UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): December 2, 1996
ADDVANTAGE MEDIA GROUP, INC.
(Exact name of Registrant as specified in its charter)
Oklahoma 1-10799 73-1351610
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(State or other (Commission File (I.R.S. Employer
jurisdiction of Number) Identification No.
incorporation)
5100 East Skelly Drive
Meridian Tower, Suite 2800
Tulsa, Oklahoma 74135
(918) 665-8414
(Address, including Zip Code, and telephone number,
including area code, of Registrant's principal executive offices)
ITEM 5 Other Events.
On December 2, 1996 (the "Redemption Date"), ADDvantage Media Group, Inc. (the
"Company") completed its redemption of the Company's 600,000 outstanding Common
Stock Purchase Warrants (the "Warrants"). Each Warrant entitled the holder
thereof to purchase one share of the Company's Common Stock at a price of $4.00
per share. A total of 582,907 Warrants were exercised prior to the Redemption
Date, resulting in gross proceeds to the Company of $2,331,628 and the issuance
of 582,907 shares of the Company's Common Stock. Set forth below are certain
unaudited financial statements of the Company as of and for the eleven-month
period ending November 30, 1996, which give effect to the exercise and
redemption of the Warrants.
INDEX TO FINANCIAL STATEMENTS
Balance Sheet as of November 30, 1996................................... 2
Statement of Operations for the Eleven Months Ended November 30, 1996... 4
Statement of Cash Flows for the Eleven Months Ended November 30, 1996... 5
Notes to Condensed Financial Statements for the Eleven
Months Ended November 30, 1996......................................... 7
-1-
ADDVANTAGE MEDIA GROUP, INC.
BALANCE SHEET
(UNAUDITED)
November 30,
1996
--------------
ASSETS
Current assets:
Cash $ 925,143
Accounts receivable 143,191
Warrant proceeds receivable 2,310,628
Deferred income taxes 2,197,219
Other current assets 43,753
--------------
Total current assets 5,619,934
Property and equipment, at cost:
Calculators 2,086,692
Office and production equipment 467,356
Furniture and fixtures 79,609
--------------
2,633,657
Accumulated depreciation 433,473
--------------
2,200,184
Deferred income taxes 799,806
Patent, net of accumulated amortization of
$528,781 at November 30, 1996 379,329
Deferred charges 36,827
--------------
Total assets $9,036,080
==============
-2-
ADDVANTAGE MEDIA GROUP, INC.
BALANCE SHEET
(UNAUDITED)
November 30,
1996
--------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to shareholders and directors $ 39,614
Current portion of long-term debt 3,406,656
Accounts payable 644,693
Accrued interest 213,185
Other accrued liabilities 895,219
Accrued preferred stock dividends 425,133
Unearned advertising revenue 31,147
--------------
Total current liabilities 5,655,647
Long-term obligations 662,735
Stockholders' equity:
Preferred stock, $1.00 par value, 1,000,000
shares authorized; Series A preferred stock,
227,750 shares issued and outstanding at
November 30, 1996; liquidation preference,
$911,000 760,260
Common stock, $0.01 par value, 10,000,000 shares
authorized, 5,721,039 issued and outstanding
at November 30, 1996 57,211
Capital in excess of par value 8,762,396
Accumulated deficit (6,862,169)
--------------
Total stockholders' equity 2,717,698
--------------
Total liabilities and stockholders' equity $ 9,036,080
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-3-
ADDVANTAGE MEDIA GROUP, INC.
STATEMENT OF OPERATIONS
(UNAUDITED)
Eleven Months
Ended
November 30, 1996
-------------------
Revenues:
Advertising $6,035,948
Sales of calculators 20,633
Other 6,523
-------------------
6,063,104
Costs and expenses:
Cost of advertising services 1,710,334
Cost of sales of calculators 10,484
Selling expenses 191,943
General and administrative expenses 1,274,362
-------------------
3,187,123
-------------------
Operating income 2,875,981
Interest expense 473,635
-------------------
Income before provision for income taxes 2,402,346
Provision for income taxes 912,975
-------------------
Net income 1,489,371
Preferred stock dividends (93,329)
-------------------
Net income applicable to common stock $1,396,042
===================
Net income per common share:
Primary $.25
===================
Fully diluted $.23
===================
-4-
ADDVANTAGE MEDIA GROUP, INC.
STATEMENT OF CASH FLOWS
(UNAUDITED)
Eleven Months
Ended
November 30, 1996
-------------------
OPERATING ACTIVITIES
Net income $ 1,489,371
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 312,373
Deferred income taxes 912,975
Amortization of discount on shareholders'
notes and long-term obligation 48,022
Deferred retirement plan obligation 99,550
Changes in operating assets and liabilities:
Accounts receivable (136,266)
Other current assets (35,239)
Deferred charges (24,763)
Accounts payable 85,945
Accrued interest (22,269)
Other accrued liabilities (29,704)
Unearned advertising revenue 31,148
-------------------
Net cash provided by operating activities 2,731,143
INVESTING ACTIVITIES
Purchases of property and equipment (1,605,594)
-------------------
Net cash used in investing activities (1,605,594)
-5-
ADDVANTAGE MEDIA GROUP, INC.
STATEMENT OF CASH FLOWS (Continued)
(UNAUDITED)
Eleven Months
Ended
November 30, 1996
-------------------
FINANCING ACTIVITIES
Proceeds from issuance of bank notes $ 180,032
Exercise of underwriter warrants 432,000
Exercise of stock options 4,312
Payment on bank notes (700,000)
Payment on shareholders and directors notes (137,194)
-------------------
Net cash used in financing activities (220,850)
-------------------
Increase in cash 904,699
Cash, beginning of period 20,444
-------------------
Cash, end of period $ 925,143
===================
Supplemental disclosures of cash information:
Interest paid $ 394,710
===================
-6-
NOTES TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
statements 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 2 - DESCRIPTION OF BUSINESS
The Company markets and sells in-store advertising to national advertisers. The
advertising is positioned on the Company's solar powered calculators attached to
the handles of mass merchants' shopping carts. The calculators are patented and
registered under the 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 November 30,
1996, cumulative advertising revenues have totaled $6,165,653, reducing the
guaranteed advertising revenues to be received in future periods to $17,328,877.
-7-
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.
Shopping Shopping
Stores to Carts to Stores Carts
Year be Added be Added Installed Installed
-------------------------------------------------------------------
1995 33 39,600 41 31,925
1996 200 240,000 286 229,757/(1)/
1997 100 120,000 N/A N/A
1998 100 120,000 N/A N/A
----------------------
433 519,600
======================
_______
/(1)/ Through November 30, 1996. The Company currently has completed its
installation program for 1996.
In July 1996, the chief executive officer of Wal-Mart expressed concern over
certain aspects of the current Wal-Mart contract. Since that time, the Company
and Wal-Mart have maintained communications in an effort to address the concerns
while continuing the installation of the Company's Shoppers Calculator(R)
program in the Supercenter stores under the terms of such contract. The Company
and Wal-Mart are currently negotiating an amendment to the existing contract and
Wal-Mart recently issued a press release stating that it remained committed to
honoring its contractual obligations to the Company.
The cost of Shoppers Calculator components and installation hardware not yet
installed was $101,991 at November 30, 1996, and is included in the balance
sheet under property and equipment.
On November 22, 1996, the Company completed the redemption of its 600,000
outstanding Common Stock Purchase Warrants that were set to expire on December
31, 1996. A total of 582,907 Warrants, or 97%, were exercised with gross
proceeds aggregating $2,331,628. This amount, net of commissions and offering
expenses of approximately $260,000 is committed to repayment of the Company's
bank debt. A payment of $2,000,000 was made to the bank on December 6, 1996.
-8-
ITEM 7 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Number Description
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27.................... Financial Data Schedule
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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.
December 30, 1996 By: /s/ CHARLES H. HOOD
---------------------------------------
Charles H. Hood
President
-10-
EXHIBIT INDEX
Exhibit Number Description
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27.................... Financial Data Schedule