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
JUNE 30, 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 August 12, 1996
Page 1 of 14 pages
<PAGE>
BYRON PREISS MULTIMEDIA COMPANY, INC.
FORM 10-QSB
INDEX
PART I FINANCIAL INFORMATION: PAGE
----
Item 1. Financial Statements:
Consolidated Balance Sheet as of June 30, 1996. 3
Consolidated Statements of Operations for three and
six months ended June 30, 1996 and 1995. 4
Consolidated Statements of Changes in Shareholders' Equity
for the six months ended June 30, 1996. 5
Consolidated Statement of Cash Flows for the
the six months ended June 30, 1996 and 1995. 6
Notes to Consolidated Financial Statements. 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-11
PART II OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits & Reports on Form 8-K 13
Signatures 14
Page 2 of 14 pages
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30,
1996
------------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and Cash equivalents $ 2,765,273
Accounts Receivable 1,148,956
Other current assets 318,132
------------
Total current assets 4,232,361
PREPUBLICATION COSTS AND RIGHTS PURCHASED, net 4,100,474
EQUIPMENT AND LEASEHOLD IMPROVEMENTS, less
accumulated depreciation of $305,111 593,898
OTHER ASSETS 331,340
------------
Total assets $ 9,258,073
============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 772,018
Deferred income 1,537,925
Other current liabilities 621,518
------------
Total current liabilities 2,931,461
OTHER LONG-TERM LIABILITIES 2,931,460
Total liabilities ------------
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,
.001 par value 4,262
Additional paid-in-capital 10,638,371
Retained deficit (4,316,021)
------------
Total shareholders' equity 6,326,612
------------
Total liabilities and shareholders' equity $ 9,258,073
============
The accompanying notes are an integral part of this balance sheet.
Page 3 of 14 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
NET REVENUES $ 1,274,609 $1,645,996 $ 1,919,300 $ 1,910,028
COST OF REVENUE 1,330,745 857,317 1,659,273 1,064,468
----------- ---------- ----------- -----------
Gross (loss)/profit (56,136) 788,679 260,027 845,560
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 1,063,641 712,229 1,938,959 1,332,669
----------- ---------- ----------- -----------
(Loss)/gain from
operations (1,119,777) 76,450 (1,678,932) (487,109)
OTHER INCOME, net 39,108 119,241 92,149 161,041
----------- ---------- ----------- -----------
Net (loss)/gain $(1,080,669) $ 195,691 $(1,586,783) $ (326,068)
=========== ========== =========== ===========
NET (LOSS)/GAIN PER WEIGHTED
AVERAGE SHARES OUTSTANDING $ (0.25) $ 0.05 $ (0.37) $ (0.08)
=========== ========== =========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 4,261,875 4,261,875 4,261,875 3,880,425
=========== ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4 of 14 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 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
Expenses related to
Warrant Registration (85,000) (85,000)
Net loss for the
six months ended
June 30, 1996 (1,586,783) (1,586,783)
----------- ------------ ----------- ----------
BALANCE,
June 30, 1995 $ 4,262 $ 10,638,371 $(4,316,021) $6,326,612
=========== ============ =========== ==========
The accompanying notes are an integral part of these statements.
Page 5 of 14 pages
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BYRON PREISS MULTIMEDIA COMPANY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
For the six months ended
June 30,
--------------------------
1996 1995
----------- -----------
CASH FLOWS USED IN OPERATING ACTIVITIES:
Net Loss $(1,586,783) $ (326,068)
Adjustments to reconcile net loss to net
cash provided by operating activities-
Depreciation and amortization:
Fixed assets and organizational costs 28,827 121,124
Prepublication costs and rights purchased 1,544,756 1,059,595
Changes in operating assets and liabilities-
Accounts receivable (70,525) 1,100,455
Other assets (293,815) (58,003)
Accounts payable and accrued expenses (118,963) (440,171)
Deferred income and customer deposit 773,158 (727,529)
Other liabilities 47,320 247,797
----------- -----------
Net Cash provided by operating activities 323,975 977,200
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of marketable securities 5,455,931 --
Purchase of marketable securities (4,473,221) (1,449,485)
Prepublication costs and rights purchased (2,988,810) (1,996,205)
Acquisition of fixed assets (60,723) (178,821)
----------- -----------
Net cash used in investing activities (2,066,823) (3,624,511)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net (85,000) 5,887,320
----------- -----------
Net cash provided by financing activities (85,000) 5,887,320
----------- -----------
Net (decrease) increase in cash and cash
equivalents (1,827,847) 3,240,009
CASH AND CASH EQUIVALENTS, beginning of period 4,593,120 1,229,045
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 2,765,273 $ 4,469,054
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the six months for-
Taxes $ 13,250 $ 11,214
Interest $ 877 1,349
The accompanying notes are an integral part of these statements.
Page 6 of 14 pages
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BYRON 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 June 30, 1996 and the related statements of operations,
statements of changes in shareholders' equity and statement of cash flows for
the periods ended June 30,1996 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 June 30, 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 included in the Company's Annual Report on Form 10-k for the
year ended December 31, 1995. The results of operations for the three months and
six months ended June 30, 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
June 30, 1996, the Company maintained a reserve of $597,273 which is included in
other current liabilities. Subsequent to the delivery of the titles, the Company
does not have any material or significant obligations.
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.
Page 7 of 14 pages
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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.
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.
Page 8 of 14 pages
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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,
1996, the Company entered into the Management Services Agreement ("MSA")with
BPVP for a one year term at a monthly cost of $15,443.32 which superseded the
Management Services Agreement dated as of January 1, 1995 with BPVP. Pursuant to
the MSA, BPVP shall provide the company with among other things the use of
certain services, office space, employees and office equipment.
Page 9 of 14 pages
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations:
Three months and six months ended June 30, 1996 compared
to three months and six months ended June 30, 1995
Revenues. For the three months ended June 30, 1996, the Company reported
total revenues of $1,274,609 and for the six months ended June 30, 1996 reported
$1,919,300 as compared to $1,645,996 and $1,910,028 respectively, for the
comparable prior year. Revenues under the Company's co-publishing relationships
with Simon & Schuster Interactive, Penguin Electronic Publishing and Harry N.
Abrams, Inc. included the release of four new CD-ROM titles resulting in
revenues for the quarter and six month period ended June 30, 1996 of
approximately $1,167,995. New CD-ROM titles released during the quarter ended
June 30, 1996 include Tim McCarver's The Way Baseball Works which was produced
with the National Baseball Hall of Fame and Museum, John Steinbeck's The Pearl &
the Red Pony co-published with Penguin Electronic Publishing, Escher Interactive
co-published with Harry N. Abrams, Inc. and Philip Marlowe Private Eye a
dramatic, fast-paced mystery/adventure game. Under the Company's agreement with
Marvel Entertainment Group, it co-published with Putnam Berkley Group, Inc. five
new books during the first and second quarters ending June 30, 1996 including
Stan Lee's Riftworld: Odyssey, Daredevil: Predator's Smile, X-Men: Mutant Empire
Book 1: Siege, The Ultimate Spider-Man Paper back) The Ultimate Super-Villains
and a young adult Spider-Man Super Thriller: Midnight Justice. Revenues from
books totalled $211,050 for the quarter ended June 30, 1996 and $397,568 for the
six months ended June 30, 1996. At this time the Company is planning to release
approximately twelve more new books during the year bringing the total number of
books for fiscal 1996 to seventeen books including three reprints.
As reported in last years second quarter 10-QSB report ended June 30, 1995,
included in 1995 revenues was $1,647,000 for the recognition of amounts
previously paid to the Company pursuant to an agreement with Microsoft
Corporation in connection with the development, production, and publication of
certain CD-ROM titles and additional payments as the result of the amendment of
said agreement.
Cost of Revenues. Cost of Revenues for the quarter ended June 30, 1996 was
$1,330,745 or 104% of Net Revenues and for six months ended June 30, 1996 Cost
of Revenues was $1,659,273 or 86% of Revenue. Cost of Revenues exceeded Net
Revenue for the quarter ended June 30, 1996 due to the fact that all development
costs associated with the development and completion of four new CD-ROM titles
in the second quarter ended June 30, 1996 is included in Cost of Revenues during
the second quarter.
Product demand and related sales of CD-ROM titles generally peaks during
the holiday season which is from November through January.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the quarter ended June 30, 1996 was $1,063,641 and
for the six months ended June 30, 1996 was $1,938,959 as compared to $712,229
and $1,332,669 respectively. The increase for the six month period ending June
30, 1996 as compared to June 30, 1995 is largely attributable to an increase in
salaries ($186,969), research and development costs ($151,212) and advertising
($83,985).
Page 10 of 14 pages
<PAGE>
Other Income. Other income decreased to $39,108 for the three months ended June
30, 1996 as compared to $119,241 for the comparable period and decreased to
$92,149 for the six months ended June 30, 1996 as compared to $161,041 for the
comparable prior year period a year ago. Interest income declined due to the
Company having a lesser amount of invested funds from the proceeds of a twenty
percent investment in the Company by Viacom International Inc.
Liquidity and Capital Resources. The Company's balance sheet at June 30, 1996
reflects a satisfactory condition with cash and cash equivalents totalling
$2,765,273 and accounts receivable of $1,148,956 (of which $815,525 or 71% was
collected in July 1996). Working capital amounted to $1,300,901 with a current
ratio of 1.44. The Company has no debt. At this time, the Company believes its
existing cash, cash equivalents and anticipated cash flow from operations will
be adequate to meet the Company's cash requirements for the remainder of fiscal
1996. At this time, the Company is contemplating raising additional capital from
a private placement to finance the operations of the Company and to finance
potential acquisitions in the foreseeable future. The Company is in discussions
with Time Warner in connection with the termination of the time Warner
Interactive Group ("TWIG") Agreement relating to, among other things, (i)
certain disputed amounts claimed by TWIG to be due by the Company to TWIG which
are allegedly for, among other things, manufacturing, marketing and distribution
fees due by the Company in connection with the Time Warner Agreement and (ii)
the Company's belief that TWIG has failed to fulfill certain of its material
obligations to the Company under the Time Warner Agreement. Although, the
Company is in the process of evaluating this matter and intends to pursue
further discussions with TWIG in connection therewith, there can be no assurance
that this matter can be resolved amicably by the parties. At this time,
management believes, based upon available information, that the outcome of the
foregoing matter, and the amounts involved at that time, should not have a
material adverse effect on the financial position and results of operations of
the Company.
Page 11 of 14 pages
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Item 4.
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Shareholders on June 12, 1996. Of
the 4,261,875 shares of Common Stock entitled to vote at the meeting, 2,967,454
shares of Common Stock were present in person or by proxy and entitled to vote.
Such number of shares represented approximately 70% of the Company's outstanding
shares of Common Stock.
At the meeting, the Company's shareholders approved: (i) the election of
Byron Preiss, James Dellomo, Matthew Shapiro, Jack Romanos, Marvin Sharfstein
and Roger Cooper and; (ii) an amendment to the Company's 1993 Stock Option Plan,
as amended. Proposals 1 and 2 were approved by the Company's shareholders as
follows:
Votes For Votes Withheld Votes Abstaining
--------- -------------- ----------------
Proposal 1:
- -----------
Byron Preiss 2,958,504 8,950 0
James Dellomo 2,958,504 8,950 0
Matthew Shapiro 2,958,504 8,950 0
Jack Romanos 2,958,504 8,950 0
Marvin Sharfstein 2,958,504 8,950 0
Roger Cooper 2,958,504 8,950 0
Proposal 2: 2,933,113 28,291 6,050
- -----------
Page 12 of 14 pages
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Item 6.
EXHIBITS & REPORTS ON FORM 8-k
a. Exhibits
The following Exhibit is hereby filed as part of this Quarterly Report
on form 10-QSB:
Exhibit No. Description
----------- -----------
27.1 Financial Data Schedule
Page 13 of 14 pages
<PAGE>
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: August 12, 1996 By: /s/ Byron Preiss
Byron Preiss, Chief Executive Officer,
President and Executive Officer
Date: August 12, 1996 By: /s/ James R. Dellomo
James R. Dellomo, Chief
Financial Officer
Page 14 of 14 pages
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,765,273
<SECURITIES> 0
<RECEIVABLES> 1,148,956
<ALLOWANCES> 0
<INVENTORY> 230,501
<CURRENT-ASSETS> 4,232,361
<PP&E> 899,009
<DEPRECIATION> 305,111
<TOTAL-ASSETS> 9,258,073
<CURRENT-LIABILITIES> 2,931,460
<BONDS> 0
0
0
<COMMON> 4,262
<OTHER-SE> 10,638,372
<TOTAL-LIABILITY-AND-EQUITY> 9,258,073
<SALES> 1,919,300
<TOTAL-REVENUES> 1,919,300
<CGS> 1,659,273
<TOTAL-COSTS> 3,598,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,586,783)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,586,783)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,586,783)
<EPS-PRIMARY> (0.37)
<EPS-DILUTED> (0.37)
</TABLE>
