (579,542)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of equipment and furniture (57,843) (4,470)
Increase in deferred acquisition costs (174,712) 0
Redemption of certificates of deposit 500,000 0
---------------- ----------------
Net cash used in investing activities 267,445 (4,470)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of common stock (81,648) 0
Issuance of common stock 7,534 100,001
Increase in deferred stock offering costs (451,363) 0
Contribution of capital 0 1,209,162
Increase in notes payable 750,000 0
Proceeds from line of credit (94,275) 211,644
Payments on capital lease obligation (3,941) 0
---------------- ----------------
Net cash provided by financing activities 126,307 1,520,807
---------------- ----------------
NET INCREASE (DECREASE) IN CASH (20,024) 936,795
CASH, BEGINNING OF PERIOD 109,387 48,523
---------------- ----------------
CASH, END OF PERIOD $ 89,363 $ 985,318
================ ================
</TABLE>
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<PAGE>
NEW FRONTIER MEDIA, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED DECEMBER 31, 1997
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization, Business, and Consolidation
The accompanying unaudited condensed consolidated financial statements
include the accounts of NFMI and its wholly owned subsidiaries David
Entertainment, Inc. ("DAVID") and Fuzzy Entertainment, Inc. ("FUZZY"), and its
70% owned subsidiary, Boulder Interactive Group, Inc. ("BIG"). All adjustments
consisting of normal accruals and elimination of intercompany accounts and
transactions, which in the opinion of management, are necessary for a fair
presentation, have been reflected in the accompanying financial statements.
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. Common stock equivalents are not included in
the weighted average calculation since their effect would be anti-dilutive.
PART 1 ITEM 2 MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND
- ------------- RESULTS OF OPERATIONS
1) Overview
All of the Company's current revenues are derived through its
wholly owned subsidiaries David Entertainment, Inc., Fuzzy
Entertainment, Inc. and its 70% owned subsidiary Boulder
Interactive Group, Inc. The Company's offices are located at
1050 Walnut Street, Suite 301, Boulder, CO 80302. The telephone
number is (303) 444-0632.
2) Results of Operations
Third Quarter 1997 Compared to Third Quarter 1996
New Frontier Media, Inc. ("NOOF" or the "Company")
The company functions as a holding company for its subsidiaries,
and such generates no independent income. The Company incurs administrative
expenses such as accounting, auditing, public relations, investor relations and
legal.
For the three month period ended December 31, 1997, the Company
reported no income and total operating expenses of $102,237, compared with total
operating expenses of $76,229 for the same period the prior year. The increase
of $26,008 for the period was due to increases in payroll costs ($55,911 in 1997
versus $7,519 in 1996). These cost increases are primarily due to the planned
public offering and acquisition of Fifth Dimension.
Boulder Interactive Group, Inc. dba Inroads Interactive
("Inroads")
Inroads reported quarterly sales of $226,192 for the period, up
from $74,735 the prior period last year. This increase in sales is due to the
release of one title in the current quarter compared to no titles in the prior
year quarter. Operating expenses were $197,725, up from $166,767, as Inroads has
hired more personnel and spent more on advertising and on development of new
product. Net loss of $96,617 decreased from the $151,660 loss in the prior
period last year.
DaVid Entertainment, Inc. ("DaViD")
DaViD had sales of $208,027 for the period, down from $542,107
in the prior year period. Sales were limited by the advent of the DVD format and
resulting consumer slow down in laser disc purchases. Operating expenses were
$97,083 versus $267,315 last year due primarily to elimination of the
distribution agreement with ELM Releasing, LP. and lower corresponding expenses
associated with direct management of the distribution function. Net profit was
$62,474 compared to a gain of $24,447 for the prior year period. Management
believes that profitability will increase in the following quarters as the DVD
format gains acceptance.
Fuzzy Entertainment, Inc. dba In-Sight Editions ("In-Sight")
In-Sight reported total revenue of $1,498 for the period, along
with operating expenses of $352 and a net gain of $558. The Company is focused
on its public offering and pending acquisition and is not devoting significant
resources to In-Sight.
First Nine Months of 1997 Compared to First Nine Months of 1996
New Frontier Media, Inc. ("NOOF" or the "Company")
For the nine month period ended December 31, 1997, the Company
reported no income and total operating expenses of $347,963, compared with total
operating expenses of $189,232 for the same period the prior year. The increase
of $158,731 for the period was due to increases in travel expense ($65,113 in
1997 versus $19,480 in 1996), payroll costs ($113,795 in 1997 versus $24,412
in 1996), legal ($38,917 in 1997 versus $17,707 in 1996), investor relations
($29,055 in 1997 versus $10,000 in 1996), and travel ($65,113 in 1997 versus
$19,480 in 1996). These cost increases are primarily due to the planned public
offering and acquisition of Fifth Dimension.
Boulder Interactive Group, Inc. dba Inroads Interactive
Inroads reported sales of $369,129 for the period, up from
$156,877 the prior period last year. This increase in sales is due to one
title released during the period. Operating expenses were $504,776, up from
$409,174. Inroads has hired more personnel and spent more on advertising and
on development of new product. Net loss of $239,214 increased from the $213,351
loss in the prior period last year.
DaVid Entertainment, Inc. ("DaViD")
DaViD had sales of $789,496 for the period, down from $1,779,644
in the prior year period. Sales were limited by the advent of the DVD format and
resulting consumer slow down in laser disc purchases. Operating expenses were
$317,777 versus $413,519 last year due primarily to elimination of the
distribution agreement with ELM Releasing, LP. and lower corresponding expenses
associated with direct management of the distribution function. Net profit was
$5,576 compared to a gain of $171,451 for the prior year period. Management
believes that profitability will increase in the following quarters as the DVD
format gains acceptance.
Fuzzy Entertainment, Inc. dba In-Sight Editions ("In-Sight")
In-Sight reported total revenue of $4,867 for the period, along
with operating expenses of $11,850 and a net loss of $9,294. The Company is
focused on its public offering and pending acquisition and is not devoting
significant resources to In-Sight.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
First Nine Months of 1997 Compared to First Nine Months of 1996
The Company reported an increase in negative cash flow from
operating activities from ($413,776) for the current period from ($579,542)
during the same period last year. Cash flow from investing activities increased
to $267,445 from ($4,470) due primarily to the redemption of certificates of
deposit. Net cash flow from financing activities declined to $126,307 from
$1,520,807 due to the one time selling of a 30% interest in BIG last year.
Management believes that cash flow from operating activities will turn positive
in the near future.
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
On February 18, 1998 the Company sold 1,500,000 units, each
consisting of 1 share of common stock and 1 redeemable common
stock purchase warrant, pursuant to an underwritten public
offering. Simultaneous therewith, the Company closed its
acquisition of Fifth Dimension's satellite network.
Item 3 Defaults upon Senior Securities
None.
Item 4 Submission of Matters to Vote of Security Holders
None.
Item 5 Other Information
None.
Item 6 Exhibits and Reports on Form 8-K
None.
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.
February 18, 1998 By:/S/ MARK H. KRELOFF
-----------------------------
Mark H. Kreloff, President
February 18, 1998 By:/S/ MICHAEL WEINER
-----------------------------
Michael Weiner, Secretary
and Treasurer
February 18, 1998 By:/S/ SCOTT WUSSOW
-----------------------------
Scott Wussow, Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> MAR-31-1996 MAR-31-1996
<PERIOD-START> APR-01-1997 OCT-01-1997
<PERIOD-END> DEC-31-1997 DEC-31-1997
<CASH> 89,363 89,363
<SECURITIES> 0 0
<RECEIVABLES> 192,336 192,336
<ALLOWANCES> 0 0
<INVENTORY> 787,147 787,147
<CURRENT-ASSETS> 1,528,234 1,528,234
<PP&E> 88,177 88,177
<DEPRECIATION> 35,218 35,218
<TOTAL-ASSETS> 2,512,833 2,512,833
<CURRENT-LIABILITIES> 1,666,023 1,666,023
<BONDS> 0 0
0 0
0 0
<COMMON> 420 420
<OTHER-SE> 1,736,048 1,736,048
<TOTAL-LIABILITY-AND-EQUITY> 2,512,833 2,512,833
<SALES> 1,163,492 435,717
<TOTAL-REVENUES> 1,153,492 435,717
<CGS> 700,004 192,951
<TOTAL-COSTS> 1,884,272 606,651
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 42,585 17,182
<INCOME-PRETAX> (571,842) (140,522)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (571,842) (140,522)
<EPS-PRIMARY> (.14) (.03)
<EPS-DILUTED> (.14) (.03)
</TABLE>
