United States
Securities and Exchange Commission
WASHINGTON, D. C. 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 30, 1999
-------------------------------------------------
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-28158
KIDEO PRODUCTIONS, INC.
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(Exact name of small business issuer as specified in its charter)
DELAWARE 13-3729350
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
611 Broadway, Suite 523, New York, New York 10012
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(Address of principal executive office) (Zip Code)
212-505-6605
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(Issuer's telephone number including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act 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 |_|
As of June 11, 1999, 3,775,886 shares of the issuer's common stock were
outstanding.
Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
This report contains 12 pages
1
<PAGE>
KIDEO PRODUCTIONS, INC.
FORM 10-QSB
INDEX
PART I Financial Information: Page
No.
Consolidated Balance Sheet as of April 30, 1999 (unaudited)
and July 31, 1998 ............................................ 3
Consolidated Statement of Operations for the three and nine
months ended April 30, 1999 and 1998 (unaudited).............. 4
Consolidated Statement of Cash Flows for the nine months ended
April 30, 1999 and 1998 (unaudited)........................... 5
Notes to the Consolidated Financial Statements (unaudited)...... 6
Management's Discussion and Analysis or Plan of Operation....... 7
PART II. Other Information............................................... 11
Signatures...................................................... 12
2
<PAGE>
KIDEO PRODUCTIONS, INC.
CONSOLIDATED BALANCE SHEET
(unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
at April 30, at July 31,
1999 1998*
--------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents (including restricted cash of $75,000
at April 30, 1999 and July 31, 1998) ................................... $ 119 $ 82
Accounts receivable trade .............................................. 213 92
Inventory .............................................................. 51 53
Prepaid expenses ....................................................... 127 169
-----------------------
Total current assets ................................................. 510 396
Property and equipment, net .............................................. 200 220
Capitalized content costs, net ........................................... 239 387
Other assets ............................................................. 90 68
-----------------------
Total assets ......................................................... $ 1,039 $ 1,071
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Notes Payable .......................................................... $ 100 $ --
Accounts payable ....................................................... 925 736
Accrued expenses ....................................................... 776 348
Capital leases, current portion ........................................ 17 49
Unearned revenue ....................................................... 1,108 1,028
Convertible notes payable ($246,668 net of $0 discount at April 30, 1999
and $620,000 net of $372,000 of discount
at July 31, 1998) ...................................................... 248 248
-----------------------
Total current liabilities ............................................ 3,174 2,409
Capital leases, long term portion ........................................ 5 10
-----------------------
Total liabilities .................................................... $ 3,179 $ 2,419
-----------------------
Shareholders' Equity
Common Stock, $.0001 par value; authorized 15,000,000 shares, issued and
outstanding 3,775,886 shares at April 30,1999 and
July 31, 1998 .......................................................... -- --
Additional paid-in capital ............................................. 10,551 10,551
Accumulated deficit .................................................... (12,691) (11,899)
-----------------------
Shareholders' (Deficiency) Equity ..................................... (2,140) (1,348)
-----------------------
Total liabilities and shareholders' equity ........................... $ 1,039 $ 1,071
=======================
</TABLE>
* Derived from the Form 10-KSB
See accompanying notes.
3
<PAGE>
KIDEO PRODUCTIONS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited)
(Dollars in thousands except for per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
April 30, April 30, April 30, April 30,
1999 1998 1999 1998
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Sales ............................. $ 902 $ 229 $ 4,007 $ 822
Cost of sales ..................... 532 283 1,831 832
----------------------------- -----------------------------
Gross profit (loss) ............... 370 (54) 2,176 (10)
Selling expenses .................. 391 278 1,464 885
General and administrative expenses 359 348 1,052 1,002
----------- ----------- ----------- -----------
Loss from operations .............. (380) (680) (340) (1,897)
Other (expense), net .............. (143) (156) (452) (208)
----------------------------- -----------------------------
Net (loss) ........................ $ (523) $ (836) $ (792) $ (2,105)
============================= =============================
Basic and diluted (loss) per share $ (.14) $ (.23) $ (.21) $ (0.59)
============================= =============================
Weighted average number of shares
outstanding basic and diluted ... 3,775,886 3,694,628 3,775,886 3,570,899
=========== =========== =========== ===========
</TABLE>
See accompanying notes
4
<PAGE>
KIDEO PRODUCTIONS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Nine months ended
April 30, April 30,
1999 1998
-------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ................................................ $ (792) $(2,105)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization of operating assets ..... 687 706
Changes in operating assets and liabilities:
Accounts receivable ................................. (121) (640)
Inventory ........................................... 2 (32)
Prepaid expenses and other current assets ........... 42 (69)
Other assets ........................................ (38) (105)
Accounts payable .................................... 189 290
Accrued expenses .................................... 435 188
Unearned revenue .................................... 80 1,378
-------------------
Net cash provided by (used in) operating activities 484 (389)
-------------------
Cash flows from investing activities:
Purchase of property and equipment ...................... (130) (24)
Increase in capitalized content costs ................... -- (419)
-------------------
Net cash used in investing activities ............. (130) (443)
-------------------
Cash flows from financing activities:
Net proceeds from issuances of capital stock ............ -- 275
Proceeds from long term debt ............................ -- 500
Proceeds from short term debt ........................... 100
Principal payments on capital leases .................... (44) --
Principal payments on convertible debt .................. (373) (73)
-------------------
Net cash (used in) provided by financing activities (317) 702
-------------------
Net increase (decrease) in cash and cash equivalents ...... 37 (130)
Cash and cash equivalents at the beginning of the period . 82 164
-------------------
Cash and cash equivalents at the end of the period ........ $ 119 $ 34
===================
</TABLE>
See accompanying notes.
5
<PAGE>
KIDEO PRODUCTIONS, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The interim financial data is unaudited; however, in the opinion of
management, the interim data includes all adjustments, consisting of all normal
recurring adjustments, necessary for a fair statement of results for the interim
periods. The financial statements included herein have been prepared by the
Company pursuant to the rules and regulations of the Securities and Exchange
Commission. 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 such rules and
regulations, although the Company believes that the disclosures included herein
are adequate to make the information presented not misleading. Operating results
for the nine months ended April 30, 1999 are not necessarily indicative of the
results that may be expected for the fiscal year ending July 31, 1999.
The organization and the business of the Company, accounting policies
followed by the Company and other information are contained in the notes to the
Company's consolidated financial statements filed as part of the Company's
annual report for the fiscal year ended July 31, 1998 on Form 10-KSB. This
quarterly report should be read in conjunction with such annual report.
For comparability, certain April 30, 1998 amounts have been reclassified
where appropriate to conform to the financial statement presentation used at
April 30, 1999.
In February 1997, FASB issued Statement No. 128, "Earnings Per Share"
which is effective for periods ending after December 15, 1997. The Company
adopted SFAS No. 128 for the year ending July 31, 1998 and has restated its
weighted-average shares for all the prior periods presented.
Subsequent Events
On May 11, 1999, the Company entered into a Note and Warrant Purchase
Agreement. The Company sold, (1) convertible notes having an aggregate principal
amount of $1,400,001 due May 15, 2000, (2) warrants to purchase an aggregate of
1,400,001 of Common Stock of the Company, exercisable after August 31, 1999
through August 31, 2004 at an exercise price of $.80 per share.
The first closing under the Purchase Agreement took place May 12,1999. The
Company received $1,000,002 and delivered notes in such principal amount and
warrants to purchase 1,000,002 shares of the Company's Common Stock. The second
closing took place May 26, 1999. The Company received $399,999 and delivered
notes in such principal amount and warrants to purchase 399,999 shares of the
Company's Common Stock.
The discount of the beneficial conversion feature of the notes and the
fair market value of the warrants will be treated as additional discount on the
issuance of the note, and accordingly will be netted against the principal
amount outstanding. The conversion feature is to be amortized from the date the
security was issued through the end of the conversion period and the warrants
are amortized over the life of the debt.
The proceeds from this financing were used to pay the short term debt of
$100,000 and the $248,000 of convertible debt outstanding from a prior financing
along with accrued interest. The remaining funds will be applied towards prior
payables and working capital.
6
<PAGE>
KIDEO PRODUCTIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The information set forth in "Management's Discussion and Analysis" below
includes "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended, and is subject to the safe harbor
created by that section. Readers are cautioned not to place undue influence on
these forward-looking statements, as they speak only as of the date hereof.
General
The Company was organized in August 1993 to develop, manufacture and market
personalized videos for children. The process of mass-producing individual
videos featuring a subject's likeness and spoken name was developed internally
by the Company. The Company claims proprietary rights in its technologies and
productions process. In April 1997, the Company was issued a U.S. patent
relating to its digital process (Patent No. 5,523,587). Since its inception the
Company has expanded its personalized product line to include books, stickers
and calendars featuring licensed and proprietary characters in some products.
Revenue Recognition
The Company's products are marketed directly to consumers and also through
mail-order catalogs, retail sales and television shopping networks. All customer
orders, regardless of their source, are processed at the Company's manufacturing
plant in New York City.
The Company generally records an account receivable and a corresponding
liability for unearned revenue for personalized product order kits shipped to
television shopping networks, mail order houses, catalogs and other retail
vendors. Revenue is recognized on the accrual basis when the personalized
product is shipped to the ultimate consumer.
Results of Operations
The following discussion should be read in conjunction with the Company's
financial statements and notes thereto appearing elsewhere in this report.
Nine month comparisons: Comparison of the nine month fiscal period from August
1, 1998 through April 30, 1999, ("Current Period") against the nine month fiscal
period from August 1, 1997 through April 30, 1998 ("Prior Period"):
Sales: Sales increased 388% in the Current Period to $4,007,000 as compared to
$822,000 in the Prior Period. Direct to consumer sales increased in the Current
Period 314% or an increase of $1,551,000 to $2,045,000 while vendor-based sales
(catalog, mail order houses and television shopping networks) increased 498% or
$1,639,000 to $1,962,000 in the Current Period. Overall the sales for the
Current Period of $4,007,000 have exceeded fiscal 1998 sales of $2,033,000 by
97%.
Personalized tape sales were up 329% to $3,421,000 in the Current Period as
compared to $798,000 in the Prior Period and accounted for 85% of total sales.
Direct to consumer tape sales increased 233% from the Prior Period to $1,584,000
and catalog and other retail-sourced tape sales increased 206% from the Prior
Period to $628,000. Tape sales from the shopping networks (electronic sales) of
$1,209,000 accounted for 35% of total tape sales in the Current Period and an
increase of 944% over the Prior Period. The increased tape sales were primarily
comprised of the Company's licensed Barney tape, "My Party With Barney."
7
<PAGE>
Personalized book and sticker sales, which premiered in the fourth quarter of
the fiscal year ended July 31, 1998, were $412,000 and $162,000, respectively in
the Current Period accounting for 10% and 4% of the Current Period revenue.
Sales of ancillary products of the Company's proprietary characters were less
then 1% and have not been significant to date.
Cost of Sales: The Company has reclassified certain selling expenses to cost of
goods sold for both the Current and Prior Periods, in order to better reflect
cost of goods sold. The Company had a gross profit of 54% or $2,176,000 in the
Current Period as compared to a gross loss of $10,000 in the Prior Period.
Continued inventory controls, improved manufacturing process and increases in
volume have reduced the cost of raw materials and direct labor per unit. Fixed
costs decreased $47,000 or 7% in the Current Period as compared to the Prior
Period. These reductions were in content amortization costs of $182,000 and
depreciation of $32,000 and were partially offset by increases in expense, which
are the direct result of increased volume such as rent and facility expense of
$42,000, creative costs of $19,000, manufacturing expenses of $7,000 and payroll
related expenses of $99,000. Royalty expense increased for the Current Period to
$406,000 or 10% of sales, which is primarily due to the sale of Barney licensed
products.
Selling expenses: Selling expenses increased $579,000 or 65% for the Current
Period from $885,000 in the Prior Period. The increase was mostly due to volume
related expenses in shipping of $272,000, commission of $10,000, prepaid kit
expenses of $68,000, credit card discount of $40,000 and customer service
related expenses of $109,000. Media and promotional expenses in regard to
direct-sales increased $66,000 and travel related expenses in regard to vender
based sales increased $12,000 in the current period as compared to the prior
period.
General and administrative expenses: The Company's general and administrative
expenses increased $50,000 or 5% to $1,052,000 in the Current Period from
$1,002,000 in the Prior Period. Related payroll expenses of $55,000 and overall
infrastructure expenses of $104,000 for rent, telephone, and supplies were due
to Company growth. Development expenses increased $17,000 as the Company
continues to develop new personalized product and improve its website. These
expenses were offset by decreases in depreciation of $58,000, professional fees
of $27,000, insurance of $31,000 and franchise taxes of $11,000.
Operating loss: The loss from operations decreased 82% or $1,557,000 to $340,000
in the Current Period as compared to an operating loss in the Prior Period of
$1,897,000.
Management continues to pursue strategic marketing alliances with the intent of
reducing its financial risk in direct-to-consumer promotions and to develop a
broader based distribution for the Company's products as evidenced by the
Current Period's sales results. There can be no assurances that these objectives
will continue to be achieved.
Other (expense) income: The Current Period reflects an increase of $244,000
which is primarily due to amortization of discount and deferred debt expense of
the convertible debt in regard to the January 1998, Financing along with debt
and lease interest expenses over interest income.
Net loss: The net loss in the Current Period decreased 62% to $792,000 or $0.21
basic and diluted loss per share on 3,775,886 average shares of common stock
outstanding, as compared to the Prior Period net loss of $2,105,000 or $0.59
basic and diluted loss per share on 3,570,899 average shares of common stock
outstanding.
8
<PAGE>
Three-month comparison: Comparison of the quarter from February 1, 1999 through
April 30, 1999, ("Current Quarter") against the quarter from February 1, 1998
through April 30, 1998 ("Prior Quarter"):
Sales: Sales increased 294% in the Current Quarter to $902,000 as compared to
$229,000 in the Prior Quarter. Sales gains were seen from all sources across the
board. Direct to the consumer sales were $487,000, up 441% or $397,000 in the
Current Quarter from Prior Quarter sales of $90,000. Vender-sourced sales
increased 199% to $415,000 in the Current Quarter as compared to $139,000 in the
Prior Quarter.
In the Current Quarter, tape sales were up 250% or $564,000 to $790,000 as
compared to the Prior Quarter and represented 88% of total revenue for the
period. Direct to consumer tape sales increased 341% or $297,000 to $384,000 and
vender-sourced catalog and retail tape sales increased 411% or $93,000 to
$116,000. Vender-sourced tape sales on the shopping networks (electronic sales)
increased $174,000 or 150% to $290,000 for the Current Quarter and represented
32% of total revenue for the period. The increased tape sales were primarily
comprised of the Company's newly licensed Barney tape, "My Party With Barney."
Personalized book and sticker sales, which premiered in the fourth quarter of
the fiscal year ended July 31, 1998, were $80,000 and $25,000, respectively in
the Current Quarter accounting for 9% and 3% of the Current Quarter revenue.
Sales of ancillary products of the Company's proprietary characters were less
then 1% and have not been significant to date.
Cost of Sales: The Company has reclassified certain selling expenses to cost of
goods sold for both the Current and Prior Quarters, in order to better reflect
cost of goods sold. The Company had a gross profit of 41% or $370,000 in the
Current Quarter as compared to a loss of $54,000 in the Prior Quarter. Continued
inventory controls, improved manufacturing process and increases in volume have
reduced the cost of raw materials and efficiency of direct labor per unit. Fixed
costs increased $5,000 or 2% in the Current Quarter as compared to the Prior
Quarter. The increased expenses mostly due to volume were in payroll and related
expense of $28,000, creative of $7,000 and facility expenses of $20,000. These
increases were offset by reductions in content amortization costs of $43,000 and
depreciation of $8,000. Royalty expense for the Current Quarter increased
$100,000 to $109,000 or 12% of sales, which is primarily due to the sale of
Barney licensed products.
Selling expenses: Selling expenses increased $113,000 or 41% for the Current
Quarter from $278,000 in the Prior Quarter. The increase was mostly due to
volume related expenses in shipping of $38,000, credit card discount of $11,000,
prepaid kit expenses of $27,000 and customer service related expenses of
$38,000. In addition, media and promotional costs related to the direct sales
increase were up $27,000 in the Current Quarter over the Prior Quarter. These
increases were offset by a decrease in vender-based sales commissions of
$27,000.
General and administrative expenses: The Company's general and administrative
expenses increased $11,000 or 3% to $359,000 in the Current Quarter from
$348,000 in the Prior Quarter. Increases were in payroll and related payroll
expense of $16,000, professional fees of $8,000 and overall infrastructure
expenses due to company growth of $29,000 inclusive of rent, telephone, and
supplies. These expenses were offset by decreases in depreciation of $24,000,
insurance of $7,000, travel of $7,000 and franchise taxes of $5,000 in the
Current Quarter as compared to the prior period.
Operating loss: The loss from operations decreased 44% or $300,000 to $380,000
in the Current Quarter as compared to an operating loss in the Prior Quarter of
$680,000.
Other (expense), net: The Current Quarter reflects a decrease of $13,000 which
is primarily due to the amortization of discount and deferred debt expense of
the convertible debt in regard to the January 1998, Financing along with debt
and lease interest expenses over interest income.
Net loss: The net loss in the Current Quarter was $523,000 or $0.14 basic and
diluted loss per share on 3,775,886 average shares of common stock outstanding,
as compared to the Prior Quarter net loss of $836,000, or $0.23 basic and
diluted loss per share on 3,694,628 average shares of common stock outstanding.
9
<PAGE>
Liquidity and Capital Resources
The Company's cash flow from operations was $484,000 for the Current Period as
compared to $389,000 cash used in the Prior Period. In addition, the Company
invested $130,000 in equipment and used $373,000 net for repayment of debt in
the Current Period.
The Company's capital requirements in connection with its development of new
product, infrastructure and marketing activities have been and continue to be
significant. The Company anticipates, based on its currently proposed plans and
assumptions relating to its operations, that anticipated revenues from
operations and its current cash and cash equivalent balances, along with the
proceeds of the May 1999, financing of $1,400,000 will be sufficient to fund the
Company's operations and capital requirements for the foreseeable future. The
Company is currently seeking additional financing. The Company has no current
arrangements with respect to any additional financing, and it is not anticipated
that existing stockholders will provide any portion of the Company's future
financing requirements. Consequently, there can be no assurance that any
additional financing will be available to the Company when needed, on
commercially reasonable terms, or at all.
On May 11, 1999, the Company entered into a Note and Warrant Purchase Agreement.
The Company sold, (1) convertible notes having an aggregate principal amount of
$1,400,001 due May 15, 2000 and (2) warrants to purchase an aggregate of
1,400,001 of Common Stock of the Company, exercisable after August 31, 1999
through August 31, 2004 at an exercise price of $.80 per share.
The first closing under the Purchase Agreement took place May 12, 1999. The
Company received $1,000,002 and delivered notes in such principal amount and
warrants to purchase 1,000,002 shares of the Company's Common Stock. The second
closing took place May 26, 1999. The Company received $399,999 and delivered
notes in such principal amount and warrants to purchase 399,999 shares of the
Company's Common Stock
The discount of the beneficial conversion feature of the notes and the fair
market value of the warrants will be treated as additional discount on the
issuance of the note and accordingly will be netted against the principal amount
outstanding. The conversion feature is to be amortized from the date the
security was issued through the end of the conversion period and the warrants
are amortized over the life of the debt.
The proceeds from the financing were used to pay the short term debt of $100,000
and the $248,000 of convertible debt outstanding from a prior financing along
with accrued interest. The remaining funds will be applied towards prior
payables and working capital.
Operating factors which would afford an evaluation of the Company's ability to
internally generate liquidity in both the short term and long term would include
the revenue growth rate (388% over the Prior Period), the 54% gross margin
generated from operating activities and the rate of selling, general and
administrative expense spending relative to the revenue generated. Operating
cash flow as evidenced by earnings adjusted for the non-cash expenses of
depreciation, amortization of content costs and non-cash write-offs (providing
$484,000 from operating activities for the Current Period) would provide an
indication of management's ability to fund future operating activities; these
factors must be evaluated along with management's actions to increase its
revenue stream, increase the efficiency of its marketing efforts, and control
the costs of its infrastructure.
The Company's material commitments and plans for capital expenditures at the
present time are driven by order volume. Currently, the Company's sales volume
can be met with existing production equipment, and increases in volume can be
met by adding additional shifts with existing equipment. Capital expansion for
additional production equipment will be driven by increases in sales volume and
will be funded by such revenues and any available equipment financing
agreements.
Because the Company has operated at a loss since its inception and has not
generated sufficient revenue from its operations to fund its activities, it has,
to date, been substantially dependent on loans from its stockholders and private
and public offerings of its securities to fund its operations.
10
<PAGE>
Year 2000 Compliance
The Company's database and present accounting system are year 2000 compliant.
The Company does not anticipate any material additional costs with regard to its
year 2000 compliance. The year 2000 issue is not expected to effect the systems
of various entities with which the Company interacts including customers and
suppliers. However, there can be no assurance that the systems of other
companies on which the Company relies will be timely converted, or that a
failure by another company's system to be year 2000 compliant would not have a
material adverse effect on the Company.
New Accounting Announcements
In June 1997, the FASB issued SFAS No. 131 "Disclosures About Segments of an
Enterprise and Related Information." SFAS No. 131 requires entities to disclose
financial and detailed information about their operating segments in a manner
consistent with internal segment reporting used by the Company to allocate
resources and asses financial performance. SFAS No. 131 is effective for
financial statements for periods beginning after December 15, 1997 and requires
comparative information for earlier years to be presented. The Company will
adopt SFAS No. 131 for the fiscal year ending July 31, 1999. This statement
expands and modifies financial statement disclosures and accordingly, has no
impact on the Company's results of operations, earnings per share or financial
position.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes in the litigation reported in the
Company's annual report on Form 10-KSB for the year ended July 31, 1998 as
filed.
Item 2. Changes in Securities
On May 11, 1999, the Company entered into a Note and Warrant Purchase
Agreement (the "Purchase Agreement") with Felton Investments Ltd.,
Greatview Investments Ltd. and Mermaid Investments Ltd. (collectively, the
"Purchasers"). Pursuant to the Purchase Agreement, the Company agreed to
sell, and the Purchasers agreed to buy, in two separate transactions, (1)
convertible notes having an aggregate principal amount of $1,400,001 due
May 15, 2000 and (2) warrants to purchase an aggregate of 1,400,001 shares
of common stock of the Company, par value $.0001 per share (the "Common
Stock"), exercisable after August 31, 1999 through August 31, 2004 at an
exercise price of $0.80 per share.
The notes bear interest at the rate of 10% per annum and are convertible
into shares of Common Stock at $.80 per share (a total of 1,750,001 shares
of the Common Stock). Payment under the notes is secured by all of the
assets of the Company.
The first closing under the Purchase Agreement occurred on May 12, 1999.
At such closing the Company received $1,000,002 and delivered to the
Purchasers (1) notes in such amount and (2) warrants to purchase an
aggregate of 1,000,002 shares of the Common Stock. The second closing
occurred on May 26, 1999. At such time the Company received $399,999 and
delivered to the Purchasers (1) notes in such amount and (2) warrants to
purchase an aggregate of 399,999 shares of the Common Stock.
The notes and warrants were issued by the Company without registration
pursuant to the exemption from registration provided by section 4(a) of
the Securities Act of 1933.
11
<PAGE>
The Company will file a registration statement with respect to the shares
of common stock underlying (1) the notes and warrants sold pursuant to the
Purchase Agreement, (2) warrants issued as a fee in connection with the
Purchase Agreement and (3) other warrants issued as a result of
adjustments to previously outstanding warrants.
Gerard, Klauer, Mattison & Co. acted as placement agent for the Company in
connection with the transactions described above and received a fee of
$70,000 and warrants to purchase 70,000 shares of the Common Stock at an
exercise price of $.80 per share.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27- Financial Data Schedule
(b) A Form 8-K was filed on May 25, 1999, which reported the financing
described in Item 2 above.
Signatures
In accordance with 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.
Kideo Productions, Inc.
Date: June 11, 1999 By: /s/ Richard L. Bulman
------------------------------------
Richard L. Bulman
President & Chief Executive Officer
(Principal Executive Officer)
Date: June 11, 1999 By: /s/ Richard D. Bulman
------------------------------------
Richard D. Bulman
Secretary & Chief Financial Officer
(Principal Financial Officer)
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Kideo
Productions, Inc. and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-START> AUG-01-1998
<PERIOD-END> APR-30-1999
<CASH> 119
<SECURITIES> 0
<RECEIVABLES> 213
<ALLOWANCES> 0
<INVENTORY> 51
<CURRENT-ASSETS> 510
<PP&E> 1,056
<DEPRECIATION> 856
<TOTAL-ASSETS> 1,039
<CURRENT-LIABILITIES> 3,174
<BONDS> 5
0
0
<COMMON> 0
<OTHER-SE> (2,140)
<TOTAL-LIABILITY-AND-EQUITY> 1,039
<SALES> 4,007
<TOTAL-REVENUES> 4,007
<CGS> 1,831
<TOTAL-COSTS> 2,516
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 452
<INCOME-PRETAX> (792)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (792)
<EPS-BASIC> (0.21)
<EPS-DILUTED> (0.21)
</TABLE>
