-----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, Fd+7///JbspwSi8XKgEC4khwPn2r1JcTfUQtJUVXeJnGHYG2VMZkNj/145iUa2ZI J1y3gv+I2gx11q70Q1NIdw== 0000891554-97-000745.txt : 19970818 0000891554-97-000745.hdr.sgml : 19970818 ACCESSION NUMBER: 0000891554-97-000745 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970815 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: METRO DISPLAY ADVERTISING INC CENTRAL INDEX KEY: 0000944742 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 33093323 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-25982 FILM NUMBER: 97664813 BUSINESS ADDRESS: STREET 1: 15265 ALTON PARKWAY STREET 2: STE 100 CITY: IRVINE STATE: CA ZIP: 92718 BUSINESS PHONE: 7147273333 MAIL ADDRESS: STREET 1: 15265 ALTON PARKWAY STREET 2: STE 100 CITY: IRVINE STATE: CA ZIP: 92718 10-Q 1 QUARTERLY REPORT - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-QSB ---------- [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 Commission File Number 0-25982 METRO DISPLAY ADVERTISING, INC. (exact name of small business issuer as specified in its charter) California 33-0093323 (State of Incorporation) (I.R.S. Employer Identification No.) SUITE 100 15265 ALTON PARKWAY IRVINE, CA 92618 (address of principal executive offices) (714) 727-3333 (issuer's telephone number, including area code) -------------------------------- Indicate by check mark whether the issuer (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 report), and (2) has been filing such requirements for the past 90 days. YES [X] NO [ ] Number of shares outstanding of each issuer's classes of common stock, as of June 30, 1997: 943,030 - -------------------------------------------------------------------------------- This report contains 9 sequentially numbered pages. METRO DISPLAY ADVERTISING, INC. INDEX PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 2 Condensed Consolidated Statement of Operations for the Three Months Ended June 30, 1997 and 1996 3 Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 1997 and 1996 4 Condensed Consolidated Statement of Cash Flows for the Three Months Ended June 30, 1997 and 1996 5 Notes to the Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition 7-8 and Results of Operations PART II - OTHER INFORMATION Item 5. Other Information 9 Part 1 Financial Information Item 1, Financial Statements METRO DISPLAY ADVERTISING, INC. CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS December 31, June 30, 1996 1997 (unaudited) ------------ ------------ CURRENT ASSETS Cash $ 74,947 $ 85,296 Accounts Recievable, net of allowance 989,804 824,191 Prepaid expenses 226,844 20,124 Deferred taxes-current portion 196,000 196,000 ------------ ------------ TOTAL CURRENT ASSETS 1,487,595 1,125,611 PROPERTY AND EQUIPMENT, net 6,172,659 5,892,419 OTHER ASSETS Performance bond deposits 734,722 735,722 Deferred taxes - less current portion 3,052,000 3,052,000 Other assets 186,528 252,958 ------------ ------------ TOTAL OTHER ASSETS 3,973,250 4,040,680 ------------ ------------ $ 11,633,504 $ 11,058,710 ============ ============ LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Current porton of long term debt $ 693,065 $ 620,327 Accounts payable and accured liabilities 1,031,117 1,139,389 Advance payments 226,067 150,000 ------------ ------------ TOTAL CURRENT LIABILITIES 1,950,249 1,909,716 LONG-TERM DEBT, net of current portion 833,785 823,221 SHAREHOLDERS' EQUITY Preferred stock, 1,000,000 shares authorized, no par value, no shares issued -- -- Common stock, 5,000,000 shares authorized, no par value, 943,030 shares issued 9,504,532 9,504,832 Accumulated deficit (655,062) (1,179,059) ------------ ------------ TOTAL SHAREHOLERS' EQUITY 8,849,470 8,325,773 ------------ ------------ $ 11,633,504 $ 11,058,710 ============ ============
See accompanying Notes to Condensed Financial Statements. 2 METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY CONDENDSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Three Months Ended June 30, 1996 1997 ----------- ----------- SALES $ 1,756,000 $ 1,763,882 COST OF SALES City fees 485,317 602,080 Advertising commissions and expenses 442,592 450,304 Installation and maintenance 328,311 438,466 Other costs 28,451 22,655 ----------- ----------- TOTAL COST OF SALES 1,284,671 1,513,505 GROSS PROFIT 471,329 250,377 ----------- ----------- OPERATING EXPENSES Sales and administrative 316,307 765,320 Depreciation 237,750 235,143 Interest expense 35,998 31,167 Other expense(income) (65,261) (19,552) ----------- ----------- TOTAL OPERATING EXPENSES 524,794 1,012,078 ----------- ----------- NET INCOME (LOSS) $ (53,465) $ (761,701) =========== =========== COMMON SHARES OUTSTANDING 906,364 943,030 NET INCOME (LOSS) PER SHARE (0.06) (0.81) =========== =========== See accompanying Notes to Condensed Financial Statements. 3 METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY CONDENDSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) Six Months Ended June 30, 1996 1997 ----------- ----------- SALES $ 3,033,436 $ 3,840,752 COST OF SALES City fees 856,028 929,923 Advertising commissions and expenses 743,823 986,614 Installation and maintenance 689,743 722,360 Other costs 73,827 68,587 ----------- ----------- TOTAL COST OF SALES 2,363,421 2,707,484 GROSS PROFIT 670,015 1,133,268 ----------- ----------- OPERATING EXPENSES Sales and administrative 632,389 1,163,085 Depreciation 474,393 470,514 Interest expense 70,871 63,372 Other expense(income) (91,320) (39,706) ----------- ----------- TOTAL OPERATING EXPENSES 1,086,333 1,657,265 ----------- ----------- NET INCOME (LOSS) $ (416,318) $ (523,997) =========== =========== COMMON SHARES OUTSTANDING 906,364 943,030 NET INCOME (LOSS) PER SHARE (0.46) (0.56) =========== =========== See accompanying Notes to Condensed Financial Statements. 4 METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Six Months Ended June 30, 1996 1997 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) (416,318) (523,997) Adjustments ot reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization $ 474,393 $ 470,514 Changes in operating assets and liabilities: Accounts receivable 514,891 165,613 Prepaid expenses and other 31,947 206,720 Deposits and other (1,664) (66,430) Accounts payable and accrued expenses (89,998) 32,205 Loss on sale of assets (6,967) -- --------- --------- NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES 506,284 284,625 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (252,554) (190,274) Advances to joint venture 0 0 Performance bond deposits (18,500) (1,000) --------- --------- NET CASH PROVIDED FROM INVESTING ACTIVITIES (271,054) (191,274) CASH FLOWS FROM FINANCING ACTIVITIES Principal reductions of long term debt (285,077) (83,302) Proceeds from stock options granted -- 300 --------- --------- NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (285,077) (83,002) NET INCREASE (DECREASE) IN CASH (49,847) 10,349 Beginning of period 225,524 74,947 --------- --------- CASH, End of period $ 175,677 $ 85,296 ========= =========
See accompanying Notes to Condensed Financial Statements. 5 METRO DISPLAY ADVERTISING, INC. AND SUBSIDIARY Notes to Condensed Consolidated Financial Statements (Unaudited) Note 1. Introduction The accompanying condensed consolidated financial statements of Metro Display Advertising, Inc. (the "Company") have been prepared without audit pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the consolidated financial statements and related footnotes included in the Company's latest Annual Report on Form 10-KSB. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 1997, and the statements of its operation and its cash flows for the three month periods ended June 30, 1997 and 1996 have been included. The results of operation for interim periods are not necessarily indicative of the results, which may be realized for the full year. 6 Item 2. Management's Discussion and Analysis of Plan of Operations General From January 22, 1992 until January 7, 1994, Metro Display Advertising, Inc., a California Corporation (the "Company"), was in bankruptcy. Since its bankruptcy proceedings, the Company has primarily been in the business of leasing advertising space on panels located in its bus stop shelters. The Company's shelters are located in both Northern and Southern California. In addition, the Company operates in Clark County, Nevada, and the City of Las Vegas, Nevada through Bustop Shelter of Nevada, (BSON), a Nevada Corporation and fully owned subsidiary. During the fiscal years ended December 31, 1994 and 1995, the Company made the transition from a company operating under the bankruptcy court in prior years, to a company operating under a revised business plan. The Company's primary focus was on increasing sales and occupancy rates, reducing overhead, and continuing scheduled payments to pre-bankruptcy Plan of Reorganization. The Company's objectives for fiscal year 1997 remain dedicated to this business plan. Comparisons of three-months ended June 30, 1997 and June 30, 1996 Sales for the three-month quarter ended June 30, 1997 (the "Current Quarter") increased slightly in comparison to the three-month period ended June 30, 1996 (the "Prior Quarter"). The company continues with its intensive marketing and public relations campaign that has been staged to offset the on-going litigation with the City of Victorville. The on-going litigation involves the Company's First Amendment Rights. In general, the Company believes that its rights to freely advertise were violated when the City prevented the Company from displaying paid advertising for a local labor union. While the Current Quarter results have been flat compared to prior year, it is expected that this litigation will continue to impact sales growth in the remaining two quarters of 1997. Current litigation concerning the marketing agreement with Van Wagner is also expected to impact sales negatively during the remaining two quarters of the 1997. Cost of sales increased by $228,834 or 18% over the prior quarter primarily due to increases in City fees of $116,763 or 24% and increases in Installation and maintenance cost of $110,155, or 34%. The increases in City fees are primarily due to an increase in the amount accrued for City fees in the Current Quarter. The increases in Installation and maintenance are the result of the Company contracting out its poster installation to an outside vendor, where previously, this was handled by internal maintenance staff. In addition, continued expansion and enhancements in shelters have caused installation and maintenance to rise. The Company's gross profit percentage declined from 26.8% in the Prior Quarter to 14.2% in the Current Quarter, primarily resulting from an increase in cost of sales as a percentage of sales from 73.2% in the Prior Quarter to 85.6% in the Current Quarter. An increase of $487,284 was incurred in operating expenses during the current quarter principally due to increases in office expenses due to office expansion in Nevada, an increase in bad debts, and legal expenses necessary to deal with the Victorville litigation. In addition, the Company has incurred professional fees relating to sale/merger agreement pending. 7 Due to the significant increase in operating expenses relating to the sale/merger and litigation expenses, the Company posted a $761,701 net loss, before income taxes, during the Current Quarter compared to a $53,465 net loss before taxes during the Prior Quarter. The Company has maintained its primary focus on increasing sales and occupancy rates, and reducing overhead. Comparisons of six-months ended June 30, 1997 and June 30, 1996 Sales for the six-month period ended June 30, 1997 (the "Current Period") increased by $807,316, or 27%, in comparison to the six-month period ended June 30, 1996 (the "Prior Period"). This increase in sales in the Current Period is attributable to a strong first quarter results which represented most of the increase during the Current Period. As previously reported in the first quarter results, the increase in the first quarter was attributable to intensive marketing and public relations campaign that been staged to offset the ongoing litigation with the City of Victorville. In addition, an overall increase in national account sales rose during the first quarter as well. Cost of sales increased by $344,063 or 14.6% over the Prior Period primarily due to increases of $242,791 in advertising commissions and expenses resulting from sales growth occurring during the first quarter of 1997. In addition, City fees rose by $73,895 and installation and maintenance costs rose $32,617 over the Prior Period, primarily from expansion and enhancements to shelters. The Company's gross profit percentage increased from 22.1% in the Prior Period to 29.5% in the Current Period, primarily resulting from first quarter sales growth. An increase of $570,932 was incurred in operating expenses during the Current Period principally due to increases in Professional fees of $160,200, an increase in bad debts of $139,668 written off during the Current Period, and a general increase in other operating expenses of $112,764. Due to the significant increase in operating expenses during the Current Period, the Company posted a $523,997 net loss, before income taxes, during the Current Period compared to a $416,318 net loss before taxes during the Prior Period. Liquidity and Capital Resources As of June 30, 1997, the Company's current liabilities exceeded its current assets by $784,105. Approximately $325,000 of the current liabilities consists of the current portion of indebtedness owed to Dr. Allan Ross, a Director of the Company. The Company's working capital position worsened by $321,451 during the Current Period, primarily the result of an increase in operating expenses of $570,932 and cost of sales of $344,063. Cash flows from operating activities decreased by $221,659 over the Prior Period, principally due to the changes in accounts receivable for the Current Period. The amount available under the credit facility is approximately $700,000. The Company believes that it will be able to fund its current working capital needs from (1) cash generated from operating activities and (2) draws against the credit line facility. 8 PART II OTHER INFORMATION Item 5, Other Information Subsequent to year-end December 31, 1996, the Company signed a memorandum of understanding with a buyer for the sale of all 100% of Metro Display Advertising, Inc. common stock. The transaction is subject to stockholder ratification and completion of due diligence procedures to be performed by the buyer. The Company continues to negotiate the terms and conditions of the sale, given its pending litigation with OSI/Van Wagner concerning contractual and fiduciary relationships between the Company and Van Wagner Communications, Inc. On May 20, 1997, a board member exercised 120,000 stock options. Signature Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereto duly authorized. METRO DISPLAY ADVERTISING, INC. /s/ Scott Kraft Dated June 14, 1997 ------------------------------------ 9 Scott A. Kraft, President and Chief Financial Officer EX-27 2 FDS
5 6-MOS Dec-31-1996 Jun-30-1997 85,296 0 997,730 (173,539) 0 1,125,611 8,996,867 (3,104,448) 11,058,710 1,909,716 0 0 0 9,504,833 0 11,058,710 3,840,752 3,840,752 2,707,484 2,707,484 1,593,893 0 63,372 (523,997) 0 0 0 0 0 (523,997) (0.53) 0
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