UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
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: 0-24294
MEDIA ARTS GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0354419
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
521 Charcot Ave, San Jose, California 95131
(Address of principal executive offices and zip code)
Registrant's telephone number: (408) 324-2020
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 shares outstanding of the Registrant's Common Stock, $0.01 par
value, was 11,083,042 at December 31, 1997.
This report consists of 14 pages of which this page is number 1.
1
<PAGE>
MEDIA ARTS GROUP, INC.
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
Page
------
Part I: Financial Information
<S> <C>
Item 1: Financial Statements (unaudited)
Condensed Consolidated Balance Sheet as
of December 31, 1997 and March 31, 1997 3
Condensed Consolidated Statement of Operations for the
Three and Nine Month Periods Ended December 31, 1997
and 1996 4
Condensed Consolidated Statement of Cash Flows for the
Three and Nine Month Periods Ended December 31, 1997
and 1996 5
Notes to Unaudited Condensed Consolidated Financial
Statements 6
Item II: Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II: Other Information
Item 1: Legal Proceedings 13
Item 2: Changes in Securities 13
Item 3: Defaults upon Senior Securities 13
Item 4: Submission of Matters to a Vote of Security Holders 13
Item 5: Other Information 13
Item 6: Exhibits and Reports on Form 8-K 13
(a). Exhibits 13
(b). Reports on Form 8-k 13
Signatures 14
</TABLE>
2
<PAGE>
<TABLE>
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
March 31, December 31,
1997 1997
_____________ _____________
<S> <C> <C>
ASSETS
Current assets
Cash $ 374 $ 5,099
Accounts receivable, net 7,394 12,733
Receivable from related parties 114 77
Inventories 5,415 6,485
Net assets of discontinued operations 890 -
Prepaid expenses and other current assets 1,464 1,574
Deferred income taxes 1,581 2,341
Income taxes refundable 2,002 34
_______ _______
Total current assets 19,234 28,343
Property, plant and equipment 3,562 4,605
Other assets 265 251
_______ _______
$23,061 $33,199
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,065 $ 3,352
Commissions payable 403 942
Accrued royalties 1,213 494
Accrued compensation costs 714 2,854
Accrued expenses 2,250 2,808
Income taxes payable - 3,871
Borrowings under line of credit 2,655 24
Current portion of long term debt 2,062 500
_______ _______
Total current liabilities 11,362 14,845
Long-term debt, less current portion 4,609 2,709
Convertible notes 1,200 1,200
_______ _______
Total liabilities 17,171 18,754
_______ _______
Stockholders' equity
Common stock 69 69
Additional paid-in capital 17,176 17,338
Retained earnings (accumulated deficit) (11,355) (2,962)
_______ _______
Total stockholders' equity 5,890 14,445
_______ _______
$23,061 $33,199
======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE> 3
<PAGE>
<TABLE>
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited, amounts in thousands, except per share data)
<CAPTION>
Three months Nine months
Ended December 31, Ended December 31,
__________________ _________________
1996 1997 1996 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Net sales $15,471 $26,796 $35,512 $57,209
Cost of sales 5,228 8,920 12,982 18,812
_______ _______ _______ _______
Gross profit 10,243 17,876 22,530 38,397
_______ _______ _______ _______
Operating expenses
Selling and marketing 3,502 5,337 9,631 13,103
General and administrative 2,833 5,516 7,581 11,430
_______ _______ _______ _______
Total operating expenses 6,335 10,853 17,212 24,533
_______ _______ _______ _______
Operating profit 3,908 7,023 5,318 13,864
Interest expense (669) (275) (1,749) (1,438)
Gain on sale and leaseback - - - 997
Exchange losses (146) (77) (208) (93)
_______ _______ _______ _______
Income from continuing operations
before income taxes 3,093 6,671 3,361 13,330
Provision for income taxes 1,289 2,482 1,394 4,937
_______ _______ _______ _______
Income from continuing operations 1,804 4,189 1,967 8,393
Loss from discontinued operations - - (1,385) -
Loss on disposal of discontinued
operations - - (12,245) -
_______ _______ _______ _______
Net income (loss) $ 1,804 $ 4,189 $(11,663) $ 8,393
======= ======= ======= =======
Earnings per common share:
Income from continuing operations $ 0.18 $ 0.38 $ 0.20 $ 0.76
Loss from discontinued operations - - (1.38) -
_______ _______ _______ _______
Net income (loss) 0.18 0.38 (1.18) 0.76
======= ======= ======= =======
Earnings per common share
assuming dilution:
Income from continuing operations 0.18 0.35 0.20 0.73
Loss from discontinued operations - - (1.37) -
_______ _______ _______ _______
Net income (loss) $ 0.18 $ 0.35 $ (1.17) $ 0.73
======= ======= ======= =======
<FN>
See Accompanying Notes to Financial Statements
</TABLE>
4
<PAGE>
<TABLE>
MEDIA ARTS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands, Unaudited)
<CAPTION>
Nine months ended December 31,
1996 1997
________ ________
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(11,663) $ 8,393
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Losses from discontinued operations 13,630 -
Gain on sale and leasback - (997)
Depreciation 717 826
Amortization of intangibles 243 689
Deferred income taxes (411) (760)
Provision for returns and allowances 827 281
Provision for losses on accounts receivable 651 (329)
Changes in assets and liabilities:
Accounts receivables (714) (5,291)
Inventories (414) (1,070)
Prepaid expenses and other current assets (386) (73)
Other assets (42) 3
Accounts payable 241 1,287
Commissions payable 88 539
Accrued compensation costs (255) 2,140
Income taxes refundable 1,699 1,968
Accrued expenses (416) (92)
Taxes payable - 3,871
Accrued royalties 1,102 (719)
________ ________
Net cash provided by continuing operations 4,897 10,666
Net cash provided by (used in) discontinued ops (2,164) 890
________ ________
Net cash provided by operations 2,733 11,556
________ ________
Cashflows from investing activities:
Acquisition of property and equipment (473) (1,869)
Proceeds from disposals of property and equipment - 1,647
________ ________
Net cash used in investing activities (473) (222)
________ ________
Cashflows from financing activities:
Repayment of line of credit (2,169) (2,631)
Repayment of notes payable (323) (4,140)
Proceeds from issuance of common stock - 162
________ ________
Net cash used in financing activities (2,492) (6,609)
________ ________
Net increase (decrease) in cash (232) 4,725
Cash at beginning of period 382 374
________ ________
Cash and cash equivalents at end of period $ 150 $ 5,099
======== ========
<FN>
See Accompanying Notes to Financial Statements
</TABLE> 5
<PAGE>
MEDIA ARTS GROUP, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The consolidated financial statements of Media Arts Group, Inc. (the
"Company") include the accounts of its wholly owned subsidiary, Thomas
Kinkade Stores, Inc. The Company designs, manufactures, markets and
retails branded art-based home accessories, collectibles and gift
products based upon the works of the artist Thomas Kinkade.
The condensed interim financial statements of Media Arts Group, Inc.
have been prepared by the Company without audit. Certain information
and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to rules and regulations of
the Securities and Exchange Commission. The information included in
this report 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.
In the opinion of management, the accompanying unaudited interim
financial statements reflect all material adjustments (consisting
solely of normal recurring adjustments) necessary for a fair
presentation of the financial position, operating results and cash
flows for the periods presented. The results of the interim period
ended December 31, 1997 are not necessarily indicative of the
results that may be expected for the entire fiscal year which ends
March 31, 1998.
Note 2 - Net income (loss) per share
The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128") during the quarter ended December 31,
1997. SFAS 128 requires presentation of both Basic EPS and Diluted EPS
on the face of the income statement. Basic EPS, which replaces primary EPS,
is computed by dividing net income available to stockholders (numerator) by
the weighted average number of common shares outstanding (denominator) during
the period. Unlike the computation of primary EPS, Basic EPS excludes the
dilutive effect of stock options. Diluted EPS replaces fully diluted EPS and
gives effect to all dilutive potential common shares outstanding during a
period. In computing Diluted EPS, the average stock price for the period is
used in determining the number of shares assumed to be purchased from exercise
of stock options rather than the higher of the average or ending stock price
as used in the computation of fully diluted EPS.
6
<PAGE>
Following is a reconciliation of the numerators and denominators of the Basic
and Diluted EPS computations for the periods presented below (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Three months Nine months
Ended December 31, Ended December 31,
__________________ _________________
1996 1997 1996 1997
_______ _______ _______ _______
<S> <C> <C> <C> <C>
Numerator:
Income from continuing operations $ 1,804 $ 4,189 $ 1,967 $ 8,393
======= ======= ======= =======
Denominator for basic earnings
per share 9,867 11,083 9,867 11,049
Effect of dilutive securities:
Stock options and warrants 65 921 63 483
_______ _______ _______ _______
Denominator for diluted earnings
per common share 9,932 12,004 9,930 11,532
======= ======= ======= =======
Income from continuing operations
per common share:
Basic $ 0.18 $ 0.38 $ 0.20 $ 0.76
======= ======= ======= =======
Diluted $ 0.18 $ 0.35 $ 0.20 $ 0.73
======= ======= ======= =======
</TABLE>
Note 3 - Inventories
Inventories consisted of (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1997 1997
_______ _______
<S> <C> <C>
Raw materials $ 843 $ 1,075
Work-in-process 12 8
Finished goods 4,560 5,402
_______ _______
$ 5,415 $ 6,485
======= =======
</TABLE>
7
<PAGE>
ITEM 2:
MEDIA ARTS GROUP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information set forth below should be read in conjunction with the
unaudited condensed consolidated financial statements and notes
thereto included in Part I - Item 1 of this Quarterly Report and the
Company's Annual Report on Form 10-K for the year ended March 31, 1997
which contains the audited financial statements and notes thereto for
the years ended March 31, 1997, 1996 and 1995 and Management's
Discussion and Analysis of Financial Condition and Results of
Operations for those respective periods.
Forward looking statements in this Quarterly Report on Form 10-Q as
well as the Company's Annual Report on Form 10-K for the year ended
March 31, 1997, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Stockholders are
cautioned that all forward-looking statements pertaining to the
Company involve risks and uncertainties, including, without
limitation, risks detailed from time to time in the Company's periodic
reports and other information filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS
Net Sales
Net sales increased 73% to $26.8 million in the December 1997 quarter compared
to $15.5 million in the December 1996 quarter and increased 61% to $57.2
million in the first nine months of fiscal 1998 compared to $35.5 million in
the first nine months of fiscal 1997. Wholesale sales increased by 98% to $20.5
million in the December 1997 quarter and increased by 75% to $41.2 million in
first nine months of fiscal 1998 as compared to the same respective periods in
the prior year. The increase in wholesale sales for the current quarter and
nine month period was due primarily to increased sales to Signature Galleries
and, to a lesser extent, an increase in the number of other independent dealers
and increased sales to existing accounts. Sales to Signature Galleries
accounted for $10.0 million of the increase in wholesale sales for the first
nine months of fiscal 1998. Retail sales through Thomas Kinkade Stores
increased by 20% to $6.3 million in the December 1997 quarter and increased by
34% to $16.0 million in the first nine months of fiscal 1998 as compared to the
same respective periods in the prior year. The increase in retail sales for
the current quarter and nine month period was due primarily to an increase in
the number of units sold and, to a lesser extent, to a shift in the retail
product mix towards higher priced editions and the opening of two retail stores
during the first six months of fiscal 1998.
Gross Margin
Gross margin increased from 66% in the December 1996 quarter and 63% in the
first nine months of fiscal 1996 to 67% in the December 1997 quarter and the
first nine months of fiscal 1998 primarily due to efficiencies resulting from
increased sales volumes, as well as improved management of labor and
manufacturing processes resulting from the hiring of more experienced
management. Gross margin also improved as a result of the outsourcing of the
manufacturing of certain open edition products.
8
<PAGE>
Selling and Marketing Expenses
Selling and marketing expenses increased 52% to $5.3 million in the December
1997 quarter compared to $3.5 million in the December 1996 quarter and
increased 36% to $13.1 million in the first nine months of fiscal 1998 compared
to $9.6 million in the first nine months of fiscal 1997. As a percentage of net
sales, selling and marketing expenses decreased from 23% in the December 1996
quarter to 20% in the December 1997 quarter, and decreased from 27% in the
first nine months of fiscal 1997 to 23% in the first nine months of fiscal
1998. The increase in absolute selling and marketing expenses for the current
quarter and nine month period was due primarily to higher compensation costs
associated with higher sales levels and higher advertising and promotion costs.
The decrease in selling and marketing expenses for the current quarter and nine
month period as a percentage of net sales was due primarily to the fact that a
significant portion of the compensation of the Company's sales force is fixed
and, as a result, selling and marketing expenses increased at a slower rate
than net sales.
General and Administrative Expenses
General and administrative expenses increased 95% to $5.5 million in the
December 1997 quarter compared to $2.8 million in the December 1996 quarter and
increased 51% to $11.4 million in the first nine months of fiscal 1998 compared
to $7.6 million in the first nine months of fiscal 1997. As a percentage of net
sales, general and administrative expenses increased from 18% in the December
1996 quarter to 21% in the December 1997 quarter, and decreased from 21% in the
first nine months of fiscal 1997 to 20% in the first nine months of fiscal
1998. The increase in absolute general and administrative expenses was
primarily due to payments under incentive compensation plans as a result of
higher profitability, as well as to other costs related to expansion such as
increased headcount and rent costs. The decrease in general and administrative
expenses as a percentage of net sales in the first nine months of fiscal 1998
as compared to the first nine months of fiscal 1997 was due to the leveraging
of relatively fixed general and administrative expenses over a higher sales
base. The increase in general and administrative expenses as a percentage of
net sales in the December 1997 quarter as compared to the December 1996 quarter
was due to incentive and other compensation costs increasing at a higher rate
than net sales.
Interest Expense
Interest expense decreased from $669,000 in the December 1996 quarter to
$275,000 in the December 1997 quarter and decreased from $1.7 million in the
first nine months of fiscal 1996 to $1.4 million in the first nine months of
fiscal 1998. The decrease was due to a reduction in the Company's borrowings
under lines of credit and secured notes, offset by an increase in non-cash
amortization of debt issuance costs resulting from refinancing of the Company's
long-term debt in February 1997.
9
<PAGE>
Sale and leaseback
In July 1997, the Company exercised an option to purchase its San Jose,
California facility. The Company subsequently sold the facility and entered
into a four year lease agreement with the purchaser. The gain on the sale and
leaseback of the facility, after transaction costs of $110,000 and deferral of
$650,000 to offset future rent increases as compared to the previous lease,
aggregated $997,000.
Provision for Income Tax
The provision for income taxes as a percentage of income before taxes decreased
from 42% in the December 1996 quarter and 41% in the first nine months of
fiscal 1997 to 37% in the December 1997 quarter and the first nine months of
fiscal 1998.
Seasonality
The Company's business has experienced, and is expected to continue to
experience, significant seasonal fluctuations in net sales and income. The
Company's net sales historically have been highest in the December quarter and
lower in the subsequent March and June quarters. Despite overall increases in
annual net sales in fiscal 1996, net sales in the December 1995 quarter were
$12.2 million and net sales in the subsequent March 1996 and June 1996 quarters
were $10.4 million and $8.7 million, respectively. Net sales in the December
1996 quarter were $15.5 million and sales in the subsequent March 1997 and June
1997 quarters were $11.5 million and $13.2 million, respectively. Management
believes that the seasonal effect is due primarily to customer buying
patterns, particularly with respect to holiday purchases, and is typical of the
home decorative accessories, collectibles and gift product industries. The
Company expects these seasonal trends to continue in the foreseeable
future.
The Company's quarterly operating results have fluctuated significantly in the
past and may continue to fluctuate as a result of numerous factors, including
demand for the art of Thomas Kinkade and the Company's Thomas Kinkade products
(including new product categories and series), the Company's ability to achieve
its expansion plans, the timing, mix and number of new product releases,
the timing of the opening of new Thomas Kinkade Stores and the expensing of the
associated pre-opening costs, the successful implementation of the Thomas
Kinkade Signature Gallery program and expansion of distribution generally, the
Company's ability to implement strategic business alliances, the Company's
ability to hire and train new manufacturing, sales and administrative
personnel, continued implementation of manufacturing efficiencies, timing of
product deliveries and the incurrence of other operating costs. In addition,
since a significant portion of the Company's net sales are generated from
orders received in the quarter, net sales in any quarter are substantially
dependent on orders booked in that quarter. The Company's results may also
fluctuate based on extraordinary events, such as the discontinuance of the
operations of John Hine Limited. Accordingly, the results of operations in any
quarter will not necessarily be indicative of the results that may be achieved
for a full fiscal year or any future quarter. Fluctuations in operating
results may also result in volatility in the price of the Company's Common
Stock.
10
<PAGE>
Liquidity and Capital Resources
The Company's primary source of funds in the first nine months of fiscal 1998
have been from its operations. The Company had working capital of $13.5
million at the end of December 1997 compared to $7.9 million at the end of
March 1997.
Net cash provided by operations for the first nine months of fiscal 1998
was $11.6 million consisting of $10.7 million provided by continuing operations
and $890,000 provided by discontinued operations. Net cash provided by
continuing operations consisted primarily of income from continuing operations
adjusted by increases in income taxes payable and accrued compensation costs
and receipt of an income tax refund partly offset by an increase in accounts
receivable and inventory. Net cash provided by operations for the first nine
months of fiscal 1997 was $2.7 million consisting of $4.9 million provided by
continuing operations which was partly offset by $2.2 million used in
discontinued operations. Net cash provided by continuing operations consisted
primarily of income from continuing operations adjusted by an increase in
income taxes refundable and a decrease in accrued royalties.
Net cash used in investing activities was $222,000 and $473,000 for the first
nine months of fiscal 1998 and 1997, respectively. The Company's investing
activities have primarily related to capital expenditures for property and
equipment. In July 1997 the Company also received net proceeds of $1.6 million
under a sale and leaseback transaction. The Company anticipates that total
capital expenditures in fiscal 1998 will be approximately $3.0 million, and
will relate to continued manufacturing and infrastructure investments as well
as to the opening of new retail locations and upgrades to management
information systems.
Net cash used in financing activities was $6.6 million and $2.5 million
in the first nine months of fiscal 1998 and 1997, respectively. Cash used in
financing activities has been primarily for the repayment of borrowings under
credit lines and notes payable.
The Company has a $10.0 million secured line-of-credit facility with CIT
Group/Business Credit, Inc. (the "Senior Debt"). Borrowing capacity under the
Senior Debt is based on eligible accounts receivable and inventory and
aggregated $10.0 million as of December 31, 1997. The Company's indebtedness
under bank lines of credit was $2.7 million as of March 31, 1997. As of
December 31, 1997, the Company had $24,000 of outstanding borrowings under the
Senior Debt and had cash on hand of $5.1 million. In February 1997, the
Company renegotiated and issued a $7.4 million secured note payable to Levine
Leichtman Capital Partners LLP(the "Subordinated Debt"), $2.0 million of which
was repaid as of July 31, 1997. The Company has filed a Registration Statement
on Form S-1 with the Securities and Exchange Commission which includes the
offering of 1.5 million shares of common stock by the Company. Assuming the
offering is completed the Company will receive net proceeds of approximately
$17.9 million (assuming an offering price of $13.50 per share), of which the
Company expects to use $5.4 million to repay the remaining outstanding
Subordinated Debt. Repayment of the Subordinated Debt before its scheduled
maturity will result in a write-off of deferred debt discount associated with
that debt as an extraordinary expense in the quarter in which it is repaid.
Deferred debt discount aggregated $2.2 million as of December 31, 1997. As of
December 31, 1997, the Company had repaid $1.6 million of debt to a former
shareholder of John Hine Limited.
11
<PAGE>
The Company's working capital requirements in the foreseeable future will
change depending on the rate of the Company's expansion, the Company's
operating results and any other adjustments in its operating plan as needed in
response to competition, acquisition opportunities or unexpected events. The
Company believes that existing borrowing capacity under lines of credit,
together with the proceeds from the offering and revenues from operations, will
be sufficient to meet the Company's working capital requirements through fiscal
1999. However, there can be no assurance that the Company will not seek
additional capital in the future as a result of expansion or otherwise.
12
<PAGE>
PART II - Other Information
ITEM 1. LEGAL PROCEEDINGS - Not Applicable
ITEM 2. CHANGES IN SECURITIES - Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 4.2 * - Bylaws
Exhibit 10.4 * - Amendment to Employment Agreement between the Company
and Kenneth E. Raasch, entered into as of October 29,
1997.
Exhibit 10.5 * - Amended Employment Agreement between the Company and
John lackner, made and entered into as of October 10,
1997.
Exhibit 10.12* - License Agreement entered into by the Company and Thomas
Kinkade, effective as of December 3, 1997.
Exhibit 11.01 - Computation of Income From Continuing
Operations and Net Income Per Share
Exhibit 27 - Financial Data Schedules (EDGAR version
only)
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-79744).
(b) Reports on Form 8-K - none
13
<PAGE>
MEDIA ARTS GROUP, INC.
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.
MEDIA ARTS GROUP, INC.
(Registrant)
By /s/ Craig Fleming
---------------------------------
Craig Fleming
Chief Executive Officer
By /s/ Raymond A. Peterson
---------------------------------
Raymond A. Peterson
Senior Vice President &
& Chief Financial Officer
Date: February 3, 1998
14
<PAGE>
EXHIBIT INDEX
Exhibit Number
4.2 * Bylaws
10.4 * Amendment to Employment Agreement between the Company
and Kenneth E. Raasch, entered into as of October 29, 1997.
10.5 * Amended Employment Agreement between the Company and
John lackner, made and entered into as of October 10, 1997.
10.12* License Agreement entered into by the Company and Thomas
Kinkade, effective as of December 3, 1997.
11.01 Computation of net income (loss) per share
27 Financial Data Schedule
* Incorporated by reference from the Company's Registration Statement on Form
S-1 (File No. 33-79744).
<PAGE> 1
MEDIA ARTS GROUP, INC.
EXHIBIT 11.01
COMPUTATION OF NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (1)
<TABLE>
<CAPTION>
Three months Nine months
Ended December 31 Ended December 31
___________________ __________________
1996 1997 1996 1997
________ _______ _______ _______
<S> <C> <C> <C> <C>
Income from continuing operations 1,804 4,189 1,967 8,393
Loss from discontinued operations - - (13,630) -
_______ _______ _______ _______
Net income (loss) $ 1,804 $ 4,189 $(11,663) $ 8,393
======= ======= ======= =======
Weighted average common shares
outstanding 9,867 11,083 9,867 11,049
Common shares issuable on
exercise of options and
warrants (2) 65 921 63 483
_______ _______ _______ _______
Weighted average common and
common equivalent shares
outstanding 9,932 12,004 9,930 11,532
======= ======= ======= =======
Earnings per common share:
Income from continuing operations $ 0.18 $ 0.38 $ 0.20 $ 0.76
Loss from discontinued operations - - (1.38) -
_______ _______ _______ _______
Net income (loss) 0.18 0.38 (1.18) 0.76
======= ======= ======= =======
Earnings per common share
assuming dilution:
Income from continuing operations 0.18 0.35 0.20 0.73
Loss from discontinued operations - - (1.37) -
_______ _______ _______ _______
Net income (loss) $ 0.18 $ 0.35 $ (1.17) $ 0.73
======= ======= ======= =======
</TABLE>
(1) This Exhibit should be read with Note 2 of Notes to Unaudited
Condensed Consolidated Financial Statements.
(2) The computation of common and common stock equivalents utilizes
the treasury stock method.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 5,099
<SECURITIES> 0
<RECEIVABLES> 15,510
<ALLOWANCES> 2,777
<INVENTORY> 6,485
<CURRENT-ASSETS> 28,343
<PP&E> 7,740
<DEPRECIATION> 3,135
<TOTAL-ASSETS> 33,199
<CURRENT-LIABILITIES> 14,845
<BONDS> 0
0
0
<COMMON> 69
<OTHER-SE> 14,376
<TOTAL-LIABILITY-AND-EQUITY> 33,199
<SALES> 57,209
<TOTAL-REVENUES> 57,209
<CGS> 18,812
<TOTAL-COSTS> 24,533
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</TABLE>
