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 September 30, 2000
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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 0-27063
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Family Room Entertainment Corporation
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(Exact name of registrant as specified in its charter)
New Mexico 85-0206160
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification number)
1041 N. Formosa Ave. Mary Pickford Bldg. Ste. 101, Los Angeles, Ca. 90046
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone number, including area code: (323) 850-2800
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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
--- ---
State the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date.
Outstanding as of
Class of Common Stock September 30, 2000
------------------------ --------------------
$.01 par value 18,245,487 Shares
Transitional Small Business Disclosure Format Yes No X
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<PAGE>
FORM 10-QSB
Securities and Exchange Commission
Washington, D.C. 20549
Family Room Entertainment Corporation
Index
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Condensed Consolidated Balance Sheets at
June 30, 2000 and September 30, 2000 (unaudited)
Condensed Consolidated Statements of Operations
for the three months ended September 30, 2000 (unaudited)
and 1999 (unaudited)
Condensed Consolidated Statement of Stockholders equity
for the three months ended September 30, 2000 (Unaudited)
Condensed Consolidated Statements of Cash Flows
for the three months ended September 30, 2000 (unaudited)
and 1999 (unaudited)
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters of a Vote to Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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PART I. FINANCIAL INFORMATION
-----------------------------
ITEM I. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FAMILY ROOM ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND JUNE 30, 2000
SEPTEMBER 30, JUNE 30,
2000 2000
ASSETS (UNAUDITED) (NOTE)
----------- ------------
<S> <C> <C>
Cash and cash equivalents $ 150,384 $ 1,370,737
Accounts receivable, net 3,563,370 491,772
Restricted certificate of deposit 1,200,000 1,200,000
Film costs, net 2,686,471 4,987,388
Property and equipment, net 60,466 54,386
Deferred income taxes 54,000 54,000
Other assets 16,562 -
------------ ------------
Total assets $ 7,731,253 $ 8,158,283
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Notes payable and convertible debt $ 2,472,500 $ 1,423,152
Accounts payable and accrued liabilities 918,848 2,309,632
Income tax payable 66,000 54,000
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Total liabilities 3,457,348 3,786,784
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Commitments and contingencies
Stockholders' equity:
Preferred stock; $.01 par value;
5,000,000 shares authorized; no shares
issued and outstanding - -
Common stock; $.01 par value; 25,000,000
shares authorized; 18,245,487 shares
issued and outstanding 1,824,549 1,824,549
Additional paid in capital 9,070,922 9,197,770
Accumulated deficit (6,621,566) (6,650,820)
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Total stockholders' equity 4,273,905 4,371,499
------------ ------------
Total liabilities and stockholders'
equity $ 7,731,253 $ 8,158,283
============ ============
</TABLE>
Note: The balance sheet at June 30, 2000 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FAMILY ROOM ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------
2000 1999
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<S> <C> <C>
Revenue:
Film revenue $ 3,050,000 $ -
Overhead fees 301,707 -
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Total revenue 3,351,707 -
Operating cost-amortization of film costs 3,026,570 -
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Gross profit 325,137 -
Selling, general and administrative 266,433 -
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Income from operations 58,704 -
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Other income and (expenses):
Interest income 17,550 -
Interest expense (35,000) -
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Total other expense, net (17,450) -
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Income from continuing operations
before provision for income taxes 41,254 -
Provision for income taxes (12,000) -
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Income from continuing operation 29,254 -
Discontinued operations (loss) from
operation of discontinued business segment - (104,618)
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Net Income (loss) $ 29,254 $(104,618)
============ ==========
Weighted average number of common shares
outstanding (basic and fully diluted) 18,245,487 853,426
============ ==========
Net Income (loss) per common share (basic and
fully diluted)
Continuing operations $ (0.00) $ 0.00
Discontinued operations 0.00 (0.12)
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Net Income $ (0.00) $ (0.12)
============ ==========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FAMILY ROOM ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS'
EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2000
__________
COMMON STOCK ADDITIONAL
------------------------ PAID-IN ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
------------ ---------- ------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 2000 18,245,487 $1,824,549 $ 9,197,770 $(6,650,820) $4,371,499
Reclassification resulting from a change
in the terms of notes to a related party
to eliminate conversion feature - - (126,848) - (126,848)
Net Income - - - 29,254 29,254
------------ ---------- ------------- ------------ -----------
Balance at September 30, 2000 18,245,487 $1,824,549 $ 9,070,922 $(6,621,566) $4,273,905
============ ========== ============= ============ ===========
</TABLE>
The accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
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<PAGE>
<TABLE>
<CAPTION>
FAMILY ROOM ENTERTAINMENT CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
_________
THREE MONTHS ENDED
SEPTEMBER 30,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 29,254 $(104,618)
Adjustment to reconcile net income (loss)
to net cash used by continuing operations (2,162,197) 104,618
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Net cash used by continuing operations (2,132,943) -
Net cash used by discontinued operations - (47,077)
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Net cash used by operating activities (2,132,943) (47,077)
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Cash flows from investing activities:
Purchase of property and equipment (9,910) -
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Net cash used by investing activities (9,910) -
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Cash flows from financing activities:
Proceeds from notes payable and revolving
line of credit 922,500 -
Principal payment on note payable - (1,732)
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Net cash provided by (used by)
financing activities 922,500 (1,732)
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Decrease in cash and cash equivalents (1,220,353) (48,809)
Cash and cash equivalents at beginning of period 1,370,737 70,906
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Cash and cash equivalents at end of period $ 150,384 $ 22,097
============ ==========
</TABLE>
The accompanying notes are an integral part of these
unaudited condensed consolidated financial statements
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<PAGE>
FAMILY ROOM ENTERTAINMENT CORPORATION
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
-----------------------
The accompanying consolidated financial statements are condensed and
unaudited and have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). In the opinion of
management, the unaudited interim financial statements furnished reflect
all adjustments of a normal recurring nature which are necessary to a fair
statement of the results for the interim periods presented. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to SEC rules or
regulations; however, the Company believes that the disclosures made are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the audited financial
statements and the notes thereto included in the Company's Form 10-K for
the year ended June 30, 2000.
For a summary of significant accounting principles, see Notes to
Consolidated Financial Statements and Note 1 thereof contained in the
Annual Report on Form 10-KSB of Family Room Entertainment Corporation (the
"Company") for the year ended June 30, 2000, which is incorporated herein
by reference. The Company follows the same accounting policies during
interim periods as it does for annual reporting purposes.
2. ESTIMATES
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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 and
disclosures of contingent assets or liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
3. COMPREHENSIVE INCOME
---------------------
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 130, Reporting Comprehensive Income, which requires a Company
to display an amount representing comprehensive income as part of the
Company's basic financial statements. Comprehensive income includes such
amounts as unrealized gains or losses on certain investment securities and
certain foreign currency translation adjustments. The Company's financial
statements include none of the additional elements that affect
comprehensive income. Accordingly, comprehensive income and net income are
identical.
4. INCOME TAX
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The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to the use of
net operating losses and the effect of graduated rates.
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5. DISCONTINUED OPERATIONS
------------------------
The loss from operation discontinued business segment presented in the
accompanying statement of operations for the three months ended September
30, 1999, consisted of the following:
Operating, general and administrative
expenses $ 54,927
Depreciation, depletion and
amortization expenses 2,181
-------------
Loss from operations (57,108)
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Other income (expenses):
Other income 2,941
Realized loss on marketable
equity securities (12,060)
Unrealized gain on marketable
equity securities (38,225)
Interest expense (166)
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Total other expense, net (47,510)
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Net loss $ (104,618)
=============
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANAYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
The Company's revenues were derived primarily from the production and
distribution rights of theatrical filmed entertainment in film licensed for
release and/or outright sale foreign territories and domestic; both theatrically
and cable, television, video and other ancillary markets. The Company generally
finances all or a substantial portion of the budgeted production costs of the
films it produces through advances obtained from distributors, investors, and
borrowings secured usually by domestic and internationally (foreign) licenses.
The Company has adopted the new Accounting Standard Executive Committee's
American Institute of Certified Pubic Accountant's recently issued Statement of
Position ("SOP") 00-002 Accounting by Producers and distributors of films,
including changes in revenue recognition and accounting for advertising,
development and overhead costs. See the Company's Notes to Consolidated
Financial Statements and Note 1 thereof contained in the Annual Report on Form
10KSB of Family Room Entertainment Corporation the "Company" for the year ended
June 30, 2000, which is incorporated herein by reference.
Results of Operations
The Company's operating revenues for its first quarter ending September 30, 2000
were $3,351,707 and $-0- for the same period ending September 30, 1999. Three
million ($3,000,000) of the revenue is licensing fees generated from foreign
film rights, $50,000 is from producer's fees and the remaining revenues are
reimbursements of overhead fees.
Costs relating to the operating revenues were $3, 026,570 during the first
quarter ending September 30, 2000 as compared to $-0- for the quarter ending
September 30, 1999. These costs represent amortization of film costs.
The company's gross profit for the period ending September 30, 2000 was $325,137
compared to $ -0- for the same period prior year.
Selling, general and administrative expenses were $266,433 for the first quarter
ending September 30, 2000 as compared to $-0- for the same period prior year.
Interest expense for the first quarter ending September 30, 2000 was $35,000 as
compared to $-0- for the same period prior year. This increase was mainly
due to completion of certain production of films during the beginning of the
first quarter in accordance with the "SOP" 00-002 referred to above.
The Company reported a net income from continuing operations of $ 29,254 for the
first quarter ended September 30, 2000, as compared with a net income (loss) of
$ 0.00 from continued operations for the same period prior year. Prior year
had a loss from discontinued operations of ($104,618).
LIQUIDITY AND CAPITAL RECOURCES
The total indebtedness of borrowed monies increased to $ $2,472,500 at September
30, 2000 from $-0- at September 30, 1999.
Net cash used in operating activities for the first quarter ending September 30,
2000 amounted to $ (2,132,943) as compared to $ (47,077) for the same period
ending September 30, 1999. The use of cash for the first quarter September 30,
2000 is mainly attributable to additions in film costs of $ 710,990, an increase
in accounts receivable of $ $3,142, 931, a decrease in accounts payable of $
1,390,786, offset by 3,026,570 of film amortization costs, with miscellaneous
items making up the remaining balance.
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Net cash used in investing activates for the first quarter ending September 30,
2000 amounted to $ (9,910) as compare to $ -0- in the same period prior year.
Financing activities generated net cash of $ 922,500 for the first quarter
ending September 30, 2000 as compared to $ -0- for the quarter ending September
30, 1999. The cash generated in the first quarter September 30, 2000 was a
result of the issuance of notes and the extension of its revolving line of
credit.
CAPITAL EXPENDITURES COMMITMENTS
In its normal course of business as a film entertainment producer and
distributor, the Company makes contractual commitments to acquire film rights
and payment for options to purchase properties. These contractual obligations
and option payments, if any, can range from $10,000 to $250,000. At September
30, 2000 there were no material commitments to be paid.
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PART II. OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
Our Company is no a party to any material pending legal proceedings and, to
the best of our knowledge, no such action by or against the Company has been
threatened.
ITEM 4. SUBMISSION OF MATTERS OF A VOTE TO SECURITY HOLDERS
There were certain matters that were submitted to a vote by our Company's
security holders during the fiscal year. These were post-reverse split shares
with respect to a ten for one reverse split of our Company's common stock, the
change in Our Company's name form COBB Resources to Family Room Entertainment,
Inc. and a change in Our Company's OTC:BB: trading symbol COBB to FMLY.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
27. Financial Data Schedule
SIGNATURES
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
/s/ George Furla Director, Chief Executive November 10, 2000
-------------------------
George Furla Officer, President and Chief
Accounting Officer
/s/ Randell Emmett Director November 10, 2000
-------------------------
Randell Emmett
/s/ Peter Benz Director November 10, 2000
-------------------------
Peter Benz
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