-----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, UTKyyNqHO9wtnIFLViFqZ2HtfOIfqR/0RhNmKHaZ5qvQGePq4yfX1IjvdzyQB+aC /0BGAyahSdyVnAvwVi8rVw== 0000868796-96-000017.txt : 19961115 0000868796-96-000017.hdr.sgml : 19961115 ACCESSION NUMBER: 0000868796-96-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCIT MEDIA PRODUCTIONS LTD CENTRAL INDEX KEY: 0000868796 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 133019470 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-23414 FILM NUMBER: 96660473 BUSINESS ADDRESS: STREET 1: 601 W 50TH ST 6TH FL CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2129779100 MAIL ADDRESS: STREET 1: 601 WEST 50TH ST 6TH FL CITY: NEW YORK STATE: NY ZIP: 10019 10-Q 1 QUARTERLY REPORT - 1ST QUARTER FISCAL 1997 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended September 30, 1996 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: 1-10781 LANCIT MEDIA PRODUCTIONS, LTD. (Exact Name of Registrant as Specified in its Charter) New York 13-3019470 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 601 West 50th Street, New York, New York, 10019 (Address of Principal Executive Office) (Zip Code) (212) 977-9100 (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 The number of shares of registrant's Common Stock, $.001 par value, outstanding as of September 30, 1996 was 6,626,750 shares. LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES INDEX PAGE PART I - FINANCIAL INFORMATION - ITEM 1. FINANCIAL STATEMENTS - CONSOLIDATED BALANCE SHEET - September 30, 1996 and June 30, 1996 1 CONSOLIDATED STATEMENT OF OPERATIONS - For the three months ended September 30, 1996 and 1995 2 CONSOLIDATED STATEMENT OF CASH FLOWS - For the three months ended September 30, 1996 and 1995 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 - 7 PART II - OTHER INFORMATION - ITEM 2. CHANGES IN SECURITIES 8 ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND STOCK 8 HOLDER MATTERS SIGNATURES 9 PART I. FINANCIAL INFORMATION LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET September 30, June 30, 1996 1996 -------------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 7,640,707 $ 3,358,230 Accounts receivable 2,458,753 2,683,433 Film and program costs, net 5,881,447 5,527,106 Prepaid expenses 189,716 268,175 -------------- ------------- TOTAL CURRENT ASSETS 16,170,623 11,836,944 ACCOUNTS RECEIVABLE - NON-CURRENT 1,135,533 1,378,078 FIXED ASSETS, NET 738,451 832,606 GOODWILL, NET 275,641 279,754 DEPOSITS 66,911 60,784 -------------- ------------- TOTAL ASSETS $ 18,387,159 $ 14,388,166 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 965,465 $ 732,158 Participation payable 1,189,422 1,199,991 Deferred revenue 1,477,655 1,651,279 -------------- ------------- TOTAL CURRENT LIABILITIES 3,632,542 3,583,428 -------------- ------------- PARTICIPATION PAYABLE - NON-CURRENT 560,310 598,461 DEFERRED REVENUE - NON-CURRENT 669,807 828,713 COMMITMENTS AND CONTINGENCIES MINORITY INTEREST 122,140 94,056 -------------- ------------- STOCKHOLDERS' EQUITY: Common stock, $.001 par value, authorized 15,000,000 shares; issued and outstanding 6,626,750 shares at September 30, 1996 and 6,187,634 shares at June 30, 1996 6,627 6,188 Additional paid-in capital 17,279,964 12,579,402 Retained earnings (accumulated deficit) (3,884,231) (3,302,082) -------------- ------------- TOTAL STOCKHOLDERS' EQUITY 13,402,360 9,283,508 -------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,387,159 $ 14,388,166 ============== ============= See notes to consolidated financial statements. - 1 - LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, --------------------- 1996 1995 --------- ---------- (UNAUDITED) REVENUES: Production and royalties $ 566,825 $ 2,751,304 Licensing agent fees 324,000 571,844 --------- ---------- 890,825 3,323,148 --------- ---------- OPERATING EXPENSES: Production and royalties 530,614 2,348,601 Licensing agent - direct costs 233,984 304,332 General and administrative 714,416 706,120 --------- ---------- 1,479,014 3,359,053 --------- ---------- INCOME (LOSS) FROM OPERATIONS (588,189) (35,905) INTEREST INCOME (EXPENSE) - NET 34,123 97,430 --------- ---------- INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST (554,066) 61,525 PROVISION FOR INCOME TAXES - CURRENT -- 7,200 MINORITY INTEREST 28,083 18,749 --------- ---------- NET INCOME (LOSS) $ (582,149) $ 35,576 ========= ========== NET INCOME (LOSS) PER SHARE $ (0.09) $ 0.01 ========= ========== WEIGHTED AVERAGE SHARES 6,261,153 6,392,990 ========= ========== See notes to consolidated financial statments. - 2 - LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, --------------------- 1996 1995 ---------- ---------- CASH FLOW FROM OPERATING ACTIVITIES: Net income (loss) $(582,149) $ 35,576 ---------- ---------- Adjustments to reconcile net income(loss)to net cash from operating activities: Amortization of film and program costs 133,749 1,753,271 Depreciation and other amortization 101,694 105,595 Minority interest 28,083 18,749 Changes in operating assets and liabilities: (Increase)decrease in accounts receivable - current 224,680 498,162 (Increase) decrease in accounts receivable - non-current 242,545 100,999 Additions to film and program costs (488,090)(2,892,246) (Increase) decrease in prepaid expenses 79,989 (14,255) (Increase) decrease in income taxes receivable (23,490) 434 (Increase) decrease in deposits receivable (6,127) -- Increase (decrease) in accounts payable and accrued expenses 233,307 193,513 Increase (decrease) in participations payable - current (10,569) 115,048 Increase (decrease) in participations payable - non-current (38,151) (65,096) Increase (decrease) in income taxes payable 21,960 (1,358,100) Increase (decrease) in deferred revenue - current (173,624) (286,310) Increase (decrease) in deferred revenue - non-current (158,906) (20,124) ---------- ---------- 167,050 (1,850,360) ---------- ---------- CASH PROVIDED (USED) IN OPERATING ACTIVITIES (415,099)(1,814,784) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (3,425) (77,641) ---------- ---------- CASH PROVIDED (USED) IN INVESTING ACTIVITIES (3,425) (77,641) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock $4,701,001 $ 200 ---------- ---------- CASH PROVIDED (USED) IN FINANCING ACTIVITIES 4,701,001 200 ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,282,477 (1,892,225) CASH AND CASH EQUIVALENTS - beginning of period 3,358,230 7,395,238 ---------- ---------- CASH AND CASH EQUIVALENTS - end of period 7,640,707 5,503,013 ========== ========== CASH PAID DURING THE PERIOD FOR: Interest -- -- ========== ========== Income taxes -- -- ========== ========== See notes to consolidated financial statements. - 3 - LANCIT MEDIA PRODUCTIONS, LTD. AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1996 (UNAUDITED) 1. BASIS OF PRESENTATION Reference is made to the Company's annual report on Form 10-K/A dated October 28, 1996 for the year ended June 30, 1996. The accompanying financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position and results of operations for the interim periods presented. All such adjustments are of a normal and recurring nature. The results of operations for any interim period are not necessarily indicative of the results of a full fiscal year. 2. NET INCOME (LOSS) PER SHARE Net income (loss) per share is computed on the basis of the weighted average number common shares and common share equivalents outstanding for the respective period. Common share equivalents include dilutive stock options and warrants using the treasury stock method. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Three months ended September 30, 1996 as compared to three months ended September 30, 1995 Production and royalty related revenues for the three month period ended September 30, 1996 decreased to $566,825 from $2,751,304 in the comparable 1995 quarter. This decrease is primarily the result of reduced activity on The Puzzle Place(R). Licensing agent fee revenues for the three month period ended September 30, 1996 decreased to $324,000 from $571,844 in the comparable 1995 quarter. This decrease is primarily the result of the extension of the license term for several licensees on The Puzzle Place(R) and reduced royalties on the Sonic the Hedgehog(TM) property. Production and royalty related expenses for the three month period ended September 30, 1996 decreased to $530,614 from $2,348,601 in the comparable 1995 quarter reflecting primarily the reduction in activity on The Puzzle Place(R). Direct costs of licensing activities for the three month period ended September 30, 1996 decreased to $233,984 from $304,332 in the comparable 1995 quarter primarily as a result of decreased personnel and trade show expenses. General and administrative expenses for the three month period ended September 30, 1996 remained relatively unchanged at $714,416 compared to $706,120 in the comparable 1995 quarter. Interest income for the three month period ended September 30, 1996 decreased to $34,123 from $97,430 in the comparable 1995 quarter. This decrease is primarily due to a reduced level of cash being invested during this year's three month period due to the Company's utilization of cash since September 30, 1995 for production, development and corporate needs. There was no provision for income taxes recorded for the three month period ended September 30, 1996, as a result of a loss during that period, compared to $7,200 recorded in the comparable 1995 quarter. Minority interest in licensing activities for the three month period ended September 30, 1996 was $28,083 compared to $18,749 in the comparable 1995 quarter. Net loss for the three month period ended September 30, 1996 was $582,149 ($.09 per share) compared to net income of $35,576 ($.01 per share) in the comparable 1995 quarter, as a result of the combination of the factors discussed above. Weighted average shares outstanding for the three month period ended September 30, 1996 decreased to 6,261,153 from 6,392,990 in the comparable 1995 quarter primarily as a result of the exclusion of outstanding stock options and warrants during a loss period, which was partially offset by the shares issued related to the purchase of a 6.6% equity stake in the Company by Discovery Communications, Inc. ("DCI") in September 1996 as well as the exercise of stock options during the twelve month period since September 30, 1995. Liquidity and Capital Resources The Company's balance sheet is in extremely strong condition, as of September 30, 1996, with cash and cash equivalents of approximately $7.6 million, a current ratio of 4.4 to 1 and no long-term debt. Cash used in operating activities was approximately $.4 million for the three month period ended September 30, 1996, compared to the use of approximately $1.8 million for the same period last year. During the three month period ended September 30, 1996, net additions to film and program costs of approximately $.4 million and a decrease in deferred revenues of approximately $.3 million were partially offset by a decrease in current accounts receivable of approximately $.2 million. Cash used in investing activities was $3,425, for the three month period ended September 30, 1996, compared to the use of $77,641 for the same period last year. The Company acquired equipment during the first quarter of fiscal 1996 as part of its expansion of the post production capabilities. Cash provided from financing activities was approximately $4.7 million for the three month period ended September 30, 1996, compared to $200 for the same period last year. In September 1996, DCI invested $5 million, which was partially offset by costs relating to the transaction, for a 6.6% equity stake in the Company. As of September 30, 1996, the Company is continuing the remaining elements associated with the outreach for the first 65 episodes of The Puzzle Place(R). The Company estimates that its remaining funding required will be less than $.1 million. With respect to The Puzzle Place(R) licensing effort, the Company and KCET have agreed to, and may in the future, extend the license term and payment schedule for certain licensees in order to more closely reflect the anticipated royalty stream generated by those particular categories. The Company is completing production and post-production on the initial season of 13 episodes of Backyard Safari(TM), which is being partially funded through a major grant from the National Science Foundation. The Company is continuing to pursue additional production funding from potential production partnerships and broadcast license fees, as well as various sources of underwriting. Only in the event the Company were to receive no amounts from these sources of outside production funding (a scenario the Company considers unlikely), the Company estimates that its remaining investment required for this project is approximately $.5 million. In September 1996, Discovery Communications, Inc. invested $5 million in the Company in return for a 6.6% equity stake in Lancit. DCI may also purchase, what currently represents, an additional 6.2% stake in the Company through the exercise of warrants at $13 per share. Management believes that its present cash position and strong liquidity will enable the Company to meet its current capital requirements. In the event the Company aggressively pursues growth opportunities which could arise over the foreseeable future, additional capital may be required. The Company and its investment banker, Allen & Co., may pursue additional strategic alliances which present a source of capital and attractive business opportunities for the Company. Management does not expect inflation to have a significant impact on the business. PART II. - OTHER INFORMATION Item 2. Changes in Securities On September 25, 1995, the Company entered into a Stock Purchase Agreement with Discovery Communications, Inc. ("DCI") a Delaware corporation pursuant to which DCI purchased 438,116 shares of the Company's common stock, par value $.001 per share (the "Common Stock") at a purchase price of $11.41 per share for an aggregate of $5 million. For as long as DCI owns more than 2% of the issued and outstanding Common Stock of the Company, the Stock Purchase Agreement grants DCI preemptive rights with regard to any public or nonpublic offering of Common Stock or other equity security of the Company or any right to purchase any Common Stock or other equity security of the Company, except for (i) shares issued as consideration to induce an individual to be employed by the Company, (ii) shares issued under an employee or director stock option plan, or (iii) consideration for property purchased from or for a share exchange with unaffiliated parties for a value of less than $100,000. At the closing on September 27, 1996, the Company also issued DCI warrants to purchase an additional 438,116 shares of Common Stock at any time through September 26, 2000 at an exercise price of $13.00 per share. The unregistered Common Stock and warrants were sold to DCI pursuant to the exemptions available under Section 4 (2) of the Securities Act of 1933, as amended, and Regulation D promulgated thereunder. Item 5. Market for Company's Common Equity and Stockholder Matters In the quarter covered by this Report, the Company sold 438,116 unregistered shares of Common Stock and issued warrants to purchase 438,116 shares of Common Stock to Discovery Communications, Inc. ("DCI") pursuant to a Stock Purchase Agreement dated September 25, 1996 by and between the Company and DCI. (See Item 2 for details of the transaction.) 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. LANCIT MEDIA PRODUCTIONS, LTD. Date: November 13, 1996 By: /s/ Gary Appelbaum -------------------------------------- Gary Appelbaum Senior Vice President, Chief Financial Officer & Treasurer Date: November 13, 1996 By: /s/ Laurence A. Lancit -------------------------------------- Laurence A. Lancit President and Chief Operating Officer -----END PRIVACY-ENHANCED MESSAGE-----