Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Results of operations for the three months ended July 31, 2000 as compared to the three months ended July 31, 1999.
Commissions and fees decreased $53,620 or 8% from $700,643 for the three months ended July 31, 1999 to $647,023 for the three months ended July 31, 2000. This decrease is principally attributable to the loss of accounts, which has been partially offset by the addition of new accounts.
Salaries and employee related expenses decreased $60,539 or 8% from $722,445 for the three months ended July 31, 1999 to $661,906 for the three months ended July 31, 2000 due primarily to management efforts to control costs.
Office and general expenses decreased $53,296 or 14% from $381,538 for the three months ended July 31, 1999 to $328,242 for the three months ended July 31, 2000 due to management efforts to control costs.
Interest income, net, increased $4,570 or 34% from $13,627 for the three months ended July 31, 1999 to $18,197 for the three months ended July 31, 2000. This increase is due to higher interest rates and an increase in the amount of cash and cash equivalents.
As a result of the above, the Company’s net loss for the three months ended July 31, 2000 was $324,928, which resulted in a basic and diluted loss per share of $0.35, compared to a net loss of $389,713 for the three months ended July 31, 1999, which resulted in a basic and diluted loss per share of $0.46.
Results of operations for the nine months ended July 31, 2000 as compared to the nine months ended July 31, 1999.
Commissions and fees decreased $504,145 or 18% from $2,870,958 for the nine months ended July 31, 1999 to $2,366,813 for the nine months ended July 31, 2000. This decrease is principally attributable to the loss of accounts, which has been partially offset by the addition of new accounts.
Salaries and employee related expenses decreased $435,828 or 19% from $2,294,439 for the nine months ended July 31, 1999 to $1,858,611 for the nine months ended July 31, 2000 due primarily to management efforts to control costs.
Office and general expenses decreased $140,178 or 12% from $1,150,927 for the nine months ended July 31, 1999 to $1,010,749 for the nine months ended July 31, 2000 due to management efforts to control costs.
Interest income, net, increased $19,225 or 46% from $42,070 for the nine months ended July 31, 1999 to $61,295 for the nine months ended July 31, 2000. This increase is due to higher interest rates and an increase in the amount of cash and cash equivalents.
As a result of the above, the Company’s net loss for the nine months ended July 31, 2000 was $441,252, which resulted in a basic and diluted loss per share of $0.48, compared to a net loss of $532,338 for the nine months ended July 31, 1999, which resulted in a basic and diluted loss per share of $0.68.
Liquidity and Capital Resources
The Company’s working capital was $1,010,295 at July 31, 2000, primarily comprised of cash and cash equivalents of $1,261,096, accounts receivable of $2,053,844 and billable production orders of $172,456, offset by accounts payable and accrued liabilities of $2,540,437.
Net cash used in operating activities for the nine months ended July 31, 2000 was $718,269. The principal factors contributing to the decrease in cash flow were decreases in accounts payable and accrued expenses of $2,300,861, partially offset by decreases in accounts receivable of $1,972,860 and increases in billable production orders in process of $46,043.
The Company reduced its gross furniture, equipment and leasehold improvements and the corresponding accumulated depreciation and amortization by $918,154 during the period for assets that had been previously fully depreciated and amortized.
Because the Company recognizes commissions as a percentage of expenditures incurred, the accounts receivable balance relates not only to the commissions and fees shown on the income statement, but also to receivables for production costs and media purchased for clients. Similarly, the accounts payable balance includes payables for production costs and media incurred on behalf of clients.
On August 25, 2000, the Company announced that it had signed a definitive merger agreement with Kupper Parker Communication, Inc. (“KPC”), a Delaware corporation located in St. Louis, Missouri. This merger is subject to shareholder approval. The Company has filed with the SEC a preliminary prospectus/proxy statement included in a form S-4 concerning the planned merger. Under the proposed terms, shares of the privately held KPC stock will be exchanged for 5,073,950 new shares of common stock of the Company. In addition, 300,000 existing shares of common stock of the Company would be repurchased by the merged entity for cash at $4.50 per share.
The Company has available an unsecured $500,000 line of credit from a bank which expires in April 2001. Loans against the credit line, of which there were none at July 31, 2000, bear interest equal to the “Prime Rate”, as defined in the loan agreement. The Prime Rate at July 31, 2000 was 9.5 percent. Management believes that its current working capital levels will be sufficient to meet the Company’s liquidity and working capital requirements for the foreseeable future. The Company does not anticipate any increases in capital expenditures or other cash requirements, which would have a material adverse effect on its liquidity.
GREENSTONE ROBERTS ADVERTISING, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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 in the City of Melville, State of New York on September 14, 2000.
| | Greenstone Roberts Advertising, Inc.
By:/s/ Ronald M. Greenstone
Ronald M. Greenstone
Chairman of the Board, Chief Executive and Financial
Officer and Director |
