<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended January 31, 1997
[ ] TRANSACTION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT for the
transaction period from _____________ to ________________
Commission file number 0-21785
NV ENTERTAINMENT, INC.
(Exact name of small business issuer as specified in its charter)
UTAH 95-45453704
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5737 Pacific Center Blvd., Suite A, San Diego, California 92121
(Address of principal executive offices)
(619) 657-9777
Issuer's telephone number
Check whether the Issuer (1) filed all reports required to be filed by
Section 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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the Registrant filed all documents and reports required to be
filed by Section 12,13 or 15(D) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes _____ No X
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
13,164,827 common shares as of January 31, 1997
Transitional Small Business Disclosure Format (check one):
Yes _____ No X
<PAGE> 2
NV ENTERTAINMENT, INC.
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
<S> <C>
PART I - Financial Information
Condensed Balance Sheets, as of January 31, 1997 and October 31, 1996 3
Condensed Statements of Operations for the three months ended January 31, 1997 and 1996 4
Condensed Statements of Cash Flows for the three months ended January 31, 1997 and 1996 5
Notes to Condensed Financial Statements 6
Management's Discussion and Analysis or Plan of Operation 7 & 8
PART II - Other Information
Items 1 through 6 9
Signature 9
</TABLE>
2
<PAGE> 3
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31, October 31,
1997 1996
----------- -----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 36,518 $ 981
Receivables 6,500 5,200
Due from related parties 167,137 92,041
MUSIC RIGHTS, net of accumulated amortization
of $ 210,000 and $ 105,000 1,890,000 1,995,000
FILM AND VIDEO LIBRARY 881,278 881,278
PROJECTS UNDER DEVELOPMENT 1,933,546 1,815,534
PROPERTY AND EQUIPMENT, net 331,254 332,199
INTANGIBLES, net 310,233 330,893
OTHER ASSETS 310,279 310,964
---------- ----------
TOTAL ASSETS $5,866,745 $5,764,090
========== ==========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 248,617 $ 251,084
NOTES PAYABLE, related parties 317,000 294,500
CONVERTIBLE NOTES PAYABLE 150,000 --
---------- ----------
TOTAL LIABILITIES 715,617 545,584
---------- ----------
SHAREHOLDERS' EQUITY:
Convertible preferred stock, series A and B, $30 par value,
200,000,000 shares authorized, liquidation value of $30
per share, 200,000 shares issued and outstanding 2,100,000 2,100,000
Common stock, $.001 par value, 100,000,000 shares authorized,
13,164,827 shares issued and outstanding 13,165 12,425
Additional Paid-In-Capital 5,483,291 5,201,988
Deficit accumulated during the development stage (1,932,558) (1,583,137)
Stock note receivable and subscription receivable (512,770) (512,770)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 5,151,128 5,218,506
---------- ----------
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES $5,866,745 $5,764,090
========== ==========
</TABLE>
See Notes to Financial Statements.
3
<PAGE> 4
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
December 5, 1985
(Inception) to
January 31, January 31, January 31, 1997
1997 1996 (Cumulative)
----------- ----------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 26,220 $ -- $ 69,942
------------ ------------ ------------
Expenses:
Cost of Sales 15,652 -- 59,374
Project written off -- -- 770,000
Selling, general & administrative
expenses 359,989 4,931 1,173,126
------------ ------------ ------------
Total Expenses 375,641 4,931 2,002,500
------------ ------------ ------------
Loss before income taxes (349,421) (4,931) (2,312,670)
Income tax expense -- -- --
------------ ------------ ------------
Net loss before cumulative preferred stock dividends (349,421) (4,931) (1,932,558)
Cumulative preferred stock dividends (75,000) -- --
Net loss (424,421) (4,931) --
============ ============ ============
Net loss per common share $ (.03) $(0.00)
============ ============
Weighted average number of shares outstanding 12,756,941 1,543,983
============ ============
</TABLE>
See Notes to Financial Statements.
4
<PAGE> 5
NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
December 5, 1985
Quarter Ending Quarter Ending (Inception) to
January 31, 1997 January 31, 1996 January 31, 1997
(UNAUDITED) (UNAUDITED) (Cumulative)
(UNAUDITED)
----------- ----------- ------------
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net loss $(349,421) $(4,931) $(1,932,558)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 141,557 -- 398,677
Consulting fees paid by issuing common stock
by controlling shareholders -- -- 14,400
Professional fees paid by issuing common stock -- -- 62,976
Services contributed by officers -- -- 140,000
Project in progress written off -- -- 770,000
Changes in operating assets and liabilities:
Receivable (1,300) -- (6,500)
Due from related parties (75,096) -- (167,137)
Projects under development (118,011) -- (1,349,404)
Music rights, and film and video library
Deposits -- -- (50,022)
Organizaiton costs -- -- (13,677)
Accounts payable and accrued expenses (2,467) 4,030 102,022
----------- ----------- ------------
Net cash used in operating activities (404,738) (901) (2,031,223)
----------- ----------- ------------
INVESTING ACTIVITIES:
Acquisition of Leasehold improvements (8,800) -- (8,800)
Acquisition of property and equipment (5,467) -- (145,003)
----------- ----------- ------------
Net cash used in investing activities (14,268) -- (153,803)
----------- ----------- ------------
FINANCING ACTIVITIES:
Proceeds from convertable note payable 150,000 -- 150,000
Proceeds from issuance of common stock 282,043 (105) 2,013,544
Proceeds from related parties 23,750 -- 88,364
Repayment on officer loan -- -- (19,614)
Repayments on notes payable (1,250) -- (10,750)
----------- ----------- ------------
Net cash provided by financing activities 454,543 (105) 2,221,544
----------- ----------- ------------
NET INCREASE IN CASH 35,537 (1,006) 36,518
Cash and cash equivalents, beginning of period 981 44 --
----------- ----------- ------------
Cash and cash equivalents, end of period $ 36,518 $ (962) $ 36,518
=========== =========== ============
</TABLE>
See Notes to Financial Statements.
5
<PAGE> 6
NV ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1. In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments (which include only normal
recurring accruals) necessary to present fairly the Company's financial
position as of January 31, 1997 and year ended October 31, 1996 and the
results of its operations for the three months ended January 31, 1997
and 1996, and cash flows for the three months ended January 31, 1997 and
1996.
Note 2. Earnings per common share are computed by dividing the net income for
each period by the weighted average number of common shares plus the
weighted average of dilutive common shares equivalents outstanding
during the period using the treasury stock method. Common share
equivalents consist of convertible preferred shares and convertible
notes. Common stock equivalents are considered dilutive for earnings per
share if shares converted during the period. The common stock
equivalents are weighted from the beginning of the earliest quarter in
which they become dilutive.
Note 3. New Visual Entertainment, Inc. has issued convertible promissory notes
in the aggregate amount of $150,000.00. The notes mature within one
year of the issuance. The principal and interest can be converted to
common shares solely at the holder's discretion. The conversion rate
for the first $30,000 of the convertible promissory note for each common
share is at $1.25. The conversion rate for the remaining $120,000 of
the convertible promissory note for each common share is at $1.12. The
interest rate for the convertible promissory notes are at 10% per
annum payable within 180 days from the date of issuance of the note
payable and the remaining interest is due at maturity of the note.
6
<PAGE> 7
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
The following section of the report contains forward-looking statements
within the meaning of the Private Securities Litgation Reform Act of 1995. Such
forward-looking statements involve risks and uncertainties for that the actual
results may vary materially.
Plan of Operations
As a development stage company, New Visual has to date produced minimal
revenues. It has utilized its resources to secure patented technology and
strategic relationships with suppliers, exhibitors, distributors, and major
networks to develop the foundation for marketing its 3D theatrical and in-home
products.
Current cash requirements have been satisfied through contributions of the
officers, the sale of stock, and private offerings. The Company anticipates to
continue to make use of these funds resources in the future months until such a
time when sufficient revenues have been produced to eliminate the need for
outside funding. Immediate sources of revenues are expected to emerge from the
sale of NVX 3D theaters and licensing of software to each location. The Company
currently has liscensed its software to special venues inluding Knott's Berry
Farm, the West Edmonton Mall and a traveling mobile threater with Great West
Entertainment (GWE). In the upcoming months the Company will agressively seek to
market its technology and software to special venue markets and anticipates the
sale of a minimum of an additional 10 theaters in 1997. The software planned for
exhibiton in each location consists of the Company's films as well as its music
library and video library of the "ON TOUR" concert series.
The Company has established multiple economic models for the sale and liscensing
of its technology and software including: leasing aggreements, owned and
operated theaters, outright purchases, retro-fitted theaters, and joint venture
partnerships. The goals in providing such options is to be able to satisfy cash
flow requirements for the exhibitors. Revenues realized from each liscensing
arrangement will either be structured on the basis of a flat rental fee, as is
the case with Knott's Berry Farm, or, on the basis of revenue share; profit
participation, as is the case with the West Edmonton Mall and GWE.
The Company anticipates the need for continued research and development of its
technology and products, specifically as it relates to the development and
marketing of the six perforation movement camera system and the continued
development and marketing of digital, video, and broadcast exhibition systems.
The significance of the six-perforations camera system lies in the fact that
original photography produced with the system can be affordably blown up or
reduced for multiple formats without a significant compromise of the
photographic integrity. The Company has identified the need to always be
involved in the evolution of cutting-edge technology trends in the
entertainment industry though it is not inherently considered a technology
entity. The West Edmonton Mall (WEM) illustrates the Companies commitment to
such trends in that, the WEM venture represents the first film and video 3D
theater known to management in the world.
7
<PAGE> 8
The Company currently is expanding its physical plant facilities to include a
location in Santa Monica. This location will function primarily as the
production house, but will also conduct product demonstrations and serve as a
central hub for business development of 3D entertainment. Apart from that
development, there are no plans to further purchase or sell significant physical
plant and/or equipment resouces.
The Company epects to expand payroll within the next 12 months as the need for
more sales and marketing expertise arises. The Company also anticipates
expansion of commmitted resources in the near future toward Public Relations,
Advertising, and Market Research. All other areas of operation not currently
done in house will continue to be contracted on a per project basis.
Liquidity
The Company is currently working with several venture capital groups to fund
both the Company's General & Administrative expenses, as well as any necessary
working capital and anticipates completion in the next period.
In order to satisfy cash requirements for the Company's production and revenue
goals, management must obtain working capital through either debtor equity
financings or public financial markets. For the purpose of general operations
and production needs, the Company anticipates the need for funding of
approximately $3,000,000 over the next 12 months. Such funding may be
accomplished through public financial markets, private offerings, and joint
venture opportunities. The Company's future operations are dependent upon
generating funds to finance the production, marketing and expansion of its
operations.
Financial characteristics of the industry include a relatively low cost of goods
sold with substantial operating expenses. Operating expenses are primarily
attributable to content production and are incurred in total prior to any income
realized from the product. Once content is produced, however, it is an asset
which may be distributed through multiple channels repeatedly over time.
Seasonality, Inflation, and Industry Trends
Several economic indicators in the special format industry strongly suggest a
trend of growth in terms of industry sales and consumer demand. Total combined
industry sales in 1996 of the top four market forces in special format
entertainment were over 198 million, up from 116 million and 148 million in 1994
and 1995 respectively. Further, anticipated 3D network events by NBC and ABC
have lended creedence to the viability of the in-home market for 3D
entertainment.
Management feels that there are seasonal aspects of sales associated with the
theatrical markets in that theme parks and amusement parks typically allocate
protions of their fiscal budgets towards the development of new attractions to
debut early in each new season (spring). For the in-home market, on the other
hand, management is aware of no significant factors that would suggest seasonal
demand.
8
<PAGE> 9
PART II - OTHER INFORMATION
Items 1 through 5. Not Applicable
Item 6. Exhibits and Reports on Forms 8-K
(a) Exhibit 11 - Statement re: Computation of per share earnings
Exhibit 27 - Financial Data Schedule
(b) There were no reports filed on Form 8-K during the quarter ended
January 31, 1997.
In accordance with the requirements of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
NV Entertainment, Inc.
(Company)
Date: March 21, 1997 /s/ Phil Kueber
---------------------
Phil Kueber, President
Chief Executive Officer
Date: March 21, 1997 /s/ Ray Willenberg
---------------------
Ray Willenberg
Controller and Chief Accounting Officer
9
<PAGE> 1
THE NEW VISUAL ENTERTAINMENT, INC.
EXHIBIT 11
COMPUTATION OF LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED JANUARY 31
-----------------------------
1997 1996
-------- --------
<S> <C> <C>
ENDING MARKET PRICE PER SHARE $.50 N/A
-------- --------
AVERAGE MARKET PRICE PER SHARE $.84 N/A
-------- --------
PRIMARY LOSS PER SHARE:
Net loss before preferred stock dividends $(349,421) $(4,931)
ADD:
Cumulative preferred stock dividend (3) (75,000)
--------- ---------
Net loss applicable to common shares $(424,421) $(4,931)
========== =========
Weighted average number of shares outstanding 12,756,941 1,543,983
========== =========
Primary loss per share (.033) (.003)
========== =========
FULLY DILUTED LOSS PER SHARE:
Net loss for fully dilutive loss per share $(349,421) $(4,931)
Add back: Convertible interest 623
---------
Net loss for fully dilutive loss per share (348,798)
==========
Weighted average number of shares outstanding
Primary weighted average number of shares 12,756,941 1,543,983
Preferred conversion 600,000
Convertible debt to be converted 131,143
---------- ---------
Weighted average number of shares outstanding 13,488,084 1,543,983
========== =========
FULLY DILUTED LOSS PER SHARE(2) (.026) (.003)
=========== ==========
COMPUTATION OF WEIGHTED AVERAGE COMMON STOCK SHARES OUTSTANDING:
Total Number
Of Shares 1997
Outstanding Shares as of November 1, 1996 12,425,227 12,425,227
Common Stock issued on November 15, 1996 256,400 213,581
Common Stock issued on December 15, 1996 112,800 56,400
Common Stock issued on January 15, 1997 370,400 61,733
---------
12,756,941
==========
(1) Shares assumed to be repurchased under the treasury stock method:
Primary common stock equivalents are assumed to be repurchased at average market price
Fully diluted common stock equivalents are assumed to be repurchased at the greater of average or ending market price
(2) Fully diluted loss per share will br anti-dilutive therefore not seperately disclosed on the financial statements.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JAN-31-1997
<CASH> 36,518
<SECURITIES> 0
<RECEIVABLES> 6,500
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 369,822
<DEPRECIATION> 38,568
<TOTAL-ASSETS> 5,866,745
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
2,100,000
<COMMON> 13,165
<OTHER-SE> 3,037,963
<TOTAL-LIABILITY-AND-EQUITY> 5,866,745
<SALES> 26,220
<TOTAL-REVENUES> 26,220
<CGS> 15,652
<TOTAL-COSTS> 375,641
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (349,421)
<INCOME-TAX> 0
<INCOME-CONTINUING> (349,421)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (349,421)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> 0
</TABLE>
