-----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 10-QSB
-----------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
Commission File Number 0-25982
METRO DISPLAY ADVERTISING, INC.
(exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0093323
(State of Incorporation) (IRS Employer Identification No.)
SUITE 100
15265 ALTON PARKWAY
IRVINE, CA 92618
(address of principal executive offices)
(714) 727-3333
(issuer's telephone number, including area code)
-------------------------------------------------------
Indicate by check mark 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 preceding 12 months (or for each such shorter period that the
registrant was required to file such report), and (2) has been filing such
requirements for the past 90 days.
YES [ X ] NO [ ]
Number of shares outstanding of each issuer's classes of
common stock, as of June 30, 1996: 906,364
- -----------------------------------------------------------------
This report contains 10 sequentially numbered pages.
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1, Financial Statements
METRO DISPLAY ADVERTISING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, June 30,
1995 1996
----------- -----------
(unaudited)
CURRENT ASSETS
Cash ......................................... 225,524 175,677
Accounts receivable, net of allowance ........ 1,377,859 862,968
Prepaid expenses and other assets ............ 39,330 7,383
Deferred taxes - current portion ............. 235,000 235,000
----------- -----------
TOTAL CURRENT ASSETS ..................... 1,877,713 1,281,028
PROPERTY AND EQUIPMENT, net .................. 6,766,441 6,551,569
OTHER ASSETS
Performance bond deposits .................... 694,722 713,222
Deferred taxes - less current portion ........ 2,924,000 2,924,000
Other assets ................................. 102,033 103,697
----------- -----------
TOTAL OTHER ASSETS ....................... 3,720,755 3,740,919
----------- -----------
$12,364,909 $11,573,516
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt .............. 751,622 751,622
Accounts payable & accrued expenses ............ 1,187,760 1,097,762
Advanced payments .............................. 214,118 214,118
----------- -----------
TOTAL CURRENT LIABILITIES .................. 2,153,500 2,063,502
LONG-TERM DEBT, net of current portion ......... 1,320,848 1,035,771
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, 1,000,000 shares
authorized, no par value,
no shares issued
Common stock, 5,000,000 shares ................. 9,504,532 9,504,532
authorized, no par value
Accumulated Deficit ............................ (613,971) (1,030,289)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY ................. 8,890,561 8,474,243
------------ ------------
$ 12,364,909 $ 11,573,516
============ ============
See accompanying Notes to Condensed Financial Statements.
2
<PAGE>
METRO DISPLAY ADVERTISING INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Three Months Ended
June 30,
1995 1996
----------- -----------
SALES ............................................ $ 2,107,558 $ 1,756,000
COST OF SALES
City fees .................................... 396,621 485,317
Advertising commissions and expenses ......... 558,122 442,592
Other costs .................................. 379,823 356,762
----------- -----------
TOTAL COST OF SALES .................... 1,334,566 1,284,671
GROSS PROFIT ................................. 772,992 471,329
----------- -----------
OPERATING EXPENSES
Sales and administrative ...................... 330,709 316,307
Depreciation .................................. 235,329 237,750
Interest expense .............................. 29,452 35,998
Other expense (Income) ........................ (21,235) (65,261)
----------- -----------
TOTAL OPERATING EXPENSES ................ 574,255 524,794
----------- -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST & TAX . 198,737 (53,465)
MINORITY INTEREST ................................ (1,974) -0-
NET INCOME (LOSS) BEFORE INCOME TAX .............. 196,763 (53,465)
INCOME TAX ....................................... (67,245) -0-
NET INCOME (LOSS) ................................ $ 129,518 $ (53,465)
=========== ===========
COMMON SHARES OUTSTANDING ........................ 823,030 906,364
=========== ===========
NET INCOME (LOSS) PER SHARE ...................... .16 (.06)
=========== ===========
See accompanying Notes to Condensed Financial Statements.
3
<PAGE>
METRO DISPLAY ADVERTISING INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30,
1995 1996
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) ................................ $ 226,814 (416,318)
Adjustments to reconcile net income to net cash
provided (used) by operating activities:
Depreciation and amortization .................... 470,333 474,393
Changes in operating assets and liabilities;
Accounts receivable ............................ (199,823) 514,891
Prepaid expenses ............................... 5,000 31,947
Deposits and other ............................. 21,124 (1,664)
Deferred income tax ............................ (89,000) -0-
Accounts payable and accrued expenses .......... (61,636) (89,998)
Advanced payments .............................. (59,868) -0-
Income tax payable ............................. (205,000) -0-
Minority interest .............................. 10,670 -0-
Loss on sale of assets ......................... -0- (6,967)
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES ................................ 118,614 506,284
CASH FLOWS FROM INVESTING ACTIVITIES
Loans made ...................................... 1,360 -0-
Purchase of property and equipment .............. (100,892) (252,554)
Performance bond deposits ....................... (33,500) (18,500)
--------- ---------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES ................... (133,032) (271,054)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reductions of long-term debt .......... (20,281) (285,077)
Proceeds from utilization of credit line ........ -0- -0-
NET CASH PROVIDED (USED) BY
FINANCING ACTIVITIES .................. (20,281) (285,077)
NET INCREASE (DECREASE) IN CASH ...................... (34,699) (49,847)
Beginning of period ............................ 121,268 225,524
--------- ---------
CASH, End of period .................................. $ 86,569 $ 175,677
========= =========
See accompanying Notes to Condensed Financial Statements.
4
<PAGE>
METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
Six Months Ended
June 30,
1995 1996
----------- -----------
SALES ............................................ $ 3,692,679 $ 3,033,436
COST OF SALES
City fees ................................... 776,057 856,028
Advertising commisions & expenses ........... 820,187 743,823
Other costs ................................. 680,763 763,570
----------- -----------
TOTAL COST OF SALES .................. 2,277,007 2,363,421
----------- -----------
GROSS PROFIT ..................................... 1,415,672 670,015
----------- -----------
OPERATING EXPENSES
Sales and administrative ...................... 579,405 632,389
Depreciation .................................. 470,718 474,393
Interest expense .............................. 58,424 70,871
Other expense (Income) ........................ (46,359) (91,320)
----------- -----------
TOTAL OPERATING EXPENSES ................ 1,062,188 1,086,333
----------- -----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST & TAX 353,484 (416,318)
MINORITY INTEREST ................................ (10,670) -0-
----------- -----------
NET INCOME (LOSS) BEFORE INCOME TAX ............. 342,814 (416,318)
INCOME TAX ....................................... (116,000) -0-
----------- -----------
NET INCOME (LOSS) ................................ $ 226,814 $ (416,318)
=========== ===========
COMMON SHARES OUTSTANDING ....................... 823,030 906,364
=========== ===========
NET INCOME (LOSS) PER SHARE ...................... .28 (.46)
=========== ===========
See accompanying Notes to Condensed Financial Statements.
5
<PAGE>
METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Introduction
The accompanying condensed consolidated financial statements of Metro
Display Advertising, Inc. (the "Company") have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be read
in conjunction with the consolidated financial statements and related footnotes
included in the Company's latest Annual Report on Form 10K-SB. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of June 30,
1996, and the statements of its operation and its cash flows for the six month
periods ended June 30, 1996 and 1995 have been included. The results of
operation for interim periods are not necessarily indicative of the results
which may be realized for the full year.
See accompanying Notes to Condensed Financial Statements.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Plan of Operations
GENERAL
From January 22, 1992 until January 7, 1994, Metro Display Advertising,
Inc., a California Corporation (the "Company"), was in bankruptcy. Since its
bankruptcy proceedings, the Company has primarily been in the business of
leasing advertising space on panels located in its bus stop shelters. The
Company's shelters are located in both Northern and Southern California. In
addition, the Company operates in Clark County, Nevada, and the City of Las
Vegas, Nevada through Bustop Shelters of Nevada (BSON), a Nevada Corporation and
a fully owned subsidiary.
During the fiscal years ended December 31,1994 and 1995, the Company made
the transition from a company operating under the bankruptcy court in prior
years, to a company operating under a revised business plan. The Company's
primary focus was on increasing sales and occupancy rates, reducing overhead,
and continuing scheduled payments to pre-bankruptcy creditors in conformance
with the bankruptcy Plan of Reorganization. The Company's objectives for fiscal
year 1996 remain dedicated to this business plan in the belief that this course,
in the long term, will increase our geographic markets and related revenues and
profits.
Comparison of six-months ended June 30, 1995 and June 30, 1996.
Sales for the six month period ended June 30, 1996 (the "Current Period")
decreased by $659,243, or 18%, under sales from the six month period ended June
30, 1995 (the "Prior Period). The decline in sales is attributable to the
ongoing litigation with the City of Victorville involving the Company's First
Amendment Rights and the affect this litigation has had on the advertising
market. The company is, however, hopeful of improving sales in the remaining
quarters of the year via an intensive marketing campaign instituted in the
latter portion of the preceding quarter.
Cost of sales for the current period increased by $86,414, or 3.8% over
then prior period. The increase is primarily due to increases in City fees,
representing additional municipal contracts added during the year and increases
in other costs. Other costs include the cost of installing and maintaining
shelters (including repairs, cleaning, license fees and property taxes). The
company continues to upgrade its shelters in conjunction with its ongoing
efforts to raise shelter occupancy and advertising rates.
The company's gross margin percentages have declined from 38.8% in the
prior period to 22.1% in the current period. The principal reason for this
decline is the 17.9% decrease in sales for the current period. In addition, the
increases in City fees and other costs have contributed to a negative change of
52.7% in gross margin from the prior period.
7
<PAGE>
Operating expenses increased modestly in the current period by $24,145, or
2.3%, from the prior period. The increases in sales and administrative expenses
of $52,984 and interest expense of $12,447 were partially offset by an increase
in other income of $44,961, Other income consisted primarily of shelter sales
and insurance reimbursements. The company sold twenty eight of its excess
shelters held in inventory to a competitor.
As a result, the company is reporting a net loss before taxes of $416,318
for the current period compared to a net income before taxes of $342,814 in the
prior period. The company is increasing its emphasis on increased sales and
reducing costs in an effort to make up the shortfall during the six month period
ended June 30, 1996.
Comparison of three-months ended June 30,1995 and June 30, 1996.
Sales for the three-month quarter ended June 30, 1996, (the "Current
Quarter"), declined $351,558, or 16.7% over sales for the three-month period
ended June 30, 1995 (the "Prior Quarter"). The decline in sales is attributable
to the on-going litigation with the City of Victorville involving the Company's
First Amendment Rights.
Cost of sales declined by $49,895, or 3.7% in the current quarter, in
comparison to the prior quarter. This modest decline is attributable to lower
commissions directly proportionate to sales. City fees have increased as a
percentage of sales from 18.8% in the prior quarter to 27.6% in the current
quarter due to the fixed costs associated with the additional municipal
contracts obtained in the current quarter.
The company's gross margin percentage decreased from 36.7% in the prior
quarter to 26.8% in the current quarter. The decrease in gross margin over the
prior quarter is primarily the result of the 16.7% decline in sales.
Operating expenses declined in the current quarter by approximately
$49,461, or 8.6%, in comparison to the prior quarter. This decline is due to an
increase in other income by $44,026. Operating expenses are expected to remain
flat during the remaining two quarters of the year in an effort to minimize
expenses to offset the decline in sales.
Net Income percentage before taxes decline from 9.3% in the prior quarter
to -3.0% in the current quarter; a decrease of $250,228 in comparison to the
prior quarter. Declining sales is the main reason for the deterioration in
earnings before taxes.
8
<PAGE>
Liquidity and Capital Resources
As of June 30, 1996, the Company's current liabilities exceeded its
current assets by $782,474. The Company's current ratio declined by 28.7% during
the six month ended June 30, 1996. The decline is directly attributable to a
decrease in sales of $659,243 during the six months ended June 30, 1996. The
Company believes that it will be able to fund its current working capital
requirements from cash generated from operating activities and/or draws against
the credit line facility. The company reported a net cash provided from
operations of $505,284 for the six months ended June 30, 1996. This is primarily
due to a reduction in accounts receivable by $514,891 during the period.
PART II
Other Information
Item 4. Submission of Matters to Vote of Security Holders
The Company held its Annual Meeting of Stockholders on June 22, 1996. The
matters voted upon at the meeting were as follows: (a) To elect a Board of
Directors for the company to serve until the next Annual Meeting of
Stockholders; and (b) to ratify the appointment of Stinchfield & Co. as
independent auditors for the company for the fiscal year ending December 31,
1996.
The voting on each proposal was as set forth in the table below:
1. Election of Directors:
For Withhold Authority
--- ------------------
Dr. Allan L. Ross 411,624 16,544
William M. Slater 411,624 16,544
Mark Boileau 402,912 25,256
2. To ratify the appointment of Stinchfield & Co. as independent
auditors for the company for the fiscal year ending December 31,
1996:
For Against Abstain
--- ------- -------
` 415,144 7,656 5,368
9
<PAGE>
Signature
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
METRO DISPLAY ADVERTISING, INC.
Dated August 5, 1996 /s/ Scott A. Kraft
---------------------------
Scott A. Kraft, President
and Chief Financial Officer
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Metro Display FDS for June 30, 1996
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 175,677
<SECURITIES> 0
<RECEIVABLES> 980,743
<ALLOWANCES> (117,775)
<INVENTORY> 0
<CURRENT-ASSETS> 1,281,028
<PP&E> 7,995,776
<DEPRECIATION> (2,280,620)
<TOTAL-ASSETS> 11,573,516
<CURRENT-LIABILITIES> 2,063,502
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 9,504,532
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 11,573,516
<TOTAL-REVENUES> 1,756,000
<CGS> 0
<TOTAL-COSTS> 1,284,671
<OTHER-EXPENSES> 1,809,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 35,998
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,465)
<EPS-PRIMARY> 0
<EPS-DILUTED> (0.06)
</TABLE>
