-----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, O4pYXG71u2wYZOOlCC2CN8vNAAakwia0Y93SMVg+htimyy1/KaMN0icx2lqya58c yD+xo89aUu1UyQWidbhNFg== 0000930661-96-000407.txt : 19960514 0000930661-96-000407.hdr.sgml : 19960514 ACCESSION NUMBER: 0000930661-96-000407 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADDVANTAGE MEDIA GROUP INC /OK CENTRAL INDEX KEY: 0000874292 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 731351610 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 033-39902 FILM NUMBER: 96562078 BUSINESS ADDRESS: STREET 1: 5100 E SKELLY DR STREET 2: MERIDIAN TOWER SUITE 1080 CITY: TULSA STATE: OK ZIP: 74135-6552 BUSINESS PHONE: 9186658414 MAIL ADDRESS: STREET 1: 5100 EAST SKELLY DRIVE STREET 2: MERIDIAN TOWER SUITE 1080 CITY: TULSA STATE: OK ZIP: 74135 10QSB 1 FORM 10QSB (QE 3-31-96) UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period _______ to ________ Commission File number 1-10799 ADDVANTAGE MEDIA GROUP, INC. (Exact name of small business issuer as specified in its charter) OKLAHOMA 73-1351610 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5100 East Skelly Drive Meridian Tower, Suite 1080 Tulsa, Oklahoma 74135-6552 (Address of principal executive office) (Zip Code) (918) 665-8414 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --- --- Shares outstanding of the issuer's $.01 par value common stock as of May 14, 1996 is 4,942,620. Transitional Small Business Issuer Disclosure Format (Check one): Yes No x --- --- PART I--FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ADDVANTAGE MEDIA GROUP, INC. BALANCE SHEETS
March 31, December 31, 1996 1995 ----------------------------- (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 8,344 $ 20,444 Accounts receivable 316,563 6,926 Deferred income taxes 667,000 667,000 Other current assets 5,491 8,514 ----------------------------- Total current assets 997,398 702,884 Property and equipment, at cost: Calculators 1,035,755 749,107 Office and production equipment 351,142 341,575 Furniture and fixtures 64,417 64,417 ----------------------------- 1,451,314 1,155,099 Accumulated depreciation 364,544 331,385 ----------------------------- 1,086,770 823,714 Deferred income taxes 3,243,000 3,243,000 Patent, net of accumulated amortization of $468,237 and $445,533 at March 31, 1996 and December 31, 1995, respectively 439,873 462,577 Deferred charges 45,847 12,064 ----------------------------- Total assets $5,812,888 $5,244,239 =============================
-1- ADDVANTAGE MEDIA GROUP, INC. BALANCE SHEETS
March 31, December 31, 1996 1995 ------------------------------ (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY (NET CAPITAL DEFICIENCY) Current liabilities: Note payable to bank $ 700,000 $ 519,968 Notes payable to shareholders and directors 176,808 176,808 Accounts payable 589,842 558,748 Accrued interest 368,837 252,677 Other accrued liabilities 667,280 687,782 Accrued preferred stock dividends 444,400 416,777 Unearned advertising revenue 234,900 - ------------------------------- Total current liabilities 3,182,067 2,612,760 Long-term obligations 554,938 515,163 Long-term bank debt 3,406,656 3,406,656 Stockholders' equity (net capital deficiency) Preferred stock, $1.00 par value, 1,000,000 shares authorized; Series A, 10% cumulative convertible, preferred stock - 277,750 shares issued and outstanding at March 31, 1996 and December 31, 1995; liquidation preference, $1,111,000 927,167 927,167 Common stock, $.01 par value, 10,000,000 shares authorized; 4,942,620 and 4,927,620 shares issued and outstanding at March 31, 1996 and December 31, 1995, respectively 49,426 49,276 Capital in excess of par value 5,995,590 5,991,428 Accumulated deficit (8,302,956) (8,258,211) ------------------------------ Net capital deficiency (1,330,773) (1,290,340) ------------------------------ Total liabilities and net capital deficiency $ 5,812,888 $ 5,244,239 ==============================
-2- ADDVANTAGE MEDIA GROUP, INC. STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended March 31, 1996 1995 -------------------------------- Revenues: Advertising $ 604,800 $ - Sales of calculators 2,033 13,728 Other 235 56 -------------------------------- 607,068 13,784 Costs and expenses: Cost of advertising services 219,140 45,034 Cost of sales of calculators 1,662 4,748 Selling expenses 5,957 12,067 General and administrative expenses 266,320 120,999 Litigation expense - 50,607 -------------------------------- 493,079 233,455 -------------------------------- Operating income (loss) 113,989 (219,671) Interest expense 131,111 115,565 -------------------------------- Net loss (17,122) (335,236) Preferred stock dividends (27,623) (27,623) -------------------------------- Net loss applicable to common stock $ (44,745) $ (362,859) ================================ Net loss per common share $(0.01) $(0.09) ================================ Shares used in computing net loss per common share 5,515,644 3,908,620 ================================
-3- ADDVANTAGE MEDIA GROUP, INC. STATEMENTS OF CASH FLOWS (UNAUDITED)
Three Months Ended March 31, 1996 1995 -------------------------------- OPERATING ACTIVITIES Net loss $ (17,122) $(335,236) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 55,863 37,842 Long-term obligation accrual 39,775 2,241 Changes in assets and liabilities: Accounts receivable (309,638) (663) Inventory - 4,482 Other current assets 3,023 2,588 Deferred charges (33,783) 3,251 Accounts payable 31,095 17,818 Accrued interest 116,160 112,060 Other accrued liabilities (20,502) 37,963 Unearned advertising revenue 234,900 - -------------------------------- Net cash provided by (used in) operating activities 99,771 (117,654) INVESTING ACTIVITIES Purchases of property and equipment (296,215) - -------------------------------- Net cash used in investing activities (296,215) -
-4- ADDVANTAGE MEDIA GROUP, INC. STATEMENTS OF CASH FLOWS (continued) (UNAUDITED)
Three Months Ended March 31, 1996 1995 -------------------------------- FINANCING ACTIVITIES Proceeds from issuance of bank notes $180,032 $ - Proceeds from issuance of investor notes - 220,000 Exercise of stock options 4,312 - -------------------------------- Net cash provided by financing activities 184,344 220,000 -------------------------------- Increase (decrease) in cash (12,100) 102,346 Cash and cash equivalents, beginning of period 20,444 169 -------------------------------- Cash and cash equivalents, end of period $ 8,344 $102,515 ================================
-5- NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION The accompanying unaudited condensed financial statements have been prepared in accordance with Regulation S-B for interim financial statements required to be filed with the Securities and Exchange Commission and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all adjustments, consisting only of normal recurring adjustments which are, in the opinion of management, necessary in order to make the financial statements not misleading. NOTE B - DESCRIPTION OF THE BUSINESS The Company markets and sells in-store advertising to national advertisers. The advertising is positioned on solar powered calculators attached to the handles of shopping carts. The patented calculators are marketed under the registered trademark "Shoppers Calculators". The Company also sells Shoppers Calculators(R) to third parties, including independent retailers and international licensees. The Company entered into separate agreements with Wal-Mart Stores, Inc. ("Wal-Mart") in July 1993 and June 1994 which provided for the installation of the Company's calculators in certain Wal-Mart stores. These contracts were never implemented, and in January 1995, the Company filed a suit against Wal- Mart for the alleged breach of the terms of those contracts. On September 1, 1995, the Company and Wal-Mart entered into a new contract in settlement of the lawsuit. Under the terms of a new four-year contract, the Company will install and maintain Shoppers Calculators(R) in all of Wal-Mart's Supercenters in the continental United States and Wal-Mart is responsible for selling the advertising for the calculators during the initial phase of the contract. During the term of the contract in which Wal-Mart is responsible for selling the advertising, Wal-Mart has agreed to guarantee advertising revenues to the Company in excess of $23.5 million, subject to the Company's obligation to install and service the Shoppers Calculators(R) during the revenue guaranty period. After the Company has received payment of the total guaranteed advertising revenues, the Company has the option to continue the contract and assume the advertising sales responsibilities for the program. If the Company elects to continue the contract, the program will then continue on this basis for a fixed period of time, and upon conclusion of the term of the contract, the program will be subject to re-evaluation by both parties. Through March 31, 1996, cumulative advertising revenues have totaled $731,700 reducing the guaranteed advertising revenues to be received in future periods to $22,823,100. Certain terms of the contract were determined based on the following assumed schedule with respect to the number of Supercenter stores to be participating in the Company's program. The following table sets forth the assumed schedule of Supercenter installations pursuant to the Wal-Mart contract's operating plan and the actual installations in Supercenters to date. -6-
Operating Plan Actual Installations -------------------------- --------------------------- Stores to Shopping Carts Stores Shopping Year be Added to be added Installed Carts Installed - -------- --------- -------------- --------- --------------- 1995 33 39,600 41 31,925 1996 200 240,000 116/(1)/ 87,297/(1)/ 1997 100 120,000 N/A N/A 1998 100 120,000 N/A N/A --- ------- --------- --------------- Total 433 519,600 === =======
- ------------ /(1)/ Through April 30, 1996. The Company currently plans to complete installations in 278 Supercenters during 1996. The cost of Shoppers Calculator components and installation hardware not yet installed was $223,789 at March 31, 1996 and is included in the balance sheet under property and equipment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS THREE MONTHS ENDED MARCH 31, 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995 - ------------------------------------------------------------------------------- Business activity was primarily related to managing a Shoppers Calculator program in Wal-Mart Supercenters and developing programs with other mass merchants. Advertising revenues totaled $604,800 during the first three months of 1996. The Company's first revenue period under the Wal-Mart contract began on November 6, 1995, and there were no advertising revenues for the comparable period last year. Revenues from sales of calculators declined from $13,700 for the three months ended March 31, 1995 to $2,000 for the three months ended March 31, 1996. Approximately 921 units were sold during the first quarter of fiscal 1995, in the domestic market compared to approximately 116 units sold in the first quarter of fiscal 1996. Cost of services representing primarily labor to supervise, service and clean the installed units and to change advertising messages, and depreciation of installed units, increased approximately $174,100 (387%) in 1996, compared to 1995 as a result of higher labor costs due to the increase in the number of calculators installed and serviced during the respective periods. Cost of sales of calculators, representing the manufacturing costs of units sold, decreased approximately $3,100 (65%) in 1996 as compared to 1995. This was due to the decreased number of units sold during the first quarter of 1996 as compared to 1995. -7- Selling expense decreased approximately $6,100 (51%) in the first quarter of 1996. This was primarily due to reductions during 1996 in payroll, and payroll related expenses. General and administrative expenses increased $145,300 (120%) for the first quarter of 1996 as compared to the same period in 1995. During 1996, payroll and payroll related expenses increased $36,600 as the Company began to increase staff to handle the increased work load required from the Wal-Mart Supercenter contract. Executive retirement plan accruals, including insurance cost to fund future payments totaled $68,600 during the 1996 first quarter. Expenses related to broker and analyst meetings and other shareholder expenses increased $15,300 over 1995. Increases amounting to $33,300 occurred in professional fees, occupancy costs, business taxes and other expenses. The increase was offset by a decrease in investment banking fees of $8,500 from the first quarter of 1995. Litigation expenses in the amount of $50,600 were incurred during the first quarter of 1995 in connection with the Company's lawsuit against Wal-Mart. Interest expenses increased approximately $7,600 (7%) in the first quarter of 1996 due primarily to high levels of borrowing. Also during 1996, interest has been accrued on amounts due investors which has been recorded in the financial statements as long-term obligation payable. FINANCIAL CONDITION AND LIQUIDITY During the first quarter of 1995, the Company completed an offering of promissory notes and warrants for an aggregate consideration of $200,000. The offering included (a) a total of 500,000 warrants, each of which, upon exercise, entitled the holder to acquire one share of the Company's Common Stock at a price of $.20 per share, and were exercisable within 24 months from the date of issuance; (b) a total of 10% of the net recovery from the Wal-Mart lawsuit described elsewhere herein; and (c) promissory notes in an aggregate principal amount of $200,000 and bearing interest at the rate of 10% per annum due on or before 20 days after the final resolution, by settlement, final judgment or otherwise, of the Wal-Mart litigation. On November 30, 1995, investors holding warrants to purchase 425,000 shares of Common Stock exercised such warrants by converting promissory notes in the principal amount $85,000 to acquire the shares. At the same date, new promissory notes totaling $130,808 (representing $115,000 principal and $15,808 accrued interest on the original notes) were issued. These notes mature on June 30, 1997. The present value of the amount payable to the participants in the Company's private placement (including Messrs. Hood and Young who provided the initial funding for the lawsuit), who have the right to receive an aggregate of 12% of the net recovery from the Wal-Mart contract which was entered into in settlement of the litigation has been calculated by the Company to be $527,787 including accrued interest through March 31, 1996, and has been recorded in the financial statements as long-term obligation payable. The Wal-Mart contract provided the Company with additional bank financing, which has been guaranteed by Wal-Mart in the amount of $700,000 all of which was advanced at March 31, 1996. On March 6, 1996, the Company completed a restructuring of all past due bank debt effective as of October 1, 1995. The $1,800,000 revolving line of credit, other notes totaling $1,132,622 and accrued interest through September 30, 1995 of $474,034 were combined into a new note in the amount -8- of $3,406,656. This new loan bears interest at the Chase Manhattan Bank prime rate (8.25% on March 31, 1996) plus 1%. The loan has a maturity date of May 31, 1998 with payment terms tied to the Company's projected revenues under the Wal- Mart contract. Payments of interest and principal on the $3,406,656 note will commence after the $700,000 note guaranteed by Wal-Mart has been paid, which is anticipated to be in January 1997. Based on the operating plan, payments on the restructured bank debt will commence in February 1997. On July 17, 1991, the Company completed an initial public offering of 600,000 units (the "Units"), each unit consisting of two shares of common stock and one redeemable common stock purchase warrant (the "warrants") to purchase one share of common stock. Each of the 600,000 outstanding Warrants entitles the holder, upon exercise, to purchase one share of common stock at a price of $4.00 per share. The expiration date of the Warrants has been extended by the Company to June 26, 1996, unless redeemed or extended again by the Company prior to that time. The Warrants may be redeemed by the Company at a price of $0.05 per Warrant on 30 days prior written notice if the closing bid price of the common stock for ten consecutive trading days ending within 15 days of the date of notice of redemption equals or exceeds $5.00 per share. In connection with the 1991 public offering of common stock and common stock purchase warrants, the Company sold to the underwriter warrants to purchase up to 60,000 units at a price of $.001 per warrant. The warrants are exercisable in whole or in part at $7.20 per unit for a period of four years commencing June 26, 1992. Each unit consists of two shares of common stock and one warrant to purchase one share of common stock for $4.80 per share exercisable until June 26, 1996. The warrants provide for adjustment of the exercise price upon the occurrence of certain events. The Company's first revenue period under the Contract began on November 6, 1995. Through March 31, 1996, cumulative advertising revenues have totaled $731,700 reducing the guaranteed advertising revenues to be received in future periods to $22,823,100. The cash flow from the Wal-Mart contract is expected to allow the Company to meet its anticipated cash requirements for the foreseeable future, including repayment of all past due obligations. All statements other than statements of historical facts, including, without limitation, statements concerning the anticipated dates of repayment of certain indebtedness of the Company, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended. Although the Company believes that such forward-looking statements are reasonable, such statements are subject to various risks and uncertainties which could cause actual results to differ from the Company's expectations, including, but not limited to, general economic conditions and conditions affecting the mass merchandising industry in general and Wal-Mart specifically, the availability of manufactured components and the Company's ability to fund the costs thereof, and the Company's ability to comply with its obligations under the Wal-Mart contract. -9- PART II--OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: Exhibit No. Description ----------- ----------- 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule (b) Reports on Form 8-K: None. -10- 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. ADDVANTAGE MEDIA GROUP, INC.
SIGNATURE TITLE DATE - ---------------------- -------------------------------------------- ------------ /s/ Charles H. Hood Director and President May 10, 1996 - ---------------------- (Principal Executive Officer) Charles H. Hood /s/ Gary W. Young Director, Executive Vice President - May 10, 1996 - ---------------------- Finance Gary W. Young and Administration and Treasurer (Principal Financial Officer)
-11- EXHIBIT INDEX -------------
EXHIBIT NO. DESCRIPTION - -------------- -------------------------------------- 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule
EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE Three Months ended March 31, 1996
Primary ------------- Net loss $ (17,122) Less preferred stock dividends (27,623) ------------- Net loss applicable to common stock (44,745) Weighted average shares outstanding 4,935,202 Effect of options and warrants 580,442 ------------- Weighted average common and common equivalent shares 5,515,644 ------------- Net loss per common share $(.01) =============
EX-27 3 FINANCIAL DATA SCHEDULE, ARTICLE 5
5 1 3-MOS DEC-31-1995 JAN-01-1996 MAR-31-1995 8,344 0 316,563 0 0 997,398 1,451,314 364,544 5,812,888 3,182,067 0 0 927,167 49,426 (2,307,366) 5,812,888 606,833 607,068 0 493,079 0 0 131,111 (17,122) 0 0 0 0 0 (17,122) (.01) (.01)
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