10-Q 1 cpi10q2003-3q.txt CPI 9-30-2003 10Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [Mark one] [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended SEPTEMBER 30, 2003 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: 0-14675 CAMERA PLATFORMS INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 95-4024550 (State or other jurisdiction (IRS Employer Identification No.) of incorporation or organization) 10909 Vanowen Street, North Hollywood, California, 91605 (Address of principal executive offices) (Zip Code) (818) 623-1700 (Registrant's telephone number, including area code) Not Applicable (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 the number of shares outstanding of each of the issuer's classes of common stock, as of October 31, 2003. Common Stock $.0005 par value 23,740,964 (Class) (Number of shares) 2 CAMERA PLATFORMS INTERNATIONAL, INC. INDEX

3 CAMERA PLATFORMS INTERNATIONAL, INC. STATEMENT OF FINANCIAL POSITION

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 4 CAMERA PLATFORMS INTERNATIONAL, INC. STATEMENT OF OPERATIONS (Unaudited)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 5 CAMERA PLATFORMS INTERNATIONAL, INC. STATEMENT OF CASH FLOWS (Unaudited)

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS. 6 CAMERA PLATFORMS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 2003 are not necessarily indicative of the results that may be expected for the year ending December 31, 2003. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2002. The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations and the realization of assets, liabilities, and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if the Company is unable to continue as a going concern. The Company's losses, negative cash flows from operations and its working capital deficit raise substantial doubt about the Company's ability to continue as a going conern and the appropriateness of using the going concern basis, which is dependent upon, among other things, an additional cash infusion. Management believes that, in the near term, credit provided by DOOFF LLC. should provide the additional cash required for the Company's operations and meeting of its obligations. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Property and Equipment Property and equipment is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is generally determined using the straight-line method over the estimated useful life of the property and equipment, using periods ranging from three to ten years. 7 CAMERA PLATFORMS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash Equivalents The Company considers all highly liquid investments held at financial institutions with maturity dates of three months or less at the time of acquisition to be cash equivalents. Per Share Data The basic income (loss) per share is calculated based upon the weighted average number of common shares outstanding during each year. Diluted income (loss) per share is calculated based upon the weighted average of shares of common stock outstanding and shares that would have been outstanding assuming the issuance of common stock for all dilutive potential common stock outstanding. The Company's outstanding stock options have not been included in the calculation of the weighted average shares of common stock as they would have an antidilutive effect. Concentration of Credit Risk The Company's customers are principally engaged in the production of motion pictures or television programming, or are suppliers to such companies. Credit is extended based on an evaluation of the customer's financial condition. Receivables arising from the granting of credit under normal trade terms are generally due within 30 to 90 days and are generally not collateralized. From time to time, the Company grants extended terms, which are generally collateralized by a security interest in the products sold. Collections of accounts receivable have consistently been within management's expectations. One customer accounted for approximately 54% of total accounts receivable at September 30, 2003. Advertising Costs The Company expenses advertising costs over the period it benefits, generally twelve months. Advertising costs expensed totaled $4,000 and $7,000 for the nine months ended September 30, 2003 and 2002, respectively, and were recorded as part of selling, general and administrative expenses. Equipment Leases The Company's leasing operations consist primarily of short-term rentals of camera cars, camera dollies and cranes. These rentals generally range from one day to several weeks in duration, with occasional rentals of several months. None of the rentals are noncancelable leases, and no contingent rentals are included in the Company's statements of operations. Stock-Based Compensation The Company has adopted the disclosure-only provisisions of SFAS 123, "Accounting for Stock-Based Compensation":, but applied APB No. 25 and related intepretations in accounting for options granted under its plan. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements. 8 CAMERA PLATFORMS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) The Company's management estimates the valuation for doubtful accounts, rental asset valuation allowance, and the useful lives of property and equipment. Actual results could differ from those estimates and such differences could be material to the financial statements. New Accounting Standards In 2001, the Company adopted SFAS No. 140, "Accounting for Transfer and Services of Financial Assets and Extinguishment of Liabilities", and FASB No. 141, "Business Combinations" with no material impact on the financial statements. In 2002, the Company adopted FASB No. 142,"Goodwill and other Intangible Assets", and FASB No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". These pronouncements had no material effect on the Company's financial statements. In 2003, the Company adopted FASB No. 143 "Accounting for Asset Retirement Obligations". This pronouncement has had no material effect on the Company's financial statements. The Company operates in a single business segment. The Company leases and rents equipment for the motion picture, television and theatrical production and music industries. Segment Reporting The Company operates in a single business segment. The Company leases and rents equipment for the motion picture, television and theatrical production and music industries. NOTE 3 - PROPERTY AND EQUIPMENT

The valuations allowance has been reduced by $284,000 for the nine months ended September 30, 2003, which was recorded against and reduced depreciation expense. During the nine months ended September 30, 2003, equipment with a cost of $309,000 and accumulated depreciation of $303,000 was damaged beyond repair while on customer rental. The Company received $171,000 of insurance proceeds from the customer's insurance carrier with respect to this equipment, realizing a gain of $165,000. 9 CAMERA PLATFORMS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 4 - LONG TERM DEBT AND RELATED PARTY TRANSACTIONS Long term debt consists of (1) a $1,500,000 term loan, interest only payable monthly at 10% maturing June 2010, secured by all the assets of the Company and (2) a $250,000 revolving line of credit, interest only payable monthly at 10%, maturing June 2005 and also secured by all the assets of the Company. The balance outstanding on this line of credit was $94,000 and $225,000 at September 30, 2003 and December 31, 2002, respectively. These loans are with DOOFF, LLC. Two directors and principal shareholders of the Company are also principals of DOOFF, LLC. As of September 31, 2003, the Company was $280,000 in arrears in its interest payment to DOOFF, LLC. due under the terms of these loans. NOTE 5 - INCOME TAXES The Company utilizes the liability method under SFAS No. 109 to account for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws expected to apply when the differences are expected to reverse. At December 31, 2002, the Company has net operating loss-carry forwards of approximately $25 million for federal tax purposes, which expire from 2006 to 2022. Because of statutory "ownership changes" the amount of net operating losses which may be utilized in future years are subject to significant annual limitations. The Company also has operating loss carryforwards of approximately $3 million for California tax purposes, which expire from 2003 to 2012. 10 CAMERA PLATFORMS INTERNATIONAL, INC. NOTES TO FINANCIAL STATEMENTS NOTE 5 - INCOME TAXES (Continued) At September 30, 2003, total deferred tax assets, consisting principally of net operating loss carryforwards, amounted to approximately $8 million. For financial reporting purposes, a valuation allowance has been recognized in an amount equal to such deferred tax assets due to the uncertainly surrounding their ultimate realization. The effective tax rate differs from the U.S. Federal statutory rate principally due to the valuation allowance recognized due to the uncertainty surrounding the ultimate realization of deferred tax assets. NOTE 6 - COMMITMENTS AND CONTINGENCIES Lease On July 1, 2002, The Company entered into a lease for its premises that expires June 30, 2007. The lease of $12,333 per month is subject to an increase annually based on a cost of living index, and the Company is also responsible for common area maintenance charges, utilities, property taxes, and insurance. NOTE 7 - SALES TO MAJOR CUSTOMERS AND GEOGRAPHIC AREAS No revenue derived from a single customer accounted for more than ten percent of total revenue during the first three quarters of 2003 or 2002. No geographic area outside the United States accounted for more than ten percent of total sales during the last three years. Note 8 - FAIR VALUE OF FINANCIAL INSTRUMENTS Management has determined that the estimated fair value of the Company's financial instruments approximates the carrying amount of such financial instruments in all material respects as of September 30, 2003 and December 31, 2002. 11 CAMERA PLATFORMS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This Quarterly Report on Form 10-Q includes certain forward-looking statements based upon management's beliefs, as well as assumptions made by and data currently available to management. This information has been, or in the future, may be included in reliance on the "safe harbor" provision of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties including, but not limited to, the following: adverse developments with respect to the Company's liquidity or results of operations; the ability of the Company to obtain products and services and negotiate terms with vendors and service providers for current orders; the ability to fund and execute an operating plan for the Company; the ability of the Company to attract and retain employees; competitive pressures from other camera car companies and grip equipment rental companies which may affect the nature and viability of the Company's business strategy; the ability of the Company to attract and retain customers; and the absence of an active public trading market for the Company's common stock. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements to reflect subsequent events or circumstances. OVERVIEW The Notes to Financial Statements are an integral part of Management's Discussion and Analysis of Financial Condition and Results of Operations and should be read in conjunction herewith. LIQUIDITY AND CAPITAL RESOURCES The Company has secured a $250,000 revolving line of credit from its secured lender DOOFF, LLC. The Company had $156,000 and $25,000 of undrawn funds available at September 30, 2003 and December 31, 2002, respectively. The Company has failed to make interest payments totalling $280,000 to DOOFF, LLC. There is no assurance that ongoing operations together with funds available under this credit line will provide sufficient cash to meet the Company's ongoing obligations as they become due. If sufficient funds are not available, the Company may be required to curtail or cease operations and seek protection under the federal Bankrupcty Code. RESULTS OF OPERATIONS The following analysis compares the three months ended September 30, 2003, with the three months ended September 30, 2002, and the nine months ended September 30, 2003 with the nine months ended September 30, 2002. Third quarter 2003 results compared with third quarter 2002 The Company's revenue for the third quarter decreased by 39% compared with the same period of 2002. Camera car rentals decreased by 50%. Camera car rentals are the largest component of the Company's revenues, and the large decrease in rental revenues for the third quarter sharply affected profitability. In addition, dolly and crane rentals decreased by 60% when compared to the same quarter of last year. Akela revenues increased by $24,000, or 160%. 12 CAMERA PLATFORMS INTERNATIONAL, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) The decreases in revenues during the quarter were a result of fewer feature films and advertising spots being shot in the Los Angeles area. The negative gross margin on rentals decreased from ($51,000) to ($3,000). The change in negative gross margin was a result of reduced revenues offset by the greater effects of the reversal of previously recorded valuation allowances on rental assets (a non-cash item) which reduced rental expenses recorded for the quarter. Selling expenses increased by $2,000, and general and administrative expenses increased by 17% or $9,000. The increase in general and administrative expenses was attributable primarily to increases in insurance and legal expenses. The net loss for the quarter was $106,000 compared with a loss of $148,000 for the same period of 2002. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $42,000 for the quarter ended September 30, 2002 compared to ($65,000) in the current quarter. Nine months ended September 30, 2003 results compared with nine months nine months ended September 30, 2002 The Company's year-to-date revenues through the third quarter decreased by 6% compared with the same period of 2002. As a percentage, the largest decrease was associated with dolly and crane rentals, which decreased $34,000 or 26%. The largest dollar decrease was in camera car rentals, which decreased $38,000 or 10%. Akela rentals have increased by $36,000, or 81%, from the previous year. Gross margins decreased by 23% on camera car rentals. The negative gross margins for dolly and cranes and Akela rentals decreased by 93% for dolly and crane rentals and 87% for Akela rentals. The changes in gross margin were a result of lower revenues offset by the greater effects of the reversal of previously recorded valuation allowances on rental assets (a non-cash item) which reduced rental expenses recorded for the period. Selling expenses decreased 48%, and general and administrative expenses increased approximately 5% in 2003. The reduction in selling expenses is due primarily to a reduction in printing expenses. The increase in general and administrative expenses reflects increased insurance expenses. The year-to-date net loss was $38,000 compared with $577,000 for the same period of 2002. Earnings (loss) before interest, taxes, depreciation and amortization (EBITDA) were $86,000 for the nine months ended September 30, 2003 compared to ($12,000) in the same period of 2002. A gain on asset disposal of $165,000 during the nine months ended September 30, 2003 comprises the largest component of the change in EBITDA. Inflation Inflation has not had a material impact on the Company's operations to date, and the Company believes it will not have a material effect on operations in the next twelve months. 13 CAMERA PLATFORMS INTERNATIONAL, INC. Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company owns no financial instruments or other assets, nor has it entered into any contracts or commitments, which would expose it to market risks such as interest rate risk, foreign currency exchange rate risk or commodity price risk as required to be disclosed pursuant to Regulation S-K, Item 305, of the 1934 Securities Exchange Act, as amended. Item 4. Controls and Procedures (a) Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, to allow timely decisions regarding required disclosures. Within the 90 days prior to this report, the Company carried out an evaluation under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures. Based upon and as of the date of that evaluation, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures are effective to ensure that the information required to be disclosed in the reports the Company files and submits under the Exchange Act is recorded, processed, summarized, and reported as and when required. 14 CAMERA PLATFORMS INTERNATIONAL, INC. (b) Changes in Internal Controls There were no changes in the Company's internal controls or in other factors that could have significantly affected those controls subsequent to the date of the Company's most recent evaluation. PART II - OTHER INFORMATION Item 1. Litigation. The Company is not party to any litigation. Item 3. Defaults on Senior Securities As of September 30, 2003, the Company was $280,000 in arrears in its interest payments to DOOFF LLC under the terms of the loans from DOOFF LLC (see Note 4 to Financial Statements). Item 6 (b) Exhibits and Reports on Form 8-K. The Company filed no reports on Form 8-K during the quarter ended September 30, 2003. 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. CAMERA PLATFORMS INTERNATIONAL, INC. /s/ Martin Perellis Date: October 31, 2003 Martin Perellis President and Chief Executive Officer /s/ Herbert Wolas Date: October 31, 2003 Herbert Wolas Chairman of the Board and Chief Financial Officer Exhibit 31.1 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 31.2 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Exhibit 32 Certifications Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

CAMERA PLATFORMS INTERNATIONAL INC 10-Q