FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 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
Commission file number: 1-10781
LANCIT MEDIA PRODUCTIONS, LTD.
(Exact Name of Registrant as Specified in its Charter)
New York 13-3019470
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
601 West 50th Street, New York, New York, 10019
(Address of Principal Executive Office) (Zip Code)
(212) 977-9100
(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.
Yes X No
The number of shares of registrant's Common Stock, $.001 par value, outstanding
as of March 31, 1996 was 6,180,634 shares.
<PAGE>
LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES
INDEX
PAGE
PART I - FINANCIAL INFORMATION -
ITEM 1. FINANCIAL STATEMENTS -
CONSOLIDATED BALANCE SHEET - March 31, 1996 and
June 30, 1995 1
CONSOLIDATED STATEMENT OF OPERATIONS - For the nine
and three months ended March 31, 1996 and 1995 2
CONSOLIDATED STATEMENT OF CASH FLOWS - For the nine
months ended March 31, 1996 and 1995 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 5 - 8
PART II - OTHER INFORMATION Not Applicable
SIGNATURES 9
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31, June 30,
1996 1995
-------------- -------------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 4,620,892 $ 7,395,238
Accounts receivable 3,347,807 5,811,788
Film and program costs, net 7,134,818 4,600,483
Prepaid expenses 126,082 56,589
Income taxes receivable 24,844 25,278
-------------- -------------
TOTAL CURRENT ASSETS 15,254,443 17,889,376
ACCOUNTS RECEIVABLE - NON-CURRENT 2,398,903 3,105,670
FIXED ASSETS, NET 918,118 1,060,878
GOODWILL, NET 283,867 296,206
DEPOSITS 45,228 43,728
-------------- -------------
TOTAL ASSETS $ 18,900,559 $ 22,395,858
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 735,629 $ 373,657
Participation payable 1,534,880 906,363
Deferred revenue 2,422,692 5,131,240
Income taxes payable 23,819 38,000
-------------- -------------
TOTAL CURRENT LIABILITIES 4,717,020 6,449,260
-------------- -------------
PARTICIPATION PAYABLE - NON-CURRENT 506,233 1,220,148
DEFERRED REVENUE - NON-CURRENT 1,106,590 1,767,059
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST 111,413 (11,704)
-------------- -------------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, authorized
15,000,000 shares; issued and outstanding
6,180,634 shares at March 31, 1996 and
6,157,634 shares at June 30, 1995 6,181 6,158
Additional paid-in capital 12,566,486 12,566,306
Retained earnings (accumulated deficit) (113,364) 398,631
-------------- -------------
TOTAL STOCKHOLDERS' EQUITY 12,459,303 12,971,095
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,900,559 $ 22,395,858
</TABLE>
============== =============
See notes to consolidated financial statements.
- 1 -
<PAGE>
<TABLE>
<CAPTION>
LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
----------------- -------------------
1996 1995 1996 1995
-------- ------- --------- ---------
(UNAUDITED) (UNAUDITED)
REVENUES:
<S> <C> <C> <C> <C>
Production and royalties $ 1,234,926 $ 7,060,312 $ 5,956,892 $ 11,022,244
Licensing agent fees 514,902 1,357,359 1,853,288 1,786,280
---------- --------- --------- ---------
1,749,828 8,417,671 7,810,180 12,808,524
---------- --------- --------- ---------
OPERATING EXPENSES:
Production and royalties 1,297,137 6,231,876 5,557,345 9,323,651
Licensing agent - direct costs 317,359 278,767 901,317 990,674
General and administrative 574,410 763,831 1,931,621 1,770,925
---------- --------- --------- ---------
2,188,906 7,274,474 8,390,283 12,085,250
---------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (439,078) 1,143,197 (580,103) 723,274
INTEREST INCOME (EXPENSE) - NET 55,870 129,951 229,665 384,629
---------- --------- --------- ---------
INCOME (LOSS) BEFORE PROVISION FOR
INCOME TAXES AND MINORITY INTEREST (383,208) 1,273,148 (350,438) 1,107,903
PROVISION FOR INCOME TAXES - CURRENT 17,450 38,000 38,440 38,000
MINORITY INTEREST 2,002 (424,368) (123,117) (211,462)
---------- --------- --------- ---------
NET INCOME (LOSS) $ (398,656) $ 810,780 $ (511,995) 858,441
========== ========= ========= =========
NET INCOME (LOSS) PER SHARE $ (0.06) $ 0.13 $ (0.08) $ 0.14
========== ========= ========= =========
WEIGHTED AVERAGE SHARES 6,180,387 6,355,490 6,180,305 6,356,200
========== ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
- 2 -
<PAGE>
<TABLE>
<CAPTION>
LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
NINE MONTHS ENDED
MARCH 31,
--------------------------------------
1996 1995
------------------ -----------------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income (loss) $ (511,995) $ 858,441
------------------ -----------------
Adjustments to reconcile net income (loss) to net cash from operating
activities:
Amortization of film and program costs 3,295,761 5,565,265
Depreciation and other amortization 314,120 251,608
Minority interest 123,117 211,462
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - current 2,463,981 (1,913,629)
(Increase) decrease in accounts receivable - non-current 706,767 --
Additions to film and program costs (5,830,096) (7,334,673)
(Increase) decrease in prepaid expenses (69,493) (49,264)
(Increase) decrease in income taxes receivable 434 22,265
(Increase) decrease in deposits receivable (1,500) 2,184
Increase (decrease) in accounts payable and accrued expenses 361,972 1,728,770
Increase (decrease) in participation payable - current 628,517 --
Increase (decrease) in participation payable - non-current (713,915) --
Increase (decrease) in deferred revenue - current (2,708,548) (1,096,365)
Increase (decrease) in deferred revenue - non-current (660,469) 235,786
Increase (decrease) in income taxes payable (14,181) 18,583
------------------ -----------------
(2,103,533) (2,358,008)
------------------ -----------------
CASH PROVIDED (USED) IN OPERATING ACTIVITIES (2,615,528) (1,499,567)
------------------ -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (159,021) (227,049)
------------------ -----------------
CASH PROVIDED (USED) IN INVESTING ACTIVITIES (159,021) (227,049)
------------------ -----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 203 153,871
------------------ -----------------
CASH PROVIDED (USED) IN FINANCING ACTIVITIES 203 153,871
------------------ -----------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,774,346) (1,572,745)
CASH AND CASH EQUIVALENTS - beginning of period 7,395,238 11,060,206
------------------ -----------------
CASH AND CASH EQUIVALENTS - end of period $ 4,620,892 $ 9,487,461
================== =================
CASH PAID DURING THE YEAR FOR:
Interest $ -- --
================== =================
Income taxes $ 56,526 $ --
================== =================
</TABLE>
See notes to consolidated financial statements.
- 3 -
<PAGE>
LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the Company's annual report on Form 10-K dated September
21, 1995 for the year ended June 30, 1995.
The accompanying financial statements reflect all adjustments which, in the
opinion of management, are necessary for a fair presentation of the financial
position and results of operations for the interim periods presented. All such
adjustments are of a normal and recurring nature. The results of operations for
any interim period are not necessarily indicative of the results of a full
fiscal year.
2. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed on the basis of the weighted average
number common shares and common share equivalents outstanding for the respective
period. Common share equivalents include dilutive stock options and warrants
using the treasury stock method.
- 4 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations - Three months ended March 31, 1996 as compared to
three months ended March 31, 1995
Production and royalty related revenues for the three month period ended March
31, 1996 decreased to $1,234,926 from $7,060,312 in the comparable 1995 quarter.
This decrease is primarily the result of reduced royalty revenue on THE PUZZLE
PLACE. The series premiered during last fiscal year's third quarter and, as a
result, the Company recognized approximately $5.6 million of initial royalty
revenues in that period. During the current fiscal year's third quarter, most of
the licensees were still in the process of recouping those initial royalties
recognized.
Licensing agent fee revenues for the three month period ended March 31, 1996
decreased to $514,902 from $1,357,359 in the comparable 1995 quarter. This
decrease is primarily the result of the prior fiscal year quarter including a
retroactive adjustment to record the portion of earned agent fees, which became
effective upon the commencement of the airing of THE PUZZLE PLACE, on certain
licensing contracts which reflected the period of service between inception and
December 31, 1994.
Production and royalty related expenses for the three month period ended March
31, 1996 decreased to $1,297,137 from $6,231,876 in the comparable 1995 quarter
reflecting primarily the reduction in royalty revenue and accompanying third
party participations on THE PUZZLE PLACE.
Direct costs of licensing activities for the three month period ended March 31,
1996 increased to $317,359 from $278,767 in the comparable 1995 quarter
primarily as a result of increased personnel and trade show expenses.
General and administrative expenses for the three month period ended March 31,
1996 decreased to $574,410 from $763,831 in the comparable 1995 quarter. This
decrease is due primarily to certain marketing-related costs being re-allocated
to Company projects.
Interest income for the three month period ended March 31, 1996 decreased to
$55,870 from $129,951 in the comparable 1995 quarter. This decrease is primarily
due to a reduced level of cash invested resulting from the Company's utilization
of cash for production and development activities and corporate overhead.
Provision for income taxes - current for the three month period ended March 31,
1996 decreased to $17,450 from $38,000 in the comparable 1995 quarter. The
current fiscal year's quarter amount represents additional state and local tax
liability from the prior fiscal year's activity.
- 5 -
<PAGE>
Minority interest in licensing activities for the three month period ended March
31, 1996 resulted in a benefit in the amount of $2,002 compared to an expense in
the amount of $424,368 in the comparable 1995 quarter. This change is a direct
result of the decreased profitability of licensing activities in the current
fiscal year's third quarter.
Net loss for the three month period ended March 31, 1996 was $398,656 ($.06 per
share) compared to net income of $810,780 ($.13 per share) in the unusually
strong fiscal 1995 third quarter, due primarily to the combination of factors
discussed above. Weighted average shares outstanding for the three month period
ended March 31, 1996 decreased to 6,180,387 from 6,355,490 in the comparable
1995 quarter primarily as a result of the exclusion of outstanding stock options
during a loss period, which was partially offset by the exercise of stock
options during the twelve month period since March 31, 1995.
Results of Operations - Nine months ended March 31, 1996 as compared to nine
months ended March 31, 1995
Production and royalty related revenues for the nine month period ended March
31, 1996 decreased to $5,956,892 from $11,022,244 in the comparable 1995 nine
month period. This decrease is primarily the result of reduced royalty revenue
on THE PUZZLE PLACE during the current fiscal year nine month period, as most of
the licensees were still in the process of recouping the initial royalties
recognized by the Company in the prior fiscal year.
Licensing agent fee revenues for the nine month period ended March 31, 1996
increased to $1,853,288 from $1,786,280 in the comparable 1995 nine month
period. This increase is primarily the result of greater licensing activity on
the SONIC THE HEDGEHOG property, and a net increase in fees earned on THE PUZZLE
PLACE property as a result of servicing a greater number of license agreements,
for a longer period of time than in the prior year's nine month period.
Production and royalty related expenses for the nine month period ended March
31, 1996 decreased to $5,557,345 from $9,323,651 in the comparable 1995 nine
month period reflecting primarily the reduction in royalty revenue and
accompanying third party participations on THE PUZZLE PLACE.
Direct costs of licensing activities for the nine month period ended March 31,
1996 decreased to $901,317 from $990,674 in the comparable 1995 nine month
period primarily as a result of reduced professional and management fees as well
as reduced marketing and trade show expenses, all which was partially offset by
increased personnel expenses.
- 6 -
<PAGE>
General and administrative expenses for the nine month period ended March 31,
1996 remained essentially unchanged at $1,931,621 compared to $1,770,925 in the
comparable 1995 nine month period, as increased personnel costs during the 1996
period were offset by certain marketing-related costs being re-allocated to
projects during this period.
Interest income for the nine month period ended March 31, 1996 decreased to
$229,665 from $384,629 in the comparable 1995 nine month period. This decrease
is primarily due to a reduced level of cash invested resulting from the
Company's utilization of cash for production and development activities and
corporate overhead.
Provision for income taxes - current for the nine month period ended March 31,
1996 remained essentially unchanged at $38,440 compared to $38,000 in the
comparable 1995 nine month period. Reduced state and local income tax liability
on licensing agent activities in the current fiscal year's nine month period was
offset by additional state and local tax liability for the prior fiscal year's
activity.
Minority interest in licensing activities for the nine month period ended March
31, 1996 decreased to $123,117 from $211,462 in the comparable 1995 nine month
period. This decrease is a direct result of the decreased profitability of the
licensing activities in the current fiscal year's nine month period.
Net loss for the nine month period ended March 31, 1996 was $511,995 ($.08 per
share) compared to net income of $858,441 ($.14 per share) in the fiscal 1995
nine month period due to the combination of factors discussed above. Weighted
average shares outstanding for the nine month period ended March 31, 1996
decreased to 6,180,305 from 6,356,200 in the comparable 1995 nine month period
primarily as a result of the exclusion of outstanding stock options during a
loss period, which was partially offset by the exercise of stock options during
the twelve month period since March 31, 1995.
Liquidity and Capital Resources
The Company's balance sheet remains in healthy condition with cash and cash
equivalents as of March 31, 1996 of approximately $4.6 million, a current ratio
of 3.2 to 1 and no long-term debt.
Cash used in operating activities was approximately $2.6 million for the nine
month period ended March 31, 1996, compared to the use of approximately $1.5
million for the same period last year. During the nine month period ended March
31, 1996, net additions to film and program costs of approximately $2.5 million
and a decrease in deferred revenues of approximately $3.4 million were partially
offset by a decrease in accounts receivable of approximately $3.2 million.
- 7 -
<PAGE>
Cash used in investing activities was approximately $159,000, for the nine month
period ended March 31, 1996, compared to the use of approximately $227,000 for
the same period last year. This use of cash is primarily the result of the
Company's continued expansion of its post-production capabilities.
The Company is in the process of completing the remaining elements associated
with the airing of and outreach for the first 65 episodes of THE PUZZLE PLACE.
As a result of the Company's success in attracting significant corporate
underwriting grants to the project and after taking into account the portion of
project funding expected to be contributed via such agreements and by the
Company's partner on the project, KCET, the Company estimates that its remaining
contribution will approximate $0.1 million. With respect to THE PUZZLE PLACE
licensing effort, the Company and KCET have agreed to, and may in the future,
extend the license term and payment schedule for certain licensees in order to
more closely reflect the anticipated royalty stream generated by those
particular categories.
The Company is in full scale production and post-production on the initial
season of 13 episodes of BACKYARD SAFARI, which is being partially funded
through a major grant from the National Science Foundation. The Company has been
actively pursuing and evaluating additional production funding from potential
production partnerships, broadcast license fees, as well as various sources of
underwriting. Only in the event the Company were to receive no amounts from
these sources of outside production funding (a scenario the Company considers
unlikely), the Company estimates that its remaining investment required for this
project would be approximately $1.0 million.
Management believes that its present cash position and overall liquidity will
enable the Company to meet its current commitments and to continue to pursue
growth opportunities involving production, post-production and licensing-related
activities over the foreseeable future. In December 1995, the Company announced
that it had retained Allen & Company as its investment banker to pursue
strategic alliances with larger media companies. Should these efforts result in
opportunities which the Company believes could significantly enhance the
Company's future revenue generation and production output, additional capital
could be required to fund such growth opportunities. Citing the business
opportunities available to the Company, it is no longer pursuing its previously
announced proposed purchase of a minority stake in EPI Ltd. The Company's major
production-related customers customarily renew their contracts with the Company
on an annual basis, and as such, there always exists the possibility that one or
more of such contracts may not be renewed in the future. Since the Company is in
the business of developing new projects involving contract production and
licensing opportunities, management believes, although cannot assure, that in
such event, new production and licensing activities will replace those existing
activities. Also, management does not expect inflation to have a significant
impact on the business.
- 8 -
<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.
LANCIT MEDIA PRODUCTIONS, LTD.
Date: May 10, 1996 By: /s/ Gary Appelbaum
Gary Appelbaum
Senior Vice President, Chief Financial
Officer & Treasurer
Date: May 10, 1996 By: /s/ Gary Stein
Gary Stein
Executive Vice President
- 9 -
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 4620892
<SECURITIES> 0
<RECEIVABLES> 3347807
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 15254443
<PP&E> 918118
<DEPRECIATION> 0
<TOTAL-ASSETS> 18900559
<CURRENT-LIABILITIES> 4717020
<BONDS> 0
0
0
<COMMON> 6181
<OTHER-SE> 12453122
<TOTAL-LIABILITY-AND-EQUITY> 18900559
<SALES> 0
<TOTAL-REVENUES> 7810180
<CGS> 0
<TOTAL-COSTS> 6458662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (350,438)
<INCOME-TAX> 38440
<INCOME-CONTINUING> (511,995)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (511,995)
<EPS-PRIMARY> (0.08)
<EPS-DILUTED> 0
</TABLE>
