U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the quarterly period ended June 30, 2004 |
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 000-25067
PRIVATE MEDIA GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
| Nevada | 87-0365673 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |
3230 Flamingo Road, Suite 156, Las Vegas, Nevada 89121
(Registered office)
Carretera de Rubí 22-26, 08190 Sant Cugat del Vallès, Barcelona, Spain
(European headquarters and address of principal executive offices)
34-93-590-7070
Registrant’s telephone number
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 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act):
Yes ¨ No x
State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date
| Class |
Outstanding at August 10, 2004 | |
| Common Stock, par value $.001 |
50,194,437 |
PART I.
Item 1. Financial Statements
PRIVATE MEDIA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
| December 31, |
June 30, (Unaudited) |
||||||||
| 2003 |
2004 |
2004 |
|||||||
| EUR | EUR | USD | |||||||
| (in thousands) | |||||||||
| ASSETS |
|||||||||
| Cash and cash equivalents |
856 | 700 | 854 | ||||||
| Trade accounts receivable |
9,768 | 10,950 | 13,354 | ||||||
| Related party receivable |
4,187 | 4,055 | 4,945 | ||||||
| Inventories—net (Note 3) |
10,733 | 12,213 | 14,894 | ||||||
| Deferred income tax asset |
1,608 | 1,607 | 1,959 | ||||||
| Prepaid expenses and other current assets |
2,110 | 2,466 | 3,008 | ||||||
| TOTAL CURRENT ASSETS |
29,262 | 31,991 | 39,014 | ||||||
| Library of photographs and videos—net |
16,807 | 15,362 | 18,734 | ||||||
| Property, plant and equipment—net |
15,792 | 17,171 | 20,941 | ||||||
| Other intangible assets |
3,590 | 3,528 | 4,302 | ||||||
| Goodwill |
2,425 | 2,425 | 2,957 | ||||||
| Other assets |
273 | 263 | 321 | ||||||
| TOTAL ASSETS |
68,149 | 70,741 | 86,269 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY |
|||||||||
| Short-term borrowings |
4,094 | 3,804 | 4,639 | ||||||
| Current portion of long-term borrowings |
1,614 | 1,968 | 2,400 | ||||||
| Accounts payable trade |
7,486 | 7,271 | 8,867 | ||||||
| Income taxes payable |
981 | 814 | 993 | ||||||
| Deferred income taxes |
2 | 2 | 3 | ||||||
| Accrued other liabilities |
1,791 | 1,882 | 2,295 | ||||||
| TOTAL CURRENT LIABILITIES |
15,969 | 15,742 | 19,198 | ||||||
| Long-term borrowings |
4,451 | 5,771 | 7,038 | ||||||
| Related party payable |
2,237 | 2,237 | 2,728 | ||||||
| Convertible notes |
1,336 | 1,224 | 1,492 | ||||||
| TOTAL LIABILITIES |
23,993 | 24,974 | 30,456 | ||||||
| SHAREHOLDERS’ EQUITY |
|||||||||
| Common Stock, $.001 par value, 100,000,000 shares authorized, 49,955,057 and 50,167,271 issued and outstanding at December 31, 2003 and June 30, 2004, respectively |
883 | 883 | 1,077 | ||||||
| Additional paid-in capital |
17,124 | 17,393 | 21,211 | ||||||
| Retained earnings |
27,976 | 29,919 | 36,486 | ||||||
| Accumulated other comprehensive income |
(1,826 | ) | (2,428 | ) | (2,961 | ) | |||
| TOTAL SHAREHOLDERS’ EQUITY |
44,157 | 45,767 | 55,814 | ||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY |
68,149 | 70,741 | 86,269 | ||||||
See accompanying notes to consolidated statements
-2-
PRIVATE MEDIA GROUP, Inc.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
| Three-months June 30, (unaudited) |
Six-months ended June 30, (unaudited) |
|||||||||||||
| 2003 |
2004 |
2003 |
2004 |
2004 |
||||||||||
| EUR | EUR | EUR | EUR | USD | ||||||||||
| (in thousands) | ||||||||||||||
| Net sales |
10,078 | 9,267 | 19,669 | 19,218 | 23,437 | |||||||||
| Cost of sales |
4,880 | 3,656 | 9,179 | 8,332 | 10,161 | |||||||||
| Gross profit |
5,198 | 5,611 | 10,490 | 10,886 | 13,276 | |||||||||
| Selling, general and administrative expenses |
4,907 | 4,452 | 9,966 | 8,984 | 10,956 | |||||||||
| Operating profit (loss) |
291 | 1,160 | 524 | 1,902 | 2,320 | |||||||||
| Interest expense |
204 | 191 | 406 | 365 | 445 | |||||||||
| Interest income |
37 | 43 | 80 | 92 | 112 | |||||||||
| Income before income tax |
124 | 1,011 | 198 | 1,629 | 1,986 | |||||||||
| Income taxes (benefit) |
58 | 147 | 93 | 314 | 383 | |||||||||
| Net income |
66 | 1,159 | 105 | 1,943 | 2,370 | |||||||||
| Other comprehensive income: |
||||||||||||||
| Foreign currency adjustments |
262 | 52 | 347 | (602 | ) | (734 | ) | |||||||
| Comprehensive income |
328 | 1,211 | 452 | 1,341 | 1,635 | |||||||||
| Income applicable to common shares |
(6 | ) | 1,159 | (43 | ) | 1,943 | 2,370 | |||||||
| Net income per share: |
||||||||||||||
| Basic |
0.00 | 0.02 | 0.00 | 0.04 | 0.05 | |||||||||
| Diluted |
0.00 | 0.02 | 0.00 | 0.04 | 0.05 | |||||||||
See accompanying notes to consolidated statements
-3-
PRIVATE MEDIA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Six-months ended June 30, (unaudited) |
|||||||||
| 2003 |
2004 |
2004 |
|||||||
| EUR | EUR | USD | |||||||
| (in thousands) | |||||||||
| Cash flows from operating activities: |
|||||||||
| Net income |
105 | 1,943 | 2,370 | ||||||
| Adjustment to reconcile net income to net cash flows from operating activities: |
|||||||||
| Depreciation |
515 | 1,086 | 1,324 | ||||||
| Bond Adjustment |
— | 123 | 150 | ||||||
| Bad debt provision |
150 | 712 | 868 | ||||||
| Amortization of other intangible assets |
25 | 62 | 76 | ||||||
| Amortization of photographs and videos |
3,474 | 3,247 | 3,960 | ||||||
| Effects of changes in operating assets and liabilities: |
|||||||||
| Trade accounts receivable |
(926 | ) | (1,894 | ) | (2,310 | ) | |||
| Related party receivable |
(260 | ) | 132 | 161 | |||||
| Inventories |
(1,889 | ) | (1,480 | ) | (1,805 | ) | |||
| Prepaid expenses and other current assets |
(993 | ) | (356 | ) | (434 | ) | |||
| Accounts payable trade |
3,043 | (215 | ) | (262 | ) | ||||
| Income taxes payable |
64 | (167 | ) | (204 | ) | ||||
| Accrued other liabilities |
155 | 91 | 111 | ||||||
| Net cash provided by operating activities |
3,462 | 3,284 | 4,005 | ||||||
| Cash flows from investing activities: |
|||||||||
| Investment in library of photographs and videos |
4,227 | 1,802 | 2,198 | ||||||
| Capital expenditures |
1,060 | 2,441 | 2,977 | ||||||
| Investments in (sale of) other assets |
(2 | ) | (10 | ) | (12 | ) | |||
| Net cash used in investing activities |
5,285 | 4,233 | 5,163 | ||||||
| Cash flow from financing activities: |
|||||||||
| Conversion of warrants |
— | 10 | 12 | ||||||
| Short-term borrowings—repayments |
(6,890 | ) | (389 | ) | (475 | ) | |||
| Long-term loan—repayments) |
— | (901 | ) | (1,099 | ) | ||||
| Related party note payable |
(1,649 | ) | 0 | 0 | |||||
| Long-term loan—additions |
9,464 | 2,577 | 3,143 | ||||||
| Short-term borrowings—additions |
— | 99 | 121 | ||||||
| Net cash (used in) provided by financing activities |
925 | 1,396 | 1,702 | ||||||
| Foreign currency translation adjustment |
347 | (602 | ) | (734 | ) | ||||
| Net (decrease) increase in cash and cash equivalents |
(551 | ) | (156 | ) | (190 | ) | |||
| Cash and cash equivalents at beginning of the period |
1,694 | 856 | 1,044 | ||||||
| Cash and cash equivalents at end of the period |
1,142 | 700 | 854 | ||||||
| Cash paid for interest |
219 | 210 | 256 | ||||||
| Cash paid for taxes |
320 | 17 | 21 | ||||||
| Conversion of bond principal into common stock |
— | ||||||||