FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
---------------------------------
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 0-15413
-----------------------------------------
MARQUEE ENTERTAINMENT, INC.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 95-3480640
- ------------------------------ ------------------------
(State or other jurisdiction of (I.R.S. Employer ID No.)
incorporation or organization)
9044 Melrose Avenue, 3rd Floor, Los Angeles, CA 90069
- -----------------------------------------------------------------
(Address of principal executive offices)
(310) 859-8250
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
NOT APPLICABLE
- -----------------------------------------------------------------
(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
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The registrant had 1,373,716 shares of its $.04 par value
common stock outstanding as of August 9, 1996.
<PAGE>
PART I
ITEM I
MARQUEE ENTERTAINMENT, INC.
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Consolidated Balance Sheets
June 30, 1996 and September 30, 1995 3
Consolidated Statements of Operations
for the three months ended June 30, 1996
and 1995 4
Consolidated Statements of Operations
for the nine months ended June 30, 1996
and 1995 5
Consolidated Statements of Cash Flows for the nine
months ended June 30, 1996 and 1996 6 to 7
Notes to Condensed Financial Statements 8 to 16
2
<PAGE>
MARQUEE ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(UNAUDITED)
June 30, September 30,
1996 1995
----------- -------------
<S> <C> <C>
ASSETS:
Cash $26,614 $75,495
Accounts receivable-trade 76,861 105,260
Note receivable-officer (Note 2) 92,484 92,484
Reserve for doubtful account (Note 2) (92,484) (92,484)
Note receivable 35,000
Film inventory (Note 2)
Furniture and fixtures, at cost, net of
accumulated depreciation of $70,987
and $64,153 at June 30, 1996 and
September 30, 1995 (Note 2) 2,116 9,586
Security deposit and other assets 30,580 38,600
----------- -------------
$171,171 $228,941
=========== =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $158,799 $149,815
Accrued Payroll 87,500 379,170
Deferred income (Note 1) 136,642 29,643
8% Convertible debenture (Note 1) 450,082
Notes Payable (Note 2) 50,000 50,000
----------- -------------
Total liabilities 883,023 608,628
----------- -------------
Commitments (Note 7)
Shareholders' equity:
Preferred stock, $.01 par value;
10,000,000 shares authorized;
none outstanding
Common stock, $.04 par value;
25,000,000 shares authorized;
1,373,716 and 1,353,716 shares issued
and outstanding at June 30, 1996
and September 30, 1995 (Note 1) 54,954 54,154
Additional paid-in capital 2,862,432 2,856,232
Accumulated (deficit) (3,629,238) (3,290,073)
----------- -------------
Total shareholders' (deficit) (711,852) (379,687)
----------- -------------
$171,171 $228,941
=========== =============
</TABLE>
See notes to financial statements.
3
<PAGE>
MARQUEE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Film revenue (Note 1 and 2) $45,068 $61,601
----------- -----------
Costs and expenses:
Operating costs and film amortization 12,615 21,156
(Note 2)
Selling, general and administration 186,214 138,804
----------- -----------
Operating profit (loss) (153,761) (98,359)
----------- -----------
Other income (expense):
Interest income 40 26
Interest expense (Note 2) (10,075) (1,250)
----------- -----------
(10,035) (1,224)
----------- -----------
Net (loss) ($163,796) ($99,583)
=========== ===========
Net (loss) per share (Note 3) ($0.12) ($0.07)
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
MARQUEE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Film revenue (Note 1 and 2) $177,024 $319,614
----------- -----------
Costs and expenses:
Operating costs and film amortization 42,513 39,171
(Note 2)
Selling, general and administration 461,207 435,962
----------- -----------
Operating profit (loss) (326,696) (155,519)
----------- -----------
Other income (expense):
Interest income 106 304
Interest expense (Note 2) (12,575) (5,000)
----------- -----------
(12,469) (4,696)
----------- -----------
Net (loss) ($339,165) ($160,215)
=========== ===========
Net (loss) per share (Note 3) ($0.25) ($0.12)
=========== ===========
</TABLE>
See notes to financial statements.
5
<PAGE>
MARQUEE ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) ($339,165) ($160,215)
----------- -----------
Adjustments to reconcile net profit
(loss) to net cash provided (used) by
operating activities (Note 2):
Depreciation and amortization 7,470 11,428
Decrease (increase) in other assets 8,020 14,976
Decrease (increase) in accounts
receivable-trade 28,399 208,055
(Increase) in note receivable (35,000)
Increase (decrease) in accounts payable
and accrued expenses 8,984 (33,692)
Increase (decrease) in accrued payroll (291,670) 24,580
Increase (decrease) in deferred income 106,999 5,525
Increase in 8% convertible debenture 450,082
(Decrease) in notes payable (50,000)
----------- -----------
Total adjustments 283,284 180,872
----------- -----------
Net cash provided (used) by
operating activities (55,881) 20,657
Cash flows from investing activities:
Purchase of copier equipment (2,053)
Issuance of common stock 7,000
----------- -----------
Net cash used in investing activities 7,000 (2,053)
----------- -----------
Cash flows from financing activities: 0 0
----------- -----------
Net increase (decrease) in cash and cash
equivalents (48,881) 18,604
Cash and cash equivalents at beginning
of year 75,495 34,726
----------- -----------
Cash and cash equivalents at end of year $26,614 $53,330
=========== ===========
</TABLE>
See notes to financial statements.
6
<PAGE>
MARQUEE ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
(Continued)
Supplemental disclosures of cash flow information:
Supplemental schedule of noncash investing and financing
activities:
The Company issued $175,000 in notes payable to Peregrine in
conjunction with the asset acquisition (Note 2). The notes
bear interest at the rate of 10% per annum and are payable over
four years.
Disclosure of accounting policy:
For purposes of the statement of cash flows, the Company
considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
See notes to financial statements.
7
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
The accompanying condensed financial statements are unaudited, but
in the opinion of management include all adjustments (consisting
only of normal recurring adjustments) necessary to fairly state the
information included therein in accordance with generally accepted
accounting principles for interim financial information and with
instructions to Form 10Q and rule 10-01 of Regulation S-X.
Accordingly, they do not include all the information and footnotes
required by generally accepted accounting principles for complete
financial statements. The accompanying financial should be read in
conjunction with the more detailed financial statements and related
footnotes thereto which are incorporated by reference in Form 10K
for the year ended September 30, 1995.
The Company's Board of Directors, on March 7, 1996, authorized a
reverse stock split of 1 for 40 of its issued and outstanding
common stock reducing the outstanding shares from 54,154,000 to
1,353,716. In addition, the authorized number of shares was
reduced from 250,000,000 to 25,000,000. On May 28, 1996 the
Company issued to a public relations firm 20,000 restricted shares
of common stock in lieu of fees for May and June 1996.
The results of operations for the nine month period ended June 30,
1996 are not necessarily indicative of the results to be expected
for the full year.
The balance sheets are presented in an unclassified format in
accordance with FAS No. 53.
As of June 30, 1996 the Company had $26,614 available to meet
operating requirements. In addition, it had net accounts
receivable of $76,861. This cash position is not adequate to meet
the Company's operational needs. The Company's Chairman and
President continue to accrue their salaries and to receive cash
compensation only based on their determination that there are
adequate funds available.
The Company entered into two 8% Convertible Debentures due March
31, 1999, one in favor of Harold Brown in the principal amount of
$239,450 and the other in favor of Ralph Smith in the principal
amount of $201,807. The Debentures were issued as of April 1, 1996
as evidence of past due salary owing to Messrs. Brown and Smith
through March 31, 1996. The Debentures are convertible, in whole
or in part, into Common Stock of the Company at any time by
delivery of written notice. The Conversion Price is $0.25 per
8
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 - cont...
share, subject to adjustment upon certain changes in the capital
stock of the Company. The Company has the right to call the
Debentures for prepayment at any time, and the right to convert
shall expire upon the call date.
Sales activity has continued and the Company's personnel are
negotiating some major market licenses. There can be no assurance
of consummating these negotiations at this time.
With regard to the note receivable due from the Company's Chairman,
although the Company fully reserved the note due to the uncertainty
of collection, the Company still continues to make efforts to
collect on the note. As of March 31, 1996, the Chairman executed
a new note which matures March 31, 2003 and bears interest at the
rate of 9% per annum, with interest payable semi-annually in
arrears.
The revenue from the library of films currently owned by the
Company was not adequate in fiscal 1995 to meet the expenses of the
Company and it is not anticipated that it will be adequate in the
long term. Management believes that the Company must acquire
additional motion pictures for distribution and is currently
seeking to make such acquisitions. However, there can be no
assurance as to the Company's ability to find such additional
motion pictures on terms favorable to the Company or, if found, as
to the Company's ability to finance the acquisition of any such
pictures, given the limited funds available to the Company and the
commercial lending and economic climate in general.
Management believes that with maintaining reductions in operational
costs, and increased sales activity from the current library and
new acquired motion pictures, the Company will be able to continue
as a going concern. However, at this time, there can be no
assurances that the Company will be able to continue as a going
concern.
Film revenue recognition:
Revenues from television license agreements are recognized as each
film becomes available for telecasting by the licensee. Revenues
from other contractual agreements are recognized when the films
delivered are free of any conflicting licenses.
9
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 1 - cont...
Accounts receivable:
Accounts receivable consist of the unpaid portion of license
agreements received from customers on a worldwide basis. The
Company's management performs credit evaluations of all customers
and reserves for any potential credit losses. The standard
procedure when entering into a licensing agreement requires 20%
payment upon signing and the 80% balance to be paid prior to
delivery of films licensed. Accordingly, uncollected amounts are
not a significant problem for the Company.
Furniture and fixtures:
Depreciation of furniture and fixtures is being provided by
utilization of the straight-line method over the estimated useful
lines of the assets which range from 3 to 5 years.
Film Costs and Amortization:
As of September 30, 1994 the Company's film inventory was fully
amortized.
Note 2 - Related Party Transactions:
Acquisition Agreement:
On March 12, 1991 the Registrant concluded an Acquisition Agreement
(the "Acquisition Agreement") with Peregrine Entertainment, Ltd.
("PEL"), Peregrine Producers Group ("PPG") and Peregrine Film
Distribution, Inc. ("PFD") (all of which are operating as debtors
in possession under the United States Bankruptcy Code), resulting
in the Registrant's acquisition of, among other things, 30,000,000
shares of common stock of the Registrant, par value $.001 per share
("Common Stock"), owned by PEL and representing 50% ownership of
the Registrant, which have been retired, and the other transactions
described below.
Pursuant to the Acquisition Agreement, the Registrant acquired from
PEL, PPG and PFD, substantially all of their assets as of August
31, 1990 (the "Assets") for a purchase price of $650,000. The
Assets principally consist of 29 made-for-television motion
10
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 2 - cont...
pictures owned by PPG (the "PPG Films"), all of PPG's and PFD's
rights to accounts receivable derived from the PPG Films,
miscellaneous furniture and equipment of PEL, and 30,000,000 shares
of Common Stock owned by PEL.
The purchase price consisted of $475,000 paid in cash and $175,000
paid by the delivery of three promissory notes bearing interest of
10% and due over a period of four years (the "Notes"). Principal is
due as follows:
March 31, 1993 $ 75,000 Paid
December 31, 1994 50,000 Paid
February 22, 1996 50,000
--------
$175,000
========
The Company was unable to make its payment due February 22, 1996.
However, the Company intends to pay this obligation as soon as
possible and no action has been taken by the lender at this time.
Note Receivable - Officer:
As of September 30, 1992 Mr. Harold Brown, Chairman and Chief
Executive Officer of the Company was indebted to the Company in the
sum of $50,000 evidenced by a promissory note. On December 16,
1992 this loan was increased to $90,000. The interest rate on the
loan was 3 percent per annum, and all interest and principal, with
extension, was due September 28, 1993.
On the due date Mr. Brown notified the Company that he was unable
to repay the note and could not provide a specific date when he
could satisfy this obligation. Due to the uncertainty of repayment
of this loan the Company has made formal demand for payment.
Further to the demand as of September 30, 1993, due to the
uncertain collectability of the note, the Company fully reserved
the note and the accrued interest in the amount of $92,484.
On March 31, 1996 the Company received a note from Mr. Brown for
$92,484 plus interest at 9% due and payable March 31, 2003.
Interest is payable semi-annually in arrears, on September 30 and
March 31 of each year.
11
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 3 - Net Profit (Loss) Per Share
Net (loss) per share is not computed using common stock equivalents
at June 30, 1996 and 1995 because they would be antidilutive. The
weighted average number of shares outstanding were 1,356,198 and
1,353,716 on June 30, 1996 and 1995, respectively.
Note 4 - Lease Commitment
The Company entered into a lease agreement for 3,000 square feet of
office space; the term is 6 years 8 months, beginning May 1, 1991
and ending December 31, 1997. Rent expense over the next three
fiscal years is as follows:
1996 $74,480
1997 $74,480
1998 $18,609
Note 5 - Income Taxes:
The Company files its federal and state income tax returns each
year as of December 31 instead of its fiscal year end of September
30. The following table sets forth the Company net loss
carryforward for each tax year beginning December 31, 1987 through
December 31, 1994 and the expiration dates of each net loss
carryforward:
<TABLE>
<CAPTION>
FEDERAL
Tax Year Amount of Expiration
Ended Net Loss Date
December 31, Carryforward December 31,
- ------------ ------------ ------------
<S> <C> <C>
1987 $< 167,461> 2002
1988 < 343,668> 2003
1989 < 289,685> 2004
1990 < 734,518> 2005
1991 < 414,108> 2006
1992 < 158,229> 2007
1993 < 800,189> 2008
1994 < 167,848> 2009
----------- ----
Total NOL $<3,075,706>
============
</TABLE>
12
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 5 - cont...
<TABLE>
<CAPTION>
STATE
Tax Year Amount of Expiration
Ended Net Loss Date
December 31, Carryforward December 31,
- ------------ ------------ ------------
<S> <C> <C>
1991 $< 206,654> 1997
1992 < 78,715> 1998
1993 < 399,695> 1998
1994 < 83,559> 1999
------------ ----
$< 768,623>
============
</TABLE>
If the net loss carryforward were to be realized, a deferred tax
asset of approximately $1,200,000 would be set forth. However, due
to the unlikely realization of such an asset, a valuation reserve
of $1,200,000 would be required and no benefit would be recorded
until the loss carryforward is realized.
Note 6 - Incentive Stock Option Plans:
Shares reserved for issuance: Shares of common stock were reserved
for the exercise of the following and are reflecting the effect of
the reverse stock split of 1 for 40:
<TABLE>
<CAPTION>
September 30,
1995 1994
--------- ---------
<S> <C> <C>
Incentive and nonqualified stock option plans:
Outstanding 75,000 65,000
Available for grant 1,200,000 1,210,000
--------- ---------
Totals 1,275,000 1,275,000
========= =========
</TABLE>
13
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 6 - cont...
Effective April 30, 1993 the Company's shareholders adopted the
1993 Incentive Stock Option Plan. No further options will be
granted under the 1986 plan. Under the previous plan options were
granted to purchase 54,375 shares during fiscal year 1992; none
have been exercised, 4,375 have been terminated and at September
30, 1995 options to purchase 50,000 remain outstanding from the
previous plan.
The 1993 Incentive Plan is administered by the Board of Directors
of the Company, or a Committee of not less than two members
thereof, which, except as set forth below with respect to the
Directors themselves, has the authority to determine the persons to
whom the options may be granted, the number of shares to be covered
by each option, the time or times at which the options may be
granted or exercised and, for the most part, the terms and
provisions of the options. Under the 1993 Incentive Plan, the
option exercise price may not be less than 100% (or 110% if the
optionee owns 10% or more of the outstanding voting securities of
the Company) of the fair market value of the Common Stock on the
date of grant; the exercise price of options granted to Officers
and Directors will be 100%of fair market value on the date of
grant, or 110% if the Officer or Director owns 10% or more of the
outstanding voting securities of the Company. No option under the
1993 Incentive Plan may be exercised (i) within one year of the
date of grant, but must be exercisable at the rate of at least 20%
per year over five years from the date of grant, or (ii) more than
ten years from the date of grant except that options granted to
optionees owning 10% or more of the outstanding voting securities
of the Company may not be exercised more than five years from the
date of grant.
On October 30th of each year while the 1993 Incentive Plan is in
effect, all eligible Directors of the Company will receive options
to purchase 2,500 shares of Common Stock if they served as a
Director during the previous fiscal year (or a pro-ratable amount
if they served for less than all of the fiscal year) which shall
expire five years from the date of grant. Options granted to
Directors will be exercisable at the rate of 50% in each of the
second and third years from the date of grant on a cumulative
basis. All grants of options to Directors under the 1993 Incentive
Plan will be automatic without any discretion on the part of the
Board or the Committee, as the case may be, with respect to the
grantee, the number of shares of Common Stock subject to options to
be granted, the term of the options, and the exercise price of the
options.
14
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 6 - cont...
The 1993 Incentive Plan provides for the granting of incentive
stock options to purchase a maximum of 625,000 shares. The 1993
Incentive Plan limits the percentage of the total number of options
which may be granted to Officers and Directors to 50% or 312,500
shares.
The 1993 Incentive Plan provides that no options shall be granted
thereunder after March 7, 2003. The Board of Directors may amend,
suspend or terminate the 1993 Incentive Plan at any time.
1993 Non-Qualified Stock Option Plan
Shareholders adopted the Marquee Entertainment 1993 Non-Qualified
Stock Option Plan ("1993 Non-Qualified Plan") on April 30, 1993.
The 1993 Non-Qualified Plan is administered by the Board of
Directors of the Company, or a committee of not less than two
members thereof, which, except as set forth below with respect to
the Directors themselves, has the authority to determine the
persons to whom the options may be granted, the number of shares to
be covered by each option, the time or times at which the options
may be granted or exercised and, for the most part, the terms and
provisions of the options. Under the 1993 Non-Qualified Plan, the
exercise price may not be less than 85% (or 110% if the optionee
owns 10% or more of the outstanding voting securities of the
Company) of the fair market value of the Common Stock on the date
of grant; the exercise price of options granted to Officers and
Directors will be 100% of the fair market value on the date of
grant, or 110% if the Officer or Director owns 10% or more of the
outstanding voting securities of the Company. Options under the
1993 Non-Qualified Plan cannot be exercised within one year or
later than five years from the date of grant and must be
exercisable at the rate of 50% in each of the second and third
years from the date of grant on a cumulative basis.
Upon their election as a Director and on October 30th of each
subsequent year while in the 1993 Non-Qualified Plan is in effect,
all Directors (including employee-Directors) of the Company will
receive options to purchase 2,500 shares of common stock if they
served as a Director during the previous fiscal year (or a pro-
ratable amount if they served for less than all of the fiscal year)
which shall expire five years from the date of grant. All grants
of options to Directors under the 1993 Non-Qualified Plan will be
15
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 6 - cont...
automatic without any discretion on the part of the Board or the
Committee, as the case may be, with respect to the grantee, the
number of shares of Common Stock subject to options to be granted,
the term of the options, and the exercise price of the options.
The 1993 Non-Qualified Plan provides for the granting of non-
qualified stock options to purchase a maximum of 625,000 shares.
The 1993 Non-Qualified Plan limits the percentage of the total
number of options which may be granted to Officers and Directors to
50% or 312,500 shares.
The 1993 Non-Qualified Plan provides that no options shall be
granted thereunder after March 7, 2003. The Board of Directors may
amend, suspend or terminate the 1993 Non-Qualified Plan at any
time. Changes in options outstanding under the stock options plans
are summarized below:
<TABLE>
<CAPTION>
Non- Per Share
Incentive qualified Exercise Price
--------- --------- --------------
<S> <C> <C> <C>
Outstanding at October 1, 1992 54,375 --- $.80 to $.88
Automatic grant to Directors --- 5,000 $.88
Exercised --- --- ---
Canceled <1,875> --- $.80
------ ------ -------------
Outstanding at September 30, 1993 52,500 5,000 $.80 to $.88
Automatic grant to Directors 5,000 5,000 $.44
Exercised --- --- ---
Canceled <2,500> --- $.80
------ ------ ------------
Outstanding at September 30, 1994 55,000 10,000 $.80 to $.88
Automatic grant to Directors 5,000 5,000 $.44
Exercised --- --- ---
Canceled --- --- ---
------- ------ --------------
Outstanding at September 30, 1995 60,000 15,000 $.44 to $.88
====== ====== ==============
</TABLE>
16
<PAGE>
MARQUEE ENTERTAINMENT, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
Note 7 - Commitment:
Pursuant to employment agreements between the Company and Harold
Brown and Ralph T. Smith, respectively, dated March 12, 1991,
annual compensation is $150,000 and $140,000 respectively. The
term of the agreements is one year; the term is automatically
extended until terminated by ninety days written notice given by
either party to the other.
17
<PAGE>
MARQUEE ENTERTAINMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
For the nine months ended June 30, 1996, the Company had a loss of
$339,165. The Company's net worth deficit increased to $711,852.
The Company's cash position decreased by $48,881 since September
30, 1995.
Results of Operations
Revenue during the nine months ended June 30, 1996 was $177,024, a
decrease of $142,590, or 45%, as compared to the nine months ended
June 30, 1995. This decrease was due to an increase in licensing
in 1995 and an increase in 1996 of deferred income of $106,999,
revenue to be recognized in future periods.
Operating expenses for the nine month period ended June 30, 1996
were $42,513, an increase of $3,342, or 9%, as compared to the same
period in the prior year. This increase reflects the Company's
continuing effort and the cost associated with creating digital
masters of its film library to improve the quality of its master
material. The cost of the digital conversion varies per film
depending on the condition of the existing film elements and the
length of the film, 90 to 150 minutes. The range in cost per film
has been as low as $11,000 to a high of $26,000.
Selling, general and administrative expenses for the nine month
period ended June 30, 1996 was $461,207, an increase of $25,245 as
compared to the period ended June 30, 1995. There were certain
off-setting factors between the periods, such as salaries and
employee benefits increased by $13,000 due to having an additional
full-time employee and group medical on all employees; professional
fees increased by $33,000 as a result of increased legal costs
associated with potential future expansion; insurance cost
increased by $4,000 as a result of a new errors and omissions
policy in 1996; auto expense decreased by $1,300 as a result of
major repairs in 1995 not recurring in 1996; copier rental cost
decreased by $2,700 as a result of the Company's purchase of the
copier; advertising and promotion decreased by $2,300 due to
certain film promotions done in 1995 and not repeated in 1996;
payroll tax expense decreased by $20,000 as a result of converting
accrued salaries and related accrued payroll tax to a convertible
debenture with excess payroll tax credited to expense.
18
<PAGE>
MARQUEE ENTERTAINMENT, INC.
ITEM 2. (Continued)
Capital Resources and Liquidity
As of June 30, 1996 the Company had $26,614 available to meet
operating requirements. In addition, it had net accounts
receivable of $76,861. This cash position is not adequate to meet
the Company's operational needs.
The Company is unable to satisfy the principal payment of $50,000
due in relation to the PPG films, with extension, on February 22,
1996. However, the Company intends to pay this obligation as soon
as possible and no action has been taken by the lender at this
time. The Company has no other significant immediate liabilities
that it is unable to satisfy.
Sales activity on the Company's owned library of films is
continuing to be relicensed as territories become available and the
Company's personnel is negotiating some major market licenses.
There can be no assurance of consummating these negotiations at
this time.
The revenues from the library of films currently owned by the
Company were not adequate in fiscal 1995 to meet the expenses of
the Company and it is not anticipated that they will be adequate in
the long term. Management believes that the Company must acquire
additional motion pictures for distribution and is currently
seeking to make such acquisitions. However, there can be no
assurance as to the Company's ability to find such additional
motion pictures on terms favorable to the Company or, if found, as
to the Company's ability to finance the acquisition of any such
pictures, given the limited funds available to the Company and the
commercial lending and economic climate in general.
Management believes that with maintaining reductions in operational
costs, and continuing sales activity from the current library and
new acquired motion pictures, the Company will be able to continue
as a going concern. However, at this time, there can be no
assurances that the Company will be able to continue as a going
concern.
19
<PAGE>
MARQUEE ENTERTAINMENT, INC.
PART II - OTHER INFORMATION
Item 1 is not applicable.
ITEM 2. CHANGES IN SECURITIES
The Company's Board of Directors, on March 7, 1996, authorized a
reverse stock split of 1 for 40 of its issued and outstanding
common stock reducing the outstanding shares from 54,154,000 to
1,353,716. In addition, the authorized number of shares was
reduced from 250,000,000 to 25,000,000. In May of 1996 the Company
issued, in lieu of fees, 20,000 restricted shares for public
relations services.
Items 3 through 5 are not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 27 is included with this report. No reports on Form 8-K
were filed by the Company during the quarter covered by this
report.
20
<PAGE>
MARQUEE ENTERTAINMENT, INC.
SIGNATURES
Pursuant to the requirements 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.
MARQUEE ENTERTAINMENT, INC.
Date August 9, 1996 By /s/ Ralph T. Smith
------------------- -----------------------------
Ralph T. Smith, President
and Chief Accounting Officer
21
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<ARTICLE> 5
<CIK> 0000806277
<NAME> MARQUEE ENTERTAINMENT,INC.
<S> <C>
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
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