<PAGE>
FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ............. to ............
Commission file number: 001-15591
PREMIER CLASSIC ART, INC.
(Exact name of registrant as specified in its charter)
Delaware 22-3680581
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1158 Staffler Road
Bridgewater, New Jersey 08807
(Address of principal executive offices)
(Zip Code)
(908) 526-7388
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At March 31, 2000 there were 7,649,946 shares of Common Stock, $.001 par
value, outstanding.
<PAGE>
PREMIER CLASSIC ART, INC.
INDEX
Page No.
--------
Part I - Financial Information 1
Item 1. Financial Statements
Balance Sheets as of February 29, 2000
(unaudited) and May 31, 1999 2
Statements of Operations and Comprehensive
Loss for the Nine Months Ended February
29, 2000 and February 28, 1999 (unaudited) 3 - 4
Statements of Cash Flows for the Nine
Months Ended February 29, 2000 and
February 28, 1999 (unaudited) 5
Notes to Financial Statements
(unaudited) 6 - 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10 - 12
Part II - Other Information
Item 1. Legal Proceedings 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
PART I. Financial Information
Item 1. Financial Statements
Certain information and footnote disclosures required under generally
accepted accounting principles have been condensed or omitted from the following
financial statements pursuant to the rules and regulations of the Securities and
Exchange Commission. It is suggested that the following financial statements be
read in conjunction with the year-end consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-SB dated
April 13, 2000.
The results of operations for the nine-month period ended February 29,
2000, are not necessarily indicative of the results to be expected for the
entire fiscal year or for any other period.
-1-
<PAGE>
PREMIER CLASSIC ART, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
February 29, May 31,
2000 1999
------------- -----------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash $ 3,846 $ -
Marketable securities 8,757 -
Accounts receivable 20,115 -
Prepaid expenses 416,666 -
Inventories 365,954 -
--------- ----------
Total Current Assets 815,338 -
Other assets 5,000 -
--------- ----------
TOTAL ASSETS $ 820,338 $ -
========= ==========
LIABILITIES AND STOCKHOLDERS' (DEFICIENCY)
Current Liabilities:
Short-term debt $ 775,000 $ -
Current portion of long-term debt - 217,370
Accounts payable - 46,263
Accrued expenses 90,856 151,408
--------- ----------
Total Current Liabilities 865,856 415,041
--------- ----------
Commitments and Contingencies
Stockholders' (Deficiency):
Series A cumulative convertible
preferred stock - 8% cumulative,
par value $.002 per share, authorized
10,000,000 shares; outstanding 136,000
and 256,800 shares 272 514
Common stock - par value $.001 per share,
authorized 50,000,000 shares;
outstanding 7,649,946 and 75,410 shares 7,650 75
Additional paid-in capital 1,709,996 917,366
Cumulative other comprehensive
(loss) (38,050) -
Deficit (1,725,386) (1,332,996)
--------- ----------
Total Stockholders' (Deficiency) (45,518) (415,041)
--------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' (DEFICIENCY) $ 820,338 $
========= ==========
</TABLE>
See notes to financial statements.
-2-
<PAGE>
PREMIER CLASSIC ART, INC.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
------------------------------------ -----------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 35,200 $ - $ 35,200 $ -
---------- --------- ---------- --------
Cost and Expenses:
Cost of sales 5,098 - 5,098 -
Selling, general
and administrative 748,085 - 231,508 -
---------- --------- ---------- --------
753,183 - 236,606 -
---------- --------- ---------- --------
Loss from operations (717,983) - (201,406) -
Other expense
Interest expense-net 48,381 17,550 15,260 5,850
---------- --------- ---------- --------
Total other expense 48,381 17,550 15,260 5,850
---------- --------- ---------- --------
Loss before income taxes and
extraordinary gain (766,364) (17,550) (216,666) (5,850)
Income tax provision - - - -
---------- --------- ---------- --------
Loss before extraordinary gain (766,364) (17,550) (216,666) (5,850)
Extraordinary gain on
extinguishment of debt 373,974 - 68,718 -
---------- --------- ---------- --------
Net (loss) $ (392,390) $ (17,550) $ (147,948) $ (5,850)
========== ========= ========== ========
Net (loss) per common
share-basic and diluted $ (0.16) $ (0.24) $ (0.03) $ (0.08)
Extraordinary gain on
extinguishment of debt 0.08 - 0.01 -
Net (loss) per common
share-basic and diluted $ (0.08) $ (0.24) $ (0.02) $ (0.08)
========== ========= ========== ========
Weighted average of common
shares outstanding - basic
and diluted 4,836,186 75,410 7,649,507 75,410
========== ========= ========== ========
</TABLE>
See notes to financial statements.
-3-
<PAGE>
PREMIER CLASSIC ART, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
----------------------------------- -----------------------------------
February 29, February 28, February 29, February 28,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net loss $(392,390) $ (17,550) $(150,918) $(5,850)
Other comprehensive loss
net of income taxes:
Unrealized loss on
marketable securities (38,050) - - -
--------- --------- --------- -------
Comprehensive loss $(430,440) $ (17,550) $(150,918) $(5,850)
========= ========= ========= =======
</TABLE>
See notes to consolidated financial statements.
-4-
<PAGE>
PREMIER CLASSIC ART, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
---------------------------------------
February 29, February 28,
2000 1999
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $ (392,390) $ (17,550)
Adjustments to reconcile net income to
cash provided by operating activities:
Common stock issued for services 8,494 -
Depreciation and amortization 3,387 -
Extraordinary gain on extinguishment
of debt (373,974) -
Non-cash compensation expense 207,268 -
Changes in operating assets and liabilities:
(Increase) in marketable securities (46,807) -
(Increase) in security deposits (5,000) -
(Increase) in accounts receivable (20,115) -
(Increase) in prepaid expenses (416,666) -
(Increase) in inventories (58,565) -
Increase in accrued expenses 89,114 17,550
---------- ---------
Net Cash Used in Operating
Activities (1,005,254) -
---------- ---------
Cash flows from financing activities:
Proceeds from sale of common stock 238,600 -
Proceeds from short term borrowings 775,000 -
Payments of short term borrowings (4,500) -
---------- ---------
Net Cash Provided by Financing
Activities 1,009,100 -
---------- ---------
Net increase in cash 3,846 -
Cash beginning of year - -
---------- ---------
Cash end of year $ 3,846 $ -
========== =========
Supplemental disclosure of non-cash financing activities:
Capital contribution to forgive debt $ 38,319 $ 88,630
========== =========
Non-cash investing activities:
Unrealized (loss) on marketable
securities $ 38,050
==========
Common stock issued for inventory $ 306,879
==========
</TABLE>
See notes to financial statements.
-5-
<PAGE>
PREMIER CLASSIC ART, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The balance sheet as of February 29, 2000 and the statements of
operations and comprehensive loss and cash flows for the period
presented herein have been prepared by the Company and are unaudited.
In the opinion of management, all adjustments (consisting solely of
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and comprehensive loss and cash flows
for all periods presented have been made. The information for May 31,
1999 was derived from audited financial statements.
2. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business.
The Company's operating activities have just commenced under new
management.
The Company's ability to continue as a going concern is dependant upon
its ability to obtain needed working capital through additional equity
and/or debt financing and its ability to market its inventory.
Management is actively seeking additional capital to liquidate its
current obligations. There is no assurance that additional capital will
be obtained or the Company will be able to sell its current inventory.
These uncertainties raise substantial doubt about the ability of the
Company to continue as a going concern.
The financial statements do not include any adjustments relative to the
recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
3. EARNINGS PER COMMON SHARE
Basic and diluted loss per common share is computed by dividing net
loss by the weighted average number of common shares outstanding during
the year. Diluted earnings per common share are computed by dividing
net earnings by the weighted average number of common and potential
common shares during the year. Potential common shares are excluded
from the loss per share calculation. because the effect would be
antidilutive. Potential common shares relate to the preferred stock
that is convertible into common stock, convertible debt and outstanding
warrants.
6
<PAGE>
4. ACQUISITION
On September 8, 1999, the Company acquired the assets, consisting of
inventory of original, hand-painted production animation cels, of Cool
Classic, Inc., a subsidiary of Joe Cool Collectibles, Inc. for
3,069,788 shares of the Company's common stock, which represents
approximately 40% of the total outstanding shares of the Company.
The acquired inventory was accounted for as a non-monetary transaction
in accordance with Accounting Principles Board Opinion No. 29,
"Accounting for Non-Monetary Transactions" (APB No. 29). The Company
recorded the inventory value at $306,879. Cool Classic, Inc. was not a
business but a collection of animated art cels and, accordingly, the
Company has not included any proforma unaudited results of operations.
5. DEBT
Short-term debt consists of the following:
On September 3, 1999, the Company issued a $775,000 principle 10 1/2 %
convertible note due September 3, 2000. Interest is payable monthly,
commencing in December 1999 and payable in arrears from September 1999.
The note is convertible into 250,000 shares of the Company's common
stock, at the option of the holder, at a conversion price of $3.10 per
share. The convertible note contains a provision for an automatic
conversion if the closing bid of the common stock is greater than or
equal to $5.50 per share for twenty consecutive trading days. In
connection with the execution of this note, the Company sold the holder
100,000 shares of the Company's restricted common stock for $.001 per
share (which was below fair market value) and a warrant to purchase
400,000 shares of the Company's common stock at an exercise price of
$1.00 per share. This transaction resulted in additional interest
expense of $9,900.
The holder of this note received a first priority security in the
Company's inventory and an insurance policy in the amount of $1.5
million, naming the holder as an additional insurer.
7
<PAGE>
Long-term debt consists of the following:
February 29, May 31,
2000 1999
------------ -------
10% notes payable to stock-
holders, obligation in
default at May 31,1999 (a) $ - $83,000
12% note payable, obligation
in default at May 31, 1999 (b) - 35,000
8% notes payable to stock-
holders, less discount of
$6,957, obligation in default
at May 31, 1999 (c) - 33,043
10% note payable, obligation
in default at May 31, 1999 (d) - 25,000
18% notes payable, obligation
in default at May 31, 1999 (e) - 23,645
12% note payable, obligation
in default at May 31, 1999 (f) - 10,000
8% note payable to stockholder,
less discount of $2,318,
obligation in default at
May 31, 1999 (g) - 7,682
-------- -------
Total - 217,370
Less current maturities - 217,370
-------- -------
$ - $ -
======== =======
(a) On August 13, 1999, the Company paid $1,500 in cash for payment in full
of a $30,000 note with accrued interest of $21,645. On August 23, 1999,
the Company issued 1,000 shares of common stock for payment of the
principal of $50,000 and accrued interest of $36,075. In December 1999
the Company paid principal of $3,000 and accrued interest of $4,610 in
cash in full payment of this debt.
8
<PAGE>
(b) On August 23, 1999, the Company issued 700 shares of common stock for
payment of the principal of $35,000 and accrued interest of $28,495.
(c) On August 23, 1999, the Company issued 200 shares of common stock for
payment of principal of $10,000 and accrued interest of $4,644. On
December 10, 1999 the Company issued 3,000 shares of common stock for
payment of the principal of $23,043 and accrued interest of $14,833.
(d) On August 17, 1999 the president personally took responsibility for the
principal of $25,000 and the accrued interest of $13,319.
(e) On August 23, 1999, the Company issued 460 shares of common stock for
payment of the principal of $23,645 and accrued interest of $21,318.
(f) On December 20, 1999 the promissory note of $10,000 and accrued
interest of $8,554 was forgiven by the noteholder.
(g) On December 10, 1999, the Company issued 1,000 shares of common stock
for payment of the principal of $7,682 and accrued interest of $5,006.
The above transactions, (a through g),resulted in the Company issuing
6,360 shares of the Company's common stock and a extraordinary gain on
extinguishment of debt of $373,974 included in the statement of
operations.
6. EXTRAORDINARY GAINS
In August 1999, the Company issued common shares to extinguish
long-term debt and accrued interest. In connection with these
transactions the Company recorded extraordinary gains of approximately
$373,974 ($.08 per share) and $68,718 ($.01 per share) for the nine
months and three months ended February 29, 2000, respectively.
9
<PAGE>
Item 2. Management's' Discussion and Analysis of Financial Condition and
Results of Operations
The Company's quarterly and annual operating results are affected by a wide
variety of factors that could materially and adversely affect revenues and
profitability, including competition; changes in consumer preferences and
spending habits; the inability to successfully manage growth; seasonality; the
ability to introduce and the timing of the introduction of new products and the
inability to obtain adequate supplies or materials at acceptable prices. As a
result of these and other factors, the Company may experience material
fluctuations in future operating results on a quarterly or annual basis, which
could materially and adversely affect its business, financial condition,
operating results, and stock prices. Furthermore, this document and other
documents filed by the Company with the Securities and Exchange Commission (the
"SEC") contain certain forward-looking statements under the Private Securities
Litigation Reform Act of 1995 with respect to the business of the Company. These
forward-looking statements are subject to certain risks and uncertainties,
including those mentioned above, and those detailed in the Company's Form 10-SB
dated January 3, 2000, which may cause actual results to differ significantly
from these forward-looking statements. The Company undertakes no obligation to
publicly release the results of any revisions to these forward-looking
statements which may be necessary to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events. An investment
in the Company involves various risks, including those mentioned above and those
which are detailed from time to time in the Company's SEC filings.
Item 3. Management's' Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Company does not have adequate cash reserves to meet its future cash
requirements. The Company is seeking to raise additional working capital through
debt or equity financings. The Company's ability to continue as a going concern
will depend upon successful completion of such financings and on its ability to
market its inventory. The Company has spent approximately $55,000 to sort the
cel art, copy the appropriate backgrounds and assemble the cels for sale. The
Company does not expect to have to purchase any property or equipment over the
next year that cannot be financed in the ordinary course of business.
Results of Operations
The Company plans to continue marketing and selling its collection of cels
over the internet and through art galleries, department stores, other retail
outlets and catalogues. The Company currently has no agreement with any such
entity. The Company anticipates that it will take more than five years for it to
liquidate the collection so as to maximize its value and to take advantage of
opportunities to sell pieces when possible. The Company has received only
limited revenues from cels to date. Royal, a sub-contractor of the Company, in
accordance with its agreement with the Company provides the necessary artistic
staff to process and prepare its cels for presentation to the public. The
Company has 35,000 cels ready for presentation and distribution.
10
<PAGE>
On January 4, 2000, the Company sold 500 cels to a distributor at a price
of $40 per cel. The Company cannot be certain that it will continue to sell cels
at this price.
Nine Months Ended February 29, 2000 compared to
Nine Months Ended February 28, 1999
Sales
Sales increased from $-0- for the nine months ended February 28, 1999
to $35,200 for the nine months ended February 29, 2000. The Company
attributes the increase to its recent acquisition of the animation cels
the Company will market.
Cost of Sales
Cost of sales increased from $-0- for the nine months ended February
28, 1999 to $5,098 for the nine months ended February 29, 2000. The
Company attributes the increase to the reasons described above.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $-0- for
the nine months ended February 28, 1999 to $748,183 for the nine months
ended February 29, 2000. The Company attributes the increase primarily
to increases in consulting fees and sales related expenses to market
the distribution of the animation cels and professional fees incurred
by the Company.
Interest Expense
Interest expense increased from $17,550 for the nine months ended
February 28, 1999 to $48,381 for the nine months ended February 29,
2000. The increase is primarily attributed to funds the Company
borrowed to make the acquisition in 1999.
Three Months Ended February 29, 2000 compared to
Three Months Ended February 28, 1999
Sales
Sales increased from $-0- for the three months ended February 28, 1999
to $35,200 for the nine months ended February 29, 2000. The Company
attributes the increase to the reasons set forth in the nine month
analysis.
Cost of Sales
Cost of sales increased from $-0- for the three months ended February
28, 1999 to $5,098 for the three months ended February 29, 2000. The
Company attributes the increase to the reasons set forth in the nine
month analysis.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased from $-0- for
the three months ended February 28, 1999 to $231,508 for the three
months ended February 29, 2000. The Company attributes the increase to
the reasons set forth in the nine month analysis.
11
<PAGE>
Interest Expense
Interest expense increased from $5,850 for the three months ended
February 28, 1999 to $15,260 for the three months ended February 29,
2000. The Company attributes the increase to the reasons set forth in
the nine month analysis.
Other Matters
Year 2000
Impact of Year 2000
The Company's mission critical systems have operated without
interruption during 2000. Furthermore, the Company has not experienced
a failure of any non-critical devices or systems. In addition, the
Company has not experienced a delay from any service providers or
vendors.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: Exhibit 27.1 Financial Data Schedule.
(b) There were no Current Reports on Form 8-K filed by the
registrant during the quarter ended February 29, 2000.
13
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
PREMIER CLASSIC ART, INC.
Date: April 13, 2000 By: /s/Charles Trapp
-----------------
Charles Trapp, President
(Principal Financial and
Accounting Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM PREMIER
CLASSIC ART, INC. FINANCIAL STATEMENTS AT FEBRUARY 29, 2000 AND THE NINE MONTHS
THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> FEB-29-2000
<CASH> 3,846
<SECURITIES> 8,757
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 365,954
<CURRENT-ASSETS> 815,338
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 820,338
<CURRENT-LIABILITIES> 865,856
<BONDS> 0
0
272
<COMMON> 7,650
<OTHER-SE> (53,440)
<TOTAL-LIABILITY-AND-EQUITY> 820,338
<SALES> 35,200
<TOTAL-REVENUES> 35,200
<CGS> 5,098
<TOTAL-COSTS> 753,183
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 48,381
<INCOME-PRETAX> (766,364)
<INCOME-TAX> 0
<INCOME-CONTINUING> (766,364)
<DISCONTINUED> 0
<EXTRAORDINARY> 373,974
<CHANGES> 0
<NET-INCOME> (392,390)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
