-----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, D33oDaWOTelcWw6nYrPJUmH69NQ9pGlrbvvuBGCYECiOcVG/WPZxtcIAZ3JpZUiz dGxE8+vXOnPhaa0FQdfWDg== 0000950130-01-503175.txt : 20010723 0000950130-01-503175.hdr.sgml : 20010723 ACCESSION NUMBER: 0000950130-01-503175 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEAM COMMUNICATIONS GROUP INC CENTRAL INDEX KEY: 0001035700 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 954519215 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB/A SEC ACT: SEC FILE NUMBER: 000-23307 FILM NUMBER: 1685159 BUSINESS ADDRESS: STREET 1: 11818 WILSHIRE BLVD. STREET 2: SUITE # 200 CITY: LOS ANGELES STATE: CA ZIP: 90025 BUSINESS PHONE: (310) 312- MAIL ADDRESS: STREET 1: 12300 WILSHIRE BLVD STREET 2: #400 CITY: LOS ANGELES STATE: CA ZIP: 90025 10QSB/A 1 d10qsba.txt AMENDMENT NO.1 TO FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (AMENDMENT NO. 1) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDED) FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001 OR [ ] 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: 1-6739 TEAM COMMUNICATIONS GROUP, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) CALIFORNIA 95-4519215 ---------- ---------- (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 11818 WILSHIRE BOULEVARD, SUITE 200 LOS ANGELES, CALIFORNIA 90025 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (310) 312-4400 Indicate by check mark whether the registrant: (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 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 [ ] On May 15, 2001, the registrant had outstanding 14,401,339 shares of Common Stock, no par value. TEAM COMMUNICATIONS GROUP, INC. CONSOLIDATED BALANCE SHEET ($ amounts in 000's)
March 31, 2001 December 31, 2000 ASSETS (Unaudited) (Audited) ----------- --------- Cash $ 478.4 $ 2,610.8 Trade receivables, less allowance for doubtful accounts of $14,155.5 and $14,155.5 respectively 1,959.0 1,376.1 Television programming costs, less accumulated amortization of $30,442 and $29,600.0 respectively 23,697.1 24,080.4 Fixed assets, net 1,767.7 1,878.8 Other assets 596.6 668.9 ---------- ---------- Total Assets $ 28,498.8 $ 30,615.0 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable, accrued expenses and other liabilities $ 8,086.0 $ 7,128.7 Deferred revenue 3,307.5 3,327.0 Accrued participations 1,160.7 1,120.7 Notes payable 8,594.2 8,688.0 Accrued interest 303.0 230.4 ---------- ---------- Total Liabilities 21,451.4 20,494.8 ========== ========== Commitments and contingencies Shareholders' equity: Preferred stock, no par value; 2,000,000 shares authorized; no shares issued and outstanding - - Common stock, no par value; 50,000,000 shares authorized; 14,401,339 and 13,831,541 issued and outstanding, respectively 1.0 1.0 Paid in capital 58,219.7 57,566.4 Accumulated other comprehensive income (584.6) (352.2) Accumulated deficit (50,588.7) (47,095.0) ---------- ---------- Total shareholders' equity 7,047.4 10,120.2 ========== ========== Total liabilities and shareholders' equity $ 28,498.8 $ 30,615.0 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 2 TEAM COMMUNICATIONS GROUP, INC. CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED) (Amounts in 000's)
For the 3 For the 3 Months Ended Months Ended March 31, 2000 March 31, 2001 (RESTATED) -------------- ---------- Revenues $ 1,426.4 $ 6,566.3 Cost of revenues (1,443.9) (5,894.6) ---------- ---------- Gross profit / (loss) (17.5) 671.7 Professional and consulting fees (1,165.2) (376.6) General and administrative (1,962.2) (396.3) ---------- ---------- Loss from operations (3,144.9) (101.2) Interest expense 348.8 24.2 Interest income - 211.2 ---------- ---------- Earnings / (loss) before income taxes (3,493.7) 85.8 Provision for income taxes - - ---------- ---------- Net earnings / (loss) before cumulative effect of change in accounting principle $(3,493.7) $ 85.8 ========== ========== Cumulative effect of change in accounting principle - (4,000.0) ---------- ---------- Net Loss $(3,493.7) (3,914.2) ========== ========== Basic earnings per common share Earnings before cumulative effect of change in accounting principle $( 0.24) $ 0.01 Cumulative effect of change in accounting principle - ( 0.30) ---------- ---------- Net Loss $( 0.24) $( 0.29) ========== ========== Weighted average number of shares outstanding - Basic and Diluted 14,401.3 13,363.5 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 3 TEAM COMMUNICATIONS GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
3 Months Ended (Amounts in 000's) 3 Months Ended March 31, 2000 March 31, 2001 (RESTATED) -------------- ---------- OPERATING ACTIVITIES: Net income $(3,493.7) $(3,914.2) Adjustments to reconcile net income to cash used for operating activities: Cumulative effect of change in accounting principle - 4,000.0 Depreciation and amortization 101.9 5.4 Amortization of television programming costs 742.7 5,325.8 Additions to television programming costs (359.4) (14,362.7) Stocks and warrants issued in exchange for services 653.3 171.7 Changes in assets and liabilities: Decrease (increase) in trade receivables (582.9) 5,738.2 Decrease (increase) in other assets 72.3 (443.8) Increase (decrease) in accounts payable, deferred taxes, accrued expenses and other liabilities 957.3 (3,727.1) Increase in accrued participations and deferred revenues 20.5 - Increase (decrease) in accrued interest 72.6 - Foreign currency translation (232.4) (42.4) ---------- ---------- Net cash used for operating activities (2,047.8) (7,249.1) ---------- ---------- INVESTING ACTIVITIES: Purchase of fixed assets 9.2 (1,377.6) Decrease (increase) in due from officer - 170.4 ---------- ---------- Net cash provided (used) for investing activities 9.2 (1,207.2) ---------- ---------- FINANCING ACTIVITIES: Proceeds from issuance of note payable 1,000.0 36.0 Change in line of credit - 7,072.2 Issuance of common stock - 2,716.1 Principal payment of notes payable (1,093.8) - ---------- ---------- Net cash provided by financing activities (93.8) 9,824.3 ---------- ---------- Net change in cash (2,132.4) 1,368.0 Cash at beginning of period 2,610.8 21,088.7 ---------- ---------- Cash at end of period $ 478.4 $ 22,456.7 ========== ==========
4 TEAM COMMUNICATIONS GROUP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (Continued) SUPPLEMENTAL SCHEDULE OF NON-CASH ACTIVITIES
(Amounts in 000's) 3 Months Ended 3 Months Ended March 31, 2001 March 31, 2000 -------------- -------------- Interest paid 276.6 - ===== ===== Issuance of stock and warrants in connection with services provided to the Company 653.3 171.7 ===== =====
The accompanying notes are an integral part of these consolidated financial statements. 5 TEAM COMMUNICATIONS GROUP, INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
Common Stock ------------ Number of Paid in Comprehensive Retained Shares Par Value Capital Loss Earnings (Amounts in 000's) ------ --------- ------- ------------- -------- Balance at December 31, 2000 14,246.3 $1.0 $ 57,566.4 $ (352.2) $ (47,095.0) Net Income for the three months ended March 31, 2001 (3,493.7) Issuance of warrants in conjunction with services rendered 188.3 Issuance of shares in conjunction with services rendered 155.0 465.0 Foreign currency translation adjustment (232.4) -------- ---- ---------- --------- ----------- Balance at March 31, 2001 14,401.3 $1.0 $ 58,219.7 $ (584.6) $ (50,588.7) ======== ==== ========== ======== ===========
The accompanying notes are an integral part of these consolidated financial statements 6 TEAM COMMUNICATIONS GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 -- BASIS OF PREPARATION-SIGNIFICANT ACCOUNTING POLICIES: This filing represents an amended form 10Q-SB for the quarter ended March 31, 2001. Such amendment is the result of the restatement of the cumulative effect of change in accounting principle for the 3 months ended March 31, 2000. The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements. Accordingly, they do not include all of the information and disclosures required for annual financial statements. These financial statements should be read in conjunction with the financial statements and related footnotes for the year ended December 31, 2000, included in the TEAM Communications Group, Inc. ("Company") financial report in the Company's 10-KSB. In the opinion of the Company's management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's financial position as of March 31, 2001, and the results of operations and cash flows for the three month period ended March 31, 2001 have been included. The results of operations for the three month period ended March 31, 2001 are not necessarily indicative of the results to be expected for the full fiscal year. For further information, refer to the financial statements and footnotes thereto included in the Company's 10-KSB filed for the year ended December 31, 2000. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. An entity that had previously been subject to the requirements of SFAS No. 53 should follow the guidance in a Statement of Position 00-02, "Accounting by Producers and Distributors of Films" and SFAS No. 139, which rescinded SFAS No. 53. The Company elected to adopt this Statement of Position early and such pronouncement has approximately a $4.0 million negative impact on the Company's results of operations and financial position as of and for the year ended December 31, 2000 and is reflected on these financial statements as cumulative effect of change in accounting principle. The Company recognizes revenues from licensing agreements covering entertainment product when the product is available to the licensee for telecast, exhibition or distribution, and other conditions of the licensing agreements have been met and values its film cost at the lower of unamortized cost or net realizable value on an individual title basis in accordance with generally accepted accounting principles. Film costs represent those costs incurred in the development, production and distribution of television projects. These costs have been capitalized. Amortization of film cost is charged to expense and third party participation are accrued using the individual film forecast method whereby expense is recognized in the proportion that current period revenues bear to an estimate of ultimate revenues. These estimates of revenues are prepared and reviewed periodically by management. 7 NOTE 2 -- TELEVISION PROGRAM COSTS: Television program costs as of March 31, 2001, consist of the following (amounts in 000's): Development $ 479.0 In Process 4,676.6 Released, less accumulated amortization 18,541.5 -------- Total television program costs $23,697.1 ========= NOTE 3 -- LITIGATION AND CONTINGENCIES: On or after March 9, 2001, a number of securities class action complaints were filed against us, our former chief executive officer and a former chief financial officer in the United States District Court for the Central District of California on behalf of purchasers of our publicly traded securities during the period between November 23, 1999 and February 12, 2001. These class action complaints were brought pursuant to the Securities Exchange Act of 1934, as amended, and allege violation of Section 10(b) and Rule 10b-5 thereunder, and Section 20(a) of that Act. These actions were a result of our February 13, 2001 public announcement concerning the substantial losses and financial adjustments we expected to incur in fiscal 2000. The plaintiffs seek unspecified damages. We are currently evaluating the merits of such claims and the Company maintains director and officer liability insurance coverage. The United States Securities and Exchange Commission is currently conducting an investigation into the matters discussed in this Note 3. NOTE 4 - RESTATEMENT: As a result of a special investigation by the Company's Board of Directors (the "Board") and the conclusion that various transactions entered into by the U.K. subsidiary lacked economic substance, the Company requested the resignation of the former chief executive officer and the managing director of the U.K. subsidiary. Accordingly, new management appointed by the Board on February 12, 2001 determined that the following transactions representing revenues previously recorded in the quarterly financial statements during 2000, and additional write-offs and reserves should be recorded in the fourth quarter of fiscal 2000:
Amount ----------------- (in 000's) 1) Write-off of accounts receivable $13,000.0 2) Write-down of film inventory 20,000.0 3) Write-off of U.K. investment 2,500.0 4) Reserve for closedown of European offices 1,000.0 5) Reserve for amounts due the Company from former Chief Executive Officer 1,000.0 - ---------- Total $37,500.0 ==========
Management believes the effect of the above on the quarter ended March 31, 2000, is an increase in cost of revenue of approximately $466,600 and reversal of previously accrued tax provision of $245,900. 8 NOTE 5 - FIXED ASSETS: Amount (000's) -------------- Equipment $ 327.7 Furniture & other 557.0 UK office building 308.9 Leasehold improvements 1,247.8 ------- Total cost 2,441.4 Accumulated depreciation (673.7) --------- Total, net of accumulated depreciation $1,767.7 ========= ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Conditions and Results of Operations contains certain "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Such statements relating to future events and financial performance are forward-looking statements involving risks and uncertainties that are detailed from time to time in our various Securities and Exchange Commission filings. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of uncontrollable factors. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto appearing elsewhere in this 10-QSB. RESULTS OF OPERATIONS For the three months ended March 31, 2001, the Company reported a net loss of approximately $3,493,700 on total revenues of approximately $1,426,400 compared to a net loss of approximately $657,100 on total revenues of approximately $6,566,300 for the same period ended March 31, 2000. Net loss decreased as a percentage of revenue for the three months ended March 31, 2001, versus the three months ended March 31, 2000, primarily due to lesser margins on programming sold in 2001 compared with 2000 and professional and consulting fees of $1,165,200 associated with the Company's internal investigation, restatement and discharge of old management. Revenue for the period ended March 31, 2001 included approximately $365,700 in sales of programming owned by the UK subsidiary Team Dandelion, approximately $605,000 from the sale of "Live through This", and approximately $267,000 from the sale of "Call of the Wild". Revenue for the period ended March 31, 2000 included approximately $3,700,000 in sales of programming owned by the UK subsidiary Team Dandelion, $1,200,000 on the airing in syndication of six episodes of "Total Recall 2070: The Series" and approximately $1,050,000 on the delivery of five episodes of "Call of the Wild". Gross profit margin on sales of television programming for the three months end March 31, 2000 was 9% compared to no margin for the period ended March 31, 2001. This situation was due to the Company not having sufficient sales volume in the first quarter ended March 31, 2001 to cover amortization, distribution, and selling costs. 9 The operations for the quarter ended March 31, 2001 included increased professional and consulting costs of $788,00 related to the special investigation and replacement of senior management and no capitalization of overhead to film inventory due to a lack of film production. The Company had $1,388,800 of capitalized overhead for the quarter ended March 31, 2000. Interest expense was $348,800 for the three months ended March 31, 2001, as compared to $24,200 for the three months ended March 31, 2000. The increase is due to the additional $1 million of debt incurred by the Company during February 2001. Interest income for the three months ended March 31, 2000 was $211,200 versus $0 for 2001. Receivables at March 31, 2001 were $1,959,000 and approximately 70% of these receivables are from entities domiciled outside the United States. Receivables represent approximately 6.9% of the total assets of the Company. LIQUIDITY AND CAPITAL RESOURCES The Company had cash balances of $478,400 as of March 31, 2001. In March 2001, the Company received $1 million in proceeds from an increase in its credit facility with a bank, pursuant to a term loan due within one year. The Company is in need of short-term working capital and received a "going concern" qualification in the auditor's opinion attached to the Company's annual report filed on Form 10-KSB. Since the filing of our Form 10-KSB in April 2001, management has been generating capital and liquidity from recently consummated arrangements with third parties for the sale and distribution of its television film library of approximately 2,000 titles. The Company is also seeking to increase its existing bank line of credit and is in active discussions with sources for various types of equity and equity related financings. No assurance can be given that any such financing arrangements will ultimately be obtained or that they will be on reasonably acceptable terms. In addition to seeking external financing and increasing its worldwide sales efforts, management has recently effected significant reductions in the Company's operating expenses. Even if the Company is able to solve its short-term liquidity and capital needs, the distribution of television products generally requires distributors such as the Company to be able to provide deficit financing to producers (representing the difference between the cost of production and amounts advanced by United States television networks). Accordingly, in order to expand our business and obtain new television products for distribution, the Company will be required to obtain a source for deficit financing for future television projects. In December 2000, we received a commitment from a bank for a $45 million debt facility to enable us to produce and finance film products for television. However, in light of our recent adverse developments, such contemplated financing was suspended pending the results of our 2001 operations. Although we will continue to explore the possibility of obtaining a significant production line of credit with a commercial bank, there is no assurance that we will be able to consummate such financing on commercially acceptable terms, if at all. 10 PART II - OTHER INFORMATION Item 1 - Legal Proceedings The Securities and Exchange Commission is currently conducting an investigation into the matters discussed in this Item 1. On or after March 9, 2001, a number of securities class action complaints were filed against us, our former chief executive officer and a former chief financial officer in the United States District Court for the Central District of California on behalf of purchasers of our publicly traded securities during the period between November 23, 1999 and February 12, 2001. These class action complaints were brought pursuant to the Securities Exchange Act of 1934, as amended, and allege violation of Section 10(b) and Rule 10b-5 thereunder, and Section 20(a) of that Act. These actions were a result of our February 13, 2001 public announcement concerning the substantial losses and financial adjustments we expected to incur in fiscal 2000. The plaintiffs seek unspecified damages. We are currently evaluating the merits of such claims. Item 2 - None Item 3 - None Item 4 - None Item 5 - None Item 6 - Exhibits and Reports on Form 8-K Exhibits a) Financial data schedule Form 8-K a) February 15, 2000 - Press release regarding the termination of Drew Levin as Chairman and Chief Executive Officer and the appointment of new management. 11 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. Dated: July 19, 2001 TEAM COMMUNICATIONS GROUP, INC. By: /s/ MICHAEL JAY SOLOMON ------------------------------------------------ Michael Jay Solomon Chairman of the Board of Directors and Chief Executive Officer By: /s/ JAY J. SHAPIRO ----------------------------------- Jay J. Shapiro Acting Chief Financial Officer 13 -----END PRIVACY-ENHANCED MESSAGE-----