<PAGE> 1
United States
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 MAY 7, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________.
COMMISSION FILE NO. 0-14023
WEST COAST ENTERTAINMENT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-3897052
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
9998 GLOBAL ROAD 2ND FLOOR, PHILADELPHIA, PENNSYLVANIA 19115
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (215) 856-2560
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 by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13, or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes --- No ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date.
The number of shares of Common Stock outstanding as of June 30, 2000
was 14,210,025.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WEST COAST ENTERTAINMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
MAY 7, FEBRUARY 6,
2000 2000
------ ------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 236 $ 888
Accounts receivable and other receivables, net 387 377
Market development funds and co-op receivable 722 678
Merchandise inventory 3,513 6,887
Prepaid expenses and other current assets 368 281
-------- --------
Total current assets 5,226 9,111
Rental library, (net of accumulated amortization) 21,016 21,132
Property and equipment, net 15,946 16,506
Intangible assets (net of accumulated amortization of $91,087 and $90,148 at
May 7, 2000 and February 6, 2000, respectively) 51,593 52,532
Other assets 1,023 1,100
-------- --------
Total assets $ 94,804 $100,381
======== ========
</TABLE>
<TABLE>
<CAPTION>
MAY 7, FEBRUARY 6,
2000 2000
------ ------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' DEFICIT
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $ 81,795 $ 81,571
Accounts payable 9,728 12,370
Accrued expenses 12,734 11,808
Income taxes payable 192 192
--------- ---------
Total current liabilities 104,449 105,941
Other Liabilities 63 42
--------- ---------
Total Liabilities 104,512 105,983
--------- ---------
Stockholders' deficit:
Common stock, $.01 par value per share, 14,210 shares as of May 7, 2000 of
which 14,118 shares were issued and outstanding and 14,190 shares as of 142 142
February 6, 2000 of which 14,098 shares were issued and outstanding
Preferred stock ($0.01 par value, 2,000 shares authorized, no shares -- --
issued)
Additional paid-in capital 104,102 104,098
Accumulated deficit (113,710) (109,600)
Treasury Stock (92 shares of common stock, at cost) (242) (242)
--------- ---------
Total stockholders' deficit (9,708) (5,602)
--------- ---------
Total liabilities and stockholders' deficit $ 94,804 $ 100,381
========= =========
</TABLE>
See accompanying notes to consolidated financial statements
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WEST COAST ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED
MAY 7, MAY 2,
2000 1999
Revenues:
<S> <C> <C>
Rental revenue $ 21,685 $ 23,406
Merchandise sales 2,299 3,559
Franchise fees 49 308
-------- --------
Total revenue 24,033 27,273
-------- --------
Operating costs and expenses:
Store operating expenses 11,612 12,676
Cost of goods sold 2,289 2,484
Amortization of rental library 5,090 6,494
Revenue sharing expense 1,820 1,266
Selling, general and administrative expenses 4,310 3,758
Amortization of intangible assets 940 1,641
-------- --------
Total operating costs and expenses 26,061 28,319
-------- --------
Loss from operations (2,028) (1,046)
Other (income) expense:
Interest expense, net 2,096 2,012
Other (14) (11)
-------- --------
Loss before taxes (4,110) (3,047)
Provision for income taxes -- 40
-------- --------
Net loss $ (4,110) $ (3,087)
======== ========
Loss per common share data:
Net loss per common share - basic and diluted $ (0.29) $ (0.22)
======== ========
Weighted average number of common shares outstanding 14,117 14,085
======== ========
</TABLE>
See accompanying notes to consolidated financial statements
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WEST COAST ENTERTAINMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------
MAY 7, MAY 2,
2000 1999
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(4,110) $(3,087)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Amortization of debt financing costs -- 326
Amortization of videocassette rental library 5,090 6,493
Depreciation and amortization of property and
equipment 953 901
Amortization of intangible assets 940 1642
Changes in assets and liabilities, net of effects of
acquisitions:
Decrease (increase) in accounts receivable (10) 133
Decrease (increase) in merchandise inventories 3374 (537)
(Increase) decrease in other assets (55) 448
Decrease in accounts payable (2,640) (2,272)
Increase (decrease) in accrued expenses 926 (129)
Increase in other liabilities 21 59
------- -------
Net cash provided by operating activities 4,489 3,977
------- -------
Cash flows related to investing activities:
Purchases of rental library, net (4,973) (6,104)
Purchases of fixed assets (392) (706)
------- -------
Net cash used in investing activities (5,365) (6,810)
------- -------
Cash flows related to financing activities:
Repayments of long-term debt -- (38)
Proceeds from borrowings under credit facility 224 2,341
------- -------
Net cash provided by financing activities 224 2,303
------- -------
Net decrease in cash (652) (530)
Cash, beginning of year 888 2,424
------- -------
Cash, end of period $ 236 $ 1,894
======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTERS ENDED
--------------
MAY 7, MAY 2,
2000 1999
------------ ------------
<S> <C> <C>
Supplementary disclosures of cash flow information:
Interest paid $ -- $ 1,668
Income taxes paid $ -- $ 4
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
WEST COAST ENTERTAINMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements include the accounts of West
Coast Entertainment Corporation ("the Company") and all of its wholly owned
subsidiaries. These subsidiaries include Giant Video, Inc., G.V. Management
Corporation, Nostalgia Ventures, Inc. and Videosmith, Inc. All material
intercompany transactions have been eliminated. The financial statements include
the operations of companies acquired from the dates of acquisition.
The consolidated balance sheet as of May 7, 2000, the consolidated statement of
operations for the quarter ended May 7, 2000, and the consolidated statement of
cash flows for the quarter ended May 7, 2000 are unaudited and have been
prepared in accordance with generally accepted accounting principles for interim
financial statements and pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and regulations,
although the Company believes that the disclosures are adequate to make the
information presented not misleading. It is recommended that these financial
statements be read in conjunction with the consolidated financial statements and
notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended February 6, 2000.
The accompanying interim consolidated financial statements reflect all
adjustments that are, in the opinion of management, necessary to present fairly
the financial position as of May 7, 2000, the results of operations for the
quarters ended May 7, 2000 and May 2, 1999, and cash flows for the quarters
ended May 7, 2000 and May 2, 1999. All such adjustments are of a normal and
recurring nature. The results of operations for the interim periods presented
are not necessarily indicative of the results to be expected for the full year.
Certain reclassifications have been made to the prior year financial statements
to conform with the current year presentation.
2. GOING CONCERN UNCERTAINTY
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the ordinary course
of business. The carrying amounts of assets and liabilities presented in the
financial statements do not purport to represent realizable or settlement
values. However, the Company has suffered recurring operating losses and has a
working capital deficit and stockholders' deficit at May 7, 2000. The Company is
also in default under its credit facility. These factors raise substantial doubt
about the Company's ability to continue as a going concern. The Consolidated
Financial Statements do not include any adjustments that might result from the
outcome of this uncertainty. The Report of our Independent Certified Public
Accountants included in our Annual Report on Form-10K for the year ended
February 6, 2000 contains an explanatory paragraph regarding the uncertainty of
the Company's ability to continue as a going concern.
3. EARNING PER SHARE
Basic EPS excludes dilution and is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted from issuance of common stock that then share in
earnings. All outstanding common stock options, warrants, and preferred stock
were not included in the computations of diluted earnings per share because the
effect of exercise and/or conversion would have an antidilutive effect on
earnings per share.
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4. RECENT DEVELOPMENTS
On March 3, 2000, the Company and Video City, Inc. ("Video City") entered into a
Management Agreement, pursuant to which Video City will manage and operate West
Coast's business until the closing of the proposed merger between Video City and
West Coast. The Management Agreement provides that West Coast shall pay
management fees for Video City's management services in an amount equal to
certain percentages of gross revenues actually collected from the West Coast
business less all selling, general and administrative costs and expenses of West
Coast incurred and paid in the ordinary course of business (in no event shall
the management fee paid by West Coast to Video City be less than $400,000 per
calendar month). West Coast may terminate the Management Agreement on or after
August 31, 2000. Concurrent with the execution of the Management Agreement, the
directors and executive officers of West Coast resigned and Video City moved its
principle executive offices from Torrance, California to Philadelphia,
Pennsylvania.
In conjunction with the merger, Video City entered into consulting, non-compete
and international service agreements with former members of West Coast's
Management that provide for total payments of $5,900,000. The payments are to be
made over approximately seven years in amounts not to exceed $800,000 per year,
subject to acceleration if West Coast bank debt is repaid.
On February 13, 2000 the Company signed a forbearance and fifth amendment to its
credit agreement whereby the banks extended the effective date of maturity to
the earlier of the completion of the Pending Merger or August 31, 2000.
A majority of the Company's existing lenders ("The Bank Group") have agreed in
concept to a complete restructuring of debt that will include repayment of $20
million in cash, issuance of $25 million in senior notes and issuance of $40
million worth of shares of Video City preferred stock. The restructuring is
contingent upon the Company providing The Bank Group with the cash portion
before the end of the forbearance agreement (August 31, 2000), and the
completion of the Pending Merger with Video City.
Under the Pending Merger and Management Agreement with Video City, Video City is
currently negotiating the sale of a significant number of the Company's stores
and is entertaining several offers. The stores for sale were strategically
selected, to concentrate the Company's operation in efficient geographic areas.
The proceeds from the divestitures will be used to pay the cash portion
necessary to complete the restructuring of its indebtedness and complete the
merger.
The Company believes that the combined company after the merger will have the
potential for greater financial strength, operational efficiencies, earning
power and growth potential than either Video City or West Coast would have on
its own. There can be no assurance, however, that these objectives can be
successfully completed or that the resultant company will be profitable and have
sufficient operating cash flows.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this Quarterly Report on Form 10-Q, particularly under
this Item 2, may constitute "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements, expressed or implied by such forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed herein and in the Company's Annual Report on Form 10-K for
the fiscal year ended February 6, 2000.
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RESULTS OF OPERATIONS
For the quarter ended May 7, 2000 compared to the quarter ended May 2, 1999.
REVENUES
Revenues decreased $3.3 million, or 11.9%, from $27.3 million for the quarter
ended May 2, 1999 to $24.0 million for the quarter ended May 7, 2000. This
change reflected a decrease of $1.7 million in rental revenues, a decrease of
$1.3 million in merchandise sales and a decrease of $0.3 million in franchise
fee revenue. The decreases in store rental and merchandise sales revenues of
$3.0 million are attributable to a lower weighted average number of stores owned
(after closing underperforming stores primarily during the second and third
quarters of last year) which decreased by 21 stores from 256 stores owned during
the quarter ended May 2, 1999 to 235 stores owned during the quarter ended May
7, 2000 and accounted for $2.3 million of the total decrease. In addition, a
decrease in average per store revenues, arising from the factors described
below, accounted for the remaining decrease of $0.7 million in store revenues.
RENTAL REVENUES
Rental revenues decreased $1.7 million, or 7.4%, from $23.4 million for the
quarter ended May 2, 1999 to $21.7 million for the quarter ended May 7, 2000.
This decrease is primarily attributable to the closing of underperforming stores
during the second and third quarters of last year and the resulting decrease in
weighted average number of stores owned as discussed above. This decrease in
stores owned accounted for a $1.9 million decrease, which was partially offset
by $0.2 million increase in average per store revenues, due to the fact that the
stores disposed of were relatively low volume stores.
MERCHANDISE AND OTHER SALES
Merchandise and other sales decreased by $1.3 million, or 35.4%, from $3.6
million for the quarter ended May 2, 1999 to $2.3 million for the quarter ended
May 7, 2000. This decrease is attributable to the closing of underperforming
stores as described above, which caused merchandise and other sales to decrease
by $0.3 million. The remaining $1.0 million decrease is due to lower merchandise
and other sales as a result of lower store inventory levels which were
necessitated by working capital restrictions and sell through competition from
mass merchants.
FRANCHISE FEE REVENUE
Franchise fee revenues decreased $.25 million, or 84.1 %, from $0.3 million for
the quarter ended May 2, 1999 to $.05 million for the quarter ended May 7, 2000.
This is primarily due to a decline in the amount of royalty payments received
from franchisees due to a decline in the number of franchisees who make required
payments and a decrease in the number of franchise stores from approximately 150
at May 2, 1999 to 74 at May 7, 2000.
STORE OPERATING EXPENSES
Store operating expenses decreased $1.1 million or 8.4% from $12.7 million for
the quarter ended May 2, 1999 to $11.6 million for the quarter ended May 7,
2000. The reduction in store expenses is primarily attributable to a reduction
in the number of weighted average stores as mentioned above and a reduction in
advertising and marketing for the quarter ended May 7, 2000. As a percentage of
total revenue, store operating expenses increased 1.8% from 46.5% for the period
ended May 2, 1999 to 48.3% for the period ended May 7, 2000, which was primarily
attributable to the unfeasibility of cutting store operating expenses to keep
pace with the decrease in total revenues.
COST OF GOODS SOLD
Cost of goods sold decreased $ 0.2 million, or 7.9%, from $2.5 million for the
quarter ended May 2, 1999 to $2.3 million for the quarter ended May 7, 2000.
This decrease was caused by lower merchandise sales and a reduction in the
number of weighted average stores. The decrease was offset by approximately
$0.6 million of fees associated with inventory returns. As a percentage of
merchandise sales, cost of goods increased 30% from 70% for the quarter ended
May 2, 1999 to 100% for the quarter ended May 7, 2000, due to the $0.6 million
of fees associated with inventory returns. The Company currently does not
anticipate any material return fees associated with returned inventory to be
incurred in future quarters.
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AMORTIZATION OF RENTAL LIBRARY
Amortization of rental library decreased $1.4 million, or 21.6% from $6.5
million for the quarter ended May 2, 1999 to $5.1 million for the quarter ended
May 7, 2000. The reduction in amortization is mainly attributable to the Company
purchasing less videocassette inventory due to entering into revenue sharing
agreements with studios and the closing of underperforming stores as mentioned
above, partially offset by the change in amortization methods to more closely
match expenses in proportion with anticipated revenues under revenue sharing
agreements.
REVENUE SHARING EXPENSE
Revenue sharing expense increased $0.5 million, or 43.8% from $1.3 million for
the quarter ended May 2, 1999 to $1.8 million for the quarter ended May 7, 2000.
The increase was due primarily to an increase in revenue sharing activity during
the quarter ended May 7, 2000 as compared to the quarter ended May 2, 1999.
Revenue sharing expense as a percentage of total revenue was 4.6% for the
quarter ended May 2, 1999 compared to 7.6% for the period ended May 7, 2000. The
increase was primarily due to the Company purchasing more product this period
under studio revenue sharing agreements.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased $0.5 million, or 14.7%
from $3.8 million for the quarter ended May 2, 1999 to $4.3 million for the
quarter ended May 7, 2000. The increase in selling, general and administrative
expenses was primarily attributable to the payment of management fees to Video
City, Inc. and an increase in consulting expense, partially offset by a
reduction in salaries, payroll taxes, equipment leases and rent. Selling,
general and administrative expenses as a percentage of total revenues was 13.8%
for the quarter ended May 2, 1999 compared to 17.9% for the quarter ended May 7,
2000. The percentage increase was due to reasons stated above and the reduction
in total revenue as previously discussed.
INTEREST EXPENSE
Interest expense increased $ 0.1 million or 4.2%, from $2.0 million for the
quarter ended May 2, 1999 to $2.1 million for the quarter ended May 7, 2000. As
a percentage of total revenues, interest expense increased 1.3 percentage points
from 7.4% for the quarter ended May 2, 1999 to 8.7% for the quarter ended
February 6, 2000; this was primarily due to a reduction in total revenue as
previously discussed.
INCOME TAXES
Statement of Financial Accounting Standards No. 109 requires a valuation
allowance to be recorded when it is more likely than not that some or all of the
deferred tax assets of a Company will not be realized. Due in large part to the
Company's short term divestiture strategy, the losses incurred during fiscal
2000 and the first quarter of fiscal 2001, management cannot determine that it
is more likely than not that future taxable income will be sufficient to realize
the deferred tax asset. According, a full valuation allowance has been
established against the deferred tax asset at May 7, 2000.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds its short-term working capital needs, including the purchase
of videocassettes and other inventory, primarily through cash from operations.
The Company expects that cash from operations and extended vendor terms will be
sufficient to fund future videocassette and other inventory purchases and other
working capital needs for its existing stores. There can be no assurance,
however, that cash from operations and extended vendor terms will be sufficient
to fund future videocassette and inventory purchases.
Videocassette rental inventories are accounted for as noncurrent assets under
generally accepted accounting principles because they are not assets which are
reasonably expected to be completely realized in cash or sold in the normal
business cycle. Although the rental of this inventory generates a substantial
portion of the Company's revenue, the classification of these assets as
noncurrent excludes them from the computation of working capital. The
acquisition cost of videocassette rental inventories, however, is reported as a
current liability until paid and, accordingly, included in the computation of
working capital. Consequently, the Company believes working capital is not as
significant a measure of financial condition for companies in the video retail
industry as it is for companies in other industries. Because of the accounting
treatment of videocassette rental inventory as a noncurrent asset, the Company
anticipates that it will operate with a working capital deficit during the
fiscal year ending February 4, 2001.
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The Company has suffered recurring operating losses and has a working capital
deficit and a stockholders' deficit at May 7, 2000. The Company is also in
default under its credit facility. These factors raise substantial doubt about
the Company's ability to continue as a going concern. The report of our
Independent Certified Public Accountants included in our Annual Report on
Form-10K for the year ended February 6, 2000, contains an explanatory paragraph
regarding the uncertainty of the Company's ability to continue as a going
concern.
While the Company is continuing to monitor and reduce its operating expenses,
including payroll, it has also entered into an agreement and plan of merger with
Video City. Under the Merger Agreement with Video City, Video City is currently
negotiating to divest a number of West Coast's video stores, with the
anticipated proceeds being used to pay the cash portion necessary to complete
the restructuring of West Coast's indebtedness and the merger. The Company
believes that the successful implementation of these plans will permit the
merger to proceed and will result in a stronger combined company. There can be
no assurance that these objectives can be successfully completed or that the
resultant company will be profitable.
During the current fiscal year, the Company has financed its operations and
capital expenditures primarily through available operating cash flow. The
increase in net cash provided by operating activities of $512,000 for the
quarter ended May 7, 2000 compared to the quarter ended May 2, 1999 was
primarily due to a decrease in merchandise inventory and an increase in accrued
expenses, partially offset by a decrease in accounts payable. Net cash used in
investing activities decreased by $1,445,000 for the quarter ended May 7, 2000
compared to the quarter ended May 2, 1999 primarily due to a decrease in the
purchases of videocassette rental inventory and fixed assets. Net cash provided
by financing activities decreased $2,079,000 for the quarter ended May 7, 2000
compared to the quarter ended May 2, 1999 mainly due to decreased borrowings
under the credit facility and proceeds received from the issuance of debt.
On January 12, 1999, the Company signed an amendment to its bank agreement
increasing the availability under the facility from $65 million to $70 million
as well as providing for certain credit enhancements. The amended credit
agreement is a non-revolving facility maturing February 15, 2000. The bank
agreement includes covenants including, but not limited to, minimum operating
cash flow, minimum net worth, dividend restrictions, and limitations on
indebtedness. The facility is secured by substantially all of the Company's
assets.
On October 22, 1999 the Company entered into the fourth amendment to its credit
facility which increased its overadvance from $5,000,000 to $9,500,000 and
eliminated its scheduled commitment reductions due from August 1, 1999 through
February 1, 2000.
On February 13, 2000 the Company signed a forbearance and fifth amendment to its
credit facility whereby The Bank Group extended the effective date of maturity
to August 31, 2000.
Due to non-payment of debt under the terms of the credit facility, prior to
September 30, 1999, the banks have the right under a warrant agreement to
purchase 5% of the Company's common stock at $0.26 per share. As of June 30,
2000 this warrant has not been exercised.
A majority of the Company's existing lenders ("The Bank Group") have agreed in
principle to a complete restructuring of debt that will include repayment of $20
million in cash, issuance of $25 million of senior notes and issuance of $40
million worth of shares of Video City Preferred Stock. The restructuring is
contingent upon the Company providing The Bank Group with the cash portion
before the forbearance agreement expires on August 31, 2000, and completing the
pending merger with Video City.
QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
The Company's market risk sensitive instruments do not subject it to material
market risk exposures, except for such risks related to interest rate
fluctuations. The carrying value of the Company's bank debt approximates fair
value at May 7, 2000 and May 2, 1999 since the note related thereto
substantially bears interest at a floating rate based upon the lenders' "prime"
rate.
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<PAGE> 10
YEAR 2000
The Company has not experienced and does not anticipate any material adverse
effects on its production equipment, systems or operations as a result of Year
2000 issues. Business is continuing as usual, and internal equipment and systems
will continue to be monitored for any likely disruptions. Further, as of June
30, 2000, the Company has not experienced any operational difficulties as a
result of Year 2000 issues with its vendors, suppliers or other critical third
parties with whom the Company conducts business. However, Year 2000 compliance
has many elements and potential consequences, some of which may not be
foreseeable or may be realized in future periods. Consequently, there can be no
assurance that unforeseen circumstances may not arise, or that the Company will
not in the future identify equipment or systems which are not Year 2000
compliant.
Although the transition to the Year 2000 did not have any significant impact on
the Company or its equipment, systems and operations, the Company will continue
to monitor the impact of the Year 2000 on its equipment and systems and those of
its vendors, suppliers and other critical third parties. The contingency plans
that were developed for use in the event of Year 2000-related failures will be
maintained and generalized for ongoing business use. In the aggregate, the
Company has spent approximately $1.0 million to address Year 2000 issues and
does not anticipate spending any additional material amounts relating to Year
2000 issues.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 - Financial Data Schedule
(b) Reports on Form 8-K
On March 28, 2000, the Company filed a current report on form 8-K, dated as of
March 3, 2000, to report under Item 5 that West Coast Entertainment (the
"Registrant") and Video City, Inc. ("Video City") entered into the Forbearance
and Fifth Amendment to Credit Agreement with PNC Bank and other financial
institutions, and a First Amendment to Merger Agreement, a Management Agreement,
and an Amended and Restated Term Sheet with Video City, Inc. and under Item 7
(c) the following Exhibits 10.1, 2.1, 10.3, 10.2 and 99 .
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
West Coast Entertainment Corporation
(Registrant)
July 19, 2000 /S/ Herbert F. Kozlov
Herbert F. Kozlov
Sole Director & Executive Officer
(Principal Executive Officer)
July 19, 2000
/S/ Joseph M. Ciano
Joseph M. Ciano
Chief Accounting Officer
(Principal Financial and Accounting
Officer)
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