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FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark one)
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________________ to _________________
OR
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1996
Commission File No. 1-10802
SPORTS MEDIA, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 95-4189256
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) identification No.)
101 E. 52nd Street, New York, NY 10022
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-308-6666
Indicate by check mark whether the registrant 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 aggregate number of Registrant's outstanding shares on June 17, 1996 was
6,100,081 shares of Common Stock, par value $0.003 per share.
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SPORTS MEDIA, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
Item 1 Financial Statements
Balance Sheets as of April 30, 1996
and July 31, 1995 3
Statement of Operations for the three months
ended April 30, 1996 and 1995 5
Statement of Operations for the nine months
ended April 30, 1996 and 1995 6
Statement of Cash Flow for the nine months
ended April 30, 1996 and 1995 7
Supplemental Disclosure of Cash Flow
Information 8
Notes to Unaudited Financial Statements 9
Item 2 Management's Discussion and Analysis of 11
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Signatures 13
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SPORTS MEDIA, INC.
BALANCE SHEET
ASSETS
(Unaudited) FYE
4/30/96 7/31/95
CURRENT ASSETS: ----------- -------
Cash and cash equivalents $15,145 $141,011
Accounts Receivable (Net of Allowance of $247,906) 1,255,832 78,748
Inventory 1,022,450 171,796
Prepaids 103,275 197,262
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TOTAL CURRENT ASSETS 2,396,702 588,817
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PROPERTY AND EQUIPMENT AT COST,
net of accumulated depreciation
of $21,479 and $8,567, respectively 81,824 94,736
INTANGIBLE ASSETS:
Covenant not-to-compete, net of accumulated
amortization of $777,250 and $627,250, respectively 350,000 500,000
INVESTMENTS 273,160 273,160
OTHER ASSETS:
Capitalized film costs, net of accumulated
amortization of $220,075 and $40,370, respectively 655,997 201,853
Purchased contracts and customer lists, net of
accumulated amortization of $650,000 and $500,000 350,000 500,000
Capitalized team contracts,
net of accumulated amortization of $808,607 534,980 0
Royalty advances 137,537 0
Deposits 8,256 8,256
PREPAID ADVERTISING,
(Net of reserve of $500,000) 600,000 1,500,000
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TOTAL ASSETS $5,388,456 $3,666,822
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SPORTS MEDIA, INC.
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited) FYE
4/30/96 7/31/95
CURRENT LIABILITIES: ----------- -------
Loans from Stockholder and related parties $2,053,119 $1,095,224
Accounts payable 1,578,716 527,518
Accrued expenses 264,264 730,967
Deferred revenue 265,433 212,880
Publishing rights/Royalty payable 551,362 0
Other payables 40,000 287,570
Current portion of long-term debt 21,711 168,000
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TOTAL CURRENT LIABILITIES 4,774,605 3,022,159
ACCOUNTS PAYABLE - OTHER 426,830 257,010
LONG TERM PUBLISHING RIGHTS 65,500 0
LONG TERM DEBT 371,000 203,000
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TOTAL LIABILITIES 5,637,935 3,482,169
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COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIT):
Convertible preferred stock, $.01 par value 1,969,850 4,119,850
Common stock, $.003 par value 18,310 15,801
Additional paid-in-capital 17,192,610 15,114,047
Accumulated deficit (19,430,249) (19,065,045)
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TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (249,479) 184,653
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TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT) $5,388,456 $3,666,822
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SPORTS MEDIA, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Period Ended
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4/30/96 4/30/95
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REVENUES FROM OPERATIONS:
Advertising revenue $2,173,578 $967,532
Yearbook Sales 621,137 1,118,571
Other revenue 0 0
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TOTAL REVENUES FROM OPERATIONS 2,794,715 2,086,103
COST OF SALES:
Editorial, production, printing, distribution 502,658 1,944,594
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GROSS PROFIT 2,292,057 141,509
EXPENSES FROM OPERATIONS:
Selling, general and administration 2,025,374 2,158,011
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OPERATING PROFIT/(LOSS) 266,683 (2,016,502)
AMORTIZATION EXPENSE (1,288,222) (341,603)
INTEREST EXPENSE (96,957) (115,273)
EARLY RETIREMENT OF DEBT 23,267 0
OTHER INCOME 730,925 0
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PROFIT/(LOSS) BEFORE INCOME TAXES (364,304) (2,473,378)
INCOME TAXES 900 0
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NET PROFIT/(LOSS) ($365,204) ($2,473,378)
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NET LOSS PER COMMON SHARE ($0.06) ($0.49)
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OUTSTANDING SHARES OF COMMON STOCK 6,100,081 5,042,115
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SPORTS MEDIA, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Period Ended
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4/30/96 4/30/95
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REVENUES FROM OPERATIONS:
Advertising revenue $14,997 $11,638
Yearbook Sales 202,075 487,377
Other revenue 0 0
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TOTAL REVENUES FROM OPERATIONS 217,072 499,015
COST OF SALES:
Editorial, production, printing, distribution 173,834 414,727
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GROSS PROFIT 43,238 84,288
EXPENSES FROM OPERATIONS:
Selling, general and administration 466,174 641,603
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OPERATING PROFIT/(LOSS) (422,936) (557,315)
AMORTIZATION EXPENSE (478,920) (99,189)
INTEREST EXPENSE (32,319) (52,564)
EARLY RETIREMENT OF DEBT 0 0
OTHER INCOME 0 0
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PROFIT/(LOSS) BEFORE INCOME TAXES (934,175) (709,068)
INCOME TAXES 0 0
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NET PROFIT/(LOSS) ($934,175) ($709,068)
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NET LOSS PER COMMON SHARE ($0.15) ($0.14)
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OUTSTANDING SHARES OF COMMON STOCK 6,100,081 5,042,115
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SPORTS MEDIA, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Period Ended
--------------------------
4/30/96 4/30/95
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CASH FLOWS USED BY OPERATING ACTIVITITES:
Net Profit/(Loss) ($365,204) ($2,473,378)
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Adjustments to reconcile net profit/(loss) cash
used by operating expenses:
Depreciation and Amortization 1,316,924 358,949
Changes in assets and liabilities:
(Increase)/Decrease in accounts receivable (1,177,084) (437,125)
(Increase)/Decrease in inventory (850,654) (47,278)
(Increase)/Decrease in prepaids 93,987 (230,473)
Increase/(Decrease) in accounts payable 1,051,198 416,085
Increase/(Decrease) in accrued expenses (466,703) (242,573)
Increase/(Decrease) in deferred revenue 52,553 428,388
Increase/(Decrease) in publishing rights 616,862 0
Increase/(Decrease) in other payable (77,750) 0
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Subtotal 559,333 245,973
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Net cash used by operating activities 194,129 (2,227,405)
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CASH FLOW USED BY INVESTING ACTIVITIES:
(Increase)/Decrease in property and equipment 0 (125,010)
(Increase)/Decrease in other assets (2,114,973) (4,660)
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Net cash used by investing activities (2,114,973) (129,670)
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CASH FLOW FROM FINANCE ACTIVITIES:
Increase/(Decrease) in notes payable 21,711 (7,000)
Increase/(Decrease) in loans from stockholder
and related parties 957,895 (1,881,450)
Adjustment/Issuance of Preferred Stock (500,000) 2,059,500
Issuance of Common Stock 2,081,072 2,787,699
Adjustment to Paid-in-Capital (765,700) 0
Expenditures related to Warrant Offering 0 0
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Net cash provided from financing activities 1,794,978 2,958,749
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Net increase/(decrease) in cash (125,866) 601,674
Cash at beginning of period 141,011 220,805
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Cash at end of period $15,145 $822,479
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SPORTS MEDIA, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Nine Months Period Ended
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4/30/96 4/30/95
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
CASH PAID DURING THE THREE MONTH PERIOD FOR:
Income Taxes $0 $0
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Interest $96,957 $115,273
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SPORTS MEDIA, INC.
Notes to Unaudited Financial Statements
April 30, 1996
1. Basis of Presentation
The unaudited financial statements have been prepared from the
books and records of Sports Media, Inc. (the "Company) in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements.
In the opinion of management, all adjustments (consisting only of
normal recurring accruals) considered necessary for a fair
presentation have been included. Interim results may not be
indicative of the results that may be expected for the year.
2. Inventory
Inventories are stated at the lower cost or market, costs being
determined on the first-in, first-out method. Inventories consist of
yearbooks in production as of April 30, 1996 and finished yearbooks
for resale that are warehoused. Appropriate consideration is given to
obsolescence and other factors in evaluating net realization value.
3. Property and Equipment
Property and equipment is stated at cost. Expenditures for additions
and major improvements are capitalized. Repairs and maintenance
costs are expensed as incurred. Depreciation on property and
equipment is computed on the straight-line method over the
estimated useful life of six years.
4. Covenants not-to-compete
Covenants not-to-compete are amortized using the straight-line
method over their contract lives which range from eighteen months
to five years.
5. Investments
The equity method of accounting is used when the Company has a
20% to 50% interest in other companies. Under the equity method,
original investments are recorded at cost and adjusted by the
Company's share of undistributed earnings or losses of these
companies. The cost method of accounting is used when the
Company has an interest of less than 20%. Under the cost method,
original investments are reported at cost and dividends received are
recorded as income.
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6. Purchased Contracts
Purchased contracts acquired are amortized using the straight-line
method over the life of each individual contract.
7. Capitalized Film Costs
Costs to develop film are capitalized and amortized using the
straight-line method over a three year period.
8. Capitalized Team Contracts
Rights Fee incurred for team contracts are capitalized and amortized
using the straight-line method over the remaining years of the
contracts.
9. Royalty Advances
Royalty advances paid or incurred to teams in lieu of Rights Fees are
capitalized and expensed as books are sold based upon a
predetermined royalty rate.
10. Prepaid Advertising
Pre-paid advertising time which represents television spots acquired
by the Company to be offered to existing and prospective advertising
and team clients, will be charged to expense as utilized or when
appropriate, sold back to FOX-Channel 28 for cash when prevailing
rates dictate the sale.
11. Deferred Revenue
Advance payment by advertising accounts on future seasons revenue
will be recognized upon initial release of books for season advertising
was acquired.
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SPORTS MEDIA, INC.
Management's Discussion and Analysis of Financial
Conditions and Results of Operations
April 30, 1996
(Unaudited)
Results of Operations:
Revenues for the three month period ended April 30, 1996 were $217,072 as
compared to $499,015 for the three month period ended April 30, 1995. The
decrease of approximately $281,943 was due to a decrease in yearbook sales of
$285,302 offset by an increase in advertising sales of $3,359. The decrease in
yearbook sales reflects the change in method of distribution from last year.
Last year yearbook sales was a function of increased print and circulation of
copies released for distribution to newsstands of current NBA titles. This
year's yearbooks' sales reflect straight sales direct to retailers of NBA
products.
Editorial, production and distribution expenses were $173,834 for the three
month period ended April 30, 1996 as compared to $414,727 for the three
month period ended April 30, 1995. The decrease of $240,893 is directly
attributable to the change in the method of distribution from last year
whereby expenses were a function of the number of copies released for
distribution to newsstands. In Fiscal 1996 yearbook sales and related
production costs will continue to reflect direct orders received from retailers
via purchase orders.
Selling, general and administrative expenses decreased to $466,174 for the
three month period ended April 30, 1996 as compared to $641,603 for the three
month period ended April 30, 1995. The decrease of $175,429 was primarily
due to a decrease in salaries and benefits, promotional and other operating
expenses.
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Amortization expense increased to $478,920 for the three months ended April
30, 1996 from $99,189 for the three months ended April 30, 1995. The increase
of $379,731 reflects the capitalization of team contracts which are amortized
over the life of the contract and the capitalization of the cost of film to
print the books which is amortized over a three-year period which reflects the
estimated useful life of the film and is consistent with reference publishing.
Interest expense decreased to $32,319 as compared to $52,564 for the
comparable three month period ending April 30, 1996 and 1995, respectively,
reflecting reduced borrowings.
Due to the cyclical nature of sports publishing and the historical dependence
the company has had with the NFL and NBA seasons and as is typical during
the fiscal third and fourth quarters, the company is suffering from severe
liquidity issues. As a result of these severe liquidity issues, various vendors
have filed eight lawsuits which the company is defending that in the
aggregate are seeking payment of approximately $500,000 of overdue accounts
payable. While management believes that by accelerating NBA advertising
receivables there would be significant cash flow to sustain operations until
the Fiscal 1997 NFL season breaks. There can be no assurance that anticipated
internal cash flow will be sufficient to meet the company's short-term cash
obligations.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf of the undersigned thereunto duly authorized.
SPORTS MEDIA, INC.
Date: June 18, 1996 By: /s/ Michael Puccini
Michael Puccini
Chief Financial Officer
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