<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
COMMISSION FILE NUMBER 0 - 25112
ADVANCED MEDIA, INC
(Exact name of registrant as specified in its charter)
DELAWARE 11-2899603
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
80 ORVILLE DRIVE
BOHEMIA, NEW YORK 11716
(Address of principal executive offices)
(516) 244 -1616
(Issuer's telephone number)
Check whether the issuer (1) has 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
---- ----
There were 89,496,462 shares of registrant's common stock outstanding as of
April 30, 1997.
<PAGE> 2
ADVANCED MEDIA INC.
INDEX
PART I - FINANCIAL INFORMATION PAGE
----
Balance Sheets 3
Statements of Operations 4
Statements of Changes in Stockholders' Equity (Deficit) 5
Statements of Cash Flows 6
Notes to Financial Statements 7-9
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10-11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 12
Item 2 - Changes in Securities 12
Item 3 - Defaults Upon Senior Securities 12
Item 4 - Submission of Matters to a Vote of Security Holders 12
Item 5 - Other Information 12
Item 6 - Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE> 3
ADVANCED MEDIA INC.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MAR. 31, DEC. 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,494 $ 40,863
Accounts receivable, net of allowance for
doubtful accounts of $42,971 and $50,725, respectively 228,970 232,840
Inventories 43,664 51,669
Prepaid expenses and other current assets 90,418 78,701
----------- -----------
Total current assets 364,546 404,073
Fixed assets, net 542,111 554,169
Intangible assets, net 1,023,684 1,066,743
Other assets 55,040 62,907
----------- -----------
Total assets $ 1,985,381 $ 2,087,892
=========== ===========
LIABILITIES & STOCKHOLDERS' DEFICIENCY
Current liabilities
Accounts payable $ 926,211 $ 866,130
Accrued expenses and other liabilities 285,833 295,095
Cash overdrafts 25,626 --
Payable to related parties 145,168 134,162
Deferred revenues 120,000 102,500
Current portion of capital lease obligations 7,387 8,840
----------- -----------
Total current liabilities 1,510,225 1,406,727
----------- -----------
Loan payable - stockholder 1,169,656 1,179,472
Capital lease obligations 21,975 23,784
Payable to related parties, long term 208,993 181,925
----------- -----------
Total liabilities 2,910,849 2,791,908
----------- -----------
Stockholders' deficiency:
Preferred stock, par value $.0001 per share,
Shares authorized: 10,000,000, issued 600,000 Series A
convertible shares, none and 120,000 outstanding
(entitled in liquidation to $120,000 at December 31, 1996) -- 12
Common stock, par value $.0001 per share,
Shares authorized: 100,000,000
Shares issued and outstanding:
1997 - 85,987,007
1996 - 75,692,816 8,599 7,569
Additional paid-in capital 9,025,411 8,698,698
Accumulated deficit (9,877,442) (9,345,126)
Less deferred compensation (82,036) (65,169)
----------- -----------
Total stockholders' deficiency (925,468) (704,016)
----------- -----------
Commitments and contingencies
Total liabilities and stockholders' (deficit) equity $ 1,985,381 $ 2,087,892
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
ADVANCED MEDIA INC
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
------------ ------------
<S> <C> <C>
Net revenues $ 741,319 $ 740,962
Cost of sales 486,828 595,227
------------ ------------
Gross profit 254,491 145,735
------------ ------------
EXPENSES:
Development 14,700 11,416
Selling and marketing 150,519 132,662
General and administrative 547,293 440,323
Amortization of intangible assets 43,059 56,174
Debt conversion expense -- 309,375
------------ ------------
Total expenses 755,571 949,950
------------ ------------
Loss from operations (501,080) (804,215)
OTHER INCOME (EXPENSE):
Interest expense, net (31,236) (78,162)
------------ ------------
Net loss $ (532,316) $ (882,377)
============ ============
Net loss per share $ (0.01) $ (0.02)
============ ============
Weighted average number of common
shares outstanding 81,426,314 55,512,512
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
ADVANCED MEDIA INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK
----------------------------------------------------- ADDITIONAL
SHARES .0001 PAR SHARES .0001 PAR PAID-IN ACCUMULATED
.0001 PAR AMOUNT .0001 PAR AMOUNT CAPITAL DEFICIT
-------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1995 -- -- 55,319,810 5,532 6,179,372 (6,093,555)
Sales of common stock -- -- 1,868,571 187 218,357 --
Sales of Class A convertible preferred stock 600,000 60 -- -- 599,940 --
Conversion of preferred to common (480,000) (48) 7,372,479 737 (689) --
Sales to 401K Plan -- -- 22,683 2 3,553 --
Issuance of common stock for:
Commission due broker -- -- 1,000,000 100 130,210 --
Consulting services -- -- 150,000 15 12,922 --
Rental expense -- -- 80,000 8 14,717 --
Public relations -- -- 350,000 35 38,215 --
Penalty shares -- -- 2,175,000 217 (217) --
Acquisition revaluations -- -- 1,597,023 160 (160) --
Issuance of stock options and warrants for:
Commission due broker -- -- -- -- 6,516 --
Employment agreement with officer -- -- -- -- 212,500 --
Legal services -- -- -- -- 7,500 --
Cancellation of shares due to:
Employment termination -- -- (292,750) (29) (1,187) --
Offset of note receivable -- -- (50,000) (5) (6,511) --
Debt conversion -- -- 6,100,000 610 1,283,660 --
Amortization of deferred compensation -- -- -- -- -- --
Net loss -- -- -- -- -- (3,251,571)
-------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1996 120,000 12 75,692,816 7,569 8,698,698 (9,345,126)
Sales of common stock -- -- 6,000,000 600 279,400 --
Conversion of preferred to common (120,000) (12) 3,171,259 317 (305) --
Sales to 401K plan -- -- 4,182 1 355 --
Issuance of common stock for:
Public relations -- -- 100,000 10 9,365 --
Services - employee -- -- 75,000 8 5,992 --
Services - directors -- -- 400,000 40 31,960 --
Penalty shares -- -- 543,750 54 (54) --
Amortization of deferred compensation -- -- -- -- -- --
Net loss -- -- -- -- -- (532,316)
-------------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1997 -- -- 85,987,007 8,599 9,025,411 (9,877,442)
-------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
DEFERRED TOTAL
COMPEN- DOLLAR
SATION AMOUNTS
------------------------
<S> <C> <C>
BALANCE, DECEMBER 31, 1995 (110,030) (18,681)
Sales of common stock -- 218,544
Sales of Class A convertible preferred stock -- 600,000
Conversion of preferred to common -- --
Sales to 401K Plan -- 3,555
Issuance of common stock for:
Commission due broker -- 130,310
Consulting services -- 12,937
Rental expense -- 14,725
Public relations -- 38,250
Penalty shares -- --
Acquisition revaluations -- --
Issuance of stock options and warrants for:
Commission due broker -- 6,516
Employment agreement with officer -- 212,500
Legal services -- 7,500
Cancellation of shares due to:
Employment termination 1,216 --
Offset of note receivable -- (6,516)
Debt conversion -- 1,284,270
Amortization of deferred compensation 43,645 43,645
Net loss -- (3,251,571)
------------------------
BALANCE AT DECEMBER 31, 1996 (65,169) (704,016)
Sales of common stock -- 280,000
Conversion of preferred to common -- --
Sales to 401K plan -- 356
Issuance of common stock for:
Public relations -- 9,375
Services - employee -- 6,000
Services - directors (32.000) --
Penalty shares -- --
Amortization of deferred compensation 15,133 15,133
Net loss -- (532,316)
------------------------
BALANCE AT MARCH 31, 1997 (82,036) (925,468)
------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
ADVANCED MEDIA INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(532,316) $(882,377)
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Debt conversion expense -- 309,375
Depreciation and amortization 46,170 55,018
Amortization of intangibles 43,059 56,174
Amortization of deferred compensation 15,133 10,314
Loss on disposal of fixed assets 4,777 --
Provision for doubtful accounts 1,082 --
Interest on loan payable - officer -- 21,700
Issuance of options to officer as compensation -- 37,500
Issuance of common stock for services and expenses 15,375 --
Changes in operating assets and liabilities:
Accounts receivable, net 2,788 59,700
Inventories, net 8,005 20,958
Prepaid expenses and other current assets (8,483) 1,801
Accounts payable 60,081 51,404
Accrued expenses and other liabilities (9,262) 26,170
Payable to related parties 38,074 22,449
Deferred revenues 17,500 --
--------- ---------
Net cash used for operating activities (298,017) (209,814)
--------- ---------
Cash flows from investing activities:
Purchases of fixed assets, net (38,889) (12,233)
Proceeds from note receivable 500 --
Increase in security deposits 4,133 5,562
--------- ---------
Net cash used for investing activities (34,256) (6,671)
--------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock 280,356 31,103
Proceeds from loan payable - stockholder, net (9,816) 40,000
Payments of capital lease obligations (3,262) (1,468)
--------- ---------
Net cash provided by financing activities 267,278 69,635
--------- ---------
Net decrease in cash and cash equivalents (64,995) (146,850)
Net cash, cash overdrafts and cash equivalents:
Beginning of period 40,863 151,463
--------- ---------
End of period $ (24,132) $ 4,613
========= =========
Cash paid during the period for:
Interest $ 1,805 $ --
========= =========
Taxes $ 1,610 $ 1,950
========= =========
</TABLE>
SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES:
The Company exchanged 6,000,000 common shares for a $1,000,000 debt on March 31,
1996.
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
1 - BASIS OF PRESENTATION
The unaudited interim financial statements of Advanced Media, Inc. (the
"Company") for the three months ended March 31, 1997 and 1996 have been prepared
by management and include all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the unaudited interim periods. The
results of operations for the three months ended March 31, 1997 are not
necessarily indicative of the results to be expected for the full year. These
interim financial statements should be read in conjunction with the financial
statements and related notes contained in the Company's annual report on Form
10-KSB for the year ended December 31, 1996.
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash overdrafts - Under the Company's cash management system, checks issued but
not presented to banks frequently result in overdraft balances for accounting
purposes and are classified as "cash overdrafts" in the balance sheet.
Reclassifications - Certain amounts in the prior year financial statements have
been reclassified to conform with the current year presentation.
3 - LIQUIDITY AND BUSINESS RISKS
As of March 31, 1997, the Company had a net capital deficiency of $925,468, a
working capital deficit of $1,145,679 and has sustained cumulative net losses of
$9,877,442 since commencing operations in August 1993. In order to meet its
obligations as they become due and to continue its operations as a going
concern, the Company must raise additional capital. The Company continues to be
engaged in various discussions with potential investors regarding possible
equity transactions. Additional funding of $280,000 was raised during the first
quarter of 1997 and approximately $86,000 was raised in the month of April. See
Note 8. Although management believes, based on the development of the Company's
business and its preliminary discussions with various potential investors and
other sources of financing, that it will be able to raise additional capital
sufficient to meet its working capital needs over the next twelve months, no
assurance can be given that it will be successful in this respect. The Company
currently has no line of credit or other access to debt financing from any
financial institution.
4 - DEBT AND EQUITY TRANSACTIONS
The Company issued a total of 6,000,000 shares of common stock in exchange for
an aggregate $280,000 in the first quarter of 1997. As a condition of two of
these placements, the Company has agreed to register 2,000,000 shares by April
30, 1997. Failure to register the 2,000,000 shares would result in the Company
paying a penalty of 50,000 shares to each of the parties, i.e., 100,000 total,
for each thirty-day period thereafter for which a registration statement is not
filed. Such penalty shares are required to be registered as contingency shares
in the registration statement. Furthermore, as consideration for not disposing
of the 2,000,000 shares between April 30, 1997 and June 30, 1997, the agreement
provides for additional contingency shares to be registered if the Company has
not met a value guaranty provision ensuring that the 2,000,000 shares will be
equivalent in value to $175,000 on June 30, 1997. The Company had not filed a
registration statement as of April 30, 1997.
In March 1997, the Board of Directors of the Company resolved to issue warrants
to purchase an aggregate 5,000,000 shares of common stock to Suan Investments
Corporation ("Suan") and its assignee, Stourbridge Investments ("Stourbridge"),
to be divided equally. The warrants become exercisable on September 30, 1997 at
an exercise price of $.065, and expire on December 31, 1998. In consideration of
the issuance of warrants to purchase 2,500,000 shares of common stock the
aforementioned parties have agreed to extend to June 30, 1997 the interest
payment due originally at the time of the conversion of the Suan Investment note
to equity. Further, upon payment of the interest the security interest in
substantially all of the assets of the Company which collateralizes the
Company's obligations will be terminated. The value of the warrants to purchase
the balance of the 2,500,000 shares will be applied against the Company's
obligation to provide a value guarantee for 6,000,000 shares previously issued
to Suan and Stourbridge. Payable to related parties includes accrued interest of
$100,168 and $96,899 at March 31, 1997 and December 31, 1996, respectively.
7
<PAGE> 8
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
5 - RELATED PARTY TRANSACTIONS
Deferred Revenues include payments from a corporation who is a shareholder of
the Company.
Expenses for the three months ended March 31, 1997 and 1996 include certain
amounts payable to the Company's chief executive officer, $45,000 and $37,500,
respectively, representing compensation payable, and $27,068 and $21,700,
respectively, representing interest on the loan from officer.
6 - INCOME TAXES
At March 31, 1997 the Company has net operating loss carryforwards for tax
purposes of approximately $6,800,000, which expire through 2011. Deferred tax
assets are comprised of the following:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
<S> <C> <C>
Gross deferred tax assets $ 2,484,550 $ 2,315,939
Valuation allowance (2,484,550) (2,315,939)
----------- -----------
Net deferred tax asset $ -- $ --
=========== ===========
</TABLE>
The gross deferred tax assets arise primarily from net operating loss
carryforwards and differences in the valuation of receivables, accruals and
deferred compensation. The Company has provided a full valuation allowance
against the gross deferred tax assets because, in management's judgement, it is
more likely than not that such benefits will not be realized.
The Company had a several changes in ownership since commencing operations in
1993, which has resulted in a restriction on the prospective annual utilization
of the loss carryforwards. Future changes in ownership may also result in
further limitations on the annual utilization of the loss carryforwards.
7 - CONTINGENCIES
Legal Proceedings
On September 29, 1995, a former employee and owner of a business acquired by the
Company, Decision Vision ("Decision"), and his wife, also a former employee of
Decision, initiated a lawsuit seeking damages of approximately $1,000,000 from
the Company, and certain present and former officers. The lawsuit was based on
claims arising out of the employees' termination, and also arising out of the
sale of the assets of Decision to the Company. The most significant aspect of
the lawsuit, pertaining to the acquisition of the assets of Decision by the
Company, was dismissed by the court in which the action had been filed, the
Superior Court of the State of California, County of San Diego, in a series of
rulings between December 1996 and February 1997, when the court dismissed
numerous causes of action and the action against all individual defendants and
eliminated any possible punitive damages award. The court also dismissed the
wrongful termination claims of both former employees. On March 25, 1997, the
Plaintiff filed an appeal regarding the above claims. The remaining claims,
including the wrongful termination claims of both plaintiffs, relatively
insignificant in scope in comparison with the claims pertaining to the
acquisition of assets, have been settled pending finalization of language and
payment by the Company of the total sum of $42,500. This pending partial
settlement would preclude a trial and conclude this matter as to these remaining
issues and would also conclude the cross-action that the Company had previously
filed against the former employee who was the principal stockholder of Decision
seeking approximately $53,000 in damages for alleged breaches arising from the
same acquisition. The settlement arrangement allows that plaintiff to appeal the
dismissal of the primary claims pertaining to the acquisition to the California
court of appeal. As to the claims that plaintiff is now pursuing in the
California court of appeal, the Company plans to vigorously contest those
claims. The Company has not set aside any reserves for these remaining claims as
management of the Company believes that it is not probable that the Company will
suffer any material loss as a result of those appeals.
A mandatory settlement conference has been scheduled at San Diego Superior Court
for late June 1997 to finalize the settlement agreement in the aforementioned
matter.
8
<PAGE> 9
ADVANCED MEDIA, INC.
NOTES TO FINANCIAL STATEMENTS
8 - SUBSEQUENT EVENTS
In April 1997, the Company received subscriptions for 2,026,900 shares of its
common stock for which the Company received $101,345 before $15,201 in
commissions. The Company agreed to attempt to have declared effective by the
Securities & Exchange Commission a registration statement on Form S-3 for these
shares by July 15, 1997 or be subject to a cumulative penalty of 10% of the
amount of shares subscribed. The penalty will continue for each 30-day period
for which the registration is not effective. The Company has also agreed that
if the value of these shares is not $.11 on the effective date of the
registration statement, it will issue additional shares of equivalent value to
such subscribers.
9
<PAGE> 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto appearing elsewhere in this Form 10-QSB.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
Gross profit for the three months ended March 31, 1997 increased $108,756 to
34.3% of net revenues versus 19.7% in 1996 on comparable net revenues. The
increase in gross profit is due to the change in the mix of products sold by the
Company as a result of management's change in sales emphasis towards more
profitable interactive system solutions and away from less profitable hardware
systems and software sales. Management has also been able to reduce rental costs
on systems utilized for tradeshow services.
Expenses for the three months ended March 31, 1997 declined $194,379, or 24.2%.
Debt conversion expense of $309,375 was related to the costs associated with
inducing to retire their outstanding debt in the first quarter of 1996 in
exchange for the Company's equity. Development expense increased $3,284, or
28.8%, as the Company continues to modify its existing proprietary products.
Selling and marketing expense increased $17,857, or 13.4%, of which $14,087
reflects an increase in expenses related to demonstrations related to sales
proposal efforts and $3,770 reflects selling costs incurred in the new
electronic commerce division which started up in September 1996. General and
administrative expenses increased $106,970, or 24.3%, of which $70,320 reflects
costs related to the Company's new electronic commerce division. The balance of
the increase is primarily related to the Company's finalization of its pending
partial settlement in its lawsuit with David Gmach. The decrease of $13,115, or
23.3%, in amortization of intangible assets is related to the reduction in
goodwill recorded by the Company in the fourth quarter of 1996 and reflected as
an impairment loss.
The decrease in interest expense of $46,926 was primarily due to the conversion
of the Suan Note to equity at March 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, l997, the Company had a net capital deficiency of $925,468, a
working capital deficit of $1,145,679 and has sustained cumulative losses of
$9,877,442 since commencing operations in August 1993. In order to meet its
obligations as they become due and to continue its operations as a going
concern, the Company must raise additional capital. The Company continues to be
engaged in various discussions with potential investors regarding additional
equity transactions. Additional funding of $280,000 was raised during the first
quarter of 1997 and approximately $86,000 was raised in the month of April (see
Note 8 to the accompanying financial statements). Although management believes,
based on the development of the Company's business and its preliminary
discussions with various potential investors and other sources of financing,
that it will be able to raise additional capital sufficient to meet its working
capital needs over the next twelve months, no assurance can be given that it
will be successful in this respect. The Company currently has no line of credit
or other access to debt financing from any financial institution.
The Company's stock price has steadily declined since January 1996, which has
made it difficult for the Company to raise additional equity capital without
significant dilution to present shareholders. The Company is further hampered by
its inability to obtain bank financing and the fact that all of its assets are
pledged as collateral to Suan Investments and its assignee, Stourbridge
Investments.
The Company is hopeful that anticipated improvements in the Company's operations
resulting from the sales and installation of interactive kiosks pursuant to the
Rollout Contract with GNC and the Company's improvements in the areas of
Electronic Commerce, including 21SoftwareDrive and its multiple
transaction-driven vertical applications, will result in an increase in the
market price of the Company's common stock used to raise additional equity
capital, although there can be no assurance it will do so.
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
LIQUIDITY AND CAPITAL RESOURCES (CONT.)
Any forward looking statements contained in this document reflect management's
current intentions and expectations. Actual future results could vary materially
depending on certain risks and uncertainties, including factors such as
financing, operational spending, revenue levels, and the other factors referred
to in this document.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 29, 1995, a former employee and owner of a business
acquired by the Company, Decision Vision ("Decision"), and his wife,
also a former employee of Decision, initiated a lawsuit seeking damages
of approximately $1,000,000 from the Company, and certain present and
former officers. The lawsuit was based on claims arising out of the
employees' termination, and also arising out of the sale of the assets
of Decision to the Company. The most significant aspect of the lawsuit,
pertaining to the acquisition of the assets of Decision by the Company,
was dismissed by the court in which the action had been filed, the
Superior Court of the State of California, County of San Diego, in a
series of rulings between December 1996 and February 1997, when the
court dismissed numerous causes of action and the action against all
individual defendants and eliminated any possible punitive damages
award. The court also dismissed the wrongful termination claims of both
former employees. On March 25, 1997, the Plaintiff filed an appeal
regarding the above claims. The remaining claims, including the
wrongful termination claims of both plaintiffs, relatively
insignificant in scope in comparison with the claims pertaining to the
acquisition of assets, have been settled pending finalization of
language and payment by the Company of the total sum of $42,500. This
pending partial settlement would preclude a trial and conclude this
matter as to these remaining issues and would also conclude the
cross-action that the Company had previously filed against the former
employee who was the principal stockholder of Decision seeking
approximately $53,000 in damages for alleged breaches arising from the
same acquisition. The settlement arrangement allows that plaintiff to
appeal the dismissal of the primary claims pertaining to the
acquisition to the California court of appeal. As to the claims that
plaintiff is now pursuing in the California court of appeal, the
Company plans to vigorously contest those claims. The Company has not
set aside any reserves for these remaining claims as management of the
Company believes that it is not probable that the Company will suffer
any material loss as a result of those appeals.
A mandatory settlement conference has been scheduled at San Diego
Superior Court for late June 1997 to finalize the settlement agreement
in the aforementioned matter.
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
(a) Reports on Form 8-K:
Current report on Form 8-K dated January 29, 1997 relating to Item 5.
12
<PAGE> 13
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.
ADVANCED MEDIA, INC.
Date: 5/15/97 By /s/ Hans Kaemmlein
------- ----------------------
Hans Kaemmlein, Chairman of the Board,
President and Chief Executive Officer
Date: 5/15/97 By /s/ Alan W. Schoenbart
------- --------------------------
Alan W. Schoenbart,
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,494
<SECURITIES> 0
<RECEIVABLES> 271,941
<ALLOWANCES> 42,971
<INVENTORY> 43,664
<CURRENT-ASSETS> 364,546
<PP&E> 905,263
<DEPRECIATION> (363,152)
<TOTAL-ASSETS> 1,985,381
<CURRENT-LIABILITIES> 1,510,225
<BONDS> 1,400,624
0
0
<COMMON> 8,599
<OTHER-SE> (934,067)
<TOTAL-LIABILITY-AND-EQUITY> 1,985,381
<SALES> 741,319
<TOTAL-REVENUES> 741,319
<CGS> 486,828
<TOTAL-COSTS> 486,828
<OTHER-EXPENSES> 754,489
<LOSS-PROVISION> 1,082
<INTEREST-EXPENSE> 31,236
<INCOME-PRETAX> (532,316)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (532,316)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
