-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MqB9TwgHSMEA7irzbvA8w9EWPhThSRhCOxvf0E/Gk1sUS/sSlbqPt5l0yDcmaPis GriRTrTkeMGF6vI1u+1zJA== 0000891092-98-000407.txt : 19981118 0000891092-98-000407.hdr.sgml : 19981118 ACCESSION NUMBER: 0000891092-98-000407 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NETWORK EVENT THEATER INC CENTRAL INDEX KEY: 0001005500 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 133864111 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-27556 FILM NUMBER: 98750560 BUSINESS ADDRESS: STREET 1: 529 FIFTH AVE CITY: NEW YORK STATE: NY ZIP: 10017 BUSINESS PHONE: 2127792740 MAIL ADDRESS: STREET 1: 149 5TH AVE CITY: NEW YORK STATE: NY ZIP: 10010 10QSB 1 FORM 10-QSB ================================================================================ U.S. 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 SEPTEMBER 30, 1998 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number: 0-27556 NETWORK EVENT THEATER, INC. (Exact Name of Small Business Issuer as Specified in Its Charter) Delaware 13-3864111 (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 529 Fifth Avenue, New York, New York 10017 (Address of Principal Executive Offices) (Zip Code) (212) 622-7300 (Registrant's Telephone Number, Including Area Code) Check whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject of such filing requirements for the past 90 days. Yes _ X_ No ___ At October 30, 1998 there were 11,353,546 shares of Common Stock, $.01 par value outstanding. Transitional Small Business Disclosure Format (check one): Yes ___ No _X_ ================================================================================ Network Event Theater, Inc. Form 10-QSB Index Page PART I--FINANCIAL INFORMATION Number ------ Item 1 Financial Statements Consolidated balance sheets - September 30, 1998 (unaudited) and June 30, 1998................................... 1 Consolidated statements of operations - three months ended September 30, 1998 and 1997 (unaudited).................. 2 Consolidated statements of cash flows - three months ended September 30, 1998 and 1997 (unaudited)......................... 3 Consolidated statement of stockholders' equity - three months ended September 30, 1998 (unaudited)..................... 4 Notes to consolidated financial statements......................... 5 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations......................................... 7 PART II--OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K................................... 9 Signatures ................................................................ 10 PART I FINANCIAL STATEMENTS Item 1. Financial Statements Network Event Theater, Inc Consolidated Balance Sheets (In thousands) September 30, June 30, 1998 1998 ----------- -------- (Unaudited) ASSETS Current Assets: Cash and cash equivalents .......................... $ 3,433 $ 2,271 Accounts receivable, net of allowance for doubtful accounts of $148 and $137 at September 30, 1998 and June 30, 1998, respectively .................. 4,104 1,539 Prepaid expenses ................................... 1,346 348 Deposits and other current assets .................. 265 181 -------- -------- Total current assets .................................. 9,148 4,339 Property and equipment, net of accumulated amortization of $3,024 and $2,664 at September 30, 1998 and June 30, 1998, respectively . 4,842 4,861 Deferred financing costs, net of accumulated amortization of $74 and $12 at September 30, 1998 and June 30, 1998, respectively .................... 1,068 77 Intangible assets, net of accumulated amortization of $981 and $857 at September 30, 1998 and June 30, 1998, respectively ........................ 6,275 6,399 -------- -------- Total assets .......................................... $ 21,333 $ 15,676 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable ................................... $ 1,223 $ 914 Accrued employee compensation ...................... 442 520 Accrued professional fees .......................... 145 225 Other accrued expenses ............................. 2,392 537 Deferred revenues .................................. 229 689 Current portion of long-term debt .................. 842 789 -------- -------- Total current liabilities ............................. 5,273 3,674 Long-term debt ........................................ 8,239 3,459 Commitments and contingencies ......................... -- -- Stockholders' Equity: Preferred stock, $.01 par value, 1,000 shares authorized, no shares issued and outstanding ..... -- -- Common stock, $.01 par value, 32,000 shares authorized, 11,347 shares issued and outstanding at September 30, 1998 and June 30, 1998 .......... 113 113 Additional paid-in capital ......................... 27,938 27,198 Accumulated deficit ................................ (20,230) (18,768) -------- -------- Total stockholders' equity ............................ 7,821 8,543 -------- -------- Total liabilities and stockholders' equity ............ $ 21,333 $ 15,676 ======== ======== See notes to consolidated financial statements. 1 Network Event Theater, Inc. Consolidated Statements of Operations (In thousands, except per share amounts) (Unaudited) Three months ended September 30, ------------------------ 1998 1997 -------- -------- Net Revenues .................................. $ 3,425 $ 2,953 Operating Expenses: Selling, general and administrative expenses 3,356 3,268 Corporate expenses ......................... 774 634 Depreciation and amortization .............. 484 394 -------- ------- Total operating expenses ...................... 4,614 4,296 -------- ------- Loss from operations .......................... (1,189) (1,343) Interest income ............................... 58 40 Interest expense .............................. (294) (155) -------- ------- Loss before provision for income taxes ........ (1,425) (1,458) Provision for income taxes .................... 37 46 -------- ------- Net loss ...................................... $ (1,462) $(1,504) ======== ======= Net loss per basic and diluted common share ... $ (0.13) $ (0.15) ======== ======= Weighted average basic and diluted common shares outstanding ......................... 11,347 9,861 ======== ======= See notes to consolidated financial statements. 2 Network Event Theater, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) Three months ended September 30, --------------------- 1998 1997 ---- ---- Cash Flows From Operating Activities Net loss ............................................. $(1,462) $(1,504) Adjustments to reconcile net loss to net cash used in operating activities: Provision for bad debts ........................... 11 9 Depreciation and amortization ..................... 484 394 Amortization of deferred financing costs .......... 62 -- Changes in assets and liabilities: Increase in prepaid expenses .................... (998) (1,061) (Increase) decrease in deposits and other current assets ......................... (84) 39 Increase in accounts receivable ................. (2,576) (2,942) Increase in accounts payable .................... 309 141 Decrease in accrued employee compensation ....... (78) (27) Decrease in accrued professional fees ........... (80) (157) (Decrease) increase in deferred revenues ........ (460) 1,237 Increase in other accrued expenses .............. 1,855 1,794 ------- ------- Net cash used in operating activities ................ (3,017) (2,077) Cash Flows From Investing Activities Capital expenditures .............................. (341) (556) Notes receivable .................................. -- (1) ------- ------- Net cash used in investing activities ................ (341) (557) Cash Flows From Financing Activities Sale of warrants .................................. 188 -- Proceeds from long-term debt ...................... 4,499 125 Repayment of long-term debt ....................... (167) (169) ------- ------- Net cash provided by financing activities ............ 4,520 (44) ------- ------- (Decrease) increase in cash and cash equivalents ..... 1,162 (2,678) Cash and cash equivalents at beginning of period ..... 2,271 4,185 ------- ------- Cash and cash equivalents at end of period ........... $ 3,433 $ 1,507 ======= ======= Supplemental cash flow information; Cash paid for interest ............................ $ 99 $ 105 ======= ======= Cash paid for income taxes ........................ $ 37 $ 42 ======= ======= Issuance of warrants in connection with long-term debt ................................. $ 552 $ -- ======= ======= See notes to consolidated financial statements. 3 Network Event Theater, Inc. Consolidated Statement of Stockholders' Equity For the period July 1, 1998 to September 30, 1998 (In thousands) (Unaudited)
Common Stock Additional ---------------------- Paid-in Accumulated Shares Amount Capital Deficit Total ------ ------- ------ ------- ------ Balances at June 30, 1998.............. 11,347 $113 $27,198 $(18,768) $ 8,543 Issuance of warrants in connection with long-term debt................. -- -- 740 -- 740 Net loss............................... -- -- -- (1,462) (1,462) ------ ---- ------- ------- ------- Balances at September 30, 1998......... 11,347 $113 $27,938 $(20,230) $ 7,821 ====== ==== ======= ======= =======
See notes to consolidated financial statements. 4 Network Event Theater, Inc. Notes to Consolidated Financial Statements September 30, 1998 (Unaudited) 1. Organization and Basis of Presentation The accompanying consolidated financial statements include the accounts of Network Event Theater, Inc. ("NET"), and its wholly-owned subsidiaries American Passage Media, Inc. ("American Passage"), Campus Voice, Inc. ("Campus Voice"), Beyond the Wall, Inc. ("Beyond the Wall") and Pik:Nik Media, Inc. ("Pik:Nik") (collectively, the "Company"). All significant intercompany transactions have been eliminated. The Company owns and operates a proprietary national network of theaters on college campuses (the "Network"). The Network delivers entertainment and educational events via satellite for display through high resolution video projectors on movie theater sized screens. Additionally, the Company owns and operates collegiate media and marketing service businesses, which complement and enhance the reach of its Network. The Company operates in one industry segment, which provides media and marketing services to advertisers who want to reach young adults. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for an interim period are not necessarily indicative of the results that may be expected for the year ended June 30, 1999. Because the Company earns most of its revenues during the academic year (September through May), the Company's second and third quarters generally reflect higher levels of revenues than are earned in the first and fourth quarters. For further information, refer to the consolidated financial statements and footnotes thereto included in Company's Form 10-KSB for the fiscal year ended June 30, 1998. 2. Reclassifications Certain June 30, 1998 amounts in the consolidated balance sheet have been reclassified to conform to the current period's presentation. 3. Pro Forma Financial Data The effect of the On the House, Inc. acquisition in May 1998 was not material to the reported net loss or net loss per share. 4. Long-Term Debt A summary of long-term debt is as follows: September 30, June 30, 1998 1997 ---------- ---------- Note Payable to Bank (A).................... $2,905,000 $3,072,000 Note Payable to Finance Company (B)......... 1,000,000 1,000,000 Note Payable - Private Placement (C)........ 5,000,000 -- Other....................................... 176,000 176,000 ---------- ---------- 9,081,000 4,248,000 Less current portion........................ (842,000) (789,000) ---------- ---------- $8,239,000 $3,459,000 ========== ========== (A) This loan is secured by all of the assets of Campus Voice, Beyond the Wall and American Passage (the "Borrowers") and is guaranteed by NET. This loan is payable in equal monthly installments, commencing in February 1998, over a maximum of six years (as defined). Interest is payable monthly at a rate of interest of 275 basis points above LIBOR for U.S. dollar deposits of one month maturity. 5 Network Event Theater, Inc. Notes to Consolidated Financial Statements (Continued) September 30, 1998 (Unaudited) The Borrowers are also party to an interest rate exchange agreement converting $3.0 million of the aforementioned floating rate debt to a fixed rate. The balance of the interest rate agreement at September 30, 1998 was $2,556,000. Under the interest rate exchange agreement, the Borrowers are required to pay interest at a fixed rate of 9.11% on the notional amount covered by the interest rate exchange agreement. In return, the Company receives interest payments on the same notional amount at the prevailing LIBOR rate plus 275 basis points. The interest rate exchange agreement terminates in June 2002. The bank has also made available to the Borrowers a revolving line of credit with a maximum principal amount of $1.0 million. All amounts borrowed under this facility must be repaid by July 1999. The revolving line of credit facility bears interest at the rate of the bank's prime rate plus 25 basis points and interest is due monthly. Borrowings under the revolving line of credit are secured by the Borrower's eligible accounts receivable (as defined) and are also guaranteed by NET. As of September 30, 1998 the Borrowers have not borrowed any amounts under this facility. (B) Interest on this note is payable monthly at a rate of 12% per annum, with the principal due in June 2000. The note is secured by all of the assets of Pik:Nik and is guaranteed by NET. (C) In July 1998, the Company realized net proceeds of approximately $4.7 million from the sale of $5,000,000 of 11% Subordinated Notes (the "Notes") and 375,000 warrants (see note 5). The Notes are due in July 2003. Interest at the rate of 11% per annum is due semi-annually. 5. Stockholders' Equity In July 1998, in connection with the sale of the Notes (see Note 4), NET sold 375,000 warrants for approximately $188,000. Each warrant entitles the holder to purchase one share of the Company's common stock for $4.125 and expires in July 2003. In connection with the sale of the Notes and warrants, the Company issued 150,000 warrants to the placement agent. Each warrant entitles the holder to purchase one share of the Company's common stock for $4.125 and expires in July 2003. The 525,000 warrants described above were valued at $740,000 based on a valuation from an independent third party. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion of the financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and related notes thereto. The following discussion contains certain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those discussed herein. Factors that could cause or contribute to such differences include, but are not limited to, the ability to obtain financing, integration of acquisitions, the management of growth, changing consumer tastes and general economic conditions. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The following financial analysis compares the three months ended September 30, 1998 (unaudited) to the three months ended September 30, 1997 (unaudited). Results of Operations For the three months ended September 30, 1998, net revenues were $3,425,000 as compared to $2,953,000 for the three months ended September 30, 1997. The increase of $472,000 is primarily due to increased sales efforts as a result of an increase in sales staff. For the three months ended September 30, 1998, selling, general and administrative expenses were $3,356,000 as compared to $3,268,000 for the three months ended September 30, 1997. The increase of $88,000 is primarily due to increased sales staff. For the three months ended September 30, 1998, corporate expenses were $774,000 as compared to $634,000 for the three months ended September 30, 1997. The increase of $140,000 is primarily due to increased corporate personnel and related overhead expenses required to support the Company's growth. For the three months ended September 30, 1998, depreciation and amortization was $484,000 as compared to $394,000 for the three months ended September 30, 1997. The increase of $90,000 is primarily due to additional equipment purchases during the period from October 1997 through September 1998. For the three months ended September 30, 1998, operating expenses were $4,614,000 as compared to $4,296,000 for the three months ended September 30, 1997. The increase of $318,000 is due to increased personnel and depreciation relating to additional equipment purchases during the period from October 1997 through September 1998. For the three months ended September 30, 1998, interest income was $58,000 as compared to $40,000 for the three months ended September 30, 1997. The increase of $18,000 was due to higher cash balances. For the three months ended September 30, 1998, interest expense was $294,000 as compared to $155,000 for the three months ended September 30, 1997. The increase of $139,000 primarily related to $5,000,000 of debt issued in July 1998. For the three months ended September 30, 1998, net loss was $1,462,000 as compared to $1,504,000 for the three months ended September 30, 1997. The decrease of $42,000 was due to increased revenues that were offset by selling, general and administrative expenses, corporate expense and interest expense. Impact of Year 2000 The Company believes that its computer programs and systems are year 2000 compliant. Liquidity and Capital Resources In July 1998, the Company realized net proceeds of approximately $4.7 million from the sale of $5,000,000 of 11% Subordinated Notes and 375,000 warrants. The Company used approximately $3.0 million in its operating activities in 1998 as compared to $2.1 million in 1997. The increase of approximately $0.9 million represents the decrease in short-term liabilities and the increase 7 in accounts receivable and long term assets offset by the increase in depreciation and amortization. Cash used in investing activities in 1998 of approximately $0.3 million is composed primarily of capital expenditures. Cash provided by financing activities in 1998 of approximately $4.5 million is primarily attributable to the issuance of long term debt and related warrants. The Company's primary capital requirements with respect to its operations have been to fund corporate overhead and the operation of its Network of campus theaters. In the event that the Company's plans and assumptions with respect to its Network change or prove to be inaccurate, if its assumptions with respect to American Passage, Campus Voice, Beyond the Wall and Pik:Nik being able to fund their operations and to make debt service payments out of their own cash flow in the future prove to be inaccurate, or if the working capital or capital expenditure requirements of American Passage, Campus Voice, Beyond the Wall or Pik:Nik prove to be greater than anticipated, the Company could be required to seek additional financing. The inability to obtain additional financing will have a material adverse effect on the Company, including possibly requiring the Company to significantly curtail or cease its operations. As of September 30, 1998, the Company had approximately $3.4 million in cash and cash equivalents. The Company believes that such amount will be sufficient to fund working capital, including debt service and interest requirements, at least through the fiscal year ended June 30, 1999. The Company's ability to improve its operations will be subject to prevailing economic conditions and to legal, financial, business, regulatory, industry and other factors, many of which are beyond the Company's control. The Company may also seek additional debt or equity financing to fund the cost of additional expansion of its Network and the cost of developing, acquiring additional media and marketing services businesses or to fund its operations. To the extent that the Company finances its requirements through the issuance of additional equity securities, including the exercise of warrants issued in the Initial Public Offering, any such issuance would result in dilution to the interests of the Company's shareholders. Additionally, to the extent that the Company incurs indebtedness or issues debt securities in connection with financing activities, the Company will be subject to all of the risks associated with incurring substantial indebtedness, including the risk that interest rates may fluctuate and cash flow may be insufficient to pay principal and interest on any such indebtedness. The Company has no current arrangements with respect to, or sources of, additional financing. There can be no assurance that any additional financing will be available to the Company on acceptable terms, if at all. 8 PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 27.1 Financial Data Schedule. (b) Reports on Form 8-K. None. 9 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. November 16, 1998 BY: /S/ HARLAN D. PELTZ ------------------------------ Harlan D. Peltz Chairman of the Board and Chief Executive Officer BY: /S/ BRUCE L. RESNIK ------------------------------ Bruce L. Resnik Executive Vice President Chief Financial Officer and Chief Accounting Officer 10 EX-27 2 FDS --
5 3-MOS JUN-30-1999 JUL-01-1998 SEP-30-1998 3,433,000 0 4,252,000 148,000 0 9,148,000 7,866,000 3,024,000 21,333,000 5,273,000 0 0 0 113,000 7,708,000 21,333,000 0 3,425,000 0 4,614,000 0 0 294,000 (1,425,000) (37,000) (1,462,000) 0 0 0 (1,462,000) (0.13) (0.13)
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