SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period 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 0-19407
LASER-PACIFIC MEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-3824617
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
809 N. Cahuenga Blvd.
Hollywood, California 90038
(213) 462-6266
(Address, including zip code and telephone number, including area code of
principal executive offices)
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 outstanding of each of the registrant's classes of common
stock, as of May 1, 1996 was 7,068,172 shares of Common Stock, $.0001 par value.
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LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Table of Contents
Page
----
Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements 1
Condensed Consolidated Balance Sheets 1
Condensed Consolidated Statements of Operations 2
Condensed Consolidated Statements of Cash Flows 3
Notes to Condensed Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Part II - Other Information
Item 4. Submission of Matters to a Vote of Securityholders 6
Item 6. Exhibits and Reports on Form 8-K 6
Signatures 7
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LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets (Unaudited)
December March 31,
31,
1995 1996
----------- ------------
Assets
Current assets $9,312,212 $5,645,046
Net property and equipment 18,260,971 16,975,282
Other assets 599,036 668,947
=========== ============
$28,172,219 $23,289,275
=========== ============
Liabilities and Stockholders' Equity
Current liabilities $11,411,304 $7,467,225
Notes payable to bank and long-term debt,
less current installments 7,892,905 6,923,242
Deferred revenue 160,123 160,123
Minority interest in consolidated subsidiary 1,249,559 1,156,182
Stockholders' equity:
Common stock, $.0001 par value. Authorized
25,000,000 shares; issued and outstanding
6,568,172 shares at December 31, 1995
and 7,068,172 shares atMarch 31, 1996 respectively 657 707
Additional paid-in capital 19,258,746 19,633,696
Accumulated deficit (11,801,075) (12,051,900)
----------- ------------
Net stockholders' equity 7,458,328 7,582,503
=========== ============
$28,172,219 $23,289,275
=========== ============
See accompanying notes to condensed consolidated financial statements.
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LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
Three Months Ended
March 31,
------------------------
---------- -----------
1995 1996
Sales revenues
$8,350,719 $7,522,904
Operating costs
6,061,852 6,157,017
---------- -----------
Gross profit 2,288,867 1,365,887
Selling, general and administrative
and other expenses 1,435,028 1,304,496
---------- -----------
Income from operations 853,839 61,391
Interest expense 469,037 396,768
Other income (122,314) (84,551)
Income taxes 18,000 ---
========== ===========
Net income (loss)
$489,116 ($250,826)
========== ===========
Net income (loss) per common and
common equivalent shares $.07 ($.04)
---------- -----------
Weighted average common and common
equivalent shares outstanding 6,568,172 7,068,172
========== ===========
See accompanying notes to condensed consolidated financial statements.
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<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
Three Months Ended
March 31,
---------------------------
------------ -------------
1995 1996
Cash flows from operating activities
Net income (loss)
$489,117 ($250,826)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 1,312,395 1,276,549
Write-off of obsolete property and
equipment --- 198,093
Provision for doubtful accounts receivable 54,141 91,840
Other 71,203 (93,377)
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 334,703 3,129,615
Inventory 60,068 (616)
Prepaid expenses and other current assets 89,103 (69,469)
Other assets 123,621 (69,911)
Increase (decrease) in:
Accounts payable and accrued expenses (767,896) (2,697,559)
Accrued severance (117,953) ---
Deferred revenue (10,668) ---
------------ -------------
Net cash provided by operating activities 1,637,834 1,514,339
------------ -------------
Cash flows from investing activities:
Purchases of property and equipment (333,979) (188,953)
------------ -------------
Net cash used by investing activities (333,979) (188,953)
------------ -------------
Cash flows from financing activities :
Proceeds borrowed under notes payable to bank
and long-term debt 88,712 ---
Repayment of notes payable to bank and
long-term debt (1,022,598) (2,267,971)
Proceeds from issuance of common stock -- 426,789
------------ -------------
Net cash used by financing activities (934,246) (1,841,182)
------------ -------------
Net increase (decrease) in cash 369,609 (515,796)
Cash at beginning of period 284,118 812,989
------------ -------------
Cash at end of period $ 653,727 297,193
============ =============
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 512,562 $ 393,495
============ =============
See accompanying notes to condensed consolidated financial statements.
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LASER-PACIFIC MEDIA CORPORATION
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of normal
recurring items) necessary to present fairly the financial position of
Laser-Pacific Media Corporation ("the Company") and its subsidiaries as of March
31, 1996 and December 31, 1995, the consolidated results of operations for the
three month periods ended March 31, 1995 and 1996, and the consolidated
statements of cash flows for the three month periods ended March 31, 1995 and
1996. The Company's business is subject to the prime time television industry's
typical seasonality. Historically, revenues and income from operations have been
highest during the first and fourth quarters, when production of television
programs and demand for the Company's services is at its highest. The net income
or loss of any interim quarter is seasonally disproportionate to revenues since
selling, general and administrative expenses and certain operating expenses
remain relatively constant during the year. Therefore, interim results are not
indicative of results to be expected for the entire fiscal year.
The 1995 financial data has been reclassified to conform with the current
year's presentation.
In accordance with the directives of the Securities and Exchange
Commission under Rule 10-01 of Regulation S-X, the accompanying consolidated
financial statements and footnotes have been condensed and do not contain
certain information included in the Company's annual consolidated financial
statements and notes thereto.
(2) Income (Loss) per Share
Net income (loss) per common and common equivalent shares are based upon
the weighted average number of common and common equivalent shares outstanding.
The outstanding stock options, warrants and convertible notes have not been
included in the calculations as their effect would not be material or would be
anti-dilutive.
(3) Income Taxes
The Company did not provide for income taxes for the quarter ending March
31, 1996 due to the operating losses incurred and estimates of the effective tax
rate for the full fiscal year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Company revenues during the quarter ended March 31, 1996 were $7,523,000
compared with $8,351,000, for the same year-ago period, a decrease of $828,000
or 9.9%. The decrease in revenue is comprised of a decrease of $96,000 in
Production Services, a decrease in Film Production Services of $151,000 and a
decrease of $581,000 in Post Production Service. The decline in revenues is a
consequence of lower levels of activity at our United States facilities where
revenues went down $741,000 which represented a drop of 10.4% versus the prior
year period . This lower level of US revenues was primarily caused by increased
competition. The revenues from International operations decreased $87,000 or
7.0%.
For the quarter ended March 31, 1996 the Company recorded a gross profit
of $1,366,000 compared to $2,289,000 for the same year-ago period. Operating
costs for the quarter ended March 31, 1996 were $6,157,000 versus $6,062,000 for
the year ago period, an increase of $95,000 or 1.6%. Operating costs, as a
percentage of revenues for the quarter ended March 31, 1996 were 81.9% compared
with 72.6% for the year ago period.
Selling, general and administrative (S, G & A), and other expenses for the
quarter ended March 31, 1996 were $1,304,000 as compared to $1,435,000 during
the same year-ago period, a decrease of $131,000 or 9.1%.
Interest expense for the three months ended March 31, 1996 was $397,000
compared to $469,000 for the same year-ago period, a reduction of $72,000 or
15.4%.
Liquidity and Capital Resources
The Company and its subsidiaries are operating under a loan
agreement with The CIT Group/Credit Finance with a maturity date of August 3,
1997. The maximum credit under the agreement is $9 million. The amended loan
agreement provides for borrowings up to $5.4 million under the term loan
(limited to 80% of eligible equipment appraisal value) and $3.6 million under
the revolving loan (limited to 80% of eligible accounts receivable) and at April
19, 1995, $245,000 was available. The term loan ($3.4 million at March 31, 1996)
is payable in monthly installments of $132,000 plus interest at prime plus 2%
through July 1, 1997. The revolving loan ($1.6 million at December 31, 1995)
bears interest at prime plus 2% which is payable monthly. The loan contains
automatic renewal provisions for successive terms of two years thereafter unless
terminated as of August 3, 1997 or as of the end of any renewal term by either
party by giving the other party at least 60 day written notice. The loans are
secured by substantially all assets of the Company and its subsidiaries and
guaranteed by certain stockholders.
The Company has outstanding borrowings at March 31, 1996 of $200,000 with
the Bank of California. The loan is secured by certain real property and Pacific
Video Canada stock, payable in monthly installments of $50,000 plus interest at
prime plus 3% through August 1996. The loan agreement contains restrictive
covenants, including limits with respect to capital expenditures and termination
of real property leases, written consent prior to issuance of warrants and
stock, and that the Company provide written notice to the bank of the occurrence
of default. The Company was not in technical compliance with the above mentioned
covenants, however, those defaults are not of a material nature and the Company
anticipates paying the loan off with monthly installments through August 1996.
The real estate loan secured by the building where the Company provides
film processing and sound services came due in May 1994. On February 29, 1996
the Company concluded an agreement with Bank of America, the existing lender, to
extend the maturity date of the loan until December 31, 1998 with an option to
extend the maturity an additional year upon payment to the Bank of America a
$25,000 loan extension fee prior to December 31, 1998. The Company made a
$320,000 principal reduction payment to the Bank of America on February 29, 1996
as a condition to extending the loan maturity date, reducing the principal
balance to $1.8 million.
In connection with the restructuring in 1993, certain facilities under
non-cancelable leases were vacated. The lease agreements expire through December
2000 and provide for unpaid and future lease payments aggregating $4 million at
December 31, 1995. As of January 12, 1996 the Company settled all outstanding
obligations associated with the termination of its lease of its New York
facility in 1995. The Company made a cash payment of $1,000,000 and issued
500,000 of Laser-Pacific's common stock.
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<PAGE>
The Company's principal source of funds is cash generated by operations. On
an annual basis, the Company anticipates that existing cash balances and
availability under existing loan agreements and cash generated from operations
will be sufficient to service existing debt. Due to seasonal variations the
Company anticipates a cash shortfall in the second quarter of 1996. Management
believes that existing lenders will provide additional funding to cover cash
requirements. To fund expenditures relating to the upgrading of the Company's
plant and equipment the Company will seek additional financing from new sources
and/or restructure current debt with existing lenders.
Item 1. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the first
quarter of 1996.
Item 6. Exhibits and Reports on Form 8-K
No reports on From 8-K were filed during the first quarter covered by this
report.
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<PAGE>
Signatures
LASER-PACIFIC MEDIA CORPORATION
(Registrant)
Dated: May 14, 1996 /s/James R. Parks
-----------------
James R. Parks
Chairman of the Board
and Chief Executive Officer
Dated: May 14, 1996 /s/Robert McClain
-----------------
Robert McClain
Secretary and
Chief Financial Officer
(Principal Financial and Accounting Officer)
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