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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB/A
Quarterly Report Under Section 13 or 15 (d) of the
Securities Exchange Act of 1934.
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For Quarter Ended December 31, 1997 Commission file number 0-18410
THE PRODUCERS ENTERTAINMENT GROUP LTD.
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(Exact name of registrant as specified in its charter)
Delaware 95-4233050
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5757 Wilshire Blvd., PH1, Los Angeles, CA 90036
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (323) 634-8634
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(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 [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
COMMON STOCK , $.001 PAR VALUE-- 19,137,427 SHARES AS OF DECEMBER 31, 1997
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Part 1. Financial Information
Item 1. Financial Statements
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
AND PRO FORMA PRESENTATION OF POOLED INTEREST
WITH THE GROSSO JACOBSON COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
PRO FORMA COMBINED (NOTE 1)
-----------------------------
The Producers Entertainment
The Producers Entertainment PRO FORMA ADJUSTMENTS Group Ltd. and The
Group Ltd. (NOTE 1) Grosso Jacobson Companies
----------------------------- ------------------------- -----------------------------
December 31, June 30, December 31, June 30, December 31, June 30,
1997 1997 1997 1997 1997 1997
(unaudited) (note) (unaudited) (note) (unaudited) (unaudited)
------------ ------------ ----------- ------------ ------------ ------------
ASSETS
Cash and cash equivalents $ 1,737,257 $ 1,037,130 $ -- $ 307,740 $ 1,737,257 $ 1,344,870
Short term investments -- 2,698,568 -- -- -- 2,698,568
Accounts receivable, net trade 1,184,748 106,909 -- 415,319 1,184,748 522,228
Due from related parties 66,227 50,631 -- -- 66,227 50,631
Prepaid expenses 4,229 24,895 -- -- 4,229 24,895
Film costs, net 1,747,330 2,144,459 -- 2,273,250 1,747,330 4,417,709
Right to receive revenue 196,105 196,105 -- -- 196,105 196,105
Fixed assets, net 137,974 80,636 -- 1,858 137,974 82,494
Covenant not to compete 253,000 391,000 -- -- 253,000 391,000
Deferred tax asset 51,300 -- -- 51,300 51,300 51,300
Other assets 23,588 61,386 -- 2,400 23,588 63,786
------------ ------------ ------- ------------ ------------ ------------
TOTAL ASSETS $ 5,401,758 $ 6,791,719 $ 0 $ 3,051,867 $ 5,401,758 $ 9,843,586
------------ ------------ ------- ------------ ------------ ------------
LIABILITIES AND SHAREHOLDERS EQUITY
Accounts payable and accrued expenses $ 577,999 $ 227,325 $ -- $ 565,447 $ 577,999 $ 792,772
Dividends payable 212,500 212,500 -- -- 212,500 212,500
Deferred income 160,000 2,641,666 -- 2,628,203 160,000 5,269,869
Loans payable 496,000 -- -- -- 496,000 --
Other (3,277) -- -- -- (3,277) --
------------ ------------ ------- ------------ ------------ ------------
TOTAL LIABILITIES $ 1,443,222 $ 3,081,491 $ 0 $ 3,193,650 $ 1,443,222 $ 6,275,141
Stockholders equity:
Preferred Stock, $.001 par value,
authorized 10,000,000 shares,
issued and outstanding
1,000,000 shares - Series A 1,000 1,000 -- -- 1,000 1,000
Common Stock, $.001 par value,
authorized 50,000,000 shares
issued and outstanding 19,137,427
and 12,387,761 shares (PRO FORMA
COMBINED WITH THE GROSSO JACOBSON
COMPANIES COMMON STOCK, $.001 PAR
VALUE, AUTHORIZED 50,000,000 SHARES
ISSUED AND OUTSTANDING
19,137,427 AND 19,054,027) 19,137 12,387 -- 6,667 19,137 19,054
Additional paid in capital 22,565,636 22,531,786 -- (6,067) 22,565,636 22,525,719
Accumulated deficit and dividends (17,617,045) (17,824,753) -- (142,383) (17,617,045) (17,967,136)
------------ ------------ ------- ------------ ------------ ------------
4,968,728 4,720,420 0 (141,783) 4,968,728 4,578,637
Treasury stock, 280,609 shares
at cost (1,010,192) (1,010,192) -- -- (1,010,192) (1,010,192)
------------ ------------ ------- ------------ ------------ ------------
Net shareholders' equity $ 3,958,536 $ 3,710,228 $ 0 $ (141,783) $ 3,958,536 $ 3,568,445
------------ ------------ ------- ------------ ------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 5,401,758 $ 6,791,719 $ 0 $ 3,051,867 $ 5,401,758 $ 9,843,586
------------ ------------ ------- ------------ ------------ ------------
Note: the balance sheet at June 30, 1997 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
AND PRO FORMA PRESENTATION OF POOLED INTEREST
WITH THE GROSSO JACOBSON COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
PRO FORMA COMBINED (NOTE 1)
------------------------------
The Producers Entertainment
The Producers Entertainment PRO FORMA ADJUSTMENTS Group Ltd. and The Grosso
Group Ltd. (NOTE 1) Jacobson Companies
----------------------------- ----------------------------- ------------------------------
Six months ended December 31, Six months ended December 31, Six months ended December 31,
----------------------------- ----------------------------- ------------------------------
1997 1996 1997 1996 1997 1996
------------ ------------- ------------ -------------- -------------- --------------
Revenues $7,989,152 820,863 4,090,497 957,520 12,079,649 1,778,383
Costs related to revenues:
Amortization of film costs 5,666,079 70,758 2,775,101 -- 8,441,180 70,758
Costs of projects sold -- -- 71,418 327,191 71,418 327,191
----------- ------------ ------------ ------------ ------------ ------------
Net Revenues 2,323,073 750,105 1,243,978 630,329 3,567,051 1,380,434
General and administration expenses 2,445,257 1,859,780 181,953 354,216 2,627,210 2,213,996
----------- ------------ ------------ ------------ ------------ ------------
Operating profit (loss) (122,184) (1,109,675) 1,062,025 276,113 939,841 (833,562)
Other income (expense):
Acquisition expense (286,680) -- -- -- (286,680) --
Interest income 47,280 157,339 150 2,518 47,430 159,857
Interest and financing expense -- (156,975) -- (6,400) -- (163,375)
Settlements expense (138,000) (166,042) -- -- (138,000) (166,042)
----------- ------------ ------------ ------------ ------------ ------------
Net other income (expense) (377,400) (165,678) 150 (3,882) (377,250) (169,560)
Net income (loss) (499,584) (1,275,353) 1,062,175 272,231 562,591 (1,003,122)
Provision for income taxes -- -- -- 85,772 -- 85,772
Net income (loss) (499,584) (1,275,353) 1,062,175 186,459 562,591 (1,088,894)
Dividend requirement on Series A
Preferred Stock at $.31875 per share (212,500) (212,500) -- -- (212,500) (212,500)
----------- ------------ ------------ ------------ ------------ ------------
Net profit (loss) applicable to
common shareholders $ (712,084) $ (1,487,853) $ 1,062,175 $ 186,459 $ 350,091 $ (1,301,394)
----------- ------------ ------------ ------------ ------------ ------------
Net income (loss) per share ($.05) ($.16) $.02 ($.08)
Average common shares outstanding 14,748,456 9,480,490 18,806,427 16,230,490
------------ ------------ ------------ ------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
AND PRO FORMA PRESENTATION OF POOLED INTEREST
WITH THE GROSSO JACOBSON COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
PRO FORMA COMBINED (NOTE 1)
The Producers Entertainment
The Producers Entertainment PRO FORMA ADJUSTMENTS Group Ltd. and The Grosso
Group Ltd. (NOTE 1) Jacobson Companies
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Three months ended Three months ended Three months ended
December 31, December 31, December 31,
--------------------------- -------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
------------ ----------- ----------- ----------- ----------- ------------
Revenues $ 7,585,583 504,004 105,474 141,251 7,691,057 645,255
Costs related to revenues:
Amortization of film costs 5,666,079 7,758 -- -- 5,666,079 7,758
Costs of projects sold -- -- -- 149,257 -- 149,257
----------- ----------- ----------- ----------- ----------- -----------
Net Revenues 1,919,504 496,246 105,474 (8,006) 2,024,978 488,240
General and administration expenses 1,627,188 1,056,277 42,544 195,840 1,669,732 1,252,117
----------- ----------- ----------- ----------- ----------- -----------
Operating profit (loss) 292,316 (560,031) 62,930 (203,846) 355,246 (763,877)
Other income (expense):
Acquisition expense (180,498) -- -- -- (180,498) --
Interest income 37,000 116,433 -- 2,461 37,000 118,894
Interest and financing expense -- -- -- (6,400) -- (6,400)
Settlements expense (69,000) (131,381) -- -- (69,000) (131,381)
----------- ----------- ----------- ----------- ----------- -----------
Net other income (expense) (212,498) (14,948) 0 (3,939) (212,498) (18,887)
Net income (loss) 79,818 (574,979) 62,930 (207,785) 142,748 (782,764)
Provision for income taxes -- -- -- 85,717 -- 85,717
Net income (loss) 79,818 (574,979) 62,930 (293,502) 142,748 (868,481)
Dividend requirement on Series A
Preferred Stock at $.31875 per share (106,250) (106,250) (106,250) (106,250)
----------- ----------- ----------- ----------- ----------- -----------
Net profit (loss) applicable to
common shareholders $ (26,432) $ (681,229) $ 62,930 $ (293,502) $ 36,498 $ (974,731)
----------- ----------- ----------- ----------- ----------- -----------
Net income (loss) per share ($.002) ($.05) $.002 ($.05)
Average common shares outstanding 17,389,761 12,631,799 18,839,036 19,381,799
----------- ----------- ---------- -----------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
AND PRO FORMA PRESENTATION OF POOLED INTEREST
WITH THE GROSSO JACOBSON COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS EQUITY
SIX MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
THE PRODUCERS ENTERTAINMENT GROUP LTD.
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Preferred Common Stock Additional Accumulated
Stock Shares Amount Paid-In Capital Deficit Net
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Balance,
June 30, 1997 1,000 12,387,761 12,387 22,531,786 (17,824,753) 4,720,420
Issuance of common shares
in payment of consulting fees 83,334 83 39,917
Net profit (loss) (499,584) (499,584)
Dividends paid on Series A
Preferred Stock (212,500) (212,500)
--------------------------------------------------------------------------------------------
Balance,
December 31, 1997 1,000 12,471,095 12,470 22,571,703 (18,536,837) 4,008,336
Less:
Treasury Stock (280,609) (1,010,192)
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NET SHAREHOLDERS EQUITY 12,190,486 2,998,144
PRO FORMA ADJUSTMENTS (NOTE 1)
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Preferred Common Stock Additional Accumulated
Stock Shares Amount Paid-In Capital Deficit Net
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Balance,
June 30, 1997 -- 6,666,666 6,667 (6,067) (142,383) (141,783)
Net profit (loss) 1,062,175 1,062,175
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Balance,
December 31, 1997 -- 6,666,666 6,667 (6,067) 919,792 920,392
Less:
Treasury Stock -- --
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NET SHAREHOLDERS EQUITY 6,666,666 920,392
PRO FORMA COMBINED (NOTE 1)
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND THE GROSSO JACOBSON COMPANIES
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Preferred Common Stock Additional Accumulated
Stock Shares Amount Paid-In Capital Deficit Net
--------------------------------------------------------------------------------------------
Balance,
June 30, 1997 1,000 19,054,427 19,054 22,525,719 (17,967,136) 4,578,637
Issuance of common shares
in payment of consulting fees 83,334 83 39,917
Net profit (loss) 562,591 562,591
Dividends paid on Series A
Preferred Stock (212,500) (212,500)
--------------------------------------------------------------------------------------------
Balance,
December 31, 1997 1,000 19,137,761 19,137 22,565,636 (17,617,045) 4,928,728
Less:
Treasury Stock (280,609) (1,010,192)
--------------------------------------------------------------------------------------------
NET SHAREHOLDERS EQUITY 18,857,152 3,918,536
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
AND PRO FORMA PRESENTATION OF POOLED INTEREST
WITH THE GROSSO JACOBSON COMPANIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
PRO FORMA COMBINED (NOTE 1)
The Producers Entertainment
The Producers Entertainment PRO FORMA ADJUSTMENTS Group Ltd. and The
Group Ltd. (NOTE 1) Grosso Jacobson Companies
--------------------------- ------------------------- ---------------------------
Six months ended Six months ended Six months ended
December 31, December 31, December 31,
--------------------------- ------------------------- ---------------------------
1997 1996 1997 1996 1997 1996
------------ ------------ ----------- ----------- ----------- -------------
Cash flows from operating activities:
Net profit (loss) $ (499,584) $ (700,374) $ 1,062,175 $ 479,959 $ 562,591 $ (220,415)
Adjustments to reconcile net profit (loss)
to net cash derived from (used in)
operating activities
Depreciation of fixed assets 27,031 5,428 1,858 -- 28,889 5,428
Amortization of film costs 5,666,079 63,000 2,775,101 -- 8,441,180 63,000
Amortization of deferred compensation expense -- 3,900 -- -- -- 3,900
Amortization of legal settlement 138,000 -- -- -- 138,000 --
Amortization of imputed interest (discount) -- (24,000) -- -- -- (24,000)
(Accrued) interest income -- (24,631) -- -- -- (24,631)
Provision for accounts receivable -- 4,890 -- -- -- 4,890
Issuance of Common Stock in settlement -- 36,563 -- -- -- 36,563
Changes in operating assets and liabilities: -- --
(Increase) decrease in accounts receivable 11,465 (141,380) (673,985) (25,400) (662,520) (166,780)
Decrease (increase) in other assets 60,864 (68,834) -- -- 60,864 (68,834)
(Decrease) increase in accounts payable
and accrued expenses (503,802) (211,755) 285,752 (100,000) (218,050) (311,755)
(Decrease) in deferred revenues (4,946,302) -- (163,567) -- (5,109,869) --
----------- ----------- ----------- ----------- ----------- -----------
Net cash (used in) operating activities (46,249) (1,057,193) 3,287,334 354,559 3,241,085 (702,634)
----------- ----------- ----------- ----------- ----------- -----------
Cash flows from investing activities:
Decrease in short term investments 2,698,568 -- -- -- 2,698,568 --
(Additions) to film costs, net (2,420,499) (15,434) (3,350,302) -- (5,770,801) (15,434)
Capital (expenditures) on equipment (44,369) (24,324) -- -- (44,369) (24,324)
(Increase) decrease in receivables
from related parties (5,596) (9,240) (10,000) -- (15,596) (9,240)
----------- ----------- ----------- ----------- ----------- -----------
Net cash (used in) investing activities 228,104 (48,998) (3,360,302) 0 (3,132,198) (48,998)
----------- ----------- ----------- ----------- ----------- -----------
Cash flows from financing activities:
Sale of 2,300,000 Units in public
offering -- 7,936,840 -- -- -- 7,936,840
Capitalized (cost) of public offering -- (336,832) -- -- -- (336,832)
Decrease in deferred financing costs -- 137,503 -- -- -- 137,503
Interest (paid) on bridge notes -- (14,167) -- -- -- (14,167)
Proceeds from borrowings 496,000 275,000 -- -- 496,000 275,000
(Repayments) from borrowings -- (875,000) -- -- -- (875,000)
(Payment of preferred dividend) (212,500) -- -- -- (212,500) --
----------- ----------- ----------- ----------- ----------- -----------
Net cash provided by financing activities 283,500 7,123,344 0 0 283,500 7,123,344
----------- ----------- ----------- ----------- ----------- -----------
Net increase in cash 465,355 6,017,153 (72,968) 354,559 392,387 6,371,712
Cash and cash equivalents at beginning
of period 1,037,130 336,415 307,740 69,987 1,344,870 406,402
----------- ----------- ----------- ----------- ----------- -----------
Cash and cash equivalents at
end of period $ 1,502,485 $ 6,353,568 $ 234,772 $ 424,546 $ 1,737,257 $ 6,778,114
----------- ----------- ----------- ----------- ----------- -----------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
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THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 31, 1997
(1) Basis of Presentation
As disclosed in the Form 8-K filed November 3, 1997 and Form 8-KA filed
December 29, 1997, on October 20, 1997, the Company acquired 100% of the
outstanding capital stock of three entities comprising the "Grosso Jacobson
Companies" (including Grosso Jacobson Productions, Inc., Grosso Jacobson
Entertainment Corporation, and Grosso Jacobson Music Company, Inc) through the
merger of three wholly-owned subsidiaries of the Company into the Grosso
Jacobson Companies. The Grosso Jacobson Companies are engaged in the business of
developing and producing entertainment products including television movies and
series. The consideration paid by the Company to the sole shareholders of the
Grosso Jacobson Companies pursuant to the merger was paid through the issuance
of 6,666,666 shares of the Company's Common Stock valued at an issue price of
$1.20 per share.
The mergers of the Company's wholly-owned subsidiaries into the Grosso Jacobson
Companies for Common Stock of the Company has been recorded, for financial
statement reporting purposes, as a pooling of interests.
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to present fairly the results
of operations for the periods presented. The information contained in this Form
10-QSB should be read in conjunction with the audited financial statements filed
as part of the Company's Form 10-KSB for the fiscal year ended June 30, 1997.
(2) Dividend on Series A Preferred Stock
During the six months ended December 31, 1997, the Company paid $106,250
in cash for the dividend required to be paid on the Series A Preferred Stock for
the quarter ended June 30, 1997. As of the date of this report, the Company has
issued shares of its Common Stock equivalent at fair market value to $212,500,
representing the $106,250 dividend required to be paid on the Series A Preferred
Stock for the each of the quarters ended September 30, 1997 and December 31,
1997.
(3) Income Per Share
Income per share for the three month and six month periods has been
computed after deducting the dividend requirements of the Series A Preferred
Stock. It is based on the weighted average number of common and common
equivalent shares reported outstanding during the entire period ending on
December 31, 1997.
(4) Stock Options and Warrants
The Company uses APB Opinion No. 25 "Accounting for Stock Issued to
Employees" to calculate the compensation expense related to the grant of options
to purchase Common Stock under the intrinsic value method. Accordingly, the
Company makes no adjustments to its compensation expense or equity accounts for
the grant of options. The Company has made no grant of options for the period
ended December 31, 1997. At December 31, 1997 there are 765,251 options
outstanding at exercise prices ranging from $1.12 per share to $13.00 per share
of Common Stock.
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In addition to the 4,600,000 Redeemable Warrants exercisable at $1.75
per share of Common Stock issued in connection with the September 1996 public
offering, there are approximately 927,554 other outstanding warrants. As part of
a June 1996 private placement of $500,000 aggregate principal amount of 10%
promissory notes ("Bridge Notes"), 500,000 "Bridge Warrants" were issued. Upon
repayment of the Bridge Notes in September 1996, the Bridge Warrants were
automatically exchanged for 500,000 Redeemable Warrants exercisable at $1.75 per
share. The Company has other existing warrants outstanding to purchase an
aggregate of 427,554 shares of Common Stock at prices ranging from $7.70 to
$14.40 per share. There were a total of approximately 5,527,554 warrants
outstanding as of December 31, 1997.
(5) Related Party Transactions
In November 1995, the Company sold an aggregate of 525,000 shares of its
Common Stock to related parties, at a purchase price of $2.00 per share, in
exchange for an aggregate of $1,050,000 principal amount of promissory notes.
500,000 of these shares were sold to Mountaingate Productions, LLC.
("Mountaingate"), a California corporation that provides the Company with
producer services of its Chief Executive Officer and others. The remaining
25,000 shares were sold to a former officer and Director of the Company.
As of June 30, 1997 the agreement with Mountaingate was terminated and the stock
returned to the Company. Mountaingate has agreed to pay the Company the 25%
maximum recourse liability ($50,631) accrued interest at June 30, 1997, and the
balance of $129,142 was written off as of June 30, 1997.
At June 30, 1997, the Company foreclosed on the 25,000 shares of common stock
issued to the former officer and Director due to nonpayment of principal and
interest. The note balance including $4,000 of interest has been written off as
of June 30, 1997 and the 25,000 shares of common stock have been cancelled.
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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.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
(Registrant)
Dated: September 28, 1998 /s/ IRWIN MEYER
------------------ -------------------------------------
Irwin Meyer,
Chief Executive Officer
Dated: September 28, 1998 /s/ ARTHUR BERNSTEIN
------------------ -------------------------------------
Arthur Bernstein,
Executive Vice President, Principal
Financial Officer
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