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 September 30, 1997
Commission File Number 0-025982
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 of 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 September 30 1997: 943,030
This report contains 9 sequentially numbered pages.
<PAGE>
METRO DISPLAY ADVERTISING, INC.
INDEX
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1997 and December 31, 1996 2
Condensed Consolidated Statement of Operations
for the Three Months Ended September 30, 1997 and 1996 3
Condensed Consolidated Statement of Operations
for the Six Months Ended September 30, 1997 and 1996 4
Condensed Consolidated Statement of Cash Flows
for the Three Months Ended September 30, 1997 and 1996 5
Notes to the Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-8
PART II - OTHER INFORMATION
Item 5. Other Information 9
<PAGE>
PART 1
Financial Information
Item 1, Financial Statements
METRO DISPLAY ADVERTISING, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
December 31, September 30,
1996 1997
------------ ------------
(unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 74,947 $ (5,254)
Accounts Receivable, net of allowance 989,804 991,788
Prepaid expenses 226,844 11,704
Deferred taxes-current portion 196,000 196,000
------------ ------------
TOTAL CURRENT ASSETS 1,487,595 1,194,238
PROPERTY AND EQUIPMENT, net 6,172,659 5,659,278
OTHER ASSETS
Performance bond deposits 734,722 734,722
Deferred taxes - less current portion 3,052,000 3,052,000
Other assets 186,528 263,906
------------ ------------
TOTAL OTHER ASSETS 3,973,250 4,050,628
------------ ------------
$ 11,633,504 $ 10,904,144
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 693,065 $ 865,079
Accounts payable and accured liabilities 1,031,117 1,168,982
Advance payments 226,067 150,000
------------ ------------
TOTAL CURRENT LIABILITIES 1,950,249 2,184,061
LONG-TERM DEBT, net of current portion 833,785 866,469
SHAREHOLDERS' EQUITY
Preferred stock, 1,000,000 shares authorized,
no par value, no shares issued -- --
Common stock, 5,000,000 shares authorized,
no par value, 943,030 shares issued 9,504,532 9,504,832
Accumulated deficit (655,062) (1,651,218)
------------ ------------
TOTAL SHAREHOLERS' EQUITY 8,849,470 7,853,614
------------ ------------
$ 11,633,504 $ 10,904,144
============ ============
</TABLE>
See accompanying Notes to condensed Financial Statements
<PAGE>
METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY
CONDENDSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1996 1997
------------ ------------
<S> <C> <C>
SALES $ 2,786,539 $ 1,606,230
COST OF SALES
City fees 710,397 578,269
Advertising commissions and expenses 745,418 353,510
Installation and maintenance 370,374 350,575
Other costs 18,873 14,497
------------ ------------
TOTAL COST OF SALES 1,845,062 1,296,851
GROSS PROFIT 941,477 309,379
------------ ------------
OPERATING EXPENSES
Sales and administrative 382,232 517,101
Depreciation 240,447 235,143
Interest expense 34,352 29,406
Other expense(income) (52,954) (112)
------------ ------------
TOTAL OPERATING EXPENSES 604,077 781,538
------------ ------------
NET INCOME (LOSS) $ 337,400 $ (472,159)
============ ============
COMMON SHARES OUTSTANDING 906,364 990,030
NET INCOME (LOSS) PER SHARE 0.37 (0.48)
============ ============
</TABLE>
See accompanying Notes to Condensed Financial Statements
<PAGE>
METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY
CONDENDSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1997
------------ ------------
<S> <C> <C>
SALES $ 5,819,975 $ 5,446,982
COST OF SALES
City fees 1,566,425 1,508,192
Advertising commissions and expenses 1,489,241 1,340,124
Installation and maintenance 1,010,378 1,072,935
Other costs 142,439 83,084
------------ ------------
TOTAL COST OF SALES 4,208,483 4,004,335
GROSS PROFIT 1,611,492 1,442,647
------------ ------------
OPERATING EXPENSES
Sales and administrative 1,014,621 1,680,186
Depreciation 714,840 705,657
Interest expense 105,223 92,778
Other expense(income) (144,274) (39,818)
------------ ------------
TOTAL OPERATING EXPENSES 1,690,410 2,438,803
------------ ------------
NET INCOME (LOSS) $ (78,918) $ (996,156)
============ ============
COMMON SHARES OUTSTANDING 906,364 990,030
NET INCOME (LOSS) PER SHARE (0.09) (1.01)
============ ============
</TABLE>
See accompanying Notes to Condensed Financial Statements
<PAGE>
METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss) $ (78,918) $ (996,156)
Adjustments ot reconcile net income to net cash provided
(used) by operating activities:
Depreciation and amortization 714,840 705,657
Changes in operating assets and liabilities:
Accounts receivable (248,127) (1,984)
Prepaid expenses and other 27,607 215,140
Deposits and other -- --
Accounts payable and accrued expenses 344,348 61,798
Loss on sale of assets (20,916) --
------------ ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 738,834 (15,545)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (354,678) (192,276)
Advances to joint venture (40,570) (77,378)
Performance bond deposits (36,500) --
------------ ------------
NET CASH PROVIDED FROM INVESTING ACTIVITIES (431,748) (269,654)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal reductions of long term debt (398,410) (275,302)
Loan proceeds -- 480,000
Proceeds from stock options granted -- 300
------------ ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (398,410) 204,998
NET INCREASE (DECREASE) IN CASH (91,324) (80,201)
Beginning of period 225,524 74,947
------------ ------------
CASH, End of period $ 134,200 $ (5,254)
============ ============
</TABLE>
See accompanying Notes to Condensed Financial Statements
<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 10-KSB. 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
September 30, 1997, and the statements of its operation and its cash flows for
the three month periods ended September 30, 1997 and 1996 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.
<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 Shelter of Nevada, (BSON), a Nevada Corporation and
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 Plan of Reorganization. The
Company's objectives for fiscal year 1997 remain dedicated to this business
plan.
Comparisons of three-months ended September 30, 1997 and September 30, 1996
Sales for the three-month quarter ended September 30, 1997 (the
"Current Quarter") decreased by 42% in comparison to the three-month period
ended September 30, 1996 (the "Prior Quarter"). The company's revenues from
national accounts has dropped significantly due to the company's current
litigation with its national advertising agency and selling agent. The company
continues with its intensive marketing and public relations campaign that has
been staged to offset the on-going litigation with the City of Victorville. The
on-going litigation involves the Company's First Amendment Rights. In general,
the Company believes that its rights to freely advertise were violated when the
City prevented the Company from displaying paid advertising for a local labor
union. While the Current Quarter results have been signifantly down compared to
prior year, it is expected that this litigation will continue to impact sales
growth in the remaining quarter of 1997. Current litigation concerning the
marketing agreement with Van Wagner is also expected to impact sales negatively
during the remaining quarter of the 1997.
Cost of sales decreased by $548,211 or 30% over the prior quarter
primarily due to decreases in City fees of $132,128 or 19% and decreases in
advertising commission expenses of $391,908, or 53%. The decreases in City fees
are primarily due to a decrease in the amount accrued for City fees in the
Current Quarter. The decreases in advertising commission expenses are the result
of significant decline in national sales, resulting in lower commisions in the
Current Quarter.
The Company's gross profit percentage declined from 34% in the Prior
Quarter to 19% in the Current Quarter, primarily resulting from lower revenues
assoicated with fixed costs of maintaining the bus shelters.
An increase of $177,461 was incurred in operating expenses during the
Current Quarter principally due to increases in office expenses due to office
expansion in Nevada, an increase in bad debts, and legal expenses necessary to
deal with the Victorville litigation. In addition, the Company has incurred
professional fees relating to sale/merger agreement pending.
<PAGE>
Due to the significant increase in operating expenses relating to
sale/merger and litigation expenses, the Company posted a $472,159 net loss,
before income taxes, during the Current Quarter compared to a $337,400 net
lncome before taxes during the Prior Quarter. The Company has maintained its
primary focus on increasing sales and occupancy rates, and reducing overhead.
Comparisons of nine-months ended September 30, 1997 and September 30, 1996
Sales for the nine-month period ended September 30, 1997 (the "Current
Period") decreased by $372,993, or 6%, in comparison to the nine-month period
ended September 30, 1996 (the "Prior Period"). This decrease in sales in the
Current Period is attributable to a significant decline in revenues during the
Current Quarter. As previously mentioned the Company's litigation with Company's
national sales agent has affected national sales significantly, resulting in
lower panel occupancy.
Cost of sales decreased by $204,148 or 5% over the Prior Period primarily
due to a decreases of $58,233, or 4% in City fees, and a decrease of $149,117,
or 10% in advertising commissions and expenses.
The Company's gross profit percentage decreased from 28% in the Prior
Period to 26% in the Current Period. The decline of $168,845 or 10% is the
result of lower occupancy and decreases in national account sales.
An increase of $748,393 was incurred in operating expenses during the
Current Period principally due to increases in Professional fees of $284,765, an
increase in bad debts of $132,341 written off during the second quarter, and a
general increase in other operating expenses of $122,202.
Due to the significant increase in operating expenses coupled with a
decline in sales of $372,993 during the Current Period, the Company posted a
$996,156 net loss, before income taxes, during the Current Period compared to a
$78,918 net loss before taxes during the Prior Period.
Liquidity and Capital Resources
As of September 30, 1997, the Company's current liabilities exceeded
its current assets by $989,823. Approximately $670,000 of the current
liabilities consists of the current portion of indebtedness owed to Dr. Allan
Ross, a Director of the Company. The Company's working capital position worsened
by $527,169 during the Current Period, primarily the result of increases in
operating expenses of $748,393. Cash flows from operating activities decreased
by $754,379 over the Prior Period, principally due to the net loss of $996,156
for the Current Period. The Company utilized $480,000 against the credit line
facility during the Current Quarter to fund current operations. The Company
believes that it will be able to fund its current working capital needs from (1)
cash generated from operating activities and (2) draws against the credit line
facility.
<PAGE>
PART II
OTHER INFORMATION
Item 5, Other Information
Subsequent to year-end December 31, 1996, the Company signed a memorandum of
understanding with a buyer for the sale of all 100% of Metro Display
Advertising, Inc. common stock. The transaction is subject to stockholder
ratification and completion of due diligence procedures to be performed by the
buyer. The Company continues to negotiate the terms and conditions of the sale,
given its pending litigation with OSI/Van Wagner concerning contractual and
fiduciary relationships between the Company and Van Wagner Communications, Inc.
Signature
Pursuant to the requirements 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.
/s/ Scott Kraft
Dated November 14, 1997 -------------------------------
Scott A. Kraft, President
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> (5,254)
<SECURITIES> 0
<RECEIVABLES> 1,165,327
<ALLOWANCES> (173,539)
<INVENTORY> 0
<CURRENT-ASSETS> 1,194,238
<PP&E> 8,998,869
<DEPRECIATION> (3,339,591)
<TOTAL-ASSETS> 10,904,144
<CURRENT-LIABILITIES> 2,184,061
<BONDS> 0
0
0
<COMMON> 9,504,832
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 10,904,144
<SALES> 5,446,982
<TOTAL-REVENUES> 5,446,982
<CGS> 4,004,335
<TOTAL-COSTS> 4,004,335
<OTHER-EXPENSES> 2,438,803
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,778
<INCOME-PRETAX> (996,156)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (996,156)
<EPS-PRIMARY> (1.01)
<EPS-DILUTED> .00
</TABLE>
