-----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, HZW2YqCTc0EtHA+nhh+dkacB5IJVFAJnnZJA/jX4LntSMk+GW4hbtwS6H2cH5QWP Fesi6IFTdiRfHYN6nToVWQ== 0001047469-98-020720.txt : 19980518 0001047469-98-020720.hdr.sgml : 19980518 ACCESSION NUMBER: 0001047469-98-020720 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANCIT MEDIA ENTERTAINMENT 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: 98624952 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 FORMER COMPANY: FORMER CONFORMED NAME: LANCIT MEDIA PRODUCTIONS LTD DATE OF NAME CHANGE: 19930328 10-Q 1 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 March 31, 1998 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: 0-23414 LANCIT MEDIA ENTERTAINMENT, 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 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 May 12, 1998 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 March 31, 1998 and June 30, 1997 1 CONSOLIDATED STATEMENTS OF OPERATIONS - For the nine and three months ended March 31, 1998 and 1997 2 CONSOLIDATED STATEMENTS OF CASH FLOWS - For the nine months ended March 31, 1998 and 1997 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 8 PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURES 10
PART I. FINANCIAL INFORMATION LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, June 30, 1998 1997 ------------- ----------- (UNAUDITED) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 2,807,608 $ 4,461,627 Accounts receivable, net 433,849 1,698,250 Film and program costs, net 1,924,531 1,718,526 Prepaid expenses 117,848 270,215 ------------- ------------- TOTAL CURRENT ASSETS 5,283,836 8,148,618 ACCOUNTS RECEIVABLE - NON-CURRENT 151,500 211,500 FIXED ASSETS, NET 290,716 525,530 GOODWILL, NET 250,963 263,302 DEPOSITS 50,363 50,363 ------------- ------------- TOTAL ASSETS $ 6,027,378 $ 9,199,313 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 2,146,665 $ 2,116,028 Participation payable 1,249,583 1,342,702 Deferred revenue 1,898,770 1,009,413 ------------- ------------- TOTAL CURRENT LIABILITIES 5,295,018 4,468,143 PARTICIPATION PAYABLE - NON-CURRENT - 88,009 DEFERRED REVENUE - NON-CURRENT 225,092 317,620 MINORITY INTEREST 252,829 195,360 STOCKHOLDERS' EQUITY: Common stock, $.001 par value, authorized 15,000,000 shares; issued and outstanding 6,634,750 shares at March 31, 1998 and June 30, 1997 6,635 6,635 Additional paid-in capital 17,604,536 17,504,536 Retained earnings (accumulated deficit) (17,356,732) (13,380,990) ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 254,439 4,130,181 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,027,378 $ 9,199,313 ============= ============= 1
See notes to consolidated financial statements. LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED MARCH 31, MARCH 31, ---------------------------------- ---------------------------------------------- 1998 1997 1998 1997 -------------- --------------- ------------------- ---------------------- (UNAUDITED) (UNAUDITED) REVENUES: Production and royalties $ 944,383 $ 820,258 $ 1,326,115 $ 1,566,266 Licensing agent fees 72,867 285,537 523,655 929,412 ------------- --------------- ------------------- ------------------- 1,017,250 1,105,795 1,849,770 2,495,678 ------------- --------------- ------------------- ------------------- OPERATING EXPENSES: Production and royalties 1,253,157 1,252,276 2,373,477 2,231,267 Licensing agent - direct costs 63,176 200,875 338,453 641,123 General and administrative 1,051,580 1,217,165 3,162,978 2,717,935 Write-down of film and program costs - 5,456,180 - 5,456,180 ------------- --------------- ------------------- ------------------- 2,367,913 8,126,496 5,874,908 11,046,505 ------------- --------------- ------------------- ------------------- LOSS FROM OPERATIONS (1,350,663) (7,020,701) (4,025,138) (8,550,827) INTEREST INCOME - NET 24,422 78,714 106,863 192,527 ------------- --------------- ------------------- ------------------- LOSS BEFORE MINORITY INTEREST (1,326,241) (6,941,987) (3,918,275) (8,358,300) MINORITY INTEREST 13,750 (13,123) 57,467 (64,724) ------------- --------------- ------------------- ------------------- NET LOSS $ (1,339,991) $ (6,955,110) $ (3,975,742) $ (8,423,024) ============= =============== =================== =================== BASIC LOSS PER COMMON SHARE $ (0.20) $ (1.05) $ (0.60) $ (1.29) ============= =============== =================== =================== BASIC WEIGHTED AVERAGE SHARES USED IN COMPUTATION 6,634,750 6,632,750 6,634,750 6,506,884 ============= =============== =================== =================== DILUTED LOSS PER COMMON SHARE $ (0.20) $ (1.05) $ (0.60) $ (1.29) ============= =============== =================== =================== DILUTED WEIGHTED AVERAGE SHARES USED IN COMPUTATION 6,634,750 6,632,750 6,634,750 6,506,884 ============= =============== =================== ===================
See notes to consolidated financial statements. 2 LANCIT MEDIA ENTERTAINMENT, LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, ------------------------------- 1998 1997 ------------- -------------- (UNAUDITED) CASH FLOW FROM OPERATING ACTIVITIES: Net loss $(3,975,742) $(8,423,024) ------------- -------------- Adjustments to reconcile net loss to net cash used in operating activities: Amortization of film and program costs 1,186,547 853,032 Write-down of film and program costs - 5,456,180 Depreciation and other amortization 264,611 288,256 Minority interest 57,469 64,724 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable, net - current 1,264,401 1,013,256 (Increase) decrease in accounts receivable - non-current 60,000 798,453 Additions to film and program costs (1,392,552) (2,652,529) (Increase) decrease in prepaid expenses 152,367 107,191 (Increase) decrease in deposits receivable - 10,421 Increase (decrease) in accounts payable and accrued expenses 30,637 1,825,733 Increase (decrease) in participations payable - current (93,119) (183,667) Increase (decrease) in participations payable - non-current (88,009) (94,315) Increase (decrease) in deferred revenue - current 889,357 (519,085) Increase (decrease) in deferred revenue - non-current (92,528) (387,801) ------------- -------------- CASH USED IN OPERATING ACTIVITIES (1,736,561) (1,843,175) ------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment (17,458) (10,742) ------------- -------------- CASH USED IN INVESTING ACTIVITIES (17,458) (10,742) ------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 100,000 4,715,581 ------------- -------------- CASH PROVIDED FROM FINANCING ACTIVITIES 100,000 4,715,581 ------------- -------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,654,019) 2,861,664 CASH AND CASH EQUIVALENTS - beginning of period 4,461,627 3,358,230 ------------- -------------- CASH AND CASH EQUIVALENTS - end of period $2,807,608 $6,219,894 ============= ============== 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 MARCH 31, 1998 (UNAUDITED) 1. BASIS OF PRESENTATION Reference is made to the Company's Annual Report on Form 10-K/A 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 In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share (Statement 128). Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the Statement 128 requirements. 3. STRATEGY LICENSING COMPANY MINORITY INTEREST In October 1997, the Company entered into an agreement with Arlene J. Scanlan, pursuant to which the Company acquired the remaining 15% of the outstanding shares of the capital stock of Strategy held by her. Additionally, Ms. Scanlan's employment with Strategy and the Company was terminated. In consideration of the foregoing, the Company paid Ms. Scanlan an aggregate of approximately $31,000 and has released Ms. Scanlan from certain restrictions contained in a covenant not to compete with respect to specified properties and entities. 4. PENDING ACQUISITION BY RCN CORPORATION The Company has entered into an Agreement and Plan of Merger, dated as of February 27, 1998, as amended on April 6, 1998 (the "Merger Agreement"), between RCN Corporation ("RCN"), LME Acquisition Corporation ("LME") and the Company pursuant to which LME will be merged with and into the Company and the Company will be the surviving corporation and a wholly owned subsidiary of RCN. A special meeting of the Company's shareholders is currently anticipated to occur in June 1998 to vote on the Merger Agreement. In the opinion of management, if the Merger Agreement and the transactions contemplated thereby are not approved by the Company's shareholders, it is unlikely that the Company would be able to sustain its operations, whether in order to pursue an alternative transaction or otherwise, for any significant period beyond the date of such meeting, absent a source of additional funding which does not currently exist. 4 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Results of Operations - Three months ended March 31, 1998 as compared to three months ended March 31, 1997 Production and royalty revenues for the three months ended March 31, 1998 increased to $944,383 from $820,258 in the comparable 1997 period. This increase was primarily due to an increase in revenues arising from production of new episodes of The Puzzle Place(R) of approximately $851,000, partially offset by a reduction of production related to Discovery Kids of approximately $686,000. Licensing agent fees for the three months ended March 31, 1998 declined to $72,867 from $285,537 in the comparable 1997 period. The decrease is primarily due to a reduction in revenues related to the Sonic(R) The Hedgehog property of approximately $119,000 and reductions in licensing revenues on The Puzzle Place of approximately $81,000 due to expirations of certain licenses. Production and royalty expenses for the three months ended March 31, 1998 increased to $1,253,157 (or 133% of related revenues) from $1,252,276 (or 153% of related revenues) in the comparable 1997 three month period. The difference was primarily due to increases attributable to production of new episodes of The Puzzle Place, partially offset by declines in production expenses for production of interstitial programming for Discovery Kids and No ReallyTM. Production and royalty expenses associated with development activities did not result in the generation of current revenues for Lancit, contributing to the increase in the percentage of these expenses to related revenues. Direct costs of licensing agent activities for the three month period ending March 31, 1998 decreased to $63,176 from $200,875 in the comparable 1997 period due primarily to reduced personnel costs of approximately $119,000, reduced trade show activity of approximately $9,300 and reductions in professional fees and telephone costs of approximately $4,000 each. General and administrative expenses for the three months ended March 31, 1998 decreased to $1,051,850 from $1,217,165 in the comparable 1997 period. This decrease was attributable to reductions in personnel costs of approximately $117,000, facilities costs of approximately $59,000 and legal fees of approximately $14,000, offset by increases in insurance costs of approximately $26,000. Interest income for the three months ended March 31, 1998 decreased to $24,422 from $78,714 in the comparable 1997 period. This decrease was attributable to a reduction in cash balances. There was no provision for income taxes recorded for the three months ended March 31, 1998 or for the comparable 1997 period, as both periods showed a loss. Net loss for the three month period ended March 31, 1998 was $1,339,991 ($.20 per share) compared to a net loss of $6,955,110 ($1.05 per share) in the comparable three month period in 1997 primarily as a result of all of the factors discussed above as well as a charge of $5,456,180 ($.82 per share) taken in the three months ended March 31, 1997 to reduce certain film and program costs to net realizable value. 5 Results of Operations - Nine months ended March 31, 1998 as compared to nine months ended March 31, 1997 Production and royalty revenues for the nine months ended March 31, 1998 decreased to $1,326,115 from $1,566,266 in the comparable 1997 period. This decrease was primarily due to reductions in production activities relating to Reading Rainbow(R) of approximately $546,000, Backyard SafariTM of approximately $209,000, Discovery Kids of approximately $672,000 and No Really of approximately $171,000, partially offset by production of new episodes of The Puzzle Place approximating $838,000, broadcast renewal fees on The Puzzle Place of approximately $272,000, increases in royalties of approximately $169,000 and net increases in other items approximating $79,000. Revenues from licensing agent fees for the nine months ended March 31, 1998 decreased to $523,655 from $929,412 in the comparable 1997 period. This decrease is primarily due to reductions in royalties from the Sonic The Hedgehog property of approximately $259,000 and reduced revenues due to the expiration of certain licensing contracts on The Puzzle Place of approximately $166,000. Production and royalty expenses for the nine months ended March 31, 1998 increased to $2,373,477 (or 179% of related revenues) from $2,231,267 (or 142.5% of related revenues) in the comparable 1997 nine month period reflecting primarily increased payments for broadcast renewal rights license fees on The Puzzle Place of approximately $273,000, production expenses on new episodes of The Puzzle Place approximating $838,000 and increased development activities approximating $270,000, all of which was partially offset by reduced production activity on Reading Rainbow of approximately $408,000, Backyard Safari of approximately $176,000 and production for Discovery Kids of approximately $677,000. Production and royalty expenses associated with development activities did not result in the generation of current revenues for Lancit, contributing to the increase in the percentage of these expenses to related revenues. Direct costs of licensing agent activities for the nine months ended March 31, 1998 decreased to $338,453 from $641,123 in the comparable 1997 nine month period due primarily to reduced personnel costs approximating $211,000, reduced travel of approximately $38,000, a decrease in telephone expenses approximating $18,000, and a reduction in trade show and marketing materials of approximately $39,000. General and administrative expenses for the nine months ended March 31, 1998 increased to $3,162,978 from $2,717,935 in the comparable 1997 nine month period. This increase was attributable to an increase in legal fees of approximately $251,000, insurance costs of approximately $84,000 and increases in other office costs approximating $110,000. Interest income for the nine months ended March 31, 1998 decreased to $106,863 from $192,527 in the comparable 1997 nine month period. This decrease is due primarily to a reduced level of cash invested in 1998 as compared to 1997. There was no provision for income taxes recorded for the nine months ended March 31, 1998 or for the comparable 1997 period, as both periods showed a loss. Minority interest in licensing activities for the nine months ended March 31, 1998 was $57,467 compared to $64,724 in the comparable 1997 period. This is a result of decreased profitability at a subsidiary with a minority owner. Net loss for the nine months ended March 31, 1998 was $3,975,742 ($.60 per share) compared to a net loss of $8,423,024 ($1.29 per share) in the comparable 1997 period primarily as a result of all of the factors discussed above as well as a charge of $5,456,180 ($.84 per share) taken in the nine months ended March 31, 1997 to reduce certain film and program costs to net realizable value. Weighted average shares outstanding for the nine month period ended March 31, 1998 increased to 6,634,750 from 6,506,884 in the comparable 1997 period primarily as a result of the inclusion for the full nine months of shares issued to DCI related to its purchase of a 6.6% equity stake in Lancit as well as the exercise of stock options during the period from December 31, 1996 to December 31, 1997. 6 Liquidity and Capital Resources The Company had cash and cash equivalents as of March 31, 1998 of approximately $2.8 million, and no long- term debt. Notwithstanding the Company's cash position at March 31, 1998, the Company's management believes that additional funding will be required to enable the Company to continue to meet its obligations and to sustain its operations through the balance of the current fiscal year. The Company had previously announced that it was actively seeking additional funding and had retained an investment banking firm to assist it in this effort. Among the alternatives considered by the Company were a sale of an interest in the Company, an acquisition of the Company, and/or strategic alliances with industry partners. As discussed in Note 4 of the Consolidated Financial Statements, on February 27, 1998, the Company entered into the Merger Agreement with RCN providing for the merger of LME, a subsidiary of RCN, with and into the Company, pursuant to which the Company will be the surviving corporation and a wholly owned subsidiary of RCN (the "Merger"). The Merger Agreement was amended on April 6, 1998 to reflect RCN's one-for-one stock dividend. Pending the Special Meeting of shareholders to consider and vote upon the proposed Merger, which is currently scheduled for June 11, 1998, the Company has negotiated arrangements with certain creditors to defer certain of its obligations until after the estimated date of the Special Meeting. As of the scheduled date of the Special Meeting, it is anticipated that the Company will have minimal, if any, further cash resources or access to substantial cash resources. Accordingly, if the Merger Agreement and the transactions contemplated thereby, including the Merger, are not approved by the Company's shareholders, it is unlikely that the Company would be able to sustain its operations, whether in order to pursue an alternative transaction or otherwise, for any significant period beyond the date of such meeting, absent a source of additional funding which does not currently exist. In such event, the Company would have to consider seeking protection from its creditors under the Federal bankruptcy laws and/or liquidating. There has been a trend over the past two to three years of decreased profitability manifested by the decreases in revenues and the increases in production and royalty expenses and general and administrative expenses. This trend is expected to continue, at least in the short term. The Company's response to this trend, as noted above, has been to seek additional funding through a sale of an interest in the Company, an acquisition of the Company, and/or strategic alliances with industry partners. The Company has also taken steps to reduce, where appropriate, its operating expenses. These steps include relocating The Strategy Licensing Company, Inc. ("Strategy") its merchandising and licensing subsidiary, from Westport, Connecticut to the Company's New York City offices, and certain staff reductions. These measures have resulted in certain reductions to licensing agent direct costs and general and administrative expenses in the third quarter of fiscal 1998, when the effect of one-time costs related to staff reductions and the relocation of Strategy has been reduced and the Company will have the benefit of a full quarter of reduced costs related to these items; however, the effect of these savings will be reduced in some cases by the effect of the minority interest. In addition, the Company did not renew the lease for its Beverly Hills, California office, which expired in April 1998 and had an annual rental of $24,636. For the nine month period ended March 31, 1998, cash used in operating activities approximated $1.7 million. A net loss of approximately $4.0 million and additions to film and program costs of approximately $1.4 million, were partially offset by increases in accounts receivable of approximately $1.3 million, increases in deferred revenue of approximately $.8 million and non-cash charges for amortization of film and program costs and other depreciation and amortization of approximately $1.5 million. For the nine month period ended March 31, 1998, cash provided from financing activities was $0.1 million, compared to $4.7 million for the comparable 1997 period. Warrants to purchase 100,000 shares of stock were issued in partial payment and satisfaction of fees owed for services performed in connection with the September 1996 purchase of a 6.6% stake in the Company by DCI. Management does not expect inflation to have a significant impact on the Company's business. Impact of the Year 2000 Issue The Company uses primarily "off the shelf" computer software and has been advised by the manufacturers that most of this software, including its accounting and financing software, is Year 2000 compliant. Additionally, the Company's hardware has been tested and is believed to be Year 2000 compliant. Accordingly, the cost of addressing the Year 2000 issue is not expected to be material to the Company and any potential cost for incomplete or untimely resolution of Year 2000 issues is not expected to be material. 7 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 Report 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. Such risks include , without limitation, (i) the risks generally associated with the production of a television series and other entertainment products, including, without limitation, (a) the availability of appropriate time slots for children's and family entertainment programming; (b) a serious strike threat that could delay production schedules; (c) availability of a star or other key individual(s) associated with production of a series, movie or other project; (ii) the network and studio acceptance of television and motion picture projects; pricing, purchasing, financing, operational, advertising and promotional decisions by intermediaries in the distribution channel; and the effects of vertical integration of companies in the media and entertainment industry, the effects of which could be to reduce the opportunities for the Company and independent producers, suppliers and distributors as a whole; (iii) the ability of the Company to successfully negotiate and enter into agreements to acquire rights, develop, produce, market and distribute entertainment and licensing projects; (iv) difficulties or delays in the development, production and marketing of entertainment projects and/or licensed products, including, but not limited to, a failure to complete production of new projects when anticipated and failures related to another party's inability to perform, which could, for example, affect the licensees' ability to manufacture, or consumer demand for, licensed products; (v) less than anticipated consumer acceptance of entertainment projects or licensed products, which could negatively affect the cycle of entertainment projects and licensed products; (vi) the effects of, and changes in, consumer tastes, economic and tax policies, social and economic conditions, and laws and regulations, including governmental action or legal proceedings relating to intellectual property rights and intellectual property licenses and the adoption of new, or changes in, accounting policies; (vii) non-renewal of annual contracts with production-related customers; and (viii) underutilization of the Company's post-production facilities resulting from, among other things, production slowdowns or inefficiencies. These and other risks are described in the Company's Annual Report on Form 10- K for the fiscal year ended June 30, 1997, as amended, filed with the Securities and Exchange Commission, copies of which are available from the Securities and Exchange Commission or may be obtained upon request from the Company. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Not Applicable. 8 PART II Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
Exhibit No. Description ------- ---------------------------------------------------------------------------------------------- 2.1 Agreement and Plan of Merger, dated as of February 27, 1998 (the "Merger Agreement"), between RCN Corporation, LME Acquisition Corporation and the Company (incorporated by reference to Exhibit 2.1 contained in the Company's Current Report on Form 8-K, filed on March 6, 1998 (the "Form 8-K")), The Registrant agrees to furnish copies of any omitted schedules to the Merger Agreement, which are not required to be included as an exhibit, to the Commission upon request. 2.2 Amendment No. 1, dated as of April 6, 1998, to the Merger Agreement 4.1 Voting Agreement, dated as of February 27, 1998, between RCN Corporation, LME Acquisition Corporation, the Company, Cecily Truett, Laurence A. Lancit and The Lancit Children's Trust (incorporated by reference to Exhibit 99.1 contained in the Form 8-K) 27 Financial Data Schedule (electronic filing only)
(b) Reports on Form 8-K: Current Report on Form 8-K, filed on March 6, 1998, reporting the entrance by the Company into the Agreement and Plan of Merger, dated as of February 27, 1998, between RCN Corporation, LME Acquisition Corporation and the Company 9 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. LANCIT MEDIA ENTERTAINMENT, LTD. Date: May 15, 1998 By: /s/ LAURENCE A. LANCIT ----------------------------------------- Laurence A. Lancit Co-President & Treasurer Date: May 15, 1998 By: /s/ SUSAN L. SOLOMON ----------------------------------------- Susan L. Solomon Chief Executive Officer and Chairman of the Board of Directors 10 EX-2.2 2 EXHIBIT 2.2 Exhibit 2.2 AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER AMENDMENT NO. 1 dated as of April 6, 1998 between RCN CORPORATION, a Delaware corporation ("RCN"), LME ACQUISITION CORPORATION, a New York corporation (the "Merger Subsidiary"), and LANCIT MEDIA ENTERTAINMENT, LTD., a New York corporation ("Lancit"), to AGREEMENT AND PLAN OF MERGER ("Merger Agreement"), dated as of February 27, 1998, between RCN, Merger Subsidiary and Lancit. W I T N E S S E T H : WHEREAS, RCN, Merger Subsidiary and Lancit entered into the Merger Agreement on February 27, 1998; and WHEREAS, RCN declared a one for one stock dividend (the "Stock Dividend") on its common stock, par value $1.00 per share, on March 9, 1998 which was paid on April 3, 1998; and WHEREAS, the parties hereto wish to amend the Merger Agreement to correctly state the par value per share of the common stock of the Merger Subsidiary and to adjust the formula for calculating the Stock Exchange Ratio (as defined therein) in order to account for the Stock Dividend in accordance with Section 1.05(d) of the Merger Agreement; NOW, THEREFORE, the parties hereto hereby amend the Merger Agreement as follows: 1. The reference to "$.01" as the par value per share of the common stock of the Merger Subsidiary in Section 1.04 shall be deleted and replaced with "$1.00"; 2. The references to "$58" in Section 1.05(a) shall be deleted and replaced with references to "$29"; 3. The references to "$48" in Section 1.05(a) shall be deleted and replaced with references to "$24"; 4. This Amendment shall be in all respects governed by and construed in accordance with the laws of the State of New York; 5. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument; 6. Except as expressly amended by this Amendment, the Merger Agreement will remain in full force and effect; and 7. Capitalized terms used in this Amendment and not otherwise defined herein are used herein as defined in the Merger Agreement. 11 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. LANCIT MEDIA ENTERTAINMENT, LTD. By: /s/ Susan L. Solomon --------------------------------- Susan L. Solomon Chairman of the Board and Chief Executive Officer RCN CORPORATION By: /s/ Paul Sigmund --------------------------------- Name: Paul Sigmund Title: Executive Vice President LME ACQUISITION CORPORATION By: /s/ Paul Sigmund --------------------------------- Name: Paul Sigmund Title: Executive Vice President EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S QUARTERLY REPORT ON FORM 10-Q FOR THE FISCAL QUARTER ENDING 3-31-98 AND REFERENCE SHOULD BE MADE TO THE FINANCIAL STATEMENTS CONTAINED THEREIN AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JUN-30-1998 JUL-01-1997 MAR-31-1998 2,807,608 0 585,349 0 0 5,283,836 290,716 0 6,027,378 5,295,018 0 0 0 6,635 247,804 6,027,378 0 1,849,770 0 5,874,908 0 0 0 (3,918,275) 0 (3,975,742) 0 0 0 (3,975,742) (.60) (.60)
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