UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
( x ) Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
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 0-9311
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 87-0269260
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization Identification Number
15840 Ventura Blvd. - Suite 310, Encino, CA 91436
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(Address of principal executive offices) (Zip Code)
(818) 386-2323
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(Registrant's telephone number, including area code)
955 South Virginia Street, Reno, Nevada 89502
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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 by check mark whether the registrant has filed all documents and
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 subsequent to the distribution of securities under a plan confirmed
by a court. Yes (X) No ( )
As of September 30, 1996, there were 5,401,127 shares of common stock ($.01 par
value) issued and outstanding.
Total sequentially numbered pages in this document: 11
2
Digital Technologies Media Group, Inc.
Unaudited Statement of Operations
For The Period Ended September 30
3 Months 9 Months
1996 1996
------------ ------------
Income:
Licensing Revenues $339,000 $627,000
Other expense (11,737)
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Total Income 339,000 615,263
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Cost of Sales:
Film amortization 135,000 330,000
Royalties 237,000 425,000
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Total Cost of sales 372,000 755,000
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Gross margin (Loss) (33,000) (139,737)
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Operating Expenses:
General and Administrative 80,041 276,266
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Net Profit (Loss) ($113,041) ($416,003)
=========== ===========
Earnings (Loss) per Share of Common Stock
and Common Stock Equivalents ($0.021) ($0.077)
=========== ===========
Common Stock outstanding 5,401,127 5,401,127
=========== ===========
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Digital Technologies Media Group, Inc.
Balance Sheet
ASSETS Dec 31, 1995 Sep 30, 1996
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(AUDITED) (Unaudited)
Cash $0 ($1,359)
Receivables net of $10,000 and $20,000
allowance for bad debts 20,300 171,000
Fixed assets - net of accumulated depreciation
of $3,600 and $5,700 12,356 10,256
Film costs - net of accumulated amortization
of $60,000 and $490,000 2,940,000 2,510,000
Other assets 0 10,930
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Total Assets $2,972,656 $2,700,827
=========== ===========
LIABILITIES AND SHAREHOLDER EQUITY
Accounts payable $145,572 $186,568
Payroll tax obligations 32,817 53,108
Royalties payable 60,000 292,000
Other accrued expenses 107,000 0
Due to related parties 29,413 30,000
Unearned income 57,500 14,800
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Total Liabilities 432,302 576,476
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Preferred Stock, $0.01 par, authorized
100,000,000, none outstanding 0 0
Common Stock, $0.01 par value, authorized
250,000,000 shares, 5,401,127 shares
issued and outstanding 54,011 54,011
Additional paid in capital 3,392,754 3,392,754
Accumulated Deficit (906,411) (1,322,414)
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Total Shareholder Equity 2,540,354 2,124,351
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Total Liabilities and Equity $2,972,656 $2,700,827
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THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
3
Digital Technologies Media Group, Inc.
UNAUDITED STATEMENT OF CASH FLOWS
For the Nine Month Period Ended September 30
CASH FLOWS FROM OPERATING ACTIVITIES 1996
------------
Net (Loss) ($416,003)
Adjustments to Reconcile Net Income to
Net Cash Used in Operating Activities:
Eliminate Non Cash Items (Depreciation
and Amortization) 432,400
(Increase) Decrease in:
Receivables (150,700)
Other assets (10,930)
Increase (Decrease) in:
Accounts payable 40,996
Accrued expenses (107,000)
Payroll tax obligations 20,291
Royalties 232,000
Unearned revenue (42,700)
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NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES (1,646)
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CASH FLOWS FROM INVESTING ACTIVITIES
Increase (Decrease) in:
Purchase of fixed assets (300)
Notes payable 587
Preferred stock 0
Common stock 0
Paid in capital 0
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NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 287
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NET INCREASE (DECREASE) IN CASH (1,359)
CASH, at Beginning of Period 0
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CASH, at End of Period ($1,359)
============
THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART
OF THIS STATEMENT
4
Digitial Technologies Media Group, Inc.
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
For the Nine Month Period Ended September 30, 1996
Common Stock Preferred Stock Additional
----------------------------------------- Paid In Retained
Shares Amount Shares Amount Capital Earnings Total
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BALANCE, December 31, 1995 5,401,127 $54,011 0 $0 $3,392,754 ($906,411) $2,540,354
Entries For Quarter Ending
June 30, 1996 $0
$0
$0
$0
$0
$0
Loss for period 1/1 thru 6/30/96 (302,962) ($302,962)
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BALANCE, June 30, 1996 5,401,127 $54,011 0 $0 $3,392,754 ($1,209,373) $2,237,392
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$0
$0
$0
$0
$0
$0
$0
$0
$0
$0
Operating Profit (Loss)
quarter ended 9/30/96 (113,041) ($113,041)
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BALANCE, September 30, 1996 5,401,127 $54,011 0 $0 $3,392,754 ($1,322,414) $2,124,351
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THE NOTES TO THE FINANCIAL STATEMENTS ARE AN INTEGRAL PART OF THIS STATEMENT
5
Digital Technologies Media Group, Inc.
Notes to Financial Statements (Unaudited)
For the Three and Nine Month Period Ended September 30, 1996
Note 1 Organization and Summary of Significant Accounting Policies
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Since Digital Technologies, Inc. was formed in April, 1995 and did
not acquire its operating assets until September, 1995, operations
through September 30, 1995 were not significant. Accordingly,
comparable 1995 financial statements are not presented.
Certain information and footnote disclosures normally included in
financial statements that have been prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to the rules and regulations of the Securities and
Exchange Commission, although management of the Company believes that
the disclosures contained in these financial statements are adequate
to make the information presented therein not misleading.
The results of operations for the 3 and 9 months ended September 30,
1996 are not necessarily indicative of the results of operations to
be expected for the full fiscal year ended December 31, 1996.
The Company merged with Miller & Benson International as of July 30,
1996.
Organization:
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Digital Technologies Group, Inc. (The "DTG") was organized in April,
1995 Under the laws of the State of Delaware for the purpose of
funding the development of television programming and to interface
with new technologies. The Company initially issued 1,207,500 shares
of common stock with a nominal value of $50.00. In May, 1995, DTG
acquired certain assets of Communication Services International
("CSI") for convertible debt.
Miller & Benson International, Ltd. (The "M&B"), a Delaware
corporation, emerged from bankruptcy in 1991 and is a dormant holding
company with 5,401,127 shares outstanding as of July 30, 1996 after a
1 for 100 stock split and acquisition of DTG. The Company had no
assets or outstanding liabilities.
Company Business:
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Effective with the consummation of the CSI asset acquisition DTG
commenced licensing in September, 1995 all acquired film rights in
currently available territories. The Company's customers consist of
domestic and foreign sub-distributors and sales agents and CSI will
be collecting approximately $50,000 in receivables for the Company
subsequent to 12/31/95.
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Basis of Presentation:
----------------------
The consolidated financial statements reflect the assets,
liabilities, and operations of DTG due to accounting treatment as
reverse merger by DTG. (See Note 6)
The Balance Sheets are presented in an unclassified format in
accordance with FAS No. 53 for audit structure, with the quarterly
statements presented in a classified format.
Going Concern:
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As of September 30, 1996 the Company had no cash available to meet
operating requirements. There was some improvement for the period
ended September 30, 1996, but it is still not adequate to meet the
Company's needs. The Company requires additional sales and
collections to meet its fiscal operating needs and to satisfy the
liabilities outstanding as of September 30, 1996. The Company's
management is continuing to negotiate certain major marketing
licenses. There can be no assurance of favorably consummating these
negotiations at this time.
Management believes that with reductions in DTG operating costs that
have been instituted and with increased sales activity, the Company
will be able to continue as a going concern. However, at this time,
there is doubt related to the continuance as a going concern. These
financial statements do not include any adjustments that might result
from the outcome
of this uncertainty.
Film Revenue and Royalty Recognition:
-------------------------------------
Revenues from television license agreements are recognized as each
film becomes available for telecasting by the licensees. The Company
defines availability as when the films delivered are free of any
conflicting licenses in the respective territory, and the licensee
has fully accepted film materials. Royalty expense is accrued based
upon earned revenue.
Income Taxes:
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The Company may have limitations regarding the use of its apparent
net operating loss due to the transaction described in Note 6.
Accounts Receivable:
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Accounts receivable consist of the unpaid portion of license
agreements received from customers on a worldwide basis. The
Company's management performs credit evaluations of customers and
reserves for any potential credits losses. The standard procedure
when entering into a license agreement requires a payment upon
signing and the balance to be paid over a period subsequent to the
delivery of the films licensed.
7
Fixed Assets:
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Depreciation of furniture and fixtures is being provided by
utilization of the straight-line method over five years.
Film Inventory and Amortization:
--------------------------------
Film inventory principally consisting of distribution rights for a
group of television series are stated at the lower of unamortized
cost or estimated realizable value.
Amortization is based on the income forecast method which utilizes
the relationship of film revenue earned in a period to estimated
future revenue. Such estimated film revenue will be revised
periodically by management and estimated losses, if any, will be
provided for at that time. During the next three years the Company
anticipates amortizing 60% of its film balance.
CSI Agreement:
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On May 1, 1995 DTG concluded an Acquisition Agreement (the
"Agreement") with CSI, a foreign corporation formed in 1990 resulting
in the acquisition of some accounts receivable, film rights to
several TV series, and a distribution network for $3 Million secured
convertible debenture bearing interest at 10%. The entire payment was
reflected as Film Cost based on an independent appraisal. This
debenture was then converted into common stock of the Company and a
shareholder of CSI became the Chief Executive Officer of the Company.
Note 2 Net Loss Per Share:
-------------------
Net Loss per share is computed using the actual shares outstanding at
the end of the period or 5,401,127 shares.
Note 3 Lease Commitment:
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The Company is in the process of moving and its lease commitments
have been negotiated so as to reduce its overhead commitment. New
leases in a different and smaller facility are presently being
negotiated.
8
Note 4 Convertible Subordinated Debt and Warrants Exercised:
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The Company issued convertible subordinated debt amounting to
$275,000 as of December 31, 1995. All of this debt was converted
during 1996.
Note 5 Stockholder Settlements:
------------------------
The Company entered into an agreement with a major shareholder for
return of 800,000 shares held by him. The shares were canceled
effective December 31, 1995. Such agreement also provides for payment
of past compensation net of expense advances which have not been
utilized and receivables were transferred upon July 1996 foreclosure
of a $25,000 note held by the stockholder.
Note 6 Reverse Acquisition:
--------------------
Pursuant to a Stock Exchange Agreement dated June 28, 1996 among DTG,
the shareholders of DTG and Miller & Benson International, Ltd.
("M&B"), M&B acquired 100% of the outstanding capital stock of DTG in
exchange for the issuance of 4,000,000 post-split shares of common
stock to DTG for its shareholders and consultant and 401,127 shares
of Company common stock to DTG secured convertible subordinated debt
holders ($301,127 including accrued interest at conversion) and
exchange for their outstanding warrant rights for 50,000 shares of
DTG common stock. The 4,401,127 total shares of common stock
represented approximately 81.5% of the issued and outstanding shares
of the Company's common stock, which is the only class of the
Company's equity securities issued and outstanding. As a result, the
former shareholders of DTG may thus be deemed to have acquired
control of M&B. For accounting purposes, the acquisition of DTG by
M&B has been treated as a recapitalization of DTG, with DTG as the
acquirer (reverse acquisition). All historical financial statements
prior to July 30, 1996 are those of DTG.
M&B was a dormant public company whose activities prior to the DTG
acquisition were limited to maintaining corporate records and
evaluating business opportunities. M&B emerged from Chapter 11 and in
this process eliminated all debt against the company. Certain
transactions with corporate officers and directors transpired in
which payments due them were paid in the form of common stock. Assets
to aid in recapitalizing the Company were acquired from CD
Management, Inc. in 1994 and paid for by common stock.
The outstanding shares as of December 31, 1995 and September 30, 1996
reflect all M&B transactions as of those dates and the consolidated
statements have been retroactively restated.
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ITEM 2. MANAGEMENT' S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the Three and the Nine Months Ended September 30, 1996
Financial Condition and Results of Operations:
The Company sales activities increased dramatically during the quarter
ended September 30, 1996. Accordingly, accounts receivable increased to $171,000
and $339,000 in licensing revenue, principally international sales, were
recognized. Also royalties payable increased to $292,000 as approximately 70% of
revenues are payable to producers at this time.
Film costs were amortized based upon the income forecast method and
resulted in a charge of $135,000 for the quarter and $330,000 for the nine
months ended September 30, 1996.
The Company's cost saving efforts resulted in a reduction of operating
expenses. Subsequent to September 30, 1996, the Company further reduced
operating expenses by reducing its facility rent and acquired new product.
Management believes that the Company's working capital resources and
anticipated cash flow will be sufficient to support operations.
PART II. OTHER INFORMATION
ITEM 1. Not applicable
ITEMS 2. through 4. are not applicable.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
None
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DIGITAL TECHNOLOGIES MEDIA GROUP, INC.
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(Registrant)
Date: November 14, 1996 /s/ Arthur Newberger
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Arthur Newberger, President
(Chief Executive, Financial
and Accounting Officer)
11