<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period __________ to __________
Commission File number 1-10799
ADDVANTAGE MEDIA GROUP, INC.
(Exact name of small business issuer as specified in its charter)
OKLAHOMA 73-1351610
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5100 East Skelly Drive
Meridian Tower, Suite 1080
Tulsa, Oklahoma 74135-6552
(Address of principal executive office) (Zip Code)
(918) 665-8414
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
--- ---
Shares outstanding of the issuer's $.01 par value common stock as of November 8,
1996 is 5,138,132. Transitional Small Business Issuer Disclosure Format (Check
one): Yes No x
--- ---
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,138,479 $ 20,444
Accounts receivable 12,096 6,926
Deferred income taxes 2,197,219 667,000
Other current assets 27,841 8,514
------------------------------
Total current assets 3,375,635 702,884
Property and equipment, at cost:
Calculators 1,935,369 749,107
Office and production equipment 456,926 341,575
Furniture and fixtures 77,067 64,417
------------------------------
2,469,362 1,155,099
Accumulated depreciation 431,650 331,385
------------------------------
2,037,712 823,714
Deferred income taxes 1,130,000 3,243,000
Patent, net of accumulated amortization of
$513,645 and $445,533 at September 30, 1996
and December 31, 1995, respectively 394,465 462,577
Deferred charges 111,624 12,064
------------------------------
Total assets $7,049,436 $5,244,239
==============================
</TABLE>
-2-
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
-------------------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
(NET CAPITAL DEFICIENCY)
Current liabilities:
Note payable to bank $ 385,000 $ 519,968
Notes payable to shareholders and directors 116,808 176,808
Current portion of long-term bank debt 2,250,000 -
Accounts payable 521,234 558,748
Accrued interest 558,334 252,677
Other accrued liabilities 731,492 687,782
Accrued preferred stock dividends 409,950 416,777
Unearned advertising revenue 163,736 -
-------------------------------
Total current liabilities 5,136,554 2,612,760
Long-term obligations 635,569 515,163
Long-term bank debt 1,156,656 3,406,656
Stockholders' equity (net capital deficiency)
Preferred stock, $1.00 par value,
1,000,000 shares authorized;
Series A preferred stock -
227,750 and 277,750 shares issued
and outstanding at September 30, 1996
and December 31, 1995, respectively;
liquidation preference, $911,000 760,260 927,167
Common stock, $.01 par value,
10,000,000 shares authorized;
5,138,132 and 4,927,620 shares issued
and outstanding at September 30, 1996
and December 31, 1995, respectively 51,382 49,276
Capital in excess of par value 6,694,736 5,991,428
Accumulated deficit (7,385,721) (8,258,211)
-------------------------------
Total stockholders' equity (deficit) 120,657 (1,290,340)
-------------------------------
Total liabilities and stockholders' equity $ 7,049,436 $ 5,244,239
===============================
</TABLE>
-3-
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1996 1995
---------------------------------
<S> <C> <C>
Revenues:
Advertising $2,229,829 $ -
Sales of calculators 4,643 14,837
Other 3,824 180
----------------------------------
2,238,296 15,017
Costs and expenses:
Cost of advertising services 582,321 43,347
Cost of sales of calculators 2,009 7,229
Selling expenses 58,370 4,534
General and administrative expenses 361,273 144,276
----------------------------------
1,003,973 199,386
----------------------------------
Operating income (loss) 1,234,323 (184,369)
Litigation expense - 579,211
Interest expense 132,284 125,862
----------------------------------
Income (loss) before provision
for income taxes 1,102,039 (889,442)
Provision for income taxes 418,882 -
----------------------------------
Net income (loss) 683,157 (889,442)
Preferred stock dividends (22,900) (27,927)
----------------------------------
Net income (loss) applicable to common stock $ 660,257 $ (917,369)
==================================
Net income (loss) per common share:
Primary $0.11 $(0.21)
==================================
Shares used in computing net income
(loss) per common share 5,845,517 4,408,620
==================================
</TABLE>
-4-
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
--------------------------------
<S> <C> <C>
Revenues:
Advertising $4,210,459 $ -
Sales of calculators 10,666 102,650
Other 4,060 7,716
--------------------------------
4,225,185 110,366
Costs and expenses:
Cost of advertising services 1,199,247 124,716
Cost of sales of calculators 5,692 50,470
Selling expenses 114,525 27,297
General and administrative expenses 973,793 561,578
--------------------------------
2,293,257 764,061
--------------------------------
Operating income (loss) 1,931,928 (653,695)
Litigation expense - 629,211
Interest expense 398,511 346,952
--------------------------------
Income (loss) before provision
for income taxes 1,533,417 (1,629,858)
Provision for income taxes 582,781 -
--------------------------------
Net income (loss) 950,636 (1,629,858)
Preferred stock dividends (78,146) (83,173)
--------------------------------
Net income (loss) applicable to common stock $ 872,490 $(1,713,031)
================================
Net income (loss) per common share:
Primary $0.15 $(0.42)
================================
Shares used in computing net income (loss)
per common share 5,800,939 4,110,452
================================
</TABLE>
-5-
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
----------------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ 950,636 $(1,629,858)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 233,830 113,552
Amortization of discount on shareholders'
notes and long-term obligation 38,956 13,935
Bonuses awarded by issuance of common stock - 187,500
Obligation in settlement of lawsuit - 502,707
Deferred retirement plan obligation 81,450 -
Changes in assets and liabilities:
Accounts receivable (5,171) (514)
Inventory - 61,048
Other current assets (19,326) 1,037
Deferred charges (99,561) 8,933
Accounts payable (37,514) 174,018
Accrued interest 322,880 302,741
Other accrued liabilities 43,710 127,797
Unearned advertising revenue 163,736 -
Deferred income taxes 582,781 -
--------------------------------
Net cash provided by (used in) operating activities 2,256,407 (137,104)
INVESTING ACTIVITIES
Purchases of property and equipment (1,379,716) (261,201)
--------------------------------
Net cash used in investing activities (1,379,716) (261,201)
</TABLE>
-6-
<PAGE>
ADDVANTAGE MEDIA GROUP, INC.
STATEMENTS OF CASH FLOWS (continued)
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended September 30,
1996 1995
--------------------------------
<S> <C> <C>
FINANCING ACTIVITIES
Proceeds from issuance of bank notes $ 180,032 $ 323,366
Proceeds from issuance of investor notes - 220,000
Exercise of underwriter warrants 432,000 -
Exercise of stock options 4,312 -
Payment on patent notes - (117,600)
Payment on bank notes (315,000) -
Payment on shareholders' and directors' notes (60,000) -
--------------------------------
Net cash provided by financing activities 241,344 425,766
--------------------------------
Increase in cash and cash equivalents 1,118,035 27,461
Cash and cash equivalents, beginning of period 20,444 169
--------------------------------
Cash and cash equivalents, end of period $1,138,479 $ 27,630
================================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Interest paid $ 45,145 $ 18,427
================================
</TABLE>
-7-
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have bene prepared in
accordance with generally accepted accounting principles for interim financial
statements and do not include all information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, the information furnished reflects all adjustments, consisting only of
normal recurring adjustments which are, in the opinion of management, necessary
in order to make the financial statements not misleading.
NOTE 2 - DESCRIPTION OF BUSINESS
The Company markets and sells in-store advertising to national advertisers. The
advertising is positioned on the Company's solar powered calculators attached to
the handles of mass merchants' shopping carts. The calculators are patented and
registered under the trademark "Shoppers Calculators." The Company also sells
Shoppers Calculators(R) to third parties, including independent retailers and
international licensees.
The Company entered into separate agreements with Wal-Mart Stores, Inc. ("Wal-
Mart") in July 1993 and June 1994 which provided for the installation of the
Company's calculators in certain Wal-Mart stores. These contracts were never
implemented, and in January 1995, the Company field a suit against Wal-Mart for
the alleged breach of the terms of those contracts. On September 1, 1995, the
Company and Wal-Mart entered into a new contract in settlement of the lawsuit.
Under the terms of a new four-year contract, the Company will install and
maintain Shoppers Calculators(R) in all of Wal-Mart's Supercenters in the
continental United States and Wal-Mart is responsible for selling the
advertising for the calculators during the initial phase of the contract.
During the term of the contract in which Wal-Mart is responsible for selling the
advertising, Wal-Mart has agreed to guarantee advertising revenues to the
Company in excess of $23.5 million, subject to the Company's obligation to
install and service the Shoppers Calculators(R) during the revenue guaranty
period. After the Company has received payment of the total guaranteed
advertising revenues, the Company has the option to continue the contract and
assume the advertising sales responsibilities for the program. If the Company
elects to continue the contract, the program will then continue on this basis
for a fixed period of time, and upon conclusion of the term of the contract, the
program will be subject to re-evaluation by both parties. Through September 30,
1996, cumulative advertising revenues have totaled $4,340,164, reducing the
guaranteed advertising revenues to be received in future periods to $19,154,366.
-8-
<PAGE>
Certain terms of the contract were determined based on the following assumed
schedule with respect to the number of Supercenter stores to be participating in
the Company's program. The following table sets forth the assumed schedule of
Supercenter installations pursuant to the Wal-Mart contract's operating plan and
the actual installations in Supercenters to date.
<TABLE>
<CAPTION>
Shopping Shopping
Stores to Carts to Stores Carts
Year be Added be Added Installed Installed
--------------------------------------------------------
<S> <C> <C> <C> <C>
1995 33 39,600 41 31,925
1996 200 240,000 258 234,847(1)
1997 100 120,000 N/A N/A
1998 100 120,000 N/A N/A
------------------
433 519,600
==================
</TABLE>
________________
(1) Through September 30, 1996. The Company currently plans to complete
installations in 286 Supercenters during 1996.
In July 1996, the chief executive officer of Wal-Mart expressed concern over
certain aspects of the current Wal-Mart contract. Since that time, the Company
and Wal-Mart have maintained communications in an effort to address the concerns
while continuing the installation of the Company's Shoppers Calculator(R)
program in the Supercenter stores under the terms of such contract. The Company
and Wal-Mart are currently negotiating an amendment to the existing contract and
Wal-Mart recently issued a press release stating that it remained committed to
honoring its contractual obligations to the Company.
The cost of Shoppers Calculator components and installation hardware not yet
installed was $293,836 at September 30, 1996, and is included in the balance
sheet under property and equipment.
On October 4, 1996, the Company commenced the redemption of its 600,000
outstanding Common Stock Purchase Warrants that were set to expire on December
31, 1996. The period for exercising the Common Stock Purchase Warrants will
expire on November 22, 1996. Each Common Stock Purchase Warrant may be exercised
at any time prior to November 22, 1996, to purchase one share of the Company's
Common Stock at $4.00 per share. Warrant holders who choose not to exercise
their Warrants by November 22, 1996, will be paid five cents per Warrant, on or
about December 2, 1996. If all of the Warrants are exercised, gross proceeds to
the Company, net of commissions, will be approximately $2,280,000. As of
November 8, 1996, 7,700 Warrants have been exercised with proceeds aggregating
$30,800. Substantially all of the proceeds, net of commissions, will be used to
reduce the Company's bank debt.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1995
Business activity was primarily related to managing a Shoppers Calculator
program in Wal-Mart Supercenters and developing programs with other mass
merchants. Advertising revenues totaled $2,229,800 during the three months ended
September 30, 1996. The Company's first revenue period under the Wal-Mart
contract began on November 6, 1995, and there were no advertising revenues for
the comparable period last year.
Revenues from sales of calculators declined from $14,800 for the three months
ended September 30, 1995 to $4,600 for the three months ended September 30,
1996. Approximately 1,400 units were sold during the third quarter of fiscal
1995, compared to approximately 294 units sold in the third quarter of fiscal
1996.
Cost of advertising services, representing primarily labor to supervise,
service and clean the installed units and to change advertising messages, and
depreciation of installed units, increased approximately $539,000 (1243%) in
1996 as compared to 1995 as a result of higher labor costs and depreciation due
to the increase in the number of calculators installed and serviced during the
respective periods.
Cost of sales of calculators, representing the manufacturing costs of units
sold, decreased approximately $5,200 (72%) in 1996 as compared to 1995. This
was due to the decreased number of units sold during the third quarter of 1996
as compared to 1995.
Selling expense increased approximately $53,800 (1187%) in the third quarter
of 1996. This was primarily due to increases during 1996 in payroll, payroll
related expenses and marketing materials costs.
General and administrative expenses increased $217,000 (283%) for the third
quarter of 1996 as compared to the same period in 1995. During 1996, payroll and
payroll related expenses increased $24,900 as the Company began to increase
staff to handle the increased work load required from the Wal-Mart Supercenter
contract. Officer bonus accruals increased $66,700 during the third quarter of
1996 as compared to the same period in 1995. Executive retirement plan accruals,
including insurance cost to fund future payments, totaled $68,600 during the
1996 third quarter, compared to none in the third quarter of 1995. Increases
amounting to $56,800 occurred in professional fees, occupancy costs, business
taxes and other expenses.
Interest expenses increased approximately $6,400 (5%) in the third quarter of
1996 as compared to the same period in 1995. Interest on bank borrowings
increased $22,700 due to higher levels of borrowing offset somewhat by lower
prime interest rates during 1996. Vendor interest was $24,000 lower in 1996 as
compared to 1995. Interest accrued on amounts due investors increased by $7,700
for the three months ended September 30, 1996.
-10-
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1995
Business activity was primarily related to managing a Shoppers Calculator
program in Wal-Mart Supercenters and developing programs with other mass
merchants. Advertising revenues totaled $4,210,500 during the first nine months
of 1996. The Company's first revenue period under the Wal-Mart contract began
on November 6, 1995, and there were no advertising revenues for the comparable
period last year.
Revenues from sales of calculators declined from $102,700 for the nine months
ended September 30, 1995 to $10,700 for the nine months ended September 30,
1996. Approximately 7,600 units were sold during the first nine months of fiscal
1995, compared to approximately 686 units sold in the first nine months of 1996.
Cost of advertising services, representing primarily labor to supervise,
service and clean the installed units and to change advertising messages, and
depreciation of installed units, increased approximately $1,074,500 (862%) in
1996 as compared to 1995 as a result of higher labor costs and depreciation due
to the increase in the number of calculators installed and serviced during the
respective periods.
Cost of sales of calculators, representing the manufacturing costs of units
sold, decreased approximately $44,800 (89%) in 1996 as compared to 1995. This
was due to the decreased number of units sold during the first half of 1996 as
compared to 1995.
Selling expense increased approximately $87,200 (320%) in the first nine
months of 1996. This was primarily due to increases during 1996 in payroll,
payroll related expenses and marketing materials costs.
General and administrative expenses increased $412,200 (73%) for the first
nine months of 1996 as compared to the same period in 1995. During 1996, payroll
and payroll related expenses increased $111,200 as the Company began to increase
staff to handle the increased work load required from the Wal-Mart Supercenter
contract. Officer bonus accruals decreased $54,200 during the first nine months
of 1996 as compared to the same period in 1995. Executive retirement plan
accruals, including insurance cost to fund future payments, totaled $205,700
during the 1996 first half. Expenses related to broker and analyst meetings and
other shareholder expenses increased $22,500 over 1995. Increases amounting to
$135,500 occurred in professional fees, occupancy costs, business taxes and
other expenses. The increase was offset by a decrease in investment banking
fees of $8,500 from 1995.
Litigation expenses in the amount of $629,200 were incurred during the first
nine months of 1995 in connection with the Company's lawsuit against Wal-Mart.
Interest expenses increased approximately $51,600 (15%) in the first nine
months of 1996 as compared to the same period in 1995. Interest on bank
borrowings increased $69,600 due to higher levels of bank borrowing offset
somewhat by lower prime interest rates during 1996. Vendor interest was $49,700
lower in 1996 as compared to 1995. Interest accrued on amounts due investors
increased by $31,700 for the nine months ended September 30, 1996.
-11-
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
During the first quarter of 1995, the Company completed a private placement
of promissory notes and warrants for an aggregate consideration of $200,000. The
offering included (a) a total of 500,000 warrants, each of which, upon exercise,
entitled the holder to acquire one share of the Company's Common Stock at a
price of $.20 per share, and were exercisable within 24 months from the date of
issuance; (b) a total of 10% of the net recovery from the Wal-Mart lawsuit
described elsewhere herein; and (c) promissory notes in an aggregate principal
amount of $200,000 and bearing interest at the rate of 10% per annum due on or
before 20 days after the final resolution, by settlement, final judgment or
otherwise, of the Wal-Mart litigation. On November 30, 1995, investors holding
warrants to purchase 425,000 shares of Common Stock exercised such warrants by
converting promissory notes in the principal amount of $85,000 to acquire the
shares. At the same date, new promissory notes totaling $130,808 (representing
$115,000 principal and $15,808 accrued interest on the original notes) were
issued. These notes mature on June 30, 1997.
During the second quarter of 1995, the Company issued 200,000 shares of
Common Stock as a partial settlement of a past due account. As a result of this
transaction, accounts payable and accrued interest were reduced by $75,000 and
$14,800 respectively.
The Company entered into separate agreements with Wal-Mart Stores, Inc. in
July 1993 and June 1994 which provided for the installation of the Company's
calculators in certain Wal-Mart stores. The July 1993 and June 1994 contracts
were never implemented and on January 18, 1995, the Company filed a suit against
Wal-Mart for the alleged breach of the terms of those contracts.
On September 1, 1995, the Company and Wal-Mart entered into a new contract in
settlement of the lawsuit. Under the terms of the new four-year contract, the
Company will install the Shoppers Calculators in all of Wal-Mart's Supercenters
in the continental United States and Wal-Mart will be responsible for selling
the advertising for the calculators during the initial phase of the contract.
During the term of the contract in which Wal-Mart is responsible for the
advertising sales, Wal-Mart has guaranteed advertising revenues to the Company
in excess of $23.5 million subject to the Company's obligation to install and
service the Shoppers Calculators during the revenue guaranty period. After the
Company has received payment of the guaranteed revenues, it has the option to
continue the contract through October 6, 1999, by assuming the advertising sales
responsibilities for the program. Upon conclusion of the contract, the
continuation of the program is subject to re-evaluation by both parties.
In July 1996, the chief executive officer of Wal-Mart expressed concerns over
certain aspects of the current Wal-Mart contract. Since that time, the Company
and Wal-Mart have maintained communications in an effort to address the concerns
while continuing the installation of the Company's Shoppers Calculator(R)
program in the Supercenter stores under the terms of such contract. The Company
and Wal-Mart are currently negotiating an amendment to the existing contract and
Wal-Mart recently issued a press release stating that it remained committed to
honoring its contractual obligations to the Company. While it is anticipated
that such amendment will benefit the interests of both parties, there can be no
assurance at this time, however, that an amendment to the existing contract will
be entered into by the parties or, if
-12-
<PAGE>
such amendment is entered into, that the resulting agreement between the
parties, as amended, will not materially increase the burdens of or reduce the
benefits to the Company.
The present value of the amounts payable to the participants in the Company's
private placement (including Messrs. Hood and Young who provided the initial
funding for the lawsuit), who have the right to receive an aggregate of 12% of
the net recovery from the Wal-Mart contract which was entered into in settlement
of the litigation has been calculated by the Company to be $554,119, including
accrued interest through September 30, 1996, and has been recorded as long-term
obligation payable in the financial statements.
In compliance with the terms of the Wal-Mart contract, the Company furnished
Wal-Mart with a detailed "operating plan" which projected advertising revenues,
capital costs and operating expenses based on the new contract. The operating
plan covered years 1995, 1996, 1997 and 1998. The key assumptions concerning
the number of Supercenters available for installation used in developing the
operating plan were provided to the Company by Wal-Mart and were as follows:
Supercenter Installations
<TABLE>
<CAPTION>
Year Stores Shopping Carts
---- ------ --------------
<S> <C> <C>
1995 33 39,600
1996 200 240,000
1997 100 120,000
1998 100 120,000
--- -------
Total Installations 433 519,600
=== =======
</TABLE>
The Wal-Mart contract provided the Company with additional bank financing,
which has been guaranteed by Wal-Mart, in the amount of $700,000. The balance
of this note, including $60,270 of accrued interest, was paid in October, 1996.
On March 6, 1996, the Company completed a restructuring of all past due bank
debt effective as of October 1, 1995. The Company's $1,800,000 revolving line of
credit, other notes totaling $1,132,622 and accrued interest through September
30, 1995 of $474,034 were combined into a new note in the amount of $3,406,656.
This new loan bears interest at the Chase Manhattan Bank prime rate (8.25% on
September 30, 1996) plus 1%. The loan has a maturity date of May 31, 1998, with
payment terms tied to the Company's projected revenues under the Wal-Mart
contract. Payments or accrued interest on the $3,406,656 note commenced in
October 1996.
The Company's first revenue period under the Wal-Mart contract began on
November 6, 1995. Through September 30, 1996, cumulative revenues received from
Wal-Mart totaled $4,340,164 reducing the guaranteed revenues to be received in
future periods to $19,154,366. The Company believes the cash flow from the Wal-
Mart contract should allow the Company to meet its anticipated cash requirements
for the foreseeable future, including repayment of all past due obligations.
-13-
<PAGE>
During June 1996, certain warrants to purchase up to 60,000 units (each unit
consisting of two shares of Common Stock and one warrant to purchase one share
of Common Stock for $4.80 per share) were exercised. These unit warrants were
issued in June 1991 to the selling agent in connection with the Company's
initial public offering. A total of 120,000 shares of Common Stock and
warrants to purchase 60,000 shares of Common Stock at $4.80 per share were
issued, with net proceeds to the Company amounting to $432,000. The warrants
expire on December 31, 1996.
During August 1996, 50,000 shares of the Company's Series A, 10% Cumulative
Convertible Preferred Stock including accrued dividends and interest were
converted into 75,532 shares of the Company's Common Stock at the conversion
rate of $4.00 per share. As a result of this transaction, Common Stock Equity
was increased $269,100.
On October 4, 1996, the Company commenced the redemption of its 600,000
outstanding Common Stock Purchase Warrants that were set to expire on December
31, 1996. The period for exercising the Common Stock Purchase Warrants will
expire on November 22, 1996. Each Common Stock Purchase Warrant may be exercised
at any time prior to November 22, 1996, to purchase one share of the Company's
Common Stock at $4.00 per share. Warrant holders who choose not to exercise
their Warrants by November 22, 1996, will be paid five cents per Warrant, on or
about December 2, 1996. If all of the Warrants are exercised, gross proceeds to
the Company, net of commissions, will be approximately $2,280,000. As of
November 8, 1996, 7,700 Warrants have been exercised with proceeds aggregating
$30,800. Substantially all of the proceeds, net of solicitation commissions,
will be used to reduce the Company's bank debt.
The Company's total stockholders' equity as reflected on its balance sheet at
December 31, 1992, fell below the minimum capital and surplus requirements
necessary to maintain the listing of the Common Stock and Warrants on the Nasdaq
Small Cap Market. Consequently, the Common Stock and Warrants were delisted
from the Nasdaq system on April 23, 1993 and from the Boston Stock Exchange on
January 14, 1994. Because the Common Stock and Warrants have been delisted from
the Nasdaq Small Cap Market and the Boston Stock Exchange, holders of such
securities may encounter greater difficulty in selling them should they desire
to do so, and it may prove to be more difficult for the Company to raise future
capital to meet its obligations. The Company's securities are now trading on
the OTC Bulletin Board with approximately eight market makers. If the
redemption of the Warrants is successful in causing the exercise of
substantially all of the outstanding Warrants, the Company plans to seek re-
listing of its Common Stock for quotation over the Nasdaq Small Cap Market as
soon as it satisfies the financial qualification criteria for inclusion thereon,
which could occur after the 1996 year end. There can be no assurance at this
time, however, that the Company will qualify for listing on the Nasdaq Small Cap
Market at such time or at all.
All statements other than statements of historical facts, including, without
limitation, statements concerning the projected installations of Shoppers
Calculators(R) in the Supercenters and the anticipated dates of repayment of
certain indebtedness of the Company, are "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended. Although the
Company believes that such forward-looking statements are reasonable, such
statements are subject to various risks and uncertainties which could cause
actual results to differ from the Company's expectations, including, but not
limited to, general economic
-14-
<PAGE>
conditions and conditions affecting the mass merchandising industry in general
and Wal-Mart specifically, the availability of manufactured components and the
Company's ability to fund the costs thereof, and other factors which may affect
the Company's ability to comply with its obligations under the Wal-Mart
contract.
-15-
<PAGE>
PART II--OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit No. Description
----------- -----------
11 Statement re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarterly period ended
September 30, 1996.
II-1
<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.
ADDVANTAGE MEDIA GROUP, INC.
SIGNATURE TITLE DATE
- - --------- ----- ----
/s/ Charles H. Hood Director and President November 12, 1996
- - --------------------- (Principal Executive Officer)
Charles H. Hood
/s/ Gary W. Young Director, Executive Vice President - November 12, 1996
- - --------------------- Finance and Administration and
Gary W. Young Treasurer
(Principal Financial Officer)
II-2
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
----------- -----------
11 Statement re: Computation of Per
Share Earnings
27 Financial Data Schedule
<PAGE>
EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE
Nine Months Ended September 30, 1996
<TABLE>
<CAPTION>
Fully
Primary Diluted
---------------------------
<S> <C> <C>
Net income $ 950,636 $ 950,636
Less preferred stock dividends (78,146) (78,146)
---------------------------
Net income applicable to common stock $ 872,490 $ 872,490
Weighted average shares outstanding 4,996,021 4,996,021
Effect of options and warrants 804,918 804,918
---------------------------
Weighted average common and common
equivalent shares 5,800,939 5,800,939
===========================
Net income per common share $.15 $.15
===========================
<CAPTION>
Three Months ended September 30, 1996
<S> <C> <C>
Net income $ 683,157 $ 683,157
Less preferred stock dividends (22,900) (22,900)
---------------------------
Net income applicable to common stock $ 660,257 $ 660,257
Weighted average shares outstanding 5,094,652 5,094,652
Effect of options and warrants 750,865 754,930
---------------------------
Weighted average common and common
equivalent shares 5,845,517 5,849,582
===========================
Net income per common share $.11 $.11
===========================
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,138,479
<SECURITIES> 0
<RECEIVABLES> 12,096
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,375,635
<PP&E> 2,469,362
<DEPRECIATION> 431,650
<TOTAL-ASSETS> 7,049,436
<CURRENT-LIABILITIES> 5,136,554
<BONDS> 0
0
760,260
<COMMON> 51,382
<OTHER-SE> (690,985)
<TOTAL-LIABILITY-AND-EQUITY> 7,049,436
<SALES> 4,221,125
<TOTAL-REVENUES> 4,225,185
<CGS> 0
<TOTAL-COSTS> 2,293,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 398,511
<INCOME-PRETAX> 1,553,417
<INCOME-TAX> 582,781
<INCOME-CONTINUING> 950,636
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 950,636
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
