-----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, Iii1kxVh07T+/EVaOwWINs3EQCONHRFK5f5kUChbLuYxmQNGOthtlzB32+B3TvvD zUVbbDdIAryttWFV00Ox2Q== 0000868796-97-000019.txt : 19971113 0000868796-97-000019.hdr.sgml : 19971113 ACCESSION NUMBER: 0000868796-97-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 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: SEC FILE NUMBER: 000-23414 FILM NUMBER: 97716534 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 ON FORM 10-Q 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 the Fiscal Quarter Ended September 30, 1997 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 ENTERTAINMENT, LTD. (Exact Name of Registrant as Specified in its Charter) New York 13-3019740 -------------- ---------------------- (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 Offices) (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 November 6, 1997 was 6,634,750 shares. LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES INDEX PAGE PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS - at September 30, 1997 and June 30, 1997 1 CONSOLIDATED STATEMENTS OF OPERATIONS - For the three months ended September 30, 1997 and 1996 2 CONSOLIDATED STATEMENTS OF CASH FLOWS - For the three months ended September 30, 1997 and 1996 3 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 5 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK 7 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8 SIGNATURES 9 PART I. FINANCIAL INFORMATION LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS September 30, June 30, 1997 1997 -------------- ------------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,887,565 $ 4,461,627 Accounts receivable 1,058,817 1,698,250 Film and program costs, net 1,813,663 1,718,526 Prepaid expenses 217,246 270,215 -------------- ------------- TOTAL CURRENT ASSETS 6,977,291 8,148,618 ACCOUNTS RECEIVABLE - NON-CURRENT 211,500 211,500 FIXED ASSETS, NET 446,918 525,530 GOODWILL, NET 259,189 263,302 DEPOSITS 50,363 50,363 -------------- ------------- TOTAL ASSETS $ 7,945,261 $ 9,199,313 ============== ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,281,435 $ 2,116,028 Participation payable 1,177,935 1,342,702 Deferred revenue 1,099,202 1,009,413 -------------- ------------- TOTAL CURRENT LIABILITIES 4,558,572 4,468,143 -------------- ------------- PARTICIPATION PAYABLE - NON-CURRENT 81,719 88,009 DEFERRED REVENUE - NON-CURRENT 200,043 317,620 COMMITMENTS AND CONTINGENCIES MINORITY INTEREST 205,926 195,360 -------------- ------------- STOCKHOLDERS' EQUITY: Common stock, $.001 par value, authorized 15,000,000 shares; issued and outstanding 6,634,750 shares at September 30, 1997 and 6,634,750 shares at June 30, 1997 6,635 6,635 Additional paid-in capital 17,604,536 17,504,536 Retained earnings (accumulated deficit) (14,712,170) (13,380,990) -------------- ------------- TOTAL STOCKHOLDERS' EQUITY 2,899,001 4,130,181 -------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 7,945,261 $ 9,199,313 ============== ============= See notes to consolidated financial statements. - 1 - LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, --------------------- 1997 1996 --------- ---------- (UNAUDITED) REVENUES: Production and royalties $ 226,496 $ 566,825 Licensing agent fees 227,641 324,000 --------- ---------- 454,137 890,825 --------- ---------- OPERATING EXPENSES: Production and royalties 629,133 530,614 Licensing agent - direct costs 187,268 233,984 General and administrative 999,374 714,416 --------- ---------- 1,815,775 1,479,014 --------- ---------- LOSS FROM OPERATIONS (1,361,638) (588,189) INTEREST INCOME - NET 41,023 34,123 --------- ---------- LOSS BEFORE PROVISION FOR INCOME TAXES AND MINORITY INTEREST (1,320,615) (554,066) PROVISION FOR INCOME TAXES - CURRENT - - MINORITY INTEREST 10,566 28,083 --------- ---------- NET LOSS $ (1,331,181) $ (582,149) ========= ========== NET LOSS PER SHARE $ (0.20) $ (0.09) ========= ========== WEIGHTED AVERAGE SHARES 6,634,750 6,261,153 ========= ========== See notes to consolidated financial statments. - 2 - LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, ----------------------- 1997 1996 ----------- ---------- CASH FLOW FROM OPERATING ACTIVITIES: Net loss $(1,331,181) $(582,149) ----------- ---------- Adjustments to reconcile net loss to net cash from operating activities: Amortization of film and program costs 224,002 133,749 Depreciation and other amortization 93,429 101,694 Minority interest 10,566 28,083 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable - current 639,435 224,680 (Increase) decrease in accounts receivable - non-current - 242,545 Additions to film and program costs (319,139) (488,090) (Increase) decrease in prepaid expenses 52,969 79,989 (Increase) decrease in income taxes receivable - (23,490) (Increase) decrease in deposits receivable - (6,127) Increase (decrease) in accounts payable and accrued expenses 165,407 233,307 Increase (decrease) in participations payable - current (164,767) (10,569) Increase (decrease) in participations payable - non-current (6,290) (38,151) Increase (decrease) in income taxes payable - 21,960 Increase (decrease) in deferred revenue - current 89,789 (173,624) Increase (decrease) in deferred revenue - non-current (117,577) (158,906) ---------- ---------- 667,824 167,050 ---------- ---------- CASH USED IN OPERATING ACTIVITIES (663,357) (415,099) ---------- ---------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (10,705) (3,425) ---------- ---------- CASH USED IN INVESTING ACTIVITIES (10,705) (3,425) ---------- ---------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 100,000 4,701,001 ---------- ---------- CASH PROVIDED FROM FINANCING ACTIVITIES 100,000 4,701,001 ---------- ---------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (574,062) 4,282,477 CASH AND CASH EQUIVALENTS - beginning of period 4,461,627 3,358,230 ---------- ---------- CASH AND CASH EQUIVALENTS - end of period $3,887,565 $7,640,707 ========== ========== CASH PAID DURING THE PERIOD FOR: Interest $ -- $ -- ========== ========== Income taxes $ -- $ -- ========== ========== See notes to consolidated financial statements. - 3 - LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (UNAUDITED) 1. BASIS OF PRESENTATION Reference is made to the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997. 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 for 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. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations - Three months ended September 30, 1997 as compared to three months ended September 30, 1996 Production and royalty related revenues for the three month period ended September 30, 1997 decreased to $226,496 from $566,825 in the comparable 1996 quarter. This decrease is primarily the result of reduced activity on Reading Rainbow(R) and Backyard Safari(R), partially offset by license fees for broadcast renewal rights and outreach activities on The Puzzle Place(R). Licensing agent fee revenues for the three month period ended September 30, 1997 decreased to $227,641 from $324,000 in the comparable 1996 quarter. This decrease is primarily the result of the expiration of certain licensee contracts and the extension of the license term for certain other licensees on The Puzzle Place and reduced royalties on the Sonic the Hedgehog(TM) property. Production and royalty related expenses for the three month period ended September 30, 1997 increased to $629,133 from $530,614 in the comparable 1996 quarter, reflecting primarily increased development costs, increased payments for broadcast renewal rights license fees and outreach activity on The Puzzle Place, partially offset by decreased production activity on Reading Rainbow and Backyard Safari. Direct costs of licensing activities for the three month period ended September 30, 1997 decreased to $187,286 from $233,984 in the comparable 1996 quarter primarily as a result of decreased travel, trade show and marketing material costs. General and administrative expenses for the three month period ended September 30, 1997 increased to $999,375 from $714,416 in the comparable 1996 quarter, primarily as a result of initiatives involving new personnel and the Company's restructuring, resulting in increased personnel, office related and insurance costs as well as increased legal and other professional fees. Interest income for the three month period ended September 30, 1997 increased to $41,023 from $34,123 in the comparable 1996 quarter. This increase is primarily due to an increased level of cash invested during this year's three month period. There was no provision for income taxes recorded for the three month period ended September 30, 1997, or for the comparable 1996 quarter, as both periods resulted in a loss for the period. Minority interest in licensing activities for the three month period ended September 30, 1997 was $10,566 compared to $28,083 in the comparable 1996 quarter. This is the result of the decreased profitability of the Company's subsidiary, The Strategy Licensing Company, Inc., for the 1997 quarter as compared to 1996. Net loss for the three month period ended September 30, 1997 was $1,331,181 ($.20 per share) compared to a net loss of $582,149 ($.09 per share) in the comparable 1996 quarter, as a result of the combination of the factors discussed above. Weighted average shares outstanding for the three month period ended September 30, 1997 increased to 6,634,750 from 6,261,153 in the comparable 1996 quarter primarily as a result of shares issued to Discovery Communications, Inc. ("DCI") being outstanding for the full period in the current year as well as the exercise of employee stock options during the twelve month period since September 30, 1996. Liquidity and Capital Resources The Company had cash and cash equivalents as of September 30, 1997 of approximately $3.9 million, and no long-term debt. Notwithstanding the Company's cash position at September 30, 1997, the Company believes that additional funding will be necessary to sustain the Company's operations through the fourth quarter of fiscal 1998. The Company is actively seeking additional funding and has retained an investment banking firm to assist it in this effort. Among the alternatives being considered by the Company are a sale of an interest in the Company, an acquisition of the Company, and/or strategic alliances with industry partners. The Company continues to pursue marketing efforts to generate cash from production and other licensing activities and, where appropriate, may explore turning to account certain non-strategic assets. While there can be no assurance that any such transactions will be available to the Company or, if available, that they will be on terms favorable to the Company or its shareholders, the Company is devoting considerable management and other resources to these efforts. The Company has also taken steps to reduce, where appropriate, its operating expenses. These steps include relocating Strategy, its merchandising and licensing subsidiary, from Westport, Connecticut to the Company's New York City offices, and certain staff reductions. Cash used in operating activities was approximately $0.7 million for the three month period ended September 30, 1997, compared to the use of approximately $0.4 million for the same period last year. A net loss from operations of approximately $1.3 million, reduced by adjustments for amortization of film and program cost of $0.2 million and depreciation and other amortization of $0.1 million, and additions to film and program costs of $0.3 million, all of which were partially offset by a decrease in accounts receivable of $0.6 million, comprise the major components of cash used in operating activities. Cash provided from financing activities was $0.1 million for the three month period ended September 30, 1997, compared to $4.7 million for the comparable 1996 period. Warrants to purchase 100,000 shares of stock were issued in partial payment as part of the final arrangement for satisfaction of fees owed for services performed in connection with the September 1996 purchase of a 6.6% stake in the Company by DCI. As of September 30, 1997, the Company is continuing the remaining elements associated with the outreach for the first 65 episodes of The Puzzle Place. All the remaining costs and costs for the first 65 episodes of The Puzzle Place were accrued in fiscal 1997. The Company estimates that, after it receives the balance of monies due from the Corporation for Public Broadcasting ("CPB") and KCET/ Southern California ("KCET"), its remaining funding required will be less than $0.1 million. With respect to The Puzzle Place licensing effort, the Company and KCET have agreed to adjust, and may in the future further adjust, the licensing term for certain licensees. The Company has completed post-production on the initial season of 13 episodes of Backyard Safari, which was partially funded through a major grant from the National Science Foundation. The Company estimates that its remaining funding requirement for this project, primarily to complete outreach and promotional activities, is approximately $0.5 million. All of these remaining costs were accrued in fiscal 1997. Management does not expect inflation to have a significant impact on the business. CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This report, including, without limitation, descriptions of the Company's targets or goals and Management's views concerning the Company's pending and proposed projects, prospects and future financial performance contained in this discussion and analysis and elsewhere, constitute forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and involve known and unknown risks and uncertainties which may cause the Company's actual results in future periods to differ materially from forecasts. These risks include, among others: the ability of the Company to secure timely production funding and additional capital financing; risks generally associated with the production of a television series, movie or other entertainment project; network and studio acceptance of television and motion picture projects; the ability of the Company to successfully negotiate and enter into agreements to acquire rights, develop, produce, market and distribute entertainment and licensing projects; difficulties or delays in the development, production and marketing of entertainment products and/or licensed products; as well as less than anticipated consumer acceptance of entertainment projects or licensed products. These and other risks are described in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 1997 filed with the Securities and Exchange Commission, copies of which are available from the SEC or may be obtained upon request from the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not Applicable. PART II. - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 11. Computation of Earnings Per Share (filed herewith) 27. Financial Data Schedule (electronic filing only) (b) No reports on Form 8-K were filed by the Company during the fiscal quarter ended September 30, 1997. 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 ENTERTAINMENT, LTD. Date: November 13, 1997 By: /s/ GARY APPELBAUM Gary Appelbaum Senior Vice President, Chief Financial Officer & Treasurer Date: November 13, 1997 By: /s/ SUSAN L. SOLOMON Susan L. Solomon Chief Executive Officer and Chairman of the Board of Directors EX-11 2 COMPUTATION OF PER SHARE EARNINGS Lancit Media Entertainment, Ltd. Exhibit 11 - Computation of Earnings Per Share Three months ended September 30, 1997 1996 ---------- ---------- Primary Weighted average shares outstanding 6,634,750 6,261,153 Net effect of dilutive stock options - based on the treasury stock method using average market price - - ---------- ---------- Total 6,634,750 6,261,153 ========== ========== Net Loss $ (1,331,181) $ (582,149) ========== ========== Per share amount $ (0.20) $ (0.09) ========== ========== Fully Diluted Weighted average shares outstanding 6,634,750 6,261,153 Net effect of dilutive stock options - based on the treasury stock method using average market price - - ---------- ---------- Total 6,634,750 6,261,153 ========== ========== Net Loss $ (1,331,181) $ (582,149) ========== ========== Per share amount $ (0.20) $ (0.09) ========== ========== EX-27 3 FINANCIAL DATA SCHEDULE
5 0000868796 Lancit Media Entertainment, Ltd. 1 U.S. Dollars 3-MOS JUN-30-1998 JUL-01-1997 SEP-30-1997 1 3,887,565 0 1,270,317 0 0 6,977,291 446,918 0 7,945,261 4,558,572 0 0 0 6,635 2,892,366 7,945,261 0 454,137 0 1,815,775 0 0 0 (1,320,615) 0 (1,331,181) 0 0 0 (1,331,181) (0.20) (0.20)
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