<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-QSB/A
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934.
-------------------
For Quarter Ended March 31, 1998 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.)
5757 Wilshire Blvd., PH1, Los Angeles, CA 90036
(Address of principal executive offices) (Zip Code)
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code (323) 634-8634
________________________________________________________________________________
(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 -- 6,475,494 SHARES AS OF MARCH 31, 1998
<PAGE> 2
Part 1. Financial Information
Item 1. Financial Statements
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, 1998 JUNE 30, 1997
(UNAUDITED) (UNAUDITED)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 933,555 $ 1,344,870
Short term investments 207,007 2,698,568
Accounts receivable, net trade 2,373,039 522,228
Receivable from related parties 68,776 50,631
Prepaid expenses 4,229 24,895
Right to receive revenue 196,105 196,105
Film costs, net 1,845,474 4,417,709
Fixed assets, net 112,183 82,494
Covenant not to compete 184,000 391,000
Covenant not to compete 51,300 51,300
Other assets 18,508 63,786
------------ ------------
TOTAL ASSETS $ 5,994,176 $ 9,843,586
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 674,624 $ 792,772
Dividends payable 106,250 212,500
Deferred Income 160,000 5,269,869
Loans payable 496,000 --
Due to related parties 262,528 --
Other (8,255) --
------------ ------------
TOTAL LIABILITIES $ 1,691,147 $ 6,275,141
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 and outstanding 6,475,494 and 6,351,476 shares 6,475 6,351
Additional paid-in capital 22,472,048 22,538,422
Accumulated deficit and dividends (17,166,302) (17,967,136)
5,313,221 4,578,637
------------ ------------
Treasury stock, 93,536 shares at cost (1,010,192) (1,010,192)
------------ ------------
Net shareholders' equity $ 4,303,029 $ 3,568,445
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 5,994,176 $ 9,843,586
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
2
<PAGE> 3
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
---------------------------
1998 1997
<S> <C> <C>
Revenues $ 18,276,403 $ 5,170,833
Costs related to revenues:
Amortization of film costs 12,422,090 --
Costs of projects sold 604,218 3,551,450
------------ ------------
Net Revenues 5,250,095 1,619,383
General and administrative expenses 3,997,429 3,347,898
------------ ------------
Operating income (loss) 1,252,666 (1,728,515)
Other income (expenses):
Acquisition expense (299,380) 0
Interest income 58,522 236,603
Interest and financing expense (3,974) (163,375)
Settlements expense (207,000) (236,916)
------------ ------------
Net other income (expense) (451,832) (163,688)
------------ ------------
Net income (loss) 800,834 (1,892,203)
Provision for income taxes 0 (90,705)
------------ ------------
Net income (loss) 800,834 (1,982,908)
Dividend requirement on Series A
Preferred Stock at $.31875 per share (318,750) (318,750)
------------ ------------
Net income (loss) applicable to common
shareholders $ 482,084 $ (2,301,658)
============ ============
Net income (loss) per share (basic and diluted) $ .08 $ (.40)
Average common shares
outstanding (basic and diluted) 6,290,871 5,727,458
------------ ------------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
3
<PAGE> 4
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1998 1997
<S> <C> <C>
Revenues $ 6,196,754 $ 3,471,227
Costs related to revenues:
Amortization of film costs 3,980,910
Costs of projects sold 532,800 3,317,609
----------- -----------
Net Revenues 1,683,044 153,618
General and administrative expenses 1,370,219 1,048,351
----------- -----------
Operating income (loss) 312,825 (894,733)
Other income (expenses):
Acquisition expense (12,700) 0
Interest income 11,092 76,527
Interest and financing expense (3,974) 0
Settlements expense (69,000) (70,875)
----------- -----------
Net other income (expense) (74,582) 5,652
Net income (loss) 238,243 (889,081)
Provision for income taxes 0 (4,933)
----------- -----------
Net income (loss) 238,243 (894,014)
Dividend requirement on Series A Preferred Stock (106,250) (106,250)
----------- -----------
at $.31875 per share
Net income (loss) applicable to common
shareholders $ 131,993 $(1,000,264)
=========== ===========
Net income (loss) per share (basic and diluted) $ .02 $ (.16)
Average common shares
outstanding (basic and diluted) 6,335,976 6,432,939
----------- -----------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
4
<PAGE> 5
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
PREFERRED COMMON STOCK PAID-IN ACCUMULATED
STOCK SHARES AMOUNT CAPITAL DEFICIT NET
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1997 $ 1,000 6,351,476 $ 6,351 $ 22,538,422 $(17,967,136) $ 4,578,637
Issuance of common
shares in payment
of dividends on
Series A
Preferred Stock 96,240 96 (96) 0
Issuance of common
shares in payment
of consulting fees 27,778 28 39,972 40,000
Adjustment to sale
of Common Stock to
related parties
Net income 800,834 800,834
Dividends on Series
A Preferred Stock (106,250) (106,250)
- -----------------------------------------------------------------------------------------------------------------------------------
Balance,
March 31, 1998 $ 1,000 6,475,494 $ 6,475 $ 22,472,048 $(17,166,302) $ 5,313,221
Less:
Treasury Stock (93,536) (1,010,192)
NET SHAREHOLDERS' EQUITY 6,381,958 $ 4,303,029
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
5
<PAGE> 6
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED MARCH 31,
---------------------------
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 800,834 $ (2,301,658)
ADJUSTMENTS TO RECONCILE NET (LOSS) TO
NET CASH (USED IN) OPERATING ACTIVITIES:
Depreciation of fixed assets 43,871 22,653
Amortization of film costs 12,422,090 22,574
Amortization of non-competition agreement 207,000 --
Write off of projects in development -- 30,779
Amortization of right to receive revenue -- 63,424
(Accrued) interest income on note receivable -- (24,381)
(Accrued) interest income on investments -- (68,200)
Amortization of imputed interest (discount) -- (83,410)
Issuance of shares of Common Stock to Cypress -- 36,563
CHANGES IN OPERATING ASSETS AND LIABILITIES:
(Increase) decrease in accounts receivable (1,850,811) (94,207)
(Increase) decrease in other assets 65,944 8,232
Increase (decrease) in accounts payable
and accrued expenses (216,143) (363,309)
Increase in accrued pension/profit sharing 262,528 --
Increase (decrease) in deferred revenues (5,109,869) 50,000
------------ ------------
Net cash (used in) operating activities 6,625,444 (2,700,940)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
(Additions) to film costs, net (9,826,365)
(476,020)
Capital (expenditures) on equipment (73,560) (58,497)
(Increase) in short term investments 2,491,561 (2,869,020)
(Increase) in investment for distribution subsidiary -- (140,493)
(Increase) decrease in receivables from related parties (18,145) 17,039
(Increase) in related party covenant not to compete -- (460,000)
Increase in accrued legal settlement payable -- --
------------ ------------
Net cash (used in) investing activities (7,426,509) (48,998)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of 766,667 Units in public offering, net -- 7,585,841
Decrease in deferred financing costs -- 137,503
Proceeds from borrowings 496,000 275,000
(Repayment) of borrowings -- (875,000)
Increase in dividends payable -- 106,250
(Payment) of cash dividends on Preferred Stock (106,250) (318,750)
------------ ------------
Net cash provided by financing activities 315,000 6,910,844
------------ ------------
Net increase (decrease) in cash (411,315)
247,463
Cash and cash equivalents at beginning of period 1,344,870 336,415
------------ ------------
Cash and cash equivalents at end of period $ 933,555 $ 583,878
============ ============
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
6
<PAGE> 7
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1998
(1) Basis of Presentation
During the nine months ended March 31, 1998, the Company's Board of
Directors announced a one-for-three reverse split of the outstanding shares of
Common Stock. The reverse split was approved at the Annual Stockholders Meeting
on April 28, 1998. This reverse stock split has been retroactively reflected for
all periods reported in the accompanying condensed consolidated financial
statements and notes.
As disclosed in the Form 8-K filed November 3, 1997 and Form 8-KA filed
December 29, 1997, on October 20, 1997, the Company acquired 100% of the
outstanding capital stock of three entities comprising the "Grosso Jacobson
Companies" (including Grosso Jacobson Productions, Inc., Grosso Jacobson
Entertainment Corporation, and Grosso Jacobson Music Company, Inc) through the
merger of three wholly-owned subsidiaries of the Company into the Grosso
Jacobson Companies. The Grosso Jacobson Companies are engaged in the business of
developing and producing entertainment products including television movies and
series. The consideration paid by the Company to the sole shareholders of the
Grosso Jacobson Companies pursuant to the merger was paid through the issuance
of 2,222,222 shares of the Company's Common Stock valued at an issue price of
$3.60 per share.
The mergers of the Company's wholly-owned subsidiaries into the Grosso Jacobson
Companies for Common Stock of the Company has been recorded, for financial
statement reporting purposes, as a pooling of interests, and accordingly, the
accompanying financial statements reflect the combined results of the pooled
businesses for the respective periods presented. The financial data below
reflects the historical results of The Producers Entertainment Group ("TPEG")
and the historical results of the Grosso Jacobson Companies ("GJ") on a pro
forma basis.
<TABLE>
<CAPTION>
(In thousands)
For the Nine Months For the Nine Months
Ended March 31, 1998 Ended March 31, 1997
TPEG GJ Combined TPEG GJ Combined
<S> <C> <C> <C> <C> <C> <C>
Revenues $ 14,185 $ 4,091 $ 18,276 $ 812 $ 4,359 $ 5,171
Operating income (loss) 189 1,064 1,253 (2,193) 465 (1,728)
Net income (loss) (582) 1,064 482 (2,353) 370 (1,983)
</TABLE>
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, 1997.
The Company's Form 10-KSB for fiscal year ended June 30, 1997 does not include
the effect of the merger with the Grosso-Jacobson Companies on October 20, 1997.
`
(2) Dividend on Series A Preferred Stock
During the nine months ended March 31, 1998, the Company paid $106,250
in cash for the dividend required to be paid on the Series A Preferred Stock for
the quarter ended June 30, 1997. The Company issued 96,240 shares of its Common
Stock at a market value of $2.21 per share, or the equivalent of $212,500,
representing the $106,250 quarterly dividend required to be paid on the Series A
Preferred Stock for the each of the quarters ended September 30, 1997 and
December 31, 1997. The Board of Directors has not stated its intentions
regarding the method of payment to be used for the dividend due for the quarter
ended March 31, 1998.
(3) Income Per Share
Income per share for the three and nine month periods has been computed
after deducting the dividend requirements 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 ending on March 31, 1998.
7
<PAGE> 8
(4) Stock Options and Warrants
The Company uses APB Opinion No. 25 "Accounting for Stock Issued to
Employees" to calculate the compensation expense related to the grant of options
to purchase Common Stock under the intrinsic value method. Accordingly, the
Company makes no adjustments to its compensation expense or equity accounts for
the grant of options. The Company has made no grant of options for the period
ended March 31, 1998. At March 31, 1998 there were options to acquire 765,251
shares outstanding at exercise prices ranging from $3.36 per share to $39.00 per
share of Common Stock.
In addition to the Redeemable Warrants to purchase an aggregate of
1,700,000 shares of Common Stock at $5.25 per share issued in connection with
the September 1996 public offering, the Company has other existing warrants
outstanding to purchase an aggregate of 142,518 shares of Common Stock at prices
ranging from $23.10 to $43.20 per share. There were a total of approximately
1,842,518 warrants outstanding as of March 31, 1998.
(5) Letter of Intent to Acquire MediaWorks International
During the three months ended March 31, 1998, the Company signed a
letter of intent to acquire 100% of the stock of MediaWorks International, a
California-based international distribution/licensing company, specializing in
children's and family programming, located in Manhattan Beach, California. The
Company will pay up to $6.5 million to purchase all of the outstanding shares of
MediaWorks International. The contemplated acquisition by the Company of
MediaWorks International is subject to completion of due diligence by the
parties, execution by the parties of definitive legal documents and approval by
the Company's Board of Directors.
8
<PAGE> 9
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: September 28, 1998 /S/ IRWIN MEYER
------------------ ---------------------------------------
Irwin Meyer,
Chief Executive Officer
Dated: September 28, 1998 /S/ ARTHUR BERNSTEIN
------------------ ---------------------------------------
Arthur Bernstein,
Executive Vice President, Principal
Financial Officer
9
