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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
[ ] TRANSITION REPORT PURSUANT OR TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period _____________ to _____________
Commission File Number: 1-10916
INTERVISUAL BOOKS, INC.
(Exact name of registrant as specified in its charter)
California 95-2929217
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2716 Ocean Park Boulevard, Suite 2020
Santa Monica, California 90405
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (310) 396-8708
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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes [ ] No [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practical date. As of June 30, 1999, there were 5,885,115 shares of common stock
outstanding.
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INTERVISUAL BOOKS, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
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<S> <C>
Item 1. Financial Statements
Balance Sheets - June 30, 1999, and December 31, 1998 1
Statements of Operations - Three and Six months ended
June 30, 1999 and 1998 2
Statements of Cash Flows - Six months ended June 30,
1999 and 1998 3
Notes to Financial Statements - June 30, 1999 4
Item 2. Management's Discussion and Analysis of Financial Condition 6
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures about Market Risk 9
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Uses of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K 10
SIGNATURES 11
</TABLE>
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INTERVISUAL BOOKS, INC.
BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
(unaudited)
ASSETS 6/30/99 12/31/98
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 156 $ 1,561
Accounts receivable, less allowances
of $160 and $175 4,659 2,246
Inventories 2,049 1,634
Prepaid expenses 103 159
Commission & royalty advances 499 352
Income taxes receivable 117 117
Other current assets 186 206
-------- --------
Total current assets 7,769 6,275
Production costs, net of accumulated
amortization of $16,250 and $15,721 3,545 3,427
Goodwill 1,589 --
Acquisition costs 343 83
Other assets 13 --
Property and equipment, net of accumulated
depreciation of $1,596 and $952 319 187
Deferred income taxes 513 443
-------- --------
$ 14,091 $ 10,415
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable 5,720 3,131
Line of credit 855 1,700
Accrued royalties 166 282
Accrued expenses 245 226
Customer deposits 211 68
-------- --------
Total current liabilities 7,197 5,407
Long term debt 2,000 --
Other liabilities-long term 209 85
TOTAL LIABILITIES 9,406 5,492
-------- --------
Stockholders' Equity:
Common stock, no par value; shares
authorized 10,000,000, shares issued and
outstanding 5,885,115 at June 30, 1999
and 5,164,531 at December 31, 1998 5,290 4,731
Additional paid in capital 355 330
Retained deficit (960) (138)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 4,685 4,923
-------- --------
$ 14,091 $ 10,415
======== ========
</TABLE>
See accompanying notes to financial statements.
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INTERVISUAL BOOKS, INC.
STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales $ 3,758 $ 3,579 $ 5,277 $ 4,737
Rights income 190 51 193 203
------- ------- ------- -------
Total revenues 3,948 3,630 5,470 4,940
Cost of sales 3,112 2,861 4,182 3,752
------- ------- ------- -------
Gross profit 836 769 1,288 1,188
Selling, general and administrative expenses 1,213 1,233 2,079 2,298
------- ------- ------- -------
Loss from operations (377) (464) (791) (1,110)
Interest expense (62) (3) (101) (3)
------- ------- ------- -------
Loss before income taxes (439) (467) (892) (1,113)
Income tax benefit -- (121) (70) (303)
------- ------- ------- -------
Net loss (439) (346) (822) (810)
======= ======= ======= =======
Loss per common share
Basic $ (0.08) (0.07) (0.15) (0.16)
======= ======= ======= =======
Diluted $ (0.08) (0.07) (0.15) (0.16)
======= ======= ======= =======
Weighted average number of common shares and equivalents outstanding:
Basic 5,546 5,092 5,378 5,071
======= ======= ======= =======
Diluted 5,546 5,092 5,378 5,071
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
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INTERVISUAL BOOKS, INC.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
(In thousands)
<TABLE>
<CAPTION>
(Unaudited) Six Months Ended June 30,
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net loss $ (822) $ (810)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 588 410
Provision for losses on accounts receivable -- 16
Provision for abandoned titles 15 11
Deferred income taxes (70) --
Stock-based compensation expense 25 --
Increase (decrease) from changes in:
Accounts receivable (496) 1,747
Inventories (415) (433)
Prepaid expenses 95 (416)
Royalty advances 60 (73)
Other assets 20 --
Accounts payable (513) (1,753)
Accrued royalties (155) (47)
Accrued expenses (74) (72)
Income taxes payable -- (130)
Customer deposits 143 58
Other liabilities (25) --
------- -------
Net cash used in operating activities (1,624) (1,492)
------- -------
Cash flows from investing activities:
Additions to property and equipment (2) (29)
Additions to leasehold improvements -- (5)
Additions to production costs (594) (717)
Additions to acquisition costs (260) --
------- -------
Net cash used in investing activities (856) (751)
------- -------
Cash flows from financing activities:
Cash acquired in acquisition 305 --
Proceeds from exercise of options 70 69
Proceeds from subordinated line of credit 2,000 --
Proceeds from bank line of credit -- 250
Repayment on bank line of credit (1,300) --
------- -------
Net cash provided by financing activities 1,075 319
------- -------
Net decrease in cash and cash equivalents (1,405) (1,924)
Cash and cash equivalents, beginning of period 1,561 2,383
------- -------
Cash and cash equivalents, end of period $ 156 $ 459
======= =======
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Income taxes $ 1 $ 153
Interest expense 101 3
</TABLE>
See accompanying notes to financial statements.
3
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NOTES TO FINANCIAL STATEMENTS
June 30, 1999
(unaudited)
Note 1 - Statement of Information Furnished
In the opinion of management the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position as of June 30, 1999, and the
results of operations for the three and six month periods ended June 30, 1999,
and cash flows for the six month period ended June 30, 1999 and 1998. These
results have been determined on the basis of generally accepted accounting
principles and practices applied consistently with those used in the preparation
of the Company's Annual Report on Form 10-K for the fiscal year ended December
31, 1998.
The results of operations for the three and six month period ended June 30,
1999, are not necessarily indicative of the results to be expected for any other
period or for the entire year.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying financial statements should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.
Note 2 - Loss Per Common Share
The Company computes loss per common share under SFAS No. 128, "Earnings Per
Share," which requires presentation of basic and diluted earnings (loss) per
share. Basic earnings (loss) per common share is computed by dividing income or
loss available to common shareholders by the weighted average number of common
shares outstanding for the reporting period. Diluted earnings (loss) per common
share reflects the potential dilution that could occur if securities or other
contracts, such as stock options, to issue common stock were exercised or
converted into common stock. Common stock options for the three and six months
ended June 30, 1999 and 1998 were not included in the computation of diluted
loss per common share because the effect would be antidilutive.
Note 3 - Fast Forward Marketing Acquisition
On May 14, 1999, the Company completed the acquisition of Fast Forward
Marketing, Inc., (Fast Forward). The transaction was completed under the terms
and conditions of a definitive agreement signed March 29, 1999. Under this
agreement, the Company acquired all the outstanding shares of Fast Forward for
670,000 shares of its common stock, a contingent cash payment of up to $200,000
due May 1, 2000, and a cash payment of $150,000 due May 1, 2001 subject to
reduction for the payment by the Company of certain tax withholdings. The
contingent cash payment of up to $200,000 or a lesser prorated amount is due if
Fast Forward achieves between 70% and 90% of its 1999 projected gross margin,
provided a minimum gross margin requirement is met. Of the 670,000 shares issued
594,940 are restricted for three years so that no more than 10% can be sold in
any one year. The
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remaining 75,060 shares were issued to certain employees under a pre-existing
Fast Forward Phantom Stock Plan. The transferability of these shares is
restricted for the period the employee remains with the Company or three years
whichever is less. In connection with the acquisition of Fast Forward, The Hunt
Family Trust agreed to vote its shares in favor of the election to the Company's
Board of Directors of Steven Ades and a second nominee, mutually acceptable to
the Company and Mr. Ades, for as long as Mr. Ades is employed by the Company.
This transaction has been accounted for as a purchase. On May 14, 1999, the
Company issued shares valued at $489,000 and a contingent cash payment of
$150,000 in exchange for the net book value of Fast Forward of ($957,000). This
resulted in goodwill of $1,596,000 which is being amortized over the estimated
useful life of 20 years.
Note 4 - Lines of Credit
The Company signed an agreement on May 12, 1999 with its bank that provides for
borrowings up to a maximum of $2,000,000 depending on availability. This
agreement which expires on May 1, 2000 has an interest rate of 2.5% over prime.
The Company also on May 12, 1999 signed a loan agreement with a private party
that provides a revolving line of credit of up to $2,300,000. This agreement is
for one year and has an interest rate of 5% above the 3-month LIBOR rate. At the
Company's option, this agreement can be extended for an additional year under
the same terms and conditions. If the Company decides to extend this line of
credit, the agreement requires that warrants for up to 150,000 shares of the
Company's common stock be issued. These warrants are exercisable for up to
two years after the issue date at a price equal to the average trading price of
the Company's stock for the 20 day period prior to the Company's notice to
extend the loan agreement. The Company expects to extend this loan for an
additional year and has reclassified the related debt at June 30, 1999 to long
term debt. In both credit agreements, the Company makes affirmative and negative
covenants and the agreement with the Company's bank contains certain financial
covenants. As of June 30, 1999, the Company was in compliance with all financial
covenants. In connection with both agreements, the Company granted to the
lenders a security interest in all of its assets. As of June 30, 1999, the
Company had borrowings of $855,000 under its bank line of credit and $2,000,000
of borrowings under its revolving line of credit.
Note 5 - Accounts Receivable and Payable
Fast Forward has an agreement with its customers and suppliers that allows for
returns of merchandise. Accordingly, a reserve for accounts receivable and
payable has been provided. The reserve accounts require the use of significant
estimates. Fast Forward believes the techniques and assumptions used in
establishing the reserve accounts are appropriate. At June 30, 1999, Fast
Forward recorded a reserve for accounts receivable of $198,000 and a reserve for
accounts payable for $141,000.
5
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
GENERAL
Intervisual Books, Inc. (the "Company") creates and produces interactive and
three-dimensional books designed for children and adults. These products include
picture books, playsets, board books and gift books. The Company's books
incorporate dimensional and moveable features which require hand-assembly in the
manufacturing process. Some titles require the incorporation of such materials
as plush, plastic novelty elements and electronic audio chips into the finished
books.
The majority of the Company's concepts and ideas for projects are generated
internally by the in house creative and editorial departments. Additional ideas
and concepts are conceived by the illustrators and designers with whom the
Company has been associated for many years. After the Company conceives an idea
and makes a dummy book, key US an UK publishers are consulted to determine if
they are interested in publishing and marketing the book. If an agreement is
reached, the Company and the publisher sign a co-publishing contract which
stipulates that the publisher will purchase the title with exclusive rights to
sell books in the English language to the book trade for generally a two to four
year period.
The Company also self-publishes titles and offers the books directly to
retailers. The recent acquisition of Fast Forward Marketing, Inc. (see Note 3
and discussion below) brings to the Company a trained sales force which will
enhance the Company's ability to sell and service retailers. The Company also
distributes video and audio products for major motion picture studios, including
Walt Disney, Warner Bros., Universal, Paramount, 20th Century Fox, and many
independent producers through Fast Forward Marketing, Inc., a leading
independent sales organization. Since its founding in 1987, Fast Forward
Marketing, Inc. has built an account base of more than 4,000 retailers,
including national chains such as Toys R Us, Blockbuster, Target, Borders,
Musicland and Best Buy, as well as specialty retailers such as Zany Brainy,
Store of Knowledge, Noodle Kidoodle, Gymboree, Books A Million and other
children's bookstores, gift shops, museums, zoos and Internet retailers such as
E-Toys. The Company also markets its products to retailers using the services of
Andrews McMeel, a leading US publisher/distributor located in Kansas City.
Andrews McMeel handles sales, collection, billing, warehousing and order
fulfillment functions.
The market for packaged books has gone through recent changes which has made it
more difficult for the Company to generate co-editions. In the past five years,
there has been a consolidation trend in the US publishing industry that has
reduced the number of the Company's customers. Many of the surviving children's
imprints are still consolidating which is having a negative impact on the size
and frequency of their orders. This trend has been a major factor in the
Company's decision to self-publish. The Company's self-publishing program is
gaining consumer acceptance, indicating its interactive books and playsets are
still in demand.
The Company does not engage in any of its own printing, binding, hand assembly,
or manufacturing. These services are contracted for with independent printers in
Colombia, Singapore, Hong Kong and Thailand. The Company supplies its printers
with artwork, color-separated materials and complete sample materials to serve
as guides for hand-assembly.
6
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On May 14, 1999, the Company completed the acquisition of Fast Forward
Marketing, Inc., (Fast Forward). The transaction was completed under the terms
and conditions of a definitive agreement signed March 29, 1999. Under this
agreement, the Company acquired all the outstanding shares of Fast Forward for
670,000 shares of its common stock, a contingent cash payment of up to $200,000
due May 1, 2000, and a cash payment of $150,000 due May 1, 2001 subject to
reduction for the payment by the Company of certain tax withholdings. The
contingent cash payment of up to $200,000 or a lesser prorated amount is due if
Fast Forward Marketing achieves between 70% and 90% of its 1999 projected gross
margin, provided a minimum gross margin requirement is met. Of the 670,000
shares issued 594,940 are restricted for three years so that no more than
10% can be sold in any one year. The remaining 75,060 shares were issued to
certain employees under a pre-existing Fast Forward Phantom Stock Plan. The
transferability of these shares is restricted for the period the employee
remains with the Company or three years whichever is less. In connection with
the acquisition of Fast Forward, The Hunt Family Trust agreed to vote its shares
in favor of the election to the Company's Board of Directors of Steven Ades and
a second nominee, mutually acceptable to the Company and Mr. Ades, as long as
Mr. Ades is employed by the Company. This transaction was accounted for as a
purchase. On May 14, 1999, the Company issued shares valued at $489,000 and a
contingent cash payment of $150,000 in exchange for the net book value of Fast
Forward Marketing of ($957,000). This resulted in goodwill of $1,596,000 which
is being amortized over the estimated useful life of 20 years.
RESULTS OF OPERATIONS
Net sales for the three and six month periods ended June 30, 1999 were
$3,758,000 and $5,277,000, respectively, as compared to $3,579,000 and
$4,737,000 for the comparable periods of the preceding year. Sales were up
$179,000 and $540,000, respectively, for the three and six month periods ended
June 30, 1999 as compared to the prior year. Domestic sales of book products
were flat for the quarter and six month periods, while foreign sales were down
$851,000 and $503,000, respectively. This decrease in foreign sales can be
primarily attributed to the effect of a strong US dollar in the latter part of
1998 against currencies of major international countries, especially UK, Germany
and Japan. Additionally, the Asian economic crisis has affected sales to our
customers in Japan. Included in the quarterly and six month figures was
$1,025,000 of video sales from the newly acquired Fast Forward Marketing.
Rights income for the three and six month periods of 1999 were $190,000 and
$193,000, respectively, as compared to $51,000 and $203,000 for the same periods
of the prior year. This income is primarily derived from the Company's sale of
worldwide direct marketing rights on some of its products. These sales do not
require that the Company manufacture, and, therefore, have no related cost.
Gross profit margin for the three and six month periods ended June 30, 1999 was
21.2% and 23.5%, respectively, as compared to 21.2% and 24.0% for the same
periods of the prior year. Cost of sales consists primarily of manufacturing,
book development amortization and royalties.
Selling, general and administrative expenses for the three and six month periods
ended June 30, 1999 were $1,213,000 and $2,079,000, respectively, as compared to
$1,233,000 and $2,298,000, respectively, for the comparable periods of the prior
year. Included in the three and six month periods of 1999 was $297,000 of
overhead expenses from Fast Forward Marketing which was not in last year's
figures. Personnel expenses, a major component of S G & A, were $671,000 and
$1,109,000 for the three and six month periods ended June 30, 1999, as compared
to $617,000 and $1,179,000 for the same periods of 1998, a decrease of $70,000
for the six month period. This decrease can be attributed primarily to salary
and staff reductions and the expiration of a consulting agreement totalling
$306,000 offset by the
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inclusion of $236,000 in salary related expenses from Fast Forward Marketing.
Selling expenses were $338,000 and $501,000 for the three and six month periods
ended June 30, 1999, as compared to $369,000 and $592,000 for the same periods
of 1998, a decrease of $91,000 for the six month period. This decrease is
primarily related to lower distribution costs relating to the Company's
self-publishing efforts and lower travel and show expenses, partially offset by
increased expenses relating to the addition of a UK sales person. The Company's
administrative expenses were $204,000 and $469,000 for the three and six month
periods ended June 30, 1999, as compared to $247,000 and $527,000 for the same
periods of 1998, a decrease of $58,000 for the six month period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased by $1,405,000 to $156,000 at
June 30, 1999 from $1,561,000 at December 31, 1998. At June 30, 1999, working
capital was $572,000 compared to $868,000 at December 31, 1998. The primary use
of cash during the six months ended June 30, 1999 was from operations.
Net cash used in operations was $1,624,000 for the six months ended June 30,
1999 as compared to $1,492,000 for the corresponding period of the previous
year. The $132,000 change in cash from operations for the first six months of
1999 was primarily attributable to increases in net operating loss, accounts
receivable, inventories and accounts payable. Net cash used in investing
activities amounted to $856,000 as compared $751,000 during the same period in
1998. This increase in cash used is primarily from costs incurred resulting from
the acquisition of Fast Forward Marketing in May of 1999. Net cash provided by
financing activities was $1,075,000 in 1999 as compared to $319,000 for the same
period in 1998. This increase in cash provided is primarily from borrowing on
the Company's line of credit from a private party offset by the Company's
repayment of obligations to its bank.
The Company signed an agreement on May 12, 1999 with its bank that provides for
borrowings up to a maximum of $2,000,000 depending on availability. This
agreement which expires on May 1, 2000 has an interest rate of 2.5% over prime.
The Company also on May 12, 1999 signed a loan agreement with a private party
that provides a revolving line of credit of up to $2,300,000. This agreement is
for one year and has an interest rate of 5% above the 3-month LIBOR rate. At the
Company's option, this agreement can be extended for an additional year under
the same terms and conditions. If the Company decides to extend this line of
credit, the agreement requires that warrants for up to 150,000 shares of the
Company's common stock be issued. These warrants are exercisable for up to two
years after the issue date at a price equal to the average trading price of the
Company's stock for the 20 day period prior to the Company's notice to extend
the loan agreement. The Company expects to extend this loan for an additional
year and has reclassified the related debt at June 30, 1999 to long term debt.
In both credit agreements, the Company makes affirmative and negative covenants
and the agreement with the Company's bank contains certain financial covenants.
As of June 30, 1999, the Company was in compliance with all financial covenants.
In connection with both agreements, the Company granted to the lenders a
security interest in all of its assets. As of June 30, 1999, the Company had
borrowings of $855,000 under its bank line of credit and $2,000,000 of
borrowings under its revolving line of credit.
As of August 1, 1999, the Company did not have any commitments for any material
capital expenditures for 1999 or beyond. Management of the Company believes that
the existing levels of funds and its ability to borrow on its lines of credit,
combined with the Company's ability to generate cash, are
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adequate to finance current and expected levels of activity as well as
anticipated capital expenditures of the Company for at least the next twelve
months.
YEAR 2000 MODIFICATIONS
The Company has reviewed its computer systems to evaluate the extent to which
modifications are necessary to insure year 2000 compliance. The Company has
upgraded its accounting software for year 2000 compliance, as well as other
software programs. Remaining computer upgrades or modifications are expected to
be completed by August 31, 1999. The total expenditures to date have been
minimal, and additional expenditures needed to complete the process are not
expected to exceed $20,000. Given the nature of the Company's products, the
Company believes that its products do not pose year 2000 compliance issues. As
with virtually all companies, the Company relies to some degree, directly and
indirectly, on external computer systems utilized by the Company's suppliers,
and the Company is reviewing the impact that any failure by these third parties
to resolve their year 2000 problems might have on the business of the Company.
This Report on Form 10-Q contains forward-looking statements and includes
assumptions concerning the Company's operations, future results and prospects.
These forward-looking statements are based on current expectations and are
subject to a number of risks, uncertainties and other factors. In connection
with the Private Securities Litigation Reform Act of 1995, the Company provides
the following cautionary statements identifying important factors which, among
other things, could cause the actual results and events to differ materially
from those set forth in or implied by the forward-looking statements and related
assumptions contained in this Section and in this entire Report. Such factors
include, but are not limited to: product demand and market acceptance risks; the
effect of economic conditions; the impact of competitive products and pricing;
changes in foreign exchange rates; product development and commercialization
difficulties; capacity and supply constraints or difficulties; availability of
capital resources; general business and economic conditions; and changes in
government laws and regulations, including taxes.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
All sales by the Company are denominated in US dollars and, accordingly, the
Company does not enter into hedging transactions with regard to any foreign
currencies. Currency fluctuations can, however, increase the price of the
Company's products to its foreign customers which can adversely impact the level
of the Company's export sales from time to time. The majority of the Company's
cash equivalents are bank accounts and money markets, and the Company does not
believe it has significant market risk exposure with regard to its investments.
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PART II - OTHER INFORMATION
Item 2. Changes in Securities and Uses of Proceeds
Sales of Unregistered Securities
During the second quarter of 1999, the Company acquired all the outstanding
shares of Fast Forward Marketing, Inc. pursuant to a definitive agreement signed
March 14, 1999. The purchase price paid by the Company was 670,000 shares of
common stock, $150,000 in cash due May 1, 2001, and a cash contingent payment of
$200,000 or a lesser prorated amount due May 1, 2000. This contingent payment is
subject to Fast Forward making at least 70% to 90% of its 1999 projected gross
margin and will be prorated based upon results between these percentages. Of the
670,000 shares, 594,940 were issued to Fast Forward Marketing's founder and CEO.
These shares are restricted for three years so that no more than 10% can be sold
in any one year. The remaining 75,060 were issued to certain employees of Fast
Forward who were members of a pre-existing Fast Forward Phantom Stock Plan.
These shares are restricted for the shorter of three years or the term of the
employee's employment with the Company. There were no underwriters or other
purchasers used or related to this transaction.
The above-referenced securities were issued in reliance on the private offering
exemption set forth in Section 4(2) of the Securities Act of 1993, as amended,
on the basis that they were issued under circumstances not involving a public
offering.
Item 6. Exhibits and Reports on Form 8-K
(a ) Exhibits required by Item 601 of Regulation S-K
27. Financial Data Schedule
(b) Reports on Form 8-K
Item 6(b).
The Company filed with the Commission a Form 8-K dated May 26, 1999 on May 27,
1999 reporting under Item 2 the acquisition of Fast Forward Marketing, Inc. and
under Item 5 the execution of a line of credit with Santa Monica Bank and a
revolving line of credit with a private party. The Company filed with the
Commission a Form 8-K/A dated July 23, 1999 containing the following financial
statements;
Audited balance sheet of Fast Forward Marketing, Inc. at December 31, 1998 and
1997 and statement of operations and cash flows for the years ended December 31,
1998 and 1997, and the related Independent Auditors' Report.
Unaudited balance sheet of Fast Forward Marketing, Inc. at March 31, 1999 and
statement of operations and cash flows for the three months ended March 31, 1999
and 1998.
Unaudited proforma balance sheet of Intervisual Books, Inc. as of March 31, 1999
and the unaudited proforma statement of operations for the year ended December
31, 1998 and the three months ended March 31, 1999 reflecting the acquisition
of Fast Forward Marketing, Inc.
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SIGNATURE
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.
INTERVISUAL BOOKS, INC.
BY: /s/ Nathan N. Sheinman
----------------------------------
Nathan N. Sheinman, President
Chief Operating Officer
BY: /s/ Dan P. Reavis
----------------------------------
Dan P. Reavis
Executive Vice President
Chief Financial Officer
Date: August 16, 1999
11
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S BALANCE SHEET AS OF JUNE 30, 1999, AND STATEMENTS OF OPERATIONS FOR
THE SIX MONTHS ENDED JUNE 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS REPORTED ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 156
<SECURITIES> 0
<RECEIVABLES> 4,820
<ALLOWANCES> (160)
<INVENTORY> 103
<CURRENT-ASSETS> 7,769
<PP&E> 1,915
<DEPRECIATION> (1,596)
<TOTAL-ASSETS> 14,091
<CURRENT-LIABILITIES> 7,197
<BONDS> 0
0
0
<COMMON> 5,290
<OTHER-SE> (605)
<TOTAL-LIABILITY-AND-EQUITY> 14,091
<SALES> 5,277
<TOTAL-REVENUES> 5,470
<CGS> 4,182
<TOTAL-COSTS> 4,182
<OTHER-EXPENSES> 2,079
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> (892)
<INCOME-TAX> (70)
<INCOME-CONTINUING> (822)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (822)
<EPS-BASIC> (.15)
<EPS-DILUTED> (.15)
</TABLE>
