<PAGE>
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 the Fiscal Quarter Ended March 31, 1998
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: 0-23414
LANCIT MEDIA ENTERTAINMENT, 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 Offices) (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 May 12, 1998 was 6,634,750 shares.
<PAGE>
LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS - at March 31,
1998 and June 30, 1997 1
CONSOLIDATED STATEMENTS OF OPERATIONS - For the nine and
three months ended March 31, 1998 and 1997 2
CONSOLIDATED STATEMENTS OF CASH FLOWS - For the nine
months ended March 31, 1998 and 1997 3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK 8
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
------------- -----------
(UNAUDITED)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,807,608 $ 4,461,627
Accounts receivable, net 433,849 1,698,250
Film and program costs, net 1,924,531 1,718,526
Prepaid expenses 117,848 270,215
------------- -------------
TOTAL CURRENT ASSETS 5,283,836 8,148,618
ACCOUNTS RECEIVABLE - NON-CURRENT 151,500 211,500
FIXED ASSETS, NET 290,716 525,530
GOODWILL, NET 250,963 263,302
DEPOSITS 50,363 50,363
------------- -------------
TOTAL ASSETS $ 6,027,378 $ 9,199,313
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 2,146,665 $ 2,116,028
Participation payable 1,249,583 1,342,702
Deferred revenue 1,898,770 1,009,413
------------- -------------
TOTAL CURRENT LIABILITIES 5,295,018 4,468,143
PARTICIPATION PAYABLE - NON-CURRENT - 88,009
DEFERRED REVENUE - NON-CURRENT 225,092 317,620
MINORITY INTEREST 252,829 195,360
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value, authorized
15,000,000 shares; issued and outstanding
6,634,750 shares at March 31, 1998 and
June 30, 1997 6,635 6,635
Additional paid-in capital 17,604,536 17,504,536
Retained earnings (accumulated deficit) (17,356,732) (13,380,990)
------------- -------------
TOTAL STOCKHOLDERS' EQUITY 254,439 4,130,181
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,027,378 $ 9,199,313
============= =============
1
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
---------------------------------- ----------------------------------------------
1998 1997 1998 1997
-------------- --------------- ------------------- ----------------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Production and royalties $ 944,383 $ 820,258 $ 1,326,115 $ 1,566,266
Licensing agent fees 72,867 285,537 523,655 929,412
------------- --------------- ------------------- -------------------
1,017,250 1,105,795 1,849,770 2,495,678
------------- --------------- ------------------- -------------------
OPERATING EXPENSES:
Production and royalties 1,253,157 1,252,276 2,373,477 2,231,267
Licensing agent - direct costs 63,176 200,875 338,453 641,123
General and administrative 1,051,580 1,217,165 3,162,978 2,717,935
Write-down of film and program costs - 5,456,180 - 5,456,180
------------- --------------- ------------------- -------------------
2,367,913 8,126,496 5,874,908 11,046,505
------------- --------------- ------------------- -------------------
LOSS FROM OPERATIONS (1,350,663) (7,020,701) (4,025,138) (8,550,827)
INTEREST INCOME - NET 24,422 78,714 106,863 192,527
------------- --------------- ------------------- -------------------
LOSS BEFORE MINORITY INTEREST (1,326,241) (6,941,987) (3,918,275) (8,358,300)
MINORITY INTEREST 13,750 (13,123) 57,467 (64,724)
------------- --------------- ------------------- -------------------
NET LOSS $ (1,339,991) $ (6,955,110) $ (3,975,742) $ (8,423,024)
============= =============== =================== ===================
BASIC LOSS PER COMMON SHARE $ (0.20) $ (1.05) $ (0.60) $ (1.29)
============= =============== =================== ===================
BASIC WEIGHTED AVERAGE SHARES
USED IN COMPUTATION 6,634,750 6,632,750 6,634,750 6,506,884
============= =============== =================== ===================
DILUTED LOSS PER COMMON SHARE $ (0.20) $ (1.05) $ (0.60) $ (1.29)
============= =============== =================== ===================
DILUTED WEIGHTED AVERAGE SHARES
USED IN COMPUTATION 6,634,750 6,632,750 6,634,750 6,506,884
============= =============== =================== ===================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
-------------------------------
1998 1997
------------- --------------
(UNAUDITED)
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss $(3,975,742) $(8,423,024)
------------- --------------
Adjustments to reconcile net loss to net
cash used in operating activities:
Amortization of film and program costs 1,186,547 853,032
Write-down of film and program costs - 5,456,180
Depreciation and other amortization 264,611 288,256
Minority interest 57,469 64,724
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable, net - current 1,264,401 1,013,256
(Increase) decrease in accounts receivable - non-current 60,000 798,453
Additions to film and program costs (1,392,552) (2,652,529)
(Increase) decrease in prepaid expenses 152,367 107,191
(Increase) decrease in deposits receivable - 10,421
Increase (decrease) in accounts payable and accrued expenses 30,637 1,825,733
Increase (decrease) in participations payable - current (93,119) (183,667)
Increase (decrease) in participations payable - non-current (88,009) (94,315)
Increase (decrease) in deferred revenue - current 889,357 (519,085)
Increase (decrease) in deferred revenue - non-current (92,528) (387,801)
------------- --------------
CASH USED IN OPERATING ACTIVITIES (1,736,561) (1,843,175)
------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (17,458) (10,742)
------------- --------------
CASH USED IN INVESTING ACTIVITIES (17,458) (10,742)
------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 100,000 4,715,581
------------- --------------
CASH PROVIDED FROM FINANCING ACTIVITIES 100,000 4,715,581
------------- --------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,654,019) 2,861,664
CASH AND CASH EQUIVALENTS - beginning of period 4,461,627 3,358,230
------------- --------------
CASH AND CASH EQUIVALENTS - end of period $2,807,608 $6,219,894
============= ==============
CASH PAID DURING THE PERIOD FOR:
Interest $ -- $ --
============= ==============
Income taxes $ -- $ --
============= ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998
(UNAUDITED)
1. BASIS OF PRESENTATION
Reference is made to the Company's Annual Report on Form 10-K/A for the fiscal
year ended June 30, 1997.
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 for a full
fiscal year.
2. NET INCOME (LOSS) PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 128, Earnings per Share (Statement 128). Statement 128
replaced the previously reported primary and fully diluted earnings per share
with basic and diluted earnings per share. Unlike primary earnings per share,
basic earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share. All earnings per share
amounts for all periods have been presented, and where necessary, restated to
conform to the Statement 128 requirements.
3. STRATEGY LICENSING COMPANY MINORITY INTEREST
In October 1997, the Company entered into an agreement with Arlene J. Scanlan,
pursuant to which the Company acquired the remaining 15% of the outstanding
shares of the capital stock of Strategy held by her. Additionally, Ms. Scanlan's
employment with Strategy and the Company was terminated. In consideration of the
foregoing, the Company paid Ms. Scanlan an aggregate of approximately $31,000
and has released Ms. Scanlan from certain restrictions contained in a covenant
not to compete with respect to specified properties and entities.
4. PENDING ACQUISITION BY RCN CORPORATION
The Company has entered into an Agreement and Plan of Merger, dated as of
February 27, 1998, as amended on April 6, 1998 (the "Merger Agreement"), between
RCN Corporation ("RCN"), LME Acquisition Corporation ("LME") and the Company
pursuant to which LME will be merged with and into the Company and the Company
will be the surviving corporation and a wholly owned subsidiary of RCN. A
special meeting of the Company's shareholders is currently anticipated to occur
in June 1998 to vote on the Merger Agreement. In the opinion of management, if
the Merger Agreement and the transactions contemplated thereby are not approved
by the Company's shareholders, it is unlikely that the Company would be able to
sustain its operations, whether in order to pursue an alternative transaction or
otherwise, for any significant period beyond the date of such meeting, absent a
source of additional funding which does not currently exist.
4
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Results of Operations - Three months ended March 31, 1998 as compared to
three months ended March 31, 1997
Production and royalty revenues for the three months ended March 31, 1998
increased to $944,383 from $820,258 in the comparable 1997 period. This increase
was primarily due to an increase in revenues arising from production of new
episodes of The Puzzle Place(R) of approximately $851,000, partially offset by
a reduction of production related to Discovery Kids of approximately $686,000.
Licensing agent fees for the three months ended March 31, 1998 declined to
$72,867 from $285,537 in the comparable 1997 period. The decrease is primarily
due to a reduction in revenues related to the Sonic(R) The Hedgehog property of
approximately $119,000 and reductions in licensing revenues on The Puzzle Place
of approximately $81,000 due to expirations of certain licenses.
Production and royalty expenses for the three months ended March 31, 1998
increased to $1,253,157 (or 133% of related revenues) from $1,252,276 (or 153%
of related revenues) in the comparable 1997 three month period. The difference
was primarily due to increases attributable to production of new episodes of The
Puzzle Place, partially offset by declines in production expenses for production
of interstitial programming for Discovery Kids and No ReallyTM. Production and
royalty expenses associated with development activities did not result in the
generation of current revenues for Lancit, contributing to the increase in the
percentage of these expenses to related revenues.
Direct costs of licensing agent activities for the three month period ending
March 31, 1998 decreased to $63,176 from $200,875 in the comparable 1997 period
due primarily to reduced personnel costs of approximately $119,000, reduced
trade show activity of approximately $9,300 and reductions in professional fees
and telephone costs of approximately $4,000 each.
General and administrative expenses for the three months ended March 31, 1998
decreased to $1,051,850 from $1,217,165 in the comparable 1997 period. This
decrease was attributable to reductions in personnel costs of approximately
$117,000, facilities costs of approximately $59,000 and legal fees of
approximately $14,000, offset by increases in insurance costs of approximately
$26,000.
Interest income for the three months ended March 31, 1998 decreased to $24,422
from $78,714 in the comparable 1997 period. This decrease was attributable to a
reduction in cash balances.
There was no provision for income taxes recorded for the three months ended
March 31, 1998 or for the comparable 1997 period, as both periods showed a loss.
Net loss for the three month period ended March 31, 1998 was $1,339,991 ($.20
per share) compared to a net loss of $6,955,110 ($1.05 per share) in the
comparable three month period in 1997 primarily as a result of all of the
factors discussed above as well as a charge of $5,456,180 ($.82 per share) taken
in the three months ended March 31, 1997 to reduce certain film and program
costs to net realizable value.
5
<PAGE>
Results of Operations - Nine months ended March 31, 1998 as compared to
nine months ended March 31, 1997
Production and royalty revenues for the nine months ended March 31, 1998
decreased to $1,326,115 from $1,566,266 in the comparable 1997 period. This
decrease was primarily due to reductions in production activities relating to
Reading Rainbow(R) of approximately $546,000, Backyard SafariTM of approximately
$209,000, Discovery Kids of approximately $672,000 and No Really of
approximately $171,000, partially offset by production of new episodes of The
Puzzle Place approximating $838,000, broadcast renewal fees on The Puzzle Place
of approximately $272,000, increases in royalties of approximately $169,000 and
net increases in other items approximating $79,000.
Revenues from licensing agent fees for the nine months ended March 31, 1998
decreased to $523,655 from $929,412 in the comparable 1997 period. This decrease
is primarily due to reductions in royalties from the Sonic The Hedgehog property
of approximately $259,000 and reduced revenues due to the expiration of certain
licensing contracts on The Puzzle Place of approximately $166,000.
Production and royalty expenses for the nine months ended March 31, 1998
increased to $2,373,477 (or 179% of related revenues) from $2,231,267 (or 142.5%
of related revenues) in the comparable 1997 nine month period reflecting
primarily increased payments for broadcast renewal rights license fees on The
Puzzle Place of approximately $273,000, production expenses on new episodes of
The Puzzle Place approximating $838,000 and increased development activities
approximating $270,000, all of which was partially offset by reduced production
activity on Reading Rainbow of approximately $408,000, Backyard Safari of
approximately $176,000 and production for Discovery Kids of approximately
$677,000. Production and royalty expenses associated with development activities
did not result in the generation of current revenues for Lancit, contributing to
the increase in the percentage of these expenses to related revenues.
Direct costs of licensing agent activities for the nine months ended March 31,
1998 decreased to $338,453 from $641,123 in the comparable 1997 nine month
period due primarily to reduced personnel costs approximating $211,000, reduced
travel of approximately $38,000, a decrease in telephone expenses approximating
$18,000, and a reduction in trade show and marketing materials of approximately
$39,000.
General and administrative expenses for the nine months ended March 31, 1998
increased to $3,162,978 from $2,717,935 in the comparable 1997 nine month
period. This increase was attributable to an increase in legal fees of
approximately $251,000, insurance costs of approximately $84,000 and increases
in other office costs approximating $110,000.
Interest income for the nine months ended March 31, 1998 decreased to $106,863
from $192,527 in the comparable 1997 nine month period. This decrease is due
primarily to a reduced level of cash invested in 1998 as compared to 1997.
There was no provision for income taxes recorded for the nine months ended March
31, 1998 or for the comparable 1997 period, as both periods showed a loss.
Minority interest in licensing activities for the nine months ended March 31,
1998 was $57,467 compared to $64,724 in the comparable 1997 period. This is a
result of decreased profitability at a subsidiary with a minority owner.
Net loss for the nine months ended March 31, 1998 was $3,975,742 ($.60 per
share) compared to a net loss of $8,423,024 ($1.29 per share) in the comparable
1997 period primarily as a result of all of the factors discussed above as well
as a charge of $5,456,180 ($.84 per share) taken in the nine months ended March
31, 1997 to reduce certain film and program costs to net realizable value.
Weighted average shares outstanding for the nine month period ended March 31,
1998 increased to 6,634,750 from 6,506,884 in the comparable 1997 period
primarily as a result of the inclusion for the full nine months of shares issued
to DCI related to its purchase of a 6.6% equity stake in Lancit as well as the
exercise of stock options during the period from December 31, 1996 to December
31, 1997.
6
<PAGE>
Liquidity and Capital Resources
The Company had cash and cash equivalents as of March 31, 1998 of approximately
$2.8 million, and no long- term debt. Notwithstanding the Company's cash
position at March 31, 1998, the Company's management believes that additional
funding will be required to enable the Company to continue to meet its
obligations and to sustain its operations through the balance of the current
fiscal year. The Company had previously announced that it was actively seeking
additional funding and had retained an investment banking firm to assist it in
this effort. Among the alternatives considered by the Company were a sale of an
interest in the Company, an acquisition of the Company, and/or strategic
alliances with industry partners.
As discussed in Note 4 of the Consolidated Financial Statements, on February 27,
1998, the Company entered into the Merger Agreement with RCN providing for the
merger of LME, a subsidiary of RCN, with and into the Company, pursuant to which
the Company will be the surviving corporation and a wholly owned subsidiary of
RCN (the "Merger"). The Merger Agreement was amended on April 6, 1998 to reflect
RCN's one-for-one stock dividend. Pending the Special Meeting of shareholders to
consider and vote upon the proposed Merger, which is currently scheduled for
June 11, 1998, the Company has negotiated arrangements with certain creditors to
defer certain of its obligations until after the estimated date of the Special
Meeting.
As of the scheduled date of the Special Meeting, it is anticipated that the
Company will have minimal, if any, further cash resources or access to
substantial cash resources. Accordingly, if the Merger Agreement and the
transactions contemplated thereby, including the Merger, are not approved by the
Company's shareholders, it is unlikely that the Company would be able to sustain
its operations, whether in order to pursue an alternative transaction or
otherwise, for any significant period beyond the date of such meeting, absent a
source of additional funding which does not currently exist. In such event, the
Company would have to consider seeking protection from its creditors under the
Federal bankruptcy laws and/or liquidating.
There has been a trend over the past two to three years of decreased
profitability manifested by the decreases in revenues and the increases in
production and royalty expenses and general and administrative expenses. This
trend is expected to continue, at least in the short term. The Company's
response to this trend, as noted above, has been to seek additional funding
through a sale of an interest in the Company, an acquisition of the Company,
and/or strategic alliances with industry partners.
The Company has also taken steps to reduce, where appropriate, its operating
expenses. These steps include relocating The Strategy Licensing Company, Inc.
("Strategy") its merchandising and licensing subsidiary, from Westport,
Connecticut to the Company's New York City offices, and certain staff
reductions. These measures have resulted in certain reductions to licensing
agent direct costs and general and administrative expenses in the third quarter
of fiscal 1998, when the effect of one-time costs related to staff reductions
and the relocation of Strategy has been reduced and the Company will have the
benefit of a full quarter of reduced costs related to these items; however, the
effect of these savings will be reduced in some cases by the effect of the
minority interest. In addition, the Company did not renew the lease for its
Beverly Hills, California office, which expired in April 1998 and had an annual
rental of $24,636.
For the nine month period ended March 31, 1998, cash used in operating
activities approximated $1.7 million. A net loss of approximately $4.0 million
and additions to film and program costs of approximately $1.4 million, were
partially offset by increases in accounts receivable of approximately $1.3
million, increases in deferred revenue of approximately $.8 million and non-cash
charges for amortization of film and program costs and other depreciation and
amortization of approximately $1.5 million.
For the nine month period ended March 31, 1998, cash provided from financing
activities was $0.1 million, compared to $4.7 million for the comparable 1997
period. Warrants to purchase 100,000 shares of stock were issued in partial
payment and satisfaction of fees owed for services performed in connection with
the September 1996 purchase of a 6.6% stake in the Company by DCI.
Management does not expect inflation to have a significant impact on the
Company's business.
Impact of the Year 2000 Issue
The Company uses primarily "off the shelf" computer software and has been
advised by the manufacturers that most of this software, including its
accounting and financing software, is Year 2000 compliant. Additionally, the
Company's hardware has been tested and is believed to be Year 2000 compliant.
Accordingly, the cost of addressing the Year 2000 issue is not expected to be
material to the Company and any potential cost for incomplete or untimely
resolution of Year 2000 issues is not expected to be material.
7
<PAGE>
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This report, including, without limitation, descriptions of the Company's
targets or goals and Management's views concerning the Company's pending and
proposed projects, prospects and future financial performance contained in this
discussion and analysis and elsewhere, constitute forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities Litigation
Report Act of 1995 and involve known and unknown risks and uncertainties which
may cause the Company's actual results in future periods to differ materially
from forecasts. Such risks include , without limitation, (i) the risks generally
associated with the production of a television series and other entertainment
products, including, without limitation, (a) the availability of appropriate
time slots for children's and family entertainment programming; (b) a serious
strike threat that could delay production schedules; (c) availability of a star
or other key individual(s) associated with production of a series, movie or
other project; (ii) the network and studio acceptance of television and motion
picture projects; pricing, purchasing, financing, operational, advertising and
promotional decisions by intermediaries in the distribution channel; and the
effects of vertical integration of companies in the media and entertainment
industry, the effects of which could be to reduce the opportunities for the
Company and independent producers, suppliers and distributors as a whole; (iii)
the ability of the Company to successfully negotiate and enter into agreements
to acquire rights, develop, produce, market and distribute entertainment and
licensing projects; (iv) difficulties or delays in the development, production
and marketing of entertainment projects and/or licensed products, including, but
not limited to, a failure to complete production of new projects when
anticipated and failures related to another party's inability to perform, which
could, for example, affect the licensees' ability to manufacture, or consumer
demand for, licensed products; (v) less than anticipated consumer acceptance of
entertainment projects or licensed products, which could negatively affect the
cycle of entertainment projects and licensed products; (vi) the effects of, and
changes in, consumer tastes, economic and tax policies, social and economic
conditions, and laws and regulations, including governmental action or legal
proceedings relating to intellectual property rights and intellectual property
licenses and the adoption of new, or changes in, accounting policies; (vii)
non-renewal of annual contracts with production-related customers; and (viii)
underutilization of the Company's post-production facilities resulting from,
among other things, production slowdowns or inefficiencies. These and other
risks are described in the Company's Annual Report on Form 10- K for the fiscal
year ended June 30, 1997, as amended, filed with the Securities and Exchange
Commission, copies of which are available from the Securities and Exchange
Commission or may be obtained upon request from the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not Applicable.
8
<PAGE>
PART II
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- ----------------------------------------------------------------------------------------------
<S> <C>
2.1 Agreement and Plan of Merger, dated as of February 27, 1998 (the "Merger Agreement"), between
RCN Corporation, LME Acquisition Corporation and the Company (incorporated by reference to
Exhibit 2.1 contained in the Company's Current Report on Form 8-K, filed on March 6, 1998 (the
"Form 8-K")),
The Registrant agrees to furnish copies of any omitted schedules to the Merger Agreement,
which are not required to be included as an exhibit, to the Commission upon request.
2.2 Amendment No. 1, dated as of April 6, 1998, to the Merger Agreement
4.1 Voting Agreement, dated as of February 27, 1998, between RCN Corporation, LME Acquisition
Corporation, the Company, Cecily Truett, Laurence A. Lancit and The Lancit Children's Trust
(incorporated by reference to Exhibit 99.1 contained in the Form 8-K)
27 Financial Data Schedule (electronic filing only)
</TABLE>
(b) Reports on Form 8-K:
Current Report on Form 8-K, filed on March 6, 1998, reporting the
entrance by the Company into the Agreement and Plan of Merger, dated
as of February 27, 1998, between RCN Corporation, LME Acquisition
Corporation and the Company
9
<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.
LANCIT MEDIA ENTERTAINMENT, LTD.
Date: May 15, 1998 By: /s/ LAURENCE A. LANCIT
-----------------------------------------
Laurence A. Lancit
Co-President & Treasurer
Date: May 15, 1998 By: /s/ SUSAN L. SOLOMON
-----------------------------------------
Susan L. Solomon
Chief Executive Officer and Chairman of the
Board of Directors
10
<PAGE>
Exhibit 2.2
AMENDMENT NO. 1 TO
AGREEMENT AND PLAN OF MERGER
AMENDMENT NO. 1 dated as of April 6, 1998 between RCN CORPORATION, a
Delaware corporation ("RCN"), LME ACQUISITION CORPORATION, a New York
corporation (the "Merger Subsidiary"), and LANCIT MEDIA ENTERTAINMENT, LTD., a
New York corporation ("Lancit"), to AGREEMENT AND PLAN OF MERGER ("Merger
Agreement"), dated as of February 27, 1998, between RCN, Merger Subsidiary and
Lancit.
W I T N E S S E T H :
WHEREAS, RCN, Merger Subsidiary and Lancit entered into the Merger
Agreement on February 27, 1998; and
WHEREAS, RCN declared a one for one stock dividend (the "Stock
Dividend") on its common stock, par value $1.00 per share, on March 9, 1998
which was paid on April 3, 1998; and
WHEREAS, the parties hereto wish to amend the Merger Agreement to
correctly state the par value per share of the common stock of the Merger
Subsidiary and to adjust the formula for calculating the Stock Exchange Ratio
(as defined therein) in order to account for the Stock Dividend in accordance
with Section 1.05(d) of the Merger Agreement;
NOW, THEREFORE, the parties hereto hereby amend the Merger Agreement
as follows:
1. The reference to "$.01" as the par value per share of the
common stock of the Merger Subsidiary in Section 1.04 shall be deleted and
replaced with "$1.00";
2. The references to "$58" in Section 1.05(a) shall be deleted
and replaced with references to "$29";
3. The references to "$48" in Section 1.05(a) shall be deleted
and replaced with references to "$24";
4. This Amendment shall be in all respects governed by and
construed in accordance with the laws of the State of New York;
5. This Amendment may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument;
6. Except as expressly amended by this Amendment, the Merger
Agreement will remain in full force and effect; and
7. Capitalized terms used in this Amendment and not otherwise
defined herein are used herein as defined in the Merger Agreement.
11
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first set forth above.
LANCIT MEDIA ENTERTAINMENT, LTD.
By: /s/ Susan L. Solomon
---------------------------------
Susan L. Solomon
Chairman of the Board and Chief
Executive Officer
RCN CORPORATION
By: /s/ Paul Sigmund
---------------------------------
Name: Paul Sigmund
Title: Executive Vice President
LME ACQUISITION CORPORATION
By: /s/ Paul Sigmund
---------------------------------
Name: Paul Sigmund
Title: Executive Vice President
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDING 3-31-98
AND REFERENCE SHOULD BE MADE TO THE FINANCIAL STATEMENTS CONTAINED THEREIN AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 2,807,608
<SECURITIES> 0
<RECEIVABLES> 585,349
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,283,836
<PP&E> 290,716
<DEPRECIATION> 0
<TOTAL-ASSETS> 6,027,378
<CURRENT-LIABILITIES> 5,295,018
<BONDS> 0
0
0
<COMMON> 6,635
<OTHER-SE> 247,804
<TOTAL-LIABILITY-AND-EQUITY> 6,027,378
<SALES> 0
<TOTAL-REVENUES> 1,849,770
<CGS> 0
<TOTAL-COSTS> 5,874,908
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (3,918,275)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,975,742)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,975,742)
<EPS-PRIMARY> (.60)
<EPS-DILUTED> (.60)
</TABLE>
