<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
Securities Exchange Act of 1934
for Quarterly Period Ended March 31, 2000
-OR-
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities And Exchange Act of 1934
for the transaction period from ___________ to _________
Commission File Number 0-14646
Entertainment International Ltd.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York 06-1113228
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(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
7380 Sand Lake Road, Suite 350, Orlando, FL 32819
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(Address of principal executive offices, Zip Code)
(407) 351-0011
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(Registrant's telephone number, including area code)
Check whether the issuer (1) 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 [ ]
The number of outstanding shares of the registrant's common stock,
par value $.01 as of May 11, 2000 is 69,597,282.
1
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PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
ENTERTAINMENT INTERNATIONAL LTD.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
(NOTE 1) (NOTE 1)
<S> <C> <C>
ASSETS
Airships and related equipment, net .......... $ 1,913,000 $ 1,929,000
Cash and cash equivalents .................... 1,000 1,000
Prepaid insurance ............................ 15,000 16,000
Other assets ................................. 7,000 6,000
----------- -----------
$ 1,936,000 $ 1,952,000
=========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
LIABILITIES:
Accounts payable -- trade ................. 397,000 226,000
Customer payments on future services ...... 200,000 514,000
Insurance financing ....................... 18,000 3,000
Accrued expenses and other liabilities .... 25,000 29,000
Obligation under capital lease ............ 615,000 839,000
Loans payable to stockholders ............. 3,560,000 3,221,000
----------- -----------
Total liabilities ................. 4,815,000 4,832,000
----------- -----------
STOCKHOLDERS' DEFICIT
Common stock, $.01 par value:
Authorized -- 110,000,000 shares
Issued and outstanding -- 69,597,000 and
68,097,000 shares, respectively ....... 696,000 681,000
Capital in excess of par value ............ 50,987,000 50,788,000
Accumulated deficit ....................... (54,562,000) (54,349,000)
----------- -----------
Total stockholders' deficit ........... (2,879,000) (2,880,000)
----------- -----------
$ 1,936,000 $ 1,952,000
=========== ===========
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
2
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ENTERTAINMENT INTERNATIONAL LTD.
CONDENSED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
---- ----
<S> <C> <C>
AIRSHIP REVENUES ................................... $ 0 $ 0
------------ ------------
COSTS AND EXPENSES:
Selling, general & administrative ............... 128,000 258,000
------------ ------------
128,000 258,000
------------ ------------
OPERATING LOSS ..................................... (128,000) (258,000)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense ................................ (85,000) (49,000)
------------ ------------
(85,000) (49,000)
------------ ------------
NET LOSS ........................................... $ (213,000) $ (307,000)
============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING....................................... 69,363,667 57,797,000
Net (loss) income per share ...................... $ (.00) $ (.01)
============ ============
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
<PAGE>
ENTERTAINMENT INTERNATIONAL LTD.
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
---- -----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $(213,000) $(307,000)
Adjustments to reconcile net loss to net cash flows
used in operating activities:
Depreciation ....................................... 16,000 35,000
Changes in operating assets and liabilities ........ 82,000 (78,000)
-------- ---------
Net change in cash used for operating activities ....... (115,000) (350,000)
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net change in due from related parties ................. 339,000 51,000
-------- ---------
Net cash flows provided by investing activies .......... 339,000 51,000
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock as payment of accrued
salaries.............................................. -- 186,000
Principal payments on capital lease and notes payable . (224,000) (207,000)
Net change in loans payable to stockholders ........... -- 322,000
-------- ---------
Net cash flows provided by financing activities ....... (224,000) 301,000
-------- ---------
NET CHANGE IN CASH AND CASH EQUIVALENTS .................. -- 2,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ........... 1,000 --
-------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ................. $ 1,000 $ 2,000
======== =========
SUPPLEMENTAL INFORMATION:
Conversion of debt into common stock ................... $ 214,000 $ --
========= =========
Interest paid .......................................... $ 16,000 $ 33,000
========= =========
</TABLE>
Unaudited -- See accompanying notes to condensed financial statements.
4
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ENTERTAINMENT INTERNATIONAL LTD.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 -- BASIS OF PRESENTATION:
The accompanying consolidated 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 statements. Management believes that all adjustments, consisting
only of normal recurring adjustments, necessary for a fair presentation of such
financial statements, have been included. 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 disclosure of contingent assets and liabilities as of
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. If such differences prove significant and material, Entertainment
International Ltd. (the "Company") will file an amendment to this report on Form
10-QSB.
NOTE 2 -- STOCKHOLDERS' EQUITY:
During the three months ended March 31, 2000, the Company issued 1,500,000
shares of its common stock and paid $100,000 in cash to Gulf Oil Limited
Partnership f/k/a Catamount Petroleum Limited Partnership ("Gulf Oil") in
settlement of claims against the Company by Gulf Oil. The value of these shares
of common stock were determined to be $.143 per share. This amount was
determined by converting the liability that was accrued to Gulf Oil to reflect
a price per share equivalent to the number of shares of common stock issued in
the settlement agreement.
5
<PAGE>
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OVERALL FINANCIAL CONDITION
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate that Entertainment
International, Ltd. (the "Company") will continue as a going concern. For the
first three months of 2000, the Company incurred a loss of $213,000 and had
negative cash flows of $115,000 from operations. The accompanying financial
statements do not include any adjustments that might result from the Company's
current liquidity shortage. The decrease in the Company's net loss from the same
period last year was $94,000. The primary reason for this decrease was a
reduction in operating expenses incurred by the Company in the first three
months of this year as compared to the first three months of 1999. The Company
is also experiencing a liquidity shortage.
RESULTS OF OPERATIONS
The Company had no revenue during the first three months of 2000 and 1999.
Selling, general and administrative costs for the three months ended March 31,
2000 were $128,000 as compared to $258,000 for the comparable period in 1999,
a decrease of $130,000 or 50%. This decrease is directly attributable to the
decrease in compensation to officers of $127,000.
Interest expense increased $36,000 or 74% to $85,000 for the three months ended
March 31, 2000 from $49,000 during the same period during 1999. The increase in
interest expense was directly attributable to the increase in loans from related
parties.
LIQUIDITY AND CAPITAL RESOURCES
The Company experienced overall negative cash flow of $115,000 in the
three-month period ended March 31 2000 due primarily to an operating cash loss
of $197,000 net of the change in non-cash working capital balances related to
operations. Proceeds of $339,000 from Trans Continental had a positive impact on
cash flow, however, this was offset by debt reduction under the Company's
capital lease obligation. The Company also had negative working capital of
$4,792,000 as at March 31, 2000 compared with $4,809,000 at December 31, 1999.
Because of the continued negative cash flow, working capital and existing
encumbrances on assets, the Company has relied on loans, cash advances, and
guarantees from Louis Pearlman, the Company's president and principal
stockholder, and TransContinental Airlines ("TCA"), a related party, and other
affiliated companies of which Mr. Pearlman is the Chairman, President, and
shareholder. There can be no assurance that Mr. Pearlman, TCA, and affiliates
will make additional loans, cash advances, and guarantees on an ongoing basis.
At March 31, 2000, the Company owed $3,560,000 to related parties. Repayment of
such amounts to TCA has been deferred for an indefinite period. These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.
Management's plans to improve the financial position of the Company, with the
goal of sustaining the Company's operations for the current year and beyond
include: (1) establishing continued arrangements with Trans Continental, a
company related through common directorship and ownership, to provide funding on
a monthly basis, and (2) establishing goals for the acquisition of assets and
operations of one or more entities, with the expectation that such business
combinations, if completed, would provide additional cash flow and net income.
The Company is negotiating the acquisition of WeBeCD.com,Inc. ("WeBeCD"), and
has entered into a letter of intent to acquire 100% of the capital stock,
including options and warrants of WeBeCD. If all agreement terms are met, shares
of the Company's common stock will be issued in exchange for shares of WeBeCD's
common stock.
6
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Other
The Company has approximately $47,641,000 in losses for income tax purposes
available to reduce future taxable income which will begin to expire in 2005. We
have no commitments for capital expenditures of a material nature in the near
future.
Inflation
The Company believes that there has not been a significant impact from inflation
on the Company's operations during the past three fiscal years.
ADDITIONAL FACTORS THAT MAY AFFECT FUTURE RESULTS
Future Operating Results -- Future operating results may be impacted by a number
of factors that could cause actual results to differ materially from those
stated herein, which reflect management's current expectations. These factors
include worldwide economic and political conditions, industry specific factors,
the Company's ability to maintain access to external financing sources and its
financial liquidity, the acceptance of the Company by small and mid-sized
businesses, and the Company's ability to manage expense levels.
Stock Price Fluctuations -- The Company's participation in a highly competitive
industry often results in significant volatility in the Company's common stock
price. This volatility in the stock price is a significant risk investors should
consider.
Forward Looking Statements -- This report contains certain forward-looking
statements that are based on current expectations. In light of the important
factors that can materially affect results, including those set forth above and
elsewhere in this report, the inclusion of forward-looking information herein
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. The Company may
encounter competitive, technological, financial and business challenges making
it more difficult than expected to continue to market its products and services;
competitive conditions within the industry may change adversely; the Company may
be unable to retain existing key management personnel; the Company's forecasts
may not accurately anticipate market demand; and there may be other material
adverse changes in the Company's operations or business. Certain important
factors affecting the forward looking statements made herein include, but are
not limited to (i) accurately forecasting capital expenditures and (ii)
obtaining new sources of external financing. Assumptions relating to budgeting,
marketing, product development and other management decisions are subjective in
many respects and thus susceptible to interpretations and periodic revisions
based on actual experience and business developments, the impact of which may
cause the Company to alter its capital expenditure or other budgets, which may
in turn affect the Company's financial position and results of operations.
7
<PAGE>
Part II
ITEM 1 -- LEGAL PROCEEDINGS
Not applicable
ITEM 2 -- CHANGES IN SECURITIES AND USE OF PROCEEDS
On January 14, 2000 1,500,000 shares of the Company's common stock was
issued to Gulf Oil. This issuance was the result of a settlement agreement dated
December 15, 1999 (Note 3).
ITEM 3 -- DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5 -- OTHER INFORMATION
Not applicable
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibit is filed herewith:
Exhibit 27.1 Financial Data Schedule
<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.
ENTERTAINMENT INTERNATIONAL LTD.
Dated: May 11, 2000 By: /s/ Louis J. Pearlman
------------------------------
Louis J. Pearlman
Chairman of the Board of
Directors, President and
Treasurer (duly authorized
officer of the registrant and
principal financial officer
of the registrant)
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as ...............................'TM'
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,000
<PP&E> 3,400,000
<DEPRECIATION> 1,487,000
<TOTAL-ASSETS> 1,936,000
<CURRENT-LIABILITIES> 4,815,000
<BONDS> 0
<COMMON> 696,000
0
0
<OTHER-SE> (2,879,000)
<TOTAL-LIABILITY-AND-EQUITY> 1,936,000
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 213,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 85,000
<INCOME-PRETAX> (213,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (213,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (213,000)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
</TABLE>
