U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
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 number 0-19997
LASER VIDEO NETWORK, INC.
-------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 13-3557317
- ---------------------------------- ------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
645 Fifth Avenue - East Wing, New York, NY 10022
-------------------------------------------------------------------------
(Address of Principal Executive Offices)
(212) 888-0617
-------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
N/A
-------------------------------------------------------------------------
(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
--- ---
Number of shares of common stock outstanding as of June 11, 1996: 10,899,157
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
<PAGE>
LASER VIDEO NETWORK, INC.
BALANCE SHEET
April 30, 1996
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . $2,123,073
Accounts receivable. . . . . . . . . . . . . . . . . . . 650,788
Prepaid expenses. . . . . . . . . . . . . . . . . . . . . 66,220
Other current assets. . . . . . . . . . . . . . . . . . . 14,073
-------------
Total current assets. . . . . . . . . . . . . . . 2,854,154
Property and equipment, net . . . . . . . . . . . . . . . . 963,536
Other assets. . . . . . . . . . . . . . . . . . . . . . . . 8,280
-------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $3,825,970
=============
LIABILITIES
Current liabilities:
Accounts payable and accrued expenses. . . . . . . . . . $593,722
Dividends payable. . . . . . . . . . . . . . . . . . . . 50,823
-------------
Total current liabilities . . . . . . . . . . . . . . . 644,545
-------------
Redeemable preferred stock. . . . . . . . . . . . . . . . . 96,667
-------------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Capital stock:
Preferred stock - $.001 par; authorized
500,000 shares; none issued
Common stock - $.001 par; authorized 20,000,000 shares;
issued and outstanding 9,020,580 shares . . . . . . . . 9,021
Additional paid in capital . . . . . . . . . . . . . . . . . 13,644,018
Accumulated deficit. . . . . . . . . . . . . . . . . . . . .(10,568,281)
-------------
Total stockholders' equity. . . . . . . . . . . . 3,084,758
-------------
TOTAL . . . . . . . . . . . . . . . . . . . . . . $3,825,970
=============
The accompanying notes are an integral part of the financial statements.
<PAGE>
LASER VIDEO NETWORK, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
April 30, April 30,
-------------------------- ------------------------
1996 1995 1996 1995
------------ ------------ ------------ ----------
Sales. . . . . . . . . . . $828,250 $564,530 $1,119,213 $739,902
----------- ----------- ------------ ------------
Cost of sales. . . . . . . 307,954 290,286 677,370 591,063
Selling, general and
administrative. . . 688,590 757,607 1,355,353 1,355,135
Interest income . . . . . . (4,435) (29,875) (10,986) (41,562)
----------- ----------- ----------- -----------
992,109 1,018,018 2,021,737 1,904,636
----------- ----------- ----------- -----------
NET LOSS. . . . . . . . . .($163,859) ($453,488) ($902,524) $1,164,734)
=========== =========== =========== ===========
Loss per share . . . . . . ($0.03) ($0.08) ($0.15) ($0.21)
Weighted average
number of common
shares outstanding. . . . 6,119,785 5,839,665 6,044,335 5,524,932
The accompanying notes are an integral part of the financial statements.
<PAGE>
LASER VIDEO NETWORK, INC.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
April 30,
---------------------------------------------
1996 1995
---------------------- ---------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (902,524) $(1,164,734)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . .. 197,396 280,999
Issuance of common stock for services . . . . . . . . . . . . . . . . . . . 30,000
Changes in operating assets and liabilities:
Increase in accounts receivable . . . . . . . . . . . . . . . . . . . . . . . (7,130) (229,976)
Decrease in prepaid expenses and other current assets . . . . . . . . 39,521 16,503
Increase in other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,967)
Increase (decrease) in accounts payable and accrued expenses. . . . 196,771 (34,528)
------------ --------------
Net cash used in operating activities . . . . . . . . . . . . . . . . . . . (445,966) (1,144,703)
------------ -------------
Cash flows from investing activities:
Proceeds from sale of equipment . . . . . . . . . . . . . . . . . . . . . . . . . 22,125 13,100
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . (7,478) (125,469)
Proceeds of short-term investments . . . . . . . . . . . . . . . . . . . . . . . 750,000
Purchases of short-term investments . . . . . . . . . . . . . . . . . . . . . . . (496,143)
------------ -------------
Net cash provided by investing activities . . . . . . . . . . . . . . . . 14,647 141,488
------------ -------------
Cash flows from financing activities:
Proceeds from sale of common stock, net. . . . . . . . . . . . . . . . . . . . 1,761,968 1,793,564
Redemption of redeemable preferred stock . . . . . . . . . . . . . . . . . . . (4,720)
------------ -------------
Net cash provided by financing activities . . . . . . . . . . . . . . . . 1,761,968 1,788,844
------------ -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . 1,330,649 785,629
Cash - beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792,424 760,917
------------ -------------
CASH AND CASH EQUIVALENTS - END OF PERIOD. . . . . . . . . . $2,123,073 $1,546,546
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
LASER VIDEO NETWORK, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Item 310(b) of
Regulation S-B. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. These financial statements should be read in conjunction
with the Company's financial statements for the fiscal year ended October 31,
1995 included in the Annual Report as filed on Form 10-KSB with the United
States Securities and Exchange Commission.
In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
The results of operations for the six months ended April 30, 1996 are not
necessarily indicative of the results of operations for the full fiscal year
ending October 31, 1996.
NOTE (A) - The Company:
Laser Video Network, Inc. ("the Company") is an interactive multimedia
company in the business of developing, producing and marketing interactive
entertainment products. Currently, the Company is principally involved in the
production and placement of interactive entertainment systems in college dining
facilities. Substantially all of its revenues are derived from advertising
displayed on these entertainment systems at installed locations. At April 30,
1996, the Company had an installed base of approximately 200 entertainment
systems at various colleges and universities throughout the United States.
The Company's revenues are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its revenues during the period of September through May
and substantially less revenues during the summer months when colleges and
universities do not hold regular classes. Furthermore, management expects
minimal sales in the summer months of 1996 during the Company's installation of
new satellite transmission technology on its College Television Network.
Pursuant to a private placement offering ("Private Placement"), the Company
issued an aggregate of 3,035,716 and 1,878,577 shares of its Common Stock at
$.70 per share on April 26, 1996 and May 28, 1996, respectively. The offering
resulted in net proceeds of $1,761,968 and approximately $1,150,000,
respectively, after payment of placement expenses and agent commissions. Under
the Private Placement, warrants to purchase an additional 3,035,716 and
1,878,577 shares of its Common Stock were also issued on April 26,1996 and May
28, 1996, respectively. The warrants, which are exercisable at $1.29 per share,
will expire on April 26, 2001 and May 28, 2001, respectively. The Company has
agreed to register the shares of Common Stock issued and to be issued pursuant
to the Private Placement in the near future.
<PAGE>
NOTE (A) - The Company: (Continued)
Management intends to use the proceeds to finance, in part, the Company's
installation of new satellite transmission technology on its College Television
Network as well as provide the Company with additional working capital for
operations. Management believes that the aggregate net proceeds received and
funds expected to be generated from operations will provide the Company with
sufficient working capital to sustain operations through at least the fiscal
year ending October 31, 1996. Additional financing may be needed for the Company
to continue to expand into additional college dining facilities.
NOTE (B) - Contingencies:
In connection with the acquisition of certain assets, the Company agreed to
pay two former shareholders of the seller an aggregate of $100,000, one-half
being payable at such time the Company's net pre-tax income equals at least
$500,000, and the balance being payable at such time as the Company has an
additional $500,000 in net pre-tax earnings.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the Company's financial statements appearing elsewhere in this report.
RESULTS OF OPERATION
The Company is an interactive multimedia company whose principal activities
involve operating and marketing the College Television Network ("CTN"), a
private commercial television network. At April 30, 1996, the Company had an
installed base of approximately 200 entertainment systems at various colleges
and universities throughout the United States. Substantially all of its revenues
are derived from advertising displayed on CTN.
The Company's sales are affected by the pattern of seasonality common to
most school-related businesses. Historically, the Company generates a
significant portion of its sales during September through May and substantially
less during the summer months when colleges and universities do not hold regular
sessions.
The following table sets forth certain financial data derived from the
Company's statement of operations for the three and six months ended April 30,
1996 and April 30, 1995:
Three Months Ended
------------------
April 30, 1996 April 30, 1995
--------------------- -----------------
% of % of
$ Sales $ Sales
---------- -------- ---------- -----
Sales . . . . . . . . . . . . $828,250 100% $564,530 100%
Cost of sales . . . . . . . . 307,954 37 290,286 51
Selling, general and
administrative 688,590 83 757,607 134
Interest income . . . . . . . 4,435 1 29,875 5
Net loss . . . . . . . . . . 163,859 20 453,488 80
Six Months Ended
----------------
April 30, 1996 April 30, 1995
--------------------- -----------------
% of % of
$ Sales $ Sales
---------- -------- ---------- -----
Sales . . . . . . . . . . . . $1,119,213 100% $739,902 100%
Cost of sales . . . . . . . . 677,370 61 591,063 80
Selling, general and
administrative 1,355,353 121 1,355,135 183
Interest income . . . . . . . 10,986 1 41,562 6
Net loss . . . . . . . . . . 902,524 81 1,164,734 157
<PAGE>
Sales increased to $828,250 and $1,119,213 for the three and six-month
periods ended April 30, 1996, respectively, versus $564,530 and $739,902 for the
comparable periods last year. These increases were attributable to a combination
of increased advertising by existing customers, adding new customers and
increased advertising rates. Management expects minimal sales during the summer
months of 1996 due to the Company's installation of new satellite transmission
technology on CTN, however sales are anticipated to increase overall for the
fiscal year ending October 31, 1996 ("Fiscal 1996"). Although the Company has
agreements with national advertisers and has held discussions or had prior
agreements with other national advertisers, no assurance can be given that these
or other advertisers will continue to purchase advertising from the Company, or
that future significant advertising revenues will ever be generated. A failure
to significantly increase advertising revenues could have a material impact on
the operations of the Company.
The cost of sales increased to $307,954 and $677,370 for the three and
six-month periods ended April 30, 1996, respectively, from $290,286 and $591,063
for the comparable periods last year. These increases relate primarily to costs
associated with the preparation for the anticipated conversion of CTN to a
satellite delivered network during the summer of 1996.
Selling, general and administrative expenses decreased to $688,590 for the
three-month period ended April 30, 1996, as compared to $757,607 for the same
period last year. Such decrease occurred even though there were increased
advertising agency fees. Such fees, which are directly related to increased
sales, were more than offset by reductions in professional and consulting fees
during the current quarter. Selling, general and administrative expenses for the
six-month period ended April 30, 1996 remained relatively constant at
$1,355,353, versus $1,355,135 last year. The decrease in professional and
consulting fees offset the increased advertising agency fees associated with the
increased sales.
Interest income decreased to $4,435 and $10,986 for the three and six-month
periods ended April 30, 1996, respectively, as compared to $29,875 and $41,562
for the comparable periods last year. The decrease is attributable to lower
average cash levels during the first half of Fiscal 1996.
The net loss decreased to $163,859 and $902,524 for the three and six-month
periods ended April 30, 1996, down from $453,488 and $1,164,734 for the
comparable periods last year. The Company has incurred substantial losses since
commencement of its operations and anticipates that such losses will continue
through Fiscal 1996. In order to reach the stage where the Company is
profitable, the Company will need to continue to expand into additional college
dining facilities. Furthermore, additional financing may be required to produce
the additional systems necessary to reach profitable operating levels.
FINANCIAL CONDITION AND LIQUIDITY
At April 30, 1996, the Company had working capital of $2,209,609. At such
date, the Company's cash and cash equivalents totaled $2,123,073.
Cash used in operations decreased to $445,966 during the six months ended
April 30, 1996 from $1,144,703 for the comparable period last year. The decrease
is related to reduced losses, an increase in cash receipts from outstanding
receivables and an increase in accounts payable during the current six-month
period.
Production of new systems during the first half of Fiscal 1996 was delayed
in anticipation of CTN converting to a satellite-delivered network during the
summer of 1996. As a result, the Company sold equipment no longer needed for the
satellite network, at cost, and such sales exceeded property
<PAGE>
and equipment purchased for the six months ended April 30, 1996 by $14,647. Net
purchases of property and equipment for the same period in the prior year was
$112,369. In January 1996, the Company contracted with IBM to provide hardware
and services required to upgrade to a satellite-delivered network, as well as
continued maintenance of the equipment. IBM will also provide financing of
equipment and installation services, contingent upon a letter of credit to
secure a portion of the loan balance outstanding.
Pursuant to the Private Placement, on April 26, 1996 and May 28, 1996, the
Company issued 3,035,716 shares and 1,878,577 shares of its Common Stock,
respectively. The issuances resulted in net proceeds of $1,761,968 and
approximately $1,150,000, respectively, after payment of placement expenses and
agent commissions.
Management intends to use the proceeds to finance, in part, the Company's
installation of new satellite transmission technology on its College Television
Network as well as provide the Company with additional working capital for
operations. Management believes that the aggregate net proceeds received and
funds expected to be generated from operations will provide the Company with
sufficient working capital to sustain operations through at least the fiscal
year ending October 31, 1996. Additional financing may be needed for the Company
to continue to expand into additional college dining facilities required to
reach profitable operating levels.
In the event the Company does not achieve anticipated revenue levels and/or
obtain additional financing, the Company expects to reduce its operating
expenses by, among other actions, downsizing its personnel and reducing its
marketing, promotional and product development costs in an effort to reduce cash
requirements. Reduction of operating expenses alone is not expected to assure
profitability.
<PAGE>
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security-Holders.
(a) Annual meeting held on March 20, 1996
(b) Not applicable
(c) Matters Voted Upon
(1) Election of Directors:
(i) Peter Kauff For: 5,193,540; Withheld: 83,919
(ii) Thom Kidrin For: 5,193,540; Withheld: 83,919
(iii) Stephen Roberts For: 5,193,540; Withheld: 83,919
(iv) Edward McLaughlin For: 5,193,540; Withheld: 83,919
(2) Approving the Company's Outside Directors' 1996 Stock Option Plan
For: 2,468,717; Against: 324,381; Abstaining: 43,763;
Broker nonvotes: 2,440,598
(3) Approving the Company's 1996 Stock Incentive Plan
For: 2,456,422; Against: 331,531; Abstaining: 48,988;
Broker nonvotes: 2,440,518
(4) Appointment of Richard A. Eisner & Company as independent auditor
For: 5,134,062; Against: 114,959; Abstaining: 28,438
(d) Not applicable
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) A report on Form 8-K filed on March 5, 1996 disclosed the
resignation of Salah Hassanein and Ken Kai, two directors of the
Company. No other reports on Form 8-K have been filed for the quarter
for which this report is being filed.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LASER VIDEO NETWORK, INC.
Registrant
Date: June 14, 1996 /s/ Peter L. Kauff
------------------
Peter L. Kauff
Chairman of the Board
(Principal Executive Officer)
Date: June 14, 1996 /s/ Alan M. Pearl
-----------------
Alan M. Pearl
Chief Financial Officer and
Treasurer (Principal Accounting
and Financial Officer)
