<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 31, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from___ to___
Commission file number 000-29169
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Neo Modern Entertainment Corp.
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(Exact name of small business issuer as specified in its charter)
California 95-4627285
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
442 N. La Cienega Blvd., Suite 206, West Hollywood, CA 90048
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(Address of principal executive offices)
(310) 652-7556
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(Issuer's telephone number)
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(Former name, former address and former fiscal year,
if changed since last report)
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [x]
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NEO MODERN ENTERTAINMENT CORP.
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet
March 31, 2000 and June 30, 1999 4
Statement of Operations
Nine Months and Three Months Ended
March 31, 2000 and 1999 5
Statement of Cash Flows
Nine Months and Three Months Ended
March 31, 2000 and 1999 6
Management's Discussion and Analysis or Plan
of Operation 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
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NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Certain statements contained in this Quarterly Report on Form 10-QSB that
are not statements of historical fact constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. These statements involve risks and uncertainties that may cause actual
results to differ materially from those in such statements.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
The accompanying interim unaudited financial statements have been
prepared in accordance with the instructions to Form 10-QSB and do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included, and the disclosures are adequate to
make the information presented not misleading. Operating results for the nine
months ended March 31, 2000 are not necessarily indicative of the results that
may be expected for the year ended June 30, 2000. These statements should be
read in conjunction with the financial statements and notes thereto included in
the Registration Statement on Form 10-SB filed with the Securities and Exchange
Commission.
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<PAGE>
NEO MODERN ENTERTAINMENT CORP.
BALANCE SHEET
<TABLE>
<CAPTION>
6/30/99
ASSETS 03/31/00 (audited)
------ -------------- --------------
<S> <C> <C>
Current assets:
Cash $ 224 $ 168
Subscription Receivables 22,500
-------------- --------------
Total current assets 224 22,668
Other assets:
Completed film less accumulated amortization of $355,248 and $340,248 respectively
(NOTE 4, 7, and 13) 110,000 125,000
Organization costs less accumulated amortization of $2,500 and $1,900 respectively (NOTE 8) 1,500 2,100
Projects in process (NOTE 4 and 7) 341,726 339,938
-------------- --------------
Total assets $ 453,450 $489,706
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payables & Accrued Expenses (NOTE 9) $ 159,315 $132,970
Long term liabilities (NOTE 10) 306,631 294,631
-------------- --------------
Total Liabilities 465,946 427,601
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Commitment and Contingencies: (Note 13)
Stockholders' equity:
Common stock $.001 par value; shares authorized 100,000,000 reserved for
stock option 13,513,182 issued and outstanding
9,810,459 and 5,172,386,245 respectively. (NOTE 11) 9,811 5,172
Preferred stock $.50 par value; authorized 20,000,000
shares; issued and outstanding, none
Paid-in capital 217,898 261,603
Retained earnings (deficit) (240,205) (204,670)
-------------- --------------
Total stockholders' equity (12,496) 62,105
-------------- --------------
Total liabilities and stockholders' equity $ 453,450 $489,706
============== ==============
</TABLE>
See accompanying notes to the financial statements.
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NEO MODERN ENTERTAINMENT CORP.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
July 1,1999 to January 1 to July 1,1998 to January 1 to
March 31, March 31, March 31, March 31,
2000 2000 1999 1999
----------------- ---------------- ---------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 15,000 $ - $ 5,707 $ -
----------------- ---------------- ---------------- -----------------
Costs and expenses:
Amortization of film costs 15,000 - 5,707 -
Administrative and general 16,173 4,841 22,507 6,491
Interest expense 19,362 4,000 12,000 4,000
----------------- ---------------- ---------------- -----------------
Total costs and expenses 50,535 8,841 40,214 10,491
----------------- ---------------- ---------------- -----------------
Loss before income taxes (35,535) (8,841) (34,507) (10,491)
Income tax (benefit) - - - -
----------------- ---------------- ---------------- -----------------
Net (loss) $ (35,535) $ (8,841) $ (34,507) $ (10,491)
================= ================ ================ =================
Loss per average share outstanding:
Basic and diluted $ (0.005) $ (0.001) $ (0.008) $ (0.002)
===================================== ====================================
Average number of outstanding shares
used in the per share calculation:
Basic and diluted 7,244,967 7,244,967 4,218,780 4,218,780
===================================== ====================================
</TABLE>
See accompanying notes to the financial statements.
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<PAGE>
NEO MODERN ENTERTAINMENT CORP.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
July 1,1999 to January 1 to July 1,1998 to January 1 to
March 31, March 31, March 31, March 31,
2000 2000 1999 1999
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net (loss) $ (35,535) $ (8,841) $ (34,507) $ (10,491)
Amortization of Film Cost and Organization Expense 15,600 200 6,507 200
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Changes in assets and liabilities:
Reduction of Recievables 22,500 15,000 - -
Increase (decrease) Accounts payables and accrued expenses 25,233 14,037 20,000 5,000
------------- -------------- ------------- ---------------
Net cash provided (applied) by operating activities 27,798 20,396 (8,000) (5,291)
------------- -------------- ------------- ---------------
Cash flows used in investing activities:
Film costs (1,788) (250) (50,856) -
------------- -------------- ------------- ---------------
Net cash used in investing activities (1,788) (250) (50,856) -
------------- -------------- ------------- ---------------
Cash used in financing activities:
Increase in Notes Payable 13,112 13,112 80,722 5,257
Proceeds from issuance of stocks 4,639 533 - -
Stock issuance cost (43,705) (34,277) (21,974) -
------------- -------------- ------------- ---------------
Net cash used in financing activities (25,954) (20,632) 58,748 5,257
------------- -------------- ------------- ---------------
Net increase in cash 56 (486) (108) (34)
Cash and cash equivalents at beginning of period 168 710 124 50
------------- -------------- ------------- ---------------
Cash and cash equivalents at end of period $ 224 $ 224 $ 16 $ 16
============= ============== ============= ===============
Supplemental disclosure of cash flow information:
Interest paid
============= ============== ============= ===============
Income taxes paid $ - $ - $ - $ -
============= ============== ============= ===============
</TABLE>
See accompanying notes to the financial statements.
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<PAGE>
NEO MODERN ENTERTAINMENT, CORP.
(A Development Stage Company)
Notes to Financial Statements
Note 1 Organization
The company was incorporated on March 19, 1997, under laws of the state
of California. The Company is engaged in the development, production and
distribution of motion pictures.
Note 2 Method of Accounting
Assets, liabilities, revenues and expenses are recorded under the
accrual method of accounting for both financial statements and income tax
purposes.
Note 3 Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires Management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from those estimates.
Note 4 Film Library and Projects under Development
Film Library and projects in progress are stated at the lower of
amortized cost or market. Upon completion, cost are amortized on an individual
production basis in the proportion of current gross revenues divided by the
Management's estimate of total gross revenues with such estimates being reviewed
at least quarterly pursuant to FASB 53.
Note 5 Income Taxes
Income taxes are accounted for in accordance with Statement of
Financial Accounting Standards SFAS No. 109 "Accounting for Income Taxes". The
Statement employs an asset and liability method of accounting for income taxes.
Under the asset and liability method, deferred income taxes are recognized for
tax consequences of "temporary differences" by applying enacted statutory tax
rates applicable to future years to differences between the financial statement
carrying amounts and the tax bases of existing assets and liabilities. Under
SFAS No. 109, the effect on deferred income taxes of a change in tax rates is
recognized income in the period that includes the enactment date.
Note 6 Development Stage Company
Since the inception, the Company has been primarily involved in raising
capital, commencing production schedules for various projects under progress,
and acquiring services in the field of legal, financial, and entertainment to
promote the company and develop it's future infrastructure.
The Company has devoted substantially all of its efforts toward
establishing the entity, by developing various projects and operating the day to
day activities. The Company has not generated any significant revenues since its
inception. Upon development, release and distribution of motion pictures, more
steady revenue can be expected. Theses financial statements comply with the
reporting requirements under SFAS No. 7 for Development Stage Companies
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NEO MODERN ENTERTAINMENT, CORP.
(A Development Stage Company)
Notes to Financial Statements
Note 7 Film Library and Projects in Progress
On May 1, 1997 the Company acquired the rights, interests, and titles
to certain feature motion pictures and projects in progress from Filmart, Inc.,
Rafael Zelinsky and related companies subject to the related liabilities. The
Company incurred additional costs for Projects in Progress, which were
capitalized pursuant to FASB 53. As of March 31, 2000 the cost for the completed
film "Fun" amounted $465,248 less accumulated amortization of $362,748 and the
cost of the film in progress "Bohemia" is $341,726 with an estimated cost to
complete of $200,000 ($100,000 for the completion of principal photography and
$100,000 for post production).
Note 8 Organization Cost
Organization cost is amortized ratably over a 60 months period.
Note 9 Accounts Payable
Account payable includes project development costs, which consists of
expenses incurred but not paid. The accounts payable includes liabilities and
obligation acquired as part of the agreement with Filmart, Inc., as explained in
Note 7, in addition to the Company's current payables.
Note 10 Long Term Payable
Long term debt at consist of the following:
3/31/2000 12/31/1999
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Rafael Zelinsky & Filmart Inc.
including interest @ prime plus one $179,468 168,468
Deluxe Lab (NOTE 13) 90,000 90,000
Other plus interest @
prime plus one 37,163 36,163
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Total $306,631 $294,631
========== ==========
Note 11 Capital Stock
Due to limited cash resources, the Company engaged various individuals
or entities to provide legal, financial, creative, script writing and
administrative services by issuing common stock.
-8-
<PAGE>
Note 12 Compensation
On October 31, 1999 the Board of Directors ratified an employment
contract to the President/CEO for a term of seven years starting from March 21,
1997 calling for the issuance of 18,088,182 in stock options at par value
exercisable 4,575,000 shares by March 21, (which were exercised), the balance
exercisable every 90 days incrementally through March 21, 2004. The contract
also calls for compensation starting March 21, 1997, of $2,000 per month
increasing by 25% each year for seven years to be paid plus 10% simple interest
when funds are available in excess of operating needs as approved by the Board
of Directors. No salary has been paid to date.
In addition the other 2 members of Board of Directors will receive 8000
shares per month until November 2000.
Note 13 Commitment & Contingencies
The company owes Deluxe Lab $90,000 colateralized by the U.S. video rights of
the movie "Fun". They will be paid from the income from sales. Compensation owed
to the President/CEO due to date is $91,500 plus interest. This will be paid by
Board approval (see Note 12).
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<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
Plan of Operation:
We have had a limited operational history over our last three and a half
years with no appreciable revenues and may be regarded as a development stage
company. Our plan of operation is to raise capital sufficient to fund the
production of several extremely low-budget films, and thereby supplement our
film library and generate revenue for the subsequent production of films. We
have completed partial principal photography on our first low-budget feature
film tentatively entitled "Bohemia", and our plan calls for finishing the film
if and when we have raised sufficient capital for "Bohemia" as well as one or
more of the micro-budget films. The modest revenues received by us so far have
been from the exploitation of our film library and are utilized towards
operating costs and to pay down a portion of the debt against the film library.
We are continuing to seek sources of financing and/or a possible
business combination as well as examining the possible application and benefits
of the digital transformation of data to our business, as well as digital
production methods.
Liquidity and Capital Resources:
We have historically raised capital to fund our operations by the sale
of our common stock. For the immediately foreseeable future, we will be required
to sell common stock or other equity securities to raise capital to fund our
operations. There can be no assurance that such capital investment will be
available on terms that will be acceptable to us. Furthermore, the sale of such
capital will further dilute the interest of current stockholders. Other capital
may also be raised through loans, deferments of goods and services, pre-sales of
rights and/or co-financing with other entities.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) None.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 2000.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: May 18, 2000 Neo Modern Entertainment Corp.
------------------------------------
(Registrant)
By: /S/ Rafal Zielinski
------------------------------------
Rafal Zielinski
President (principal executive officer
and principal financial and accounting
officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 224
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 224
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 453,450
<CURRENT-LIABILITIES> 159,315
<BONDS> 0
0
0
<COMMON> (12,496)
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 453,450
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 8,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,841)
<EPS-BASIC> (0.001)
<EPS-DILUTED> (0.001)
</TABLE>
