Finally, earnings are released:
DURKIN HAYES PUBLISHING LTD. - REPORT TO SHAREHOLDERS</p>
BURLINGTON, ONTARIO--
Report to Shareholders
Revenues for 1997 were $5,564,698, an increase of 27% over 1996 revenues of
$4,373,851. For the year we are reporting a loss of $919,386 as compared to
a 1996 loss of $2,994,286.
Results for 1997 reflect three significant factors: an operating loss during
the startup phase of the Animazing Entertainment venture of $150,000; a
restructuring provision of $270,000 relating to the closure of the Florida
and Toronto offices and the Burlington warehouse; and a provision of $250,000
for potential tax liability relating to an I.R.S. audit of the period 1992 to
1994.
During the last half of 1997 we undertook a critical reassessment of the
company, it's product offerings and it's perception in the marketplace. As a
result of this analysis we have implemented many changes. First we
repackaged our Paperback audio product in order to penetrate the US bookstore
marketplace. Second we raised the profile of our product offerings through a
publishing arrangement with Harlequin Enterprises Ltd. Under this arrangement
we will publish audio versions of such high profile authors as Debbie
Macomber whose current release, Montana,is number 8 on the U.S.A. Today
bestseller list. Third we recognized the necessity to expand beyond our base
of fiction publishing. We have entered a publishing agreement with Bloomberg
Press to market, in audio, their highly acclaimed "Bloomberg Personal
Bookshelf" series. This series covers a range of financial topics and has
been featured in Newsweek. Fourth we have contracted for several self
improvement releases from Golden Books featuring authors such as Dr. Gilda
Carle who can be seen on MTV. Finally we have developed a branding strategy
for all of our products. All of our new releases will be branded DH Audio in
prominent places. In addition we have negotiated the use of Harlequin brands
and the Bloomberg brand on our packaging. The first significant impact of
these changes will be seen in the second quarter.
Our investment in Animazing continues to make progress. Currently the show is
aired for 30 minutes daily on The Learning Channel at 8:30 a.m. Starting in
the fall it will be aired for 60 minutes daily, form 11:00 a.m. to noon.
During 1997 we launched successful video and plush toy merchandising programs
with Bass Pro Shops and on QVC, a television shopping channel. In the first
quarter we expanded our product offering to include activity books, read
along books and a music c.d.. Initial orders have been received from Borders
Books and the Opryland Hotel. The product will also be featured in the J.C.
Penny Christmas 1998 catalog.
We have totally refocused the company, from operational efficiencies to
marketplace initiatives. Our new alliances with Harlequin, Bloomberg and
Golden Books will favourably impact our results.
Durkin Hayes is a company with renewed energy and desire to grow and succeed.
The initiatives of 1997 bode well for the future performance of Durkin Hayes.
(signed)
D.L. Matheson
President
3385 Harvester Road, Suite 215, Burlington, On.
Tel 905 639-6552
DURKIN HAYES PUBLISHING LTD.
CONSOLIDATED BALANCE SHEETS AS AT DECEMBER 31, 1997 AND 1996
1997 1996
ASSETS
CURRENT ASSETS
Cash and term deposits $ 985,688 $2,590,545
Accounts receivable 2,843,763 2,808,804
Inventory 2,185,130 1,294,792
Royalty advances 997,630 634,332
Prepaid expenses and deposits 130,325 209,197
---------------------------------------------------------------------------
7,142,536 7,537,670
PRODUCTION COSTS AND MASTERS 806,916 864,247
CAPITAL ASSETS 276,449 179,075
FILM COSTS 2,450,716 -
FUTURE INCOME TAX DEBITS 202,000 202,000
----------------------------------------------------------------------------
$10,878,617 $8,782,992
---------------------------------------------------------------------------
LIABILITIES
CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 1,478,026 $ 746,009
Income taxes payable 248,907 -
---------------------------------------------------------------------------
1,726,933 746,009
---------------------------------------------------------------------------
LONG TERM LIABILITY 415,900 458,000
---------------------------------------------------------------------------
MINORITY INTEREST 207,562 -
---------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
CAPITAL STOCK (Note 8) 8,989,663 7,374,124
CONTRIBUTED SURPLUS 19,000 19,000
RETAINED EARNINGS (DEFICIT) (821,643) 97,743
FOREIGN CURRENCY TRANSLATION ACCOUNT 341,202 88,116
---------------------------------------------------------------------------
8,528,222 7,578,983
---------------------------------------------------------------------------
$10,878,617 $8,782,992
---------------------------------------------------------------------------
DURKIN HAYES PUBLISHING LTD.
CONSOLIDATED STATEMENTS RETAINED EARNINGS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
RETAINED EARNINGS -as previously stated $ 97,743 $ 3,348,029
Prior period adjustment - (256,000)
---------------------------------------------------------------------------
RETAINED EARNINGS - as adjusted 97,743 3,092,029
Net loss for the year (919,386) (2,994,286)
---------------------------------------------------------------------------
RETAINED EARNINGS (DEFICIT)- END OF YEAR $ (821,643) $97,743
DURKIN HAYES PUBLISHING LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997 AND 1996
1997 1996
REVENUE
Sales $ 5,196,197 $ 4,026,258
Royalty and other income 368,501 347,593
---------------------------------------------------------------------------
5,564,698 4,373,851
Cost of sales 1,659,022 1,938,991
---------------------------------------------------------------------------
GROSS MARGIN 3,905,676 2,434,860
---------------------------------------------------------------------------
OPERATING EXPENSES
Administration 2,220,246 1,854,072
Marketing 1,281,180 1,538,734
Development 741,783 479,811
Interest expense 22,914 3,353
Depreciation and amortization 431,484 411,700
Write-down of goodwill - 1,252,527
---------------------------------------------------------------------------
4,697,607 5,540,197
---------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (791,931) (3,105,337)
INCOME TAX (EXPENSE) RECOVERY (277,873) 111,051
---------------------------------------------------------------------------
(1,069,804) (2,994,286)
MINORITY INTEREST 150,418 -
---------------------------------------------------------------------------
NET LOSS FOR THE YEAR $ (919,386) $(2,994,286)
---------------------------------------------------------------------------
NET LOSS PER SHARE
. based on the weighed average number of shares
outstanding during the year $ (0.04) $ (0.15)
---------------------------------------------------------------------------
DURKIN HAYES PUBLISHING LTD.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1997 AND 1996
1997 1996
OPERATING ACTIVITIES
Net loss for the year $(919,386) $(2,994,286)
Items not requiring cash -
Depreciation and amortization 431,484 411,700
Imputed interest 22,900 -
Minority interest 150,418 -
Write-down of goodwill - 1,252,527
---------------------------------------------------------------------------
(314,584) (1,330,059)
Change in non-cash operating working
capital balances (1,468,401) 809,521
---------------------------------------------------------------------------
(1,782,985) (520,538)
---------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of capital stock 1,615,539 -
Payment of long-term liability (65,000) 61,970
---------------------------------------------------------------------------
1,550,539 61,970
---------------------------------------------------------------------------
INVESTING ACTIVITIES
Production costs and masters (363,805) (345,529)
Acquisition of capital assets (172,585) (31,055)
Film costs (836,021) -
Other - 25,601
-----------------------------------------------------------------------------
(1,372,411) (350,983)
---------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH (1,604,857) (809,551)
CASH - BEGINNING OF YEAR 2,590,545 3,400,096
---------------------------------------------------------------------------
CASH - END OF YEAR $ 985,688 $ 2,590,545
---------------------------------------------------------------------------
<br>
Have a very nice day
Pierre |
