UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[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
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: 0-23364
MECKLERMEDIA CORPORATION
------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 06-1385519
- ---------------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
20 KETCHUM STREET
WESTPORT, CONNECTICUT 06880
- ---------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
(203) 226-6967
---------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
--------------
(Former name, former address and former fiscal year, if changed
since last report)
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 outstanding shares the registrant's common stock, par value $.01
per share, as of June 30, 1997, was 8,518,029.
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
INDEX
-----
Page
-----
PART I Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997
and September 30, 1996 3-4
Consolidated Statements of Operations -
Three and Nine Months
Ended June 30, 1997 and 1996 5
Consolidated Statements of Cash Flows -
Nine Months
Ended June 30, 1997 and 1996 6
Notes to Consolidated Financial Statements 7-8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-12
PART II. Other Information 13-14
Signatures 15
EXHIBIT 11. STATEMENT REGARDING COMPUTATION OF PER SHARE
EARNINGS (LOSS) 16
EXHIBIT 27. FINANCIAL DATA SCHEDULE 17
2
PART I. FINANCIAL INFORMATION Item 1. Financial Statements
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 1997 AND SEPTEMBER 30, 1996
------------------------------------
(Dollars in thousands, except share and per share amounts)
----------------------------------------------------------
June 30, September 30,
1997 1996
----------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $21,964 $19,859
Accounts receivable, less
allowances of $1,193 and $647,
respectively 17,464 7,327
Current note receivable 225 213
Inventory 921 511
Prepaid trade show expenses 3,045 2,265
Deferred income taxes 1,895 -
Prepaid expenses and other 464 584
------- -------
Total current assets 45,978 30,759
DEFERRED PROMOTION COSTS AND OTHER
ASSETS 227 719
PROPERTY AND EQUIPMENT:
Computer equipment 2,452 1,497
Furniture, fixtures and equipment 917 517
Leasehold improvements 327 297
------- -------
3,696 2,311
Less: Accumulated depreciation
and amortization (1,164) (652)
------- -------
2,532 1,659
INTANGIBLE ASSETS, net of accumulated
amortization of $783 and $193,
respectively 3,741 1,449
------- -------
Total assets $52,478 $34,586
======= =======
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
3
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 1997 AND SEPTEMBER 30, 1996
------------------------------------
(Dollars in thousands, except share and per share amounts)
----------------------------------------------------------
June 30, September 30,
1997 1996
----------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,270 $ 2,876
Accrued expenses 6,291 2,312
Deferred magazine revenue 2,778 2,586
Deferred trade show revenue 20,708 12,138
------- -------
Total current liabilities 33,047 19,912
DEFERRED MAGAZINE REVENUE - LONG-TERM 375 281
------- -------
Total liabilities 33,422 20,193
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock ($.01 par value,
1,000,000 shares authorized, no
shares issued and outstanding) - -
Common stock ($.01 par value,
35,000,000 shares authorized,
8,518,029 and 8,479,243 shares
issued and outstanding at June 30,
1997 and September 30, 1996,
respectively) 85 85
Additional paid-in capital 24,627 23,348
Treasury stock, at cost (10,000
shares in 1997) (172) -
Accumulated deficit (5,385) (9,050)
Foreign currency translation
adjustment (99) 10
------- -------
Total stockholders' equity 19,056 14,393
------- -------
Total liabilities and stockholders'
equity $52,478 $34,586
======= =======
The accompanying notes to consolidated financial statements
are an integral part of these balance sheets.
4
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
THREE AND NINE MONTHS ENDED JUNE 30, 1997 AND 1996
--------------------------------------------------
(UNAUDITED)
-----------
(Dollars in thousands, except per share amounts)
------------------------------------------------
Three Months Ended Nine Months Ended
June 30 June 30
------------------ -----------------
1997 1996 1997 1996
------- ------- ------- -------
REVENUES:
Trade shows $ 865 $ 5,971 $26,987 $11,865
Magazines and newspaper 4,524 4,649 14,817 10,954
Other 881 990 2,468 1,681
------- ------- ------- -------
6,270 11,610 44,272 24,500
------- ------- ------- -------
COST OF SALES AND DIRECT COSTS:
Trade shows 128 2,997 13,598 6,987
Magazines and newspaper 3,961 2,925 10,421 7,167
Other 404 438 1,254 699
------- ------- ------- -------
4,493 6,360 25,273 14,853
------- ------- ------- -------
Gross profit after cost of sales and
direct costs 1,777 5,250 18,999 9,647
OPERATING EXPENSES:
Advertising, promotion and selling 2,834 2,550 10,089 7,064
General and administrative 2,196 2,410 6,844 5,235
------- ------- ------- -------
Operating income (loss) (3,253) 290 2,066 (2,652)
------- ------- ------- -------
Interest income, net 279 243 825 750
------- ------- ------- -------
Income (loss) before income taxes (2,974) 533 2,891 (1,902)
Provision (benefit) for income taxes (1,046) 20 (773) 65
------- ------- ------- -------
Net income (loss) $(1,928) $ 513 $ 3,664 $(1,967)
======= ======= ======= =======
Income (loss) per share $(0.23) $0.06 $0.42 $(0.23)
======= ======= ======= =======
Weighted average number of common
shares and equivalents 8,512 8,720 8,773 8,405
======= ======= ======= =======
The accompanying notes to consolidated financial statements
are an integral part of these statements.
5
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
NINE MONTHS ENDED JUNE 30, 1997 AND 1996
----------------------------------------
(UNAUDITED)
-----------
(Dollars in thousands)
----------------------
Nine Nine
Months Ended Months Ended
June 30, 1997 June 30, 1996
------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 3,664 $(1,967)
Adjustments to reconcile net cash
provided by operations-
Depreciation and amortization 1,102 362
Accretion of interest income
on note receivable (20) (32)
Deferred income tax benefit (1,098) -
Changes in assets and liabilities -
(Increase) in accounts
receivable (10,136) (4,545)
(Increase) decrease in
inventory (410) 225
(Increase) in prepaid trade
show expenses (780) (25)
Decrease (increase) in
prepaid expenses and other 133 (106)
Decrease in deferred
promotion costs 274 26
Increase in accounts payable
and accrued expenses 4,373 2,019
Increase in deferred magazine
revenue 286 882
Increase in deferred trade
show revenue 8,570 3,531
(Decrease) in deferred book
revenue - (117)
-------- -------
Net cash provided by
operating activities 5,958 253
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note receivable 212 200
Sales of short-term investments - 9,947
Purchases of short-term investments - (9,947)
Additions to property and equipment (1,385) (697)
Additions to intangibles (2,882) (593)
-------- -------
Net cash used in
investing activities (4,055) (1,090)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of options 483 355
Purchase of treasury stock (172) -
Repayment of notes and loans - (14)
-------- -------
Net cash provided by
financing activities 311 341
-------- -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (109) 29
-------- -------
Net increase (decrease) in cash and
cash equivalents 2,105 (467)
-------- -------
CASH AND CASH EQUIVALENTS, beginning of
period 19,859 19,442
-------- -------
CASH AND CASH EQUIVALENTS, end of period $ 21,964 $18,975
-------- -------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW:
Cash paid for interest $ - $ 1
Cash paid for income taxes $ 150 $ 72
The accompanying notes to consolidated financial statements
are an integral part of these statements.
6
MECKLERMEDIA CORPORATION AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
JUNE 30, 1997
-------------
(UNAUDITED)
-----------
(Dollars in thousands, except per share data)
-------------------------------------------
(1) The Company:
-----------
The Company is a leading provider of information about the Internet through its
(i) INTERNET WORLD and INTERNET SHOPPER EXPO trade shows and conferences, (ii)
publication of INTERNET WORLD, a monthly general circulation magazine, (iii)
publication of WEB WEEK, a weekly business-to-business controlled circulation
newspaper, (iv) publication of INTERNET SHOPPER, a quarterly general circulation
magazine, and (v) INTERNET.COM (formerly iWORLD), the Company's Web site for
Internet news and information resources. Since all of the Company's products
and services relate to providing Internet-related information to business and
information technology professionals, and consumers, the Company's success is
dependent on the continued growth of the Internet.
(2) Basis of Presentation:
---------------------
The accompanying unaudited financial statements have been prepared from the
books and records of the Company in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. It is suggested that these unaudited
consolidated financial statements be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's report on Form
10-KSB for the fiscal year ended September 30, 1996. In the opinion of
management, all adjustments considered necessary for a fair presentation of the
results for the interim periods presented have been reflected in such financial
statements. Certain of the Company's operations are cyclical in nature. The
number and size of INTERNET WORLD trade shows held in the United States in a
particular quarter has and will continue to significantly impact the Company's
quarterly results. Accordingly, presentation of quarterly results of operations
is not necessarily indicative of annual results or trends. The Company now holds
INTERNET WORLD trade shows in the United States in its first, second, and fourth
fiscal quarters.
Certain amounts have been reclassified in the prior year statements to conform
to the current year presentation.
The Company does not believe any recently issued accounting standards will have
a material impact on its financial condition or results of operations.
(3) Inventory:
---------
Components of inventory include:
June 30, September 30,
1997 1996
-------- -------------
Paper $ 602 $ -
Work-in-process 319 437
Finished goods - 74
----- -----
$ 921 $ 511
===== =====
(4) Income Taxes:
------------
Income taxes are provided at the projected annual effective tax rate. The
provision (benefit) for income taxes for the fiscal 1997 interim period differs
from the federal statutory rate due primarily to the reduction of valuation
allowances for net operating loss carryforwards. During the three months ended
June 30, 1997, the
7
Company eliminated valuation allowances for future federal and state income tax
benefits to recognize a deferred income tax asset of approximately $1.9 million,
of which approximately $800,000 related to disqualifying incentive stock option
dispositions which was credited to additional paid-in capital. The recognized
deferred tax asset is based upon expected utilization of net operating loss
carryforwards and reversal of certain temporary differences. The ultimate
realization of the deferred income tax asset will require aggregate taxable
income of approximately $5.0 million in future periods which, based on the
trends of operations, the Company believes is more likely than not.
(5) Common Stock:
------------
On December 23, 1996, the Company's Board of Directors authorized the Company to
purchase up to $2.0 million of the Company's common stock in the public market.
On May 15, 1997, the Company purchased 10,000 shares of its common stock for
$172,000.
8
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS
------------------------------------
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
INTRODUCTION
- ------------
Certain of the Company's operations are cyclical in nature. The number and size
of INTERNET WORLD trade shows held in the United States in a particular quarter
has and will continue to significantly impact the Company's quarterly results.
Accordingly, presentation of quarterly results of operations is not necessarily
indicative of annual results or trends. The Company now holds INTERNET WORLD
trade shows in the United States in its first, second, and fourth fiscal
quarters.
Since 1993, the Company has focused its efforts toward the Internet, launching
INTERNET WORLD magazine in August 1993. The Company launched its INTERNET WORLD
trade shows in 1994. In addition, the Company added its WEB WEEK newspaper and
INTERNET.COM World-Wide Web site (formerly iWorld) in 1995. The Company
launched INTERNET SHOPPER magazine in March 1997, and its INTERNET SHOPPER EXPO
trade show in April 1997. Since all of the Company's products and services
relate to providing Internet-related information to business and information
technology professionals, and consumers, the Company's success is dependent on
the continued growth of the Internet.
RESULTS OF OPERATIONS
- ---------------------
Comparison of the Three Months Ended June 30, 1997 and 1996
Revenues. Revenues for the three months ended June 30, 1997, decreased 46% to
approximately $6.3 million from $11.6 million for the comparable period in
fiscal 1996. Trade show revenues for the three months ended June 30, 1997, of
approximately $865,000 decreased by approximately $5.1 million, from the
comparable period in fiscal 1996. This decrease was due primarily to the timing
of Spring INTERNET WORLD 1997, which had paid exhibition space of approximately
290,000 square feet and was held in the second quarter of fiscal 1997 while
Spring INTERNET WORLD 1996, which had paid exhibition space of 120,000 square
feet was held in the third quarter of fiscal 1996. Revenues from magazines and
newspaper decreased approximately $125,000 due to lower advertising revenues
from INTERNET WORLD offset by the growth in advertising from WEB WEEK which was
partially related to the increase in frequency to 11 issues published in the
three months ended June 30, 1997, compared to six issues in the same period of
the prior year. The conversion of WEB DEVELOPER from a bimonthly print magazine
to an online daily publication in May 1997 also contributed to the decrease in
magazine and newspaper revenue. Offsetting this was the launch of INTERNET
SHOPPER, which contributed approximately $200,000 to magazine and newspaper
revenues for the period. Other revenues decreased to $881,000 for the three
months ended June 30, 1997, from $990,000 in the comparable period in fiscal
1996, due primarily to decreased book sales offset by increased list rentals and
advertising and other revenues from INTERNET.COM, the Company's Web site for
Internet news and information resources.
Cost of sales and direct costs. Cost of sales and direct costs include the
costs associated with producing its trade shows and costs associated with
editing, producing and distributing the Company's publications. Cost of sales
and direct costs for the three months ended June 30, 1997, decreased to
approximately $4.5 million from $6.4 million for the comparable period in fiscal
1996. Trade show cost of sales and direct costs for the three months ended June
30, 1997, decreased by approximately $2.9 million to $128,000 from the
comparable period in fiscal 1996. The decrease was due to the timing of Spring
INTERNET WORLD 1997 which was held in the second quarter of fiscal 1997. In
fiscal 1996, Spring INTERNET WORLD 1996 was held during the three months ended
June 30, 1996. Gross profit after cost of sales and direct costs for trade
shows for the three
9
months ended June 30, 1997, decreased by $2.2 million to approximately $737,000
million from $3.0 million for the comparable period in fiscal 1996. This
decrease is primarily attributable to the timing of the Spring INTERNET WORLD
show, offset by the costs incurred in fiscal 1996 associated with canceling the
Company's future VR WORLD trade shows. Magazine and newspaper cost of sales and
direct costs increased by approximately $1.0 million for the three month period
ended June 30, 1997, from the comparable period for fiscal 1996. Of this
increase, $1.1 million related to the change in publication frequency of WEB
WEEK newspaper from monthly to weekly and $213,000 related to the launch of
INTERNET SHOPPER in March 1997, offset by a decrease in cost of sales and direct
costs of $326,000 for INTERNET WORLD. The cost of sales and direct costs
associated with magazines and newspaper increased from approximately 63% to 88%
of magazine and newspaper revenue. This percentage increase is a function of the
increase in frequency of WEB WEEK from biweekly to weekly, converting WEB
DEVELOPER from a bimonthly print magazine to an online daily publication in May
1997, and the launch of INTERNET SHOPPER in March 1997. Gross profit after cost
of sales and direct costs for magazines and newspaper for the three months ended
June 30, 1997, decreased 67% to approximately $563,000 from $1.7 million for the
comparable period in fiscal 1996. Cost of sales and direct costs for other
revenues decreased to $404,000 for the three month period ended June 30, 1997,
compared to $438,000 in the comparable period in fiscal 1996, due primarily to
the decreased costs incurred for the production of books.
Advertising, promotion and selling expenses. Advertising, promotion and selling
expenses represent costs related to circulation and promotion, including direct
mail, newsstand promotion and fulfillment expense, sales commissions, and
advertising and marketing staff. In addition, advertising, promotion and
selling expenses include the amortization of deferred promotion costs.
Advertising, promotion and selling expenses for the three months ended June 30,
1997, increased 11% to approximately $2.8 million from $2.6 million for the
comparable period in fiscal 1996. Of this increase, approximately $300,000
related to the launch of INTERNET SHOPPER magazine.
General and administrative expenses. General and administrative expenses
include salaries, depreciation, amortization, telecommunications, insurance and
professional fees. General and administrative expenses for the three months
ended June 30, 1997, decreased 9% to approximately $2.2 million from $2.4
million for the comparable period in fiscal 1996. Approximately $519,000 of
this decrease was due to reduced professional fees for trademarks and other
matters partially offset by increased depreciation and amortization expense of
$158,000. The Company anticipates that future general and administrative
expenses will increase in the aggregate, although such expenses are expected to
continue to decline as a percentage of revenue.
Income taxes. Income taxes are provided at the projected annual effective tax
rate. The income tax benefit for the three months ended June 30, 1997, of $1.0
million represents the elimination of valuation allowances due to the
anticipated utilization of net operating loss carryforwards in fiscal 1998.
For the same period in fiscal 1996, the provision for income taxes of $20,000
was for state capital taxes.
Comparison of the Nine Months Ended June 30, 1997 and 1996
Revenues. Revenues for the nine months ended June 30, 1997, increased $19.8
million, or 81%, to approximately $44.3 million from $24.5 million for the
comparable period in fiscal 1996. Trade show revenues for the nine months ended
June 30, 1997, of approximately $27.0 million increased by approximately $15.1
million, or 127%, from the comparable period in fiscal 1996. This increase was
due primarily to the increase in exhibition space sales and registrations
related to Fall INTERNET WORLD 1996 and Spring INTERNET WORLD 1997, which had
paid exhibition space of approximately 240,000 and 290,000 square feet,
respectively, compared to 60,000 and 120,000 square feet for Fall INTERNET WORLD
1995 and Spring INTERNET WORLD 1996. Approximately $3.9 million of the revenue
increase for the nine months ended June 30, 1997, compared to the nine month
period of fiscal 1996, was a result of greater revenues from magazines and
newspaper, including $3.2 million related to the growth in advertising from WEB
WEEK which was partially related to the increase in frequency to 25 issues
published in the first nine months of fiscal 1997 compared to 12 issues in the
same period of the prior year, and $394,000 related to the advertising and paid
circulation of INTERNET SHOPPER magazine, which was launched in March 1997.
Growth in advertising
10
and paid circulation of WEB DEVELOPER, which was converted from a bimonthly
print magazine to an online daily publication in May 1997, also contributed
$420,000 of the revenue increase for the period. Other revenues increased
$787,000 for the nine months ended June 30, 1997, from $1.7 million in the
comparable period in fiscal 1996, due primarily to increased list rentals,
advertising and other revenues from INTERNET.COM, the Company's Web site for
Internet news and information resources, and royalties from publishing licensing
arrangements.
Cost of sales and direct costs. Cost of sales and direct costs include the
costs associated with producing its trade shows and costs associated with
editing, producing and distributing the Company's publications. Cost of sales
and direct costs for the nine months ended June 30, 1997, increased to
approximately $25.3 million from $14.9 million for the comparable period in
fiscal 1996. Trade show cost of sales and direct costs for the nine months
ended June 30, 1997, increased by approximately $6.6 million to $13.6 million
from $7.0 million for the comparable period in fiscal 1996. The increase was
due to the expansion of Fall INTERNET WORLD 1996 and Spring INTERNET WORLD 1997.
Gross profit after cost of sales and direct costs for trade shows for the nine
months ended June 30, 1997, increased $8.5 million to approximately $13.4
million from $4.9 million for the comparable period in fiscal 1996. The cost of
sales and direct costs associated with trade shows decreased from 59% to 50% of
trade show revenue. This percentage decrease is primarily attributable to the
efficiencies of the larger Fall and Spring INTERNET WORLD shows as well as the
elimination of costs incurred in fiscal 1996 associated with producing the
Company's December 1995 VR WORLD trade show and in canceling the Company's
future VR WORLD trade shows. Magazine and newspaper cost of sales and direct
costs increased by approximately $3.3 million for the nine month period ended
June 30, 1997, from the comparable period for fiscal 1996. Of this increase,
$2.7 million related to the change in publication frequency of WEB WEEK
newspaper from monthly to weekly, and $200,000 related to converting WEB
DEVELOPER from a bimonthly print magazine to an online daily publication in May
1997. The launch issue of INTERNET SHOPPER in March 1997 also contributed to
the increase in magazine cost of sales and direct costs. The cost of sales and
direct costs associated with magazines and newspaper increased from
approximately 65% to 70% of magazine and newspaper revenue. Gross profit after
cost of sales and direct costs for magazines and newspaper for the nine months
ended June 30, 1997, increased 16% to approximately $4.4 million from $3.8
million for the comparable period in fiscal 1996. Cost of sales and direct costs
for other revenues increased to $1.3 million for the nine month period ended
June 30, 1997, compared to $699,000 in the comparable period in fiscal 1996, due
primarily to the expansion of the Company's INTERNET.COM Web site, the write-
down of book inventory and costs associated with list rentals.
Advertising, promotion and selling expenses. Advertising, promotion and selling
expenses represent costs related to circulation and promotion, including direct
mail, newsstand promotion and fulfillment expense, sales commissions, and
advertising and marketing staff. In addition, advertising, promotion and selling
expenses include the amortization of deferred promotion costs. Advertising,
promotion and selling expenses for the nine months ended June 30, 1997,
increased 43% to approximately $10.0 million from $7.1 million for the
comparable period in fiscal 1996. Of this increase, approximately $1.4 million
related to increased selling expense for WEB WEEK, $567,000 related to INTERNET
WORLD, $548,000 related to increased costs associated with INTERNET.COM, and
$490,000 related to the launch of INTERNET SHOPPER.
General and administrative expenses. General and administrative expenses
include salaries, depreciation, amortization, telecommunications, insurance and
professional fees. General and administrative expenses for the nine months ended
June 30, 1997, increased 31% to approximately $6.8 million from $5.2 million for
the comparable period in fiscal 1996. In addition to the other costs required
to support current operations and the anticipated growth of the Company,
approximately $762,000 of this increase was due to personnel costs and $740,000
was due to increased depreciation and amortization expense. The Company
anticipates that future general and administrative expenses will increase in the
aggregate, although such expenses are expected to continue to decline as a
percentage of revenue.
Income taxes. Income taxes are provided at the projected annual effective tax
rate. The income tax benefit for the nine months ended June 30, 1997 of
$773,000, primarily relates to the elimination of valuation allowances due to
the anticipated utilization of the net operating loss carryforwards in fiscal
1998, offset by foreign income
11
taxes and state capital taxes. For the same period in fiscal 1996, the provision
for income taxes of $65,000 was for state capital taxes.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Since the beginning of fiscal 1994, the Company's primary sources of liquidity
have been the proceeds from sales of assets, borrowing under lines of credit
that have been repaid, its public offerings in February 1994 and August 1995 and
operations. Through its public offerings, the Company realized net proceeds,
after offering expenses and underwriters' discounts, of approximately $20.7
million. At June 30, 1997, the Company had cash and cash equivalents of
approximately $22.0 million, compared to $19.9 million at September 30, 1996.
Operating activities for the nine months ended June 30, 1997, provided
approximately $6.0 million in cash, due primarily to net income of approximately
$3.7 million for the period and changes in components of working capital.
The Company's accounts receivable increased to approximately $17.5 million at
June 30, 1997, from $7.3 million at September 30, 1996, primarily as a result of
advance billings for exhibit space in future trade shows and the growth in
advertising revenues in the period. Accounts payable and accrued expenses
increased to approximately $9.6 million primarily as a result of expanded
domestic and international trade show activity. Deferred magazine revenue
increased to approximately $3.2 million at June 30, 1997, from approximately
$2.9 million at September 30, 1996, reflecting growth in the subscription levels
of the Company's magazines. Deferred trade show revenue increased to $20.7
million at June 30, 1997, from $12.1 million at September 30, 1996, primarily as
a function of advanced billings for Summer 1997, Fall 1997, and Spring INTERNET
WORLD 1998 trade shows.
The Company had capital expenditures of approximately $1.4 million for the nine
months ended June 30, 1997. This was primarily due to an increase in computer
equipment and software purchases required for the Company's general operating
activities and its INTERNET.COM Web site. The Company anticipates that the level
of capital expenditures will decrease for the remainder of fiscal 1997. During
the nine months ended June 30, 1997, the Company also incurred approximately
$2.9 million for Web site acquisitions and for expenditures to register its
various trade names in the United States and throughout the world.
The Company believes that funds available will be sufficient to meet its
obligations and its anticipated capital requirements for the foreseeable future.
12
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Not Applicable
Item 2. CHANGES IN SECURITIES
Not Applicable
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
a) The Registrant's 1997 Annual Meeting of Stockholders (the "Annual
Meeting") was held on March 26, 1997.
b) Proxies were solicited by the Registrant's management pursuant to
Regulation 14A under the Securities Exchange Act of 1934; there was no
solicitation in opposition to management's nominees for director as
listed in the proxy statement; and all of such nominees were elected
for a one-year term.
c) The following matters were voted upon at the Annual Meeting with the
voting results as indicated:
1. Proposal to approve the election of the individuals set forth below
to the Board of Directors of the Registrant to serve until the 1998
Annual Meeting of Stockholders of the Registrant.
Nominee Votes For Votes Against Votes Withheld
- ------- --------- ------------- --------------
Alan M. Meckler 6,661,318 - 4,391
Wayne A. Martino 6,661,318 - 4,391
Michael J. Davies 6,661,318 - 4,391
Walter H. Lippincott 6,661,318 - 4,391
Christopher S. Cardell 6,661,318 - 4,391
Gilbert F. Bach 6,661,318 - 4,391
13
2. Proposal to approve an amendment to the Registrant's 1995 Stock
Option Plan providing for an increase in the number of shares
available for grant pursuant to the exercise of options thereunder.
Votes For Votes Against Abstain
--------- ------------- -------
6,644,169 19,077 2,463
3. Proposal to appoint Arthur Andersen LLP, independent accountants,
to act as auditors for the Registrant for the year ending September
30, 1997.
Votes For Votes Against Abstain
--------- ------------- -------
6,662,535 2,016 1,158
There were no broker non-votes in connection with any of the proposals
listed above.
Item 5. OTHER INFORMATION
Not Applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Statement Regarding Computation of Per Share Earnings (Loss)
27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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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.
MECKLERMEDIA CORPORATION
Dated: August 5, 1997 /s/ Alan M. Meckler
---------------------------------------------------
Alan M. Meckler
Director, Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer)
Dated: August 5, 1997 /s/ Christopher S. Cardell
---------------------------------------------------
Christopher S. Cardell
Director, Executive Vice President, Chief Operating
Officer and Chief Financial Officer
15