UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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 0-12252
PATHE COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-2624802
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
C/O THE LAW OFFICES OF FREDRIC S. NEWMAN
10 EAST 40TH STREET
NEW YORK, NEW YORK 10016
(Address of principal executive offices)
(Zip Code)
(212) 545-1900
(Registrant's telephone number, including area code)
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
As of November 10, 1995 there were 116,746,810 shares of common stock,
par value $.01 per share, of the registrant outstanding.
PATHE COMMUNICATIONS CORPORATION
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Balance Sheets . . . . . . . . . . . . . . . 3
Condensed Statements of Operations . . . . . . . . . . 4
Condensed Statements of Cash Flows . . . . . . . . . . 5
Notes to Condensed Financial Statements . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . 14
EXHIBIT INDEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
PATHE COMMUNICATIONS CORPORATION
CONDENSED BALANCE SHEETS
(in thousands)
September 30, Dec. 31,
1995 1994
(unaudited)
ASSETS:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 1,312 $ 44
Accounts and notes receivable . . . . . . . . . . . . . . . . . . - 2,556
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 513 581
$ 1,825 $ 3,181
LIABILITIES AND STOCKHOLDERS' DEFICIT:
LIABILITIES:
Accounts payable and accrued
liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 76,142 $ 62,346
Matured debt payable . . . . . . . . . . . . . . . . . . . . . . 14,599 14,599
Bank and other debt . . . . . . . . . . . . . . . . . . . . . . . 179,206 179,206
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . 559 560
Subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . 31,124 30,811
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . 301,630 287,522
STOCKHOLDERS' DEFICIT:
Preferred stock - $.01 par value, authorized 200,000,000 shares,
none outstanding . . . . . . . . . . . . . . . . . . . . . . . .
- -
Common stock - $.01 par value, authorized 200,000,000 shares;
issued and outstanding,
116,746,810 shares in 1995 and
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,167 1,167
Additional paid-in capital . . . . . . . . . . . . . . . . . . . 906,808 906,808
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . (1,207,780) (1,192,316)
Total stockholders' deficit . . . . . . . . . . . . . . . . . . (299,805) (284,341)
$ 1,825 $ 3,181
The accompanying Notes to Condensed Financial Statements are an integral part of these statements.
PATHE COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Qtr. Ended September 30,
1995 1994
General corporate administration
expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 135 $ 232
Operating loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135) (232)
Other income (expenses):
Interest expense, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,872) (4,941)
Interest and other income
(expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 -
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,995) (5,173)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . - -
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(4,995) $(5,173)
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.04) $ (0.04)
The accompanying Notes to Condensed Financial Statements are an integral part of these statements.
PATHE COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Nine Months Ended September 30,
1995 1994
General corporate administration expenses . . . . . . . . . . . . $ 819 $ 1,146
Operating Loss . . . . . . . . . . . . . . . . . . . . . . . . . (819) (1,146)
Other income (expenses):
Interest expense . . . . . . . . . . . . . . . . . . . . . . . (14,680) (13,917)
Interest and other income (expense), net . . . . . . . . . . . 35 -
Loss before income taxes . . . . . . . . . . . . . . . . . . . . (15,464) (15,063)
Provision for income taxes . . . . . . . . . . . . . . . . . . . - -
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (15,464) $ (15,063)
Net loss per common share . . . . . . . . . . . . . . . . . . . . $ (0.13) $ (0.13)
The accompanying Notes to Condensed Financial Statements are an integral part of these statements.
PATHE COMMUNICATIONS CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended September 30,
1995 1994
Net cash provided by (used in)
operating activities . . . . . . . . . . . . . . . . . . . . . . $1,268 $ (2,890)
Financing activities:
Net additions to borrowed funds . . . . . . . . . . . . . . . . - 2,597
Cash provided by financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,597
Increase (decrease) in cash
from operating and financing
activities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268 (293)
Beginning balance - cash and
cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . 44 343
Ending balance - cash and cash equivalents . . . . . . . . . . .
$1,312 $ 50
The accompanying Notes to Condensed Financial Statements are an integral part of these statements.
PATHE COMMUNICATIONS CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
Pathe Communications Corporation ("Pathe" or the "Company") has no operating
assets or sources of operating income and has been, and is currently,
dependent on Credit Lyonnais Bank Nederland N.V. ("CLBN") to fund its ongoing
cash requirements. CLBN controls the voting rights with respect to
approximately 97% of the Company's common stock. On May 7, 1992, CLBN
foreclosed on 59,100,000 shares constituting 98.5% of the common stock of
Metro-Goldwyn-Mayer, Inc. ("MGM"), which shares constituted substantially all
of the assets of the Company. The accompanying unaudited condensed financial
statements should be read in conjunction with the audited financial statements
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.
NOTE 2 - MARKET FOR THE COMPANY'S COMMON STOCK
On August 28, 1992, the Securities and Exchange Commission, in response to the
application by the New York Stock Exchange (the "Exchange"), issued an order
removing the Company's common stock from listing and registration on the
Exchange. At this time the Company has no knowledge of the existence of any
established public trading market for the Company's common stock. The Company
does not have any present plans that would result in the repurchase or
redemption of its common stock or in the admission for trading of such stock
on other exchanges or markets.
NOTE 3 - BANK AND OTHER DEBT
The Company's bank and other debt are summarized as follows (in thousands):
September 30, December 31,
1995 1994
(unaudited)
Credit facilities . . . . . . . . . . . . . . . . . . . . . . . . $ 29,206 $ 29,206
Sealion note payable . . . . . . . . . . . . . . . . . . . . . . 150,000 150,000
$179,206 $179,206
CREDIT FACILITIES. The Company has an arrangement with CLBN under which the
Company's borrowings are made under the form of demand promissory notes, with
interest accruing quarterly at LIBOR plus two percent. Any future advances
are at the absolute discretion of CLBN. CLBN has made no commitment to the
Company that it will fund any future expenses, including interest or principal
payments on the Company's outstanding subordinated debt, or any other
obligations, and the Company currently has no other source of institutional
funding.
SEALION NOTE PAYABLE. In November 1990, the Company borrowed $150,000,000
from Sealion Corporation N.V. ("Sealion"), a company affiliated with SASEA
Holding, S.A. (SASEA), which is affiliated with prior management of the
Company, and lent the proceeds to Melia International N.V. ("Melia"), the
Company's major stockholder. Sealion assigned, as collateral security, its
receivable from the Company to Credit Lyonnais S.A., the parent of CLBN. The
obligation is guaranteed by Melia and collateralized by approximately 51
percent of the Company's outstanding stock. The obligation bears interest at
LIBOR plus 2 percent payable monthly and, as amended, calls for principal
payments of $30,000,000 a month beginning in January 1992. None of these
interest or principal payments have been made by the Company, and this
facility is currently in default.
NOTE 4 - RELATED PARTY TRANSACTIONS
The Company has a credit arrangement with CLBN (See Note 3.). Interest of
approximately $667,000 and $1,989,000 was charged on such facility in the
quarter and nine months ended September 30, 1995 respectively.
In connection with the foreclosure by CLBN on the shares of MGM common stock
owned by the Company, the Company acquired, by right of subrogation, a claim
against Melia in the amount of $343,125,754. This claim represented the
amount of Melia debt owed to CLBN, which amount was secured by the pledge of
the Company's MGM common stock, and which was bid-in at the foreclosure
auction on May 7, 1992. On April 16, 1993, the Company filed a bankruptcy
petition against Melia with the Bankruptcy Chamber of the Amsterdam District
Court. Subsequent to this petition, which was joined by CLBN and other
creditors, Melia was declared bankrupt on April 27, 1993 (See Note 5.).
NOTE 5 - COMMITMENTS AND CONTINGENCIES
LITIGATION. The Company is subject to a consent decree (the "Consent Decree")
entered in the United States District Court for the Central District of
California in a Securities and Exchange Commission civil action commenced
against the Company on November 19, 1987, entitled Securities and Exchange
Commission v. The Cannon Group, Inc. et al., Case No. 87-07590. This
proceeding against the Company and certain of its former directors and
officers alleged, among other things, violations or aiding and abetting of
violations of the antifraud, reporting, proxy, record keeping and internal
controls provisions of the federal securities laws. Without admitting or
denying the allegations in the Commission's complaint, the Company and certain
individuals settled the action and consented to the entry of a final judgment
enjoining them from violating the aforementioned provisions of the federal
securities laws.
The Consent Decree required the Company to appoint an independent person to
examine transactions between the Company and related parties for the period
January 1, 1984 through December 31, 1986. The independent person is required
to deliver a report to the Company's Board of Directors regarding such
transactions together with recommendations regarding what action the Board
should take as a result of the examination. The Company appointed a law firm
as the independent person. In November 1991, the independent person resigned
without having delivered a report to the Board of Directors. In its
resignation letter, the independent person stated it had been unable to
complete their examination because of the Company's failure to pay the
independent person's fees and because certain members of the former management
of the Company had failed to cooperate in the examination.
Current management also believes that the Company under prior management may
have violated other provisions of the Consent Decree. Violations of the
Consent Decree could result in further proceedings by the Commission. If the
Company were found to have violated the Consent Decree, the Company could be
held in contempt of court and could be subjected to substantial penalties.
The Company has informed the Commission of its concerns regarding compliance
with the Consent Decree and is cooperating with the Commission in its review
of this matter. While no assurances can be given, management believes that
any punitive measures which may be imposed as a result of violations of the
Consent Decree would be imposed upon those persons responsible for such
violations (as opposed to the Company's current management) and would not have
a material adverse effect upon the Company.
The Commission is currently conducting an investigation into certain
transactions effected by prior management of the Company. The Company is
cooperating fully with the Commission in its investigation. The Company
cannot presently determine what, if any, action the Commission might take as a
result of its investigation. Finally, the Consent Decree imposed upon the
Company certain current disclosure requirements, including an updated report
of transactions with Video Medien Pool Productions and Vertriebs GmbH. The
Company's current management has no knowledge of these transactions and, to
the extent that current reporting is still required, the Company may be in
default of its obligations under the Consent Decree. This matter has also
been discussed with the Commission staff.
On January 22, 1991, Century West Financial Corporation ("Century West") filed
a complaint in Los Angeles Superior Court against the Company, Renta
Properties, Inc. and others for breach of contract, breach of third party
beneficiary contract, bad faith denial of contract, breach of the implied
covenant of good faith and fair dealing, and tortious interference with
prospective economic advantage. Century West alleges that it acted as broker
for the sale of 6420 Wilshire Boulevard and is owed a commission. Century
West seeks compensatory damages in the amount of $470,000, interest thereon
and punitive damages. A Third Amended Complaint was filed in this action on
January 14, 1994. Cross-complaints have been filed against the Company
seeking damages in excess of $1,000,000 plus unspecified punitive damages.
The Company has entered into a settlement of all claims with the original
plaintiffs in this action at a cost to the Company of approximately $13,000.
The Court sustained a demurrer by the Company to all causes of action against
it in relation to the cross-complaint, without leave to amend. The plaintiffs
are appealing this action. The Company has also filed a cross-claim. In
addition, the Company has been advancing defense costs to a former employee
and will indemnify him subject to an undertaking for reimbursement under
certain circumstances. The Company intends vigorously to defend this action.
On June 18, 1991, a complaint was filed in the United States District Court
for the Central District of California against the Company, MGM, Messrs.
Parretti, Fiorini, Globus and Aurelio Germes and Maria Cecconi (Mr. Parretti's
wife) on behalf of a purported class which acquired MGM's 13% Subordinated
Debentures due 1996. On October 10, 1991, J. Phillip Williams, on behalf of a
group of MGM bondholders, filed a complaint in the United States District
Court for the Central District of California against the Company, MGM, CLBN
and Mr. Parretti which alleges that the defendants violated U.S. securities
laws, and conspired to deceive plaintiffs about MGM's financial condition,
markets, and business prospects, thereby artificially inflating the price of
MGM's securities. The complaint seeks unspecified damages. The Company
answered the complaint on November 5, 1991. Limited discovery was conducted
regarding class certification. On March 23, 1992, the court heard and denied
Williams' motion for class certification. On May 18, 1992, the court denied
Williams' motion for reconsideration. On July 22, 1992, another bondholder,
Herbert Eisen, moved to intervene in the lawsuit. After limited discovery was
conducted regarding intervention, the court granted Mr. Eisen's motion to
intervene. On December 15, 1992, Mr. Eisen filed a complaint-in-intervention
that mirrors the allegations in the Williams' complaint. The Company and MGM
answered Eisen's complaint-in-intervention on December 29, 1992. On October
26, 1993, the parties entered into a Stipulation of Settlement which would
dispose of this matter subject to Court approval. An Order preliminarily
approving the settlement was entered on October 10, 1995; that Order sets the
hearing to determine final approval for February 12, 1996. The settlement, if
approved, would create a fund of $4,500,000 against which injured class
members may make a claim. Any unclaimed portion of the fund will be returned
to the contributing defendants. The Company has accrued $2,250,000 to fund
the settlement.
On September 25, 1991, Century Insurance Ltd. ("Century") filed a complaint in
Superior Court against the Company, MGM, Melia, Comfinance S.A.
("Comfinance"), CLBN and Mr. Parretti alleging, among other things, breach of
contract, fraud, constructive fraud, conversion and conspiracy. The claims
arise out of certain defendants' failure to pay a purported $1.75 million
premium in connection with plaintiff's purported issuance of a completion
guarantee bond in connection with the financing of the acquisition of MGM by
the Company in 1990 and alleged unpaid premiums in connection therewith. The
plaintiff seeks $34,200,000 in alleged management fees on three purported
insurance investment bonds and declaratory relief. MGM was voluntarily
dismissed from the action on January 3, 1992. The plaintiff served a second
amended complaint on February 3, 1992. In addition, on December 6, 1991, this
case was consolidated with an earlier declaratory relief suit filed by CLBN
against Century. The Company was not a party to this earlier suit. On
February 3, 1993, the court dismissed with prejudice Century's complaint
against the Company and all of the other defendants, for failure to comply
with discovery orders. On July 14, 1993, Century moved to vacate the judgment
in the Company's and other defendants' favor, which motion was denied.
Century has filed a notice of appeal of denial of its motion to vacate. The
parties have not completed the appeal briefing and no date has been set for
the hearing of the appeal. The Company intends vigorously to defend this
action.
On January 27, 1992, Linda Carter filed an application for award for employer
violation of Section 132(a) of the Labor Code before the Workers' Compensation
Appeals Board of the State of California against the Company and MGM seeking
reinstatement of employment, back wages at approximately $21,000 per year plus
benefits, and costs of suit. The application alleges Ms. Carter was laid off
on March 4, 1991, in retaliation for filing a workers' compensation claim.
The Company is vigorously defending this action.
On May 6, 1992, Robert Solomon filed a complaint in Delaware Chancery Court
against the Company, CLBN, Dennis Stanfill, Alan Ladd, Jr., Charles Meeker,
Kenneth Meyer, Jay Kanter, William Jones, Thomas Carson, Rene Claude Jouannet,
Bahman Naraghi, Guy Etienne Dufour, G. Goirand and Jacques Bertholier for
breach of defendants' duties of fair dealing and breach of fiduciary duties to
the public stockholders of the Company in connection with the Foreclosure and
CLBN's Tender Offer for the Company's stock at a price of $1.50 per share.
Plaintiff filed the action on his own behalf and as a class action on behalf
of a purported class of public stockholders of the Company. On March 15,
1994, Solomon filed an amended class action complaint against the Company,
CLBN and certain of the previously named individuals. Defendants' motion to
dismiss the complaint was granted. The plaintiffs have appealed this decision
to the Delaware Supreme Court and oral arguments were heard on November 10,
1995. The Company plans vigorously to defend the action.
On April 16, 1993, the Company filed a bankruptcy petition against Melia with
the Bankruptcy Chamber of the Amsterdam District Court. This petition was
joined by the Dutch tax authorities, Scotti International N.V., Cannon Cinema
B.V. and CLBN. At a hearing on April 27, 1993, the Court found that Melia had
ceased to pay its debts and declared Melia officially bankrupt. The Court
appointed Mr. R.W. De Ruuk as official receiver in the bankruptcy. The appeal
period under the governing Dutch Bankruptcy Code has lapsed. Mr. De Ruuk has
deposited three public reports with the Dutch authorities. It appears to the
Company from such reports that no material recovery benefitting it will be
forthcoming.
On March 30, 1994, Giancarlo Parretti, Valentina Parretti, Maria Cecconi and
Comfinance, S.A. filed suit in Los Angeles Superior Court against the Company
and numerous other defendants, including CLBN, CLBN's parent company Credit
Lyonnais S.A., MGM and former officers and directors of the Company and of
MGM. Plaintiffs' complaint arises from alleged acts in connection with the
Company's merger with MGM in November 1990 and subsequent events by which
plaintiffs lost ownership and control of MGM and the Company. Plaintiffs
assert causes of action for violation of the Racketeer Influenced and Corrupt
Organizations Act, fraud, conspiracy to defraud, rescission, injunctive
relief, spoliation of evidence, malicious prosecution, breach of employment
contract, intentional interference with contract, intentional interference
with prospective economic advantage and indemnification. Plaintiffs also
purport to bring derivative claims on PCC's behalf for breach of fiduciary
duty, constructive fraud and waste of corporate assets. The Company believes
that plaintiffs' claims are largely barred because they were previously
adjudicated in a Delaware court, but the trial court denied defendants' motion
for summary judgment. Discovery is being conducted at this time. No trial
date has been set. The Company intends to defend this lawsuit vigorously.
On June 24, 1994, Ovidio Assonitis, a former employee of Cannon Pictures,
Inc., together with a related corporation, filed a complaint against Cannon
and the Company arising out of the termination of his employment by Cannon and
challenging a settlement agreement he entered into. The Company was not
served with the complaint until November, 1994, and an answer was filed on
December 8, 1994, in which the Company has denied plaintiffs' allegations.
Discovery is underway. A trial date in October, 1995 has been set. The
Company intends to defend this lawsuit vigorously.
The Company was named a third party defendant in an action brought by CLBN in
the United States District Court for the Central District of California
against Tracinda Corporation, Kirk Kerkorian, Jeffrey Barbakow and Stephen
Silbert. Those parties claimed that if they were held liable to CLBN in the
principal suit, the Company would be obligated to indemnify them for their
damages and the attorneys' fees expended in defending themselves. There was
also other pending litigation involving claims by, against and among CLBN and
MGM, on the one hand, and Tracinda Corporation, Kirk Kerkorian, and other
related entities and individuals, on the other hand, in the California State
courts. The Company was a party to certain of these actions. All of the
claims and counterclaims in these actions have been settled under terms which
impose no material financial obligations on the company.
Demands for the advancement of legal fees and indemnification in the defense
of certain legal actions have been made by Giancarlo Parretti, Maria Cecconi
and Valentina Parretti and by Yoram Globus. The Company has rejected these
demands. In addition, there have been other claims for indemnification and/or
the advancement of expenses and legal fees which have been asserted from time
to time by former officers, directors and/or employees of the Company, and the
Company reviews each demand on a case by case basis.
NOTE 6 - SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid was approximately $388,000 and $913,000 during the nine-month
periods ended September 30, 1995 and 1994, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
Condensed Financial Statements and the related notes thereto. References to
Notes refer to the notes to such statements.
GENERAL
The Company has no operating assets or sources of income (See Note 1 and
"Liquidity and Capital Resources"). During the nine-month period ended
September 30, 1995, the Company paid its operating and administrative expenses
and certain other obligations, including interest on subordinated debt, from
the proceeds of a litigation settlement previously reported. That transaction
resulted in net cash provided by operating activities of $1,371,000.
RESULTS OF OPERATIONS
The Company reported net losses for the quarters ended September 30, 1995 and
1994 of ($4,995,000) and ($5,173,000), or ($.04) and ($.04) per common share,
respectively, based on 116,747,000 weighted average common shares outstanding.
For the nine-month periods ended September 30, 1995 and 1994 the Company
reported net losses of ($15,464,000) and ($15,063,000), or ($.13) and ($.13),
respectively.
GENERAL CORPORATE ADMINISTRATION EXPENSES
The decrease in general corporate administration expenses by approximately
$97,000, or 42%, for the quarter and $327,000 or 29% for the nine-month period
was primarily the result of legal fees associated with litigation.
OTHER INCOME (EXPENSE)
The decrease in the net interest expense by approximately $69,000 for the
quarter and the increase by approximately $763,000 for the nine-month period
is due primarily to fluctuations in the applicable interest rates with respect
to bank and other debt. Interest amounts were also affected by an increase in
the principal amount borrowed from CLBN and by the elimination of the interest
payable on the 12-3/8% senior subordinated notes which matured on November 1,
1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company is currently dependent on CLBN for additional capital to fund its
expenses and obligations in excess of cash on hand. CLBN may, in its absolute
discretion, decide whether to advance additional funds to the Company.
Additionally, the Company is in default on its existing indebtedness to
Sealion.
The Company's subordinated debt agreements contain cross acceleration
provisions which generally provide that if holders of certain other debt of
the Company accelerate the maturity of such debt, such acceleration would be a
default with respect to the subordinated debt. If such event were to occur
and certain notices are given under the various agreements and indentures, a
substantial portion of the Company's subordinated debt could be accelerated.
The Company has not received any such notices.
The Company currently does not meet the minimum net worth covenant under its
12-7/8% and 8-7/8% debenture Indentures as its net worth has been below
$37,500,000 for more than two consecutive quarters. Upon the occurrence of
such event, such Indentures, as amended, require the Company to redeem 10
percent of the aggregate principal amount of the debentures then outstanding
(at 100 percent of the principal amount) plus accrued interest by the last day
of the following quarterly period. Similar payments must be made semi-annually
thereafter until all outstanding debentures are redeemed, unless the net worth
is above $37,500,000 as of the last day of any subsequent quarter. The Company
can satisfy the redemption requirement through previously acquired and
canceled debentures. Due to the significant amount of such debentures
previously acquired by the Company, the Company will not be required to make
any cash redemptions for the foreseeable future.
COMMITMENTS AND CONTINGENCIES
The Company is a party to various lawsuits (See Note 5.). A significant
adverse judgment in one or more of the cases could have a material impact on
the Company's liquidity.
IMPACT OF INTEREST RATES
Any significant increase in interest rates would have a substantial adverse
effect on the Company's financial position.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
See Note 5 regarding various material legal proceedings. Because of the
Company's financial condition and lack of operating income, a significant
adverse judgment in one or more of the cases described therein could have a
material effect on the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 - Computation of loss per common share.
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
September 30, 1995.
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.
PATHE COMMUNICATIONS CORPORATION
Date: November 14, 1995 by /s/ Fredric S. Newman
Fredric S. Newman
President
(Principal Executive,
Financial and Accounting
Officer)
EXHIBIT INDEX
Exhibit Description Page No.
11 Computation of Loss per Common Share 17
27 Financial Data Schedule