<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934.
-------------------
For Quarter Ended September 30, 1996 Commission file number 0-18410
------------------ -------
THE PRODUCERS ENTERTAINMENT GROUP LTD.
--------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4233050
- ------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9150 Wilshire Blvd., Suite 205, Beverly Hills, CA 90212
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (310) 285-0400
--------------
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 THE LATEST PRACTICABLE DATE.
COMMON STOCK , $.001 PAR VALUE-- 12,632,152 SHARES AS OF NOVEMBER 8, 1996
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<PAGE>
Part 1. Financial Information
Item 1. Financial Statements
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996
(UNAUDITED) (NOTE)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 6,353,568 $ 336,415
Accounts receivable, net trade 358,690 222,200
Receivable from related parties 28,223 18,983
Notes receivable, trade 270,464 260,000
Right to receive revenue 291,241 291,241
Film costs, net 725,211 772,777
Fixed assets, net 69,138 50,242
Other assets 141,944 154,979
------------ ------------
TOTAL ASSETS $ 8,238,479 $ 2,106,837
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ --- $ 600,000
Accounts payable and accrued expenses 221,381 433,136
------------ ------------
Total liabilities $ 221,381 $ 1,033,136
Shareholders' equity:
Preferred Stock, $.001 par value.
Authorized 10,000,000 shares;
Issued and outstanding 1,000,000 shares - Series A 1,000 1,000
Common Stock, $.001 par value.
Authorized 50,000,000 shares;
issued 12,912,761 and 3,585,819;
outstanding 12,632,152 and 3,305,210 shares 12,913 3,586
Additional paid-in capital 23,772,461 16,114,017
Accumulated deficit (13,883,084) (13,182,710)
------------ ------------
9,903,290 2,935,893
Treasury stock 280,609 shares, at cost (1,010,192) (1,010,192)
Notes receivable from related parties from
sales of Common Stock, net of imputed
interest discount (876,000) (852,000)
------------ ------------
Net shareholders' equity $ 8,017,098 $ 1,073,701
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,238,479 $ 2,106,837
------------ ------------
</TABLE>
Note: The balance sheet at June 30, 1996 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1996 1995
<S> <C> <C>
Revenues $ 316,859 $1,073,401
Film amortization 63,000 634,000
--------- ----------
Net Revenues 253,859 439,401
General and administrative expenses 838,163 813,322
--------- ----------
Operating (loss) (584,304) (373,921)
Other income (expenses):
Interest income 40,905 7,607
Interest and financing expense (156,975) ---
--------- ----------
Net other income (expense) (116,070) 7,607
--------- ----------
Net (loss) (700,374) (366,314)
--------- ----------
Dividend requirement on Series A Preferred Stock (106,250) (106,250)
Net (loss) applicable to common
shareholders $(806,624) $ (472,564)
---------- -----------
Net (loss) per share ($.13) ($.18)
Average common shares outstanding 6,329,182 2,585,916
--------- ----------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON STOCK PAID-IN ACCUMULATED
STOCK SHARES AMOUNT CAPITAL DEFICIT NET
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<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1996 $1,000 3,585,819 $ 3,586 $16,114,017 ($13,182,710) $ 2,935,893
Issuance of common
shares in payment of
dividends on Series A
Preferred Stock 94,442 94 (94)
Issuance of common
shares to Cypress in
connection with legal
settlement 32,500 33 36,530 36,563
Deferred compensation
of stock option granted
under FASB 123 31,200 31,200
Sale of Units in Public
Offering 9,200,000 9,200 7,927,640 7,936,840
Offering issuance costs
incurred by the Company (336,832) (336,832)
Net (loss) (700,374) (700,374)
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Balance,
September 30, 1996 $1,000 12,912,761 $12,913 $23,772,461 ($13,883,084) $ 9,903,290
Less:
Treasury stock (1,010,192)
Notes receivable from
related parties for sales
of Common Stock, net
imputed interest discount (876,000)
-----------
NET SHAREHOLDERS' EQUITY $ 8,017,098
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (700,374) $(366,314)
Adjustments to reconcile net (loss) to
net cash (used in) operating activities:
Depreciation 5,428 7,645
Amortization of film costs 63,000 634,000
Amortization of deferred compensation expense 3,900 ---
Amortization of imputed interest (discount) (24,000) ---
(Accrued) interest income (24,631) ---
Provision for accounts receivable 4,890 ---
Issuance of shares of Common Stock to
Cypress in legal settlement 36,563 ---
(Decrease) in deferred profit participations --- (69,790)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (141,380) 136,384
Decrease (increase) in other assets (68,834) 3,747
(Decrease) in accounts payable
and accrued expenses (211,755) (217,772)
(Decrease) in deferred revenues --- (598,708)
----------- ---------
Net cash (used in) operating activities (1,057,193) (470,808)
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) to film costs, net (15,434) (84,308)
Capital (expenditures) on equipment (24,324) ---
(Increase) decrease in receivables from related parties (9,240) 16,346
----------- ---------
Net cash (used in) investing activities (48,998) (67,962)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of 2,300,000 Units in public offering 7,936,840 ---
Capitalized (cost) of public offering (336,832) ---
Decrease in deferred financing costs 137,503 ---
Interest (paid) on Bridge Notes (14,167) ---
Proceeds from borrowings 275,000 ---
(Repayment) of borrowings (875,000) ---
----------- ---------
Net cash provided by financing activities 7,123,344 ---
----------- ---------
Net increase (decrease) in cash 6,017,153 (538,770)
Cash and cash equivalents at beginning of period 336,415 832,754
----------- ---------
Cash and cash equivalents at end of period. $ 6,353,568 $ 293,984
----------- ---------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
As disclosed in note (2), during the three months ended September 30,
1996, the Company issued 32,500 shares of Common Stock to Cypress Entertainment
LP in connection with the settlement of certain litigation.
As disclosed in note (5), during the three months ended September 30,
1996, the Company issued 94,442 shares of Common Stock as payment in kind of
dividends due on the Series A Preferred Stock for the quarter ended June 30,
1996.
As disclosed in note (7), during the three months ended September 30,
1996, the Company adopted FASB 123 and recorded $31,200 of deferred compensation
expense for vested stock options granted.
6
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
September 30, 1996
(1) Basis of Presentation
---------------------
In June 1996, the Company effected a one-for-four reverse split of the
outstanding shares of Common Stock. This reverse stock split has been
retroactively reflected for all periods reported in the accompanying condensed
consolidated financial statements and notes.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting 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-QSB should be read in conjunction with the audited financial statements filed
as part of the Company's Form 10-KSB for the fiscal year ended June 30, 1996.
(2) Settlement of Litigation
------------------------
During the three months ended September 30, 1996, the Company settled
certain litigation relating to DSL Entertainment JV (described in the June 30,
1996 Form 10-KSB) by paying $50,000 in cash and issuing 32,500 shares of the
Company's Common Stock valued at $1.125 per share to Cypress Entertainment LP.
On November 4, 1996, the Company settled its litigation with a former
officer and Director in a negotiated stipulated settlement filed with the Los
Angeles County Superior Court that requires the Company to make aggregate
payments of $575,000 within the next year in exchange for an agreement by this
individual not to compete with the Company.
(3) Employment Agreement
--------------------
During the three months ended September 30, 1996, the Company entered
into an agreement to extend an existing employment agreement with its Senior
Vice President and Secretary. This agreement now expires on June 30, 1998, and
provides for payments by the Company of $172,000 for the period from October 1,
1996 through June 30, 1997, and $187,000 from July 1, 1997 through June 30,
1998.
(4) Public Offering of Common Stock and Warrants
--------------------------------------------
The Company issued a total of 2,300,000 Units consisting of 9,200,000
shares of its Common Stock and 4,600,000 Redeemable Warrants to purchase Common
Stock (at an exercise price of $1.75 per share), each Unit comprised of four
shares of Common Stock and two Redeemable Warrants, pursuant to a public
offering which commenced on September 12, 1996. The total number of shares of
Common Stock and Redeemable Warrants issued pursuant to the public offering
included 300,000 Units (comprised of 1,200,000 shares of Common Stock and
600,000 Redeemable Warrants) which were issued by the Company pursuant to
exercise by the Underwriter of its over-allotment option on September 26, 1996,
which was consummated on October 2, 1996.
Each of the Units was priced at $4.00. The net proceeds derived by
the Company from the public offering of 2,300,000 Units described above equaled
$7,574,987 representing gross proceeds of $9,200,000 from the sale of such Units
less (a) the Underwriter's discount of $920,000 less (b) the Underwriter's
- ---- ----
7
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reimbursable costs and other fees associated with the offering of $368,181. The
Company's other aggregate costs associated with the offering were $336,832.
(5) Dividend on Series A Preferred Stock
------------------------------------
During the three months ended September 30, 1996, the Company issued a
total of 94,442 shares of Common Stock as payment in kind for the $106,250
dividend required to be paid on the Series A Preferred Stock for the quarter
ended June 30, 1996.
(6) (Loss) Per Share
----------------
(Loss) per share has been computed after deducting the $106,250
dividend requirement of the Series A Preferred Stock. It is based on the
weighted average number of common and common equivalent shares reported
outstanding during the entire period after giving effect to the shares of Common
Stock sold in the public offering described in note (4).
(7) Stock Options and Warrants
--------------------------
The Company has adopted FASB 123 "Accounting for Stock Based
Compensation" which, among other things, provides for the recognition of
compensation expense related to the granting of stock options. On August 15,
1996, the Company granted options to purchase 50,000 shares of Common Stock to
its Chief Financial Officer at the exercise price of $1.12 per share which
equaled the fair market value of the Common Stock on the date of their grant.
One-half of such options vested on the date of grant and the other half vest one
year from the date of grant subject to certain conditions. Using the Black-
Scholes pricing model to evaluate the fair market value of the options, under
FASB 123 the Company recorded a $31,200 deferred compensation expense on vested
options for fiscal 1996 and may record a $10,400 option expense for fiscal 1997.
Accordingly, the compensation expense for the three month period ended on
September 30, 1996 was approximately $3,900 on a monthly amortization basis.
There were a total of 676,916 options outstanding as of September 30, 1996 at
exercise prices ranging from $1.12 to $13.00 per share of Common Stock.
In addition to the 4,600,000 Redeemable Warrants exercisable at $1.75
per share of Common Stock issued in connection with the September 1996 public
offering, there are approximately 831,916 other outstanding warrants. As part
of a June 1996 private placement of $500,000 aggregate principal amount of 10%
promissory notes ("Bridge Notes"), 500,000 "Bridge Warrants" were issued. Upon
repayment of the Bridge Notes in September 1996, the Bridge Warrants were
automatically exchanged for Redeemable Warrants exercisable at $1.75 per share.
The Company has other preexisting warrants outstanding to purchase an aggregate
of 331,916 shares of Common Stock at prices ranging from $7.70 to $14.40 per
share. There were a total of 5,431,916 warrants outstanding as of September 30,
1996.
(8) Related Party Transactions
--------------------------
As of November 14, 1995, the Company sold an aggregate of 525,000
shares of its Common Stock to related parties in exchange for an aggregate of
$1,050,000 principal amount of promissory notes. Of these shares, 500,000 were
sold to Mountaingate Productions, LLC, a California company that provides the
Company with producer services of its President and Chief Executive Officer and
others. The 25,000 balance of these shares was sold to a then officer and
Director of the Company, Charles Weber.
The principal amount of the promissory notes is payable as follows:
April 1, 1997 -- $131,250; October 1, 1998 -- $131,250; and October 1, 2000 --
$787,500. Interest on these notes is computed at the annual rate of 7%
compounded semi-annually, and is payable with the installment payments of
principal on the notes. The notes are secured by the purchased shares with the
personal liability of the purchasers limited to 25% of the principal amount
thereof (aggregate $262,500) plus accrued interest thereon.
8
<PAGE>
The promissory notes received by the Company were recorded at their
principal amount less an imputed interest discount in the aggregate amount of
approximately $265,000. This imputed interest discount is being amortized over
the term of the notes using the interest method to provide an effective interest
rate of 12% per annum. During the three months ended September 30, 1996, the
Company recorded approximately $24,000 of interest income on these notes. The
difference between this imputed interest rate and the stated rate on the notes
may be deemed to be additional compensation to the purchasers of the shares.
For further information regarding these transactions and the vesting of the
shares of Common Stock purchased in these transactions, reference is made to
Item 10. (Executive Compensation) of the Company's Form 10-KSB for the fiscal
year ended June 30, 1996.
9
<PAGE>
Part 1. Financial Information
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
- -------
The following discussion and analysis should be read in conjunction with
the Company's accompanying condensed consolidated financial statements and
notes.
The Company's revenues are primarily derived from the production and
distribution of completed television projects, producers fees and personal
management fees. The amount of revenues derived by the Company in any one
period is dependent upon, among other factors, projects completed during any
such period and the distribution of completed projects. Revenues from producers
fees and personal management fees are primarily dependent on the number of
projects being produced by the Company and other parties and the agreements
related to such projects. Accordingly, the amount of revenues recognized in any
period are not necessarily indicative of revenues to be recognized by the
Company in future periods.
Amounts received from license fees for projects in process are deferred
until the project becomes available for broadcast in accordance with the terms
of its licensing agreements and are recognized as revenue at such time.
Additional licensing and distribution fees are recognized as earned in
accordance with the terms of the related agreements. Revenues from the sale of
completed projects are recognized upon their sale.
Revenues from completed projects owned by the Company are recognized when
the project becomes contractually available for broadcasting or exhibition by
the licensee. Amortization of film costs is charged to operations on an
individual project basis in a ratio that the current year's revenue bears to
management's estimates of total gross revenue (current and future years) from
all sources for that project. This is commonly referred to as the Individual
Film Forecast Method under FASB 53. The effects on the amortization of
completed projects resulting from revision of management's estimates of total
gross revenue on certain projects are reflected in the year in which such
revisions are made.
Results of Operations
- ---------------------
Three Months Ended September 30, 1996, Compared to Three Months
- ---------------------------------------------------------------
Ended September 30, 1995
- ------------------------
Revenues for the three months ended September 30, 1996 consisted of
$123,103 from the continuing distribution of completed projects and $193,756
from personal management fees for total revenues of $316,859, a 70% decrease
from the first quarter of 1995. Revenues of $1,073,401 for the three months
ended September 30, 1995, included approximately $880,000 of production and
distribution revenues from completed projects, including previously deferred
revenues that were recognized upon the completion of the television series
entitled "Simply Style" and earned producer fees from the television series
entitled "Can't Hurry Love." The remainder of revenues were generated by
personal management fees.
Amortization of film costs for the three months ended September 30, 1996
and 1995 was $63,000 and $634,000, respectively, and was computed using the
individual film forecast method. No new projects were completed during the
three months ended September 30, 1996 so the rate of amortization was based on
completed projects in the Company's film library.
General and administrative expenses for the three months ended September
30, 1996, were $838,163 compared to $813,322 for the three months ended
September 30, 1995. The $24,841 increase in general and administrative expenses
was primarily attributable to the expansion of staff in the television
10
<PAGE>
development department and the marketing costs associated with attendance at
trade shows in connection with the Company's planned expansion of production and
international distribution activities.
During the three months ended September 30, 1996, the Company recorded
$40,905 of interest income of which $24,000 consisted of amortization of the
imputed interest discount on notes receivable from related parties in connection
with sales of the Company's Common Stock described in note (8). Interest income
for this period also included $7,864 of imputed interest related to a trade note
receivable and $9,041 interest earned on a portion of the proceeds from the
Company's September 1996 public offering described in note (4). During the
three months ended on September 30, 1995, interest income was $7,607 on
temporary cash investments.
Interest and financing expense of $156,975 for the three months ended
September 30, 1996 included $137,503 of deferred financing charges which were
expensed to operations upon repayment of the $500,000 aggregate principal amount
of 10% promissory notes ("Bridge Notes") described in note (7). The one time
charge to operations represented complete amortization of the deferred financing
costs over the term of the Bridge Notes which were repaid in September 1996.
There was no interest expense for the three months ended September 30, 1995.
The Company reported a loss of ($806,624) or ($.13 per share) in the first
quarter of fiscal 1997 compared to a loss ($472,564) or ($.18 per share) in the
first quarter of fiscal 1996. The loss for both compared periods included
required dividend payments of $106,250 owed to holders of the Series A Preferred
Stock. The number of weighted average common shares outstanding increased to
6,329,182 in the first quarter of 1997 from 2,585,916 in the first quarter of
fiscal 1996 due to the recent public offering described in note (4).
Liquidity and Capital Resources
- -------------------------------
As of September, 30, 1996, the Company had increased liquidity from the
comparable period ended September 30, 1995 primarily as a result of the recent
public offering. Cash and cash equivalents were $6,353,568 and trade accounts
receivable were $358,690. As of September 30, 1996, the Company had recorded
accounts payable and accrued expenses of $221,381.
As of September 30, 1996, the Company's cash commitments for the next
twelve months includes (a) base compensation to its officers, key independent
contractors and consultants of approximately $2,148,000, (b) office rent of
approximately $279,600 and (c) after giving effect to the legal settlement
described under note (2), $575,000 of required installment payments (aggregate
of approximately $3,002,600 for the next twelve months). The Company also
incurs other costs such as employee benefits, premiums on insurance policies,
marketing costs, office expenses, professional fees and other expenses. For the
three months ended September 30, 1996, general and administrative expenses,
including compensation and rent, aggregated $838,163. Required dividends on the
shares of Series A Preferred Stock are $425,000 annually. In accordance with
the Company's December 1994 public offering, the dividends on this Series A
Preferred Stock could be paid in either shares of the Company's Common Stock or
in cash. The Company has agreed with the Underwriter of the September 1996
public offering of 2,300,000 Units described in note (4) that it will not pay
such dividends on the Series A Preferred Stock in shares of Common Stock without
the Underwriter's approval through March 1998. Accordingly, the Company
anticipates that it will pay dividends in cash. The Company plans to pay the
cash dividend for the first quarter by approximately December 5, 1996.
The Company's projected business plan is to use a substantial portion of
its liquid resources to expand its operations and to establish other activities
related to its core business. The Company anticipates that cash and cash
equivalents will be used to finance timing differences between production costs
and collection of license fees, to acquire the copyrights and distribution
rights to third party product, to complete its arrangements for an international
distribution division, to develop new revenue streams related to the
merchandising of characters and story ideas created in its television projects,
to maintain its present level of
11
<PAGE>
television development and administrative staffs and to pay cash dividends on
its Series A Preferred Stock. The actual utilization of excess working capital
is subject to change based on the then present circumstances and management's
evaluation of alternative projects.
The financing of production or acquisition timing differences of certain
projects may require the Company to obtain additional external financing or
capital. The Company's ability to use third party funds, rather than its own
liquid resources, will be a significant determinant in how the Company will
expand and diversify its production and distribution activities. There is no
assurance that such financing will be available to the Company or that the terms
thereof will be satisfactory. No agreements have been entered into for any such
external financing. The Company currently has no commitments for capital
expenditures.
Although management anticipates that the Company will continue to incur
losses through at least the second quarter of the Company's current fiscal year,
the Company believes that its present resources will be sufficient to meet its
cash needs for the next twelve months.
The notes to the consolidated financial statements contain certain forward-
looking statements with respect to the Company and its operations that involve
risks and uncertainties. The Company's results could differ materially from
those discussed herein due to unforeseen changes in various factors that could
affect actual results including, but not limited to, changes in conditions
related to the entertainment industry, economic, political, regulatory,
technological and public taste environments.
INFLATION
Inflation has not had a material effect on the Company.
EFFECT OF RECENT ACCOUNTING CHANGES
The Company adopted FASB 123 "Accounting for Stock-Based Compensation"
relating to, among other things, the recognition of expenses for stock based
awards based on their fair market value at the time of grant. The Company
believes that the adoption of FASB 123 will not have a material effect on its
consolidated financial statements.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On January 3, 1996, the Company commenced a legal action in the Superior
Court of the State of California for the County of Los Angeles against Ronald
Lightstone entitled The Producers Entertainment Group Ltd. v. Ronald Lightstone.
-----------------------------------------------------------
Mr. Lightstone filed a cross-complaint in the same court on January 8, 1996
entitled Ronald Lightstone v. The Producers Entertainment Group Ltd., Irwin
------------------------------------------------------------------
Meyer, et. al. Both of these proceedings were settled by the parties on
- --------------
November 4, 1996 in a stipulated settlement. In exchange for an agreement not
to compete with the Company until December 31, 1998, the Company agreed to make
aggregate payments to Mr. Lightstone of $575,000 within the next year. For
further information regarding the nature of the claims of the above entitled
proceedings, reference is made to Item 3. (Legal Proceedings) of the Company's
Form 10-KSB for the fiscal year ended June 30, 1996.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits
--------
10.25 Amendment to Employment Agreement dated October 4, 1996, between Arthur
Bernstein and the Company.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the three
-------------------
months ended September 30, 1996.
13
<PAGE>
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.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
--------------------------------------
(Registrant)
Dated: November 14, 1996 /s/ Irwin Meyer
----------------- ------------------------
Irwin Meyer,
President and
Chief Executive Officer
Dated: November 14, 1996 /s/ Lenore Nelson
----------------- ------------------------
Lenore Nelson,
Chief Financial Officer
14
<PAGE>
EXHIBIT 10.25
[LETTERHEAD OF THE PRODUCERS ENTERTAINMENT GROUP LTD.]
October 4, 1996
Mr. Arthur Bernstein
8228 Fountain Avenue #3
Los Angeles, CA 90046
Re: Amendment to Employment Agreement
---------------------------------
Dear Mr. Bernstein:
The parties hereby amend that certain employment agreement
dated June 22, 1992, as amended on August 15, 1994, March 7, 1995,
and January 25, 1996, to provide the following:
(1) The Term of this Agreement shall be and is extended
through June 30, 1998.
(2) The salary for the period, September 30, 1996 through
June 30, 1997, shall be paid at an annual rate of
$160,000 in accordance with the Company's standard
payroll practice.
(3) The salary for the period July 1, 1997-June 30, 1998,
shall be paid at the annual rate of $175,000, in
accordance with the Company's standard payroll practice.
(4) During the extended Term of the Agreement, the Company
shall pay Employee an automobile reimbursement of $1,000
per month.
(5) For each of the Company's fiscal years ending June 30,
1997, and June 30, 1998, the Company shall pay Employee
a performance bonus of $25,000, if the Company earns an
amount at least equal to $1,000,000 of pre-tax profit.
<PAGE>
Mr. Arthur Bernstein
October 4, 1996
Page 2
All other Terms and conditions shall remain in full force and
effect unless and until modified in writing and signed by the
parties.
If the aforementioned is agreed and accepted, please
acknowledge same by executing as indicated below.
Sincerely,
THE PRODUCERS ENTERTAINMENT
GROUP LTD.
By: /s/ Irwin Meyer
------------------------------
Irwin Meyer
President/CEO
ACCEPTED AND AGREED:
/s/ Arthur Bernstein
- ------------------------------
Arthur Bernstein
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 6,353,568
<SECURITIES> 0
<RECEIVABLES> 358,690
<ALLOWANCES> 4,890
<INVENTORY> 725,211
<CURRENT-ASSETS> 6,712,258
<PP&E> 0
<DEPRECIATION> 68,428
<TOTAL-ASSETS> 8,238,479
<CURRENT-LIABILITIES> 221,381
<BONDS> 0
1,000
0
<COMMON> 12,913
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,238,479
<SALES> 316,859
<TOTAL-REVENUES> 357,764
<CGS> 838,163
<TOTAL-COSTS> 995,138
<OTHER-EXPENSES> 106,250<F1>
<LOSS-PROVISION> (4,890)
<INTEREST-EXPENSE> (156,975)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (806,624)
<EPS-PRIMARY> ($.13)
<EPS-DILUTED> 0
<FN>
<F1>Other expense is 106,250 dividend on Series A Preferred Stock
</FN>
</TABLE>
