<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
MARCH 31, 1996
Commission File No 1-13084
BYRON PREISS MULTIMEDIA COMPANY, INC.
(Exact name of small business issuer as specified in its charter)
New York 13-3676574
(State of Incorporation) (I.R.S. Employer
Identification
number)
24 West 25th Street
New York, New York 10010
(Address of principal executive offices) (Zip code)
(212) 989-6252
(Issuer's telephone number)
Check whether the Issuer (1) filed all reports required to be filed by Section
13 or 15 (d) of the Securities Exchange Act of 1934 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 ___
The number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practical date is 4,261,875 shares of common stock par
value $.001 per share as of May 6, 1996.
Page 1 of 12 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC.
FORM 10-QSB
INDEX
PART I FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheet as of March 31, 1996 3
Consolidated Statements of Operations for
the three months ended March 31, 1996 and 1995 4
Consolidated Statements of Changes in Shareholders'
Equity for the three months ended March 31, 1996
and 1995. 5
Consolidated Statement of Cash Flows for the
the three months ended March 31, 1996. 6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
Signatures 12
Page 2 of 12 pages
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BYRON PREISS MULTIMEDIA COMPANY, INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
March 31,
1996
-----------
(unaudited)
ASSETS
------
CURRENT ASSETS:
Cash and Cash equivalents $ 2,878,740
Marketable Securities 940,400
Accounts Receivable 1,551,203
Other current assets 244,642
-----------
Total current assets 5,614,985
PREPUBLICATION COSTS AND RIGHTS PURCHASED, net 3,860,326
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less
accumulated depreciation of $235,036 608,589
OTHER ASSETS 41,577
-----------
Total assets $10,125,477
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 607,663
Deferred income 1,191,030
Other current liabilities 735,768
-----------
Total current liabilities 2,534,461
CUSTOMER DEPOSITS
DEFERRED INCOME 98,735
-----------
OTHER LONG-TERM LIABILITIES
Total liabilities 2,633,196
-----------
SHAREHOLDERS' EQUITY:
Preferred Stock, 5,000,000 shares authorized
-0- shares issued and outstanding
Common stock, 30,000,000 shares authorized,
4,261,875 shares issued and outstanding, 4,262
.001 par value
Additional paid-in-capital 10,723,371
Retained deficit (3,235,352)
-----------
Total shareholders' equity 7,492,281
-----------
Total liabilities and shareholders' equity $10,125,477
===========
The accompanying notes are an integral part of this balance sheet
Page 3 of 12 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended
March 31,
------------------------------
1996 1995
---------- ----------
REVENUE $ 644,691 $ 264,032
COST OF REVENUE 328,528 207,151
---------- ----------
Gross profit 316,163 56,881
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 875,318 620,440
---------- ----------
(Loss from operations) (559,155) (563,559)
OTHER INCOME 53,041 41,800
---------- ----------
Net Loss $ 506,114 $ 521,759
========== ==========
NET LOSS PER WEIGHTED AVERAGE
SHARES OUTSTANDING $ (0.12) $ (0.15)
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,261,875 3,494,738
========== ==========
The accompanying notes are an integral part of these statements.
Page 4 of 12 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
Additional
Common Paid-in Retained
Stock Capital Deficit Total
------ ----------- ----------- ----------
BALANCE,
December 31, 1995 $4,262 $10,723,371 $(2,729,238) $7,998,395
Net loss for the
three months ended
March 31, 1996 (506,114) (506,114)
------ ----------- ----------- ----------
BALANCE,
March 31, 1996 $4,262 $10,723,371 $(3,235,352) $7,492,281
====== =========== =========== ==========
The accompanying notes are an integral part of these statements
Page 5 of 12 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,1996 AND 1995
(Unaudited)
For the three months ended
March 31,
--------------------------
1996 1995
--------------------------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net Loss $ (506,114) $ (521,759)
Adjustments to reconcile net loss to net
cash provided by operating activities-
Depreciation and amortization:
Fixed assets and organizational costs 22,424 21,901
Prepublication costs and rights purchased 92,933 153,643
Changes in operating assets and liabilities-
Accounts receivable (472,772) 602,238
Other assets 69,438 48,391
Accounts payable and accrued expenses (283,317) (450,815)
Deferred income and customer deposit 524,998 410,089
Other liabilities 161,570 302,533
----------- ----------
Net Cash provided by operating activities 390,840 566,221
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities 4,515,531 --
Purchase of marketable securities (4,473,221) 501,185
Prepublication costs and rights purchased (1,296,839) (829,624)
Acquisition of fixed assets (69,011) (33,099)
----------- ----------
Net cash used in investing activities (1,323,540) (361,538)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 5,906,499
----------- ----------
Net cash provided by financing activities 5,906,499
----------
Net (decrease) increase in cash and cash
equivalents (1,714,380) 6,111,182
CASH AND CASH EQUIVALENTS, beginning of period 4,593,120 1,229,045
----------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 2,878,740 $7,340,227
=========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during quarter for-
Taxes $ 7,125 $ 4,212
Interest $ 373 $ 603
The accompanying notes are an integral part of these statements.
Page 6 of 12 pages
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BYORN PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND MARCH 31, 1995
1. FINANCIAL STATEMENTS
The balance sheet as of March 31, 1996 and the related statements of operations,
statements of changes in shareholders' equity and statement of cash flows for
the periods ended March 31,1996 and 1995 have been prepared by the Company,
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly its financial
position, results of operations and cash flows as of March 31, 1996 and 1995
have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the December 31,1995 audited financial statements
and notes thereto. The results of operations for the three month ended March
31,1996 are not necessarily indicative of the operating results for the full
year.
2. SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries, Byron Preiss Multimedia On-Line
Services, Inc. and Byron Preiss Multimedia Holdings, Inc.
Revenue Recognition
Copublishing Arrangements -- Revenues related to the development of a
CD-ROM titles under copublishing agreements are recorded upon completion and
delivery of each title. Revenues from the sale of CD-ROM and book titles to end
users are recorded upon shipment.
Sale of Titles -- Revenues related to the sale of titles not covered by
copublishing agreements (which are generally made by distributors) are recorded
upon shipment to end users, subject to an appropriate reserve for returns. As
at March 31, 1996, the Company maintained a reserve of $522,241 which is
included in other current liabilities. Subsequent to the delivery of the
titles, the Company does not have any material or significant obligations. In
addition, minimum guaranteed sales to distributors are recognized as revenue
upon completion and delivery of each title.
Page 7 of 12 pages
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Equipment and Leasehold Improvements
Equipment is stated at cost. For financial reporting purposes, equipment is
being depreciated over five years using the straight-line method. Leasehold
improvements will be amortized over the term of the lease for office space,
which is four and one half years, or the life of the improvement, whichever is
shorter.
Cash and Cash Equivalents
Highly liquid investments purchased with an original maturity of three months or
less are considered cash equivalents.
Marketable Securities
The Company has adopted the provisions of Statement of Financial Accounting
Standards ("SFAS") no. 115," Accounting for Certain Investments in Debt and
Equity Securities," which require investments in debt and marketable equity
securities other than investments accounted for by the equity method to be
categorized as either trading, available-for-sale or held-to-maturity which are
stated at amortized cost.
Prepublication Costs and Rights Purchased
Prepublication costs are capitalized and represent the time and expense relating
to work performed in order to get a working product ready for sale. For
financial reporting purposes, these costs will be charged to operations as
revenues are earned on the related titles, but in no event over a period longer
than eighteen months.
Rights purchased represent prepaid royalty expenses and relate to contracts
between the Company and various third parties which enable the Company to use
the said parties' material to create and produce products that contain such
material. For financial reporting purposes, these costs will be charged to
operations as revenues are earned on the related titles, but in no event over a
period longer than eighteen months.
The Company continually evaluates whether events and circumstances have occurred
that indicate the remaining useful life of prepublication costs or rights
purchased may warrant revision or that the remaining balances may not be
recoverable, using an estimate of undiscounted cash flows over the remaining
life of the related products. The Company's management believes, based on
theses continuing analyses, that all capitalized prepublication costs and rights
purchased will be fully realized.
Deferred Income
Deferred income primarily represents amounts received under copublishing
relationships. These amounts are recorded as deferred income pending the final
testing and acceptance of each title.
Page 8 of 12 pages
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Net Loss Per Weighted
Average Shares Outstanding
Net loss per weighted average shares outstanding is computed based on the
weighed average number of common shares outstanding during the period. All
common stock equivalents were determined to be antidilutive.
3. RELATED PARTY TRANSACTIONS
Byron Preiss, a principal shareholder, Director and CEO of the Company, is also
the owner and CEO of Byron Preiss Visual Publications ("BPVP"). On January 1,
1995, the Company entered into the Management Services Agreement with BPVP
covering the use of certain services, office space, employees and office
equipment. The Agreement was subsequently amended to provide for termination on
December 31, 1996.
Page 9 of 12 pages
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
Three months ended March 31, 1996 compared to three months
ended March 31, 1995
Net Revenues: The Company did not release any new CD-ROM titles during the
first quarter ended March 31, 1996. Nevertheless, Net Revenues increase 144% to
$644,691 up from $264,032 reported for the comparable period a year ago. The
increase in revenues is primarily the result of increased sales of the Company's
back list of CD-ROM 1994 and 1995 titles as well as the sale of recently
published books.The Company, under its agreement with Marvel Entertainment Group
published three books during the first quarter ended March 31, 1996 including
Daredevil: Predator's Smile, Stan Lee's Riftworld: Odyssey and X-Men: Mutant
Empire Book 1 Siege. At this time the Company is planning to release
approximately seven more books during the year. In addition, the Company is
planning to release approximately sixteen new CD-ROM titles during the year and
expects to record the majority of its CD-ROM sales during the third and fourth
quarters of 1996. The entertainment software industry is highly seasonal.
Product demand typically peaks during the holiday season. Timely releases to
meet demand are crucial to success, and delays will result in lost sales during
peak times.
The Cost of Revenues for the quarter ended March 31, 1996 was $328,528 or
51% of Net Revenues as compared to $207,151 or 78% of Net Revenues for the
comparable quarter ended March 31, 1995. The improvement is partially due to
the fact that all CD-ROM sales were derived from the Company backlist of 1994
and 1995 titles in which all development costs were written off in previous
years.
Selling, General and Administrative Expenses for the quarter ended March
31, 1996 was $875,318 as compared to $620,440 for the comparable period in 1995.
The increase is largely attributable to an increase in salaries and wages
($182,000), principally representing salary increases, advertising ($28,000), as
well as a small increase in office and legal expenses ($14,000).
Other income/expense for the quarter ended March 31, 1995 amounted to
$53,041 as compared to interest income of $41,800 for the quarter ended March
31, 1995. Other income is the result of interest earned on a portion of funds
invested from the proceeds of a twenty percent investment in the Company by
Viacom International Inc. in March 1995. The Company earned the interest from
temporary investments in money market accounts and certificates of deposit with
a major financial institution and U.S. Treasury Bills.
Liquidity and Capital Resources.
The Company's balance sheet at March 31, 1996 reflects a liquid and
satisfactory condition with cash and cash equivalents and marketable securities
totalling $3,819,140 and accounts receivable totalling $1,551,203. Working
capital at March 31, 1996 amounted to $3,080,524. Shareholders' equity at March
Page 10 of 12 pages
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31, 1996 amounted to $7,492,281 and the Company has virtually no debt. The
Company's operations from inception, in July 1992, have been funded from (i) the
proceeds from loans (which have been fully repaid) (ii) the net proceeds to the
Company from its initial public offering, after underwritten commissions and
related underwriting expenses of approximately $5 million, of which no
proceeds remain, (iii) proceeds from a stock purchase in March 1995 by Viacom of
a 20% interest in the Company. (iv)advance royalty and development fees and
(v)to a lesser extend from operations. The Company currently intends in the
foreseeable future to continue with its copublishing relationships whereby it
receives advance royalty and revenue fees. At this time, the Company believes
its existing cash, cash equivalents and marketable securities and anticipated
cash flow from operations will be adequate to meet the Company's cash
requirements for fiscal 1996.
Page 11 of 12 pages
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SIGNATURE
In accordance with the requirements of the Securities and Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BYRON PREISS MULTIMEDIA COMPANY, INC.
Date: May 13, 1996 By: /s/ Byron Preiss
Byron Preiss, Chief Executive Officer,
President and Executive Officer
Date: May 13, 1996 By: /s/ James R. Dellomo
James R. Dellomo, Chief
Financial Officer
Page 12 of 12 pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,878,740
<SECURITIES> 940,400
<RECEIVABLES> 1,551,203
<ALLOWANCES> 0
<INVENTORY> 233,699
<CURRENT-ASSETS> 5,614,985
<PP&E> 843,625
<DEPRECIATION> (235,036)
<TOTAL-ASSETS> 10,125,477
<CURRENT-LIABILITIES> 2,534,461
<BONDS> 0
0
0
<COMMON> 4,262
<OTHER-SE> 7,488,019
<TOTAL-LIABILITY-AND-EQUITY> 10,125,477
<SALES> 0
<TOTAL-REVENUES> 644,691
<CGS> 328,528
<TOTAL-COSTS> 1,203,846
<OTHER-EXPENSES> (53,041)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (506,114)
<EPS-PRIMARY> 0
<EPS-DILUTED> (0.12)
</TABLE>
