-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BGj7awzYIxOnKKpETVDI3EkLV2PpIeCIBHho06Tcguh6r9jllwgStioJoSI0ywhi kN8/8PmjpGk7KjQRc2Zaow== 0000930661-99-001902.txt : 19990816 0000930661-99-001902.hdr.sgml : 19990816 ACCESSION NUMBER: 0000930661-99-001902 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ADDVANTAGE MEDIA GROUP INC /OK CENTRAL INDEX KEY: 0000874292 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-PROFESSIONAL & COMMERCIAL EQUIPMENT & SUPPLIES [5040] IRS NUMBER: 731351610 STATE OF INCORPORATION: OK FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 033-39902-FW FILM NUMBER: 99687293 BUSINESS ADDRESS: STREET 1: 5100 E SKELLY DR STREET 2: MERIDIAN TOWER SUITE 1080 CITY: TULSA STATE: OK ZIP: 74135-6552 BUSINESS PHONE: 9186658414 MAIL ADDRESS: STREET 1: 5100 EAST SKELLY DRIVE STREET 2: MERIDIAN TOWER SUITE 1080 CITY: TULSA STATE: OK ZIP: 74135 10QSB 1 FORM 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB [x] QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period ________________ to ______________ Commission File number 1-10799 ADDvantage Media Group, Inc. (Exact name of small business issuer as specified in its charter) OKLAHOMA 73-1351610 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5100 East Skelly Drive Meridian Tower, Suite 1080 Tulsa, Oklahoma 74135-6552 (Address of principal executive office) (Zip Code) (918) 665-8414 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 --- --- Shares outstanding of the issuer's $.01 par value common stock as of August 11, 1999 is 1,476,646. Transitional Small Business Issuer Disclosure Format (Check one): Yes ___ No x --- PART I. FINANCIAL INFORMATION Item 1. Financial Statement ADDVANTAGE MEDIA GROUP, INC. BALANCE SHEETS June 30, December 31, 1999 1998 ------------------------ (UNAUDITED) ASSETS Current assets: Cash and cash equivalents $ 62,539 $ 421,722 Accounts receivable 86,252 124,777 Other current assets 22,876 13,434 ---------- ---------- Total current assets 171,667 559,933 Property and equipment, at cost: Calculators -- 722,905 Office and production equipment 738,167 840,596 Furniture and fixtures 98,902 100,332 ---------- ---------- 837,069 1,663,833 Accumulated depreciation 409,335 489,152 ---------- ---------- 427,734 1,174,681 Patent, net of accumulated amortization of $763,370 and $717,961 at June 30, 1999 and December 31, 1998, respectively 144,741 190,150 Investment in Ventures Education Systems Corporation 599,503 883,626 Other assets 13,081 280,196 ---------- ---------- Total assets $1,356,726 $3,088,586 ========== ========== 2 ADDVANTAGE MEDIA GROUP, INC. BALANCE SHEETS June 30, December 31, 1999 1998 ------------------------- (UNAUDITED) LIABILITIES AND STOCKHOLDERS EQUITY Current liabilities: Accounts payable $ 56,149 $ 45,604 Other accrued liabilities 119,275 18,786 ----------- ----------- Total current liabilities 175,424 64,390 Long-term obligations 177,269 359,495 Shareholders' equity: Preferred stock, $1.00 par value, 1,000,000 shares authorized, none issued Common Stock, $.01 par value, 10,000,000 shares authorized, 1,476,646 issued and outstanding at June 30, 1999 and December 31, 1998, respectively 14,766 14,766 Capital in excess of par value 8,756,194 8,756,194 Accumulated deficit (7,766,927) (6,106,259) ----------- ----------- Total stockholders' equity 1,004,033 2,664,701 ----------- ----------- Total liabilities and stockholders' equity $ 1,356,726 $ 3,088,586 =========== =========== 3 ADDVANTAGE MEDIA GROUP, INC. STATEMENT OF OPERATIONS (UNAUDITED) Three Months Ended June 30, 1999 and 1998 1999 1998 -------------------------- Revenues: Advertising Sales $ -- $ 1,947,480 Other 3,042 49,668 ----------- ----------- 3,042 1,997,148 Costs and expenses: Cost of advertising services 18,778 694,429 Selling expenses 33,461 142,716 General and administrative expenses 256,541 430,618 Equity in loss of Ventures Education System Corporation 185,173 -- Calculator writedown 722,761 364,822 Interest expense -- 4,117 ----------- ----------- 1,216,714 1,636,702 ----------- ----------- Income (loss) before income taxes (1,213,672) 360,446 Provision for income taxes -- 1,116,204 ----------- ----------- Net income (loss) (1,213,672) (755,758) Prefered stock dividends -- (15,681) ----------- Net income (loss) applicable to Common Stock $(1,213,672) $ (771,439) =========== =========== Net income (loss) per share $ (0.82) $ (0.52) =========== =========== Shares used in computing net income per share 1,476,646 1,476,646 =========== =========== 4 ADDVANTAGE MEDIA GROUP, INC. STATEMENTS OF OPERATIONS (UNAUDITED) Six Months Ended June 30, 1999 and 1998 1999 1998 -------------------------- Revenues: Advertising $ -- $ 4,863,481 Other 9,802 82,283 ----------- ----------- 9,802 4,945,764 Costs and expenses: Cost of advertising services 78,680 1,739,113 Selling expenses 88,622 280,412 General and administrative expenses 499,434 835,006 Equity in loss of Ventures Education Systems Corporation 280,973 -- Calculator writedown 722,761 364,822 Interest expense -- 7,937 ----------- ----------- 1,670,470 3,227,290 ----------- ----------- Income (loss) before provision for income taxes (1,660,668) 1,718,474 Provision for income taxes -- 1,640,972 ----------- ----------- Net income (loss) (1,660,668) 77,502 Prefered stock dividends -- (38,332) ----------- ----------- Net income (loss) applicable to Common Stock $(1,660,668) $ 39,170 =========== =========== Net income (loss) per common share $ (1.12) $ 0.03 =========== =========== Shares used in computing net income (loss) per Common Share 1,476,646 1,476,646 =========== =========== 5 ADDVANTAGE MEDIA GROUP, INC. STATEMENTS OF CASH FLOWS (UNAUDITED) Six Months Ended June 30, 1999 and 1998 1999 1998 --------------------------- OPERATING ACTIVITIES Net income (loss) $(1,660,668) $ 77,502 Adjustments to reconcile net income to net cash used in operating activities: Deferred income tax -- 1,473,000 Depreciation and amortization 73,021 472,472 Equity in loss of investment 280,973 -- Calculator writedown 722,761 364,822 Accrual of long-term obligations 72,282 65,712 Changes in assets and liabilities: Accounts receivable 38,527 1,222,433 Other current assets (9,444) (73,850) Other assets 12,607 (76,977) Account payable 10,545 (592,291) Income taxes payable -- 17,674 Other accrued liabilities 100,489 (179,556) Unearned advertising revenue -- (762,151) ----------- ----------- Net cash used in operating activities (358,907) 2,008,790 INVESTING ACTIVITIES Purchases of property and equipment (276) (698,591) ----------- ----------- Net cash used in investing activities (276) (698,591) FINANCING ACTIVITIES Proceeds for note payable -- 383,680 Payments on bank note -- -- Payment on notes payable -- (60,120) Payment of preferred stock dividends -- (38,332) Redemption of preferred stock -- (911,000) ----------- ----------- Net cash provided by financing activities -- (625,772) ----------- ----------- Increase (decrease) in cash (359,183) 684,427 Cash at beginning of period 421,722 2,003,165 ----------- ----------- Cash at end of period $ 62,539 $ 2,687,592 =========== =========== Supplemental disclosures of cash information: Interest paid $ -- $ 7,938 =========== =========== 6 NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial statements and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all adjustments, in the opinion of management, necessary in order to make the financial statements not misleading. Note 2 - Description of Business ADDvantage Media Group, Inc. (the "Company") markets and sells in-store advertising to national advertisers. This advertising is positioned on solar powered calculators attached to the handles of shopping carts. The patented calculators are marketed under the registered trademark "Shoppers Calculator(R)." On September 1, 1995, the Company and Wal-Mart Stores, Inc. ("Wal-Mart") entered into a four-year contract in settlement of a lawsuit related to prior contracts under which the Company would install and maintain Shoppers Calculator(R) in all of Wal-Mart's Supercenters in the continental United States and Wal-Mart was responsible for selling the advertising for the calculators during the initial phase of the contract. Under the contract, the Company had the right to retain 90% of the advertising revenue. During the last quarter of 1996, the Company assumed the responsibility for sales of advertising and this arrangement was formalized in an amendment to the Wal-Mart contract dated August 25, 1997. Wal- Mart agreed to guarantee advertising revenues to the Company of $23.5 million, subject to the Company's obligation to install and service the Shoppers Calculators(R) during the revenue guaranty period. In May 1998, the Company received the final revenue guarantee payment. The Company had the option to continue the contract to October 6, 1999, however, Wal-Mart notified the Company that it would not agree to a new contract or an extension of the current contract past its present term. Based on Wal-Mart's decision not to renew the present contract, the Company made the decision to commence de-installation of the Shopper Calculator(R) program beginning June 15, 1998. Such de-installation was completed by September 15, 1998. On September 2, 1998 the Company filed a civil complaint against Wal-Mart in the United States District Court for the Western District of Arkansas, Fayetteville Division, seeking both compensatory and punitive damages based on various allegations of wrongdoing by Wal-Mart. During July, 1999 the Company and Wal- Mart dismissed their claims against each other, and Wal-Mart paid the Company approximately $15,000 as reimbursement for lost calculators. The settlement has concluded the Company's business relationship with Wal-Mart. The Company expects to incur losses for the foreseeable future. Presently, business activity is being limited to selling units, which provides unpredictable cash flow, and contacting other retailers and advertisers about the Shoppers Calculator program. The Company has continued to downsize its staff and overhead requirements in order to continue with limited operational activity. During the first six months of 1999, payment for officers compensation was reduced to 50% of accrual amounts. Beginning July 1, 1999 payments for officers compensation was suspended pending a reorganization of the Company. 7 During the second quarter of 1999, the Shoppers Calculator(R) assets were written down by $722,761. The write-down is the direct result of management's continuing evaluation of the potential realization of future revenues from advertising sales, unit sales or the sale of the Shoppers Calculator(R) assets. While the inventory of calculators and parts is being written off, the net costs of production equipment and calculator patents have not been impaired because of the estimated likelihood of recovery of these assets. The Company is currently evaluating a number of options and opportunities which could include a merger, the sale of the Shoppers Calculator(R) assets or some other business alliance. Note 3 - Investment In Ventures Education Systems Corporation On September 1, 1998 the Company acquired a 27% interest in Ventures Education Systems Corporation, a private company engaged in the commercial development and marketing of proprietary teaching techniques, services, products and materials, principally to public primary and secondary schools. The Company paid $990,000 cash for the interest, which consists of 550,000 shares of common stock. Under the terms of the investment, the Company was able to designate one member of the Ventures Board of Directors. It is also contemplated that the Company may provide certain assistance in connection with the development of Ventures' future marketing and sales efforts and financial planning. Ventures is a development stage company formed in May of 1997 and is headquartered in New York, New York. Its innovative teaching methods, based on cognitive science precepts, focus on student-centered learning and are designed to improve student motivation. The products and services were developed from the methods and techniques developed by its not-for-profit affiliate, Ventures in Education, Inc., over a period of approximately 17 years. Its methods and techniques strived for improved literacy, logical and quantitative reasoning and problem solving skills. The company's principal customer base is comprised of those public schools which are eligible for Federal "Title I" funds. Ventures Education Systems Corporation's operating results for the three months and six months ended June 30, 1999 were as follows:
Three Months ended Six Months ended June 30, 1999 June 30, 1999 (Unaudited) (Unaudited) ------------------ ---------------- Total Revenues $ 295,711 $ 640,192 Cost and Expenses 981,537 1,680,832 ----------- ------------ Net Loss $ (685,826) $ (1,040,640) =========== ============ ADDvantage Media Group, Inc. equity in the net loss for the period $ (185,173) $ (280,973) =========== ============
8 Note 4 - Income Taxes As a result of Wal-Mart's decision to terminate its contract with the Company, management has reevaluated the likelihood of realizing the deferred tax assets resulting from its net operating loss and tax credit carryforwards. During the second quarter of 1998 management determined that the Company no longer met the criteria to continue to recognize these tax carryforwards as assets. Consequently, the second quarter tax provision was increased to reverse the deferred tax asset. Note 5 - Reverse Stock Split On October 7, 1998, the Company's shareholders approved an amendment to the Company's Certificate of Incorporation to effect a one for four reverse stock split. The amendment became effective at the close of business on October 8, 1998. As a result of the reverse stock split, the total number of issued and outstanding shares of the Company were reduced from 5,906,584 to 1,476,646. The number of shares held by each shareholder was reduced to an amount equal to 25% of the number owned prior to the effectiveness of the reverse split. The number of shares subject to outstanding options and warrants was reduced accordingly. The earnings per share and the shares outstanding have been reported herein on a post-split basis. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 - ----------------------------------------------------------------------------- The Company entered into a contract with Wal-Mart effective as of September 1, 1995, whereby the Company agreed to install and maintain its Shoppers Calculators in all of Wal-Mart's Supercenter stores in the continental United States. Under the contract, Wal-Mart guaranteed that the Company's share of advertising revenues would be $2,700 per installed store, per four-week advertising cycle, until a total of approximately $23,500,000 had been received by the Company. At June 30, 1998, the total amount of the revenue guarantee had been received, so therefore, the last half of 1998 and the first quarter 1999 did not include any revenue guarantee payments from Wal-Mart. The Company commenced de-installation of the Wal-Mart Supercenter program on June 15, 1998 and completed such de-installation approximately September 15, 1998. Advertising revenues decreased approximately $1,947,500 (100%) for the second quarter ended June 30, 1999, as compared to the three months ended June 30, 1998. During the second fiscal quarter of 1998 the Wal-Mart revenue guarantee was concluded with a final billing of $360,900 ($1,074 per store) for advertising cycle number six which ended on June 14, 1998. There were no significant advertising revenues earned after that date. The Company's net loss applicable to Common Stock was $1,213,700 for 1999, as compared to a net loss of $771,400 for the same period last year. As a result of Wal-Mart's decision to terminate its contract with the Company, management has reevaluated the likelihood of realizing the 9 deferred tax assets resulting from its net operating loss and tax credit carryforwards. During the second quarter of 1998, management determined that the Company no longer met the criteria to continue to recognize these tax carryforwards as assets. Consequently, the tax provision for the second quarter of 1998 was increased by $1,556,000. Costs of advertising services (representing primarily labor to supervise, service and clean the installed units and change advertising messages and the depreciation of installed units) decreased approximately $675,700 (97%) in the second quarter of 1999 as compared to the same period in 1998 as a result of reduced labor costs and depreciation expense. On March 1, 1998 the Company began reducing its field service staff and by the end of November 1998, all field service staff employees except for warehouse personnel were terminated. Labor costs and related expenses subsequent to June 30, 1998 related entirely to the de-installation of the of the Wal-Mart Supercenter program which was completed approximately September 15, 1998. Selling expenses decreased approximately $109,300 (77%) in 1999 compared to the same period 1998. During 1999, payroll and payroll related expenses and sales representative retainer expenses decreased $98,400. Marketing materials cost, advertising and other expenses decreased $10,900 in 1999 as compared to 1998. Sales efforts for the second of 1999 were shifted from advertising sales for the Wal-Mart Supercenter program to contacting other retailers and advertisers regarding the Shoppers Calculator(R) program. General and administrative expenses decreased $174,000 (40%) during the second quarter of 1999 as compared to the same period in 1998. During 1999, payroll and payroll related expenses decreased $45,200. Officer and management bonus accruals decreased $82,500 in 1999 as compared to 1998. Executive retirement plan accruals, including insurance cost to fund future payments, decreased $11,400 during 1999. Expenses related to broker and analyst meetings and other shareholder expenses decreased $11,700 over 1998. Decreases amounting to $23,200 occurred in professional fees, occupancy costs and other expenses. Equity in loss of Ventures Education Systems Corporation increased $185,173 during the second quarter of 1999 as compared to 1998. The Company acquired a 27% interest in Ventures on September 1, 1998. Ventures has operated at a loss since the acquisition date and the Company's share has been reflected as a charge to earnings with a corresponding reduction in the carrying cost of the investment. Calculator write-down increased $358,000 in the second quarter of 1999, as compared to the same period in 1998. The write-down is the direct result of management's continuing evaluation of the potential realization of future revenues from advertising sales, unit sales or sale of the Shoppers Calculator(R) assets. Interest expenses decreased approximately $4,100 (100%) during the second quarter of 1999 as compared to the same period in 1998. During 1999, the Company incurred no interest expenses. Results of Operations Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998 - ------------------------------------------------------------------------- The Company entered into a contract with Wal-Mart effective as of September 1, 1995, whereby 10 the Company agreed to install and maintain its Shoppers Calculators in all of Wal-Mart's Supercenter stores in the continental United States. Under the contract, Wal-Mart guaranteed that the Company's share of advertising revenues would be $2,700 per installed store, per four-week advertising cycle, until a total of approximately $23,500,000 had been received by the Company. At June 30, 1998, the total amount of the revenue guarantee had been received, so therefore, the last half of 1998 and the first quarter 1999 did not include any revenue guarantee payments from Wal-Mart. The Company commenced de-installation of the Wal-Mart Supercenter program on June 15, 1998 and completed such de-installation approximately September 15, 1998. Advertising revenues decreased approximately $4,863,500 (100%) for the six months ended June 30, 1999, as compared to the six months ended June 30, 1998. During the second fiscal quarter of 1998 the Wal-Mart revenue guarantee was concluded with a final billing of $360,900 ($1,074 per store) for advertising cycle number six which ended on June 14, 1998. There were no significant advertising revenues earned after that date. The Company's net loss applicable to Common Stock was $1,660,700 for 1999, as compared to net income of $ 39,200 for the same period last year. As a result of Wal-Mart's decision to terminate its contract with the Company, management has reevaluated the likelihood of realizing the deferred tax assets resulting from its net operating loss and tax credit carryforwards. During the second quarter of 1998, management determined that the Company no longer met the criteria to continue to recognize these tax carryforwards as assets. Consequently, the tax provision for the second quarter of 1998 was increased by $1,556,000. Costs of advertising services (representing primarily labor to supervise, service and clean the installed units and change advertising messages and the depreciation of installed units) decreased approximately $1,660,400 (95%) in the six months ended June 30, 1999 as compared to the same period in 1998 as a result of reduced labor costs and depreciation expense. On March 1, 1998 the Company began reducing its field service staff and by the end of November 1998, all field service staff employees except for warehouse personnel were terminated. Labor costs and related expenses subsequent to June 30, 1998 related entirely to the de-installation of the of the Wal-Mart Supercenter program which was completed approximately September 15, 1998. Selling expenses decreased approximately $191,800 (68%) in 1999 compared to the same period 1998. During 1999, payroll and payroll related expenses and sales representative retainer expenses decreased $175,200. Marketing materials cost, advertising and other expenses decreased $16,600 in 1999 as compared to 1998. Sales efforts for the second quarter of 1999 were shifted from advertising sales for the Wal-Mart Supercenter program to contacting other retailers and advertisers regarding the Shoppers Calculator(R) program. General and administrative expenses decreased $335,600 (40%) during the six months ended June 30, 1999 as compared to the same period in 1998. During 1999, payroll and payroll related expenses decreased $71,200. Officer and management bonus accruals decreased $165,000 in 1999 as compared to 1998. Executive retirement plan accruals, including insurance cost to fund future payments, decreased $31,000 during 1999. Expenses related to broker and analyst meetings and other shareholder expenses decreased $27,700 over 1998. Decreases amounting to $40,700 occurred in professional fees, occupancy costs and other expenses. 11 Equity in loss of Ventures Education Systems Corporation increased $280,973 during the six months ended June 30, 1999 as compared to 1998. The Company acquired a 27% interest in Ventures on September 1, 1998. Ventures has operated at a loss since the acquisition date and the Company's share has been reflected as a charge to earnings with a corresponding reduction in the carrying cost of the investment. Calculator write-down increased $358,000 in the second quarter of 1999, as compared to the same period in 1998. The write-down is the direct result of management's continuing evaluation of the potential realization of future revenues from advertising sales, unit sales or sale of the Shoppers Calculator(R) assets. Interest expenses decreased approximately $7,900 (100%) during the second quarter of 1999 as compared to the same period in 1998. During 1999, the Company incurred no interest expenses. Financial Condition and Liquidity The termination of the Company's program with Wal-Mart has materially reduced the Company's revenues. Consequently, the Company expects to incur losses for the foreseeable future. Presently, business activity is being limited to selling units, which provides unpredictable cash flow, and contacting other retailers and advertisers about the Shoppers Calculator program. The Company has continued to downsize its staff and overhead requirements in order to continue with limited operational activity. During the first six months of 1999, payment for officers compensation was reduced to 50% of accrual amounts. Beginning July 1, 1999 payments for officers compensation was suspended pending a reorganization of the Company. Notwithstanding the cost-cutting steps that have been taken, the Company will need additional financing or significantly increased funds from operations to accomplish its current business plan, which could include a merger, the sale of the Shoppers Calculator assets or some other business alliance. To the extent that the Company cannot generate the necessary funding from cash flow from operations, it will be required to seek capital from third parties in order to accomplish its business plan. Year 2000 The Company is making an assessment of its Year 2000 date issues as it relates to computer operations of the Company, the computer hardware and software owned by the Company, the accounting software provided by its vendor, the software of other suppliers and vendors, and the software of customers. The most critical aspect for the Company regarding the Year 2000 problem involves the Company's accounting software. The Company's vendor of the software is addressing this issue and assures its users that all software will be revised to permit the usage of the Year 2000 date without adverse consequences to the software users' systems. The Company has made arrangements with its local computer systems consultant to survey all of the Company's computers and non- accounting software acquired and used in Company operations. This survey will include alarm systems, office equipment, computers, "off-the-shelf" software, and software designed by the Company. It has been determined that Year 2000 problems encountered by the 12 Company's customers would not be material. However, the Company does have equipment which will be affected by the Year 2000 problem. The Company will contact vendors of such equipment supplied by the Company and determine if the equipment requires modifications to address its customers' Year 2000 problems. The Company has determined that the Year 2000 is not a material event or uncertainty that would cause reported financial information not to be necessarily indicative of future operating results or financial condition. Additionally, the Company believes that the costs or consequences of incomplete or untimely resolution of the Year 2000 issue is not a material event. These determinations are based on three factors: the availability of accounting software which has dealt with the Year 2000 problem, the relatively small amount of reliance by the Company on specialized software or computer equipment, and the inconsequential impact on the Company of any of the Company's customers' Year 2000 problems. Forward Looking Statements Certain statements included in this report which are not historical facts are forward-looking statements. These forward-looking statements are based on current expectations, estimates, assumptions and beliefs of management; and words such as "expects," "anticipates," "intends," "plans," "believes," "projects", "estimates" and similar expressions are intended to identify such forward looking statements. These forward looking statements involve risks and uncertainties, including, but not limited to, the Company's ability to generate or to raise sufficient capital to allow it to continue operations, the Company's ability to conclude a transaction with a suitable merger partner, the Company's ability to obtain new users of the Shoppers Calculator(R) program and to sell advertising for that program, general economic conditions and conditions affecting the retail environment, the availability of raw materials and manufactured components and the Company's ability to fund the costs thereof, and other factors which may affect the Company's ability to comply with future obligations. Accordingly, actual results may differ materially from those expressed in the forward looking statements. PART II--OTHER INFORMATION Item 1. Legal Proceedings. ADDvantage Media Group, Inc. v. Wal-Mart Stores, Inc. and Wal-Mart Stores, -------------------------------------------------------------------------- Inc. v. Charles H. Hood and Gary Young and John Does, in the U.S. District - ---------------------------------------------------- Court, Western District of Arkansas, Fayetteville Division, Case No. 98-5156. This case arose out of allegations by the Company of breach of contract and related wrongful actions by Wal-Mart in connection with a contract between the parties dated August 25, 1997. Wal-Mart in turn filed counter-claim against the Company and its officers. In July, 1999, after consultation with its counsel, the Company and Wal-Mart dismissed their claims against each other, and Wal-Mart paid the Company approximately $15,000 as reimbursement for lost calculators. 13 Item 4. Submission of Matters to a Vote of Securities Holders The annual meeting of shareholders of the Company was held in the Meeting Tower Conference Room, Meridian Tower, 4th Floor, 5100 East Skelly Drive, Tulsa, Oklahoma on May 26, 1999. At the meeting the following directors were elected for one year terms (with the votes as indicated): Abstentions/ For Withheld Broker Non-Votes --- -------- ---------------- J Larre Barrett 1,304,754 6,950 -0- John W. Condon 1,304,754 7,100 -0- Charles H. Hood 1,304,754 7,450 -0- Steven C. Oden 1,304,754 6,950 -0- Stephen G. Smith 1,304,754 6,950 -0- Gary W. Young 1,304,754 6,950 -0- Item 5. Other Information (a) On June 21, 1999, the Company entered into a letter of intent with vanAar, Inc. under which vanAar agreed to purchase one million shares of Common Stock of the Company at a price of $1.00 per share with $250,000 payable in cash at the closing of the transaction and the remainder payable through the delivery to the Company of assets having an agreed value of $750,000. The letter of intent also contemplated the formation of a merchant banking division within the Company to be managed by a vanAar affiliate. With the mutual agreement of the parties, the letter of intent expired on July 31, 1999, by reason of the failure of the parties to enter into a definitive agreement on or before such date. (b) The NASDAQ has advised the Company that if its Common Stock does not achieve a closing bid price of $1.00 per share or more for ten consecutive trading days on or before September 20, 1999, the stock will be de-listed from trading privileges on NASDAQ effective as of the opening of business on September 22, 1999. If this occurs, the Company will likely apply for listing of its Common Stock on the NASDAQ over the counter bulletin board (OTCBB) and thereafter will seek to have its stock re-listed on NASDAQ as such time as the Common Stock meets the requirements for inclusion on NASDAQ. There are several NASDAQ requirements for listing, one of which includes a $4.00 or greater trading price. As set forth in the Company's Proxy Statement for the 1999 Annual Meeting, stockholder proposals submitted pursuant to Rule 14a-8 for inclusion in the Company's proxy statement for the 2000 Annual Meeting of Stockholders must be received no later than December 29, 1999. Any stockholder who intends to present a proposal at the 2000 Annual Meeting and has not sought inclusion of the proposal in the Company's proxy materials pursuant to Rule 14a-8 must provide notice of such proposal to the Company no later than March 14, 2000. Failure to provide timely notice of such proposal will mean that the persons named as proxies will be able to vote the shares for which they have received proxies on such proposal in their discretion. 14 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ADDVANTAGE MEDIA GROUP, INC. Signature Title Date - --------- ----- ---- /s/ CHARLES H. HOOD - -------------------- Director and President August 11, 1999 Charles H. Hood (Principal Executive Officer) /s/ GARY W. YOUNG - -------------------- Director, Executive Vice President August 11, 1999 Gary W. Young Finance and Administration and Treasurer (Principal Financial Officer) 15 EXHIBIT INDEX ------------- Exhibit No. Description ----------- ----------- 11 Statement re: Computation of Per Share Earnings 27 Financial Data Schedule 16 EX-11 2 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 COMPUTATION OF EARNINGS PER SHARE The Company adopted SFAS No. 128, "Earnings Per Share," during 1997. SFAS No. 128 requires presentation of basic and diluted earnings per share. Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. All prior period weighted average and per share information has been restated in accordance with SFAS No. 128. Outstanding stock options and warrants issued by the Company represent the only dilutive effect on weighted average shares. A reconciliation between basic and diluted weighted average shares outstanding and the related earnings per share calculation is presented below: Basic and diluted EPS for the three months ended June 30, 1999 and 1998, were computed as follows: Earnings per share data has been restated to reflect the one for four reverse stock split to holders of record at the close of business on September 15, 1998 effective October 8, 1998.
Three Months Ended June 30, 1999 1998 ------------------------------- Basic EPS Computation: Net income (loss) $(1,213,672) $ (755,758) Less preferred stock dividends -- 15,681 ------------------------------ Net income (loss) available to common stockholders $(1,213,672) $ (771,439) Weighted average shares outstanding 1,476,646 1,476,646 ============================== Basic EPS $ (0.82) $ (0.52) Diluted EPS Computation: Net income (loss) available to common stockholders $(1,213,672) $ (771,439) ============================== Weighted average shares outstanding 1,476,646 1,476,646 Incremental shares for assumed exercise of securities -- -- Options -- -- ------------------------------ 1,476,646 1,476,646 Diluted EPS $ (0.82) $ (0.52) =========== ==========
Basic and diluted EPS for the six months ended June 30, 1999 and 1998, were computed as follows:
Six Months Ended June 30, ------------------------- 1999 1998 ---- ---- Basic EPS Computation: Net income (Loss) $ (1,660,668) $ 77,502 Less preferred stock dividends -- 38,332 ----------------------------------- Net income available to common stockholders $ (1,660,668) $ 39,170 =================================== Weighted average shares outstanding 1,476,646 1,476,646 ----------------------------------- Basic EPS $ (1.12) $ 0.03 =================================== Diluted EPS Computation: Net income (Loss) available to common stockholders $ (1,660,668) $ 39,170 =================================== Weighted average shares outstanding 1,476,646 1,476,646 Incremental shares for assumed exercise of securities -- -- Options -- 85,141 ----------------------------------- 1,476,646 1,561,787 =================================== Diluted EPS $ (1.12) $ 0.03 ===================================
EX-27 3 FINANCIAL DATA SCHEDULE
5 6-MOS DEC-31-1999 JAN-01-1999 JUN-30-1999 62,539 0 86,252 0 0 171,667 837,069 409,335 1,356,726 175,424 0 0 0 14,766 1,004,033 1,356,726 0 9,802 78,680 1,671,470 280,973 0 0 (1,660,668) 0 (1,660,668) 0 0 0 (1,660,668) (1.12) (1.12)
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