-----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, E52CfZrtBfgkboCu+VT1xy6VmQjdjhy8RdMIfp9cJzyLv1RBh33oIZz+U40/hxQT VJ9TV4W8fs5zImnuUlqz6w== 0000950116-96-001441.txt : 19961216 0000950116-96-001441.hdr.sgml : 19961216 ACCESSION NUMBER: 0000950116-96-001441 CONFORMED SUBMISSION TYPE: 10-Q CONFIRMING COPY: PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960531 FILED AS OF DATE: 19961213 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NTN CANADA INC CENTRAL INDEX KEY: 0000797313 STANDARD INDUSTRIAL CLASSIFICATION: CABLE & OTHER PAY TELEVISION SERVICES [4841] IRS NUMBER: 112805051 STATE OF INCORPORATION: NY FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18066 FILM NUMBER: 00000000 BUSINESS ADDRESS: STREET 1: 14 METEOR DR CITY: ETOBOCOKE ONTARIO STATE: A6 BUSINESS PHONE: 4166756666 MAIL ADDRESS: STREET 1: 14 METEOR DR CITY: ETOBICOKE ONTARIO STATE: A6 10-Q 1 FORM 10-Q Securities and Exchange Commission Washington, D.C. 20549 |X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarter ended: May 31, 1996 Commission file number: 0-18066 NTN CANADA, INC. (Exact name of registrant as specified in its charter) New York 11-2805051 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 14 Meteor Drive Etobicoke, Ontario, Canada M9W 1A4 (Address of principal executive offices) (Zip Code) (416) 675-6666 (Registrant's telephone number, including area code) 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 ----- ----- Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the period covered by this report: 1,412,225 shares of common stock, par value $.07 per share, and 950,000 shares of preferred stock, $.01 par value per share. PART I - FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) Index to Financial Statements Consolidated Balance Sheets as at May 31, 1996 and August 31, 1995. Consolidated Statement of Operations and Retained Earnings (Deficit) for the nine month periods ended May 31, 1996 and May 31, 1995. Consolidated Statement of Operations and Retained Earnings for the three month periods ended May 31, 1996 and May 31, 1995. Consolidated Statement of Cash Flows for the nine month periods ended May 31, 1996 and May 31, 1995. The financial information for the nine month periods ended May 31, 1996 and May 31, 1995 and the three month periods ended May 31, 1996 and May 31, 1995 is unaudited, but in the opinion of management contains all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial information shown therein. Reference is made to the Company's Form 10-K Annual Report for the fiscal year ended August 31, 1995 for additional Notes to Financial Statements. - 2 - NTN CANADA, INC. CONSOLIDATED BALANCE SHEETS AT MAY 31, 1996 AND AUGUST 31, 1995
May 31, 1996 August 31, 1995 ------------ --------------- ASSETS CURRENT Cash $459,727 $ 277,840 Short-Term temporary investments 4,521,529 4,871,681 Accounts Receivable, Trade - net of allowance for doubtful accounts of $42,271; August - $47,834 473,258 362,586 Accounts Receivable - Other 106,152 101,831 Inventory Held for Sale or Rent 809,822 555,256 Prepaid Expenses 143,076 150,271 ----------- ----------- Total current assets 6,513,564 6,319,465 ----------- ----------- Property & Equipment, Net 2,019,203 1,620,995 License, Net 240,675 250,051 Goodwill, Net 142,384 162,159 ----------- --------- 2,402,626 2,033,205 ---------- ---------- TOTAL ASSETS $8,915,826 $8,352,670 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT Mortgage Payable - 244,223 Accounts Payable - trade 421,199 228,722 Accrued Liabilities 135,693 235,600 Income Taxes Payable 176,042 97,714 Total current liabilities 732,934 806,259 ------- ------- Deferred Income Taxes Payable 10,000 10,000 ---------- ---------- TOTAL LIABILITIES $ 742,934 $816,259 ---------- --------- SHAREHOLDERS' EQUITY SHARE CAPITAL Common Stock - 1,412,225 Issued; August - 1,370,763 Issued 129,535 125,573 Preferred Stock - 950,000 Issued 11,523 11,523 Capital In Excess of Par Value 7,267,583 7,145,997 Retained Earnings 764,251 253,318 TOTAL SHAREHOLDERS' EQUITY 8,172,892 7,536,411 TOTAL LIABILITIES AND SHAREHOLDER EQUITY $8,915,826 $8,352,670 ========== ==========
- 3 - NTN CANADA, INC. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS (DEFICIT) FOR THE NINE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995 (Expressed in Canadian Dollars - Unaudited)
------------------------------------------------------ May 31, 1996 May 31, 1995 ------------ ------------ Revenues $4,732,916 $3,324,044 Cost of Sales 1,841,773 1,438,229 --------- ---------- 2,891,143 1,885,815 General and Administrative Expenses 2,164,551 1,570,782 --------- ---------- Income Before Income Taxes and Unrealized Foreign Exchange Gain 726,592 315,033 Unrealized Foreign Exchange Gain 79,441 61,433 Income Before Income Taxes 806,033 376,466 Provision for Income Taxes 295,100 101,000 ------------- ------------- Net Income 510,933 275,466 Retained Earnings (Deficit), Beginning of Period 253,318 (104,217) ------------- -------------- Retained Earnings, End of Period $ 764,251 $ 171,249 ============= ============= Earnings per Share $0.32 $0.24 ===== =====
- 4 - NTN CANADA, INC. CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS FOR THE THREE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995 (Expressed in Canadian Dollars - Unaudited)
------------------------------------------------------ May 31, 1996 May 31, 1995 ------------ ------------ Revenues $1,647,442 $1,243,660 Cost of Sales 714,173 498,494 ------------ ------------ 933,269 745,166 General and Administrative Expenses 717,574 534,127 ------------ ------------ Income Before Income Taxes and Unrealized Foreign Exchange Gain 215,695 211,039 Unrealized Foreign Exchange Loss (154) (84,333) Income Before Provision for Income Taxes 215,541 126,706 Provision for Income Taxes 95,100 59,000 ------------ ------------ Net Income 120,441 67,706 Retained Earnings, Beginning of Period 643,810 103,543 ------------ ------------ Retained Earnings, End of Period $ 764,251 $ 171,249 ============ ============ Earnings per Share $0.07 $0.06 ===== =====
- 5 - NTN CANADA, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED MAY 31, 1996 AND MAY 31, 1995 (Expressed in Canadian Dollars - Unaudited)
------------------------------------------------------- May 31, 1996 May 31, 1995 ------------ ------------ OPERATING ACTIVITIES Net Income for the nine months $510,933 $275,466 Adjustments to Reconcile Net Income to Net Cash provided by Operating Activities Depreciation and Amortization 239,821 161,484 Changes in Assets and Liabilities Increase in Accounts Receivable (114,993) (194,901) Decrease (Increase) in Inventory Held for Sale or Rent (254,566) 4,137 Decrease (increase) in Prepaid Expenses 7,195 (22,316) Increase (decrease) in Accounts Payable and Accrued Liabilities 92,570 (155,768) Increase in Income Taxes Payable 78,328 88,860 ---------- ---------- Cash Provided by Operating Activities 559,288 156,962 FINANCING ACTIVITIES Proceeds from Issuing Common Shares Mortgage Payable 125,548 4,331,694 Bank Loan (244,223) 245,788 Cash Provided by (used in) Financing Activities -- (350,000) ---------- --------- (118,675) 4,227,482 INVESTING ACTIVITIES Purchases of Property and Equipment Cash Used in Investing Activities (608,878) (1,100,327) (608,878) (1,100,327) ---------- --------- Net Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents, Beginning of Period (168,265) (3,284,117) Cash and Cash Equivalents, End of Period 5,149,521 1,612,104 4,981,256 4,896,221 ---------- ---------- Cash and Cash Equivalents are Represented by Cash Short-Term Temporary Investments 459,727 592,974 4,521,529 4,303,247 ========== ========== $4,981,256 $4,896,221 ========== ==========
- 6 - Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations - -------------------------------------------------------------------------------- The financial statements of the Company and the information in this analysis include the operations of the Company's wholly owned subsidiary, NTN Interactive Network Inc. The financial statements of the Company are expressed in Canadian Dollars. The information contained in this analysis is expressed in both Canadian and United States Dollars, the conversion rate being Cdn $1.3616 per US$1.00 for fiscal 1996 and 1.3794 per US$1.00 for fiscal 1995. Highlights of the Three Months ending May 31, 1996 - -------------------------------------------------------------------- During the quarter, the Company signed an agreement with TSN The Sports Network, Canada's leading sports broadcaster, to bring live NTN interactive sports programming and sports trivia games to TSN's World Wide Web site. In addition the Company's Hospitality Network launched two new interactive programs - including Blue Jays 20th Anniversary Trivia (sponsored by the Toronto Blue Jays Baseball Club). At May 31, 1996, there were 473 installed sites, an increase of 20 sites over the previous quarter. The Company's Corporate Products group delivered interactive programmes during the quarter for Coca Cola, to tie in with their Olympics involvement; for the Invest in Kids Foundation at a black tie fundraising event for 500 of Toronto's corporate elite; for General Motors Quebec, Trizec, and America OnLine Canada. In a subsequent event, the Company's wholly-owned subsidiary NTN Interactive Network Inc. entered into a Letter of Intent on June 3, 1996 to acquire 100% of the shares of Magic Lantern Communications Ltd. for a total consideration of Cdn $2,350,000 (US$1,725,911) made up of a combination of stock and cash. Magic Lantern is Canada's leading distributor of educational video programming and is currently collaborating with New Brunswick Telephone to develop Educational Video-on-Demand in New Brunswick's pioneering interactive television initiative. Magic Lantern has also established a state-of-the-art centre of encoding and repurposing analog video content into digital MPEG format. Results of Operations in the First Three Quarters - --------------------------------------------------------- During the nine months ended May 31, 1996, the Company's revenues totaled Cdn $4,732,916 (US$3,475,996), an increase of Cdn $1,408,872 (US$1,034,718) or 42.4% from the same period in 1995. The primary contributor to the increase in revenues was the addition of 71 Hospital sites during the period. The Hospitality Network numbered 473 live and installed sites at May 31, 1996, up from 376 a year earlier. Cost of sales of Cdn $1,841,773 (US$1,352,653) in the first nine months increased Cdn $403,544 (US$296,375) or 28.1% from Cdn $1,438,229 (US$1,042,648). The major contributing factor to this increase was increased broadcast fees which are directly related to the number of hospitality sites. General and administrative expenses increased Cdn $593,769 (US$436,082) or 37.8% over the same period last year. The major factors causing this increase included a Cdn $387,704 (US$284,741) increase in salaries due to additions of personnel to meet the demands of the Company's growth. Advertising and promotion expenditures increased Cdn $102,664 (US$75,400) due primarily to the development of a frequent player program. Other increases in general and administrative expenses result from increased business volumes reflected in the Company's increased revenues. The unrealized foreign exchange gain for the first three quarters of fiscal 1996 was Cdn $18,008 (US$13,226) greater than the first three quarters of 1995. This gain results primarily from fluctuations in the Canadian/U.S. dollar exchange rate as it related to U.S. dollar temporary investments held by the Company. Net income was Cdn $510,933 (US$375,245), an increase of Cdn $235,467 (or 85%) from the first three quarters of fiscal 1995. Results of Operations The Third Quarter - --------------------------------------- During the three months ended May 31, 1996, the Company's revenues totaled Cdn $1,647,442 (US$1,209,931), an increase of Cdn $403,782 (US$296,550) or 32% from the same period in 1995. The primary reason for increased revenue was the addition of 20 hospitality sites during the quarter as well as increased sponsorship revenue. Cost of sales of Cdn $714,173 (US$524,510) in the third quarter increased Cdn $215,679 (US$158,401) or 43.3% from Cdn $498,494 (US$361,385). The major contributing factors to the increase in cost of sales includes increased broadcast fees which are directly related to the number of hospitality sites as well as an increase in depreciation expense on an increased rental equipment base. General and administrative expenses of Cdn $717,574 (US$527,008) increased Cdn $183,447 (US$134,729) or 34.3% from Cdn $534,127 (US$387,217). The major factors causing this increase include a Cdn $108,193 (US$79,460) increase in salaries due to the addition of personnel to meet the demands of the company's growth. Advertising and promotion expense increased Cdn $22,695 (US$16,668) due to increased expenditures on point of sales materials and the costs associated with the frequent player program. Other increases in general and administrative expenses result from the Company's increased business volumes. 2 Net income for the third quarter was Cdn $120,441 (US$88,456), an increase of Cdn $52,735 (US$38,730) or 77.9% from the third quarter of fiscal 1995. Management believes the general outlook for the rest of the fiscal year, will continue to be favorable with on-going growth in its core businesses. In addition, the company is pursuing other projects for the education market, including, LearnStar, a system and curriculum software for distance learning and in-class use. Liquidity and Capital Resources - ----------------------------------------------------- In the first three quarters of Fiscal 1996, the Company's net use of cash amounted to (Cdn $168,265 US$123,579). During the same period in Fiscal 1995, cash and cash equivalents increased Cdn $3,284,117 (US$2,380,830). Cash was provided by operations during the first three quarters of Fiscal 1996 (Cdn $559,288; US$410,758), as well as during the first three quarters of Fiscal 1995 (Cdn $156,962; US$113,790). The major factor in the increase in cash generated from operations was net income for the nine months of Cdn $510,933 (US$375,245) up from Cdn $275,466 (US$199,700) in Fiscal 1995. Financing activities used Cdn $118,675 (US$87,158) in the first three quarters. Cash was used to pay off the mortgage on the land and building owned by the company. The Company issued common shares in the third quarter of 1996 with proceeds of Cdn $125,548 (US$92,206). In the first three quarters of Fiscal 1995 financing activities provided Cdn $4,331,694 (US$3,140,274), representing the proceeds from issuing common shares of Cdn $4,315,365 (US$3,131,160). Investing activities used cash in both the first three quarters of 1996 (Cdn $608,878; US$447,178) and 1995 (Cdn $1,100,327; US$797,685). Cash used in the first three quarters of 1996 was less than in 1995 because the land and building owned by the company was purchased in the first quarter of 1995. There have been no similar transactions in fiscal 1996. The Company believes that its working capital position provides the liquidity, on both a long and short term basis, required for its growth strategy. The Company is substantially dependent on the continued existence of NTN Communications, Inc. Based on published reports on its first quarter ended March 31, 1996, the consolidated revenues for NTN Communications, Inc. increased 44% to US$8,275,000 from US$5,738,000 for the same period last year. NTN Communications, Inc. reported first quarter consolidated profit of US$273,000 as compared to a loss of US$1,897,000 in the first quarter in 1995. NTN Communications, Inc. had current assets of US$22,337,000 and shareholders' equity of US$31,379,000 as at March 31, 1996. 3 Inflation - ---------------------------- The rate of inflation has had little impact on the Company's results of operations and is not expected to have a significant impact on continuing operations. The Company pays a number of its suppliers in US dollars. Therefore fluctuations in the value of the Canadian dollar against the US dollar will have an impact on gross profit as well as the net income of the Company. If the value of the Canadian dollar falls against the US dollar, the cost of sales of the Company will increase, thereby reducing gross profit and net income. Conversely, if the value of the Canadian dollar rises against the US dollar, gross profit and net income will increase. Part II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: None. 4 SIGNATURES Pursuant to 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. NTN CANADA, INC. Dated: July 8, 1996 By: /s/ Peter Rona --------------------------------------------- Peter Rona, President and Principal Financial Officer EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS CONTAINED HEREIN. CANADIAN DOLLARS 9-MOS AUG-31-1996 SEP-01-1995 MAY-31-1996 1.3616 459,727 4,521,529 515,529 42,271 809,822 6,513,564 2,019,203 0 8,915,826 732,934 0 0 11,523 129,535 7,937,143 8,915,826 4,732,916 4,732,916 1,841,773 1,841,773 (79,441) 0 0 806,033 295,100 510,933 0 0 0 510,933 .32 .32
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