SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[ X ] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
for the Quarterly Period Ended June 30, 1999
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 (323) 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 July 31, 1999 was 7,585,010 shares of Common Stock, $.0001
par value.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Table of Contents
Page
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements 3
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about Market Risk 11
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
<PAGE>
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Audited) (Unaudited)
December 31 June 30
1998 1999
---------------- ----------------
<S> <C> <C>
Assets
Current assets $ 6,654,235 $ 6,758,893
Net property and equipment 13,219,739 13,876,738
Other assets 352,325 539,562
---------------- ----------------
Total Assets $ 20,226,299 $ 21,175,193
================ ================
Liabilities and Stockholders' Equity
Current liabilities $ 3,885,523 $ 4,213,316
Notes payable to bank and long-term debt, less current installments 7,628,588 7,673,037
Stockholders' equity:
Common stock, $.0001 par value. Authorized 25,000,000 shares; issued
and outstanding 7,222,575 shares at December 31, 1998 and 7,519,559
at June 30, 1999. 722 752
Additional paid-in capital 19,792,737 19,828,237
Accumulated deficit (11,081,271) (10,540,149)
---------------- ----------------
Net stockholders' equity 8,712,188 9,288,840
---------------- ----------------
Total Liabilities and Stockholders' Equity $ 20,226,299 $ 21,175,193
================ ================
</TABLE>
See accompanying notes to the condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------------- --------------------------------
1998 1999 1998 1999
-------------- ---------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues $ 6,576,480 5,594,118 $ 14,628,331 13,535,727
Operating costs
Direct costs 4,609,903 4,212,592 9,690,041 8,935,238
Depreciation and amortization 1,076,258 713,511 1,923,806 1,407,554
-------------- ---------------- -------------- -------------
5,686,161 4,926,103 11,613,847 10,342,792
-------------- ---------------- -------------- -------------
Gross profit 890,319 668,015 3,014,484 3,192,935
Selling, general and administrative
and other expenses 1,309,546 1,054,051 2,510,887 2,111,928
-------------- ---------------- -------------- -------------
Income (loss) from operations (419,227) (386,036) 503,597 1,081,007
Gain on sale of subsidiary, net of applicable taxes 874,578 --- 874,578 ---
Interest expense 352,431 282,730 729,753 583,014
Other Income 6,242 34,353 16,036 57,829
-------------- ---------------- -------------- -------------
Income before income taxes 109,162 (634,413) 664,458 555,822
Provision for (benefit from) income taxes 54,544 (20,200) 54,544 14,700
============== ================ ============== =============
Net income (loss) $ 54,618 (614,213) $ 609,914 541,122
============== ================ ============== =============
Net Income (loss) Per Share
Basic Net Income $ 0.01 (0.08) $ 0.09 0.07
-------------- ---------------- -------------- -------------
Diluted Net Income $ 0.01 (0.08) $ 0.08 0.07
-------------- ---------------- -------------- -------------
Weighted average shares outstanding (basic) 7,147,539 7,414,670 7,137,855 7,344,705
============== ================ ============== =============
Weighted average shares outstanding (diluted) 7,627,385 7,414,670 7,408,888 7,779,488
============== ================ ============== =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months ended June 30
------------------------------------
1998 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 609,914 $ 541,122
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,563,860 1,407,554
Gain on sale of subsidiary (874,578) ---
Gain on sale of property and equipment (46,957) (2,500)
Provision for doubtful accounts receivable 115,742 134,678
Other 810 76
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable 1,723,997 1,580,793
Inventory 27,937 (7,545)
Prepaid expenses and other current assets (28,251) 38,214
Other assets 75,476 (187,237)
Increase (decrease) in:
Accounts payable and accrued expenses 285,633 (12,805)
=============== ===============
Net cash provided by operating activities 3,453,583 3,492,350
=============== ===============
Cash flows from investing activities:
Purchases of property and equipment (1,454,204) (2,064,553)
Net proceeds from disposal of property and equipment 46,957 2,500
Net effect of sale of subsidiary 3,402,091 ---
--------------- ---------------
Net cash (used in) provided by investing activities 1,994,844 (2,062,053)
=============== ===============
Cash flows from financing activities :
Net (repayment) proceeds of notes payable to bank and long- term debt (3,351,252) 385,047
(Repayment) of notes payable to related parties (900,000) ---
Proceeds from issuance of common stock 6,534 35,530
=============== ===============
Net cash (used in) provided by financing activities (4,244,718) 420,577
=============== ===============
Net increase in cash 1,203,709 1,850,874
Cash at beginning of period 367,363 1,159,206
--------------- ---------------
Cash at end of period 1,571,072 3,010,080
=============== ===============
Supplementary disclosure of cash flow information:
Cash paid during the period for interest $ 729,753 $ 583,014
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
Notes to Condensed Financial Statements
(Unaudited)
(1) Basis of Presentation
In the opinion of management, the accompanying unaudited condensed
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 June 30, 1999 and
December 31, 1998; the results of operations for the three and six month periods
ended June 30, 1998 and 1999; and the statements of cash flows for the six month
periods ended June 30, 1998 and 1999. Included in the Condensed Consolidated
Financial Statements is the activity of the Company's consolidated subsidiary,
Pacific Video Canada, Ltd. ("PVC"). On May 15, 1998 the Company sold all of its
investment in PVC. Accordingly, revenue and expense of PVC through May 15, 1998
is included in the results of operations for the three and six month periods
ended June 30, 1998. 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 because 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.
In accordance with the regulations 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 per Share
Net income per basic and diluted shares are based upon the weighted average
number of common shares outstanding. Diluted shares outstanding represents the
total of common shares outstanding as well as those options and warrants where
the exercise price was below the average closing stock price, unless considered
anti-dilutive, during the three and six month periods ended June 30 1999.
(3) Income Taxes
For the six months ended June 30, 1999, federal income tax expense of
$11,000 and state income tax expense of $3,700 was recognized after the
application of net operating loss carry forwards. Income tax expense for the six
months ended June 30, 1999 was computed using the estimated effective tax rate
to apply for all of 1999 after considering the impact of net operating loss
carry forwards.
<PAGE>
LASER-PACIFIC MEDIA CORPORATION
Notes to Condensed Consolidated Financial Statements (continued)
(Unaudited)
(4) Income per Share (EPS)
Basic EPS is computed as net earnings divided by the weighted-average
number of common shares outstanding for the period. Diluted EPS reflects the
potential dilution that could occur from common shares issuable through
stock-based compensation plans including stock options, restricted stock awards,
warrants and other convertible securities using the treasury stock method. The
following summarizes the computation of Basic EPS and Diluted EPS:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Three Months ended Six Months ended
6/30/98 6/30/99 6/30/98 6/30/99
Net Income (Loss) $ 54,618 (614,213) $ 609,914 541,122
Shares:
Weighted Average Common Shares 7,147,539 7,414,670 7,137,855 7,344,705
Dilutive Stock Options and Warrants 479,846 --- 271,033 434,783
Dilutive Potential Common Shares 7,627,385 7,414,670 7,408,888 7,779,448
Earnings Per Share:
Basic $ 0.01 (0.08) $ 0.09 0.07
Diluted $ 0.01 (0.08) $ 0.08 0.07
</TABLE>
(5) Sale of Pacific Video Canada Ltd. (PVC)
On May 15, 1998 the Company sold all of its investment in PVC to Command
Post and Transfer Corporation. The Company realized cash consideration of
$3,810,000 and a gain on sale of $875,000, net of applicable taxes.
The statement of operations of PVC presented below reflects the amounts
attributable to PVC, which are included in the condensed consolidated financial
statements of the Company, as of the three and six month periods ended June 30,
1998.
PACIFIC VIDEO CANADA, Ltd.
Condensed Statement of Operations
<TABLE>
<CAPTION>
<S> <C> <C>
3 Months ended 6 Months ended
June 30, 1998 June 30, 1998
--------------------------- ------------------------
Sales $ 1,645,067 $ 2,894,972
Direct expenses 1,172,840 2,079,822
--------------------------- ------------------------
Gross Profit 472,228 815,151
SG&A expenses 333,146 606,257
--------------------------- ------------------------
Earnings from Operations 139,081 208,893
Interest and Other expenses 36,628 71,166
--------------------------- ------------------------
Earnings before income taxes 102,453 137,727
Income taxes 38,318 54,544
=========================== ========================
Net earnings $ 64,135 $ 83,183
=========================== ========================
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
On May 15, 1998 the Company sold all of it's investment in Pacific Video
Canada Ltd. (PVC) to Command Post and Transfer Corporation. The Company realized
cash consideration of $3,830,000 and recognized a net gain on sale of $875,000.
The proceeds were used to reduce outstanding debt and to provide working
capital.
The condensed consolidated statement of operations of Laser Pacific Media
Corporation for the three and six month periods ended June 30, 1998 include
amounts attributable to PVC and also the gain recognized on the sale. In
comparing the results for three and six month periods ended June 30, 1998 to the
same periods ended June 30, 1999 material amounts attributable to PVC are
presented, followed by a comparison of our U.S. operations for the periods,
excluding the contribution of PVC. Revenues for the six months ended June 30,
1999 decreased to $13,536,000 from $14,628,000 for the same year-ago period, a
decrease of $1,092,000 or 7.5%. Revenues from International Operations decreased
$2,895,000 as a result of the sale of our Canadian subsidiary Pacific Video
Canada Ltd (PVC) on May 15, 1998. All of Laser Pacific's International
Operations are attributable to PVC.
Revenues for six months ended June 30, 1999 at the Company's U.S.
facilities increased $1,803,000, or 15.4% versus the year-ago period. The
increase in revenues at U.S. facilities is comprised of an increase of
$1,833,000 in Post Production Services, an increase of $61,000 in Film
Production Services and a decrease of $91,000 in Production Services. The
Company's Production Services Business has declined over the last four years and
is no longer material to the Company's sales or operating profits. The increase
in revenues at the U.S. facilities from Post Production Services is attributable
to increased demand for the Company's services with significant increases in
Digital Compression Services including Digital Versatile, Disc Feature Film
Mastering and High Definition Services. The increase in revenues from Digital
Compression Services, Film Mastering and High Definition Services amounted to
$1,273,000 for the period, an increase of 107.3% over the previous year-ago
period.
Revenues for the quarter ended June 30, 1999 decreased to $5,594,000 from
$6,576,000 for the same year-ago period, a decrease of $982,000 or 14.9%.
Revenues from International Operations decreased $1,645,000 as a result of the
sale of the Company's Canadian subsidiary Pacific Video Canada Ltd (PVC) on May
15, 1998. All of Laser Pacific's International Operations are attributable to
PVC. Revenues for three months ended June 30, 1999 at the Company's U.S.
facilities increased $663,000, or 13.4% versus the year-ago period. The increase
in revenues at the Company's U.S. facilities is comprised of an increase of
$780,000 in Post Production Services, a decrease of $63,000 in Film Production
Services and a decrease of $54,000 in Production Services. The Company's
Production Services Business has declined over the last four years and is no
longer material to the Company's sales or operating profits. The increase in
revenues at the U.S. Facilities from Post Production Services is attributable to
increased demand for the Company's services with significant increases in
Digital Compression Services including Digital Versatile Disc, Feature Film
Mastering and High Definition Services. The increase in revenues from Digital
Compression Services, Film Mastering and High Definition Services amounted to
$608,000 for the period an increase of 81.8% over the previous year-ago period.
For the six months ended June 30, 1999, the Company recorded a gross profit
of $3,193,000 compared with $3,014,000 for the same year ago period, an increase
of $179,000 or 5.9%. The overall increase in gross profit was offset by a
decline in gross profit from International Operations which is the result of the
sale of PVC. The gross profit for the six months ended June 30, 1999 at the
Company's U.S. facilities increased $994,000 or 45.2% versus the year-ago
period, while gross profit from Canada decreased $815,000 versus the year-ago
period. The increase in gross profit at U.S. facilities is the result of
increased sales volume, discussed above, offset by increased operating costs,
explained below.
For the quarter ended June 30, 1999 the Company recorded a gross profit of
$668,000 compared to a gross profit of $890,000 for the same year ago period, a
decrease of $222,000 or 25.0%. The decrease in gross profit is the result of the
decline in gross profit of $472,000 from International Operations, which is the
result of the sale of PVC. The gross profit for the three months ended June 30,
1999 at the Company's U.S. facilities increased $250,000 or 59.8% versus the
year-ago period. The increase in gross profit at U.S. facilities is the result
of increased sales volume, discussed above, offset by increased operating costs,
explained below.
<PAGE>
Operating costs for the six months ended June 30, 1999 were $10,343,000
versus $11,614,000 for the year-ago period, a decrease of $1,271,000 or 10.9%.
There was an increase in operating costs at the Company's U.S. facilities of
$809,000 or 8.5% versus the year-ago period. The increase at our U.S. facilities
was offset by a decline in operating costs of $2,080,000 from International
Operations, which is the result of the sale PVC. The operating costs from the
Company's U.S. operations increased in most categories as a result of the
increase in sales volume. The most significant increase being labor costs which
increased $860,000. Higher labor costs were brought about by an increased number
of employees and more hours worked. The additional labor costs were incurred as
a result of increased sales and the expansion of the Company's facilities. These
increases were partially offset by a reduction in depreciation expense from U.S.
Operations of $156,000. Operating costs from U.S. Operations, as a percentage of
revenues of the Company's U.S. Operations for the six months ended June 30, 1999
were 76.4% compared with 81.3% for the same year-ago period.
Operating costs for the quarter ended June 30, 1999 were $4,926,000 versus
$5,686,000 for the year-ago period, a decrease of $760,000 or 13.4%. There was
an increase in operating costs at the Company's U.S. facilities of $413,000 or
9.2% versus the year-ago period. The increase at the Company's U.S. facilities
was offset by a decline in operating costs of $1,173,000 from International
Operations, which is the result of the sale of PVC. The most significant
increase in operating costs from the Company's U.S. operations was labor costs
which increased $361,000. Higher labor costs were brought about by an increased
number of employees and more hours worked. The additional labor costs were
incurred as a result of increased demand for services and the expansion of our
facilities. Operating costs, as a percentage of revenues of the Company's U.S.
Operations for the three months ended June 30, 1999 were 88.1% compared with
91.5% for the same year-ago period.
Depreciation expense for the six months ended June 30, 1999 was $1,408,000
compared to $1,924,000 for the same year-ago period, a decrease of $516,000 or
26.8%. The depreciation expense reduction was primarily the result of the sale
of PVC discussed above. Depreciation expense for PVC for the six months ended
June 30, 1998 was $360,000.
Depreciation expense for the quarter ended June 30, 1999 was $714,000
compared to $1,076,000 for the same year-ago period, a decrease of $362,000 or
33.7%. The depreciation expense reduction was primarily the result of the sale
of PVC discussed above.
Selling, general and administrative (S G & A), and other expenses for the
six months ended June 30, 1999 were $2,112,000 as compared to $2,511,000 during
the same year-ago period, an decrease of $399,000 or 15.9%. There was an
increase in SG&A of $207,000 at the Company's U.S. facilities while SG&A for the
Company's International Operations decreased $606,000 as the result of the sale
of PVC discussed above. The most significant increase in SG&A in the U.S. was
advertising and promotion expense, which was partially offset by a reduction in
professional fees and insurance expense.
SG&A and other expenses for the three months ended June 30, 1999 were
$1,054,000 as compared to $1,310,000 during the same year-ago period, a decrease
of $256,000 or 19.5%. There was an increase in SG&A of $77,000 at our U.S.
facilities while SG&A for our International Operations decreased $333,000 as the
result of the sale of PVC discussed above. . The most significant increase in
SG&A in the U.S. was advertising and promotion expense, which was partially
offset by a reduction of expenses in other categories.
Interest expense for the six months ended June 30, 1999 was $583,000
compared to $730,000 for the same year-ago period, a decrease of $147,000 or
20.1%. The decrease in interest expense is the result of lower borrowing,
reduced rates in the U.S. and the elimination of PVC discussed above. Interest
expense decreased $73,000 in the U.S. Total U.S. debt was reduced significantly
after May 15, 1998 with the proceeds from the sale of PVC.
Interest expense for the quarter ended June 30, 1999 was $283,000 compared
to $352,000 for the same year-ago period, a decrease of $69,000 or 19.8%. The
decrease in interest expense is the result of lower borrowing, reduced rates in
the U.S. and the elimination of PVC discussed above. Interest expense decreased
$32,000 in the U.S. Total U.S. debt was reduced significantly after May 15, 1998
with the proceeds from the sale of PVC.
<PAGE>
Liquidity and Capital Resources
Improved operating results and the sale of Pacific Video Canada had a very
positive effect on the liquidity and capital resources of the company. The
improved operating results and the cash generated enabled the company to reduce
debt, borrow at better terms and increase availability under existing loan
agreements.
The Company and its subsidiaries are operating under a loan agreement with
The CIT Group/Credit Finance which has been amended and extended to August 3,
2001. The maximum credit under the agreement is $9 million. The amended loan
agreement provides for borrowings of up to $5.4 million under the term loan
(limited to 100% of eligible equipment appraisal value) and $3.6 million under
the revolving loan (limited to 85% of eligible accounts receivable). The
outstanding balance of the term loan was $2,998,000 at June 30, 1999. It is
payable in monthly installments of $81,000 plus interest at prime plus 1.0%
through August 3, 2003. Principal payments are not required in June, July or
August. The revolving loan bears interest at prime plus 1.0% which is payable
monthly. The revolving loan had an outstanding balance of $23,000 at June 30,
1999. The loan agreement contains automatic renewal provisions for successive
terms of two years thereafter unless terminated as of August 3, 2001 or as of
the end of any renewal term by either party by giving the other party at least
60 day written notice.
The Company has entered into commitments with various equipment
manufacturers and distributors to acquire additional equipment as a result of
the increasing demand for the Company's services. The commitments made by the
Company to acquire the equipment may exceed $7,000,000 for the fiscal year ended
December 31, 1999. Projected cash flow and available borrowings under existing
credit arrangements are adequate to fund the purchases.
The Company's principal source of funds is cash generated by operations. On
an annual basis, the Company anticipates that existing cash balances,
availability under existing loan agreements and cash generated from operations
will be sufficient to service existing debt and to meet the Company's capital
requirements for fiscal 1999. Management is of the opinion that the Company will
be able to meet its obligations on a timely basis. There is no assurance that
management's plan will be achieved.
Seasonality and Variation of Quarterly Results
The Company's business is subject to substantial quarterly variations as a
result of seasonality, which the Company believes is typical of the television
post-production industry. Historically, revenues and net income have been
highest during the first and fourth quarters, when the production of television
programs and consequently the demand for the Company's services is at its
highest. Revenues have been substantially lower during the second and third
quarters, when the Company historically has incurred operating losses.
Year 2000
State of Readiness
The Company is aware of what could be a critical problem with older
computer systems. The critical problem refers to computers that designate the
year as a two-digit number and thus may recognize the year 2000 as the year
1900. The Company has created a task force to ascertain its Year 2000
compliance. The task force is lead by the Senior Vice President of Engineering.
The Company uses a wide variety of microprocessor based equipment, which
runs software on numerous computer platforms. The Company is in the process of
determining the potential impact of the century date change by conducting an
inventory of computerized equipment and testing all of the Company's systems for
compliance. The Company is also contacting third party vendors regarding their
Year 2000 compliance. Testing of internal systems is complete on approximately
90% of both information technology systems and non-information technology
systems. No significant Year 2000 issues have been revealed. The Company
anticipates that the remaining systems testing will be completed in 1999.
<PAGE>
Cost to Address the Company's Year 2000 Issues
When systems are identified that are not Year 2000 compliant the Company
contracts with vendors to obtain updates, which will ensure compliance, and in a
limited number of instances the systems are replaced. Some older equipment will
need to be reset after January 01, 2000 but should function properly thereafter.
The cost to remedy Year 2000 compliance to date has not been material and is
being funded out of operating cash flow. The Company estimates that any future
remedial costs will not be material and should not exceed $100,000.
The Company's Risk
The failure to correct a material Year 2000 problem could result in an
interruption or failure of certain normal business activities or operations.
Such failures could materially and adversely affect the Company's results of
operations, liquidity and financial condition. To date, the only conditions that
the Company has determined that may result in the Company's inability to provide
services to our clients, and consequently, a loss of revenue, would be a loss of
service to the Company by regulated public utility companies. The Company cannot
assess the likelihood of this occurrence. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the uncertainty of the
Year 2000-readiness of third-party suppliers, the Company is unable to determine
at this time whether the consequences of Year 2000 failures will have a material
impact on the Company's results of operations, liquidity or financial condition.
The Company believes its continuing actions will significantly reduce the
Company's level of uncertainty about the Year 2000 problem and in particular
about Year 2000 Compliance. The Company believes that the completion of Year
2000 testing will reduce the possibility of significant interruptions of normal
operations.
Contingency Plans
The Company will test new products for Year 2000 compliance. To the extent
the Company has not been able to determine third party vendor compliance, plans
for alternative backup suppliers are being established and the Company plans to
acquire an additional supply of critical parts to reduce the chance of a loss of
services. The first week of January is traditionally a period of very low demand
for the Company's services. The Company plans to have appropriate technical
staff monitor operations on and after January 1 and take necessary action to
provide services to our customers. The Company will continue to refine its
contingency plans throughout the remainder of 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Derivative Instruments. The Company does not invest, and during the quarter
ended June 30, 1999 did not invest, in market risk sensitive instruments.
Market Risk. The Company's market risk exposure with respect to financial
instruments is to changes in the "prime rate" in the United States. The Company
had borrowings of $2,998,000 at June 30, 1999 under a term loan (discussed
below) and may borrow up to $3.6 million under a revolving loan. Amounts
outstanding under the term loan and revolving credit facility bear interest at
the bank's prime rate plus 1%.
Forward looking statements and comments in this document relating to, among
other things, the prospects for the Company to achieve growth in sales, the
ability to reduce overhead, ability to achieve positive operating results,
obtain financing and to resolve Year 2000 computer problems, are necessarily
subject to risks and uncertainties. These risks and uncertainties are
significant in scope and nature, including risks related to competition,
continuation of sales levels and in particular the risks related to the cost and
availability of capital.
<PAGE>
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's Annual Meeting of Shareholders held on July 16, 1999, the
following individuals were elected to the Board of Directors with each such
individual receiving 5,816,489 votes in favor of his election to the Board of
Directors, while 4,050 votes were withheld.
Emory M. Cohen
Thomas Gordon
James R. Parks
Ronald Zimmerman
A proposed Amendment to add 500,000 options to the Company's Incentive and
Non-Qualified Stock Option Plan (1997) was also approved.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits 10.2A Amendment Number 1 to Incentive and Non-Qualified Stock
Option Plan (1997), dated July 19, 1999.
(b) Reports on Form 8-K None.
<PAGE>
Signatures
LASER-PACIFIC MEDIA CORPORATION
(Registrant)
Dated: August 11, 1999 /s/James R. Parks
James R. Parks
Chairman of the Board
and Chief Executive Officer
Dated: August 11, 1999 /s/Robert McClain
Robert McClain
Secretary and
Chief Financial Officer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
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</LEGEND>
<CURRENCY> US DOLLARS
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AMENDMENT NO. 1 TO
LASER-PACIFIC MEDIA CORPORATION
INCENTIVE AND NON-QUALIFIED STOCK OPTION PLAN (1997)
This Amendment No. 1 (this "Amendment") to Laser Pacific Media Corporation
Incentive and Non-Qualified Stock Option Plan (1997) (the "Plan") is made as of
July 19, 1999.
WHEREAS, the Board of Directors of Laser-Pacific Media Corporation, a Delaware
corporation (the "Company") approved amending the Plan in April 1999, subject to
the approval of the stockholders of the Company, to increase the aggregate
number of shares that may be sold pursuant to options granted under the Plan by
500,000;
WHEREAS, the stockholders of the Company approved amending the Plan to increase
the aggregate number of shares that may be sold pursuant to options granted
under the Plan by 500,000 on July 16, 1999 at the annual meeting of the
Company's stockholders ;
NOW, THEREFORE, the Plan is amended as follows:
1. Amendment of Section 3.
Section 3 of the Plan is hereby amended by deleting Section 3 in its
entirety and substituting in lieu thereof the following:
Subject to the provisions of Section 6 relating to adjustments upon changes in
stock, the aggregate number of shares that may be sold pursuant to options
granted under the Plan shall not exceed, in the aggregate, One Million
(1,000,000) Company Shares. If any option granted under the Plan shall for any
reason expire, be canceled, or otherwise terminate without having been exercised
in full, the stock not purchased under such option shall again become available
for issuance pursuant to the Plan.
IN WITNESS WHEREOF, the Company has executed this Amendment on this 19 day of
July, 1999.
LASER-PACIFIC MEDIA CORPORATION
By:_________________________________
Name: James R. Parks
Title: Chairman of the Board and
Chief Executive Officer
