UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10--Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended June 30, 2003 Commission File No. 1--9502
MAGIC LANTERN GROUP, INC.
New York 13--3016967
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1075 North Service Road West, Suite 27
Oakville, Ontario L6M 2G2
(Address of principal executive offices) (Zip Code)
1385 Broadway
New York, New York 10018
(Address of Previous Principal Executive Offices and Zip
Codes)
Registrant's telephone number, including area code: (905) 827--2755
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.
Title of Class Outstanding at August 14, 2003
Common Stock 66,815,267
MAGIC LANTERN GROUP, INC.
INDEX
|
Item 1. Financial Information |
Page |
|
Condensed Consolidated Balance Sheets - June 30, 2003 (unaudited) and December 31, 2002 |
2 |
|
Condensed Consolidated Statements of Operations - Three Months and Six Months Ended June 20, 2003 and 2002 (unaudited) |
3 |
|
Consolidated Statements of Comprehensive Loss - Three Months and Six Months Ended June 30, 2003 and 2002 (unaudited) |
4 |
|
Consolidated Statement of Shareholders' Equity - Six Months Ended June 30, 2003 (unaudited) |
5 |
|
Condensed Consolidated Statements of Cash Flows - Six Months Ended June 30, 2003 and 2002 (unaudited) |
6 |
|
Notes to Condensed Consolidated Financial Statements |
7 |
|
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations |
12 |
|
Item 3. Quantitative and Qualitative Disclosure About Market Risk |
17 |
|
Item 4. Controls and Procedures |
17 |
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Part II. Other Information |
18 |
1
PART I. FINANCIAL INFORMATION
MAGIC LANTERN GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
|
|
June 30, 2003 (Unaudited) |
December 31, 2002 |
||
|
ASSETS: |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash................................................. |
$ |
142 |
$ |
696 |
|
Accounts receivable, net of allowances of $69 at June 30, 2003 and $70 at December 31, 2002........................... |
|
508 |
|
386 |
|
Miscellaneous receivable................... |
|
18 |
|
218 |
|
Inventories....................................... |
|
87 |
|
82 |
|
Prepaid expenses and other current assets................................................ |
|
107 |
|
110 |
|
Total current assets....................... |
|
862 |
|
1492 |
|
|
|
|
|
|
|
Property and equipment, at cost, less accumulated depreciation and amortization...................................... |
|
1,167 |
|
1,110 |
|
Other assets: |
|
|
|
|
|
Intangible assets, net of accumulated amortization...................................... |
|
4,674 |
|
4,436 |
|
Goodwill........................................ |
|
6,874 |
|
6,868 |
|
Cash surrender value of officer's life insurance......................................... |
|
-- |
|
32 |
|
Security deposits and other assets.... |
28 |
24 |
||
|
TOTAL ASSETS........................... |
$ |
13,605 |
$ |
13,962 |
|
|
|
|
|
|
|
LIABILITIES: |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Current portion of long-term debt |
$ |
557 |
$ |
492 |
|
Note payable to affiliate |
|
-- |
|
176 |
|
Accounts payable - trade |
|
756 |
|
377 |
|
Accrued liabilities |
|
636 |
|
613 |
|
Other current liabilities |
|
-- |
|
13 |
|
Total current liabilities |
|
1,949 |
|
1,671 |
|
|
|
|
|
|
|
Long-term liabilities: |
|
|
|
|
|
Long-term debt, net of current portion |
|
22 |
|
10 |
|
Note payable, including accrued interest |
|
3,097 |
|
3,022 |
|
Total long-term liabilities |
|
3,119 |
|
3,032 |
|
|
|
|
|
|
|
Units to be issued |
|
300 |
|
-- |
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (See Note 4) |
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDER'S EQUITY |
|
|
|
|
|
Preferred stock, $.01 par value, 1,000 shares authorized; none issued and outstanding |
|
-- |
|
-- |
|
Common stock, $.01 par value, 100,000 authorized at June 30, 2003 and December 31, 2002; 66,197 and 66,147 shares issued and outstanding at June 30, 2003 and December 31, 2002 |
|
662 |
|
661 |
|
Additional paid-in capital |
|
19,286 |
|
20,685 |
|
Deferred compensation |
|
(656) |
|
(966) |
|
Accumulated deficit |
|
(11,350) |
|
(11,078) |
|
|
|
7,942 |
|
9,302 |
|
Accumulated other comprehensive income (loss) |
|
295 |
|
(43) |
|
TOTAL SHAREHOLDERS' EQUITY |
|
8,237 |
|
9,259 |
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ |
13,605 |
$ |
13,962 |
|
|
|
|
|
|
|
See Notes to Condensed Consolidated Financial Statements. |
|
|
|
|
2
MAGIC LANTERN GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||
|
2003 |
2002 |
2003 |
2002 |
|||||
| Net revenue | $ | 807 | $ | 4 | > $ | 1,526 | $ | 21 |
| Cost of goods sold | 299 | 8 | $ | 572 | 35 | |||
| Gross profit (loss) | 508 | (4) | 954 | (14) | ||||
| Royalty and other income | -- | 22 | -- | 45 | ||||
| 508 | 18 | 954 | 31 | |||||
| Selling, general and administrative expenses | 845 | 107 | 1,830 | 255 | ||||
| Depreciation and amortization | 202 | -- | 394 | -- | ||||
| Compensation expense from options | 40 | -- | 131 | -- | ||||
| Compensation adjustment from replacement options | 529 | 959 | (1,233) | 959 | ||||
| Gain on settlement of litigation, net of legal expenses | -- | (526) | -- | (526) | ||||
| Operating loss | (1,108) | (522) | (168) | (657) | ||||
| Other income (expenses): | ||||||||
| Interest income (expense) | (51) | 1 | (104) | 1 | ||||
| Factoring income (expense) | -- | 3 | -- | (12) | ||||
| Gain on sale of marketable securities | -- | -- | -- | 30 | ||||
| Net loss | $ | (1,159) | $ | (518) | $ | (272) | $ | (638) |
| Loss per common share: | ||||||||
| Basic and fully diluted | $ | (0) | $ | (0) | $ | - | $ | (0) |
| Weighted average common shares outstanding: | ||||||||