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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
QUARTERLY REPORT
Under Section 13 or 15(d) of the Securities Act of 1934
For the Three Months Ended October 1, 2000
DIGITAL CREATIVE DEVELOPMENT CORPORATION
----------------------------------------
(Name of Small Business Issuer in Its Charter)
UTAH 34-1413104
------------------------------ ----------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
67 Irving Place North New York, New York 10003
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(Address of Principal Executive Offices) (Zip Code)
(212) 387-7700
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(Issuer's Telephone Number)
Formerly Arthur Treacher's Inc.
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Check whether the issuer (1) filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act 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 _____
At November 17, 2000, the latest practicable date there were 16,590,701 shares
of Common Stock outstanding, $.01 par value.
<PAGE>
DIGITAL CREATIVE DEVELOPMENT CORPORATION
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
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<S> <C> <C>
Item 1. Unaudited Financial Statements:
Consolidated Balance Sheets as of October 1, 2000 and June 30, 2000 3
Consolidated Statements of Operations for the Three Month Periods
July 1, 2000 through October 1, 2000; and
July 1, 1999 through September 26, 1999 5
Consolidated Statement of Cash Flows for the Three Month Periods
July 1, 2000 through October 1, 2000; and
July 1, 1999 through September 26, 1999 6
Notes to Interim Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis results of Operations and
Financial Condition 10
Part II. OTHER INFORMATION 15
</TABLE>
2
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 2000 and JUNE 30, 2000
<TABLE>
<CAPTION>
October 1, June 30
ASSETS 2000 2000
(Unaudited) (Audited)
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,454,153 8,239,351
Accounts receivable, net of allowance of $10,065
and $10,065 respectively 194,586 92,750
Inventories 113,168 127,635
Prepaid expenses and other 88,942 84,358
----------- -----------
TOTAL CURRENT ASSETS 6,850,849 8,544,094
----------- -----------
PROPERTY AND EQUIPMENT, AT COST
Leasehold improvements 2,386,864 2,382,525
Furniture, fixtures, and equipment 1,824,037 1,824,037
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4,210,901 4,206,562
Less accumulated depreciation 3,557,141 3,403,910
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PROPERTY AND EQUIPMENT, net 653,760 802,652
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OTHER ASSETS
Deposits 19,291 18,513
Goodwill 263,954 268,035
Notes Receivable, Net of Allowance of $210,000
and $210,000 respectively 765,135 266,134
Investments and Advances in Entertainment Concept Companies 427,291 0
Marketable Securities Available for Sale 720,736 300,000
Non-Marketable Securities, Net of Allowance of $450,000 2,200,000 2,200,000
Other 8,412 8,412
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TOTAL OTHER ASSETS 4,404,819 3,061,094
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TOTAL ASSETS $11,909,428 12,407,840
=========== ===========
</TABLE>
3
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
CONSOLIDATED BALANCE SHEETS
OCTOBER 1, 2000 and JUNE 30, 2000
<TABLE>
<CAPTION>
October 1, June 30,
2000 2000
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,276,895 2,155,326
Accrued expenses and other liabilities 248,174 455,261
Current maturities of long-term debt 1,379,285 1,377,993
Deferred revenue 280,760 317,262
------------ ------------
TOTAL CURRENT LIABILITIES 4,185,114 4,305,842
Long-term debt, net of current maturities 433,159 470,994
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TOTAL LIABILITIES 4,618,273 4,776,836
------------ ------------
MINORITY INTEREST IN SUBSIDIARY 4,805,282 4,805,282
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STOCKHOLDERS' EQUITY
Preferred stock 1,744,885 1,744,885
Common stock 165,907 164,707
Additional paid-in capital 20,063,870 19,941,820
Accumulated deficit (19,488,789) (19,025,690)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,485,873 2,825,722
------------ ------------
TOTAL LIABILITIES and STOCKHOLDERS' EQUITY $ 11,909,428 12,407,840
============ ============
</TABLE>
4
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS
<TABLE>
<CAPTION>
July 1, 2000 July 1, 1999
through through
October 1, 2000 September 26, 1999
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
TOTAL REVENUE $ 3,051,251 3,899,702
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OPERATING EXPENSES:
Cost of sales, including occupancy except depreciation 1,642,299 2,058,775
Operating expenses 1,055,387 1,503,866
Depreciation and amortization 157,313 215,050
General and administrative expenses 611,697 301,364
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TOTAL OPERATING EXPENSES 3,466,696 4,079,055
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LOSS FROM OPERATIONS (415,445) (179,353)
OTHER INCOME (EXPENSES):
Interest Expense (47,654) (41,713)
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NET LOSS (463,099) (221,066)
Undeclared preferred stock dividends (39,805) (30,570)
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Net loss for common shareholders $ (502,904) (251,636)
============ ============
Basic loss per common share $ (.03) (.02)
============ ============
Diluted loss per common share $ (.03) (.02)
============ ============
Weighted average number of outstanding shares for basic and diluted 16,590,701 15,165,011
============ ============
</TABLE>
5
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIODS
<TABLE>
<CAPTION>
July 1, 2000 July 1, 1999
through through
October 1, 2000 September 26, 1999
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<S> <C> <C>
Operating activities:
Net loss $ (463,099) (221,066)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 153,231 215,050
Amortization of deferred revenue (36,502) --
Changes in assets and liabilities:
(Increase) in accounts receivable (101,836) (5,344)
(Increase) in deposits and other assets (927,070) (24,577)
(Increase) in prepaid expenses and other
current assets (4,584) (40,332)
Decrease in inventories 14,467 44,949
Decrease in goodwill 4,081 4,081
Increase (decrease) in accounts payable 121,569 (32,207)
(Decrease) in accrued expenses, and
other liabilities (207,087) (68,656)
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Net cash (used in) provided by operating activities (1,446,830) (269,847)
----------- -----------
Investing activities:
Capital expenditures (4,339) (2,655)
Investments made by subsidiary (420,736) --
Proceeds from disposition of restaurants -- 49,248
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Net cash used in investing activities (425,075) 46,773
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Financing activities:
Proceeds from the issuance of stock, from subsidiary 75,000 0
Proceeds from the issuance of preferred stock, net of issue costs -- --
Issuance of common stock 48,250 --
Proceeds from long-term debt -- --
Payment of dividend -- --
Principal payments on long-term debt (36,543) (65,316)
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Net cash (used in) provided by financing activities 86,707 (65,316)
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Net (decrease) in cash and cash equivalents (1,785,198) (146,645)
</TABLE>
6
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED
<TABLE>
<CAPTION>
July 1, 2000 July 1, 1999
through through
October 1, 2000 September 26, 1999
--------------- ------------------
<S> <C> <C>
Cash and cash equivalents beginning of period 8,239,351 165,459
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Cash and cash equivalents end of period $ 6,454,153 18,814
============ =======
Supplemental disclosure of cash flow information:
Cash paid for interest $ 6,999 7,586
============ =======
Supplemental disclosure of noncash transactions:
Common stock issued to settle accounts payable $ 0 0
============ =======
Supplemental disclosure of noncash transactions:
Common stock issued to settle debt and interest $ 0
============ =======
</TABLE>
7
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DIGITAL CREATIVE DEVELOPMENT CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 1, 2000
NOTE 1 - BASIS OF PRESENTATION
The accompanying interim unaudited financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission, and reflect all adjustments which, in the opinion of management, are
necessary to properly state the results of operations and financial position.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations although
management believes that the disclosures are adequate to make the information
presented not misleading. The results of operations are not necessarily
indicative of the results for the full year. These financial statements should
be read in conjunction with the financial statements and notes thereto included
in the Company's audited financial statements included in the Form 10-KSB for
the fiscal year ended June 30, 2000, filed with the Securities and Exchange
Commission on October 16, 2000.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation: The interim consolidated financial statements
include the accounts of the Company and its wholly-owned subsidiaries,
MIE Hospitality, Inc., a wholly-owned subsidiary: which operates 29
Arthur Treacher's Fish and Chips restaurants in Pennsylvania, New York, New
Jersey and Delaware.
Arthur Treacher's Management Co., a wholly-owned subsidiary, which
provides payroll services to the Company.
Arthur Treacher's Advertising Co., a wholly-owned subsidiary, which
provides certain advertising services to the Company and the franchisees.
Digital Creative Development Corporation (DCDC (Delaware)), a
subsidiary which acquires invests and forms joint ventures with web design, web
consulting and companies that create and transmit digital broadband content.
Arthur Treacher's Inc., a wholly-owned subsidiary, which was formed to
conduct the Company's restaurant operations.
Earnings per Share
Effective December 28, 1997, the Company implemented the provisions of Statement
of Financial Accounting Standards # 128 "Earnings Per Share". All earnings per
share information presented has been restated to reflect the provisions of this
statement.
8
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Note 3 - COMMITMENTS AND CONTINGENCIES
ATAC Corporation and Patrick Cullen v. Arthur Treacher's, Inc. and James
Cataland, Case No. 1:95CV 1032, In the U.S. District Court, Northern District,
Ohio Eastern Division; filed May 9, 1995. On November 16, 1994, Arthur
Treacher's terminated the agency agreement of a Regional Development
Representative, ATAC Corporation, on the grounds that ATAC breached the
agreement by assigning the agency agreement to a third party without the consent
of Arthur Treacher's. ATAC claims that the Company was aware of and consented to
the third-party assignment. The Company is unaware of any document signed by a
properly-authorized representative of the Company formally authorizing or
consenting to the assignment. On May 9, 1995, ATAC filed the action and alleged
that the Company terminated the contract without cause, tortuously interfered
with other business relationships, committed wrongful conversion of the
territory and committed restraint of trade and price-fixing, breach of contract,
fraud, and violations of RICO. ATAC originally demanded a minimum of $2,750,000
in compensatory damages and $6,000,000 in punitive damages. In response to the
original complaint, the Company filed a motion to dismiss all of the claims. In
addition, the Company filed a counterclaim against ATAC seeking a Declaratory
Judgment that ATAC does not have a service contract with the Company in certain
areas which the Company does business, that ATAC has committed breach of
contract and that the Company is entitled to indemnification for previous
lawsuits which have occurred because of the actions of ATAC on behalf of the
Company. ATAC has twice amended the claims and allegation of the original
complaint. In the Third Amended Complaint, ATAC asserts claims against the
Company and the Company's former President, James Cataland, for fraud, breach of
contract, tortuous interference with contract, violations of the Ohio Business
Opportunity Act, violations of the Ohio Consumer Sales Practices Act and breach
of fiduciary duty. ATAC seeks in excess of $10,000,000 in compensatory,
punitive, and statutory damages from the Company. In response to the Third
Amended Complaint, the Company in 1997 filed a Motion to Dismiss ATAC's claims
for breach of fiduciary duty and under the Consumer Sales Practices and Business
Opportunity Acts. The Company also requested that the district court dismiss the
claim against the Company's former President. The Company in 1998 filed Motions
for Summary Judgment on behalf of itself and the Company's former President with
respect to all of ATAC's claims (except breach of contract) and requested that
the court refer the remaining contract claim to binding arbitration. The Court
recently granted the Company's Motion to Stay the lawsuit pending arbitration
and the ruling is presently the subject of an appeal to the Sixth Circuit Court
of Appeals.
The Company originally believed that the lawsuit was an attempt by plaintiffs to
regain the territory by forcing the Company to defend expensive litigation at
significant expense and that the plaintiffs' claims are without merit. The
Company now understands that ATAC solely seeks damages from the Company. The
Company still believes that ATAC's claims are meritless. The Company's attorneys
have indicated that they intend to vigorously defend the Company from the claims
made by ATAC and pursue any counterclaims.
In opinion of management, the ultimate disposition of these matters will not
have a material adverse effect on the Company's consolidated results or
operations or financial position.
9
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Management's Discussion and Analysis or Plan of Operation
This Management's Discussion and Analysis of Financial Condition and Results of
Operations of the Company should be read in conjunction with the Financial
Statements and Notes thereto appearing elsewhere in this Registration Statement.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995
Information set forth herein contains "forward-looking statements" which can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy. No
assurance can be given that the future results covered by the forward-looking
statements will be achieved. The Company cautions readers that important factors
may affect the Company's actual results and could cause such results to differ
materially from forward-looking statements made by or on behalf of the Company.
Such factors include, but are not limited to, changing market conditions, the
impact of competitive products, pricing and acceptance of the Company's
products.
Overview
The Company's principal sources of revenues are from the operation of it's
Company owned restaurants and the receipt of royalties from franchisees. The
Company's cost of sales includes food, supplies and occupancy costs (rent and
utilities at Company owned stores). Operating expenses include labor costs at
the Company owned stores and advertising, marketing and maintenance costs.
Franchise services and selling expenses include fees payable to regional
representatives and their expenses. General and administrative expenses include
costs incurred for corporate support and administration, including the salaries
and related expenses of personnel at the Company's headquarters in Jacksonville,
the costs of operating the headquarters offices (rent and utilities) and certain
related costs (travel and entertainment).
On October 19, 2000, Arthur Treacher's Inc., a Delaware Corporation ATI
(Delaware) purchased all of the outstanding capital stock of the entities which
own and act as franchisor of the Pudgies Famous Chicken chain of fast food
chicken restaurants. Pudgies consists of 32 restaurants in the New York
tri-state metropolitan area, including 12 company owned stores and 20
franchises. The purchase price was 20% of the issued and outstanding stock of
ATI (Delaware). Mr. Jeff Bernstein, the Chief Executive Officer of Pudgies,
became Chief Executive Officer and President of ATI (Delaware).
ENTERTAINMENT BUSINESS
The Company intends to acquire and make investments primarily in traditional
entertainment content entities. To date, the Company's investments have been
made through its subsidiary, Digital Creative Development Corporation (DCDC
(Delaware)). The Company's entertainment business is headquartered in New York,
New York. The Company's strategy is to acquire and invest in entities which
provide comprehensive
10
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services to a wide variety of entertainment and other related businesses and for
general public consumption. The Company seeks strategic alignments with these
business entities to focus on creative services (i.e., original content
production; web design; advertising; brand marketing; etc.) resulting in revenue
generation from motion pictures; television; animation; product endorsement and
sales; and licensing and syndication. Content is intended to be delivered to
both business and the consumer through digital broadband and conventional
distribution platforms.
On March 16, 2000, the Board of Directors of the Company approved the
appointment of Ralph Sorrentino as the Chief Executive Officer of Digital. Mr.
Sorrentino became Chief Executive Officer of DCDC (Delaware) effective
May 1, 2000.
These steps are part of management's plan to change the Company's business
focus. The Company plans to invest in companies that are involved in the
creation and transmission of broadband content. The Company also plans to
provide, services and capital to early stage internet companies. The Company
intends to acquire controlling interest in its portfolio companies but may, from
time to time, take minority equity positions in consideration for such services
and capital. The Company believes that it can develop such internet business
activities, including e*commerce and content portals either through acquisitions
of majority owned subsidiaries or through internal development.
The Company does not intend to engage primarily in the business of investing,
reinvesting or trading in securities so as to be an investment company required
to register as such under the Investment Company Act of 1940. Nevertheless, the
Company may be required to register as an investment company as a consequence of
investments that is has made subsequent to its change of control to the extent
that it presently holds "investment securities" (as defined by the Investment
Company Act) which constitutes more than 40% of the value of the Company's
assets (exclusive of U.S. government securities and cash items) on an
unconsolidated basis, unless the Company restructures or reduces its holdings of
investment securities within a reasonable period of time. Although it is the
intention of the Company to take the actions necessary to avoid investment
company status, no assurance can be given that the Company will be able to take
such actions. The Investment Company Act of 1940 imposes a comprehensive scheme
of regulation which would require a substantial restructuring of the operations
of the Company to permit the Company to comply with the applicable regulations.
11
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Applicable regulations may also operate to impose significant restrictions on
the permissible activities and transactions of the Company. If the Company
cannot restructure its operations or reduce its holdings of investment
securities to avoid the need for the investment company restriction, the Board
of Directors will consider taking such actions as may be necessary or
appropriate under the circumstances.
The Company through its entertainment subsidiary, has invested or advanced
approximately $427,000 in two entertainment concept companies. In the period
ended October 1, 2000.
Results of Operations
The following discussion includes the following periods: unaudited interim
financial statements for the three months ended October 1, 2000 and September
26,1999.
2000 Three months and 1999 Three months
The Company's reported total revenues of $3,051,251 for the three month period
ended October 1, 2000 reflected a decrease of $848,451, or 21.8%, compared to
$3,899,702 in the same three month period ended September 26, 1999. This
decrease was primarily attributed to the franchising of 10 Company owned
restaurants compared to the same period in the previous fiscal year.
The Company recognized a decrease in net restaurant sales (defined as gross
restaurant sales less coupons, promotion cost and discounts) of $761,006 or
22.9% to $2,559,895 for the three month period ended October 1, 2000, compared
to $3,320,901 in the same three month period ended September 26, 1999. The
decrease is primarily attributed to the franchising of 10 Company owned
restaurants to existing franchisees. Same store net sales decreased by 8.9% or
$248,118 to $2,545,079 for the three month period ended October 1, 2000,
compared to $2,793,197 for the same three month period ended September 26, 1999.
Franchise and other income decreased 12.7% or $46,212 to $318,617 for the
three month period ended October 1, 2000, compared to $364,829 in the same three
month period ended September 26, 1999. The decrease was primarily due to the
timeliness of the receipt of marketing allowances from the Company's suppliers.
The Company's total costs and expenses decreased 15.0% or $612,359 to $3,466,696
for the three month period ended October 1, 2000, compared to $4,079,055 for the
three month period ended September 26, 1999. This decrease was primarily
attributed to the franchising of 10 Company owned restaurants compared to the
same period in the previous fiscal year.
General and administrative expense increased $310,333 or 103.0% to $611,697 for
the three month period ended October 1, 2000, compared to $301,364 for the three
month period ended September 26, 1999. The increase is primarily attributed to
the expenses incurred by DCDC (Delaware) in the amount of $389,229 for the three
month period ended October 1, 2000, compared to zero for the three month period
ended September 26, 1999. Without these charges from DCDC (Delaware), general
and administrative expenses would have decreased $78,896 or 26.2% to $231,437
for the three month period ended October 1, 2000, compared to $301,364 for the
three month period ended September 26, 1999.
12
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Interest expense increased 14.2% or $5,941 to $47,654 for the three month period
ended October 1, 2000, compared to $41,713 for the three month period ended
September 26, 1999. The increase was due to new debt taken on by the Company.
Depreciation and amortization decreased 26.9% or $57,737 to $157,313 for the
three month period ended October 1, 2000, compared to $215,050 for the three
month period ended September 26, 1999. This decrease was primarily attributed to
the franchising of 10 Company owned restaurants compared to the same period in
the previous fiscal year.
The Company considers earnings before interest, taxes, depreciation and
amortization to be another important indicator of performance before expenses
associated with the entertainment business for the three month period ended
October 1, 2000, earnings before interest, taxes, depreciation and amortization
increased by 174.8% or $62,419 to a ($98,116) compared to ($35,697) for the same
period in the previous fiscal year. This improvement is partially attributed to
the franchising of 10 Company owned restaurants.
As a result of the foregoing, particularly the franchising of 10 Company owned
restaurants compared to the same period in the previous fiscal year the
Company's net loss (before preferred dividends) increased $242,033 or 109.5% to
$463,099 for the three month period ended October 1, 2000, compared to a net
loss (before preferred dividends) of $221,066 for the three month period ended
September 26, 1999. Without taking into account the net loss (before preferred
dividends) from DCDC (Delaware) of $356,248, the Company's net loss (before
preferred dividends) would have decreased $114,215 or 51.7% to $106,851 for the
three month period ended October 1, 2000, as compared to a net loss (before
preferred dividends) of $221,066 for the three month period ended September 26,
1999.
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Liquidity and Capital Resources
The Company has financed its restaurant operations principally from revenues
derived from Company owned restaurants, franchise income and private placements
of equity and debt. The Company has raised approximately $12,000,000 in equity
and debt since May 1996, (exclusive of capital raised by DCDC (Delaware)),
approximately $1.9 million of equity and debt has been raised since September
1998.
<TABLE>
<CAPTION>
<S> <C> <C>
Private Placement of Promissory Notes and Warrants September 1998 $ 200,000
Preferred Stock "Series D" September 1998 $ 400,000
Common Stock March 1999 $ 110,000
Promissory Notes and Warrants May 1999 - February 2000 $ 1,137,000
Warrants July 2000 $ 48,250
------------
$ 1,895,250
</TABLE>
The Company's current assets exceeded its current liabilities by $2,665,735 at
October 1, 2000, compared to current liabilities exceeding its current assets by
$4,238,252 at June 30, 2000. The primary reason for the improved ration of
current assets to current liabilities is the capital raised by DCDC (Delaware)
in 2000. The Company had cash and short-term investments of $6,454,153 at
October 1, 2000 compared to $8,239,351 at June 30, 2000. The primary reason for
this decrease in cash is the investments on marketable and non-marketable
securities by DCDC (Delaware). The capital that has been raised by Digital and
not the Company, will be retained by DCDC (Delaware) and is intended to be
used solely for DCDC (Delaware) operations and the acquisition and investment in
companies and technologies that focus on the creation and delivery of
entertainment content. The Company had also incurred indebtedness in connection
with (i) the conversion of past due amounts under certain leases to indebtedness
and (ii) the repurchase of certain franchises, but several of such restaurants
were unable to generate sufficient revenues to repay the indebtedness. During
the Fiscal 2000, and the three month period ended October 1, 2000 the Company
experienced negative cash flow which has adversely affected its liquidity. The
lack of liquidity in the Company has adversely affected the Company's restaurant
operations.
The Company implemented a restructuring strategy in January 1999 which focused
on improving cash flow by franchising or selling certain company owned
restaurants, franchise sales, cobranding and introducing a retail product line
for major supermarkets chains. As of October 1999, the restructuring of real
estate obligations by franchising, selling and terminating selected leases was
completed. As a result of the transfer of selected leases, losses typically
incurred by certain locations have been eliminated, thus improving cashflow.
The Company intends to transfer its assets and liabilities related to its
restaurant operations to ATI Delaware and distribute all of its shares of
ATI Delaware to its shareholders. However, the Company may still be liable for
some of such liabilities.
In Novemeber 1996, MIE Hospitality, Inc. (MIE) a subsidiary of the Company,
issued a promissory note in favor of Magee Industrial Enterprises, Inc. in the
original principal amount of $1,139,563 in connection with the purchase of MIE
by the Company. In October, 2000 Magee Industries has demanded payment in full
of the promissory note with a principal balance owed of $567,283. The note is
guaranteed by the Company. MIE is not in default of its payment obligations
under the note. The Company is engaged in discussions with Magee regarding the
note, but there can be no assurance that the Company will not become liable for
MIE's obligations under the note.
The Company believes that it will need additional financing and working capital
to finance its restaurant operations and capital expenditures. Although the
Company has obtained additional financing in the past and believes it could meet
its needs through either additional borrowings or the sale of additional equity,
and the re-negotiation of the Company's accounts payable. There can be no
assurance that the Company would succeed in obtaining any such financing, or
that the terms of such transactions could be effected, and that such strategy
will be successful. If the Company's strategy is unsuccessful, there is
substantial doubt about the restaurants operations continuing as a going conern.
14
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PART II OTHER INFORMATION
Item 1 Legal Proceedings
None
Item 2 Changes in Securities and Use of Proceeds
None
Item 3 Defaults on Senior Securities
None
Item 4 Submission of Matters to a Vote of Shareholders
None
Item 5 Other Information
None
Item 6 Exhibits and Reports on Form 8-K
From 8-K Filed March 27, 2000
Regarding Item 4 Changes in registrant's certifying
accountants
15
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SIGNATURES
In accordance with the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
DIGITAL CREATIVE DEVELOPMENT CORPORATION
(Registrant)
Date: November 17, 2000 /s/ William F. Saculla
---------------------------------
William F. Saculla
President and Chief Financial Officer
16
