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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 July 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
----- -----
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: 14,481,051 common shares as
of July 31, 1997
Transitional Small Business Disclosure Format (check one):
Yes No
----- -----
1
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NV ENTERTAINMENT, INC.
FORM 10-QSB
INDEX
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<S> <C>
PART I - Financial Information
Condensed Balance Sheets, as of July 31, 1997 and October 31, 1996 3
Condensed Statements of Operations for the three months ended July 31, 1997 and 1996 4
Condensed Statements of Operations for the nine months ended July 31, 1997 and 1996 5
Condensed Statements of Cash Flows for the nine months ended July 31, 1997 and 1996 6
Notes to Condensed Financial Statements 7
Management's Discussion and Analysis or Plan of Operation 8 & 9
PART II - Other Information
Items 1 through 6 10
Signatures 10
</TABLE>
2
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NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
PART 1 - FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
July 31, October 31,
1997 1996
----------- -----------
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Assets
Cash $ 4,353 981
Receivables 7,800 5,200
Due From Related Parties 211,884 92,041
Theater Equipment Held For Sale 52,820 52,820
Music Rights, Net of Accumulated Amortization
of $315,000 and $210,000 1,680,000 1,995,000
Films and Video Library 906,878 881,278
Projects Under Development 1,571,732 1,815,534
Property and Equipment, Net 244,574 279,379
Intangibles, Net 268,913 330,893
Other Assets 258,890 310,964
----------- -----------
Total Assets $5,207,844 $5,764,090
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Accounts Payable and accrued expenses $ 610,083 $ 251,084
Short Term Loans Payable 37,000 -
Notes Payable, Related Parties 463,875 294,500
----------- -----------
Total Liabilities 1,110,958 545,584
----------- -----------
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,
17,111,273 & 12,425,227 Shares Issued and Outstanding 17,111 12,425
Additional Paid-In-Capital 5,969,416 5,201,988
Deficit Accumulated During the Development Stage (3,473,871) (1,583,137)
Stock Note Receivable and Subscription Receivable (515,770) (512,770)
----------- -----------
Total Shareholders' Equity 4,096,886 5,218,506
----------- -----------
Total Liabilities and Shareholders' Equity $5,207,844 $5,764,090
=========== ===========
</TABLE>
3
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NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Three Months December 5, 1985
Ended Ended (Inception) to
July 31, July 31, July 31, 1997
1997 1996 (Cumulative)
------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 13,162 $ 93,373 $ -
------------ ------------- --------------
Expenses:
Cost of Sales - 100,604 58,074
Project Written Off 584,141 - 1,379,141
Selling, General & Administrative
Expenses 488,826 70,287 2,141,860
------------ ------------- -----------
Total Expenses 1,072,967 170,891 3,579,075
------------ ------------- -----------
Loss Before Income Taxes (1,059,805) (77,518) (3,473,871)
Income Tax Expense - - -
------------ ------------- -----------
Net Loss Before Cumulative Preferred
Stock Dividends (1,059,805) (77,518) (3,473,871)
===========
Cumulative Preferred Stock Dividends (75,000) -
------------ -------------
Net Loss (1,134,805) (77,518)
=========== =============
Net Loss Per Common Shares $ (0.07) $ (0.03)
=========== =============
Weighted Average Number of Shares Outstanding 15,859,290 8,623,205
=========== =============
</TABLE>
4
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NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Nine Months Nine Months December 5, 1985
Ended Ended (Inception) to
July 31, July 31, July 31, 1997
1997 1996 (Cumulative)
------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
Revenues $ 61,482 $ 93,373 $ 105,204
------------ ------------ ------------
Expenses:
Cost of Sales 14,352 100,604 58,074
Project Written Off 584,141 - 1,379,141
Selling, General & Administrative
Expenses 1,353,723 210,337 2,141,860
------------ ------------ ------------
Total Expenses 1,952,216 310,941 3,579,075
------------ ------------ ------------
Loss Before Income Taxes (1,890,734) (217,568) (3,473,871)
Income Tax Expense: - - -
------------ ------------ ------------
Net Loss Before Cumulative Preferred
Stock Dividends (1,890,734) (217,568) (3,473,871)
============
Cumulative Preferred Stock Dividends (300,000) -
------------ ------------
Net Loss (2,190,734) (217,568)
============ ============
Net Loss per Common Share $ (0.15) $ (0.03)
============ ============
Weighted Average Number of Shares Outstanding 14,197,745 8,651,955
============ ============
</TABLE>
5
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NEW VISUAL ENTERTAINMENT, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONDENSED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH
<TABLE>
DECEMBER 5, 1985
NINE MONTHS NINE MONTHS (INCEPTION) TO
ENDED ENDED JULY 31, 1997
JULY 31, 1997 JULY 31, 1996 (Cumulative)
------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (1,890,734) $ (217,568) $ (3,473,871)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 424,858 90,486 681,978
Consulting fees paid by issuing common stock -- -- --
by controlling shareholders -- 35,000 14,400
Professional fees paid by issuing common stock -- 15,000 62,976
Compensation expense 180,000 -- 180,000
Services contributed by officers -- -- 140,000
Project in progress written off 584,141 -- 1,354,141
Changes in operating assets and liabilities:
Receivable (2,600) (65,527) (7,800)
Due from related parties (119,843) (57,699) (211,884)
Film and Video Library (25,600) -- (25,600)
Projects under development (340,339) (581,325) (1,571,732)
Deposits 50,022 5,000 --
Intangible assets -- (2,500) --
Organization costs -- -- (13,677)
Accounts payable and accrued expenses 358,999 26,485 463,488
------------- ------------- -------------
Net cash used in operating activities (781,096) (752,648) (2,407,581)
------------- ------------- -------------
INVESTING ACTIVITIES
Acquisition of Leasehold Improvements (8,800) -- (8,800)
Disposition of Leasehold Improvements 8,730 -- 8,730
Acquisition of furniture and fixtures (8,451) -- (8,451)
Acquisition of property and equipment (2,500) (121,391) (142,035)
------------- ------------- -------------
Net cash used in investing activities (11,021) (121,391) (150,556)
------------- ------------- -------------
FINANCING ACTIVITIES
Proceeds from short term loans and note payable 217,000 -- 217,000
Proceeds from issuance of common stock 592,114 922,802 2,836,385
Proceeds from related parties -- -- 64,614
Repayment on officer loan (13,750) -- (33,364)
Repayments on notes payable (1,250) (7,000) (10,750)
Subscription Receivable (3,000) -- (515,770)
Interest on Convertible Notes 4,375 -- 4,375
------------- ------------- -------------
Net cash provided by financing activities 795,489 915,802 2,562,490
------------- ------------- -------------
Net Increase in Cash and cash equivalents 3,372 41,763 4,353
Cash and cash equivalents, beginning of period 981 (41,763) --
------------- ------------- -------------
Cash and cash equivalents, end of period $ 4,353 $ (0) $ 4,353
============= ============= =============
</TABLE>
6
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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 July 31, 1997 and year ended October 31, 1996
and the results of its operations for the nine and three months ended
July 31, 1997 and 1996, and cash flows for the nine months ended
July 31, 1997 and 1996.
Note 2. Earnings (loss) per common share are computed by dividing the net
income (loss) for each period by the weighted average number of common
and common equivalent shares outstanding, including shares to be
issued. Common equivalent shares, representing the common shares that
would be issued on exercise of outstanding stock options and warrants
reduced by the number of shares which could be purchased from the
related exercise proceeds, are not included since their effect would
be anti-dilutive or not material.
Statements of Financial Standards No. 128, "earnings Per Share" (SFAS
128) is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. Earlier
application is not permitted. SFAS 128 requires dual presentation of
basic and diluted earnings per share (EPS) on the face off the income
statement. It also requires a reconciliation of the numerator and
denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation. This statement also
requires restatement of all prior-period EPS data presented. The
company has not determined the effect on its EPS from the adoption of
this statement.
Note 3. The Company is currently working to secure a funding through private
placements which will provide the funds necessary for the Company to
execute its aggressive Business and Marketing Plans.
7
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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 Litigation Reform Act of 1995.
Such forward-looking statements involve risks and uncertainties so 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, special
venue 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 licensed its software to special venues including Knott's Berry
Farm, the West Edmonton Mall and a traveling mobile theater with Great West
Entertainment (GWE). In the upcoming months the Company will aggressively seek
to market its technology and software to special venue markets and anticipates
the sale of a minimum of an additional 3 theaters by year end. The software
planned for exhibition in each location consists of the Company's films, its
music library and video library of the "ON TOUR" concert series as well as a
new joint venture production with an X-Games theme with Bella Blu Productions
scheduled for fall of 1997. An agreement has also been reached for the
Company's short film, "Edge of Reality" to be rented for a 3D film festival in
the summer of 1998.
The Company has established multiple economic models for the sale and licensing
of its technology and software including: leasing agreements, owned and
operated theaters, outright purchases, retro-fitted theaters, and joint venture
partnerships. The goal in providing such options is to be able to satisfy cash
flow requirements for the exhibitors. Revenues realized from each licensing
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
is currently involved in negotiations with many theme park executives to
develop 3D theaters and custom 3D productions to be distributed to multiple
locations.
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 perf. camera system and the continued development and
marketing of digital, video, and broadcast exhibition. The significance of the
six-perf. 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.
The current facilities have been deemed adequate to support the current
operations of the Company.
8
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The Company expects to expand payroll within the next 12 months as the need for
more sales and marketing expertise arises. The Company also anticipates
expansion of committed 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.
Since the last 10Q filing the company has made no significant changes in the
plan of operations.
LIQUIDITY
---------
The Company is currently working with several venture capital groups to fund
both the Company's G&A, 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 debt or equity
financing or public financial markets. For the purpose of general operations
and production needs, the Company anticipates the need for funding of
approximately $3,500,000 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, recent 3D network events by NBC and ABC
have lended credence 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
portions 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 or atypical factors that would
suggest seasonal demand.
9
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NV ENTERTAINMENT, INC.
PART II - OTHER INFORMATION
Items 1 through 5. Not Applicable
Item 6. Exhibits and Reports on Forms 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) There were no reports filed on Form 8-K during the
quarter ended July 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: September 19, 1997 /s/ RAY WILLENBERG JR.
----------------------
Ray Willenberg, Jr., President
Chief Executive Officer
Date: September 19, 1997 /s/ FRANK W. DEMILLE
--------------------
Frank W. DeMille
Chief Financial Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-START> NOV-01-1996
<PERIOD-END> JUL-31-1997
<CASH> 4353
<SECURITIES> 0
<RECEIVABLES> 7800
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 313686
<DEPRECIATION> (69112)
<TOTAL-ASSETS> 5207844
<CURRENT-LIABILITIES> 1110958
<BONDS> 0
0
2100000
<COMMON> 17111
<OTHER-SE> 1979774
<TOTAL-LIABILITY-AND-EQUITY> 5207844
<SALES> 61482
<TOTAL-REVENUES> 61482
<CGS> 14352
<TOTAL-COSTS> 1952216
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1890734)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1890734)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2190734)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
