<PAGE>
UNITED STATES
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: December 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: 0-23364
Mecklermedia Corporation
------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1385519
- --------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
20 Ketchum Street
Westport, Connecticut 06880
- ------------------------------------------- --------------------------------
(Address of principal executive offices) (Zip Code)
(203) 226-6967
---------------
(Registrant's telephone number, including area code)
Not Applicable
--------------
(Former name, former address and former fiscal year, if changed
since last report)
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 outstanding shares the registrant's common stock, par value $.01
per share, as of December 31, 1996, was 8,492,909.
<PAGE>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
INDEX
-----
Page
----
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - December 31, 1996
and September 30, 1996 3-4
Consolidated Statements of Operations - Three Months
Ended December 31, 1996 and 1995 5
Consolidated Statements of Cash Flows - Three Months
Ended December 31, 1996 and 1995 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
PART II. Other Information 11
Signatures 12
EXHIBIT 11. STATEMENT REGARDING COMPUTATION OF
PER SHARE EARNINGS (LOSS) 13
EXHIBIT 27. FINANCIAL DATA SCHEDULE 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
----------------------------------------
(Dollars in thousands, except per share amounts)
------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
-------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $22,077 $19,859
Accounts receivable, less
allowances of $955 and $647,
respectively 11,229 7,327
Current note receivable 213 213
Income taxes receivable 6 6
Inventory 665 511
Prepaid trade show expenses 1,890 2,265
Prepaid expenses and other 511 578
-------------- ---------------
Total current assets 36,591 30,759
LONG-TERM NOTE RECEIVABLE, net of
amortized discount of $24 and $32,
respectively 213 205
DEFERRED PROMOTION COSTS, NET OF
ACCUMULATED AMORTIZATION 365 481
OTHER ASSETS 26 33
PROPERTY AND EQUIPMENT:
Leasehold improvements 308 297
Furniture, fixtures and equipment 772 517
Computer equipment 1,810 1,497
-------------- ---------------
2,890 2,311
Less: Accumulated depreciation
and amortization (794) (652)
-------------- ---------------
2,096 1,659
INTANGIBLE ASSETS, net of accumulated
amortization of $357 and $193,
respectively 2,725 1,449
-------------- ---------------
Total assets $42,016 $34,586
============== ===============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
3
<PAGE>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
DECEMBER 31, 1996 AND SEPTEMBER 30, 1996
----------------------------------------
(Dollars in thousands, except share and per share amounts)
----------------------------------------------------------
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
------------------ ------------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,240 $ 2,876
Accrued expenses 7,260 2,237
Current income taxes payable 156 75
Deferred magazine revenue 2,745 2,586
Deferred trade show revenue 11,708 12,138
------------------ ------------------
Total current liabilities 25,109 19,912
DEFERRED MAGAZINE REVENUE - LONG-TERM 382 281
------------------ ------------------
Total liabilities 25,491 20,193
COMMITMENTS - -
STOCKHOLDERS' EQUITY:
Preferred stock ($.01 par value,
1,000,000 shares authorized,
no shares issued and outstanding) - -
Common stock ($.01 par value,
35,000,000 shares authorized,
8,492,909 and 8,479,243
shares issued and outstanding
at December 31, 1996 and
September 30, 1996, respectively 85 85
Additional paid-in capital 23,532 23,348
Accumulated deficit (6,965) (9,050)
Foreign currency translation
adjustment (127) 10
------------------ ------------------
Total stockholders' equity 16,525 14,393
------------------ ------------------
Total liabilities and
stockholders' equity $42,016 $34,586
================== ===================
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
4
<PAGE>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
---------------------------------------------
(UNAUDITED)
-----------
(Dollars in thousands, except per share amounts)
------------------------------------------------
<TABLE>
<CAPTION>
Three Months
Ended
December 31
------------------
1996 1995
--------- -------
REVENUES:
<S> <C> <C>
Magazines and newspaper $ 5,528 $ 3,024
Trade shows 11,197 3,835
Other 761 309
--------- -------
17,486 7,168
--------- -------
COST OF SALES AND DIRECT COSTS:
Magazines and newspaper 3,080 2,127
Trade shows 6,270 2,388
Other 425 87
--------- -------
9,775 4,602
--------- -------
Gross profit after cost of sales and 7,711 2,566
direct costs
OPERATING EXPENSES:
Advertising, promotion and selling 3,588 2,060
General and administrative 2,195 1,448
--------- -------
Operating income (loss) 1,928 (942)
--------- -------
Interest income, net 272 272
--------- -------
Income (loss) before income taxes 2,200 (670)
Provision for income taxes 116 18
--------- -------
Net income (loss) $ 2,084 ($688)
========= =======
Income (loss) per share $.24 ($0.08)
========= =======
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
5
<PAGE>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
THREE MONTHS ENDED DECEMBER 31, 1996 AND 1995
---------------------------------------------
(UNAUDITED)
-----------
(Dollars in thousands, except per share amounts)
------------------------------------------------
<TABLE>
<CAPTION>
Three Three
Months Ended Months Ended
December 31, December 31,
1996 1995
------------------- ------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $2,084 ($688)
Adjustments to reconcile net cash used in operations-
Depreciation and amortization 306 109
Accretion of interest income on note receivable (8) (12)
Changes in assets and liabilities -
(Increase) in accounts receivable (3,902) (725)
(Increase) decrease in inventory (154) 167
Decrease in prepaid trade show expenses 375 197
Decrease (increase) in deferred promotion costs 116 (3)
Decrease (increase) in prepaid expenses and other 74 (55)
Increase (decrease) in accounts payable and accrued expenses 5,387 (322)
Increase (decrease) in income taxes payable 81 (4)
Increase in deferred magazine revenue 260 115
(Decrease) increase in deferred trade show revenue (430) 374
------------------- ------------------
Net cash provided by (used in) operating activities 4,189 (847)
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of short-term investments - (9,947)
Additions to property and equipment (579) (213)
Additions to intangibles (1,439) (75)
------------------- ------------------
Net cash provided by (used in) investing activities (2,018) (10,235)
------------------- ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options 184 55
Repayment of notes and loans - (5)
------------------- ------------------
Net cash provided by (used in) financing activities 184 50
------------------- ------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (137) 31
------------------- ------------------
Net increase (decrease) in cash and cash equivalents 2,218 (11,001)
------------------- ------------------
CASH AND CASH EQUIVALENTS, beginning of period 19,859 19,442
------------------- ------------------
CASH AND CASH EQUIVALENTS, end of period $22,077 $8,441
=================== ==================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Cash paid for interest $ - $ -
Cash paid for income taxes $ - $ -
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6
<PAGE>
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
DECEMBER 31, 1996
-----------------
(UNAUDITED)
-----------
(Dollars in thousands, except per share data)
--------------------------------------------
(1) The Company:
-----------
The Company is a leading provider of information about the Internet through its
(i) publication of INTERNET WORLD, a monthly general circulation magazine, (ii)
publication of WEB WEEK, a biweekly business-to-business controlled circulation
newspaper, (iii) publication of WEB DEVELOPER, a bimonthly general circulation
magazine for technical, hands-on Internet professionals, (iv) INTERNET WORLD
trade shows and conferences, and (v) iWORLD, the Company's electronic daily
newspaper for Internet news and resources located on the World-Wide Web. Since
all of the Company's products and services relate to providing Internet-related
information to business and information technology professionals, and consumers,
the Company's success is dependent on the continued growth of the Internet.
(2) Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared from the
books and records of the Company in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation of the results for the
interim periods presented have been reflected in such financial statements.
Certain amounts have been reclassified in the prior year statements to conform
to the current year presentation.
The Company does not believe any recently issued accounting standards will have
a material impact on its financial condition or results of operations.
(3) Inventory:
---------
Components of inventory include :
December 31, September 30,
1996 1996
------------- -------------
Finished goods $- $74
Work-in-process 665 437
------------- -------------
$665 $511
============= =============
(4) Common Stock:
------------
On December 23, 1996, the Company's Board of Directors authorized the Company to
purchase up to $2 million of the Company's common stock in the public market.
For the three months ended December 31, 1996, the Company did not purchase any
of its common stock.
7
<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Introduction
- ------------
Certain of the Company's operations are cyclical in nature. The number and size
of trade shows and magazine promotions in a particular quarter has and will
continue to significantly impact the Company's quarterly results. Accordingly,
presentation of quarterly results of operations is not necessarily indicative of
annual results or trends.
Since 1993, the Company has focused its efforts toward the Internet, launching
INTERNET WORLD magazine in August 1993. The Company launched its INTERNET WORLD
trade shows in 1994. In addition, the Company added its WEB WEEK newspaper and
iWORLD World-Wide Web site in 1995, and in October 1995, launched the magazine
WEB DEVELOPER. Since all of the Company's products and services relate to
providing Internet-related information to business and information technology
professionals, and consumers, the Company's success is dependent on the
continued growth of the Internet.
Results of Operations
- ---------------------
Revenues. Revenues for the three months ended December 31, 1996, increased 144%
to approximately $17.5 million from $7.2 million for the comparable period in
fiscal 1996. Of this $10.3 million increase, approximately $2.5 million was a
result of greater revenues from magazines and newspaper, including $1.5 million
related to the growth in advertising from WEB WEEK which was partially related
to the change in frequency from monthly to biweekly, and $509,000 related to the
growth in advertising and paid circulation of INTERNET WORLD magazine, which
increased its paid circulation to approximately 340,000 for the January 1997
issue from approximately 268,000 for the January 1996 issue. Growth in
advertising and paid circulation of WEB DEVELOPER, for which there were two
issues published in the first three months of fiscal 1997 compared to one issue
in the fiscal 1996 period due to the timing of issues, also contributed $475,000
of the revenue increase for the quarter. Trade show revenues for the three
months ended December 31, 1996, of approximately $11.2 million increased by
approximately $7.4 million, or 192%, from the comparable period in fiscal 1996.
This increase was due primarily to the increase in exhibition space sales and
registrations related to Fall 1996 INTERNET WORLD, which had paid exhibition
space of approximately 240,000 square feet compared to 60,000 square feet for
Fall 1995 INTERNET WORLD, an increase of 300%. Other revenues increased to
$761,000 for the three months ended December 31, 1996, from $309,000 in the
comparable period in fiscal 1996, due primarily to the continued development and
marketing of subscriber lists for rental and advertising and other revenues from
iWORLD, the Company's electronic daily newspaper for Internet news and resources
located on the World-Wide Web.
Cost of sales and direct costs. Cost of sales and direct costs include the
costs associated with editing, producing and distributing the Company's
publications and costs associated with producing its trade shows. Cost of sales
and direct costs for the three months ended December 31, 1996, increased to
approximately $9.8 million from $4.6 million for the comparable period in fiscal
1996. Magazine and newspaper cost of sales and direct costs increased by
approximately $1.0 million for the three month period ended December 31, 1996,
from the comparable period for fiscal 1996. Of this increase, $606,000 related
to the change in publication frequency of WEB WEEK magazine from monthly to
biweekly and $164,000 related to the increased cost of publishing two issues of
WEB DEVELOPER in the three months ended December 31, 1996, compared to one issue
in the same period for the prior year. The higher print order for INTERNET
WORLD for the first three months of fiscal 1997 also contributed to the increase
in magazine cost of sales and direct costs. The cost of sales and direct costs
associated with magazines and newspaper decreased from approximately 70% to 56%
of magazine and newspaper revenue. This percentage decrease is a function of
the higher revenue associated with
8
<PAGE>
the advertising space for WEB WEEK. Gross profit after cost of sales and direct
costs for magazines and newspaper for the three months ended December 31, 1996,
increased 173% to approximately $2.4 million from $897,000 for the comparable
period in fiscal 1996. Trade show cost of sales and direct costs for the three
months ended December 31, 1996, increased by approximately $3.9 million to $6.3
million from the comparable period in fiscal 1996. The increase was due to the
expansion of Fall 1996 INTERNET WORLD. Gross profit after cost of sales and
direct costs for trade shows for the three months ended December 31, 1996,
increased $3.5 million to approximately $4.9 million from $1.4 million for the
comparable period in fiscal 1996. The cost of sales and direct costs associated
with trade shows decreased from 62% to 56% of trade show revenue. This
percentage decrease is primarily attributable to the efficiencies of the larger
Fall INTERNET WORLD show, as well as the costs incurred in fiscal 1996
associated with producing the Company's December 1995 VR WORLD trade show and in
canceling the Company's future VR WORLD trade shows. Cost of sales and direct
costs for other revenues increased to $425,000 for the three month period ended
December 31, 1996, compared to $87,000 in the comparable period in fiscal 1996,
due primarily to the expansion of the Company's iWORLD electronic daily
newspaper located on the World-Wide Web, the writedown of book inventory and
costs associated with list rentals.
Advertising, promotion and selling expenses. Advertising, promotion and selling
expenses represent costs related to circulation and promotion, including direct
mail, newsstand promotion and fulfillment expense, sales commissions, and
advertising and marketing staff. In addition, advertising, promotion and selling
expenses include the amortization of deferred promotion costs. Advertising,
promotion and selling expenses for the three months ended December 31, 1996,
increased 74% to approximately $3.6 million from $2.1 million for the comparable
period in fiscal 1996. Of this increase, approximately $670,000 related to
INTERNET WORLD due primarily to circulation marketing efforts as well as
increased selling expense for advertising revenues. For the three months ended
December 31, 1996, the Company incurred approximately $1.1 million for
advertising, promotion and selling expense for WEB WEEK and WEB DEVELOPER,
compared to $360,000 for the same period in fiscal 1996.
General and administrative expenses. General and administrative expenses
include salaries, depreciation, amortization, telecommunications, insurance and
professional fees. General and administrative expenses for the three months
ended December 31, 1996, increased 52% to approximately $2.2 million from $1.4
million for the comparable period in fiscal 1996. In addition to the other
costs required to support current operations and the anticipated growth of the
Company, approximately $455,000 of this increase was due to personnel costs,
$294,000 was due to professional fees for trademarks and other matters, and
$197,000 was due to increased depreciation and amortization expense. The
Company anticipates that future general and administrative expenses will
increase in the aggregate, although such expenses are expected to continue to
decline as a percentage of revenue.
Liquidity and Capital Resources
- -------------------------------
Since the beginning of fiscal 1994, the Company's primary sources of liquidity
have been the proceeds from sales of assets, borrowing under lines of credit
that have been repaid, its public offerings in February 1994 and August 1995 and
operations. Through its public offerings, the Company realized net proceeds,
after offering expenses and underwriters' discounts, of approximately $20.7
million. At December 31, 1996, the Company had cash and cash equivalents of
approximately $22.0 million, compared to $19.9 million at September 30, 1996.
Operating activities for the three months ended December 31, 1996, provided
approximately $4.2 million in cash, due primarily to net income of approximately
$2.1 million for the period and changes in components of working capital.
The Company's accounts receivable increased to approximately $11.2 million at
December 31, 1996, from $7.3 million at September 30, 1996, primarily as a
result of advance billings for exhibit space in future trade shows and the
growth in advertising revenues in the period. Accounts payable and accrued
expenses increased approximately $5.4 million primarily as a result of expanded
domestic and international trade show activity. Deferred magazine revenue
increased to approximately $3.1 million at December 31, 1996, from approximately
$2.9 million at September 30, 1996, reflecting growth in the subscription levels
of the Company's magazines.
9
<PAGE>
Deferred trade show revenue decreased to $11.7 million at December 31, 1996,
from $12.1 million at September 30, 1996, primarily as a function of revenue
earned from the Fall 1996 Internet World trade show offset by billings for
participation in the Spring 1997, Summer 1997 and Fall 1997 INTERNET WORLD trade
shows.
The Company had capital expenditures of approximately $579,000 for the three
months ended December 31, 1996. This was primarily due to an increase in
computer equipment and software purchases required for the Company's general
operating activities and its iWORLD World-Wide Web site. The Company anticipates
that the level of capital expenditures will decrease for the remainder of fiscal
1997. During the three months ended December 31, 1996, the Company also incurred
approximately $1.4 million for Web site acquisitions and for expenditures to
register its various trade names in the United States and throughout the world.
The Company believes that funds available will be sufficient to meet its
obligations and its anticipated capital requirements for the foreseeable future.
10
<PAGE>
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
</TABLE>
(a) Exhibits
11 - Statement Regarding Computation of Per Share Earnings
(Loss)
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
MECKLERMEDIA CORPORATION
Dated: February 5, 1997 /s/Alan M. Meckler
---------------------------------------------------
Alan M. Meckler
Director, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: February 5, 1997 /s/Christopher S. Cardell
---------------------------------------------------
Christopher S. Cardell
Executive Vice President, Chief Operating Officer
and Chief Financial Officer
12
<PAGE>
EXHIBIT 11
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS (LOSS)
------------------------------------------------------------
(UNAUDITED)
-----------
( In thousands, except per share amounts )
----------------------------------------
<TABLE>
<CAPTION>
Three Months Ended
December 31
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
NET INCOME (LOSS) $2,084 ($688)
============= =============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,486 8,377
DILUTIVE STOCK OPTIONS AND WARRANTS 291 -
------------- -------------
TOTAL PRIMARY COMMON SHARES AND
EQUIVALENTS 8,777 8,377
============= =============
PRIMARY EARNINGS (LOSS) PER COMMON
SHARE $ 0.24 ($0.08)
============= =============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Meckelmedia
Corporation's unaudited consolidated financial statements as of and for the
period ended December 31, 1996, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 22,077
<SECURITIES> 0
<RECEIVABLES> 12,403
<ALLOWANCES> 955
<INVENTORY> 665
<CURRENT-ASSETS> 36,591
<PP&E> 2,890
<DEPRECIATION> 794
<TOTAL-ASSETS> 42,016
<CURRENT-LIABILITIES> 25,109
<BONDS> 0
0
0
<COMMON> 85
<OTHER-SE> 16,440
<TOTAL-LIABILITY-AND-EQUITY> 42,016
<SALES> 5,528
<TOTAL-REVENUES> 17,486
<CGS> 3,080
<TOTAL-COSTS> 9,775
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,200
<INCOME-TAX> 116
<INCOME-CONTINUING> 2,084
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,084
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
