U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB/A
(Mark One)
[X] Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
of 1934 For the quarterly period ended June 30, 2000
[] Transition report under Section 13 or 15 (d) of the Exchange Act
For the Transition period from ________ to __________
Commission file number 0-92402
----------------------------------------------------------
ON STAGE ENTERTAINMENT, INC.
---------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter
NEVADA 88-0214292
-------------------------------- ----------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
4625 W. NEVSO DRIVE, LAS VEGAS, NEVADA 89103
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (ZIP CODE)
(702) 253-1333
-----------------------------------------------
Issuer's Telephone Number, Including Area Code
-------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)
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 CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
Class Outstanding at August 11, 2000
----- ------------------------------
Common Stock, $0.01 par value 7,226,808
<PAGE>
ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
PAGE NO.
Part I. Financial Information
Item 1. Consolidated Financial Statements
Balance sheets......................................... 1
Statements of operations............................... 2-3
Statements of cash flows............................... 4
Notes to financial statements.......................... 5-7
Item 2. Management's Discussion and Analysis
Of Financial Condition and Results of Operations..... 8-15
Part II. Other Information
Item 1. Exhibits and Reports on Form 8-K....................... 16
Signatures........................................................ 17
Index of Exhibits................................................. 18
<PAGE>
This document contains certain forward-looking statements that are
subject to risks and uncertainties. Forward -looking statements include certain
information relating to potential new show openings, markets for On Stage
productions, the expansion of existing and potential gaming and tourist markets,
our exposure to various of existing and potential gaming industry, our
restructuring plans and the benefits we anticipate from restructuring, our
business strategy, our outstanding litigation matters and the defenses available
to us, the seasonality of our business, and the liquidity issues, as well as
information contained elsewhere in this report where current statements are
preceded by, followed by or include the words "believes", "expects"
"anticipates" or similar expression. For these statements, On Stage claims the
protection of the safe harbor for forward-looking statements contained in the
Private securities Litigation Reform act of 1955. The forward-looking statements
in this document are subject to risks and uncertainties that could cause the
assumptions underlying the forward-looking statements and the actual results to
differ materially from those expressed in or implied by the statements
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
December 31, June 30,
Assets 1999 2000
--------------- ---------------
(Unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents............................................. $ 374,587 $ 615,770
Accounts receivable, net.............................................. 1,249,619 951,171
Inventory............................................................. 234,579 218,117
Deposits.............................................................. 198,523 371,625
Prepaid and other assets.............................................. 238,274 372,719
Notes receivable from officers ........................................ 117,906 193,899
---------------- ----------------
Total current assets......................................... 2,413,488 2,723,301
---------------- ----------------
Property, equipment and leasehold improvements.............................. 23,720,804 16,553,319
Less: Accumulated depreciation and amortization............................ (5,176,244) (5,368,335)
---------------- ----------------
Property, equipment and leasehold improvements, net......................... 18,544,560 11,184,984
Direct acquisition costs (Note 4)........................................... 597,328 -
Deferred financing costs, net of amortization of $192,810 (Note 5).......... 927,190 -
---------------- ---------------
$ 22,482,566 $ 13,908,285
================ ===============
Liabilities and Stockholders' Equity
Current liabilities
Working capital line ................................................... $ 459,146 $ 139,315
Accounts payable and accrued expenses................................... 1,444,878 1,334,809
Accrued payroll and other liabilities................................... 3,937,951 4,670,478
Current maturities of long-term debt.................................... 15,398,282 15,395,164
Note payable to officer ................................................ - 20,841
---------------- ----------------
Total current liabilities............................................... 21,240,257 21,560,607
---------------- ----------------
Long-term debt, less current maturities..................................... 30,773 30,773
---------------- ----------------
Total liabilities and long-term debt............................. 21,271,030 21,591,380
---------------- ----------------
Commitments and contingencies (Note 3)
Stockholders' equity (deficiency)
Preferred stock, par value $1 per share, 1,000,000 shares
authorized; none issued and outstanding............................ - -
Common stock, par value $0.01 per share; authorized 25,000,000
Shares; 7,226,808 shares issued and outstanding................... 72,268 72,268
Additional paid-in-capital.............................................. 11,430,336 11,430,336
Accumulated deficit................................................... (10,291,068) (19,185,699)
---------------- ----------------
Total stockholders' equity (deficiency)........................... 1,211,536 (7,683,095)
$ 22,482,566 $ 13,908,285
============= ============
</TABLE>
See notes to consolidated financial statements.
1
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
Three months ended
June 30,
--------------------
1999 2000
--------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net revenue .................................................................... $ 7,403,008 $ 7,151,490
Costs of revenues............................................................... 5,379,324 5,674,062
---------------- -----------------
Gross profit.................................................................... 2,023,684 1,477,428
Selling, general & administrative............................................... 1,035,952 737,772
Depreciation and amortization................................................... 353,534 260,351
Restructuring charges........................................................... 262,793 -
---------------- -----------------
Operating income................................................................ 371,405 479,305
Interest expense, net........................................................... 1,019,838 1,159,924
Loss on disposition of fixed assets............................................. - (5,856)
---------------- -----------------
Net loss........................................................................ $ (648,433) $ (686,475)
================ =================
Basic and diluted loss per share................................................ $ (0.09) $ (0.10)
================ =================
Basic and diluted average number of common shares outstanding................... 7,354,676 7,226,808
================ =================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
Six months ended
June 30,
--------------------------------------
1999 2000
--------------- ----------------
(Unaudited) (Unaudited)
<S> <C> <C>
Net revenues.................................................................... $13,675,247 $ 13,257,247
Costs of revenues............................................................... 10,829,833 10,891,966
---------------- -----------------
Gross profit.................................................................... 2,845,414 2,365,281
Selling, general & administrative............................................... 2,081,868 1,332,787
Depreciation and amortization................................................... 603,601 1,201,822
Write down of assets held for sale and subject for foreclosure (Note 6)........ - 6,861,718
Restructuring charges .......................................................... 262,793 -
---------------- -----------------
Operating loss.................................................................. (102,848) (7,031,046)
Interest expense, net........................................................... 1,429,149 1,857,729
Loss on disposition of fixed assets............................................. - (5,856)
Net loss........................................................................ $ (1,531,997) $ (8,894,631)
================ =================
Basic and diluted loss per share................................................ $ (0.21) $ (1.23)
================ =================
Basic and diluted average number of common shares outstanding................... 7,459,597 7,226,808
================ =================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
On Stage Entertainment, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
Six months ended
June 30,
------------------------------------------
1999 2000
----------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities
Net loss.............................................................. $ (1,531,997) (8,894,631)
----------------- -------------------
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization....................................... 676,087 1,201,822
Write-down of assets held for sale and subject to foreclosure....... - 6,861,719
Write-down of deferred financing charges............................ - 927,190
Loss on disposal of fixed assets.................................... - 5,856
Accounts receivable............................................ 180,505 298,448
Inventory...................................................... (4,438) 16,462
Deposits....................................................... (223,792) (173,102)
Prepaid and other assets....................................... (73,151) (134,445)
Accounts payable and accrued expenses.......................... (143,496) (145,485)
Accrued payroll and other liabilities.......................... 794,769 732,527
------------------ --------------------
Total adjustments................................................... 1,206,484 9,590,992
------------------ --------------------
Net cash provided (used in) operating activities............................. (325,513) 696,361
------------------ --------------------
Cash flows from investing activities
Advances on notes receivable from officer........................... (31,950) (75,993)
Payments received on notes receivable from officer.................. 15,526 -
Capital expenditures........................................... (42,538) (77,085)
------------------ --------------------
Net cash provided (used in) investing activities............................. (58,962) (153,078)
------------------ --------------------
Cash used in financing activities
Borrowings/repayments under working capital line (Note 5)..... (127,834) (319,823)
Repayment on long-term borrowing.............................. (263,976) (3,118)
Notes payable to officer...................................... 300,000 20,841
Cash received on notes payable from officer................... (83,000) -
Issuance of common stock...................................... 100,050 -
-------------------- --------------------
Net cash provided by (used in) financing activities.......................... (74,760) (302,100)
------------------ --------------------
Effect of exchange rate changes on cash and cash equivalents................. (84,456) -
------------------ --------------------
Net decrease in cash and cash equivalents.................................... (543,691) 241,183
Cash and cash equivalents at beginning of period............................. 1,009,768 374,587
------------------ --------------------
Cash and cash equivalents at end of period................................... $ 466,077 $ 615,770
================== ====================
Supplemental disclosure of cash flow information Cash paid during the period
for:
Interest............................................................. $ 460,827 $ 7,703
================== ====================
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
Supplemental Schedule of Non-Cash Investing and Financing Activities
On June 2000 On Stage sold equipment with historical cost of approximately
$8000, at a loss of $5,856.
On Stage Entertainment, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
June 30, 1999
Basis of Presentation
The financial statements included in this report include the accounts of On
Stage Entertainment, Inc., a publicly traded Nevada corporation and its
subsidiaries: Legends in Concert, Inc., a Nevada corporation; On Stage
Marketing, Inc., a Nevada corporation; On Stage Theaters, Inc., a Nevada
corporation; Wild Bill's California, Inc., a Nevada corporation; Blazing Pianos,
Inc., a Nevada corporation; King Henry's Inc., a Nevada corporation; On Stage
Merchandise, Inc., a Nevada corporation; On Stage Events, Inc., a Nevada
corporation; On Stage Casino Entertainment, Inc., a Nevada corporation; On Stage
Productions, Inc., a Nevada corporation; On Stage Theaters North Myrtle Beach,
Inc., a Nevada corporation; and On Stage Theaters Surfside Beach, Inc., a Nevada
corporation.
In the opinion of the management of On Stage Entertainment, Inc. and
Subsidiaries, the accompanying unaudited consolidated financial statements
include all normal adjustments considered necessary to present fairly the
financial position as of June 30, 2000, and the results of operations and cash
flows for the three months ended June 30, 2000 and 1999. Interim results are not
necessarily indicative of results for full year. The consolidated financial
statements and notes are presents as permitted by form 10-Q, and do not contain
information included in the Company's audited consolidated financial statements
and notes for the fiscal year ended December 31, 1999.
(1) Loss per share
Statement of Financial Accounting Standard No. 128 provides a different
method of calculating earnings per share than is currently used in accordance
with APB 15, Earnings per Share. SFAS 128 provides for the calculation of Basic
and Diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted
earnings per share reflect the potential dilution of securities that could share
in the earnings of the entity, similar to fully diluted earnings per share. SFAS
128 is effective for fiscal years and interim periods after December 15, 1997.
We have adopted this pronouncement during the fiscal year ended December 31,
1997.
For the six months ended June 30, 1999, potential dilutive securities
representing 1,121,550 outstanding stock options and 3,660,155 outstanding
warrants are not included, since their effect would be anti-dilutive. For the
six months ended June 30, 2000, potential dilutive securities representing
1,224,850 outstanding stock options and 3,660,155 outstanding warrants are not
included, since their effect would be anti-dilutive.
(2) Commitments and Contingencies
We are a party to various legal proceedings in which the adverse parties
are seeking damages from us. While there can be no assurance that any of the
instituted or threatened lawsuits will be settled or decided in favor of us, the
management of On Stage does not believe the final resolution of these matters
will have a material adverse effect upon the our financial condition and results
of operations.
5
<PAGE>
(3) Going Concern
The accompanying consolidated financial statements have been prepared
assuming that On Stage will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal 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, On Stage has suffered recurring operating losses, has a working
capital deficit of $18,837,000 and has defaulted on its long-term debt. These
factors raise substantial doubt about the ability to continue as a going
concern. The consolidated financial statements do not include any adjustments
that might result from the outcome of those uncertainties.
On Stage has historically met its working capital requirements through a
combination of cash flow from operations, equity and debt offerings and
traditional bank financing. On Stage anticipate, based on our proposed plans and
assumptions relating to our operations that the current cash, cash equivalent
balances, anticipated revenue from operations are insufficient to fund our
ongoing operations.
Management plans to manage short-term liquidity concerns through the
renegotiations of its expired working capital line, capital leases and mortgage
facilities. On Stage has either closed down or restructured any business units
that are not generating positive cash flow. In addition, the we have lowered
selling, general and administrative costs as a percent of net revenues from
15.2% for the six months ended June 30, 1999, to 10.1% for the six months ended
June 30, 2000 and continues to downsize and restructure its selling, general and
administrative functions.
In addition, On Stage is continuing its efforts to secure working capital
for operations, expansion and possible acquisitions, mergers, joint ventures,
and/or other business combinations. However, there can be no assurance that On
Stage will be able to secure additional capital or that if such capital is
available, whether the terms or conditions would be acceptable to us. While we
are currently in settlement negotiations with ICCMIC and First Security Bank,
there can be no assurance that we will be successful with reaching a settlement
with either party.
(4) Direct acquisition costs
On March 31, 2000, On Stage wrote-off direct acquisition costs totaling
$597,238, which had no future value.
(5) Deferred financing charges
On June 30, 2000, On Stage wrote-off deferred financing charges totaling
$927,190, which had no future value.
(6) Foreclosing procedures
On May 1, 2000, we entered into a partial settlement with our first
mortgage lender, Imperial Credit Commercial Mortgage Investment Corp.
("ICCMIC"), pursuant to which we agreed not to take measures to prevent ICCMIC
from foreclosing upon the Fort Liberty, King Henry's Feast and Legends in
Concert Surfside Beach theaters in exchange for an aggregate credit of $9.0mm
for its Fort Liberty ($3.0mm), King Henry's Feast ($4.0mm) and Legends in
Concert Surfside Beach ($2.0mm) theaters. Additionally, we agreed to operate the
King Henry's and Fort Liberty Theaters until June 21, 2000, at which time the
theaters were closed to the public. We are continuing to work with ICCMIC to
generate a sale of the Legends in Concert Surfside Beach Theater to a purchaser
who would be interested in leasing the venue back to us so that we can continue
to operate our show therein. In the meantime, ICCMIC has allowed us to continue
to publicly present our show at the theater until it can be sold and leased back
to us as set forth above.
6
<PAGE>
(7) Segment information
The following information is presented in accordance with SFAS No. 131,
which was adopted by the Company in the fourth quarter of 1998.
The Company derives its net revenues from five reportable segments:
o Casinos. The Casinos segment primarily sells live theatrical productions to
casinos worldwide for a fixed fee. In addition, this Casinos segment also
operates our Legends show at the Imperial Palace in Las Vegas, Nevada and
Biloxi, Mississippi and at Bally's Park Place in Atlantic City, New Jersey.
o Theaters. The Theaters segment owns and /or rents live theaters and dinner
theaters in urban and resort tourist locations primarily in the United
States. This Theaters segment derives revenues from the sale of tickets
along with food and beverages to patrons who attend our live theatrical
productions.
o Events. The Events segment sells live theatrical productions to commercial
clients, which include corporations, theme and amusement parks and cruise
lines for a fixed fee. Revenues generated from the Events segment are
included in the Casinos segment.
o Merchandise. The Merchandise segment sells merchandise and souvenir
photography products to patrons who attend our Casinos, Theaters, and
Events productions. Revenues generated from the merchandise segment are
included in the Theaters segment.
o Production Services. The Production Services segment sells technical
equipment and services to commercial clients. However, the Production
Services segment's primary focus is to provide technical support for all of
the Casinos, Theaters, Events and Merchandise segments.
The accounting policies of the reportable operating segments are the same
as those described in the Summary of Accounting Policies. The Company's
management evaluates the performance of its operating segments based upon the
profit or loss from operations. On Stage reportable segments are strategic
business units because each business unit services a different market or
performs a specialized function in support of a given market.
The following table sets forth the segment profit/(loss) and asset information
<TABLE>
For the six months ended June 30, 1999
-------------- -------------- ------------- ------------- ----------------
Total
Casino Production Theaters OSE Consolidated
-------------- -------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Revenues from external customers $ 4,848,049 $ 45,499 $ 8,781,699 $ - $ 13,675,247
Interest expense $ 27 $ 1,123 $ 1,323,694 $ 104,305 $ 1,429,149
Depreciation and amortization $ 185,583 $ 43,923 $ 280,397 $ 93,698 $ 603,601
Segment profit (loss) $ 1,246,182 $ (342,939) $(1,092,935) $(1,342,305) $ (1,531,997)
Segment assets $ 3,182,401 $ 775,783 $18,336,767 $ 1,861,576 $ 24,156,527
Additions to long-lived assets $ 20,091 $ - $ 22,447 $ - $ 42,538
</TABLE>
<TABLE>
For the six months ended June 30, 2000
-------------- -------------- ------------- ------------- ----------------
Total
Casino Production Theaters OSE Consolidated
-------------- -------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Revenues from external customers $ 4,959,682 $ 24,075 $ 8,273,490 $ - $ 13,257,247
Interest expense $ 2,028 $ - $ 1,809,515 $ 46,186 $ 1,857,729
Depreciation and amortization $ 200,057 $ 54,146 $ 241,874 $ 705,745 $ 1,201,822
Segment profit (loss) $ 1,308,421 $ (412,517) $ (8,299,049) $(1,491,486) $ (8,894,631)
Segment assets $ 3,216,367 $ 899,897 $ 10,572,140 $ 1,865,215 $ 16,553,319
Additions to long-lived assets $ 8,064 $ 11,971 $ 48,730 $ 8,320 $ 77,085
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This document contains certain forward-looking statements that are subject
to risks and uncertainties. Forward-looking statements include certain
information relating to potential new show openings, the potential markets for
On Stage's productions, the expansion of existing and potential gaming and
tourist markets, our exposure to various trends in the gaming industry, our
acquisition plans and the benefits we anticipate from these acquisitions, our
business strategy, our outstanding litigation matters and the defenses available
to us, the seasonality of our business, and liquidity issues, as well as
information contained elsewhere in this report where current statements are
preceded by, followed by or include the words "believes," "expects,"
"anticipates" or similar expressions. For these statements, On Stage claims the
protection of the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
in this document are subject to risks and uncertainties that could cause the
assumptions underlying the forward-looking statements and the actual results to
differ materially from those expressed in or implied by the statements.
The most important factors that could prevent On Stage from achieving our
goals and cause the assumptions underlying the forward-looking statements and
the actual results to differ materially from those expressed in or implied by
those forward-looking statements include the information provided under the
heading "Description of Business-Risk Factors" in Item 1 of our Annual Report on
Form 10-KSB for the year ended December 31, 1999, as well as the following:
o On Stage's dependence on our flagship Legends in Concert production and our
principal production venues; o The ability to successfully produce and
market new productions and to manage the growth associated with the any new
productions;
o Risks associated with our acquisition strategy, including our ability to
successfully identify, complete and integrate strategic acquisitions;
o The ability to meet our commitments under our credit facilities, which are
currently in default, and to obtain alternative, additional financing on
commercially reasonable terms;
o The ability to continue as an ongoing concern;
o The competitive nature of the leisure and entertainment industry and the
ability to continue to distinguish our services;
o Fluctuations in quarterly operating results and the highly seasonal nature
of our business;
o The ability to reproduce the performance, likeness and voice of various
celebrities without infringing on the publicity rights of those celebrities
or their estates, as well as our ability to protect our intellectual
property rights;
o The ability to successfully manage the litigation pending against us and to
avoid future litigation;and
o The results of operations which depend on numerous factors, including the
commencement and expiration of contracts, the timing and amount of new
business generated by us, our revenue mix, the timing and level of
additional selling, general and administrative expense and the general
competitive conditions in the leisure and entertainment industry as well as
the overall economy.
8
<PAGE>
Results of Operations
The following tables set forth, the results of operations for the
reportable segments indicated:
<TABLE>
For the quarter ended June 30, 1999
-------------- ------------- -------------- --------------- ---------------- ---------------
Sub-Total
Operating Total
Casino Production Theaters Segments OSE Consolidated
-------------- ------------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................$ 2,274,856 $ 26,929 $ 5,101,223 $ 7,403,008 $ - $ 7,403,008
Cost of revenues............. 1,437,970 170,628 3,770,726 5,379,324 - 5,379,324
-------------- ------------- -------------- --------------- ---------------- ---------------
Gross profit (loss).......... 836,886 (143,699) 1,330,497 2,023,684 - 2,023,684
Selling, general &
administrative............... 132,112 - 425,132 557,244 478,708 1,035,952
Depreciation & amortization.. 86,204 22,029 199,724 307,957 45,577 353,534
Restructuring charges 10,000 - 113,359 123,359 139,434 262,793
-------------- ------------- -------------- --------------- ---------------- ---------------
Operating income (loss)...... 608,570 (165,728) 592,282 1,035,124 (663,719) 371,405
Interest expense, net........ 27 - 966,804 966,831 53,007 1,019,838
-------------- ------------- -------------- --------------- ---------------- ---------------
Net income (loss)............ $ 608,543 $ (165,728) $ (374,522) $ 68,293 $ (716,726) $ (648,433)
============== ============= ============== =============== ================ ===============
</TABLE>
<TABLE>
For the quarter ended June 30, 2000
-------------- ------------- -------------- --------------- ---------------- ---------------
Sub-Total
Operating Total
Casino Production Theaters Segments OSE Consolidated
-------------- ------------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................$ 2,486,233 $ 13,405 $ 4,651,852 $ 7,151,490 $ - $7,151,490
Cost of revenues............. 1,657,216 196,543 3,820,303 5,674,062 - 5,674,062
-------------- ------------- -------------- --------------- ---------------- ---------------
Gross profit (loss).......... 829,017 (183,138) 831,549 1,477,428 - 1,477,428
Selling, general &
administrative............... 115,257 - 194,827 310,084 427,688 737,772
Depreciation & amortization.. 99,977 27,137 84,729 211,843 48,508 260,351
-------------- ------------- -------------- --------------- ---------------- ---------------
Operating income (loss)...... 613,783 (210,275) 551,993 955,501 (476,196) 479,305
Interest expense, net........ 399 - 1,140,147 1,140,546 19,378 1,159,924
Loss on disposal of fixed
assets................... - - 5,856 5,856 - 5,856
-------------- ------------- -------------- --------------- ---------------- ---------------
Net income (loss)............ $ 613,384 $ (210,275) $ (594,010) $ (190,901) $ (495,574) $ (686,475)
============== ============= ============== =============== ================ ===============
</TABLE>
9
<PAGE>
<TABLE>
For the six months ended June 30, 1999
-------------- ------------- -------------- --------------- ----------------- --------------
Sub-Total
Operating Total
Casino Production Theaters Segments OSE Consolidated
-------------- ------------- -------------- --------------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.................$ 4,848,049 $ 45,499 $ 8,781,699 $ 13,675,247 $ - $ 13,675,247
Cost of revenues............. 3,082,748 343,392 7,403,693 10,829,833 - 10,829,833
-------------- ------------- -------------- --------------- ----------------- --------------
Gross profit (loss).......... 1,765,301 (297,893) 1,378,006 2,845,414 - 2,845,414
Selling, general &
administrative............... 323,509 - 753,491 1,077,000 1,004,868 2,081,868
Depreciation & 185,583 43,923 280,397 509,903 93,698 603,601
amortization.................
Restructuring charges........ 10,000 - 113,359 123,359 139,434 262,793
-------------- ------------- -------------- --------------- ----------------- --------------
Operating income (loss)...... 1,246,209 (341,816) 230,759 1,135,152 (1,238,000) (102,848)
Interest expense, net........ 27 1,123 1,323,694 1,324,844 104,305 1,429,149
-------------- ------------- -------------- --------------- ----------------- --------------
Net income (loss)............$ 1,246,182 $ (342,939) $ (1,092,935) $ (189,692) $ (1,342,305) $ (1,531,997)
============== ============= ============== =============== ================= ==============
</TABLE>
<TABLE>
For the six months ended June 30, 2000
-------------- ------------- -------------- --------------- ---------------- ---------------
Sub-Total
Operating Total
Casino Production Theaters Segments OSE Consolidated
-------------- ------------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. $4,959,682 $ 24,075 $ 8,273,490 $ 13,257,247 $ - $ 13,257,247
Cost of revenues............. 3,207,288 382,446 7,302,232 10,891,966 - 10,891,966
-------------- ------------- -------------- --------------- ---------------- ---------------
Gross profit (loss).......... 1,752,394 (358,371) 971,258 2,365,281 - 2,365,281
Selling, general &
administrative............... 241,888 - 351,344 593,232 739,555 1,332,787
Depreciation &
amortization................. 200,057 54,146 241,874 496,077 705,745 1,201,822
Loss on write-down of assets. - - 6,861,718 6,861,718 - 6,861,718
-------------- ------------- -------------- --------------- ---------------- ---------------
Operating income (loss)...... 1,319,449 (412,517) (6,483,678) (5,585,746) (1,445,300) (7,031,046)
Interest expense, net........ 2,028 - 1,809,515 1,811,543 46,186 1,857,729
Gain (loss) on disposition
of fixed assets............ - - (5,856) (5,856) - (5,856)
-------------- ------------- -------------- --------------- ---------------- ---------------
Net income (loss)............$ 1,308,421 $ (412,517) $ (8,299,049) $ (7,403,145) $ (1,491,486) $ (8,894,631)
============== ============= ============== =============== ================ ===============
</TABLE>
10
<PAGE>
Quarter Ended June 30, 1999 versus Quarter Ended June 30, 2000
Net Revenues. Revenues were approximately $7,151,000 for the quarter ended
June 30, 2000 compared to $7,403,000 for the quarter ended June 30, 1999 a
decrease of $252,000, or 3.4%. Our revenue is derived from five principal
operating segments: Casinos, Events, Merchandise, Production Services, and
Theaters. Revenues from Events are included in the Casino segment. Revenues from
Merchandise are included in the Theaters segment.
Casinos revenues were approximately $2,486,000 for the quarter ended June
30, 2000 compared to $2,275,000 for the quarter ended June 30, 1999, an increase
of $211,000, or 9.3%. Contributing to this increase were the addition of new
Legends shows at the Imperial Palace in Biloxi, Mississippi, the addition of new
Legends show on Premier Cruise Lines and the increases in revenue attributable
to limited engagements and corporate events. These increases were partially
offset by a decrease in revenue at the Legends show at the Imperial Palace and
Casino, in Las Vegas, Nevada.
Production Services revenues were approximately $13,000 for the quarter
ended June 30, 2000 compared to $27,000 for the quarter ended June 30, 1999. The
decrease was attributable to a decrease in equipment rentals.
Theaters revenues were approximately $4,652,000 for the quarter ended June
30, 2000 compared to $5,101,000 for the quarter ended June 30, 1999, a decrease
of $449,000, or 8.8%. This decrease was primarily attributable to decreases in
revenues generated by On Stage's dinner theaters and the discontinuation of the
Legends show at the Sheraton Centre Hotel in Toronto, Canada.
Costs of Revenues. Total costs of revenues were $5,674,000 for the quarter
ended June 30, 2000 compared to $5,379,000 for the quarter ended June 30, 1999,
an increase of $295,000, or 5.5%. Costs of revenues increased to 79.3% of net
revenues for the quarter ended June 30, 2000, as compared to 72.7% for the
quarter ended June 30, 1999. This increase in cost of sales as a percentage of
revenues was primarily attributable to a change in the mix of our revenues.
Selling, General and Administrative. Selling, general and administrative
costs were approximately $738,000 for the quarter ended June 30, 2000 as
compared to $1,036,000 for the quarter ended June 30, 1999, a decrease of
$298,000, or 28.8%. This is primarily attributable to our reduction of overhead
associated with the discontinuation of our "roll-out" strategy. Selling, general
and administrative costs decreased to 10.0% of net revenues for the quarter
ended June 30, 2000, as compared to 14.0% for the quarter ended June 30, 1999.
Depreciation and Amortization. Depreciation and amortization for the
quarter ended June 30, 2000 decreased by $93,000, or 26.4%, as compared to the
quarter ended June 30, 1999. The decrease was primarily due to the write down of
assets held for sale and subject to foreclosure.
Restructuring Charges. Restructuring charges represents expenses related to
the closing of the Legends show in Toronto, Canada, payment of
employment-related severance and termination benefits, legal expenses, and
relocation expenses of a key executive.
11
<PAGE>
Operating Income. Our operating income was approximately $479,000 for the
quarter ended June 30, 2000 compared to an operating income of $371,000 for the
quarter ended June 30, 1999.
Interest Expense, Net. Interest expense for the quarter ended June 30, 2000
increased by $141,000, or 13.9% as compared to the quarter ended June 30, 1999.
The increase was primarily due to interest accrued on the Imperial Credit debt,
together with penalties and default interest rates.
Income Taxes. On Stage is a Nevada corporation with a substantial portion
of revenue and income derived in Nevada. There are no state or local income
taxes in Nevada. We have not accrued any federal income tax for the quarter
ended June 30, 1999. At June 30, 1999 and 2000, we had federal net operating
loss carryforwards of approximately $7,907,000 and $17,290,000, respectively.
Under Section 382 of the Internal Revenue Code, certain significant changes in
ownership that On Stage is currently undertaking may restrict the future
utilization of these tax loss carryforwards. The net deferred tax assets have a
100% valuation allowance, as management cannot determine if it is more likely
than not that the deferred tax assets will be realized.
Six Months Ended June 30, 1999 versus Six Months Ended June 30, 2000
Net Revenues. Revenue were approximately $13,257,000 for the six months
ended June 30, 2000 compared to $13,675,000 for the six months ended June 30,
1999 a decrease of $418,000, or 3.1%. Our revenue is derived from five principal
operating segments: Casinos, Events, Merchandise, Productions and Theaters.
Revenues from Events are included in the Casino segment. Revenues from
Merchandise are included in the Theaters segment.
Casinos revenues were approximately $4,960,000 for the six months ended
June 30, 2000 compared to $4,848,000 for the six months ended June 30, 1999, an
increase of $112,000, or 2.3%. Contributing to this increase were the addition
of new Legends shows at the Imperial Palace in Biloxi, Mississippi, the addition
of new Legends shown on Premier Cruise Lines and the increases in revenue
attributable to limited engagements and corporate events. These increases were
partially offset by a decrease in revenue at the Legends show at the Imperial
Palace and Casino, in Las Vegas, Nevada.
Production Services revenues were approximately $24,000 for the six months
ended June 30, 2000 compared to $45,000 for the six months ended June 30, 1999.
The decrease was attributable to a decrease in equipment rentals.
Theaters revenues were approximately $8,273,000 for the six months ended
June 30, 2000 compared to $8,782,000 for the six months ended June 30, 1999, a
decrease of $509,000, or 5.8%. This decrease was primarily attributable to
decreases in revenue generated by On Stage's theaters in Orlando, Florida,
Legends show in Myrtle Beach, South Carolina and the discontinuation of the
Legends show in Toronto, Canada.
12
<PAGE>
Costs of Revenues. Total costs of revenues were $10,892,000 for the six
months ended June 30, 2000 compared to $10,830,000 for the six months ended June
30, 1999, an increase of $62,000, or 0.6%. Costs of revenues increased to 82.2%
of net revenues for the six months ended June 30, 2000, as compared to 79.2% for
the six months ended June 30, 1999. This increased in cost of sales as a
percentage of revenues was primarily attributable to a change in the mix of our
revenues.
Selling, General and Administrative. Selling, general and administrative
costs were approximately $1,333,000 for the six months ended June 30, 2000 as
compared to $2,082,000 for the six months ended June 30, 1999, a decrease of
$749,000, or 36.0%. Selling, general and administrative costs decreased to 10.1%
of net revenues for the six months ended June 30, 2000, as compared to 15.2% for
the six months ended June 30, 1999. This is primarily attributable to our
reduction of overhead associated with the discontinuation of our roll-out"
strategy.
Depreciation and Amortization. Depreciation and amortization for the six
months ended June 30, 2000 increased by $598,000, or 99.1%, as compared to the
six months ended June 30, 1999. The increase was primarily due to the write-off
of the direct acquisition costs.
Restructuring Charges. Restructuring charges represents expenses related to
the closing of the Legends show in Toronto, Canada, payment of
employment-related severance and termination benefits, legal expenses, and
relocation expenses of a key executive.
Operating Loss. On Stage's operating loss were approximately $7,031,000 for
the six months ended June 30, 2000, compared to an operating loss of $103,000
for the six months ended June 30, 1999, an increase of $6,928,000.
Interest Expense, Net. Interest expense for the six months ended June 30,
2000 increased by $429,000, or 30.0% as compared to the six months ended June
30, 1999. The increase was primarily due to interest accrued on the Imperial
Credit debt, together with penalties and default interest rates.
Income Taxes. On Stage is a Nevada corporation with a substantial portion
of revenue and income derived in Nevada. There are no state or local income
taxes in Nevada. We have not accrued any federal income tax for the six months
ended June 30, 2000. At June 30, 1999 and 2000, we had federal net operating
loss carryforwards of approximately $7,907,000 and $17,290,000 respectively.
Under Section 382 of the Internal Revenue Code, certain significant changes in
ownership that On Stage is currently undertaking may restrict the future
utilization of these tax loss carryforwards. The net deferred tax assets have a
100% valuation allowance, as management cannot determine if it is more likely
than not that the deferred tax assets will be realized.
Seasonality and Quarterly Results
On Stage's business has been, and is expected to remain, highly seasonal,
with the majority of our revenue being generated during the months of April
through October. Part of our business strategy is to increase sales in tourist
markets that experience their peak seasons from November through March, so as to
offset this seasonality in revenues.
The following table sets forth On Stage's net revenue for each of the last
six quarters ended June 30, 2000:
<TABLE>
Net Revenues ($ in thousands)
<S> <C> <C> <C> <C>
March 31, June 30, September 30, December 31,
--------- -------- ------------- ------------
Fiscal 1999....... $ 6,272 $ 7,403 $8,059 $7,819
Fiscal 2000....... $ 6,106 $ 7,151
</TABLE>
13
<PAGE>
Liquidity and Capital Resources
General
On Stage has historically met its working capital requirements through a
combination of cash flow from operations, equity and debt offerings and
traditional bank financing. On Stage anticipate, based on our proposed plans and
assumptions relating to our operations (including assumptions regarding the
anticipate timetable of our new show openings and the costs associated
therewith), that On Stage current cash, cash equivalent balances, anticipated
revenue from operation and our working capital line will not be sufficient to
fund our ongoing operations and contemplated capital requirements over the next
12 months.
Going Concern
On Stage has suffered recurring operating losses, has a working capital
deficit of $18,837,000, and has defaulted on our long-term debt. These factors
raise substantial doubt about our ability to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of those uncertainties. These repots of On Stage
independent certified public accountant for the year ended December 31, 1999
contains an explanatory paragraph regarding the uncertainty of our ability to
continue as a going concern.
Management plans to manage short-term liquidity concerns through the
renegotiation of its expired working capital line, capital leases and mortgage
facilities. On Stage has either closed down or restructured any business units
that are not generating positive cash flow. In addition, On Stage has lowered
selling, general and administrative costs as a percentage of revenues from 15.2%
for the six months ended June 30, 1999, 10.1% for the six months ended June 30,
2000 and continues to downsize and restructure our selling, general and
administrative.
In addition, On Stage is continuing its efforts to secure working capital
for operations, expansion and possible acquisitions, mergers, joint ventures,
and/or other business combinations. However, there can be no assurance that On
Stage will be able to secure additional capital or that if such capital is
available, whether the terms or conditions would be acceptable to us. While we
are currently in settlement negotiations with ICCMIC and First Security Bank,
there can be no assurance that we will be successful with reaching a settlement
with either party
Cash Flow
For the six months ended June 30, 1999, On Stage had net cash deficit used
by operations of approximately $325,000. As of June 30, 1999, On Stage had
approximately $466,000 in cash and cash equivalents. The operating deficit was
primarily attributable to pre-opening costs for new shows and business
seasonality. For the six months ended June 30, 2000, On Stage had net cash
provided by operations of approximately $696,000. As of June 30, 2000, On Stage
had approximately $616,000 in cash and cash equivalents. The cash provided by
operations was primarily attributable to the write down of assets and write off
of deferred financing costs.
The net cash used in investing activities for the six months ended June 30,
1999 of $59,000 was primarily attributable to capital expenditures. The net cash
used in investing activities for the six months ended June 30, 2000 of $153,000,
was primarily attributable to capital expenditures and advances on note
receivable from stockholder.
Net cash used by financing activities for the six months ended June 30,
1999 of $75,000, was attributable to notes payable from officer and issuance of
common stock, offset by repayment of long-term borrowing and repayment of
working capital line. Net cash used by financing activities for the six months
ended June 30, 2000 of $302,000 was primarily attributable to repayment of line
of credit and long-term debt.
14
<PAGE>
Working Capital
At June 30, 1999, we had a working capital deficit of approximately
$17,927,000 primarily attributable from an increase in the accrued expenses,
accrued payroll and other liabilities, notes payable to officer and the default
acceleration of our lease and loan from First Security and Imperial Credit to
current liabilities. At June 30, 2000, we had working capital deficit of
approximately $18,837,000 which resulted primarily from increase in the accrued
expenses, accrued payroll and other liabilities, notes payable to officer and
the default acceleration of our lease and loan from First Security and Imperial
Credit to current liabilities. Because of the recurring losses, the working
capital deficit and the loan defaults, our auditors issued a going concern
opinion for the year ended December 31, 1999.
Working Capital Line
In May 1997, First Security Bank of Nevada ("First Security") issued a line
of credit to us for up to $250,000. Borrowings under such facility bear variable
interest at 1.5% over the First Security Bank of Idaho's index (10% per year as
of the facility's inception) and are due on demand. John W. Stuart has
personally guaranteed this line of credit.
On March 28, 1998, First Security agreed to increase this line of credit
from $250,000 to $1,000,000 and the expiration date was extended to March 25,
1999. As of December 31, 1998, On Stage had drawn $1,000,000 on the line of
credit. As of March 31, 1999, On Stage had failed to pay off any part of the
line of credit and is in default under its terms. On April 29, 1999, we received
a notice of default under the line of credit from First Security. As of June 30,
2000, amounts owed under the line of credit were $139,000.
Capital Equipment Financing Commitment
On September 29, 1997, First Security Leasing Company (First Security
Leasing), a Utah corporation, approved On Stage for a $1,000,000 lease line of
credit. Advances under the lease line incur interest at a rate of 9.75% per
annum. The lease line has been utilized in the following amounts: $389,290,
$442,997 and $167,713, commencing in April 1998 and May 1998, respectively, and
terminating on October 2001, September 2001 and November 2001. We also received
a notice of default under this line on April 29, 1999. As on June 30, 2000,
amounts owed under the lease line was $1,300,000.
Mortgage Financing Commitment
Theater Foreclosures. On May 1, 2000, we entered into a partial settlement
with our first mortgage lender, Imperial Credit Commercial Mortgage Investment
Corp. ("ICCMIC"), pursuant to which we agreed not to take measures to prevent
ICCMIC from foreclosing upon the Fort Liberty and King Henry's Feast theaters in
exchange for: (1) an aggregate credit of $9.0mm for its Fort Liberty ($3.0mm),
King Henry's Feast ($4.0mm) and Legends in Concert Surfside Beach ($2.0mm)
theaters; and (2) a thirty (30) day extension of time during which ICCMIC has
agreed: (i) to forego collection on its deficiency judgment in Nevada; and (ii)
to extend the foreclosure date on the Legends in Concert Surfside Beach theater.
Additionally, we agreed to operate the King Henry's and Fort Liberty Theaters
until June 21, 2000, at which time the theaters were closed to the public. We
are continuing to work with ICCMIC to generate a sale of the Legends in Concert
Surfside Beach Theater to a purchaser who would be interested in leasing the
venue back to us so that we can continue to operate our show therein. In the
meantime, ICCMIC has allowed us to continue to publicly present our show at the
theater until it can be sold and leased back to us as set forth above.
15
<PAGE>
PART II. OTHER INFORMATION
Item 1. Exhibits & Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
On Stage filed a Current Report on Form 8-K on May 5,2000 (Commission
File No: 000-29402)
On Stage filed a Current Report on Form 8-K on September 15, 2000
(Commission File No: 000-29402)
16
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ON STAGE ENTERTAINMENT, INC.
Date: November 16, 2000 By: /s/ John W. Stuart
---------------------------------
John W Stuart
Chairman and Chief Executive Officer
Date: Novemer 16, 2000 By: /s/ Pedro Perez
----------------------------------
Pedro Perez Chief Accounting Officer
17
